B-165398, NOVEMBER 1, 1968, 48 COMP. GEN. 281

B-165398: Nov 1, 1968

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FOR A DEPENDENT UNDER THE RETIRED SERVICEMAN'S PROTECTION PLAN (10 U.S.C. 1441-1446) IS FOR DETERMINATION. AN INCREASE IN THE AMOUNT OF AN ANNUITY IS ONLY AVAILABLE TO A MEMBER NOT YET RETIRED. 1968: REFERENCE IS MADE TO LETTER DATED OCTOBER 4. A. ALL SUCH PERSONS WILL BE ASSUMED TO HAVE ELECTED AN ANNUITY OF 50 PERCENT. B. EXISTING ELECTIONS WILL NOT BE DISTURBED (OTHER THAN TO HAVE FORMER OPTION 4 ADDED IN EACH CASE). THE "AMOUNT" OF THE ANNUITY BASED ON THE MEMBER'S ELECTION FOR PERCENTAGE OF REDUCED RETIRED PAY WILL BE ESTABLISHED AND THE COST THEREOF DETERMINED BASED ON THE NEWLY DEVELOPED COST TABLES. C. MEMBERS WITH EXISTING ELECTIONS WILL BE ADVISED THAT EFFECTIVE 1 JANUARY 1971.

B-165398, NOVEMBER 1, 1968, 48 COMP. GEN. 281

PAY - RETIRED - ANNUITY ELECTIONS FOR DEPENDENTS - ANNUITY DETERMINATION UPON THE RETIREMENT OF ANY MEMBER OF THE UNIFORMED SERVICES AFTER NOVEMBER 1, 1968, THE EFFECTIVE DATE OF PUBLIC LAW 90-445, THE PERCENTAGE OF ANNUITY ELECTED PRIOR TO NOVEMBER 1, 1968, FOR A DEPENDENT UNDER THE RETIRED SERVICEMAN'S PROTECTION PLAN (10 U.S.C. 1441-1446) IS FOR DETERMINATION, ABSENT A SAVINGS PROVISION IN THE ACT, ON THE TOTAL RETIRED PAY OF THE MEMBER, THE ACT HAVING ELIMINATED THE REQUIREMENT THAT THE COST OF AN ANNUITY SHOULD BE DEDUCTED FROM A MEMBER'S RETIRED PAY BEFORE APPLYING THE ELECTED PERCENTAGE IN DETERMINING THE ANNUITY PAYABLE. ALTHOUGH MEMBERS SUBJECT TO THE ACT MAY WITHIN PRESCRIBED TIME LIMITATIONS BOTH BEFORE AND AFTER RETIREMENT REDUCE THE AMOUNT OF AN ELECTED ANNUITY OR WITHDRAW FROM PARTICIPATION IN THE PLAN, AN INCREASE IN THE AMOUNT OF AN ANNUITY IS ONLY AVAILABLE TO A MEMBER NOT YET RETIRED.

TO THE SECRETARY OF DEFENSE, NOVEMBER 1, 1968:

REFERENCE IS MADE TO LETTER DATED OCTOBER 4, 1968, FROM THE ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER) TRANSMITTING FOR DECISION DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE ACTION NO. 422 INVOLVING THE FOLLOWING QUESTIONS:

IN THE IMPLEMENTATION OF PUBLIC LAW 90-485 A QUESTION HAS ARISEN AS TO THE LEGALITY OF THE FOLLOWING POSSIBLE ALTERNATIVES AS THEY RELATE TO PERSONS WHO ELECTED PARTICIPATION IN THE RETIRED SERVICEMAN'S FAMILY PROTECTION PLAN BEFORE 1 NOVEMBER 1968.

A. ALL SUCH PERSONS WILL BE ASSUMED TO HAVE ELECTED AN ANNUITY OF 50 PERCENT, 25 PERCENT OR 12-1/2 PERCENT AS THE CASE MAY BE OF THEIR TOTAL (RATHER THAN THEIR REDUCED) RETIRED PAY.

B. EXISTING ELECTIONS WILL NOT BE DISTURBED (OTHER THAN TO HAVE FORMER OPTION 4 ADDED IN EACH CASE), BUT WHEN RETIREMENT OCCURS, THE "AMOUNT" OF THE ANNUITY BASED ON THE MEMBER'S ELECTION FOR PERCENTAGE OF REDUCED RETIRED PAY WILL BE ESTABLISHED AND THE COST THEREOF DETERMINED BASED ON THE NEWLY DEVELOPED COST TABLES.

C. MEMBERS WITH EXISTING ELECTIONS WILL BE ADVISED THAT EFFECTIVE 1 JANUARY 1971, ALL ELECTIONS WILL THEREAFTER BE CONSIDERED TO BE BASED ON TOTAL (RATHER THAN REDUCED RETIRED PAY), THUS IN EFFECT GIVING THOSE RETIRING AFTER THAT DATE THE OPPORTUNITY TO ADJUST THE AMOUNT OF THEIR ANNUITY BEFORE RETIREMENT, IF THEY DESIRE TO DO SO. THOSE WHO ARE RETIRING PRIOR TO 1 JANUARY 1971 WOULD BE HANDLED IN ACCORDANCE WITH PARA. B. ABOVE.

THE PURPOSE OF THE ACT OF AUGUST 13, 1968, PUBLIC LAW 90-485, 82 STAT. 751, 10 U.S.C. CH. 73, THE PERTINENT PROVISIONS OF WHICH ARE EFFECTIVE NOVEMBER 1, 1968, WAS TO LIBERALIZE VARIOUS PROVISIONS OF THE RETIRED SERVICEMAN'S FAMILY PROTECTION PLAN (10 U.S.C. 1441-1446) SO AS TO ENCOURAGE GREATER PARTICIPATION IN THE PROGRAM BY RETIRING SERVICE PERSONNEL. THE CHANGES MADE REQUIRE THE ESTABLISHMENT OF NEW COST TABLES IN ORDER TO MAINTAIN THE ACTUARIAL SOUNDNESS OF THE PLAN.

PRIOR TO NOVEMBER 1, 1968, UNDER THE PROVISIONS OF 10 U.S.C. 1434 (A), THE ANNUITY THAT A PERSON WAS ENTITLED TO ELECT MIGHT BE 50, 25 OR 12-1/2 PERCENT OF THE REDUCED AMOUNT OF HIS RETIRED OR RETAINER PAY. UPON RETIREMENT THE COST OF THE ANNUITY COMPUTED UNDER THE APPROPRIATE ACTUARIAL TABLE WAS DEDUCTED FROM THE MEMBER'S RETIRED PAY BEFORE THE ELECTED PERCENTAGE WAS APPLIED TO DETERMINE THE AMOUNT OF THE ANNUITY. THOSE PROVISIONS WERE ELIMINATED FROM THE LAW EFFECTIVE NOVEMBER 1, 1968.

BEGINNING NOVEMBER 1, 1968 (THE EFFECTIVE DATE OF CLAUSE 3 OF SECTION 1 OF PUBLIC LAW 90-485), THE ANNUITY THAT A PERSON WILL BE ENTITLED TO ELECT IS THE DOLLAR AMOUNT SPECIFIED BY THE ELECTOR AT THE TIME OF THE ELECTION, BUT MORE THAN 50 PERCENT NOR LESS THAN 12-1/2 PERCENT OF HIS TOTAL RETIRED OR RETAINER PAY, IN NO CASE LESS THAN $25. THUS, THE MEMBER, WITHIN THE LIMITATIONS SPECIFIED, MAY CHOOSE THE AMOUNT OF THE ANNUITY ELECTED WHEREAS PREVIOUSLY HE HAD NO WAY OF KNOWING PRECISELY THE AMOUNT OF THE ANNUITY THAT HIS BENEFICIARY WOULD RECEIVE.

UNDER THE PLAN AS AMENDED, A CHANGE OR REVOCATION BEFORE THE MEMBER COMPLETES 19 YEARS OF SERVICE IS IMMEDIATELY EFFECTIVE. OTHER CHANGES OR REVOCATIONS ARE EFFECTIVE ONLY IF MADE 2 YEARS BEFORE THE FIRST DAY FOR WHICH RETIRED OR RETAINER PAY IS GRANTED. THUS, MEMBERS WHO HAVE ELECTED AN ANNUITY ON A PERCENTAGE BASIS CAN, WITHIN THOSE LIMITATIONS, CHANGE THEIR ELECTIONS TO A DEFINITE AMOUNT OF ANNUITY. HOWEVER, THE ACT MAKES NO SPECIFIC PROVISION FOR THE CONVERSION OF THOSE ELECTIONS OF A PERCENTAGE OF REDUCED RETIRED PAY TO AN AMOUNT OF TOTAL RETIRED PAY WHERE A CHANGE BY THE ELECTOR, BECAUSE OF TIME LIMITATIONS, CANNOT BECOME EFFECTIVE.

THERE IS LITTLE IN THE LEGISLATIVE HISTORY OF THE STATUTE WHICH THROWS ANY LIGHT ON THE MATTER, IT BEING INDICATED, HOWEVER, THAT THE CHANGE IN THE METHOD OF DESIGNATING AN ELECTION WAS FOR THE PURPOSE OF SIMPLIFYING THE METHOD OF COMPUTING THE MONTHLY COST AND THE AMOUNT OF THE ANNUITY SO THAT A MEMBER COULD DETERMINE IN DOLLAR AMOUNTS THE EXACT MONTHLY COST TO HIM AS WELL AS THE EXACT AMOUNT HIS SURVIVORS WOULD RECEIVE. IT IS INDICATED ALSO THAT MEMBERS ON ACTIVE DUTY WHO HAD MADE AN ELECTION UNDER THE OLD LAW "COULD TAKE ADVANTAGE OF" THE BENEFITS PROVIDED BY THE NEW LAW. SEE HEARINGS BEFORE SUBCOMMITTEE NO. 2, HOUSE COMMITTEE ON ARMED SERVICES ON H.R. 12323, 90TH CONG., 1ST SESS. 5551.

SECTION 5 OF THE NEW LAW, 10 U.S.C. 1431 NOTE, RETAINS IN EFFECT THE COST TABLES APPLICABLE ON THE DATE OF RETIREMENT IN THE CASES OF MEMBERS RETIRED OR TRANSFERRED TO THE FLEET RESERVE PRIOR TO DATE OF ENACTMENT AND SECTION 6 PROVIDES THAT A MEMBER WHO HAS MADE AN ELECTION BUT IS NOT YET RETIRED MAY APPLY FOR A LIMITED TIME TO HAVE THE EFFECTIVE DATE OF HIS ELECTION OR CHANGE OR REVOCATION OF ELECTION MADE PRIOR TO THE NEW LAW GOVERNED BY THE OLD LAW. NO OTHER RELEVANT SAVINGS PROVISION HAS BEEN FOUND IN THE NEW LAW.

IT SEEMS CLEAR THEREFORE THAT IN VIEW OF THE REPEAL OF THE PROVISIONS OF LAW AUTHORIZING AN ELECTION OF AN ANNUITY BASED ON REDUCED RETIRED PAY AND THE ABSENCE OF A SAVINGS PROVISION, ANY ANNUITY PAID, AND REDUCTION IN RETIRED PAY MADE TO PURCHASE SUCH ANNUITY, IN THE CASE OF A MEMBER WHO WAS NOT RETIRED PRIOR TO THE EFFECTIVE DATE OF THE NEW LAW ARE GOVERNED BY THE NEW LAW, WHICH DOES NOT AUTHORIZE COMPUTATION OF THE ANNUITY OR THE COST THEREOF ON THE BASIS OF THE MEMBER'S REDUCED RETIRED PAY, BUT ONLY ON THE BASIS OF AN ELECTION OF A DOLLAR AMOUNT ANNUITY THAT IS WITHIN CERTAIN MINIMUM AND MAXIMUM PERCENTAGES OF THE MEMBER'S FULL RETIRED PAY.

IT MAY BE NOTED THAT UNDER THE PROVISIONS OF THE NEW LAW A MEMBER MAY REDUCE THE AMOUNT OF THE ANNUITY OR WITHDRAW FROM PARTICIPATING IN THE ANNUITY PROGRAM EVEN AFTER RETIREMENT EXCEPT THAT THE REDUCTION OR WITHDRAWAL MAY NOT TAKE EFFECT UNTIL THE FIRST DAY OF THE SEVENTH MONTH BEGINNING AFTER HE APPLIES FOR SUCH REDUCTION OR WITHDRAWAL. THERE IS NO PROVISION AUTHORIZING AN INCREASE IN THE AMOUNT OF THE ANNUITY AFTER THE MEMBER HAS RETIRED.

IF ALTERNATIVE A SUGGESTED ABOVE IS AUTHORIZED, IT WOULD RESULT IN A GREATER COST TO THE MEMBER UPON RETIREMENT THAN THE COST WOULD HAVE BEEN UNDER THE OLD LAW AND A GREATER ANNUITY WOULD BE PAYABLE TO HIS SURVIVING BENEFICIARY IN CASE OF HIS DEATH. IN MANY INSTANCES THE HIGHER ANNUITY FOR THE MEMBER'S BENEFICIARY WOULD BE DESIRABLE AND THE MEMBER DOUBTLESS WOULD WANT TO ELECT SUCH GREATER ANNUITY.

THERE IS NOTHING IN THE LAW OR ITS LEGISLATIVE HISTORY WHICH INDICATES AN INTENT TO BAR ELIGIBILITY FOR SUCH GREATER ANNUITY IN THE CASE OF A MEMBER NOT YET RETIRED. IN FACT, AS INDICATED ABOVE, IT WAS THE LEGISLATIVE UNDERSTANDING THAT SUCH MEMBER WOULD BE ELIGIBLE TO HAVE HIS BENEFICIARY RECEIVE THE GREATER ANNUITY. IF, UPON RETIREMENT, THE MEMBER FINDS THE ADDITIONAL COST OF THE HIGHER ANNUITY TO BE TOO ONEROUS, HE CAN APPLY FOR REDUCTION OF THE ANNUITY ELECTION TO BE EFFECTIVE 6 MONTHS LATER. IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO THE ADOPTION BY REGULATION OF ALTERNATIVE A.

FROM THE STANDPOINT OF COST TO THE MEMBER AND AMOUNT OF ANNUITY, ALTERNATIVE B SUGGESTED ABOVE SEEMS TO REPRESENT AS CLOSELY AS POSSIBLE THE ELECTION WHICH THE MEMBER ACTUALLY MADE UNDER THE SUPERSEDED LAW. WHEN HIS ELECTION IS TRANSLATED INTO A DOLLAR AMOUNT IN THE MANNER INDICATED, IT WOULD BE CONSISTENT WITH THE NEW LAW EXCEPT WHERE THE ANNUITY MIGHT BE LESS THAN THAT AUTHORIZED BY THE NEW LAW, IN WHICH CASE THE NEW MINIMUM WOULD GOVERN. AS INDICATED ABOVE, HOWEVER, THE LEGISLATIVE HISTORY INDICATES THAT A MEMBER WHO HAS MADE AN ANNUITY ELECTION BUT IS NOT YET RETIRED SHOULD BE ABLE TO "TAKE ADVANTAGE" OF THE BENEFITS PROVIDED BY THE NEW LAW AND UNDER THIS ALTERNATIVE MOST MEMBERS WHO RETIRE IN THE NEAR FUTURE COULD NOT RECEIVE THE BENEFIT OF THE HIGHER ANNUITY PROVISIONS BECAUSE OF TIME LIMITATIONS WITHIN WHICH AN ELECTED ANNUITY MAY BE INCREASED. FOR THAT REASON WE THINK ALTERNATIVE B IS OBJECTIONABLE.

THE NEW LAW MAKES A CHANGE OR REVOCATION OF AN ELECTION PRIOR TO RETIREMENT EFFECTIVE IF IT IS MADE 2 YEARS OR MORE BEFORE RETIREMENT, INSTEAD OF 3 YEARS AS FORMERLY. PRESUMABLY IT IS WITH THAT PROVISION IN MIND THAT ALTERNATIVE C IS SUGGESTED. UNDER THAT ALTERNATIVE MEMBERS RETIRING PRIOR TO 1971 WOULD BE REGARDED AS HAVING ELECTED ALTERNATIVE B AND THOSE MEMBERS RETIRING AFTER 1970 WOULD BE REGARDED AS HAVING ELECTED ALTERNATIVE A. THUS UNDER ALTERNATIVE C THE ANNUITY OPTION OFFERED WOULD DEPEND ON THE TIME OF RETIREMENT.

WE KNOW OF NO AUTHORITY FOR DETERMINING ADMINISTRATIVELY THAT ELECTIONS WILL BE GIVEN ONE EFFECT FOR A CERTAIN PERIOD OF TIME AND ANOTHER EFFECT THEREAFTER. IN OTHER WORDS, IT SEEMS CLEAR THAT THE LAW CONTEMPLATES THAT THE MEMBER MAKE AN AFFIRMATIVE ELECTION AND IT IS OUR OPINION THAT SUCH ELECTION ALREADY MADE BY THE MEMBER MAY NOT BE TRANSLATED UNDER THE SAME STATUTE INTO ONE OPTION BASED UPON AN EARLIER RETIREMENT DATE AND ANOTHER OPTION BASED UPON A LATER RETIREMENT DATE. ACCORDINGLY, WE DO NOT CONSIDER ALTERNATIVE C TO BE PROPER.