B-123191, JULY 13, 1955, 35 COMP. GEN. 12

B-123191: Jul 13, 1955

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RETIREMENT - UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953 - DEPOSITS WHEN NOT RECEIVING RETIRED PAY RETIRED MEMBERS OF THE UNIFORMED SERVICES WHO HAVE MADE SURVIVORSHIP ANNUITY ELECTIONS UNDER THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953. WHO ARE NOT RECEIVING RETIRED PAY. ARE REQUIRED TO DEPOSIT THE AMOUNT WHICH WOULD HAVE BEEN WITHHELD ON ACCOUNT OF SUCH ELECTIONS AND IN EVENT MEMBER FAILS TO MAKE DEPOSITS AND COLLECTION HAS NOT BEEN EFFECTED AT TIME OF DEATH. DEPARTMENT OF DEFENSE: QUESTION 1: IN THOSE CASES WHERE A RETIRED MEMBER IS NOT RECEIVING RETIRED PAY. QUESTION 2: IF THE ANSWER TO QUESTION 1 IS IN THE NEGATIVE. DURING ANY PERIOD IN WHICH HE IS NOT RECEIVING RETIRED PAY.

B-123191, JULY 13, 1955, 35 COMP. GEN. 12

RETIREMENT - UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953 - DEPOSITS WHEN NOT RECEIVING RETIRED PAY RETIRED MEMBERS OF THE UNIFORMED SERVICES WHO HAVE MADE SURVIVORSHIP ANNUITY ELECTIONS UNDER THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, BUT WHO ARE NOT RECEIVING RETIRED PAY, ARE REQUIRED TO DEPOSIT THE AMOUNT WHICH WOULD HAVE BEEN WITHHELD ON ACCOUNT OF SUCH ELECTIONS AND IN EVENT MEMBER FAILS TO MAKE DEPOSITS AND COLLECTION HAS NOT BEEN EFFECTED AT TIME OF DEATH, THE SURVIVING WIFE OR CHILDREN SHOULD PAY AMOUNT DUE, WITH INTEREST, OR AUTHORIZE APPLICATION OF ANNUITY TOWARD PAYMENT.

TO THE SECRETARY OF DEFENSE, JULY 13, 1955:

BY LETTER OF MARCH 7, 1955, THE ASSISTANT SECRETARY OF DEFENSE ( COMPTROLLER) REQUESTED A DECISION ON THE FOLLOWING TWO QUESTIONS AS SET FORTH AND DISCUSSED IN COMMITTEE ACTION NO. 3 OF THE UNIFORMED SERVICES CONTINGENCY OPTION ACT COMMITTEE, DEPARTMENT OF DEFENSE:

QUESTION 1: IN THOSE CASES WHERE A RETIRED MEMBER IS NOT RECEIVING RETIRED PAY, MAY THE SECRETARY OF DEFENSE OR THE SECRETARY OF ANY UNIFORMED SERVICE PRESCRIBE REGULATIONS FOR THE ADMINISTRATION OF THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, 67 STAT. 501, WHICH DENY HIM THE RIGHT TO REPAY, OR LIMIT THE TIME DURING WHICH HE OR HIS WIFE OR CHILDREN AFTER HIS DEATH MAY REPAY, AMOUNTS DUE BUT NOT WITHHELD FROM RETIRED PAY UNDER SAID ACT, SO AS TO PRECLUDE A FUTURE PAYMENT OF BENEFITS?

QUESTION 2: IF THE ANSWER TO QUESTION 1 IS IN THE NEGATIVE, MAY THE SURVIVING WIFE OR CHILDREN (A) REPAY IN CASH THE TOTAL AMOUNT NOT WITHHELD FROM THE RETIRED PAY OF THE MEMBER, PLUS COMPOUND INTEREST, OR (B) AUTHORIZE ANY ANNUITIES DUE, TO BE WITHHELD UNTIL SUCH AMOUNT PLUS COMPOUND INTEREST HAS BEEN REPAID, SO AS TO BE ENTITLED TO A MONTHLY ANNUITY SUBSEQUENT TO SUCH REPAYMENT?

SECTION 5 OF THE CONTINGENCY OPTION ACT, 37 U.S.C. 374, PROVIDES THAT "A RETIRED MEMBER OF A UNIFORMED SERVICE WHO HAS MADE THE ELECTION SPECIFIED IN SECTION 3 SHALL, DURING ANY PERIOD IN WHICH HE IS NOT RECEIVING RETIRED PAY, DEPOSIT WITH THE UNITED STATES TREASURY THE AMOUNT WHICH WOULD HAVE BEEN WITHHELD FROM HIS RETIRED PAY HAD HE BEEN RECEIVING THAT PAY.'

THE LEGISLATIVE HISTORY OF THE CONTINGENCY OPTION ACT CONTAINS SEVERAL STATEMENTS TO THE EFFECT THAT THE PLAN WAS ACTUARIALLY SOUND AND THAT PUBLIC FUNDS WOULD NOT HAVE TO BE APPROPRIATED TO PAY ANY OF THE BENEFITS PROVIDED IN THAT ACT. THE PLAN FOR PAYMENT OF ANNUITIES UNDER THE ACT IS BASED, OF COURSE, ON BOTH GOOD AND BAD RISKS, THE AVERAGES OF THE ONE BALANCING THE AVERAGES OF THE OTHER. FOR THE PLAN TO BE ACTUARIALLY SOUND, BOTH GROUPS MUST MAKE THE MONTHLY PAYMENTS REQUIRED BY THE ACT. THE PROVISIONS OF SECTION 3, 37 U.S.C. 372, REQUIRING EARLY ELECTIONS ARE DESIGNED TO ASSURE THAT THE GOOD AS WELL AS THE BAD RISKS WILL PAY THE AVERAGE AMOUNTS REQUIRED TO PAY THE ANNUITIES. FOR EXAMPLE, THE BEST RISKS PROBABLY ARE THE RETIRED MEMBERS WHOSE DEPENDENTS WILL PREDECEASE THEM, SINCE NO ANNUITIES WILL BE PAYABLE IN SUCH CASES. IF SUCH MEMBERS ARE NOT REQUIRED TO CONTINUE PAYMENTS OF THE AMOUNTS PROVIDED IN SECTION 5, PLUS INTEREST IF THE PAYMENTS ARE IN ARREARS, THE DEFICIT WILL HAVE TO BE MADE UP FROM APPROPRIATED FUNDS OR THE PREMIUMS WILL HAVE TO BE RAISED DISPROPORTIONATELY TO THE AVERAGE RISK.

SECTION 5 OF THE CONTINGENCY OPTION ACT AFFIRMATIVELY REQUIRES THAT THE PAYMENTS MENTIONED THEREIN "SHALL" BE DEPOSITED WITH THE TREASURY. SECTION 3 (B) 37 U.S.C. 372B, OF THAT ACT PROVIDES THAT A TIMELY ELECTION MADE BY A RETIRED MEMBER AWARDED RETIREMENT PAY PRIOR TO ENACTMENT OF THE ACT "SHALL THEREAFTER BE IRREVOCABLE.' IN VIEW OF SUCH PROVISIONS AND IN THE ABSENCE OF OTHER LANGUAGE IN THE ACT PERMITTING A REVOCATION OF AN ELECTION BY A RETIRED MEMBER, IT IS BELIEVED THAT WHEN AN ELECTION IS MADE UNDER THE ACT WHICH DOES NOT INCLUDE THE OPTION UNDER SECTION 4 (A) (4), 37 U.S.C. 373, AND THE ELECTION IS NOT REVOKED UNDER SECTION 3 (A), 37 U.S. CODE 372 (A), PRIOR TO RETIREMENT, SUCH ELECTION CONSTITUTES A CONTRACT TO PAY A MONTHLY SUM UP TO THE TIME OF DEATH OF THE MEMBER AND, UPON FAILURE TO PAY THE PAYMENTS REQUIRED BY SECTION 5, THE RETIRED MEMBER INVOLVED BECOMES INDEBTED TO THE GOVERNMENT FOR EACH PAYMENT AS IT BECOMES DUE.

ANSWERING YOUR QUESTIONS SPECIFICALLY, REGULATIONS SHOULD NOT BE PROMULGATED WHICH DENY A RETIRED MEMBER THE RIGHT TO PAY ALL AMOUNTS DUE AND UNPAID UNDER SECTION 5 OF THE ACT. ON THE CONTRARY, ALL LEGAL MEANS SHOULD BE USED TO ASSURE COLLECTION OF SUCH AMOUNTS, TOGETHER WITH PROPER INTEREST, IF THEY ARE NOT PAID WITHIN THE GRACE PERIOD PROVIDED IN PARAGRAPH 403D OF THE REGULATIONS FOR THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953.

IN THE EVENT THAT A RETIRED MEMBER FAILS TO PAY THE AMOUNTS REQUIRED UNDER SECTION 5 AND COLLECTION OF ARREARS HAS NOT BEEN EFFECTED AT THE TIME OF HIS DEATH, NO REASON IS PERCEIVED WHY THE SURVIVING WIFE OR CHILDREN SHOULD NOT BE PERMITTED TO PAY THE TOTAL AMOUNT DUE, WITH INTEREST, OR TO AUTHORIZE APPLICATION OF THE ANNUITY DUE TOWARDS PAYMENT OF SUCH AMOUNT SINCE IT IS OUR VIEW THAT THE ANNUITY COULD BE WITHHELD FOR THAT PURPOSE IN THE ABSENCE OF SUCH ACTION. COMPARE 46 C.J.S. 701, NOTES 49 AND 50, AND CASES THERE CITED.