B-230865, Oct 17, 1990

B-230865: Oct 17, 1990

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Issued after offset was initiated. Was obtained because. MSG Eby obtained Workers' Compensation benefits to which he was not entitled. Noting that the 25 percent rate was not even covering the interest on the judgment. If such offset is not appropriate. The holding in Tafoya is consistent with past decisions of this Office recognizing that the term "employee" as used in connection with personnel in government service does not include members of the armed forces. Expressly included members of the armed forces within its authority to offset erroneous payments from current pay. /1/ Given the proximity of the dates on which section 124 and amended section 5514 were enacted and the historical exclusion of service members from the definition of government "employee.

B-230865, Oct 17, 1990

MILITARY PERSONNEL - Pay - Retirement pay - Judgment debtors - Debt collection - Set-off DIGEST: 1. Authority in section 124 of Public Law No. 97-276 for collection of judgment debt by administrative offset from current pay of indebted federal employees does not permit offset of judgment debt from the monthly retired pay of members of the armed forces. Such collection by offset instead must be effected pursuant to the authority and procedures in 5 U.S.C. Sec. 5514. 2. Amount set off from military retired pay pursuant to the apparent authority of section 124 of Public Law No. 97-276 toward satisfaction of judgment debt of retired service member need not be refunded based on otherwise unrelated court decision, issued after offset was initiated, that section 124 generally does not apply to military personnel, since authority for offset clearly existed in another statute, 5 U.S.C. Sec. 5514.

Master Sergeant Robert T. Eby, USAF (Retired) -Debt Collection - Setoff of Retired Pay:

This decision responds to a request for an advance decision from the Air Force Accounting and Finance Center (AFAFC) as to the propriety of off- setting the retired pay of Master Sergeant (MSG) Robert T. Eby to satisfy a judgment entered against him by the United States District Court for the District of Columbia. The request has been approved by the Department of Defense Military Pay and Allowance Committee and assigned submission No. DO-AF-1484.

The judgment, in the amount of $81,221.93, was obtained because, by making false and fraudulent representations, MSG Eby obtained Workers' Compensation benefits to which he was not entitled. The U.S. Attorney requested an offset in February 1985 under the authority of section 124 of Public Law No. 97-276, 5 U.S.C. Sec. 5514 note hereafter "section 124", and the Air Force began withholding 25 percent of MSG Eby's retired pay in accordance with the request. In September 1985, the U.S. Attorney, noting that the 25 percent rate was not even covering the interest on the judgment, asked that the rate be increased. Shortly afterward, in an otherwise unrelated opinion, a federal circuit court held that section 124 does not apply to members of the armed forces in any event.

The Air Force asks whether and at what rate it should continue to offset MSG Eby's retired pay pursuant to section 124 and, if such offset is not appropriate, whether either 37 U.S.C. Sec. 1007(c) or 5 U.S.C. Sec. 5514 provides alternative authority.

For the reasons which follow, we find that collection of the judgment debt by administrative offset from MSG Eby's retired pay may be made pursuant to 5 U.S.C. Sec. 5514.

Section 124 provides that indebtedness of an "employee of the Federal Government" resulting from an action or suit brought against the employee by the United States may be collected in installments by deducting reasonable amounts from the employee's current pay. After AFAFC began withholding from MSG Eby's retired pay under the authority of section 124, the court in the case of United States v. Tafoya, 803 F.2d 140 (5th Cir. 1986), issued an opinion holding that section 124 does not provide authority for offsetting a service member's pay against indebtedness to the United States since members of the armed forces do not fall within the meaning of the term "employee of the Federal Government" as used in the statute. We agree.

The holding in Tafoya is consistent with past decisions of this Office recognizing that the term "employee" as used in connection with personnel in government service does not include members of the armed forces, active or retired. See, for example, B-197059, Feb. 5, 1980; B-188932, Dec. 23, 1977. Furthermore, as the court in Tafoya notes, 23 days after passing section 124, Congress enacted amendments to 5 U.S.C. Sec. 5514 which, like the unamended provisions, expressly included members of the armed forces within its authority to offset erroneous payments from current pay. /1/ Given the proximity of the dates on which section 124 and amended section 5514 were enacted and the historical exclusion of service members from the definition of government "employee," we agree with the Tafoya court that the difference in the statutes' language is not a "mere fortuity".

Accordingly, section 124 does not provide the statutory authority to withhold MSG Eby's retired pay.

AFAFC also asks whether either 37 U.S.C. Sec. 1007(c) or 5 U.S.C. Sec. 5514 provides the requisite statutory authority for withholding military retired pay. Subsection 1007(c) of title 37 authorizes the setoff of up to two-thirds of a service member's monthly pay for amounts administratively determined to be owed to the U.S., in accordance with regulations prescribed by the secretary of the department concerned. Air Force regulations implementing section 1007(c) limit setoffs to cases where the amounts are owed to the Department of Defense or its instrumentalities. Because MSG Eby's debt does not fall into that category there is no authority for the Air Force to offset it under 37 U.S.C. Sec. 1007(c).

Money may be offset against MSG Eby's retired pay, however, under 5 U.S.C. Sec. 5514. Section 5514 expressly includes retired pay in authorizing offset against current pay to collect debts to the United States, including debts that arise as the result of fraud or misrepresentation. See B-224750, Sept. 25, 1987. As we noted above, that authority applies to debts of members of the armed forces.

Use of 5 U.S.C. Sec. 5514 as authority for collection from MSG Eby nevertheless will not necessarily resolve the problem addressed in the U.S. Attorney's September 1985 request, that is, that withholding at a rate of 25 percent will not yield recovery of even the interest accruing on the $81,221.93 debt. The reason is that 5 U.S.C. Sec. 5514 requires that a debtor be afforded notice and an opportunity to enter into a written agreement establishing a schedule for payment of the debt, and that absent his agreement no more than 15 percent of his disposable pay may be withheld in any period.

The record establishes that MSG Eby effectively has agreed to a 25 percent offset albeit under section 124. In his February 13, 1985, letter to AFAFC, the U.S. Attorney stated that he would be giving MSG Eby the opportunity to object to that rate, and although deductions have been made since April 1985, neither the Air Force nor the U.S. Attorney has reported receiving notice from MSG Eby that the 25 percent offset created difficulties or that MSG Eby has requested a hearing concerning the terms of the payment schedule. Section 5514, however, clearly would require further express acquiescence by MSG Eby before the rate could be increased above 25 percent.

In these circumstances, the Air Force should advise the U.S. Attorney to consider encouraging MSG Eby to voluntarily establish a new payment schedule that would liquidate the judgment debt, pursuant to the procedures in 5 U.S.C. Sec. 5514, or to pursue execution of the judgment against MSG Eby by other than installment offsets against his retired pay.

Finally, AFAFC asks whether, in the event we determine as we have that section 124 does not provide authority for offset of MSG Eby's retired pay, he is entitled to a refund of any amounts already collected from him.

In our view, MSG Eby is not, in these circumstances, entitled to refund. As indicated above, 5 U.S.C. Sec. 5514 always provided an alternative basis for offset and, as we have stated, we see no basis in this case to object to a 25 percent rate under that statute. See also Federal Claims Collection Standards, 4 C.F.R. Sec. 102.3(b)(5), which authorizes administrative offset to collect a debt before the debtor is afforded his procedural rights if the government's ability to collect the debt otherwise would be prejudiced and if the procedures are promptly followed.

In sum, the Air Force may continue withholding 25 percent of MSG Eby's retired pay; need not refund amounts already collected; and should advise the U.S. Attorney to consider additional or alternative means of liquidating the debt.

/1/ Debt Collection Act of 1982, Pub.L. No 97-365, October 25, 1982. Whereas section 5514 provides authority for the offset of general indebtedness, application of section 124 is limited to collection of indebtedness resulting from an action or suit brought against an employee by the United States.