B-135620, APRIL 15, 1958, 37 COMP. GEN. 681

B-135620: Apr 15, 1958

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MILITARY PERSONNEL - SAVINGS DEPOSITS - INTEREST - DISCHARGE AND REENLISTMENT - REDEPOSIT SAVINGS DEPOSITS WHICH ARE NOT WITHDRAWN AT THE EXPIRATION OF EACH THREE- YEAR ENLISTMENT PERIOD BY ENLISTED MEMBERS OF THE UNIFORMED SERVICES WHOSE ENLISTMENTS ARE FOR PERIODS LONGER THAN THREE YEARS MAY CONTINUE TO ACCRUE INTEREST TO THE EXTENT AUTHORIZED BY REGULATION. THE LONG ESTABLISHED RULE THAT INTEREST DOES NOT ACCRUE ON THE SAVINGS DEPOSITS OF AN ENLISTED MEMBER OF THE UNIFORMED SERVICES AFTER THE DATE OF DISCHARGE IS FOR APPLICATION UNCER 10 U.S.C. 1035 (C). IF THE MEMBER WISHES TO HAVE THE DEPOSIT CONTINUE TO DRAW INTEREST AFTER DISCHARGE AND IMMEDIATE REENLISTMENT OR AFTER RETIREMENT AND IMMEDIATE RECALL TO ACTIVE DUTY.

B-135620, APRIL 15, 1958, 37 COMP. GEN. 681

MILITARY PERSONNEL - SAVINGS DEPOSITS - INTEREST - DISCHARGE AND REENLISTMENT - REDEPOSIT SAVINGS DEPOSITS WHICH ARE NOT WITHDRAWN AT THE EXPIRATION OF EACH THREE- YEAR ENLISTMENT PERIOD BY ENLISTED MEMBERS OF THE UNIFORMED SERVICES WHOSE ENLISTMENTS ARE FOR PERIODS LONGER THAN THREE YEARS MAY CONTINUE TO ACCRUE INTEREST TO THE EXTENT AUTHORIZED BY REGULATION. THE LONG ESTABLISHED RULE THAT INTEREST DOES NOT ACCRUE ON THE SAVINGS DEPOSITS OF AN ENLISTED MEMBER OF THE UNIFORMED SERVICES AFTER THE DATE OF DISCHARGE IS FOR APPLICATION UNCER 10 U.S.C. 1035 (C), EVEN THOUGH THE MEMBER REENLISTS IMMEDIATELY; ACCORDINGLY, IF THE MEMBER WISHES TO HAVE THE DEPOSIT CONTINUE TO DRAW INTEREST AFTER DISCHARGE AND IMMEDIATE REENLISTMENT OR AFTER RETIREMENT AND IMMEDIATE RECALL TO ACTIVE DUTY, THE PRINCIPAL AND INTEREST MUST BE REDEPOSITED IN WHICH EVEN BOTH PRINCIPAL AND ACCRUED INTEREST WILL DRAW INTEREST. UNDER 10 U.S.C. 1035, WHICH PERMITS THE DEPOSIT OF SAVINGS BY AN ENLISTED MEMBER OF THE UNIFORMED SERVICES AND AUTHORIZES PAYMENT OF THE DEPOSITS AND INTEREST UPON DISCHARGE, A REGULATION TO PERMIT THE COMPOUNDING OF INTEREST AS OF THE DATE OF THE EXPIRATION OF EACH THREE YEAR PERIOD IN THE CASE OF ENLISTMENTS FOR LONGER PERIODS WOULD NOT BE PROPER.

TO THE SECRETARY OF DEFENSE, APRIL 15, 1958:

REFERENCE IS MADE TO LETTER OF MARCH 24, 1958, FROM THE ASSISTANT SECRETARY OF DEFENSE ( COMPTROLLER), REQUESTING DECISION ON CERTAIN QUESTIONS SET FORTH AND DISCUSSED IN COMMITTEE ACTION NO. 205 OF THE MILITARY PAY AND ALLOWANCE COMMITTEE, DEPARTMENT OF DEFENSE. THE QUESTIONS ARE AS FOLLOWS:

1. MAY INTEREST CONTINUE TO ACCRUE ON SAVINGS, THAT WERE DEPOSITED BY ENLISTED MEMBERS, IN ACCORDANCE WITH TITLE 10, UNITED STATES CODE, SECTION 1035, WHICH ARE NOT WITHDRAWN AND REDEPOSITED UPON OCCURRENCE OF THE FOLLOWING:

A. EXPIRATION OF EACH 3-YEAR PERIOD OF AN ENLISTMENT GREATER THAN 3 YEARS?

B. DISCHARGE AND IMMEDIATE REENLISTMENT (WITHOUT A BREAK IN SERVICE/?

C. RETIREMENT AND IMMEDIATE RECALL TO ACTIVE DUTY (WITHOUT A BREAK IN SERVICE/?

2. IF THE ANSWER TO QUESTION 1, OR ANY PART THEREOF, IS IN THE AFFIRMATIVE, MAY THE SERVICE REGULATIONS BE CHANGED TO PROVIDE THAT SUCH INTEREST BE COMPOUNDED AS OF THE DATE FOLLOWING THE DATE OF EXPIRATION OF EACH 3-YEAR PERIOD OF AN ENLISTMENT GREATER THAN 3 YEARS; DISCHARGE AND IMMEDIATE REENLISTMENT; OR RETIREMENT AND IMMEDIATE RECALL TO ACTIVE DUTY, AS THE CASE MAY BE?

SECTION 1035, 10 U.S.C. (CODIFIED FROM THE ACT OF JULY 15, 1954, 68 STAT. 485), PERMITS THE DEPOSIT OF SAVINGS BY AN ENLISTED MEMBER OF THE ARMY, NAVY, AIR FORCE OR MARINE CORPS, WITH ANY BRANCH, OFFICE OR OFFICER OF HIS ARMED FORCE DESIGNATED BY THE SECRETARY CONCERNED; AUTHORIZES THE PAYMENT OF INTEREST AT THE RATE OF 4 PERCENT A YEAR ON THE AMOUNTS DEPOSITED FOR SIX MONTHS OR MORE, AND PROVIDES THAT:

(C) PAYMENTS OF DEPOSITS FROM THE RESPECTIVE FUNDS NAMED IN SUBSECTION (A), AND INTEREST THEREON, MAY BE MADE ONLY TO THE MEMBER UPON DISCHARGE, OR AT SUCH TIME BEFORE HIS DISCHARGE AS MAY BE PRESCRIBED BY THE SECRETARY CONCERNED, OR TO THE MEMBER'S HEIRS OR LEGAL REPRESENTATIVE.

UNDER THE FOREGOING PROVISIONS OF LAW, INTEREST ON AMOUNTS DEPOSITED FOR 6 MONTHS OR MORE PRIOR TO DISCHARGE MAY BE PAID UPON DISCHARGE OR AT SUCH TIME BEFORE DISCHARGE AS MAY BE SPECIFIED IN REGULATIONS ISSUED BY THE SECRETARY CONCERNED. PARAGRAPH 22-65, ARMY REGULATIONS 37-104, DECEMBER 2, 1957, PROVIDES, IN PART, AS FOLLOWS:

22-65. REPAYMENT UPON EXPIRATION OF 3-1YEAR PERIOD OF AN ENLISTMENT GREATER THAN 3 YEARS

A. REQUEST SUBMITTED ON THIRD ANNIVERSARY. DEPOSITS, WITH ACCRUED INTEREST, ARE AUTHORIZED TO BE REPAID UPON EXPIRATION OF EACH 3-YEAR PERIOD OF ANY ENLISTMENT GREATER THAN 3 YEARS. A MEMBER SHOULD SUBMIT A WRITTEN REQUEST TO THE FINANCE AND ACCOUNTING OFFICER AT THE EXPIRATION OF THE THIRD ANNIVERSARY OF SUCH ENLISTMENT REQUESTING REPAYMENT OF DEPOSITS PLUS INTEREST. THE FINANCE AND ACCOUNTING OFFICER WILL ATTACH THIS REQUEST TO SF 1049 WHEN REPAYMENT IS MADE AS EVIDENCE OF THE DISPOSITION OF THE MONEY DUE THE DEPOSITOR.

B. REQUEST SUBMITTED SUBSEQUENT TO THIRD ANNIVERSARY. IF A MEMBER DID NOT SUBMIT A WRITTEN REQUEST ON THE THIRD ANNIVERSARY, PAYMENT WILL NOT BE PRECLUDED IF THE REQUEST IS SUBMITTED SUBSEQUENT TO THE THIRD ANNIVERSARY OF HIS CURRENT ENLISTMENT. THE REPAYMENT, HOWEVER, WILL INCLUDE ONLY SUCH AMOUNTS ON DEPOSIT AT THE EXPIRATION OF THE 3 YEAR PERIOD AND INTEREST ACCRUED THEREON THROUGH THE DATE OF REPAYMENT. * * *

PARAGRAPH 11011D, AIR FORCE MANUAL 173-20, AUTHORIZES REPAYMENT OF DEPOSITS WITH ACCRUED INTEREST ANY TIME AFTER THE EXPIRATION OF EACH 3 YEAR PERIOD OF AN ENLISTMENT GREATER THAN 3 YEARS. IT IS UNDERSTOOD THAT THE NAVY AND THE MARINE CORPS DO NOT AUTHORIZE REPAYMENT OF DEPOSITS UPON THE EXPIRATION OF A 3-YEAR PERIOD OF AN ENLISTMENT GREATER THAN 3 YEARS. THE FOREGOING REGULATIONS OF THE ARMY AND THE AIR FORCE RELATING TO REPAYMENT OF DEPOSITS WITH INTEREST PRIOR TO DISCHARGE APPEAR TO BE WITHIN THE SCOPE OF 10 U.S.C. 1035 (C) AND QUESTION A IS ANSWERED IN THE AFFIRMATIVE TO THE EXTENT THAT PAYMENT OF INTEREST IS AUTHORIZED UNDER SUCH REGULATIONS.

IT LONG HAS BEEN HELD THAT INTEREST DOES NOT ACCRUE UPON AN ENLISTED MAN'S DEPOSIT AFTER THE DATE OF HIS DISCHARGE. 8 COMP. DEC. 739, 31 COMP. GEN. 178. NOTWITHSTANDING SUCH RULINGS, CURRENT REGULATIONS CONTAINED IN PARAGRAPH 22-3B (5), ARMY REGULATIONS 37-104, DECEMBER 2, 1957, STATE THAT INTEREST ON DEPOSITS WILL CONTINUE TO ACCRUE, WHEN REPAYMENT IS NOT EFFECTED, UPON DISCHARGE AND IMMEDIATE REENLISTMENT OR UPON RETIREMENT AND IMMEDIATE RECALL TO ACTIVE DUTY. IT IS REPORTED THAT SUCH REGULATIONS, AND SIMILAR REGULATIONS CONTAINED IN CHANGE 2, ARMY REGULATIONS 35-1550, OCTOBER 24, 1955, WERE PROMULGATED IN THE BELIEF THAT THE CITED DECISIONS WERE BASED PRIMARILY ON THE SERVICE REGULATIONS IN EFFECT AT THE TIME THOSE DECISIONS WERE RENDERED. WHILE THOSE DECISIONS REFER TO SUCH REGULATIONS, THE REGULATIONS MERELY REFLECTED THE PROVISION OF LAW THERE QUOTED WHICH AUTHORIZED PAYMENTS OF INTEREST ON DEPOSITS TO A SOLDIER "ON (OR PRIOR TO) HIS FINAL DISCHARGE.' SEE SECTION 1306 OF THE REVISED STATUTES, AS AMENDED, 10 U.S.C. 907 (1952 USED.). TO THE SAME EFFECT, WAS THE ACT OF JULY 15, 1954, WHICH AUTHORIZED PAYMENT OF INTEREST TO AN ENLISTED MEMBER ,UPON (OR, UNDER CERTAIN CONDITIONS, PRIOR TO) FINAL DISCHARGE.' THE OMISSION OF THE WORD "FINAL" BEFORE THE WORD "DISCHARGE" IN THE LANGUAGE USED IN 10 U.S.C. 1035 (C), WHICH PROVIDES THAT PAYMENTS OF DEPOSITS AND INTEREST THEREON "MAY BE MADE ONLY TO THE MEMBER UPON DISCHARGE OR AT SUCH TIME BEFORE HIS DISCHARGE AS MAY BE PRESCRIBED BY THE SECRETARY CONCERNED," WAS NOT INTENDED AS EFFECTING ANY CHANGE IN THE LAW. SEE SECTION 49 (A) OF THE ACT OF AUGUST 10, 1956, 70A STAT. 640.

IT APPEARING THAT THERE HAS BEEN NO SUBSTANTIAL CHANGE IN THE APPLICABLE PROVISIONS OF LAW, THERE APPEARS TO BE NO BASIS FOR QUESTIONING THE RULE WHICH HAS BEEN FOLLOWED BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT FOR MORE THAN 70 YEARS. IT IS CLEAR THAT AN ENLISTED MEMBER IS ENTITLED TO PAYMENT OF HIS DEPOSITS AND ACCRUED INTEREST AT THE TIME OF HIS DISCHARGE, EVEN THOUGH HE REENLISTS IMMEDIATELY. IF HE WISHES TO HAVE THAT MONEY CONTINUE TO DRAW INTEREST, IT MUST BE REDEPOSITED, IN WHICH EVENT BOTH PRINCIPAL AND THE ACCRUED INTEREST SO REDEPOSITED WILL DRAW INTEREST. THE WITHDRAWAL AND REDEPOSIT MAY BE ACCOMPLISHED IN ONE TRANSACTION ON THE REQUEST OF THE MEMBER CONCERNED AS PROVIDED IN PARAGRAPH 22-63, ARMY REGULATIONS 37-104. SEE ALSO, PARAGRAPH 22-46B OF SUCH REGULATIONS.

QUESTIONS B AND C ARE ANSWERED IN THE NEGATIVE.

CONCERNING THE MATTER OF COMPOUND INTEREST, WE FIND NOTHING IN THE LANGUAGE CONTAINED IN 10 U.S.C. 1035 RELATING TO THE PAYMENT OF INTEREST WHICH WOULD PERMIT A CHANGE IN THE REGULATIONS TO PROVIDE THAT INTEREST BE COMPOUNDED AS OF THE DATE FOLLOWING THE DATE OF EXPIRATION OF EACH 3-YEAR PERIOD OF AN ENLISTMENT GREATER THAN 3 YEARS. QUESTION 2 IS ANSWERED ACCORDINGLY. AS INDICATED BY THE ANSWERS TO QUESTIONS B AND C, INTEREST WOULD BE COMPOUNDED AFTER DISCHARGE AND IMMEDIATE REENLISTMENT, OR AFTER RETIREMENT AND IMMEDIATE RECALL TO ACTIVE DUTY, ONLY IN THE EVENT THAT THE ACCRUED INTEREST PAYABLE AT THE TIME OF DISCHARGE OR RETIREMENT IS REDEPOSITED. IF DEPOSITS WITHDRAWN WITH ACCRUED INTEREST AT THE EXPIRATION OF EACH 3-YEAR PERIOD OF AN ENLISTMENT GREATER THAN 3 YEARS UNDER PARAGRAPH 22-65, ARMY REGULATIONS 37-104, ARE REDEPOSITED UNDER PARAGRAPH 22-46B OF SUCH REGULATIONS, THE TOTAL AMOUNT OF THE REDEPOSIT INVOLVED, INCLUDING THE ACCRUED INTEREST, WOULD EARN INTEREST UNTIL ITS WITHDRAWAL AGAIN IS AUTHORIZED.