B-25559, MAY 8, 1942, 21 COMP. GEN. 1000

B-25559: May 8, 1942

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SET-OFF - RETIREMENT DEDUCTIONS AND ANNUITIES - IN GENERAL RETIREMENT DEDUCTIONS WHICH ARE MADE FROM AN EMPLOYEE'S SALARY ON AND AFTER THE DATE OF THE ACT OF JANUARY 24. ARE REQUIRED TO REMAIN IN THE RETIREMENT FUND AS A BASIS FOR FUTURE ANNUITY PAYMENTS IF THE EMPLOYEE HAS HAD 5 OR MORE YEARS OF SERVICE. ARE NOT AVAILABLE AFTER SEPARATION FOR SET-OFF AGAINST AN INDEBTEDNESS TO THE GOVERNMENT. ANY AMOUNT TO HIS CREDIT IN THE RETIREMENT FUND OTHERWISE PAYABLE TO HIS ESTATE IS AVAILABLE FOR SET OFF PURPOSES. ARE AVAILABLE FOR SET-OFF AGAINST AN INDEBTEDNESS TO THE GOVERNMENT IF AND WHEN THE EMPLOYEE MAKES CLAIM FOR REFUND THEREOF. PROVIDING FOR ANNUITY BENEFITS AT A CERTAIN AGE TO FORMER EMPLOYEES WHO HAVE BEEN SEPARATED FROM THE SERVICE AFTER SERVING 5 OR MORE YEARS.

B-25559, MAY 8, 1942, 21 COMP. GEN. 1000

SET-OFF - RETIREMENT DEDUCTIONS AND ANNUITIES - IN GENERAL RETIREMENT DEDUCTIONS WHICH ARE MADE FROM AN EMPLOYEE'S SALARY ON AND AFTER THE DATE OF THE ACT OF JANUARY 24, 1942, AMENDING THE CIVIL SERVICE RETIREMENT ACT, AND WHICH, UPON SEPARATION OF THE EMPLOYEE FROM THE SERVICE, ARE REQUIRED TO REMAIN IN THE RETIREMENT FUND AS A BASIS FOR FUTURE ANNUITY PAYMENTS IF THE EMPLOYEE HAS HAD 5 OR MORE YEARS OF SERVICE, ARE NOT AVAILABLE AFTER SEPARATION FOR SET-OFF AGAINST AN INDEBTEDNESS TO THE GOVERNMENT, BUT IF THE EMPLOYEE DIES PRIOR TO BECOMING ELIGIBLE FOR AN ANNUITY, ANY AMOUNT TO HIS CREDIT IN THE RETIREMENT FUND OTHERWISE PAYABLE TO HIS ESTATE IS AVAILABLE FOR SET OFF PURPOSES. RETIREMENT DEDUCTIONS MADE PRIOR TO JANUARY 24, 1942, FROM THE SALARY OF AN EMPLOYEE WITHIN THE PURVIEW OF SECTION 5 OF THE ACT OF JANUARY 24, 1942, AMENDING THE CIVIL SERVICE RETIREMENT ACT TO PROVIDE IN EFFECT THAT RETIREMENT DEDUCTIONS MADE PRIOR TO JANUARY 24, 1942--- AS DISTINGUISHED FROM THOSE MADE ON AND AFTER SUCH DATE WHERE THE EMPLOYEE HAS HAD 5 OR MORE YEARS OF SERVICE--- SHALL BE SUBJECT TO WITHDRAWAL AT HIS ELECTION UPON SEPARATION FROM THE SERVICE, ARE AVAILABLE FOR SET-OFF AGAINST AN INDEBTEDNESS TO THE GOVERNMENT IF AND WHEN THE EMPLOYEE MAKES CLAIM FOR REFUND THEREOF. ANNUITY PAYMENTS DUE A FORMER EMPLOYEE PURSUANT TO SECTION 5 OF THE ACT OF JANUARY 24, 1942, PROVIDING FOR ANNUITY BENEFITS AT A CERTAIN AGE TO FORMER EMPLOYEES WHO HAVE BEEN SEPARATED FROM THE SERVICE AFTER SERVING 5 OR MORE YEARS, ARE AVAILABLE AS A SET-OFF AGAINST AN INDEBTEDNESS GOVERNMENT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE PRESIDENT, UNITED STATES CIVIL SERVICE COMMISSION, MAY 8, 1942:

I HAVE YOUR LETTER OF APRIL 22, 1942, AS FOLLOWS:

THE COMMISSION HAS BEFORE IT A QUESTION INVOLVING INTERPRETATION OF SECTION 5 (A), ACT OF JANUARY 24, 1942 ( PUBLIC NO. 411).

THIS SECTION AMENDS SECTION 7, ACT OF MAY 29, 1930, BY VESTING TITLE TO ANNUITY, UPON ATTAINING AGE 62, IN AN OFFICER OR EMPLOYEE WHO IS SEPARATED FROM SERVICE AFTER SERVING FIVE YEARS OR MORE. IF SUCH SEPARATION IS INVOLUNTARY NOT BY REMOVAL FOR CAUSE ON CHARGES OF MISCONDUCT OR DELINQUENCY, THE EMPLOYEE MAY ELECT AT AGE 55 (OR AT DATE OF SEPARATION IF SUBSEQUENT TO THAT AGE) AN ANNUITY EQUAL TO THE PRESENT WORTH OF AN ANNUITY BEGINNING AT AGE 62. UPON ANY SUCH SEPARATION, THE INDIVIDUAL ACCOUNT OF THE EMPLOYEE IS RETAINED IN THE RETIREMENT FUND AND DRAWS INTEREST AT 3 PERCENT COMPOUNDED ANNUALLY UNTIL BEGINNING DATE OF ANNUITY, UNLESS HE ELECTS TO RECEIVE REFUND COVERING HIS SERVICE UP TO AND INCLUDING JANUARY 23, 1942.

DECISIONS BY YOUR OFFICE HAVE BEEN UNIFORM IN HOLDING THAT A SUM OTHERWISE DUE FROM THE RETIREMENT FUND IN THE CASE OF AN EMPLOYEE SEPARATED UNDER CONDITIONS ENTITLING HIM TO REFUND COULD BE DIVERTED TO SATISFY A GOVERNMENT CLAIM EVEN THOUGH THE INDIVIDUAL DID NOT HIMSELF FILE APPLICATION THEREFOR, OR THAT A PERSON ELIGIBLE FOR ANNUITY WOULD BE REQUIRED TO REIMBURSE THE UNITED STATES FROM HIS ANNUITY PAYMENTS. THE LAW THEN IN EFFECT, HOWEVER, ACCORDED NO ANNUITABLE RIGHTS TO PERSONS SEPARATED AFTER SERVING ONLY FIVE YEARS EXCEPT IN CASES OF TOTAL DISABILITY FOR USEFUL AND EFFICIENT SERVICE.

YOUR DECISION IS, THEREFORE, RESPECTFULLY REQUESTED WHETHER AN EMPLOYEE SEPARATED UNDER CONDITIONS OUTLINED IN THE SECOND PARAGRAPH ABOVE, WHO LEAVES HIS MONEY IN THE RETIREMENT FUND FOR FUTURE ANNUITABLE PURPOSES IS SUBJECT TO HAVING HIS ACCOUNT DIVERTED TO SATISFY A BONA FIDE GOVERNMENT INDEBTEDNESS, OR WHETHER THE DEPARTMENT INVOLVED MUST WAIT TO RECOVER THE INDEBTEDNESS FROM THE ANNUITY PAYMENTS WHEN DUE (OR FOR THE LUMP SUM PAYABLE TO THE ESTATE IF THE FORMER EMPLOYEE DIES IN THE MEANTIME).

SECTION 5 OF THE ACT OF JANUARY 24, 1942, PUBLIC LAW 411, 56 STAT. 16, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

SEC. 5. SECTION 7 OF THE SAID ACT OF MAY 29, 1930, AS AMENDED, IS HEREBY REPEALED, AND IN LIEU THEREOF THE FOLLOWING IS SUBSTITUTED:

"/A) SHOULD ANY OFFICER OR EMPLOYEE TO WHOM THIS ACT APPLIES, AFTER HAVING SERVED FOR A TOTAL PERIOD OF NOT LESS THAN FIVE YEARS AND BEFORE BECOMING ELIGIBLE FOR RETIREMENT BECOME SEPARATED FROM THE SERVICE, SUCH OFFICER OR EMPLOYEE SHALL BE PAID A DEFERRED ANNUITY BEGINNING AT THE AGE OF SIXTY-TWO YEARS, COMPUTED AS PROVIDED IN CLAUSES (1) AND (2) OF SECTION 4 (A) OF THIS ACT: PROVIDED, THAT ANY SUCH PERSON INVOLUNTARILY SEPARATED FROM THE SERVICE NOT BY REMOVAL FOR CAUSE ON CHARGES OF MISCONDUCT OR DELINQUENCY MAY ELECT TO RECEIVE AN IMMEDIATE ANNUITY BEGINNING AT THE AGE OF FIFTY-FIVE OR AT THE DATE OF SEPARATION FROM THE SERVICE IF SUBSEQUENT TO THAT AGE HAVING A VALUE EQUAL TO THE PRESENT WORTH OF A DEFERRED ANNUITY BEGINNING AT THE AGE OF SIXTY-TWO YEARS, OR AT AGE OF SEPARATION IF SUBSEQUENT TO AGE SIXTY-TWO, COMPUTED AS PROVIDED IN SECTION 4 OF THIS ACT: PROVIDED FURTHER, THAT NOTHING IN THIS ACT SHALL BE SO CONSTRUED AS TO PROHIBIT THE REFUND OF DEDUCTIONS, DEPOSITS, OR REDEPOSITS MADE PRIOR TO THE EFFECTIVE DATE OF THIS ACT WITH INTEREST THEREON, OR OF ANY VOLUNTARY CONTRIBUTIONS MADE UNDER THE PROVISIONS OF SECTION 10 OF THIS ACT, WITH INTEREST: AND PROVIDED FURTHER, THAT ALL MONEYS, EXCEPT VOLUNTARY CONTRIBUTIONS, SO REFUNDED AN OFFICER OR EMPLOYEE MUST BE REDEPOSITED WITH INTEREST BEFORE SUCH OFFICER OR EMPLOYEE MAY DERIVE ANY ANNUITY BENEFITS BASED ON THE SERVICE COVERED BY THE REFUND.'

AS STATED IN THE THIRD PARAGRAPH OF YOUR LETTER, IT IS THE SETTLED RULE THAT (1) THE AMOUNT TO THE CREDIT OF A FORMER EMPLOYEE IN THE RETIREMENT FUND, OR (2) THE AMOUNT OF HIS RETIREMENT ANNUITY INSTALLMENTS MAY BE APPLIED IN LIQUIDATION OF HIS INDEBTEDNESS TO THE UNITED STATES (4 COMP. GEN. 521; 9 ID. 465; 10 ID. 225; 11 ID. 363; 16 ID. 161 1017; ID. 1101; 17 ID. 391; ID. 518; 19 ID. 88; ID. 721; O LEARY V. UNITED STATES, 82 C.1CLS. 305; BOERNER V. UNITED STATES, 30 FED. SUPP. 635; AFFIRMED ON APPEAL, 117 F./2D) 387; UNITED STATES V. UNITED STATES FIDELITY AND GUARANTY COMPANY, 35 FED. SUPP. 959), ALSO, THAT IF THE AMOUNT TO THE CREDIT OF AN EMPLOYEE IN THE RETIREMENT FUND BE DUE AND PAYABLE TO A FORMER EMPLOYEE, NO APPLICATION FOR REFUND IS NECESSARY TO AUTHORIZE THE UNITED STATES TO APPLY SUCH AMOUNT IN LIQUIDATION OF THE INDEBTEDNESS TO THE UNITED STATES (16 COMP. GEN. 962). HOWEVER, IT HAS BEEN HELD THAT THE AMOUNT IN THE RETIREMENT FUND TO THE CREDIT OF AN EMPLOYEE MAY NOT BE USED FOR THE PURPOSE OF OFFSET SO LONG AS HE REMAINS IN THE SERVICE. 19 COMP. GEN. 705, 708; DECISION DATED JUNE 11, 1941, B-16420, TO YOU; AND DECISION DATED AUGUST 9, 1937, A-87351. SEE, ALSO, UNITED STATES V. UNITED STATES FIDELITY AND GUARANTY COMPANY, SUPRA, IN WHICH IT WAS STATED AT PAGE 962:

* * * FURTHERMORE, IT CAN WELL BE QUESTIONED WHETHER THE UNITED STATES COULD, FOR ANY OBLIGATION OWING TO IT, ATTACH THE RETIREMENT FUND CREDIT OF ONE OF ITS EMPLOYEES WHO WAS CONTINUING IN ITS EMPLOYMENT. BUT, WHEN AN EMPLOYEE HAS BEEN DISMISSED, AND THE PORTION CONTRIBUTED BY HIM IS PAYABLE TO HIM, I AM DECIDED THAT A DIFFERENT RULE GOVERNS, THAT THE UNITED STATES CAN WITHHOLD AN AMOUNT EQUAL TO THE ARREARAGE. THERE THEN REMAINED NO BAR TO THE APPLICATION OF THIS AMOUNT TO THE INDEBTEDNESS OF HAMILTON TO THE UNITED STATES. * * *

UNDER THE PROVISIONS OF SECTION 7 OF THE RETIREMENT ACT, AS AMENDED BY SECTION 5 OF THE ACT OF JANUARY 24, 1942, SUPRA, AN EMPLOYEE WHO HAS SERVED A TOTAL PERIOD OF 5 YEARS OR MORE AND IS SEPARATED FROM THE SERVICE AFTER THE DATE OF THE ACT MAY NOT WITHDRAW FROM THE RETIREMENT FUND THE AMOUNT DEDUCTED FROM HIS SALARY, FOR RETIREMENT PURPOSES, ON AND AFTER THE DATE OF THE ACT; AND HE MAY ELECT TO LEAVE IN THE RETIREMENT FUND THE AMOUNT WHICH WAS DEDUCTED FOR RETIREMENT PURPOSES PRIOR TO THE DATE OF THE ACT, SAID AMOUNT, TOGETHER WITH THE AMOUNT DEDUCTED ON OR AFTER THE DATE OF THE ACT, TO REMAIN AVAILABLE AS THE BASIS FOR AN ANNUITY AT THE AGE OF 62 YEARS. IN LINE WITH THE DECISIONS HEREINBEFORE CITED--- WHICH ARE TO THE EFFECT THAT THE AMOUNT TO THE CREDIT OF AN EMPLOYEE IN THE RETIREMENT FUND IS NOT AVAILABLE FOR SET-OFF TO LIQUIDATE AN INDEBTEDNESS OF THE EMPLOYEE TO THE UNITED STATES WHILE THE EMPLOYEE REMAINS IN THE SERVICE--- IT IS CONCLUDED THAT THE PORTION OF THE INDIVIDUAL ACCOUNT IN THE RETIREMENT FUND TO THE CREDIT OF A FORMER EMPLOYEE AS A RESULT OF RETIREMENT DEDUCTIONS MADE ON AND AFTER JANUARY 24, 1942, IS NOT AVAILABLE FOR SET-OFF; AND THAT THE PORTION OF HIS INDIVIDUAL ACCOUNT IN THE RETIREMENT FUND AS A RESULT OF RETIREMENT DEDUCTIONS MADE PRIOR TO JANUARY 24, 1942, IS AVAILABLE FOR SET-OFF ONLY IN THE EVENT THE FORMER EMPLOYEE ELECTS TO RECEIVE REFUND AND MAKES CLAIM FOR THE AMOUNT THEREOF. HOWEVER, ANNUITY PAYMENTS IF AND WHEN DUE WILL BE AVAILABLE FOR SET-OFF. ALSO, IF THE FORMER EMPLOYEE DIES PRIOR TO BECOMING ELIGIBLE FOR AN ANNUITY, ANY AMOUNT IN THE RETIREMENT FUND OTHERWISE PAYABLE TO HIS ESTATE WILL BE AVAILABLE FOR SET-OFF.

WHEN A DEBT IS REPORTED TO THE CIVIL SERVICE COMMISSION IN A CASE OF THE CLASS HEREIN DISCUSSED A CAVEAT SHOULD BE PLACED AGAINST THE INDIVIDUAL ACCOUNT OF THE EMPLOYEE IN THE RETIREMENT FUND WITH A VIEW TO COLLECTION IN ACCORDANCE WITH THE RULES HEREIN STATED.