B-142031, JULY 1, 1960, 40 COMP. GEN. 1

B-142031: Jul 1, 1960

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DUE TO A FINDING THAT THE MEMBER WAS PHYSICALLY FIT FOR DUTY. IS NOT A REMOVAL FOR RETIREMENT OR GRANT OF RETIRED PAY MERELY BECAUSE THE MEMBER IS IMMEDIATELY ELIGIBLE FOR RETIRED OR RETAINER PAY. THE MEMBER IS ENTITLED UNDER 10 U.S.C. 1439 TO A REFUND OF THE DIFFERENCE BETWEEN THE AMOUNT BY WHICH HIS RETIRED PAY WAS REDUCED TO PROVIDE FOR THE DEPENDENTS' ANNUITY AND THE COST OF AN AMOUNT OF TERM INSURANCE EQUAL TO THE PROTECTION PROVIDED FOR HIS DEPENDENTS DURING THE PERIOD THE MEMBER WAS ON THE TEMPORARY DISABILITY RETIRED LIST. IS REMOVED FROM THE TEMPORARY DISABILITY RETIRED LIST UPON A FINDING THAT HE IS PHYSICALLY FIT FOR DUTY AND RESUMES HIS STATUS IN THE FLEET RESERVE MAY HAVE SUCH REMOVAL REGARDED AS A REMOVAL FOR A REASON OTHER THAN FOR RETIREMENT OR GRANT OF RETIRED PAY FOR REFUND OF THE ANNUITY DEDUCTIONS UNDER 10 U.S.C. 1439.

B-142031, JULY 1, 1960, 40 COMP. GEN. 1

MILITARY PERSONNEL - RETIRED PAY - ANNUITY ELECTIONS FOR DEPENDENTS - TEMPORARY DISABILITY RETIRED LIST THE REMOVAL OF THE NAME OF A MEMBER OF THE UNIFORMED SERVICES FROM THE TEMPORARY DISABILITY RETIRED LIST AFTER HE HAD ELECTED TO RECEIVE REDUCED RETIRED PAY TO PROVIDE A SURVIVORSHIP ANNUITY FOR HIS DEPENDENTS, DUE TO A FINDING THAT THE MEMBER WAS PHYSICALLY FIT FOR DUTY, IS NOT A REMOVAL FOR RETIREMENT OR GRANT OF RETIRED PAY MERELY BECAUSE THE MEMBER IS IMMEDIATELY ELIGIBLE FOR RETIRED OR RETAINER PAY, THE REMOVAL BEING ACCOMPLISHED WITHOUT REGARD TO THE MEMBER'S ELIGIBILITY FOR RETIRED OR RETAINER PAY; AND, THEREFORE, THE MEMBER IS ENTITLED UNDER 10 U.S.C. 1439 TO A REFUND OF THE DIFFERENCE BETWEEN THE AMOUNT BY WHICH HIS RETIRED PAY WAS REDUCED TO PROVIDE FOR THE DEPENDENTS' ANNUITY AND THE COST OF AN AMOUNT OF TERM INSURANCE EQUAL TO THE PROTECTION PROVIDED FOR HIS DEPENDENTS DURING THE PERIOD THE MEMBER WAS ON THE TEMPORARY DISABILITY RETIRED LIST. A FLEET RESERVIST WHO, AFTER PLACEMENT ON THE TEMPORARY DISABILITY RETIRED LIST AND ELECTION OF REDUCED RETIRED PAY TO PROVIDE A SURVIVORSHIP ANNUITY FOR HIS DEPENDENTS, IS REMOVED FROM THE TEMPORARY DISABILITY RETIRED LIST UPON A FINDING THAT HE IS PHYSICALLY FIT FOR DUTY AND RESUMES HIS STATUS IN THE FLEET RESERVE MAY HAVE SUCH REMOVAL REGARDED AS A REMOVAL FOR A REASON OTHER THAN FOR RETIREMENT OR GRANT OF RETIRED PAY FOR REFUND OF THE ANNUITY DEDUCTIONS UNDER 10 U.S.C. 1439, NOTWITHSTANDING THAT THE ANNUITY BENEFITS EXCEEDED THE COST OF TERM INSURANCE DURING THE PERIOD ON THE DISABILITY RETIRED LIST. THE PROVISION FOR A RE-EVALUATION OF SURVIVORSHIP ANNUITY COSTS IN THE CASE OF A MEMBER OF THE UNIFORMED SERVICES WHOSE NAME IS REMOVED FROM THE TEMPORARY DISABILITY RETIRED LIST FOR ANY REASON OTHER THAN RETIREMENT OR GRANT OF RETIRED PAY, WITHIN THE PURVIEW OF 10 U.S.C. 1439, NECESSARILY REQUIRES A NEW COMPUTATION WHEN THE MEMBER AGAIN BECOMES ELIGIBLE FOR RETIRED OR RETAINER PAY, WHETHER IMMEDIATELY OR NOT, AND SUCH COMPUTATION SHOULD BE MADE ON THE BASIS OF THE OPTIONS ORIGINALLY ELECTED BY THE MEMBER, BUT COGNIZANCE SHOULD BE TAKEN OF SUCH CHANGED FACTORS AS GROSS RETAINER OR RETIRED PAY, AGES, AND DISABILITY, OR NONDISABILITY AS OF THE DATE OF ELIGIBILITY FOR RETAINER OR RETIRED PAY. A MEMBER WHO, AFTER PLACEMENT ON THE TEMPORARY DISABILITY RETIRED LIST AND ELECTION OF REDUCED RETIRED PAY TO PROVIDE FOR A SURVIVORSHIP ANNUITY FOR HIS DEPENDENTS, IS FOUND PHYSICALLY FIT FOR DUTY, AND DISCHARGED FOR IMMEDIATE REENLISTMENT IS REGARDED AS HAVING HIS NAME REMOVED FOR A REASON OTHER THAN RETIREMENT OR RETIRED PAY UNDER THE ANNUITY REFUND PROVISIONS IN 10 U.S.C. 1439 AND IS ENTITLED TO A REFUND OF THE DIFFERENCE BETWEEN DEDUCTIONS FROM HIS RETIRED PAY FOR DEPENDENTS' ANNUITY AND THE COST OF TERM INSURANCE EQUAL TO THE PROTECTION PROVIDED FOR HIS DEPENDENTS DURING THE PERIOD WHILE HE WAS ON THE TEMPORARY DISABILITY RETIRED LIST. A REFUND UNDER 10 U.S.C. 1439, TO A MEMBER WHOSE NAME WAS REMOVED FROM THE TEMPORARY DISABILITY RETIRED LIST, OF THE DIFFERENCE BETWEEN DEDUCTIONS FROM RETIRED PAY FOR DEPENDENTS' ANNUITY AND THE COST OF TERM INSURANCE EQUAL TO THE PROTECTION PROVIDED FOR THE DEPENDENTS DURING THE PERIOD THE MEMBER WAS ON THE LIST NULLIFIED THE OPERATION OF THE SURVIVORSHIP ANNUITY OPTION SYSTEM FOR THAT PERIOD INSOFAR AS DEDUCTIONS FROM RETIRED PAY WERE CONCERNED; HENCE, WHEN THE MEMBER, AFTER A PERIOD OF ACTIVE DUTY, IS TRANSFERRED TO THE FLEET RESERVE, HE IS REGARDED AS BEING RETIRED ON THE FOLLOWING DAY AND THAT DAY IS THE DATE FOR THE COMPUTATION OF THE COST OF THE ANNUITY ELECTION ON THE BASIS OF THE MEMBER'S GROSS RETAINER PAY AND AGES AT THAT TIME IN ACCORDANCE WITH THE OPTIONS ORIGINALLY ELECTED BY THE MEMBER.

TO R. A. WILSON, DEPARTMENT OF THE NAVY, JULY 1, 1960:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 20, 1959, WITH ENCLOSURES, FORWARDED HERE IN FEBRUARY 15, 1960, AS SUBMISSION NO. DO-N-481 (ASSIGNED BY THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE), REQUESTING DECISION AS TO CERTAIN QUESTIONS ARISING IN CONNECTION WITH ELECTIONS MADE UNDER THE UNIFORMED SERVICE CONTINGENCY OPTION ACT OF 1953, 10 U.S.C. 1431-1444, BY PAUL H. EALEY, ADC, USN, AND HENRY CARTA, BMC, USN.

PARAGRAPHS (A) AND (B), SECTION 402 OF THE CAREER COMPENSATION ACT OF 1949, 63 STAT. 816, 817, 37 U.S.C. 272--- REPEALED AND RE-ENACTED AUGUST 10, 1956, AS 10 U.S.C. 1201 AND 1202--- PROVIDED IN PERTINENT PART THAT UPON DETERMINATION BY THE SECRETARY CONCERNED THAT A MEMBER OF A REGULAR COMPONENT OF THE UNIFORMED SERVICES, ENTITLED TO RECEIVE BASIC PAY, HAD INCURRED DISABILITY OF AT LEAST 30 PERCENT WHILE ENTITLED TO RECEIVE BASIC PAY, AND THAT SUCH DISABILITY MIGHT BE PERMANENT, THE MEMBER SHOULD BE PLACED UPON THE TEMPORARY DISABILITY RETIRED LIST OF HIS SERVICE WITH ENTITLEMENT TO DISABILITY RETIREMENT PAY.

SECTION 3 (A) OF THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, 67 STAT. 502, 10 U.S.C. 1431-1444--- REPEALED AND RE-ENACTED EFFECTIVE AUGUST 10, 1956, AS 10 U.S.C. 1431 (B) AND (C/--- PROVIDED THAT AN ACTIVE MEMBER MIGHT ELECT, PRIOR TO THE COMPLETION OF 18 YEARS' SERVICE CREDITABLE IN THE COMPUTATION OF ACTIVE-DUTY PAY, TO RECEIVE A REDUCED AMOUNT OF ANY RETIRED PAY WHICH MIGHT BE AWARDED TO HIM AS THE RESULT OF SERVICE IN HIS UNIFORMED SERVICE, IN ORDER TO PROVIDE ONE OR MORE OF THE ANNUITIES SPECIFIED IN SECTION 4 OF THE ACT; AND THAT THE TERMS OF AN ELECTION MIGHT BE MODIFIED OR REVOKED AT ANY TIME PRIOR TO THE MEMBER'S RETIREMENT, BUT THAT ANY MODIFICATION OR REVOCATION SO MADE SHOULD NOT BE EFFECTIVE IF HE RETIRED WITHIN FIVE YEARS AFTER THE DATE IT WAS MADE.

SECTION 3 (B) OF THE 1953 ACT, NOW 10 U.S.C. 1431 (D), PROVIDED THAT:

A RETIRED MEMBER WHO HAS HERETOFORE BEEN AWARDED RETIRED PAY BY A UNIFORMED SERVICE MAY, WITHIN ONE HUNDRED AND EIGHTY DAYS AFTER THE EFFECTIVE DATE OF THIS ACT, ELECT TO RECEIVE A REDUCED AMOUNT OF THAT RETIRED PAY IN ORDER TO PROVIDE ONE OR MORE OF THE ANNUITIES SPECIFIED IN SECTION 4, PAYABLE AFTER HIS DEATH TO HIS WIDOW, CHILD, OR CHILDREN. ELECTION SO MADE SHALL THEREAFTER BE IRREVOCABLE.

SECTION 4 (A) OF THE 1953 ACT, NOW 10 U.S.C. 1434, PROVIDED THAT ANNUITIES MIGHT BE ELECTED IN AMOUNTS EQUAL TO ONE-HALF, ONE-QUARTER OR ONE-EIGHTH OF REDUCED RETIRED PAY FOR: OPTION 1, THE MEMBER'S WIDOW, OR OPTION 2, HIS SURVIVING CHILDREN, OR, OPTION 3, HIS WIDOW AND SURVIVING CHILDREN. IT ALSO WAS PROVIDED THAT WITH ANY OF THE ABOVE OPTIONS THE MEMBER ALSO MIGHT ELECT OPTION 4 (NO FURTHER DEDUCTIONS TO BE MADE FROM RETIRED PAY FOLLOWING THE MONTH IN WHICH THERE WOULD BE NO BENEFICIARY ELIGIBLE TO RECEIVE AN ANNUITY UPON THE MEMBER'S DEATH).

SECTION 4 (C) OF THE 1953 ACT, NOW 10 U.S.C. 1436, PROVIDED THAT THE REDUCTION TO BE MADE IN RETIRED PAY SHOULD BE COMPUTED AS OF THE DATE OF RETIREMENT IN THE CASE OF AN ACTIVE MEMBER, AND AS OF THE DATE OF ELECTION IN THE CASE OF A RETIRED MEMBER.

SECTION 1439 OF TITLE 10, U.S.C. PROVIDES THAT:

IF A PERSON WHOSE NAME IS ON THE TEMPORARY DISABILITY RETIRED LIST OF AN ARMED FORCE, AND WHO HAS ELECTED AN ANNUITY UNDER THIS CHAPTER, HAS HIS NAME REMOVED FROM THAT LIST FOR ANY REASON OTHER THAN RETIREMENT OR GRANT OF RETIRED PAY, HE IS ENTITLED TO A REFUND OF THE DIFFERENCE BETWEEN THE AMOUNT BY WHICH HIS RETIRED PAY WAS REDUCED TO PROVIDE THE ANNUITY AND THE COST OF AN AMOUNT OF TERM INSURANCE EQUAL TO THE PROTECTION FOR HIS DEPENDENTS DURING THE PERIOD THAT HE WAS ON THAT LIST.

THE FACTS IN THE TWO CASES PRESENTED, AS REPORTED IN YOUR LETTER ARE SET OUT BELOW:

PAUL H. EALEY, ADC, USN, WAS INITIALLY TRANSFERRED TO THE FLEET RESERVE EFFECTIVE OCTOBER 23, 1952, AND WAS RETAINED ON ACTIVE DUTY. EFFECTIVE APRIL 1, 1953, HE WAS RELEASED FROM ACTIVE DUTY AND TRANSFERRED TO THE TEMPORARY DISABILITY RETIRED LIST, PURSUANT TO THE PROVISIONS OF SECTION 402 (A), 37 U.S.C. 272 (A), OF THE CAREER COMPENSATION ACT OF 1949. UNDER THE PROVISIONS OF THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, HE EXECUTED AN ELECTION, POSTMARKED APRIL 2, 1954, OF OPTIONS 2 AND 4, AT ONE-HALF OF REDUCED RETIRED PAY. IT WAS DETERMINED THAT THE DEDUCTION FROM HIS RETIRED PAY SHOULD BE $3.15 PER MONTH, AND THE PROSPECTIVE ANNUITY WOULD BE $67.22 PER MONTH. DEDUCTIONS OF $3.15 PER MONTH HAVE BEEN MADE, BEGINNING APRIL 1, 1954. EALEY WAS FOUND TO BE PHYSICALLY FIT FOR DUTY, HIS STATUS ON THE TEMPORARY DISABILITY RETIRED LIST WAS TERMINATED AND HE RESUMED HIS STATUS IN THE FLEET RESERVE ON FEBRUARY 28, 1958. IN EALEY'S CASE THE COST OF TERM INSURANCE FOR THE PERIOD APRIL 1, 1954, TO FEBRUARY 28, 1958, EXCEEDED THE AMOUNT OF DEDUCTIONS FROM HIS RETIRED PAY FOR THAT PERIOD. YOU STATE THAT IF A NEW COMPUTATION WERE MADE EFFECTIVE AS OF MARCH 1, 1958, ON THE BASIS OF RETAINER PAY AND AGES ON THAT DATE AND NONDISABILITY RETIREMENT, THE DEDUCTION WOULD BE REDUCED TO ?97 PER MONTH AND THE PROSPECTIVE ANNUITY INCREASED TO $75.57 PER MONTH.

HENRY CARTA, BMC, USN, ON OCTOBER 29, 1954, EXECUTED AN ELECTION UNDER THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953 OF OPTIONS 3 AND 4 AT ONE-HALF OF REDUCED RETIRED PAY. HE WAS TRANSFERRED TO THE TEMPORARY DISABILITY RETIRED LIST EFFECTIVE JUNE 1, 1957, UNDER THE PROVISIONS OF 10 U.S.C. 1202. IT WAS DETERMINED THAT THE HIGHEST TEMPORARY RANK SATISFACTORILY HELD BY HIM WAS THAT OF LIEUTENANT (JUNIOR GRADE) AND HE WAS PLACED ON THE RETIRED LIST IN THAT RANK. MONTHLY DEDUCTIONS OF $43.13 AND A PROSPECTIVE ANNUITY OF $86.96 PER MONTH WERE ESTABLISHED AS OF JUNE 1, 1957, AND DEDUCTIONS WERE MADE AT THAT RATE FROM JUNE 1, 1957, TO AUGUST 27, 1959. CARTA WAS FOUND TO BE PHYSICALLY FIT FOR DUTY AND ON AUGUST 27, 1959, HE WAS HONORABLY DISCHARGED FOR IMMEDIATE REENLISTMENT. HIS STATUS ON THE RETIRED LIST AND HIS RETIRED PAY TERMINATED ON THAT DAY. HE REENLISTED AUGUST 28, 1959. UNDER 10 U.S.C. 1439, QUOTED ABOVE, HE WAS GIVEN A REFUND OF $611.62, REPRESENTING THE DIFFERENCE BETWEEN DEDUCTIONS FROM HIS RETIRED PAY FROM JUNE 1, 1957, TO AUGUST 27, 1959, AND THE COST OF TERM INSURANCE FOR THAT PERIOD. CARTA WAS TRANSFERRED TO THE FLEET RESERVE EFFECTIVE SEPTEMBER 30, 1959. THE DEDUCTION IN HIS CASE HAS BEEN RECOMPUTED AS OF OCTOBER 1, 1959, ON THE BASIS OF RETAINER PAY AND AGES ON THAT DATE AND NONDISABILITY RETIREMENT, RESULTING IN A MONTHLY DEDUCTION OF $26.72 AND A PROSPECTIVE ANNUITY OF $78.52 PER MONTH.

IT IS ASSUMED THAT THE ORIGINAL COMPUTATION IN EACH OF THE ABOVE CASES WAS MADE ON THE BASIS OF RETIREMENT FOR DISABILITY, RESULTING IN EACH CASE IN A GREATER DEDUCTION FROM RETIRED PAY THAN WOULD HAVE BEEN APPLIED HAD COMPUTATION BEEN ON A NONDISABILITY BASIS.

THE QUESTIONS PRESENTED FOR DECISION ARE QUOTED AND DISCUSSED BELOW, BUT NOT IN THE ORDER PRESENTED.

A. IF THE COST OF BENEFITS UNDER REFERENCE (A) ( UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953) HAD EXCEEDED THE COST OF TERM INSURANCE, WOULD PAUL H. EALEY HAVE BEEN ENTITLED TO THE REFUND AUTHORIZED BY 37 U.S.C. 373 (D) AND 10 U.S.C. 1439?

C. IN EALEY'S CASE, SHOULD THE MONTHLY DEDUCTIONS BE RECOMPUTED AS OF 1 MARCH 1958 (THE DAY AFTER HIS REMOVAL FROM THE TEMPORARY DISABILITY RETIRED LIST) ON THE BASIS OF GROSS RETAINER PAY AND AGES AS OF THAT DATE, USING NONDISABILITY COST TABLES?

AS STATED IN THE DISCUSSION OF QUESTION "C" BELOW, EALEY'S CASE COMES WITHIN THE SCOPE OF 10 U.S.C. 1439. ACCORDINGLY, QUESTION "A" IS ANSWERED IN THE AFFIRMATIVE.

EALEY'S NAME WAS REMOVED FROM THE TEMPORARY DISABILITY RETIRED LIST BECAUSE HE WAS FOUND PHYSICALLY FIT FOR DUTY, WHICH WOULD HAVE BEEN DONE WHETHER OR NOT HE WAS IMMEDIATELY ELIGIBLE FOR RETAINER PAY. THUS, HIS NAME WAS NOT REMOVED FROM THE LIST BECAUSE OF "RETIREMENT OR GRANT OF RETIRED PAY.' THAT BEING TRUE, THE PROVISIONS OF 10 U.S.C. 1439 ARE APPLICABLE IN HIS CASE.

THE PROVISION FOR A RE-EVALUATION OF OPTION COSTS IN A CASE COMING UNDER 10 U.S.C. 1439 NECESSARILY REQUIRES A NEW COMPUTATION WHEN THE MEMBER AGAIN BECOMES ELIGIBLE FOR RETIRED OR RETAINER PAY, WHETHER IMMEDIATELY OR NOT. SUCH COMPUTATION SHOULD BE ON THE BASIS OF THE OPTIONS ORIGINALLY ELECTED BY THE MEMBER, BUT COGNIZANCE SHOULD BE TAKEN OF THE FACTORS--- GROSS RETAINER OR RETIRED PAY, AGES, AND DISABILITY OR NONDISABILITY--- AS OF THE DATE OF SUCH ELIGIBILITY.

ACCORDINGLY, QUESTION "C" IS ANSWERED IN THE AFFIRMATIVE.

B. IS THE REFUND GIVEN TO HENRY CARTA CONSIDERED TO BE PROPER UNDER 27 U.S.C. 373 (D) AND 10 1439?

D. WAS IT PROPER TO RECOMPUTE THE COST OF CARTA'S ELECTION ON THE BASIS OF GROSS RETAINER PAY AND AGES AS OF 1 OCTOBER 1959 (THE DAY AFTER HIS TRANSFER TO THE FLEET RESERVE), USING NONDISABILITY COST TABLES?

IN THE REPORT OF THE COMMITTEE ON ARMED SERVICES, U.S. SENATE, S.1REPT. NO. 672, 83D CONG., ST SESS. (1953), P. 6; U.S.C. CONGRESSIONAL AND ADMINISTRATIVE NEWS, 83D CONG., ST SESS. (1953), VOL. 2, P. 2266, IT STATED THAT: "UNDER THIS SUBSECTION (NOW 10 U.S.C. 1439) REFUND WOULD BE MADE WHERE THE MEMBER WAS RETURNED TO ACTIVE SERVICE OR WHERE HE WAS SEPARATED FROM THE SERVICE.' CARTA, UPON THE TERMINATION OF HIS STAY ON THE TEMPORARY DISABILITY RETIRED LIST, WAS SEPARATED FROM THE SERVICE AND IMMEDIATELY RETURNED TO ACTIVE SERVICE. IN VIEW OF SUCH LEGISLATIVE HISTORY AND THE LANGUAGE OF 10 U.S.C. 1439, THAT SECTION PROPERLY WAS FOR APPLICATION IN HIS CASE. QUESTION "B" IS ANSWERED IN THE AFFIRMATIVE.

BY VIRTUE OF THE REFUND TO CARTA THE COSTS OF PROTECTION TO HIS DEPENDENTS FOR THE PERIOD DURING WHICH HIS NAME WAS CARRIED ON THE TEMPORARY DISABILITY RETIRED LIST HAVE BEEN READJUSTED ON THE BASIS OF TERM INSURANCE. THIS, IN EFFECT, NULLIFIED THE OPERATION OF THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953 FOR THAT PERIOD INSOFAR AS DEDUCTIONS FROM RETIRED PAY WERE CONCERNED. HENCE, THE DATE OF COMPUTATION OF SUCH DEDUCTIONS AND OF POTENTIAL ANNUITIES UNDER THAT ACT IS NOW OCTOBER 1, 1959, THE DAY FOLLOWING THE DATE OF CARTA'S TRANSFER TO THE FLEET RESERVE, WHICH IS TO BE CONSIDERED AS THE DATE OF HIS RETIREMENT.

ON THE ASSUMPTION THAT THE NEW COMPUTATION WAS MADE ON THE BASIS OF THE OPTIONS ELECTED ON OCTOBER 29, 1954, QUESTION "D" IS ANSWERED IN THE AFFIRMATIVE.