B-14817, FEBRUARY 21, 1941, 20 COMP. GEN. 474

B-14817, FEBRUARY 21, 1941, 20 COMP. GEN. 474

RETIREMENT - CIVILIAN - ANNUITIES - FORM OF - EMPLOYEE'S ELECTION TO CHANGE AFTER RETIREMENT THE CIVIL SERVICE RETIREMENT ACT, AS AMENDED, GRANTS TO AN EMPLOYEE ONLY ONE RIGHT OF ELECTION BETWEEN THE DIFFERENT FORMS OF RETIREMENT ANNUITY AND DOES NOT AUTHORIZE A FORMER EMPLOYEE TO CANCEL THE ELECTION ON WHICH HIS CLAIM FOR ANNUITY WAS FINALLY ADJUDICATED AND MAKE A DIFFERENT ELECTION AFTER SUCH ADJUDICATION, NOTWITHSTANDING THAT NO ANNUITY CHECKS MAY HAVE BEEN RECEIVED BY HIM.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE PRESIDENT, UNITED STATES CIVIL SERVICE COMMISSION, FEBRUARY 21, 1941:

I HAVE YOUR LETTER OF JANUARY 31, 1941 (FILE CSA-108576), AS FOLLOWS:

THERE HAS BEEN PRESENTED TO THIS COMMISSION, THROUGH THE OFFICE OF THE HONORABLE PETER G. GERRY, UNITED STATES SENATE, A QUESTION CONCERNING THE PROPER ACTION TO BE TAKEN IN THE CASE OF MR. JAMES P. MCMAHON, A FORMER EMPLOYEE OF THE POST OFFICE DEPARTMENT.

IN HIS APPLICATION FOR ANNUITY MR. MCMAHON ELECTED TO RECEIVE AN INCREASED LIFE ANNUITY CARRYING WITH IT UPON HIS DEATH A FORFEITURE OF ANY UNEXPENDED PORTION OF HIS INDIVIDUAL ACCOUNT IN THE RETIREMENT FUND. ACCORDANCE WITH THE COMMISSION'S POLICY IN SUCH CASES AND BEFORE ADJUDICATING HIS CLAIM UNDER THIS ELECTION THIS OFFICE ADVISED CLAIMANT OF THE RATE PAYABLE UNDER THIS FORFEITURE PLAN AS COMPARED WITH THE RATE ALLOWABLE UNDER THE REGULAR LIFE ANNUITY OPTION. IN RESPONSE TO SUCH ADVICE MR. MCMAHON ADVISED THE COMMISSION BY LETTER DATED JANUARY 1, 1941, AS FOLLOWS:

" I AM IN RECEIPT OF YOUR COMMUNICATION OF DEC. 20. IN MY ORIGINAL APPLICATION FOR RETIREMENT I STATED THAT I CHOSE THE FORFEITURE PLAN WHICH AS YOUR COMMUNICATION STATES ENTITLES ME TO $1,231.08 PER ANNUM. THERE IS NO DISPOSITION ON MY PART TO ALTER THAT CHOICE.

"WILL YOU PLEASE, AT YOUR EARLIEST CONVENIENCE, SEND ME A CHECK FOR THE AMOUNT DUE ME FOR THE TWO MONTHS BEGINNING NOV. 1, AND ENDING DEC. 31. MAY I EXPECT AN IMMEDIATE REPLY?

BASED UPON SUCH ADVICE THIS COMMISSION, UNDER DATE OF JANUARY 7,1941, FINALLY APPROVED MR. MCMAHON'S ANNUITY CLAIM FOR ALLOWANCE, AND CERTIFICATE EVIDENCING SUCH ACTION WAS ISSUED THE FOLLOWING DAY AND MAILED HIM AT THE ADDRESS GIVEN IN HIS APPLICATION. IN VIEW OF THE INFORMAL PROTEST RECEIVED FROM SENATOR GERRY ON JANUARY 10, 1941, NO PAYMENT OF ANNUITY HAS GONE FORWARD TO HIM FROM THE TREASURY DEPARTMENT.

THE COMMISSION'S PRACTICE HERETOFORE HAS BEEN TO HOLD THAT WHEN AN ELECTION HAS BEEN MADE AT THE TIME OF RETIREMENT AS BETWEEN THE FORFEITURE AND NONFORFEITURE ANNUITY, WITH THE EMPLOYEE IN FULL POSSESSION OF ALL MATERIAL FACTS, AND THE CLAIM IS FINALLY APPROVED BASED ON SUCH ELECTION, NO CHANGE MAY LATER BE MADE REGARDLESS OF THE REASON THEREFOR. WE HAVE NOT CONSIDERED THAT RECEIPT OF THE FIRST ANNUITY CHECK BY THE FORMER EMPLOYEE IS A NECESSARY ELEMENT TO BIND THE ANNUITANT TO THE PLAN PREVIOUSLY ELECTED BY HIM AND FINALLY APPROVED BY THE COMMISSION.

IT MAY BE STATED THAT IN OUR OPINION AUTHORITY FOR THIS PRACTICE MAY BE FOUND IN A DECISION OF THE COMPTROLLER GENERAL UNDER DATE OF OCTOBER 7, 1932 (AR-42415) IN WHICH IT WAS HELD THAT THE LINE OF DEMARCATION BETWEEN AN INDIVIDUAL'S TRANSITION FROM EMPLOYEE TO ANNUITANT IS THE DATE OF FINAL APPROVAL OF THE ANNUITY CLAIM. THIS DECISION IS CONSIDERED AS INTERPRETATIVE OF THE REQUIREMENT OF SECTION 4 OF THE ACT OF MAY 29, 1930, PROVIDING THAT THE ELECTION BY AN EMPLOYEE OF FORFEITURE OR NONFORFEITURE ANNUITY IS TO BE MADE "AT THE TIME OF HIS RETIREMENT.' THE DECISION OF OCTOBER 7, 1932, WAS MADE BY THE COMPTROLLER GENERAL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS. FOLLOWING RECEIPT OF SAID DECISION, THE SOLICITOR OF THE VETERANS' ADMINISTRATION HELD THAT THE PHRASE "FINAL APPROVAL" MEANT THE APPROVAL OF THE CLAIM BY THE LEGAL REVIEWER.

WE WOULD APPRECIATE YOUR REVIEWING THIS QUESTION AND SUPPLYING US WITH A DECISION ON THE POINT OF WHETHER OR NOT, IN THE LIGHT OF THE LAW AND THE DECISION OF OCTOBER 7, 1932, THERE REMAINS IN THE EMPLOYEE THE RIGHT OF ELECTION ONCE THE CASE HAS BEEN FINALLY APPROVED BY THE LEGAL REVIEWER.

SECTION 4 OF THE RETIREMENT ACT OF MAY 29, 1930, 46 STAT. 472, AND AS AMENDED BY SECTION 2 OF THE ACT OF AUGUST 4, 1939, 53 STAT. 1201, CONTAINS A PROVISION AS FOLLOWS:

(C) ANY EMPLOYEE AT THE TIME OF HIS RETIREMENT MAY ELECT TO RECEIVE, IN LIEU OF THE LIFE ANNUITY HEREIN DESCRIBED, AN INCREASED ANNUITY OF EQUIVALENT VALUE WHICH SHALL CARRY WITH IT A PROVISO THAT NO UNEXPENDED PART OF THE PRINCIPAL UPON THE ANNUITANT'S DEATH SHALL BE RETURNED.

ALSO, SECTION 2 OF THE AMENDED STATUTE GRANTS AN ELECTION TO AN EMPLOYEE "AT THE TIME OF HIS RETIREMENT" TO RECEIVE A REDUCED ANNUITY DURING HIS LIFETIME AND THE LIFETIME OF A SURVIVING DESIGNATED BENEFICIARY.

THUS, THE RETIREMENT ACT FIXES A DEFINITE TIME FOR THE EXERCISE OF AN ELECTION BY AN EMPLOYEE BETWEEN THE DIFFERENT FORMS OF ANNUITY; THAT IS,"AT THE TIME OF HIS RETIREMENT.' UNDER THE PRACTICE OF THE CIVIL SERVICE COMMISSION THE TIME OF RETIREMENT HAS BEEN ADMINISTRATIVELY DETERMINED TO BE THE DATE THE CLAIM FOR ANNUITY HAS BEEN FINALLY APPROVED OR ADJUDICATED BY THE COMMISSION. ON PAGE 20 OF THE PUBLICATION OF THE COMMISSION ENTITLED " THE CIVIL SERVICE RETIREMENT ACT WITH ANNOTATIONS AND REGULATIONS" APPEARS THE FOLLOWING:

ELECTION BETWEEN LIFE AND FORFEITURE ANNUITY.--- AN APPLICANT FOR RETIREMENT SHOULD BE INFORMED OF THE PRACTICAL EFFECT OF THE OPERATION OF THE TWO PLANS OF ANNUITY--- LIFE AND FORFEITURE--- SINCE AFTER AN ANNUITY IS GRANTED, IT WILL NOT BE CHANGED TO ANOTHER FORM.

IN DECISION OF JULY 1, 1931, 11 COMP. GEN. 1, IT WAS HELD AS FOLLOWS (QUOTING FROM THE YLLABUS):

WHEN THERE IS PENDING AN APPLICATION FOR DISABILITY RETIREMENT UNDER SECTION 6 OF THE CIVIL RETIREMENT ACT OF MAY 29, 1930, 46 STAT. 472, NO ADMINISTRATIVE ACTION SHOULD BE TAKEN TO SEPARATE THE EMPLOYEE FROM THE SERVICE SOLELY BECAUSE OF DISABILITY OR TO PREVENT THE EMPLOYEE FROM RENDERING SERVICE, UNTIL THE FINAL DECISION OF THE BUREAU OF PENSIONS AND/OR THE ADMINISTRATOR OF VETERANS' AFFAIRS IS RENDERED, WHICH DECISION WILL FIX THE EFFECTIVE DATE OF THE RETIREMENT, THE CHANGE FROM ACTIVE STATUS TO RETIREMENT STATUS FOR PAY PURPOSES TO BE CONTINUOUS IN SO FAR AS POSSIBLE AND IN ACCORDANCE WITH THE ACT OF APRIL 23, 1930, 46 STAT. 253, ESTABLISHING THE FIRST OF A MONTH AS A UNIFORM RETIREMENT DATE.

SEE, ALSO, 12 COMP. GEN. 54.

IN THE DECISION OF THIS OFFICE CITED IN YOUR LETTER, NAMELY, A 42415, DATED OCTOBER 7, 1932, THERE WAS INVOLVED THE CASE OF AN EMPLOYEE WHO DIED PRIOR TO THE ADJUDICATION OF HIS CLAIM FOR AN ANNUITY AND THE QUESTION THEREIN ASKED," IS AN ELECTION TO RECEIVE INCREASED ANNUITY MADE AT TIME OF APPLICATION AN ELECTION MADE AT TIME OF RETIREMENT WITHIN THE MEANING OF SECTION 4 OF THE ACT, ? " WAS, IN EFFECT, ANSWERED IN THE NEGATIVE, THE DECISION HAVING STATED THAT "THERE CAN BE NO RETIREMENT AND NO PAYMENT OF AN ANNUITY OR RIGHT TO PAYMENT OF AN ANNUITY UNTIL THE ELIGIBILITY OF THE APPLICANT HAS BEEN FINALLY DETERMINED AND THE CLAIM FINALLY ADJUDICATED.'

ALSO, IN DECISION OF SEPTEMBER 9, 1939, 19 COMP. GEN. 340, INVOLVING THE RIGHT OF ELECTION TO MAKE DEPOSITS IN THE RETIREMENT FUND COVERING PAST SERVICE UNDER THE PROVISIONS OF SECTION 9 OF THE RETIREMENT ACT, THE FOLLOWING QUESTION AND ANSWER WERE STATED:

QUESTION:

SINCE THE RETIREMENT LAW PROVIDES ONLY FOR THE MAKING OF SUCH DEPOSIT BY EMPLOYEES, MAY A PERSON AFTER THE ADJUDICATION OF HIS ANNUITY CLAIM ELECT TO MAKE SUCH DEPOSIT, OR IS THE EXERCISE OF SUCH ELECTION BARRED BY THE ACTION OF ADJUDICATION? SUCH ELECTION HAS BEEN PERMITTED THROUGHOUT THE ENTIRE OPERATION OF THE RETIREMENT LAW, AND THE ASSISTANT SECRETARY'S DECISION IN THE WESTON CASE, A COPY OF WHICH IS ENCLOSED, WOULD AUTHORIZE AND AFFIRM SUCH PROCEDURE.

ANSWER:

HOWEVER THAT MAY BE, THERE SEEMS TO HAVE BEEN OVERLOOKED IN THE CITED OPINION OF THE ASSISTANT SECRETARY OF THE INTERIOR THE FACT THAT THE OPTIONAL PAYMENT OF RETIREMENT DEDUCTIONS FOR PAST SERVICE ALLOWED BY THE PROVISIONS OF SECTION 9 OF THE RETIREMENT ACT AS ORIGINALLY ENACTED AND AS AMENDED IS APPLICABLE ONLY TO "EMPLOYEES," THE TERM SPECIFICALLY USED IN THE STATUTE, AS DISTINGUISHED FROM ANNUITANTS. WHEN A CIVILIAN EMPLOYEE IS RETIRED AND IS IN RECEIPT OF A RETIREMENT ANNUITY HE CEASES TO BE AN EMPLOYEE FOR ANY PURPOSE, BUT IS AN ANNUITANT. THE AMOUNT OF THE ANNUITY IS PROPERLY FOR COMPUTATION UNDER THE TERMS OF SECTION 4 OF THE STATUTE UPON THE LENGTH OF SERVICE AND ON THE AMOUNT TO THE EMPLOYEE'S CREDIT IN THE RETIREMENT FUND AT DATE OF RETIREMENT. THE VIEW THAT THE EMPLOYEE'S SHARE OF THE ANNUITY IS FOR COMPUTATION UPON THE BASIS OF THE AMOUNT TO HIS CREDIT WHEN HE RETIRES-- OR AT LEAST WHEN HIS CLAIM IS ADJUDICATED AND PRIOR TO THE COMMENCEMENT OF THE ANNUITY--- IS STRENGTHENED BY THE PROVISIONS OF SECTION 12 (B) OF THE ACT THAT INTEREST IS NOT COMPUTED FOR PERIODS THE EMPLOYEE IS NOT IN THE SERVICE AND, ALSO, BY THE TERMS OF SECTION 10 OF THE ACT AS AMENDED BY THE ACT OF AUGUST 4, 1939, PUBLIC, NO. 263, EFFECTIVE JANUARY 1, 1940, AUTHORIZING VOLUNTARY DEPOSITS OF ADDITIONAL AMOUNTS IN THE RETIREMENT FUND AND PROVIDING THAT SUCH "AMOUNT TOGETHER WITH INTEREST THEREON AT 3 PERCENTUM PER ANNUM COMPOUNDED AS OF JUNE 30 OF EACH YEAR, SHALL AT THE DATE OF HIS RETIREMENT, BE AVAILABLE TO PURCHASE," AN ANNUITY. ( ITALICS SUPPLIED.) * * *

IN ANSWER TO QUESTION 1, SUPRA, YOU ARE ADVISED THAT A PERSON MAY NOT, AFTER THE ADJUDICATION OF HIS ANNUITY CLAIM, ELECT TO MAKE THE DEPOSITS REFERRED TO, THE EXERCISE OF SUCH ELECTION BEING BARRED BY THE ACTION OF ADJUDICATION. * * *

THUS, IT WILL BE SEEN THAT BOTH BY THE PRACTICE AND REGULATIONS OF THE CIVIL SERVICE COMMISSION AND THE DECISIONS OF THIS OFFICE THE TIME AN EMPLOYEE RETIRES HAS BEEN DETERMINED TO BE THE DATE OF THE FINAL APPROVAL OR ADJUDICATION OF THE ANNUITY CLAIM--- NOT THE ISSUANCE OR PAYMENT OF THE FIRST ANNUITY CHECK WHICH FOLLOWS MERELY AS A ROUTINE MINISTERIAL PROCESS AFTER FINAL ADJUDICATION OF THE CLAIM. REGARDING THE EFFECT OF THE REGULATIONS OF THE CIVIL SERVICE COMMISSION UNDER THE RETIREMENT ACT REFERENCE IS MADE TO THE CASE, IN RE DICKERSON'S ESTATE, 1938, 300 N.Y.S. 748, 165 MISC. 230. SEE, ALSO, 18 COMP. GEN. 910. COMPARE 17 COMP. GEN. 644, INVOLVING THE RIGHT OF ELECTION TO RECEIVE RETIREMENT ANNUITY OR DISABILITY COMPENSATION UNDER THE EMPLOYEE'S COMPENSATION ACT, WHICH RIGHT OR OPTION MAY BE EXERCISED UNDER THE TERMS OF THE STATUTE AT ANY TIME DURING THE LIFE OF THE ANNUITANT, BUT WHICH, ONCE EXERCISED, MAY NOT BE CHANGED.

THE STATUTE GRANTS ONLY ONE RIGHT OF ELECTION BETWEEN THE DIFFERENT FORMS OF ANNUITY AND DOES NOT AUTHORIZE A FORMER EMPLOYEE TO CANCEL THE ELECTION ON WHICH HIS CLAIM FOR ANNUITY WAS FINALLY ADJUDICATED AND MAKE A DIFFERENT ELECTION AFTER SUCH ADJUDICATION, NOTWITHSTANDING THAT NO ANNUITY CHECKS MAY HAVE ACTUALLY BEEN RECEIVED BY HIM UNDER THE CERTIFICATE OF ANNUITY ISSUED TO HIM.