B-222138, AUG 26, 1986, 65 COMP.GEN. 813

B-222138: Aug 26, 1986

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PAY - RETIRED - SURVIVOR BENEFIT PLAN - SPOUSE - SOCIAL SECURITY OFFSET COMPUTATION SERVICES MAY NOT CALCULATE A SOCIAL SECURITY OFFSET AGAINST A SURVIVOR BENEFIT PLAN ANNUITY AS IF THE BENEFICIARY WERE RECEIVING AN UNREDUCED SOCIAL SECURITY PAYMENT WHEN THAT PAYMENT HAS ACTUALLY BEEN REDUCED BECAUSE THE SPONSORING RETIRED MEMBER HAD ELECTED TO RECEIVE A REDUCED SOCIAL SECURITY BENEFIT PRIOR TO REACHING FULL ELIGIBILITY AGE. THE SERVICES MAY NOT CALCULATE THE OFFSET AS IF THE BENEFICIARY WERE RECEIVING AN UNREDUCED SOCIAL SECURITY PAYMENT WHEN THE RETIRED MEMBER HAD NEVER RECEIVED SOCIAL SECURITY BENEFIT. 1986: THIS ACTION IS IN RESPONSE TO A REQUEST FOR AN ADVANCE DECISION REGARDING THE SOCIAL SECURITY OFFSET TO BE MADE AGAINST THE SURVIVOR BENEFIT PLAN ANNUITY OF MRS.

B-222138, AUG 26, 1986, 65 COMP.GEN. 813

PAY - RETIRED - SURVIVOR BENEFIT PLAN - SPOUSE - SOCIAL SECURITY OFFSET COMPUTATION SERVICES MAY NOT CALCULATE A SOCIAL SECURITY OFFSET AGAINST A SURVIVOR BENEFIT PLAN ANNUITY AS IF THE BENEFICIARY WERE RECEIVING AN UNREDUCED SOCIAL SECURITY PAYMENT WHEN THAT PAYMENT HAS ACTUALLY BEEN REDUCED BECAUSE THE SPONSORING RETIRED MEMBER HAD ELECTED TO RECEIVE A REDUCED SOCIAL SECURITY BENEFIT PRIOR TO REACHING FULL ELIGIBILITY AGE. SIMILARLY, THE SERVICES MAY NOT CALCULATE THE OFFSET AS IF THE BENEFICIARY WERE RECEIVING AN UNREDUCED SOCIAL SECURITY PAYMENT WHEN THE RETIRED MEMBER HAD NEVER RECEIVED SOCIAL SECURITY BENEFIT, BUT THE SPOUSE OF THE RETIRED MEMBER ELECTED TO RECEIVE REDUCED BENEFIT PRIOR TO REACHING FULL ELIGIBILITY AGE.

MATTER OF: LUCILLE EATON, AUGUST 26, 1986:

THIS ACTION IS IN RESPONSE TO A REQUEST FOR AN ADVANCE DECISION REGARDING THE SOCIAL SECURITY OFFSET TO BE MADE AGAINST THE SURVIVOR BENEFIT PLAN ANNUITY OF MRS. LUCILLE H. EATON. /1/ MRS. EATON ELECTED TO RECEIVE A REDUCED SOCIAL SECURITY WIDOW'S BENEFIT AT THE AGE OF 60. THE QUESTION IS WHETHER THE OFFSET AGAINST HER SURVIVOR BENEFIT PLAN ANNUITY SHOULD BE BASED ON THE ACTUAL AMOUNT OF HER SOCIAL SECURITY BENEFIT OR THE LARGER BENEFIT SHE WOULD HAVE RECEIVED IF SHE HAD NOT DELAYED HER SOCIAL SECURITY APPLICATION UNTIL AGE 62. IT IS OUR VIEW THAT THE SOCIAL SECURITY OFFSET IN HER CASE MAY NOT EXCEED THE ACTUAL AMOUNT OF HER SOCIAL SECURITY BENEFITS.

BACKGROUND

MRS. LUCILLE EATON IS THE WIDOW OF THE LATE COLONEL ALFRED F. EATON, USAF, WHO RETIRED FROM THE AIR FORCE IN 1977. WHEN COLONEL EATON RETIRED FROM THE SERVICE HE ELECTED TO PARTICIPATE IN THE SURVIVOR BENEFIT PLAN IN FAVOR OF MRS. EATON. COLONEL EATON RECEIVED REDUCED RETIRED PAY DUE TO THE DEDUCTION FOR SURVIVOR BENEFIT PLAN PARTICIPATION COSTS. HE DID NOT RECEIVE ANY SOCIAL SECURITY BENEFITS DURING HIS LIFETIME. ON OCTOBER 28, 1979, COLONEL EATON DIED. A SURVIVOR BENEFIT PLAN ANNUITY BECAME AVAILABLE TO MRS. EATON ON OCTOBER 29. ON NOVEMBER 17, 1979, MRS. EATON REACHED AGE 60 AND SHORTLY THEREAFTER BEGAN RECEIVING SOCIAL SECURITY BENEFITS, APPARENTLY BASED SOLELY ON HER LATE HUSBAND'S SERVICE IN THE AIR FORCE. ON NOVEMBER 17, 1981, MRS. EATON REACHED AGE 62 AND UNDER THE PROVISIONS OF 10 U.S.C. SEC. 1451 THE SERVICE BEGAN OFFSETTING SOCIAL SECURITY BENEFITS AGAINST HER SURVIVOR BENEFIT PLAN ANNUITY.

MRS. EATON RECEIVES A MONTHLY PAYMENT OF $470 FROM SOCIAL SECURITY. THE SOCIAL SECURITY DEDUCTION FROM HER SURVIVOR BENEFIT PLAN ANNUITY HAS BEEN $478, HOWEVER, WHICH IS THE AMOUNT OF THE MONTHLY SOCIAL SECURITY BENEFIT SHE WOULD HAVE BEEN ELIGIBLE TO RECEIVE IF SHE HAD DELAYED HER SOCIAL SECURITY APPLICATION UNTIL AGE 62. THE SOCIAL SECURITY ADMINISTRATION AND THE SERVICE HAVE BOTH VERIFIED THAT THE AMOUNTS CONCERNED ARE CORRECT. MRS. EATON QUESTIONS WHETHER THE SERVICE IS PROPERLY DEDUCTING A LARGER AMOUNT FROM HER ANNUITY THAN THAT WHICH SHE IS RECEIVING AS A SOCIAL SECURITY BENEFIT AND HAS REQUESTED AN ADJUSTMENT OF THE SOCIAL SECURITY OFFSET BASED ON OUR DECISION DORA M. LAMBERT, 62 COMP.GEN. 471 (1983).

THE CONCERNED SERVICE OFFICIALS NOTE THAT THE LAMBERT DECISION IS LIMITED TO SITUATIONS IN WHICH THE SERVICE MEMBER HAS DRAWN SOCIAL SECURITY BENEFITS PRIOR TO HIS DEATH. THEY ASK WHETHER THE DEDUCTIONS SHOULD ALSO BE RECALCULATED FOR WIDOWS OR WIDOWERS WHOSE MEMBER SPOUSES HAD NOT RECEIVED SOCIAL SECURITY BENEFITS, BUT THE WIDOW OR WIDOWER ELECTED TO RECEIVE REDUCED BENEFITS PRIOR TO REACHING AGE 62, THUS DECREASING THE ACTUAL AMOUNT OF SOCIAL SECURITY PAYMENTS RECEIVED BY THE INDIVIDUAL.

SURVIVOR BENEFIT PLAN AND SOCIAL SECURITY OFFSET

PURSUANT TO 10 U.S.C. SECS. 1447-1455, A RETIRED SERVICE MEMBER MAY ELECT TO PROVIDE AN ANNUITY FOR HIS DEPENDENTS UNDER THE SURVIVOR BENEFIT PLAN. THE MEMBER ACCEPTS A REDUCED AMOUNT OF RETIRED PAY DURING HIS LIFE AND UPON HIS DEATH, AN ANNUITY IS PAYABLE TO HIS SPOUSE, FORMER SPOUSE OR HIS OTHER DEPENDENTS. HOWEVER, AS IN MRS. EATON'S CASE, WHEN A WIDOW IS ELIGIBLE FOR SOCIAL SECURITY BENEFITS BASED UPON THE MEMBER'S MILITARY SERVICE IN ADDITION TO THE SURVIVOR BENEFIT PLAN ANNUITY, 10 U.S.C. SEC. 1451 PROVIDES FOR THE DEDUCTION OF AN AMOUNT EQUAL TO THE SOCIAL SECURITY BENEFIT FROM THE SURVIVOR BENEFIT PLAN ANNUITY. IN MRS. EATON'S CASE, THE DEDUCTION FROM THE ANNUITY IMPOSED WHEN SHE ATTAINED THE AGE OF 62 YEARS WAS IN EXCESS OF THE ACTUAL AMOUNT WHICH SHE RECEIVED FROM THE SOCIAL SECURITY BENEFIT.

IN DORA M. LAMBERT, SUPRA, A WIDOW WAS RECEIVING A REDUCED BENEFIT FROM SOCIAL SECURITY DUE TO THE FACT THAT HER SPOUSE HAD BEEN RECEIVING A REDUCED BENEFIT PRIOR TO THE TIME HE REACHED FULL ELIGIBILITY AGE. HELD THAT THE COMPUTATION OF SETOFFS FROM THE SURVIVOR BENEFIT PLAN ANNUITIES WHICH WERE REQUIRED TO BE MADE MUST TAKE INTO ACCOUNT THE REDUCTION IN THE SPOUSE'S SOCIAL SECURITY BENEFITS WHEN THE RETIREE RECEIVED REDUCED BENEFITS. WE HELD THAT WHEN A WIDOW'S BENEFIT WAS REDUCED BECAUSE OF THE REDUCTION IN THE RETIREE'S BENEFIT, THE SERVICES COULD NOT CALCULATE THE OFFSET AGAINST THE SURVIVOR BENEFIT PLAN ANNUITY AS IF THE BENEFICIARY WERE RECEIVING AN UNREDUCED SOCIAL SECURITY PAYMENT.

IN THE PRESENT CASE, COLONEL EATON DID NOT RECEIVE SOCIAL SECURITY BENEFIT PRIOR TO HIS DEATH. HOWEVER, HIS WIDOW ELECTED TO RECEIVE A REDUCED SOCIAL SECURITY BENEFIT PRIOR TO REACHING AGE 62. THE SERVICE OFFICIALS ASK WHETHER ADJUSTMENTS TO THE AMOUNT DEDUCTED FOR THE SOCIAL SECURITY OFFSET SHOULD BE MADE UNDER THESE CIRCUMSTANCES. IT IS OUR VIEW THAT THE RATIONALE OF THE LAMBERT DECISION SHOULD ALSO BE APPLIED UNDER THE CIRCUMSTANCES PRESENTED HERE AND THAT THE DEDUCTIONS MADE FROM MRS. EATON'S SURVIVOR BENEFIT PLAN ANNUITY SHOULD NOT BE IN EXCESS OF THE AMOUNT SHE ACTUALLY RECEIVED.

THE SURVIVOR BENEFIT PLAN WAS ESTABLISHED IN 1972 AS AN INCOME MAINTENANCE PROGRAM FOR THE DEPENDENTS OF MEMBERS OF THE UNIFORMED SERVICES, THROUGH THE ENACTMENT OF PUBLIC LAW 92-425, SEPTEMBER 21, 1972, 86 STAT. 706. IT WAS DESIGNED TO COMPLEMENT THE SOCIAL SECURITY BENEFITS RECEIVED BY THE SURVIVING SPOUSES AND DEPENDENTS OF RETIRED MILITARY MEMBERS, AND ACTIVE DUTY PERSONNEL WHO DIE WHILE ELIGIBLE TO RETIRE. THE SURVIVOR BENEFIT PLAN ANNUITY AND SOCIAL SECURITY BENEFIT WERE INTEGRATED SINCE THE GOVERNMENT CONTRIBUTES TO BOTH PROGRAMS ON BEHALF OF THE MEMBER FOR HIS SERVICE. THE HISTORY OF THE ORIGINAL PLAN LEGISLATION SHOWS THAT THE SOCIAL SECURITY OFFSET AGAINST THE ANNUITY WAS INTENDED TO BE THE EQUIVALENT OF THE SOCIAL SECURITY PAYMENT WHICH WAS ATTRIBUTABLE TO THE RETIRED MEMBER'S MILITARY SERVICE. THE METHOD OF COMPUTING THE OFFSET WAS INTENDED TO BE A "MOST GENEROUS FORMULA *** TO ASSURE THAT A WIDOW WILL RECEIVE AT LEAST 55 PERCENT OF THE MAN'S MILITARY RETIRED PAY." SEE H.R. REP. NO. 481, 92D CONG., 1ST SESS. 14 (1971). SIMILAR STATEMENTS APPEAR ON PAGES 30, 31, AND 53 OF S.REP. NO. 1089, 92D CONG., 2D SESS., REPRINTED IN 1972 U.S.C. CONG., & AD. NEWS 3288, 3304-3305, 3316.

IN THE LAMBERT DECISION, SUPRA, WE OBSERVED THAT IF A PLAN PARTICIPANT ELECTED TO RECEIVE SOCIAL SECURITY BENEFITS PRIOR TO FULL ELIGIBILITY AGE, THIS WOULD OPERATE TO REDUCE THE SOCIAL SECURITY BENEFIT OF THE SURVIVING SPOUSE, BUT THAT IF THE SOCIAL SECURITY OFFSET WERE INSTEAD CALCULATED AS THOUGH THE SPOUSE-BENEFICIARY WERE RECEIVING UNREDUCED BENEFITS, THEN THE SPOUSE-BENEFICIARY'S COMBINED ENTITLEMENTS WOULD BE REDUCED TO AN AMOUNT LESS THAN 55 PERCENT OF THE PLAN PARTICIPANT'S MILITARY RETIRED PAY. CONCLUDED THAT THIS RESULT WOULD BE IMPERMISSIBLE, SINCE IT WOULD BE CONTRARY TO THE STATUTE AND THE INTENT OF THE CONGRESS, IN LIGHT OF THE LEGISLATIVE HISTORY DESCRIBED IN THE PREVIOUS PARAGRAPH. /2/

JUST AS THE SURVIVING SPOUSE'S SOCIAL SECURITY ANNUITY IS REDUCED AS A RESULT OF THE MEMBER'S ELECTION TO RECEIVE BENEFITS PRIOR TO FULL ELIGIBILITY AGE, UNDER 42 U.S.C. SEC. 402(Q) THE SURVIVING SPOUSE'S ANNUITY IS ALSO REDUCED IF HE OR SHE ELECTS TO DRAW BENEFITS BEFORE ATTAINING AGE 62. IT WOULD SEEM THAT REGARDLESS OF WHETHER THE SOCIAL SECURITY ANNUITY IS REDUCED ON ACCOUNT OF THE EARLY ELECTION OF BENEFITS BY THE MILITARY RETIREE OR BY THE SURVIVING SPOUSE, THE SURVIVOR BENEFIT ANNUITY OF THE SURVIVING SPOUSE SHOULD TAKE INTO ACCOUNT THE ACTUAL AMOUNT OF THE SOCIAL SECURITY ANNUITY RECEIVED.

CONSISTENT WITH THE FOREGOING, OUR VIEW IS THAT IN THE CASE OF MRS. EATON, THE SOCIAL SECURITY OFFSET SHOULD HAVE BEEN SET AT $470, THE ACTUAL AMOUNT OF HER MONTHLY SOCIAL SECURITY BENEFIT, RATHER THAN AS SOME HIGHER AMOUNT PREDICATED ON HER HYPOTHETICAL RECEIPT OF UNREDUCED SOCIAL SECURITY BENEFITS. WE THEREFORE CONCLUDE THAT SHE IS ENTITLED TO A RETROACTIVE RECOMPUTATION OF HER SURVIVOR BENEFIT PLAN ANNUITY USING THE LOWER SOCIAL SECURITY OFFSET FIGURE IN THE COMPUTATION OF HER ENTITLEMENTS. WE FURTHER CONCLUDE THAT OTHER ANNUITANTS IN THE SAME SITUATION AS MRS. EATON MAY RECEIVE THE SAME TYPE OF RETROACTIVE ADJUSTMENT IN THEIR ANNUITIES. COMPARE SERGEANT FRANKLIN L. SECREST, USMC B-210827, SEPTEMBER 21, 1983.

THE VOUCHER PRESENTED FOR DECISION IS RETURNED FOR PAYMENT, IF OTHERWISE CORRECT.

/1/ THE REQUEST WAS MADE BY LIEUTENANT COLONEL J. N. JOHNSON, USAF, ACCOUNTING AND FINANCE OFFICER, UNITED STATES AIR FORCE ACCOUNTING AND FINANCE CENTER, WHO QUESTIONS THE PROPRIETY OF APPROVING A VOUCHER IN FAVOR OF MRS. LUCILLE H. EATON IN THE AMOUNT OF $353, REPRESENTING ADDITIONAL SURVIVOR BENEFIT PLAN ANNUITY MONIES DUE HER FOR THE PERIOD FROM NOVEMBER 1, 1981, TO SEPTEMBER 30, 1985, IF IT MAY PROPERLY BE CONCLUDED THAT THE SOCIAL SECURITY OFFSET MAY NOT EXCEED HER ACTUAL SOCIAL SECURITY ENTITLEMENT. THE REQUEST HAS BEEN ASSIGNED SUBMISSION NUMBER DO- AF-1460 ASSIGNED BY THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE.

/2/ WE NOTE THAT IN AMENDING 10 U.S.C. SEC. 1451 THROUGH LEGISLATION CONTAINED IN PUBLIC LAW 99-145, SEC. 711, NOVEMBER 8, 1985, 99 STAT. 666, CONGRESS ELIMINATED THE SOCIAL SECURITY OFFSET AND ESTABLISHED A TWO-TIER SYSTEM UNDER WHICH THE SURVIVOR WOULD RECEIVE 55 PERCENT OF RETIRED PAY BEFORE AGE 62 AND 35 PERCENT THEREAFTER IN RECOGNITION OF ENTITLEMENT TO SOCIAL SECURITY. SEE H.R. REP. NO. 81, 99TH CONG., 1ST SESS. 251, REPRINTED IN 1985 U.S.C. CONG., & AD. NEWS 472, 527-528. PROVISION WAS MADE, HOWEVER, TO RETAIN THE SOCIAL SECURITY OFFSET FOR PERSONS WHO, LIKE MRS. EATON, WERE ELIGIBLE PLAN BENEFICIARIES ON OCTOBER 1, 1985, IF THAT WERE ADVANTAGEOUS TO THEM. SEE 10 U.S.C. SEC. 1451(E) (CURRENT).