B-161164, MAY 31, 1967, 46 COMP. GEN. 820

B-161164: May 31, 1967

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THE FORMULA RESULTING IN THE GREATER AMOUNT OF RETIRED PAY WITHOUT CONSIDERING TAXABLE INCOME IS APPROVED. 1967: FURTHER REFERENCE IS MADE TO LETTER DATED MARCH 29. PRESENTING THE QUESTION WHETHER THIS OFFICE WOULD BE REQUIRED TO OBJECT TO A PROPOSED NEW PROCEDURE TO ACCELERATE THE ESTABLISHMENT OF RETIRED PAY ACCOUNTS OF MEMBERS OF THE UNIFORMED SERVICES WHO ARE RETIRED FOR PHYSICAL DISABILITY. A DISCUSSION OF THIS MATTER IS SET FORTH IN DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE ACTION 394 RECEIVED AS AN ENCLOSURE. THE APPLICABLE STATUTORY PROVISIONS CURRENTLY RELATING TO THE RETIREMENT OF MEMBERS OF THE UNIFORMED SERVICES FOR PHYSICAL DISABILITY ARE CONTAINED IN CHAPTER 61.

B-161164, MAY 31, 1967, 46 COMP. GEN. 820

PAY - RETIRED - DISABILITY - ELECTION - PERSONAL TO THE MEMBER A PROCEDURE TO ACCELERATE THE ESTABLISHMENT OF DISABILITY RETIRED PAY ACCOUNTS BY ASSUMING A RETIRED MEMBER OF THE UNIFORMED SERVICES, WHETHER PLACED ON A TEMPORARY OR PERMANENT DISABILITY LIST OR TRANSFERRED FROM A TEMPORARY TO A PERMANENT DISABILITY LIST, WOULD ELECT UNDER 10 U.S.C. 1401, THE FORMULA RESULTING IN THE GREATER AMOUNT OF RETIRED PAY WITHOUT CONSIDERING TAXABLE INCOME IS APPROVED. HOWEVER, THE PHRASE "AS MEMBER ELECTS" IN FORMULAS 1 AND 2 CONTEMPLATING AN ELECTION BETWEEN A YEARS-OF- SERVICE COMPUTATION OR A COMPUTATION BASED ON PERCENTAGE OF DISABILITY, A MEMBER SHOULD BE APPRAISED BY REGISTERED MAIL, DELIVERY RESTRICTED TO HIM, OF HIS RIGHTS TO ELECT, AND THE LAW CONTEMPLATING ONLY ONE ELECTION, THAT HIS FAILURE TO OBJECT TO THE ELECTION MADE FOR HIM WITHIN A SPECIFIED TIME WOULD CONSTITUTE AN ELECTION, AND THE REQUESTED RETURN RECEIPT PLACED IN THE MEMBER'S MILITARY PAY RECORD OR OTHER APPROPRIATE PLACE.

TO THE SECRETARY OF DEFENSE, MAY 31, 1967:

FURTHER REFERENCE IS MADE TO LETTER DATED MARCH 29, 1967, FROM THE ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER), PRESENTING THE QUESTION WHETHER THIS OFFICE WOULD BE REQUIRED TO OBJECT TO A PROPOSED NEW PROCEDURE TO ACCELERATE THE ESTABLISHMENT OF RETIRED PAY ACCOUNTS OF MEMBERS OF THE UNIFORMED SERVICES WHO ARE RETIRED FOR PHYSICAL DISABILITY. A DISCUSSION OF THIS MATTER IS SET FORTH IN DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE ACTION 394 RECEIVED AS AN ENCLOSURE.

THE APPLICABLE STATUTORY PROVISIONS CURRENTLY RELATING TO THE RETIREMENT OF MEMBERS OF THE UNIFORMED SERVICES FOR PHYSICAL DISABILITY ARE CONTAINED IN CHAPTER 61, TITLE 10, U.S. CODE, SECTIONS 1201-1221. MEMBERS WHO ARE PLACED ON THE PERMANENT DISABILITY RETIRED LIST UNDER THE PROVISIONS OF SECTIONS 1201 OR 1204, OR ON THE TEMPORARY DISABILITY RETIRED LIST UNDER SECTIONS 1202 OR 1205, ARE ENTITLED TO RECEIVE RETIRED PAY COMPUTED AS PRESCRIBED IN FORMULAS 1 AND 2, RESPECTIVELY, 10 U.S.C. 1401. DISABILITY RETIRED PAY COMPUTED UNDER THESE TWO FORMULAS IS BASED UPON THE MONTHLY BASIC PAY (AT RATES APPLICABLE ON DATE OF PERMANENT RETIREMENT OR ON DATE PLACED ON TEMPORARY DISABILITY RETIRED LIST) OF THE GRADE TO WHICH THE MEMBER IS ENTITLED UNDER 10 U.S.C. 1372 OR TO WHICH HE WAS ENTITLED ON THE DAY BEFORE PERMANENT RETIREMENT OR PLACEMENT ON THE TEMPORARY DISABILITY RETIRED LIST, WHICHEVER IS HIGHER.

UNDER FORMULA 1 (APPLICABLE WHEN PLACED ON THE PERMANENT DISABILITY RETIRED LIST) MONTHLY BASIC PAY IS MULTIPLIED "AS MEMBER ELECTS" BY "2 1/2 PERCENT OF YEARS OF SERVICE CREDITED TO HIM UNDER SECTION 1208" (A PAR OF A YEAR OF 6 MONTHS OR MORE IS CREDITED AS A WHOLE YEAR) OR THE PERCENTAGE OF THE MEMBER'S DISABILITY ON THE DATE OF RETIREMENT. A MEMBER WHO IS PLACED ON THE TEMPORARY DISABILITY RETIRED LIST IS ENTITLED TO COMPUTE HIS RETIRED PAY UNDER FORMULA 2 BY MULTIPLYING "AS MEMBER ELECTS" THE MONTHLY BASIC PAY OF THE GRADE TO WHICH ENTITLED BY "2-1/2 PERCENT OF YEARS OF SERVICE CREDITED TO HIM UNDER SECTION 1208" (A PART OF A YEAR OF 6 MONTHS OR MORE IS CREDITED AS A WHOLE YEAR) OR THE PERCENTAGE OF HIS DISABILITY ON THE DATE HIS NAME IS PLACED ON THE TEMPORARY DISABILITY RETIRED LIST. UNDER BOTH FORMULAS THE MAXIMUM RETIRED PAY MAY NOT EXCEED 75 PERCENT OF THE PAY UPON WHICH THE COMPUTATION IS BASED AND IN THE CASE OF PLACEMENT ON THE TEMPORARY DISABILITY RETIRED LIST THE MINIMUM AMOUNT OF RETIRED PAY IS 50 PERCENT OF THE PAY UPON WHICH THE COMPUTATION IS BASED.

SECTION 1401 FURTHER PROVIDES THAT IF THE MEMBER WOULD OTHERWISE BE ENTITLED TO RETIRED PAY COMPUTED UNDER MORE THAN ONE OF THE FOUR FORMULAS THEREIN PRESCRIBED OR UNDER ANY OTHER PROVISION OF LAW "HE IS ENTITLED TO BE PAID UNDER THE APPLICABLE FORMULA THAT IS MOST FAVORABLE TO HIM.'

THE ASSISTANT SECRETARY OF DEFENSE STATES THAT ONE OF THE MILITARY DEPARTMENTS WOULD LIKE TO ADOPT A PROCEDURE UNDER WHICH THE RETIRED PAY ACCOUNTS OF MEMBERS RETIRED FOR PHYSICAL DISABILITY WILL BE COMPUTED ON THE BASIS OF THE FORMULA THAT RESULTS IN THE GREATER AMOUNT OF RETIRED PAY. THE DISCUSSION IN COMMITTEE ACTION 394 OUTLINES THE EXISTING PROCEDURES AT THE NAVY FINANCE CENTER, CLEVELAND, OHIO.

IT IS STATED THAT UNDER THE PRESENT PRACTICE, WHEN A MEMBER OF THE NAVAL SERVICE RETIRES BY REASON OF DISABILITY, THE DISBURSING OFFICER IN THE FIELD IS REQUIRED TO COMPLETE THE RETIRED PAY ELECTION FORM, ADVISE AND INSTRUCT THE RETIRING MEMBER AS TO THE SEVERAL ELECTIONS AVAILABLE AND INSURE THAT THE ELECTION FORM ENDORSED BY THE RETIREE IS FURNISHED THE NAVY FINANCE CENTER. IT IS ESTIMATED THAT AS TO APPROXIMATELY 40 PERCENT OF THE NEW DISABILITY RETIRED PAY ACCOUNTS SO RECEIVED AT THE NAVY FINANCE CENTER "THE ELECTION FORMS AND ENDORSEMENTS ARE NOT RECEIVED WITH THE PAY RECORD AND RELEASE ORDERS.'

AS A CONSEQUENCE, IN SUCH CASES AND IN THE CASES OF THOSE MEMBERS WHO ARE TRANSFERRED FROM THE TEMPORARY TO THE PERMANENT DISABILITY RETIRED LIST NEW ELECTION FORMS MUST BE PREPARED FOR EACH INDIVIDUAL AT THE NAVY FINANCE CENTER. THE FORMS THEN MUST BE FORWARDED TO THE MEMBERS CONCERNED WHILE PAYMENT OF RETIRED PAY IS WITHHELD UNTIL THE FORMS ENDORSED BY THE MEMBERS HAVE BEEN RETURNED TO THE NAVY FINANCE CENTER. THIS PROCEDURE NECESSITATES MAINTAINING RECORDS FOR FOLLOWUP ACTION IN THOSE INSTANCES WHERE A MEMBER HAS FAILED TO RETURN THE ELECTION FORM WITH HIS ENDORSEMENT THEREON.

FURTHERMORE, WHEN THE MEMBER'S ELECTION ENDORSEMENT IS RECEIVED, THE PARTICULAR ACCOUNT IN QUESTION MUST THEN BE REVIEWED TO DETERMINE THAT THE MEMBER'S RETIRED PAY IS BEING COMPUTED IN ACCORDANCE WITH HIS ELECTION AND ACTION THEN MUST BE TAKEN TO RELEASE ANY PAYMENT CHECKS WHICH MAY HAVE BEEN WITHHELD. ADDITIONAL HANDLING BECOMES NECESSARY WHEN A MEMBER SUBMITS AN ENDORSED ELECTION FORM WHICH DOES NOT APPEAR TO PROVIDE FOR COMPUTATION OF HIS RETIRED PAY ON THE BASIS OF THE FORMULA MOST FAVORABLE TO HIM. IN SUCH CIRCUMSTANCES A FURTHER DELAY IN COMMENCING PAYMENT OF RETIRED PAY RESULTS SINCE, IN ORDER TO ASCERTAIN THE TRUE INTENT, THE MEMBER IS GIVEN AN OPPORTUNITY TO RECONSIDER HIS INITIAL ELECTION BEFORE ANY PAYMENTS OF RETIRED PAY ARE RELEASED TO HIM.

IT IS POINTED OUT IN THE DISCUSSION THAT WHEN THE EXISTING PROCEDURES WERE INSTITUTED THE ISSUANCE OF ELECTION FORMS IN ALL CASES WAS PREMISED ON THE BELIEF THAT IT WOULD NOT OTHERWISE BE POSSIBLE FOR THE MEMBER TO EVALUATE HIS OWN PERSONAL FINANCIAL CIRCUMSTANCES, SPECIFICALLY WITH REGARD TO HIS INCOME TAX LIABILITY, IN ORDER TO DETERMINE WHICH METHOD OF RETIRED PAY COMPUTATION WOULD BE MORE BENEFICIAL TO HIM. IN THAT CONNECTION IT IS STATED THAT:

EXPERIENCE INDICATES, HOWEVER, THAT IN THE VAST MAJORITY OF CASES THE MEMBERS ELECT THE METHOD RESULTING IN THE GREATER RATE OF PAY WITHOUT CONSIDERATIONS OF TAXABLE INCOME. THUS, ELECTIONS ARE STRICTLY A SELECTION OF THE GREATER MONETARY AMOUNT BASED ON THE TWO METHODS OF COMPUTATION AVAILABLE. A CHOICE OF THE METHOD RESULTING IN THE LESSER MONETARY AMOUNT PREVAILS, ALMOST EXCLUSIVELY, IN THE CASES OF THOSE MEMBERS WITH 20 YEARS OR MORE ACTIVE SERVICE WHO ARE TRANSFERRED TO THE TEMPORARY DISABILITY RETIRED LIST WITH A DISABILITY RATED AT LESS THAN 50 PERCENT. EXCEPT FOR MEMBERS OF THIS CATEGORY, NO USEFUL PURPOSE IS REALLY SERVED IN ISSUING ELECTION FORMS TO MEMBERS, AND REQUIRING THEIR EXECUTION, SINCE THE NAVY FINANCE CENTER CAN READILY DETERMINE AND AUTOMATICALLY ESTABLISH PAYMENTS AT THE GREATER RATE OF PAY.

THE DISCUSSION ADDS THAT:

IT IS REASONABLY FORESEEABLE THAT INSTANCES WILL ARISE IN WHICH THE MEMBER BELATEDLY MAY REQUEST A CHANGE IN THE RATE OF PAY SO DETERMINED AND AUTOMATICALLY ESTABLISHED. SUCH A REQUEST COULD PLAUSIBLY RESULT FROM AN ASSERTED FAILURE TO RECEIVE CORRESPONDENCE FROM THE NAVY FINANCE CENTER OR FROM AN ASSERTED MISUNDERSTANDING OF CORRESPONDENCE. IN NO SUCH INSTANCE WOULD THE NAVY FINANCE CENTER ASSUME THE POSITION THAT THE RATE OF PAY WHICH HAD BEEN DETERMINED AND AUTOMATICALLY ESTABLISHED COULD NOT BE CHANGED. THE ACCOUNT WOULD BE ADJUSTED AS REQUIRED. THIS WOULD INSURE THAT ANY MEMBER CONCERNED WOULD BE PAID UNDER THE APPLICABLE FORMULA MOST FAVORABLE TO HIM IN ACCORDANCE WITH HIS CHOICE.

UNDER THE PROCEDURE PROPOSED TO BE ESTABLISHED THE NAVY FINANCE CENTER WOULD:

A. APPRAISE THE MEMBER OF THE RATES OF PAY RESULTING FROM THE METHODS OF COMPUTATION TO WHICH HE IS LEGALLY ENTITLED.

B. ADVISE THE MEMBER THAT HIS ACCOUNT IS BEING ESTABLISHED (OR PROCESSED FOR CHANGE IN HIS RATE OF PAY, FOR THOSE ACCOUNTS WHERE THE MEMBER IS BEING TRANSFERRED FROM THE TEMPORARY TO THE PERMANENT DISABILITY RETIRED LIST) AT THE HIGHER OF THE TWO RATES AND THAT, UNLESS HE ADVISES THE NAVY FINANCE CENTER TO THE CONTRARY WITHIN 45 DAYS, IT WILL BE CONSIDERED THAT HE CONCURS WITH THE RATE ESTABLISHED FOR HIM.

C. FOR THOSE MEMBERS WITH 20 OR MORE YEARS OF ACTIVE SERVICE WHOSE DISABILITY IS RATED AT LESS THAN 50 PERCENT UPON PLACEMENT OF (ON) THE TEMPORARY DISABILITY RETIRED LIST, THE NAVY FINANCE CENTER WOULD ESTABLISH THE ACCOUNT IN THE GREATER MONETARY AMOUNT, FURNISH THE MEMBER ELECTION FORMS, AND ADVISE HIM THAT UNLESS HE SUBMITS THE ELECTION ENDORSEMENT WITHIN 45 DAYS, HIS PAYMENTS OF RETIRED PAY WILL CONTINUE AS ESTABLISHED.

D. IN ANY INSTANCES, AS IN B. OR C. IN WHICH THE MEMBER SHOULD AT ANY TIME EXPRESS NONCONCURRENCE WITH THE RATE ESTABLISHED FOR HIM, HIS ACCOUNT WOULD BE ADJUSTED IN ACCORDANCE WITH HIS CHOICE SO AS TO PAY HIM UNDER THE APPLICABLE FORMULA THAT IS MOST FAVORABLE TO HIM.

THE SUGGESTED NEW PROCEDURE APPEARS TO BE DIRECTED ENTIRELY TO THE ESTABLISHMENT OF NEW RETIRED PAY ACCOUNTS WHICH ARE FOR COMPUTATION UNDER FORMULAS 1 AND 2 OF SECTION 1401 INCLUDING THE RECOMPUTATION OF RETIRED PAY IN THE CASES OF MEMBERS WHO ARE TRANSFERRED FROM THE TEMPORARY TO THE PERMANENT DISABILITY RETIRED LIST. THE PROCEDURES PROPOSED UNDER PARAGRAPHS B AND C ARE NOT NECESSARILY INCONSISTENT WITH THE BASIC STATUTORY RIGHT OF A MEMBER RETIRED FOR DISABILITY TO RECEIVE RETIRED PAY UNDER ANY FORMULA PRESCRIBED IN SECTION 1401 OR UNDER ANY OTHER PROVISION OF LAW IF SUCH RETIRED PAY IS GREATER THAN THAT TO WHICH THE MEMBER IS ENTITLED COMPUTED IN ACCORDANCE WITH FORMULAS 1 OR 2. HOWEVER, THE COMPUTATION OF RETIRED PAY UNDER FORMULAS 1 AND 2 IS EXPRESSLY DEPENDENT, IN VIEW OF THE SPECIFIC TERMS OF THE STATUTE, ON THE MEMBER'S "ELECTION.'

THUS, ALTHOUGH THE EXPERIENCE OF THE DEPARTMENT OF THE NAVY IN THIS MATTER, AS MENTIONED IN COMMITTEE ACTION 394, INDICATES THAT IN THE VAST MAJORITY OF CASES THE METHOD ACTUALLY ELECTED IS THE GREATER MONETARY RATE OF RETIRED PAY WITHOUT REGARD TO CONSIDERATION OF TAXABLE INCOME AND THAT THE ADMINISTRATIVE ESTABLISHMENT OF A RETIRED PAY ACCOUNT ON THAT BASIS GENERALLY WOULD COINCIDE WITH THE DESIRES OF THE INDIVIDUAL CONCERNED, IT IS NEVERTHELESS ESSENTIAL THAT SUCH ADMINISTRATIVE ACTION BE SUPPORTED ULTIMATELY BY EVIDENCE OF AN ELECTION ON THE PART OF THE INDIVIDUAL MEMBER.

THE PHRASE "AS MEMBER ELECTS" IN FORMULAS 1 AND 2 CONTEMPLATES AN ELECTION BY THE MEMBER HIMSELF BETWEEN A YEARS-OF-SERVICE COMPUTATION OR A COMPUTATION BASED ON PERCENTAGE OF DISABILITY. THE LANGUAGE OF THE LAW IN FORMULAS 1 AND 2 IMPLIES VERY STRONGLY THAT THE MEMBER'S ELECTION IS TO BE MADE CONCURRENTLY OR AT LEAST WITHIN A REASONABLE PERIOD OF TIME IN RELATION TO THE DATE THAT HE IS PLACED ON THE TEMPORARY OR PERMANENT DISABILITY RETIRED LIST.

NO BASIC OBJECTION IS PERCEIVED TO THE ESTABLISHMENT OF DISABILITY RETIRED PAY ACCOUNTS UNDER FORMULAS 1 AND 2 ON THE BASIS OF THE LARGER MONETARY BENEFITS PROVIDED THEREUNDER WITHOUT REGARD TO THE MATTER OF TAXABLE INCOME. HOWEVER, THE PROCEDURE SUGGESTED IN PARAGRAPHS B AND C (WHICH PROVIDES THAT UNLESS THE MEMBER CONCERNED ADVISES THE NAVY FINANCE CENTER WITHIN 45 DAYS IT WILL BE CONSIDERED THAT HE CONCURS WITH THE RATE THAT HAS BEEN ESTABLISHED FOR HIM AND THAT HIS RETIRED PAY WILL CONTINUE AT THAT RATE) WILL FALL SHORT OF ESTABLISHING A RECORD SHOWING A CONCURRENCE OR "ELECTION" ON HIS PART WITH RESPECT TO THE PHRASE "AS MEMBER ELECTS" CONTAINED IN FORMULAS 1 AND 2. IN OTHER WORDS, UNLESS THE RECORD SHOWS THAT HE HAS BEEN APPRISED OF THE FACT THAT HIS FAILURE TO OBJECT TO THE RATE ESTABLISHED WILL BE VIEWED AS AN AFFIRMATIVE ELECTION TO ACCEPT THAT RATE, IT CANNOT BE SAID THAT HIS SILENCE CONSTITUTES AN ELECTION.

AS INDICATED IN PARAGRAPH D, A MEMBER IN SUCH A SITUATION COULD "AT ANY TIME" THEREAFTER EXPRESS NONCONCURRENCE WITH THE RATE ESTABLISHED FOR HIM AND IN THE ABSENCE OF ANY ACTUAL RECORD OF SUCH AN ELECTION HAVING BEEN MADE BY THE MEMBER, THE RETIRED PAY STATUS OF SUCH AN INDIVIDUAL WOULD REMAIN SUBJECT TO RECOMPUTATION UNDER FORMULAS 1 AND 2 AT THE WILL OF THE MEMBER. HOWEVER, IF THE RETIRED MEMBER ACTUALLY RECEIVES A COMMUNICATION FROM THE NAVY FINANCE CENTER APPRISING HIM OF THE AUTHORIZED RATES OF RETIRED PAY, HIS RIGHT TO ELECT, AND THAT HIS FAILURE TO OBJECT TO THE RATE ESTABLISHED WILL BE VIEWED AS AN ELECTION OF THE ESTABLISHED RATE, HIS FAILURE TO OBJECT TO THAT RATE WITHIN A SPECIFIED TIME WOULD, IN OUR VIEW, CONSTITUTE AN ELECTION. THE LAW DOES NOT APPEAR TO CONTEMPLATE THAT MORE THAN ONE SUCH ELECTION SHALL BE MADE OR THAT AN ELECTION SO MADE MAY BE CHANGED. SEE 44 COMP. GEN. 488.

IN VIEW OF THE CIRCUMSTANCES DISCLOSED, THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO THE PROPOSED PROCEDURES IF THE ELECTION INFORMATION, INCLUDING ALL THE INFORMATION INDICATED ABOVE, IS SENT TO THE MEMBER BY REGISTERED MAIL WITH A RETURN RECEIPT REQUIRED AND DELIVERY RESTRICTED TO THE ADDRESSEE, SUCH RECEIPT TO BE PLACED IN THE MEMBER'S MILITARY PAY RECORDS OR OTHER APPROPRIATE PLACE AS DETERMINED ADMINISTRATIVELY.