B-236414, Feb 22, 1991

B-236414: Feb 22, 1991

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GAO will not issue advance decision requested by the Air Force on the propriety of paying a successful litigant against the government more than specified in the judgment because the Air Force. Since after the request was filed the successful litigant and the Department of Justice were advised of the miscalculation and are pursuing resolution of the matter. The Military Retirement Fund that finances the self-sustaining Survivor Benefit Plan is intended by law to operate on an actuarially sound basis. The Department of Defense Military Retirement Fund is a special fund for paying. Survivor Benefit Plan (SBP) annuities. the Fund is mandated to make such payments without reference to how benefit eligibility or amount is determined.

B-236414, Feb 22, 1991

APPROPRIATIONS/FINANCIAL MANAGEMENT - Judgment Payments - Attorney fees DIGEST: 1. GAO will not issue advance decision requested by the Air Force on the propriety of paying a successful litigant against the government more than specified in the judgment because the Air Force, in advising the court, miscalculated the amount due, since after the request was filed the successful litigant and the Department of Justice were advised of the miscalculation and are pursuing resolution of the matter. MILITARY PERSONNEL - Pay - Survivor benefits - Annuities - Amount determination MILITARY PERSONNEL - Pay - Survivor benefits - Annuities - Interest Amount determination 2. The Military Retirement Fund that finances the self-sustaining Survivor Benefit Plan is intended by law to operate on an actuarially sound basis. Therefore, in calculating amounts due annuitants under the Plan as a result of court-ordered retroactive awards, interest on uncollected cost contributions, as well as the interest benefit that accrued to the Fund by virtue of not having paid benefits, should be considered. MILITARY PERSONNEL - Pay - Survivor benefits - Annuities - Amount determination 3. The Department of Defense Military Retirement Fund is a special fund for paying, among other things, Survivor Benefit Plan (SBP) annuities. the Fund is mandated to make such payments without reference to how benefit eligibility or amount is determined-- by administrative or judicial action-- judgments determining SBP benefits should be paid from the Fund and not from the permanent appropriation for judgments commonly known as the Judgment Fund.

Ms. Rosemary J. McCarthy, Annuitant:

This responds to an Air Force request for an advance decision pursuant to 31 U.S.C. Sec. 3529 on the propriety of refunding Survivor Benefit Plan (SBP) costs due to Ms. Rosemary J. McCarthy incident to a judgment in her favor by the United States Claims Court. /1/ The Air Force states that the refund amount was inadvertently omitted from its computation of amounts due Ms. McCarthy that the parties had presented to the court for incorporation into the judgment. The agency asks whether it can pay Ms. McCarthy more than was specified in the judgment, and what the source of any payments should be. The agency also asks whether in computing amounts due annuitants as a result of court-ordered retroactive awards it should set off interest on uncollected contributions, which themselves are set off.

We conclude that the Air Force cannot pay Ms. McCarthy more than specified in the judgment absent modification of it by the court, and that any payments should come from the Military Retirement Fund. We also conclude that interest on uncollected contributions should be set off in these types of computations.

Prior to his retirement in 1972, Ms. McCarthy's husband, an Air Force Colonel, elected not to participate in the SBP and thus not to provide an annuity for his spouse. After Colonel McCarthy died in 1981, Ms. McCarthy challenged the election not to participate on the basis that she had not been notified of it as required by then-current law.

The Claims Court, in McCarthy v. United States, 10 Cl.Ct. 573 (1986), aff'd, 826 F.2d 1049 (1987), held that Ms. McCarthy was entitled to appropriate survivor benefits beginning on the date of Colonel McCarthy's death. The court further held that there should be an offset against accrued total benefits of the amount actually paid to Colonel McCarthy during the period of his retirement that otherwise would have been deducted from his retirement pay as his contribution to the plan.

The Claims Court then directed the parties to file a stipulation as to the amount due and the clerk to enter judgment in plaintiff's favor for that amount. In due course, the Air Force Finance Center determined that the gross SBP payment due Ms. McCarthy was $122,351.06, against which should be set off $22,135 as the unpaid cost of coverage and $49,726.86 in payments Ms. McCarthy had received from the Veterans Administration; this left a net due of $50,489.20. The parties stipulated as to those amounts, and the clerk prepared, signed and entered a judgment specifying them.

After paying the judgment, the Air Force determined that the computation that was the basis for the stipulation and judgment was erroneous in two respects: an overpayment of $66 and an underpayment of $9,463.26. In view of this recalculation, the Air Force asks a series of questions concerning the adjustment of Ms. McCarthy's account beginning with whether, in the absence of a court order modifying the original judgment, the Air Force can take any action to pay Ms. McCarthy based on the recalculation.

We considered an analogous situation in a 1929 decision, which concerned war-risk insurance claims.

We were advised that government attorneys had been representing to plaintiffs that judgments for less than amounts actually due based on further calculations would cause no loss to the judgment creditors because subsequent payments by the government could be adjusted to take care of any discrepancies. (The attorneys were concerned that a judgment in excess of the amount in fact due would require modification of the judgment.) We stated:

"Where the language of the judgment will permit, it may be construed liberally to give the full benefit to which the plaintiffs are entitled under the principles announced by the court, but the judgment may not be amended or modified by an executive officer of the Government. If an error or omission has been made in a final judgment of the court ... resulting unfavorably either to the government or to the plaintiffs, it is the duty of the attorney concerned to apply to the court for correction or amendment of the judgment." 8 Comp.Gen. 603, 605 (1929).

We suggested that the government either request the courts to refrain from stating specific amounts in the judgments, or that the government exercise greater care in advising the court of the exact amounts involved.

We reiterated our view in a 1981 decision, in describing our Office's judgment certification function. /2/ We explained that since that function is an essentially ministerial task, our Office can neither modify nor refuse to certify a judgment for payment in accordance with its precise terms, even if the judgment itself is legally incorrect or requires payment of an amount otherwise prohibited by law. We quoted substantially the same material from the 1929 decision that is set out above, and noted that once a judgment is entered, "there are but two alternatives: contest it through normal judicial channels, or comply with it as written." B-124720, B-129346, Sept. 23, 1981 at 4.

As discussed, below, the source of Ms. McCarthy's payment is a special fund, as opposed to the continuing appropriation to pay judgments, against which our Office certifies payments. We stated in the 1981 decision, however, that the principle involved-- the government may pay neither more nor less under a judgment than the amount specified in it-- applies to all judgments. Accordingly, it is our view that the Air Force should not pay Ms. McCarthy the additional amount proposed absent a modification to the McCarthy judgment by the court.

The Air Force's second concern relates to advice our Office gave the agency that the Judgment Fund, a continuing appropriation established by 31 U.S.C. Sec. 1304, was not available to pay the judgment in favor of Ms. McCarthy. According to 31 U.S.C. Sec. 1304:

"(a) Necessary amounts are appropriated to pay final judgments ... and interest and costs specified in the judgments or otherwise by law when

"(1) payment is not otherwise provided for. ..."

In reaching our conclusion, we noted the existence of a specific fund to pay SBP benefits, so that payment of the McCarthy judgment was "otherwise provided for." The Air Force asks that we re-examine our advice. For the reasons that follow, we see no basis for changing our views.

The Department of Defense Military Retirement Fund (Fund) was established to accumulate funds to finance, on an actuarially sound basis, DOD liabilities under military retirement and survivor benefit programs. U.S.C. Sec. 1461. Service members do not contribute directly to the Fund. Instead, fund assets are derived from investments, charges levied against the individual services' military personnel appropriations and amounts paid from the Treasury's General Fund. /3/ The Fund is specifically designated as a special fund for SBP payments, as well as for other retirement programs. See 10 U.S.C. Sec. 1463(a).

On a prior occasion, involving the Special Risk Insurance Fund, we held that where special funds are used to finance programs, judgments arising from the operation of the program (as opposed to those that are common to all agencies, such as tort or discrimination judgments) should be paid from program funds. See 62 Comp.Gen. 12 (1982). Such judgments are viewed as necessary expenses of the program for which program funds are available. Id. Like the Special Risk Insurance Fund, the Military Retirement Fund is a special, dedicated source of funds.

Moreover, the judgment entered in Ms. McCarthy's case was that "plaintiff recover of and from the United States" an amount "for survivor benefits." The Fund statute, 10 U.S.C. Sec. 1463(a)(4), mandates the Fund to pay such benefits in absolute terms that do not distinguish how benefit eligibility or amount is determined-- by administrative action or judicial decision.

In sum, in view of the special nature of the Fund as the sole source for the payment of survivor benefits and the specific language in the Fund statute mandating payment, we remain of the view that funds are "otherwise provided for," so that the Judgment Fund established by 31 U.S.C. Sec. 1304 is not available to pay judgments of the type discussed here.

Finally, the Air Force asks whether in cases involving court-ordered retroactive awards of annuity benefits, such as Ms. McCarthy's, it would be proper in computing amounts due annuitants to set off the interest that has accrued on the uncollected cost contributions.

Although we have not issued a decision on the SBP specifically, we have held as a general matter in decisions involving annuity issues that arose before the establishment of the Fund in 1983, that annuity payments under plans intended to be self-sustaining cannot be paid until all uncollected contributions plus interest are recouped. 41 Comp.Gen. 500 (1962); see also 54 Comp.Gen. 493 (1974).

Also, we have described the SBP as self-sustaining, 54 Comp.Gen., supra, and as noted above, the Fund operates on an "actuarially sound basis." view of this, we believe interest on uncollected cost contributions should be collected from or offset against amounts due a beneficiary.

The judgment entered in Ms. McCarthy's case essentially was based on he calculations presented to the Claims Court by the Air Force, which did not address the interest issue. We therefore do not believe the Air Force properly can collect interest from Ms. McCarthy for the period covered by the judgment. B-124720, B-129346, supra.

/1/ This request has been approved by the DOD Military Pay and Allowance Committee and assigned control number DO-AF-1494.

/2/ The decision, issued at the request of the Commissioner of Internal Revenue, held that our Office had no authority to withhold taxes on backpay judgments against the United States, unless the judgments specifically provided for such withholding or the parties involved agreed to the deduction of a specified amount.

/3/ H.R. Rep. No. 98-107, 98th Cong., 1st Sess. (1983) at 229; 10 U.S.C. Sec. 1462. For an extensive discussion of the Fund and its non investment funding sources, see 63 Comp.Gen. 331 (1984).