B-147403, FEBRUARY 1, 1962, 41 COMP. GEN. 500

B-147403: Feb 1, 1962

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PAY - RETIRED - ANNUITY ELECTIONS FOR DEPENDENTS - CONTRIBUTION INDEBTEDNESS UNDER THE SURVIVORSHIP ANNUITY PLAN FOR MEMBERS OF THE UNIFORMED SERVICES WHEN A MEMBER DIES WHO WAS RECEIVING DISABILITY COMPENSATION RATHER THAN RETIRED PAY AND WHO HAS FAILED TO DEPOSIT THE MONTHLY PAYMENTS REQUIRED UNDER 10 U.S.C. 1348 TO COVER THE ANNUITY. ARE PAID. EVEN THOUGH LIQUIDATION OF THE DEBT WILL TAKE A LONG TIME. YOUR REQUEST FOR DECISION WAS FORWARDED TO THIS OFFICE BY THE OFFICE OF THE CHIEF OF FINANCE. IT IS REPORTED THAT CAPTAIN BRUMIT WAS PLACED ON THE EMERGENCY OFFICERS' RETIRED LIST AND WAS GRANTED DISABILITY COMPENSATION BY THE VETERANS ADMINISTRATION ON THE BASIS OF A 40 PERCENT DISABILITY RATING.

B-147403, FEBRUARY 1, 1962, 41 COMP. GEN. 500

PAY - RETIRED - ANNUITY ELECTIONS FOR DEPENDENTS - CONTRIBUTION INDEBTEDNESS UNDER THE SURVIVORSHIP ANNUITY PLAN FOR MEMBERS OF THE UNIFORMED SERVICES WHEN A MEMBER DIES WHO WAS RECEIVING DISABILITY COMPENSATION RATHER THAN RETIRED PAY AND WHO HAS FAILED TO DEPOSIT THE MONTHLY PAYMENTS REQUIRED UNDER 10 U.S.C. 1348 TO COVER THE ANNUITY, THE ACTUARIAL SOUNDNESS OF THE PLAN PRECLUDES THE PAYMENT OF ANY ANNUITY TO THE WIDOW UNTIL ALL THE MONTHLY CONTRIBUTIONS, PLUS INTEREST, ARE PAID, AND, EVEN THOUGH LIQUIDATION OF THE DEBT WILL TAKE A LONG TIME, THE ANNUITY PAYMENT ACCOUNT SHOULD BE ESTABLISHED AND THE AMOUNTS WITHHELD FROM THE BENEFICIARY SHOULD BE DEPOSITED INTO THE TREASURY AS PROVIDED IN 10 U.S.C. 1438.

TO COLONEL WEBSTER MILLS, DEPARTMENT OF THE ARMY, FEBRUARY 1, 1962:

YOUR LETTER OF OCTOBER 12, 1961, REQUESTED ADVANCE DECISION CONCERNING THE PROPRIETY OF PAYMENT OF A VOUCHER TOTALING $556.36 IN FAVOR OF SUSAN R. BRUMIT, WIDOW OF CAPTAIN PHILLIP R. BRUMIT, C 218018, RETIRED, DECEASED, REPRESENTING ANNUITY PAYMENTS TO HER FOR THE PERIOD AUGUST 1, 1960, THROUGH SEPTEMBER 30, 1961. YOUR REQUEST FOR DECISION WAS FORWARDED TO THIS OFFICE BY THE OFFICE OF THE CHIEF OF FINANCE, DEPARTMENT OF THE ARMY, BY FIRST ENDORSEMENT OF DECEMBER 19, 1961, UNDER D.O. NUMBER 260 ALLOCATED BY THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE.

IT IS REPORTED THAT CAPTAIN BRUMIT WAS PLACED ON THE EMERGENCY OFFICERS' RETIRED LIST AND WAS GRANTED DISABILITY COMPENSATION BY THE VETERANS ADMINISTRATION ON THE BASIS OF A 40 PERCENT DISABILITY RATING. CONTINUED TO RECEIVE SUCH COMPENSATION FROM THE VETERANS ADMINISTRATION, CENTRAL OFFICE, WASHINGTON 25, D.C., THROUGH THE DATE OF HIS DEATH, AUGUST 17, 1960.

BY FORM DA 1041 WS, DATED APRIL 29, 1954, THE MEMBER, WHO WAS RETIRED PRIOR TO NOVEMBER 1, 1953, EFFECTIVE DATE OF THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, 67 STAT. 501, 10 U.S.C. 1431, ELECTED OPTIONS ONE AND FOUR AT ONE-HALF REDUCED RETIREMENT PAY IN ORDER TO PROVIDE AN ANNUITY FOR HIS WIFE UNDER THAT ACT. THE ELECTION WAS EFFECTIVE APRIL 1, 1954, AND THE COST OF ANNUITY WAS COMPUTED AS $135.80 AND THE ANNUITY PAYABLE AS $39.74 MONTHLY. CAPTAIN BRUMIT WAS REQUESTED TO MAKE REMITTANCES FOR THE MONTHLY COST OF ANNUITY TO HEADQUARTERS, FINANCE AND ACCOUNTING OFFICER, UNITED STATES ARMY, IN ACCORDANCE WITH SECTION 5 OF THAT ACT, WHICH, AS CODIFIED IN 10 U.S.C. 1438, PROVIDES AS FOLLOWS:

IF, FOR ANY PERIOD, A PERSON WHO HAS BEEN RETIRED OR HAS BECOME ENTITLED TO RETIRED OR RETAINER PAY, AND WHO HAS ELECTED AN ANNUITY UNDER THIS CHAPTER, IS NOT ENTITLED TO RETIRED OR RETAINER PAY, HE MUST DEPOSIT IN THE TREASURY THE AMOUNT THAT WOULD OTHERWISE HAVE BEEN DEDUCTED FROM HIS PAY FOR THAT PERIOD TO PROVIDE THE ANNUITY.

DUE TO THE FACT THAT HE WAS RECEIVING VETERANS BENEFITS IN LIEU OF RETIRED PAY, CAPTAIN BRUMIT WAS SUBJECT TO THE DEPOSIT PROVISION OF THE LAW. IN REPLY TO LETTER DATED JULY 21, 1954, ADDRESSED TO HIM BY THE ARMY FINANCE CENTER REQUESTING PAYMENT OF $407.40 REPRESENTING PREMIUMS FOR THE MONTHS OF APRIL, MAY AND JUNE 1954, MRS. BRUMIT STATED THAT HER HUSBAND WAS MENTALLY INCOMPETENT AND REQUESTED THAT HIS ELECTION UNDER THE CONTINGENCY OPTION ACT BE CANCELED UNTIL HIS CONDITION IMPROVED. ALTHOUGH SHE WAS REQUESTED TO FURNISH PROOF OF HER HUSBAND'S COMPETENCY, SHE FAILED TO DO SO. BY LETTERS DATED DECEMBER 3, 1956, AND JANUARY 30, 1957, AFTER THE INDEBTEDNESS WAS REFERRED HERE AS UNCOLLECTIBLE, OUR OFFICE REQUESTED CAPTAIN BRUMIT TO PAY THE AMOUNT OF $2,639.09 THEN REPORTED TO BE DUE OR SUBMIT A DEFINITE PLAN FOR PAYMENT WITHIN A REASONABLE TIME, BUT HE DID NOT REPLY. IT WAS LATER DETERMINED FROM INFORMATION OUR OFFICE RECEIVED THAT CAPTAIN BRUMIT WAS WITHOUT FUNDS, OTHER THAN COMPENSATION FROM THE VETERANS ADMINISTRATION WHICH, WITHOUT HIS CONSENT, COULD NOT BE USED TO LIQUIDATE THE DEBT AND COLLECTION ACTION WAS DISCONTINUED.

THE INDEBTEDNESS FOR THE PERIOD APRIL 1, 1954, THROUGH AUGUST 17, 1960, IS NOW STATED TO BE $10,397.75 PLUS $1,030.07 INTEREST AT THE RATE OF .0025 PERCENT A MONTH, COMPOUNDED MONTHLY, OR A TOTAL OF $11,427.82. THE MONTHLY ANNUITY PAYMENTS OF $39.74 WITHHELD SINCE AUGUST 1960 AND COMPUTED THROUGH SEPTEMBER 1961 HAVE REDUCED THE INDEBTEDNESS FROM $11,427.82 TO $10,871.46 AS OF OCTOBER 1, 1961. THE WIDOW HAS REQUESTED PAYMENT OF THE ANNUITY WITH A REASONABLE DEDUCTION THEREFROM TO PAY THE DEBT. YOU STATE THAT IF PAYMENT WERE WITHHELD IN FULL IT WOULD TAKE APPROXIMATELY 24 YEARS TO LIQUIDATE THE DEBT AND THAT IN VIEW OF THESE CIRCUMSTANCES DOUBT EXISTS AS TO WHETHER OR NOT PAYMENT SHOULD BE ESTABLISHED AND WITHHELD IN WHOLE OR IN PART FROM THE ANNUITANT OR WHETHER FURTHER ACTION SHOULD BE DISCONTINUED IN THIS AND SIMILAR CASES.

THE CONTINGENCY OPTION ACT PROVIDES A PLAN WHICH WAS INTENDED TO BE ACTUARIALLY SOUND WITH NO PUBLIC FUNDS BEING APPROPRIATED TO PAY ANY OF THE BENEFITS PROVIDED IN THE 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. IF THE OPERATION OF THE PLAN IS NOT CONTINUED ON THIS BASIS THE DEFICIT WILL HAVE TO BE MADE UP FROM APPROPRIATED FUNDS OF THE PREMIUMS WILL HAVE TO BE RAISED DISPROPORTIONATELY TO THE AVERAGE RISK.

WE HAVE HELD THAT IN THE EVENT A RETIRED MEMBER FAILS TO PAY THE REQUIRED AMOUNTS UNDER SECTION 5 AND COLLECTION OF ARREARS HAS NOT BEEN EFFECTED AT THE TIME OF HIS DEATH, THE ANNUITY DUE MAY BE WITHHELD TO ACCOMPLISH PAYMENT OF THE TOTAL AMOUNT OF ARREARS DUE, WITH INTEREST. 35 COMP. GEN. 12. NO AUTHORITY HAS BEEN FOUND FOR PAYMENT OF AN ANNUITY UNDER THE ACT BEFORE PAYMENT TO THE GOVERNMENT OF THE COST OF THAT ANNUITY AND, ACCORDINGLY, IT MUST BE HELD THAT NO ANNUITY MAY BE PAID TO MRS. BRUMIT UNTIL ALL THE MONTHLY CONTRIBUTIONS PLUS INTEREST ARE PAID. THE VOUCHER PRESENTED, NOT BEING PROPER FOR PAYMENT, WILL BE RETAINED HERE.

IN ANSWER TO YOUR QUESTION AS TO "WHETHER PAYMENTS SHOULD BE ESTABLISHED AND WITHHELD," YOU ARE ADVISED THAT SINCE THE AMOUNT OF THE INDEBTEDNESS IN THIS CASE REPRESENTS THE SUM OF THE PAYMENTS WHICH SHOULD HAVE BEEN DEPOSITED IN THE TREASURY CURRENTLY PURSUANT TO THE PROVISIONS OF 10 U.S.C. 1438, ANNUITY PAYMENTS SHOULD BE ESTABLISHED, THE AMOUNT THEREOF TO BE WITHHELD FROM MRS. BRUMIT AND DEPOSITED IN THE TREASURY AS PROVIDED IN THAT SECTION IN LIQUIDATION OF THE INDEBTEDNESS.