B-183249, JUN 23, 1975

B-183249: Jun 23, 1975

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BECAUSE EMPLOYEE (1) ELECTED BENEFIT TO BE FUNDED FROM PAY DEDUCTIONS (2) WAS FULLY COVERED FOR BENEFITS FROM TIME OF ELECTION (3) WAS ABLE TO ASCERTAIN ACTUAL AMOUNT OF DEDUCTION WITHIN SHORT TIME OF ELECTION AND COULD HAVE READILY DETERMINED CORRECT AMOUNT OF DEDUCTION. EMPLOYEE DID NOT MEET DUTY AND WAS AT FAULT. IS APPEALING OUR TRANSPORTATION AND CLAIMS DIVISION'S (TCD) DENIAL ON SEPTEMBER 9. BECAUSE DEDUCTIONS OF PREMIUM PAYMENTS FOR OPTIONAL FEDERAL EMPLOYEES GROUP LIFE INSURANCE (FEGLI) WHICH HE HAD ELECTED WERE NOT MADE FROM JUNE 15. THE ELECTION OF OPTIONAL INSURANCE WAS RECEIVED IN MR. WITHHOLDING OF THE PREMIUM FOR OPTIONAL INSURANCE SHOULD HAVE COMMENCED WITH THE PAY PERIOD BEGINNING JUNE 15.

B-183249, JUN 23, 1975

CIVILIAN EMPLOYEE REQUESTS WAIVER OF HUD CLAIM AGAINST HIM FOR OPTIONAL LIFE INSURANCE PAYMENTS THAT HUD FAILED TO DEDUCT FROM HIS PAY FROM JULY 15, 1969, THROUGH JULY 21, 1973, IN AMOUNT OF $331.90. BECAUSE EMPLOYEE (1) ELECTED BENEFIT TO BE FUNDED FROM PAY DEDUCTIONS (2) WAS FULLY COVERED FOR BENEFITS FROM TIME OF ELECTION (3) WAS ABLE TO ASCERTAIN ACTUAL AMOUNT OF DEDUCTION WITHIN SHORT TIME OF ELECTION AND COULD HAVE READILY DETERMINED CORRECT AMOUNT OF DEDUCTION, EMPLOYEE HAD DUTY TO DETERMINE CORRECTNESS OF DEDUCTION AND REPORT DISCREPANCIES. EMPLOYEE DID NOT MEET DUTY AND WAS AT FAULT, THEREBY PRECLUDING WAIVER UNDER 5 U.S.C. 5584(B)(1).

OWEN M. CORNELL, JR. - REQUEST FOR WAIVER:

BY LETTER OF JANUARY 13, 1975, MR. OWEN M. CORNELL, AN EMPLOYEE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD), IN EFFECT, IS APPEALING OUR TRANSPORTATION AND CLAIMS DIVISION'S (TCD) DENIAL ON SEPTEMBER 9, 1974, OF HIS REQUEST FOR A WAIVER UNDER 5 U.S.C. SEC. 5584 (SUPP. III, 1973), OF A HUD CLAIM AGAINST HIM FOR $331.90. THE CLAIM AGAINST MR. CORNELL ARISES OUT OF ERRONEOUS OVERPAYMENTS OF PAY, BECAUSE DEDUCTIONS OF PREMIUM PAYMENTS FOR OPTIONAL FEDERAL EMPLOYEES GROUP LIFE INSURANCE (FEGLI) WHICH HE HAD ELECTED WERE NOT MADE FROM JUNE 15, 1969, THROUGH JULY 21, 1973.

THE RECORD SHOWS THAT MR. CORNELL BECAME ELIGIBLE FOR AND COVERED BY FEGLI REGULAR INSURANCE COVERAGE ON JUNE 2, 1969, AND ELECTED THE OPTIONAL INSURANCE ON JUNE 6, 1969. THE ELECTION OF OPTIONAL INSURANCE WAS RECEIVED IN MR. CORNELL'S EMPLOYING OFFICE ON JUNE 17, 1969, AND WITHHOLDING OF THE PREMIUM FOR OPTIONAL INSURANCE SHOULD HAVE COMMENCED WITH THE PAY PERIOD BEGINNING JUNE 15, 1969. 5 C.F.R. SEC. 871.401 (1969). HOWEVER, HUD'S PERSONNEL OFFICE, WHEN PREPARING MR. CORNELL'S SF- 50 (NOTIFICATION OF PERSONNEL ACTION), MISTAKENLY INDICATED IN BLOCK 9 THAT MR. CORNELL HAD NOT ELECTED OPTIONAL INSURANCE. MR. CORNELL'S BIWEEKLY PAY VOUCHER FOR THE PERIOD JUNE 2, 1969, THROUGH JUNE 14, 1969, SHOWED A DEDUCTION OF $7.98 FOR REGULAR FEGLI INSURANCE, THE ONLY INSURANCE IN EFFECT DURING THAT PAY PERIOD. MR. CORNELL'S EARNINGS AND LEAVE STATEMENT FOR THE PAY PERIOD JUNE 15, 1969, THROUGH JUNE 28, 1969, THE FIRST PAY PERIOD WHEREIN A DEDUCTION FOR THE OPTIONAL INSURANCE SHOULD HAVE BEEN MADE, SHOWED NO ADDITIONAL PREMIUM DEDUCTIONS FOR OPTIONAL FEGLI. IN THIS CONNECTION THE LATTER EARNINGS AND LEAVE STATEMENT WAS A REVISED STATEMENT WITH BLOCKS FOR REGULAR AND OPTIONAL FEGLI INSURANCE DEDUCTIONS. THAT STATEMENT SHOWED A DEDUCTION IN THE REGULAR FEGLI BLOCK BUT THERE WAS NO ENTRY IN THE OPTIONAL FEGLI BLOCK. IN APRIL 1973 THE HUD OFFICE OF PERSONNEL, AT MR. CORNELL'S REQUEST, REVIEWED HIS INSURANCE COVERAGE AND CORRECTED THE ERROR THAT HAD CAUSED THE NONDEDUCTION OF THE FEGLI OPTIONAL INSURANCE PREMIUM. THE PREMIUM PAYMENTS DUE WERE COLLECTED IN FULL ON OCTOBER 27, 1973, BY PAYROLL DEDUCTIONS.

ON OCTOBER 11, 1973, MR. CORNELL REQUESTED A WAIVER OF HUD'S CLAIM AGAINST HIM. HUD DENIED THE REQUEST FOR WAIVER ON OCTOBER 19, 1973, BECAUSE IT DETERMINED THAT MR. CORNELL WAS AT FAULT BASED ON THE RATIONALE OF THE COMPTROLLER GENERAL'S DECISIONS B-172117, MAY 12, 1971, B-173854, SEPTEMBER 17, 1971, AND B-176546, SEPTEMBER 8, 1972. IN THOSE CASES WE DETERMINED THAT EMPLOYEES WHO HAD RECEIVED BIWEEKLY STATEMENTS OF EARNINGS SHOWING ERRONEOUS SALARY PAYMENTS WERE AT FAULT FOR NOT VERIFYING THE CORRECTNESS OF SUCH STATEMENTS AND, THEREFORE, NOT ENTITLED TO A WAIVER OF THE AGENCIES' CLAIMS UNDER THE PROVISIONS OF 5 U.S.C. SEC. 5584(B)(1).

MR. CORNELL COMMENTED ON HUD'S DENIAL OF HIS WAIVER REQUEST BY LETTER OF DECEMBER 7, 1973. MR. CORNELL CONTENDED THAT HE WAS FREE FROM FAULT IN THE MATTER, BECAUSE THERE WAS NO READILY DISCERNABLE INDICATION ON THE FACE OF EITHER THE BIWEEKLY EARNINGS STATEMENTS FOR THE PAY PERIODS ENDING JUNE 14 OR JUNE 28 THAT WOULD LEAD HIM TO BELIEVE THAT THERE WAS ANY ERROR TO BE CORRECTED. MR. CORNELL NOTED THAT:

"STATEMENT NO. 2, FOR THE PERIOD ENDING JUNE 14, 1969, SHOWS THE DEDUCTION OF $7.98 FOR LIFE INSURANCE. THERE IS NO OTHER 'BOX' WHICH I NOTE WHICH COULD HAVE ANY EFFECT ON LIFE INSURANCE DEDUCTIONS. IN OTHER WORDS, $7.98 IS THAT DEDUCTION WHICH I ASSUMED COVERED WHAT I HAD REQUESTED; I.E., REGULAR PLUS OPTIONAL INSURANCE.

"STATEMENT NO. 3, FOR THE PERIOD ENDING JUNE 28, 1969, AGAIN INDICATES THE SAME DEDUCTION FOR THE LIFE INSURANCE AS HAD BEEN INDICATED ON THE PREVIOUS STATEMENT."

UNDER SECTION 870.203 OF TITLE 5 OF THE CODE OF FEDERAL REGULATIONS, IMPLEMENTING 5 U.S.C. SEC. 8702 (SUPP. IV, 1965-1968), ALL EMPLOYEES, EXCEPT THOSE SPECIFICALLY EXCLUDED BY LAW, AUTOMATICALLY HAVE THE REGULAR INSURANCE COVERAGE UNLESS IT IS WAIVED. THUS, THE PAYROLL DEDUCTION OF $7.98 CORRECTLY REFLECTED MR. CORNELL'S PORTION OF HIS REGULAR INSURANCE PREMIUM, AND THE JUNE 14, 1969 BIWEEKLY STATEMENT COULD NOT BY ITSELF HAVE INDICATED TO MR. CORNELL THE MISTAKE ON HIS SF 50. BUT MR. CORNELL STATES THAT HE ASSUMED THAT THE JUNE 14, 1969 STATEMENT DID REFLECT THE PROPER AMOUNT OF DEDUCTION FOR BOTH THE REGULAR AND OPTIONAL INSURANCE, AND NOT JUST REGULAR INSURANCE. IN SO DOING HE ASSUMED BUT FAILED TO VERIFY THAT $7.98 WAS THE PROPER AMOUNT TO BE DEDUCTED FROM HIS PAY FOR REGULAR AND OPTIONAL INSURANCE. HAD HE MADE INQUIRIES HE WOULD HAVE LEARNED THAT THE PROPER AMOUNT WOULD HAVE BEEN $13.98 IN THE NEXT PAY PERIOD.

FOLLOWING MR. CORNELL'S COMMENTS OF DECEMBER 7, 1973, AND FURTHER COMMENTS OF JANUARY 15, 1974, WHICH ATTEMPTED TO DISTINGUISH COMPTROLLER GENERAL DECISIONS RELIED ON BY HUD IN DENYING MR. CORNELL'S WAIVER, HUD ON MARCH 13, 1974, REQUESTED TCD TO DETERMINE MR. CORNELL'S ELIGIBILITY FOR WAIVER. TCD REPLIED BY LETTER OF SEPTEMBER 25, 1974, DWZ-2547476-PES-2, AND AGREED WITH HUD'S FINDING OF FAULT STATING AS FOLLOWS:

"WE HAVE CONSIDERED THE MATTER WITH RESPECT TO THE INFORMATION PERTAINING TO THE REGULAR AND OPTIONAL INSURANCE WHICH IS FURNISHED EACH NEW EMPLOYEE OR ONE WHO IS TRANSFERRED FROM AN EXCLUDED TO A NONEXCLUDED STATUS. THEREFORE, WE MUST ASSUME THAT MR. CORNELL WAS ADVISED THAT HE WAS AUTOMATICALLY COVERED FOR REGULAR INSURANCE UNLESS HE TOOK ACTION TO WAIVE IT AND THAT HE COULD ELECT OR DECLINE THE OPTIONAL INSURANCE. IT WAS MR. CORNELL'S RESPONSIBILITY TO FAMILIARIZE HIMSELF WITH ALL THE BENEFITS OF THE INSURANCE COVERAGE AND THE RESULTANT DEDUCTIONS FROM HIS PAY. WOULD APPEAR THAT A REASONABLE MAN UPON ENTERING A NEW INSURANCE PROGRAM WOULD HAVE ESTABLISHED THE COST OF THE REGULAR INSURANCE AND BEFORE ELECTING THE OPTIONAL INSURANCE HE WOULD HAVE CONSIDERED THE ADDITIONAL COST OF THIS COVERAGE. THUS, MR. CORNELL SHOULD HAVE BEEN AWARE THAT HIS EARNINGS AND LEAVE STATEMENT FOR PERIOD ENDING JUNE 14, 1969 SHOWED A DEDUCTION FOR REGULAR INSURANCE ONLY AND THAT SUBSEQUENT STATEMENTS CLEARLY SHOWED THAT NO DEDUCTIONS WERE BEING MADE FOR THE OPTIONAL INSURANCE."

MR. CORNELL IN HIS LETTER OF JANUARY 13, 1975, TOOK EXCEPTION TO THE RATIONALE THAT A "REASONABLE MAN" SHOULD INQUIRE INTO THE COST OF GROUP LIFE INSURANCE WHEN BEING PURCHASED BY HIM. HE ARGUED THAT BECAUSE GROUP LIFE INSURANCE IS A NORMAL EMPLOYEE BENEFIT AND "THE CHEAPEST INSURANCE AVAILABLE," A "REASONABLE MAN" WOULD MERELY ELECT THE INSURANCE AS A MATTER OF COURSE, PAYING NO PARTICULAR ATTENTION TO ITS COST. THUS, HE STATED, ANY DUTY HE MAY HAVE HAD TO VERIFY THE AMOUNT OF MONEY DEDUCTED FOR OPTIONAL LIFE INSURANCE, IN ORDER TO BE ELIGIBLE FOR WAIVER OF SUCH PAYMENT IF DEDUCTIONS WERE NOT MADE, WAS SATISFIED WHEN HE DETERMINED THAT SOME MONEY, REGARDLESS OF THE AMOUNT, WAS BEING DEDUCTED. IN SHORT, MR. CORNELL CONTENDED THAT HE HAD NEITHER A DUTY TO DETERMINE INITIALLY THE AMOUNT OF HIS FEGLI PREMIUM NOR A DUTY TO VERIFY THAT THE CORRECT AMOUNT HAD BEEN WITHHELD FROM HIS PAY.

MR. CORNELL WAS COVERED BY OPTIONAL LIFE INSURANCE FROM JUNE 17, 1969, THROUGH JULY 21, 1973, EVEN THOUGH NO PREMIUM DEDUCTIONS WERE MADE. THIS IS SO SINCE 5 C.F.R. SEC. 871.203 (1969) STATES AT SUBSECTION (A) AS FOLLOWS:

"THE EFFECTIVE DATE OF AN ELECTION OF OPTIONAL INSURANCE IS THE FIRST DAY AN EMPLOYEE ACTUALLY ENTERS ON DUTY IN A PAY STATUS ON OR AFTER THE DAY THE ELECTION IS RECEIVED IN HIS EMPLOYING OFFICE."

THUS, THE EFFECTIVE DATE OF COVERAGE IS NOT TIED TO THE PREMIUM DEDUCTIONS, BUT DEPENDS UPON RECEIPT OF THE EMPLOYEE'S ELECTION AND THE EMPLOYEE BEING ON DUTY IN A PAY STATUS. ONCE EFFECTIVE, OPTIONAL INSURANCE CAN ONLY BE CANCELLED BY THE EMPLOYEE'S BECOMING INELIGIBLE FOR COVERAGE OR THE EMPLOYEE'S WRITTEN CANCELLATION. SINCE MR. CORNELL ELECTED THE OPTIONAL INSURANCE; SUCH ELECTION WAS RECEIVED BY THE EMPLOYING OFFICE; THE ELECTION WAS NEVER RESCINDED; AND MR. CORNELL'S EMPLOYMENT STATUS DID NOT CHANGE DURING THE DATES THAT NO DEDUCTIONS WERE MADE; THEN HE RECEIVED THE FULL BENEFITS OF THE OPTIONAL INSURANCE COVERAGE EVEN THOUGH NO INSURANCE PREMIUMS WERE WITHHELD. CF. B 173854, SEPTEMBER 17, 1971, HEALTH INSURANCE PREMIUMS.

WE BELIEVE THAT WHERE, AS HERE, AN EMPLOYEE (1) ELECTED AN EMPLOYEE BENEFIT THAT WAS FUNDED OUT OF PAY DEDUCTIONS, (2) SUCH EMPLOYEE INTENDED TO AND, BY LAW, DID RECEIVE THE BENEFITS OF HIS ELECTION, (3) THE COST OF SUCH PAYMENT WAS READILY ASCERTAINABLE WHEN THE ELECTION WAS MADE, AND (4) THE EMPLOYEE WAS FULLY APPRISED BY HIS EARNINGS STATEMENTS OF THE ACTUAL AMOUNT DEDUCTED FOR PAYMENTS FOR THE ELECTED BENEFIT WITHIN A RELATIVELY SHORT PERIOD OF ELECTING SUCH BENEFIT, THEN SUCH EMPLOYEE HAD A DUTY TO FIND OUT WHETHER SUCH DEDUCTIONS WERE PROPERLY MADE AND REPORT ANY DISCREPANCIES TO THE PROPER AUTHORITY FOR RECTIFICATION. B-183113, MARCH 31, 1975.

THIS CASE IS DISTINGUISHED FROM OUR DECISION B-180137, DECEMBER 28, 1973. THERE WE HELD THAT THE EMPLOYEE, HAVING NEITHER ACTUAL OR CONSTRUCTIVE KNOWLEDGE OF THE OVERPAYMENT, COULD NOT HAVE BEEN AT FAULT AND WAS, THEREFORE, ENTITLED TO A WAIVER. IN THAT CASE, WHEN THE EMPLOYEE AT AGE 52 ELECTED OPTIONAL LIFE INSURANCE COVERAGE, SHE ARGUABLY HAD BEEN GIVEN SUFFICIENT INFORMATION OF THE FACT THAT HER LIFE INSURANCE PAY DEDUCTIONS WOULD INCREASE AT AGE 55. WHEN SHE REACHED AGE 55, NO INCREASED DEDUCTIONS WERE MADE, AND THE ERROR WAS NOT DISCOVERED UNTIL 2 YEARS LATER. WE HELD THAT SOMEONE WITHOUT SPECIAL KNOWLEDGE OF HEALTH INSURANCE AND PERSONNEL LAWS COULD NOT REASONABLY BE EXPECTED TO REMEMBER FOR 3 YEARS THAT ADDITIONAL LIFE INSURANCE DEDUCTIONS WOULD BE WITHHELD FROM HER PAY. FURTHERMORE, WE FOUND THAT THERE WAS NO SIGNIFICANT EVENT, SUCH AS A PERSONNEL ACTION OR FLUCTUATION IN SALARY WHEN SHE REACHED AGE 55, THAT WOULD ALLOW US TO FIND AS A MATTER OF LAW THAT SHE KNEW OF THE ADMINISTRATIVE ERROR.

IN VIEW OF THE ABOVE WE FIND THAT MR. CORNELL WAS AT FAULT BY FAILING TO ASCERTAIN THAT CORRECT PAYROLL DEDUCTIONS WERE MADE, AND THUS WE MAY NOT WAIVE HIS INDEBTNESS. THEREFORE, THE TCD DENIAL OF WAIVER IS SUSTAINED.