B-242277, Sep 12, 1991

B-242277: Sep 12, 1991

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The interest is payable from the agency's appropriation covering the fiscal year or years in which the retirement contributions were withheld. USIA is responsible for the payment of interest. All federal employees were covered by the Civil Service Retirement System (CSRS). All new employees are covered by FERS. At issue here is the retirement coverage of certain non-U.S. citizens who hold J-1 visas and were employed by the Voice of America (VOA). These employees were covered by CSRS. FERS coverage is not available to them because FERS does not cover employees who are not covered by the Social Security Act. J-1 visa holders are not covered by the Social Security Act. Provides for the payment of interest to the J-1 visa holders on the CSRS deductions that were erroneously withheld from their pay.

B-242277, Sep 12, 1991

DIGEST: Under the Back Pay Act, the United States Information Agency must pay interest on amounts erroneously withheld from their employees' pay and contributed to the government's retirement fund. 5 U.S.C. Sec. 5596(b)(2)(A) (1988). The interest is payable from the agency's appropriation covering the fiscal year or years in which the retirement contributions were withheld.

Payment of Interest Under the Back Pay Act:

This responds to a request from the Deputy General Counsel, United States Information Agency (USIA), for our advice on whether the Office of Personnel Management (OPM) or USIA should pay USIA employees interest on monies withheld from the employees and erroneously contributed to the government's retirement fund. The amount withheld from the employees has since been refunded to them. While USIA argues that OPM must pay interest to the employees on these amounts, OPM contends that under the Back Pay Act (Act), 5 U.S.C. Sec. 5596 (1988), USIA is responsible for the payment of interest. We agree with OPM and conclude that under 5 U.S.C. Sec. 5596(b)(2)(C), USIA must pay interest to their employees with respect to any monies erroneously withheld from their pay.

BACKGROUND

Until 1986, when the Congress created the Federal Employees Retirement System (FERS), all federal employees were covered by the Civil Service Retirement System (CSRS). Effective January 1, 1987, all new employees are covered by FERS. See generally 5 U.S.C. Sec. 8401 8479. At issue here is the retirement coverage of certain non-U.S. citizens who hold J-1 visas and were employed by the Voice of America (VOA), the broadcasting arm of USIA, after December 31, 1986.

Prior to the creation of FERS, these employees were covered by CSRS, and upon the advice and counsel of OPM, USIA had withheld CSRS contributions from their pay. By law, however, FERS coverage is not available to them because FERS does not cover employees who are not covered by the Social Security Act, 5 U.S.C. Sec. 8401(11), and J-1 visa holders are not covered by the Social Security Act, 42 U.S.C. Sec. 410(a)(19). With the statutory exclusion of these employees from FERS in mind, USIA, relying on the pre- FERS advice of OPM, continued withholding CSRS contributions for its J-1 visa holding employees. In 1989, OPM advised VOA to discontinue this practice because the law creating FERS excludes from CSRS coverage employees hired after January 1, 1987.

Beginning July 29, 1990, USIA stopped withholding CSRS contributions from these employees. OPM returned the erroneous CSRS deductions to USIA by reducing subsequent transfers of CSRS funds. USIA returned to the employees the CSRS deductions erroneously withheld from their pay.

DISCUSSION

The Back Pay Act provides for the payment of interest on awards of back pay resulting from an unjustified or unwarranted personnel action. U.S.C. Sec. 5596(b)(2). OPM has determined, under its authority under the Act, 5 U.S.C. Sec. 5596(c), that erroneously withholding retirement contributions from an employee's pay constitutes an unjustified or unwarranted personnel action. See OPM letter, March 8, 1991. The Act, therefore, provides for the payment of interest to the J-1 visa holders on the CSRS deductions that were erroneously withheld from their pay.

The Act also expressly provides that interest is payable from the same appropriation or appropriations and in the same manner as the back pay to which the interest applies. 5 U.S.C. Sec. 5596(b)(2)(C). It is therefore clear that, in this case, interest is payable by USIA. Moreover, we have held that interest payable pursuant to an administrative determination, as is the case here, is chargeable to the fiscal year or years to which the back pay award relates. 69 Comp.Gen. 40, 43 (1989). USIA must therefore pay the employees interest from the agency's appropriation covering the fiscal year or years in which the retirement contributions were erroneously withheld.

Interest is computed from the date of the erroneous retirement contributions until not more than 30 days before the date on which the payment was made. Interest is computed at the rate or rates in effect under section 6621(a) of the Internal Revenue Code of 1986. 5 U.S.C. Sec. 5596(b)(2)(B).