A-39525, NOVEMBER 25, 1931, 11 COMP. GEN. 208

A-39525: Nov 25, 1931

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RETIREMENT - PANAMA RAILROAD COMPANY EMPLOYEES FORMER EMPLOYEES WHO WERE ON JUNE 30. ARE COMPUTED. QUESTIONS HAVE ARISEN AS TO THE PROPRIETY OF REQUIRING FORMER EMPLOYEES NOW IN RECEIPT OF PENSION OR ANNUITY UNDER THE PANAMA RAILROAD COMPANY PENSION PLAN. ALSO WHETHER SUCH ADDITIONAL CONTRIBUTIONS WILL BE REQUIRED OF PANAMA RAILROAD COMPANY EMPLOYEES RETIRING AFTER THE EFFECTIVE DATE OF THE CANAL ZONE RETIREMENT ACT. SUCH INTEREST SHALL NOT BE INCLUDED FOR ANY PERIOD DURING WHICH THE EMPLOYEE WAS SEPARATED FROM THE SERVICE. THAT FAILURE TO MAKE SUCH DEPOSIT SHALL NOT DEPRIVE THE EMPLOYEE OF CREDIT FOR ANY PAST SERVICE FOR WHICH NO DEPOSIT IS REQUIRED UNDER THE PROVISIONS OF THIS SECTION.'.

A-39525, NOVEMBER 25, 1931, 11 COMP. GEN. 208

RETIREMENT - PANAMA RAILROAD COMPANY EMPLOYEES FORMER EMPLOYEES WHO WERE ON JUNE 30, 1931, IN RECEIPT OF PENSIONS OR ANNUITIES UNDER THE PANAMA RAILROAD CO. PENSION SYSTEM, AND EMPLOYEES IN THE SERVICE OF THE PANAMA RAILROAD CO. ON JUNE 30, RETIRED AFTER JULY 1, 1931, MAY NOT BE REQUIRED TO MAKE ADDITIONAL CONTRIBUTIONS TO THE RETIREMENT FUND CREATED BY THE CANAL ZONE RETIREMENT ACT OF MARCH 2, 1931, 46 STAT. 1471, EFFECTIVE JULY 1, 1931, IN ORDER TO OBTAIN CREDIT FOR SERVICE RENDERED PRIOR TO JULY 1, 1931, ON THE BASIS OF WHICH THE ANNUITIES PROPERLY PAYABLE UNDER THE ACT OF MARCH 2, 1931, ARE COMPUTED.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, NOVEMBER 25, 1931:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF NOVEMBER 12, 1931, AS FOLLOWS:

IN THE ADMINISTRATION OF THE ACT OF MARCH 2, 1931 (PUBLIC NO. 781, 71ST CONGRESS), EXTENDING CIVIL RETIREMENT TO EMPLOYEES OF THE PANAMA RAILROAD COMPANY, QUESTIONS HAVE ARISEN AS TO THE PROPRIETY OF REQUIRING FORMER EMPLOYEES NOW IN RECEIPT OF PENSION OR ANNUITY UNDER THE PANAMA RAILROAD COMPANY PENSION PLAN, TO MAKE AN ADDITIONAL CONTRIBUTION IN ORDER TO OBTAIN CREDIT FOR SERVICES RENDERED PRIOR TO JULY 1, 1931; ALSO WHETHER SUCH ADDITIONAL CONTRIBUTIONS WILL BE REQUIRED OF PANAMA RAILROAD COMPANY EMPLOYEES RETIRING AFTER THE EFFECTIVE DATE OF THE CANAL ZONE RETIREMENT ACT, AS A CONDITION PRECEDENT TO OBTAINING CREDIT FOR SERVICES RENDERED PRIOR TO JULY 1, 1931.

SECTION 8 OF THE ACT OF MARCH 2, 1931, PROVIDES---

"ALL EMPLOYEES COMING WITHIN THE PROVISIONS OF THIS ACT AFTER THE EFFECTIVE DATE THEREOF SHALL BE REQUIRED TO DEPOSIT WITH THE TREASURER OF THE UNITED STATES TO THE CREDIT OF THE CANAL ZONE RETIREMENT AND DISABILITY FUND REFERRED TO IN SECTION 9 HEREOF, UNDER RULES TO BE PRESCRIBED BY THE COMMISSIONER OF PENSIONS, A SUM EQUAL TO 2 1/2 PERCENTUM OF THE EMPLOYEE'S BASIC SALARY, PAY, OR COMPENSATION RECEIVED FOR SERVICES RENDERED AFTER JULY 31, 1920, AND PRIOR TO JULY 1, 1926, AND ALSO 3 1/2 PERCENTUM OF THE BASIC SALARY, PAY, OR COMPENSATION FOR SERVICES RENDERED SUBSEQUENT TO JUNE 30, 1926, TOGETHER WITH INTEREST COMPUTED AT THE RATE OF 4 PERCENTUM PER ANNUM COMPOUNDED ON THE LAST DAY OF EACH FISCAL YEAR, BUT SUCH INTEREST SHALL NOT BE INCLUDED FOR ANY PERIOD DURING WHICH THE EMPLOYEE WAS SEPARATED FROM THE SERVICE. UPON MAKING SUCH DEPOSIT THE EMPLOYEE SHALL BE ENTITLED TO CREDIT FOR THE PERIOD OR PERIODS OF SERVICE INVOLVED: PROVIDED, THAT NO SUCH DEPOSIT SHALL BE REQUIRED ON ACCOUNT OF SERVICES RENDERED FOR THE PANAMA RAILROAD COMPANY PRIOR TO JANUARY 1, 1924: PROVIDED FURTHER, THAT FAILURE TO MAKE SUCH DEPOSIT SHALL NOT DEPRIVE THE EMPLOYEE OF CREDIT FOR ANY PAST SERVICE FOR WHICH NO DEPOSIT IS REQUIRED UNDER THE PROVISIONS OF THIS SECTION.'

SECTION 13:

"IN THE CASE OF THOSE EMPLOYEES OF THE PANAMA CANAL OR THE PANAMA RAILROAD COMPANY WHO BEFORE THE EFFECTIVE DATE OF THIS ACT SHALL HAVE BEEN RETIRED ON ANNUITY UNDER THE PROVISIONS OF THE ACT OF MAY 22, 1920, OR SAID ACT AS AMENDED, OR AS EXTENDED BY EXECUTIVE ORDERS, OR UNDER THE PROVISIONS OF THE PANAMA RAILROAD PENSION PLAN, THE ANNUITY SHALL BE COMPUTED, ADJUSTED, AND PAID UNDER THE PROVISIONS OF THIS ACT, BUT THIS ACT SHALL NOT BE SO CONSTRUED AS TO REDUCE THE ANNUITY OF ANY PERSON RETIRED BEFORE ITS EFFECTIVE DATE, NOR SHALL ANY INCREASE IN ANNUITY COMMENCE BEFORE SUCH EFFECTIVE DATE.'

THE SUGGESTION HAS BEEN MADE THAT INASMUCH AS THE CONTRIBUTIONS OF BENEFICIARIES OF THE PANAMA RAILROAD COMPANY PENSION SYSTEM WERE LESS THAN THOSE MADE BY EMPLOYEES ON THE ISTHMUS OF PANAMA RETIRED UNDER THE PROVISIONS OF THE GENERAL CIVIL SERVICE RETIREMENT LAWS, THE BENEFITS WERE GREATER AS REGARDS THE RAILROAD PENSIONERS AND THAT, THEREFORE, AN ADJUSTMENT OF THE CONTRIBUTIONS SO AS TO EQUALIZE THE SAME WOULD APPEAR TO BE EQUITABLE. IN OTHER WORDS, IT WOULD APPEAR PROPER TO REQUIRED A 2 1/2 PERCENT CONTRIBUTION BY THE PENSIONER FROM JANUARY 1, 1924, AND 3 1/2 PERCENT FROM JULY 1, 1926, TO THE DATE OF COMMENCEMENT OF THE PENSION IN EACH CASE, IN VIEW OF THE LANGUAGE OF SECTION 13 TO THE EFFECT THAT THE ANNUITY IN THE CASE OF THOSE ALREADY RETIRED SHOULD BE COMPUTED, ADJUSTED, AND PAID UNDER THE CANAL ZONE ACT, THAT ACT IN SECTION 7 REQUIRING CONTRIBUTIONS AT THE ABOVE RATE AS A CONDITION PRECEDENT TO THE GRANT OF CREDIT FOR PAST SERVICE. ON THE OTHER HAND, IT IS CONTENDED THAT THE EMPLOYEES AUTOMATICALLY COMING WITHIN THE PROVISIONS OF THE CANAL ZONE ACT ON JULY 1, 1931, ARE NOT REQUIRED TO MAKE ANY FURTHER CONTRIBUTIONS ON ACCOUNT OF PAST SERVICE FOR WHICH DEDUCTIONS WERE MADE UNDER THE PANAMA RAILROAD PENSION PLAN PRIOR TO JULY 1, 1931.

APROPOS OF WHETHER ADDITIONAL CONTRIBUTIONS SHOULD BE REQUIRED OF EITHER PANAMA RAILROAD COMPANY PENSIONERS OR EMPLOYEES, PARAGRAPH 3 OF SECTION 9 OF THE ACT OF MARCH 2, 1931, IS QUOTED AS FOLLOWS:

"THE BOARD OF DIRECTORS OF THE PANAMA RAILROAD COMPANY SHALL CAUSE TO BE TRANSFERRED TO THE SECRETARY OF THE TREASURY, FOR CREDIT TO THE CANAL ZONE RETIREMENT AND DISABILITY FUND, THE GROSS ASSETS IN THE PANAMA RAILROAD PENSION FUND AT THE CLOSE OF BUSINESS ON JUNE 30, 1931, APPLYING TO EMPLOYEES INCLUDED WITHIN THE PROVISIONS OF THIS ACT, SUBJECT TO THE ASSUMPTION OF THE LIABILITIES OF THAT FUND AS OF THE CLOSE OF BUSINESS ON JUNE 30, 1931, BY THE CANAL ZONE RETIREMENT AND DISABILITY FUND.'

SECTION 6 DECLARES IN ITS FIRST PROVISO THAT:

"THE ANNUITY PAID A RETIRING EMPLOYEE OF THE PANAMA RAILROAD COMPANY IN SUCH SERVICE ON JUNE 30, 1931, SHALL BE AN AMOUNT EQUAL TO 2 PERCENTUM OF THE AVERAGE ANNUAL BASIC SALARY, PAY, OR COMPENSATION, NOT TO EXCEED $5,000 PER ANNUM, RECEIVED BY THE EMPLOYEE DURING ANY FIVE CONSECUTIVE YEARS OF ALLOWABLE SERVICE AT THE OPTION OF THE EMPLOYEE, MULTIPLIED BY THE NUMBER OF YEARS OF ALLOWABLE SERVICE RENDERED PRIOR TO JULY 1, 1931, PLUS THE AMOUNT TO WHICH THE EMPLOYEE IS ENTITLED UNDER THE PROVISIONS OF THIS SECTION, EXCLUSIVE OF PARAGRAPH (4), FOR SERVICE RENDERED SUBSEQUENT TO JUNE 30, 1931: PROVIDED, HOWEVER, THAT THE SUM TO BE USED IN COMPUTING THE ANNUITY PURCHASABLE UNDER PARAGRAPH (2) OF THIS SECTION SHALL INCLUDE ONLY CONTRIBUTIONS MADE SUBSEQUENT TO JUNE 30, 1931.'

IT IS CLAIMED THAT THE OBJECT OF THIS PROVISION WAS TO PRESERVE THE RIGHTS OF EMPLOYEES OF THE PANAMA RAILROAD COMPANY IN THEIR OWN RETIREMENT OR PENSION FUND.

IN VIEW OF THE FACT THAT THERE ARE NOW PENDING THIRTEEN CLAIMS OF BENEFICIARIES UNDER THE PANAMA RAILROAD COMPANY PENSION SYSTEM AND APPROXIMATELY THIRTY CLAIMS OF RAILROAD EMPLOYEES IN THE SERVICE ON JULY 1, 1931, WHO BECAME ELIGIBLE FOR RETIREMENT ON AUGUST 1, 1931, AN EARLY DECISION IN THIS MATTER WILL BE APPRECIATED.

THE CANAL ZONE RETIREMENT ACT OF MARCH 2, 1931, 46 STAT. 1471, EFFECTIVE JULY 1, 1931, ESTABLISHED A NEW AND DISTINCT RETIREMENT SYSTEM FOR (1) EMPLOYEES OF THE PANAMA CANAL ON THE ISTHMUS, AND (2) EMPLOYEES OF THE PANAMA RAILROAD CO. ON THE ISTHMUS. SEE SECTION 1 OF THE ACT. THESE TWO CLASSES OF EMPLOYEES HAD PREVIOUSLY BEEN SUBJECT TO TWO SEPARATE AND DISTINCT RETIREMENT SYSTEMS, RESPECTIVELY, (1) THE PROVISIONS OF THE CIVIL RETIREMENT ACT, FIRST EFFECTIVE AUGUST 1, 1930, AND (2) THE PANAMA RAILROAD CO. RETIREMENT SYSTEM, FIRST EFFECTIVE JANUARY 1, 1924. PRIOR TO JULY 1, 1931, EMPLOYEES HAD RETIRED UNDER THE TWO RETIREMENT SYSTEMS PREVIOUSLY IN FORCE. THE PROVISION OF SECTION 13 OF THE ACT QUOTED IN YOUR SUBMISSION REQUIRES THAT THE ANNUITIES OF ALL THE EMPLOYEES RETIRED PRIOR TO JULY 1, 1931, UNDER EITHER OF THE SYSTEMS THEN IN FORCE "SHALL BE COMPUTED, ADJUSTED, AND PAID UNDER THE PROVISIONS OF THIS ACT," WITH A SAVING CLAUSE AGAINST THE REDUCTION OF THE ANNUITIES PREVIOUSLY PAID. THERE IS NO PROVISION IN THIS SECTION, OR OTHERWISE IN THE CANAL ZONE RETIREMENT ACT, REQUIRING ANY FURTHER CONTRIBUTIONS TO THE RETIREMENT FUND CREATED BY THE ACT, FROM EMPLOYEES OF EITHER CLASS WHO HAD RETIRED PRIOR TO JULY 1, 1931. THE PROVISION OF SECTION 8 OF THE ACT REQUIRING DEPOSITS TO THE CREDIT OF THE RETIREMENT FUND IS APPLICABLE ONLY TO "EMPLOYEES COMING WITHIN THE PURVIEW THIS ACT AFTER THE EFFECTIVE DATE REOF.' THE FIRST PARAGRAPH OF SECTION 13 OF THE CANAL ZONE RETIREMENT ACT IS SIMILAR IN TERMS TO SECTION 8 OF THE CIVIL RETIREMENT ACT, AS AMENDED BY THE ACT OF MAY 29, 1930, 46 STAT. 475, EFFECTIVE JULY 1, 1930, BUT IT IS NOT UNDERSTOOD THAT CONTRIBUTIONS FROM EMPLOYEES RETIRED PRIOR TO JULY 1, 1930, HAVE BEEN REQUIRED, TO ENABLE THEM TO RECEIVE THE GREATER BENEFITS, EVEN THOUGH SECTION 9, SIMILAR IN TERMS TO SECTION 8 OF THE CANAL ZONE RETIREMENT ACT, REQUIRES DEPOSITS TO THE RETIREMENT FROM "EMPLOYEES WHO MAY BE BROUGHT THEN AND THEREAFTER WITHIN THE PURVIEW OF THE ACT.' FURTHERMORE, THE REQUIREMENT OF CONTRIBUTIONS FROM EMPLOYEES RETIRED PRIOR TO JULY 1, 1931, WOULD BE TANTAMOUNT TO REDUCING THE AMOUNT OF THE ANNUITIES COMPUTED UNDER THE LAWS PREVIOUSLY IN FORCE IN CONTRAVENTION OF THE SAVING CLAUSE AGAINST LOSS IN THE AMOUNT OF ANNUITIES.

FROM YOUR SUBMISSION IT WOULD APPEAR THAT THE SUGGESTION THAT FORMER EMPLOYEES OF THE PANAMA RAILROAD CO. RETIRED PRIOR TO JULY 1, 1931, SHOULD MAKE FURTHER CONTRIBUTIONS TO THE RETIREMENT FUND, IS FOR THE PURPOSE OF EQUALIZING THE AMOUNT OF CONTRIBUTIONS IN THE FUND TO THE CREDIT OF THE TWO CLASSES OF EMPLOYEES RETIRED UNDER THE TWO SYSTEMS PREVIOUSLY IN FORCE. IT IS RECOGNIZED THAT ONE CLASS MAY HAVE AN ADVANTAGE OVER THE OTHER IN THIS RESPECT, BUT, IF SO, IT IS BECAUSE THE LAW HAS MADE IT SO, AND THE INEQUALITY MAY NOT BE OVERCOME BY REQUIRING FURTHER CONTRIBUTIONS FROM ONE CLASS.

ANSWERING YOUR FIRST QUESTION SPECIFICALLY, YOUR ARE ADVISED THAT FORMER EMPLOYEES WHO WERE ON JUNE 30, 1931, IN RECEIPT OF PENSIONS OR ANNUITIES UNDER THE PANAMA RAILROAD CO. PENSION SYSTEM, MAY NOT BE REQUIRED TO MAKE ADDITIONAL CONTRIBUTIONS TO THE RETIREMENT FUND CREATED BY THE CANAL ZONE RETIREMENT ACT IN ORDER TO OBTAIN CREDIT FOR SERVICES RENDERED PRIOR TO JULY 1, 1931.

IT IS UNDERSTOOD YOUR SECOND QUESTION RELATES TO THOSE EMPLOYEES OF THE PANAMA RAILROAD CO. RETIRED, OR TO BE RETIRED, AFTER JULY 1, 1931, THE EFFECTIVE DATE OF THE CANAL ZONE RETIREMENT ACT, WHO WERE IN THE SERVICE JUNE 30, 1931. AS THE STATUTE FROM ITS EFFECTIVE DATE WAS MADE APPLICABLE TO EMPLOYEES OF THE PANAMA RAILROAD CO. AS WELL AS TO EMPLOYEES OF THE PANAMA CANAL, THERE WOULD BE NO MORE JUSTIFICATION FOR REQUIRING FURTHER CONTRIBUTIONS COVERING PERIODS PRIOR TO JULY 1, 1931, FROM EMPLOYEES OF THE PANAMA RAILROAD CO. THAT FROM EMPLOYEES OF THE PANAMA CANAL. SECTION 8 REQUIRING DEPOSITS TO OBTAIN CREDIT FOR PRIOR SERVICE IS SPECIFICALLY LIMITED TO EMPLOYEES COMING WITHIN THE PURVIEW OF THE ACT AFTER ITS EFFECTIVE DATE. APPARENTLY UNDER THE PROVISO TO SECTION 6, QUOTED IN YOUR SUBMISSION, A DIFFERENCE IS REQUIRED IN THE METHOD OF COMPUTING ANNUITIES OF EMPLOYEES OF THE PANAMA RAILROAD CO. IN THE SERVICE JUNE 30, 1931, WHICH WILL BE REFLECTED IN THE AMOUNT OF ANNUITIES PAID.

ANSWERING YOUR SECOND QUESTION SPECIFICALLY, YOUR ARE ADVISED THAT ADDITIONAL CONTRIBUTIONS MAY NOT BE REQUIRED OF EMPLOYEES IN THE SERVICE OF THE PANAMA RAILROAD CO. ON JUNE 30, 1931, RETIRED AFTER JULY 1, 1931, AS A CONDITION PRECEDENT TO OBTAINING CREDIT FOR SERVICES RENDERED PRIOR TO JULY 1, 1931.