B-160453, JANUARY 31, 1967 46 COMP. GEN. 647

B-160453, JANUARY 31, 1967 46 COMP. GEN. 647

MILITARY PERSONNEL - RETIRED - EMPLOYMENT BY EDUCATIONAL INSTITUTIONS - ADDITIONAL COMPENSATION RETIRED MEMBERS AND MEMBERS OF THE FLEET RESERVE AND FLEET MARINE CORPS RESERVE WHO ARE EMPLOYED UNDER 10 U.S.C. 2031 (D) BY EDUCATIONAL INSTITUTIONS FOR INSTRUCTIONAL AND ADMINISTRATIVE DUTIES IN CONNECTION WITH THE JUNIOR RESERVE OFFICERS TRAINING CORPS (ROTC) PROGRAM ARE ENTITLED FROM THE DATE OF ENTRY ON DUTY UNDER THE PROGRAM TO HAVE THE DIFFERENCE BETWEEN RETIRED PAY AND ACTIVE DUTY PAY AND ALLOWANCES PRESCRIBED BY SECTION 2031 (D) COMPUTED ON THE BASIS OF THE ACTIVE DUTY RATES OF PAY THEY WOULD HAVE RECEIVED HAD THEY BEEN CALLED TO ACTIVE DUTY, PLUS THE PRESCRIBED INCREASES IN ACTIVE DUTY PAY ACCRUING WHILE PERFORMING UNDER THE ROTC PROGRAM, AS THE MAXIMUM AMOUNT ESTABLISHED ON THE DATE OF ENTRY ON DUTY WITH AN INSTITUTION IS NOT REQUIRED TO REMAIN FIXED OR LIMITED FOR THE DURATION OF THE EMPLOYMENT CONTRACT. PAY - RETIRED - INCREASES - COST-OF-LIVING - EFFECT ON COMPENSATION FROM EDUCATIONAL INSTITUTIONS THE ADDITIONAL AMOUNT PAID RETIRED MEMBERS AND MEMBERS OF THE FLEET RESERVE AND FLEET MARINE CORPS RESERVE UNDER 10 U.S.C. 2031 (D) WHEN EMPLOYED BY INSTITUTIONS TO PERFORM INSTRUCTIONAL AND ADMINISTRATIVE DUTIES IN CONNECTION WITH THE JUNIOR RESERVE OFFICERS TRAINING CORPS PROGRAM REQUIRED TO BE "NOT MORE THAN THE DIFFERENCE BETWEEN THEIR RETIRED PAY AND THE ACTIVE DUTY PAY AND ALLOWANCES WHICH THEY WOULD RECEIVE IF ORDERED TO ACTIVE DUTY," THAT AMOUNT IS SUBJECT TO REDUCTION IN THE AMOUNT OF THE COST-OF-LIVING INCREASE IN RETIRED OR RETAINER PAY THAT BECAME EFFECTIVE DECEMBER 1, 1966 UNDER 10 U.S.C. 1401 (A). SOCIAL SECURITY - COVERAGE - RETIRED MILITARY PERSONNEL - EMPLOYMENT BY EDUCATIONAL INSTITUTIONS WHETHER EDUCATIONAL INSTITUTIONS EMPLOYING RETIRED MEMBERS OF THE UNIFORMED SERVICES ARE EMPLOYERS FOR THE PURPOSE OF THE EXCISE TAX IMPOSED BY 26 U.S.C. 3111 (A) IS A MATTER WITHIN THE JURISDICTION OF THE INTERNAL REVENUE SERVICE. HOWEVER, UNDER 26 U.S.C. 501 (C) (3) AND 3121 (B) (8) (B) CERTAIN ORGANIZATIONS, INCLUDING EDUCATIONAL INSTITUTIONS, ARE EXEMPT FROM TAXATION UNLESS A WAIVER OF EXEMPTION IS FILED BY THE ORGANIZATION IN ACCORDANCE WITH SECTION 3121 (K) (1) IN ORDER THAT CERTAIN PROVISIONS OF THE SOCIAL SECURITY ACT WILL BE EXTENDED TO THE SERVICE PERFORMED BY THEIR EMPLOYEES.

TO THE SECRETARY OF DEFENSE, JANUARY 31, 1967:

FURTHER REFERENCE IS MADE TO LETTER DATED NOVEMBER 22, 1966, FROM THE ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER), REQUESTING DECISION ON CERTAIN QUESTIONS WHICH HAVE ARISEN IN THE ADMINISTRATION OF 10 U.S.C. 2031 (D), CONCERNING RETIRED MEMBERS OF THE UNIFORMED SERVICES PERFORMING INSTRUCTIONAL AND ADMINISTRATIVE DUTIES IN CONNECTION WITH THE JUNIOR ROTC PROGRAM.

THE QUESTIONS PRESENTED ARE CONTAINED IN COMMITTEE ACTION NO. 390 OF THE MILITARY PAY AND ALLOWANCE COMMITTEE, DEPARTMENT OF DEFENSE, AS FOLLOWS:

1. ARE RETIRED MEMBERS AND MEMBERS OF THE FLEET RESERVE AND FLEET MARINE CORPS RESERVE EMPLOYED UNDER THE PROVISIONS OF 10 U.S.C. 2031 (D) ENTITLED AT ALL TIMES DURING THEIR EMPLOYMENT TO "AN ADDITIONAL AMOUNT OF NOT MORE THAN THE DIFFERENCE BETWEEN THEIR RETIRED PAY AND THE ACTIVE DUTY PAY AND ALLOWANCES WHICH THEY WOULD RECEIVE IF ORDERED TO ACTIVE DUTY" ON ANY GIVEN DAY DURING SUCH EMPLOYMENT?

2. IRRESPECTIVE OF THE ANSWER TO QUESTION 1, IS THE "ADDITIONAL AMOUNT" REQUIRED TO BE ADJUSTED AT ANY TIME RETIRED OR RETAINER PAY IS ADJUSTED PURSUANT TO THE PROVISIONS OF 10 U.S.C. 1401A?

3. IS THE EMPLOYER EXCISE TAX IMPOSED BY 26 U.S.C. 3111 CONSIDERED AN EXCLUSIVE OBLIGATION OF THE INSTITUTION UNDER 10 U.S.C. 2031 (D) (1/?

THE LAW GOVERNING THE JUNIOR RESERVE OFFICERS TRAINING CORPS, CONTAINED IN CHAPTER 102 OF TITLE 10, U.S. CODE, AS ADDED BY SECTION 101 OF THE ACT OF OCTOBER 13, 1964, PUBLIC LAW 88-647, 78 STAT. 1063, PROVIDES IN SUBSECTION (D) OF SECTION 2031 OF TITLE 10, AS FOLLOWS:

(D) INSTEAD OF, OR IN ADDITION TO, DETAILING NONCOMMISSIONED AND COMMISSIONED OFFICERS ON ACTIVE DUTY UNDER SUBSECTION (C) (1), THE SECRETARY OF THE MILITARY DEPARTMENT CONCERNED MAY AUTHORIZE QUALIFIED INSTITUTIONS TO EMPLOY, AS ADMINISTRATORS AND INSTRUCTORS IN THE PROGRAM, RETIRED NONCOMMISSIONED AND COMMISSIONED OFFICERS, AND MEMBERS OF THE FLEET RESERVE AND FLEET MARINE CORPS RESERVE, WHOSE QUALIFICATIONS ARE APPROVED BY THE SECRETARY AND THE INSTITUTION CONCERNED AND WHO REQUEST SUCH EMPLOYMENT, SUBJECT TO THE FOLLOWING:

(1) RETIRED MEMBERS SO EMPLOYED ARE ENTITLED TO RECEIVE THEIR RETIRED OR RETAINER PAY AND AN ADDITIONAL AMOUNT OF NOT MORE THAN THE DIFFERENCE BETWEEN THEIR RETIRED PAY AND THE ACTIVE DUTY PAY AND ALLOWANCES WHICH THEY WOULD RECEIVE IF ORDERED TO ACTIVE DUTY, AND ONE HALF OF THAT ADDITIONAL AMOUNT SHALL BE PAID TO THE INSTITUTION CONCERNED BY THE SECRETARY OF THE MILITARY DEPARTMENT CONCERNED FROM FUNDS APPROPRIATED FOR THAT PURPOSE.

(2) NOTWITHSTANDING ANY OTHER PROVISION OF LAW, SUCH A RETIRED MEMBER IS NOT, WHILE SO EMPLOYED, CONSIDERED TO BE ON ACTIVE DUTY OR INACTIVE DUTY TRAINING FOR ANY PURPOSE.

UNDER THE PROVISIONS OF CLAUSE (1) OF SUBSECTION 2031 (D), RETIRED MEMBERS EMPLOYED BY THE INSTITUTIONS AS ADMINISTRATORS AND INSTRUCTORS IN THE PROGRAM ARE ENTITLED TO RECEIVE THEIR RETIRED OR RETAINER PAY AND AN "ADDITIONAL AMOUNT" OF "NOT MORE THAN" THE DIFFERENCE BETWEEN THEIR RETIRED PAY AND THE "ACTIVE DUTY PAY AND ALLOWANCES WHICH THEY WOULD RECEIVE IF ORDERED TO ACTIVE DUTY.' WHILE IT THUS SEEMS CLEAR THAT THE LAW DOES NOTHING MORE THAN FIX A MAXIMUM ON THE "ADDITIONAL AMOUNT" WHICH THE EMPLOYED RETIRED MEMBER MAY RECEIVE, IT APPEARS THAT THE MAXIMUM AMOUNT HAS BEEN AUTHORIZED PURSUANT TO IMPLEMENTING REGULATIONS, NAMELY, PARAGRAPH IV.B2, DEPARTMENT OF DEFENSE DIRECTIVE NO. 1205.13 DATED DECEMBER 22, 1965, WHICH READS, IN PERTINENT PART, AS FOLLOWS:

* * * RETIRED PERSONNEL SO EMPLOYED SHALL RECEIVE THEIR RETIRED OR RETAINER PAY AND AN ADDITIONAL AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THEIR RETIRED PAY AND THE ACTIVE DUTY PAY AND ALLOWANCES, EXCLUDING HAZARDOUS DUTY PAY, WHICH THEY WOULD RECEIVE IF ORDERED TO ACTIVE DUTY.

IN THE LIGHT OF THE ABOVE-QUOTED REGULATIONS, IT IS STATED IN COMMITTEE ACTION NO. 390, THAT QUESTION 1 ASKS WHETHER THE MAXIMUM ADDITIONAL AMOUNT IS FIXED AS OF THE DATE OF ENTRY ON SUCH EMPLOYMENT, OR MUST IT BE AT ALL TIMES IN THE AMOUNT OF THE DIFFERENCE THAT WOULD PREVAIL AS THOUGH THE RETIRED MEMBER WERE CONTINUOUSLY ON ACTIVE DUTY THROUGHOUT THE TENURE OF HIS EMPLOYMENT.

IT IS CLEAR FROM THE LANGUAGE OF 10 U.S.C. 2031 (D) THAT THE RETIRED MEMBERS THERE MENTIONED ARE ENTITLED TO RECEIVE AN ADDITIONAL AMOUNT OF NOT MORE THAN THE DIFFERENCE BETWEEN THEIR RETIRED PAY AND THE "ACTIVE DUTY PAY AND ALLOWANCES WHICH THEY WOULD RECEIVE IF ORDERED TO ACTIVE DUTY.' IN THIS CONNECTION, DURING THE HOUSE DEBATE ON H.R. 9124, MR. HEBERT REMARKED THAT "HERE IN THE JUNIOR ROTC PROGRAM A HIGH SCHOOL MAY PARTICIPATE BY PAYING NOT MORE THAN ONE-HALF OF THE DIFFERENCE BETWEEN THE RETIRED MEMBER'S RETIRED PAY AND THE AMOUNT HE WOULD DRAW IF ON FULL-TIME ACTIVE DUTY.' SEE 110 CONG. REC. 14686. IF A RETIRED MEMBER ACTUALLY IS ORDERED TO ACTIVE DUTY HE BECOMES ENTITLED TO RECEIVE ACTIVE DUTY PAY AND ALLOWANCES AT THE RATES IN EFFECT AT THAT TIME AND HE WOULD CONTINUE TO RECEIVE SUCH PAY PLUS ANY LAWFULLY PRESCRIBED INCREASES ACCRUING WHILE ON ACTIVE DUTY. THE SAME BASIS MUST BE USED IN COMPUTING THE ADDITIONAL AMOUNT WHICH IS PAYABLE TO THE RETIRED MEMBERS HERE INVOLVED.

WE FIND NOTHING IN THE LAW OR ITS LEGISLATIVE HISTORY WHICH WOULD REQUIRE THAT THE MAXIMUM AMOUNT ESTABLISHED ON THE DATE OF ENTRY ON SUCH EMPLOYMENT BE FIXED OR LIMITED TO THAT AMOUNT FOR THE DURATION OF HIS EMPLOYMENT CONTRACT. IN THE ABSENCE OF SOME INDICATION OF SUCH A REQUIREMENT, WE DOUBT THAT CONGRESS INTENDED TO RESTRICT THE AMOUNT OF COMPENSATION THE RETIRED MEMBER MAY RECEIVE UNDER HIS CONTRACT WITH THE INSTITUTION BY FIXING OR LIMITING SUCH AMOUNT TO THE AMOUNT HE RECEIVED AS OF THE DATE OF ENTRY ON SUCH EMPLOYMENT. ACCORDINGLY, QUESTION 1 IS ANSWERED IN THE AFFIRMATIVE.

WITH RESPECT TO QUESTION 2, THE COMMITTEE ACTION REFERS TO THE FACT THAT THE SECRETARY OF DEFENSE HAS DETERMINED, PURSUANT TO THE PROVISIONS OF 10 U.S.C. 1401A, THAT THE RETIRED PAY AND RETAINER PAY OF MEMBERS OR FORMER MEMBERS OF THE ARMED FORCES WHO BECAME ENTITLED TO THAT PAY BEFORE THE FIRST DAY OF DECEMBER 1966, SHALL BE INCREASED, EFFECTIVE THAT DAY, BY 3.7 PERCENT. SINCE CLAUSE (1) OF SUBSECTION 2031 (D) REQUIRES THAT THE ADDITIONAL AMOUNT SHALL BE "NOT MORE THAN THE DIFFERENCE BETWEEN THEIR RETIRED PAY AND THE ACTIVE DUTY PAY AND ALLOWANCES WHICH THEY WOULD RECEIVE IF ORDERED TO ACTIVE DUTY," IT IS THE COMMITTEE'S VIEW THAT RETIRED MEMBERS SO EMPLOYED WILL HAVE THE AMOUNT RECEIVED FROM THE INSTITUTION REDUCED IN AN AMOUNT EQUAL TO THE AMOUNT THEIR RETIRED OR RETAINER PAY IS INCREASED, EFFECTIVE DECEMBER 1, 1966. WE CONCUR WITH THE COMMITTEE'S VIEWS AND QUESTION 2 IS ANSWERED IN THE AFFIRMATIVE.

WITH RESPECT TO QUESTION 3, IT IS STATED THAT THE COMMITTEE VIEWS THE INSTITUTIONS AS THE EMPLOYERS WITHIN THE MEANING OF 26 U.S.C. 3111. VIEW OF THE FACT THE INSTITUTIONS ARE OBLIGATED TO PAY THE TOTAL "DIFFERENCE," ALTHOUGH SUBJECT TO ONE-HALF REIMBURSEMENT, IT IS THE COMMITTEE'S VIEW THAT THE LITERAL LANGUAGE OF SUBSECTIONS 3111 (A) AND (B) WOULD APPEAR TO CONFIRM THIS CONCLUSION. THE INTERNAL REVENUE CODE PROVIDES IN PERTINENT PART (SECTIONS 3111 (A) AND (B) OF TITLE 26 (1964 ED., SUPP. I) (, AS FOLLOWS:

(A) OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE.

IN ADDITION TO OTHER TAXES, THERE IS HEREBY IMPOSED ON EVERY EMPLOYER AN EXCISE TAX, WITH RESPECT TO HAVING INDIVIDUALS IN HIS EMPLOY, EQUAL TO THE FOLLOWING PERCENTAGES OF THE WAGES (AS DEFINED IN SECTION 3121 (A) ( PAID BY HIM WITH RESPECT TO EMPLOYMENT (AS DEFINED IN SECTION 3121 (B) (---

(B) HOSPITAL INSURANCE.

IN ADDITION TO THE TAX IMPOSED BY THE PRECEDING SUBSECTION, THERE IS HEREBY IMPOSED ON EVERY EMPLOYER AN EXCISE TAX, WITH RESPECT TO HAVING INDIVIDUALS IN HIS EMPLOY, EQUAL TO THE FOLLOWING PERCENTAGES OF THE WAGES (AS DEFINED IN SECTION 3121 (A) ( PAID BY HIM WITH RESPECT TO EMPLOYMENT (AS DEFINED IN SECTION 3121 (B) (--- * * *

THE QUESTION WHETHER THE INSTITUTIONS ARE CONSIDERED EMPLOYERS FOR PURPOSES OF THE EXCISE TAX IMPOSED IN 26 U.S.C. 3111 (A) AND (B), IS A MATTER PRIMARILY WITHIN THE JURISDICTION OF THE INTERNAL REVENUE SERVICE UNDER THE BASIC AUTHORITY SET FORTH IN THE INTERNAL REVENUE CODE, TITLE 26, U.S.C. FOR YOUR INFORMATION, HOWEVER, SECTIONS 501 (C) (3) AND 3121 (B) (8) (B) OF TITLE 26, EXEMPT FROM TAXATION CERTAIN ORGANIZATIONS, INCLUDING EDUCATIONAL INSTITUTIONS, UNLESS A WAIVER OF EXEMPTION IS FILED BY THE ORGANIZATION IN ACCORDANCE WITH SECTION 3121 (K) (1) OF TITLE 26, SO AS TO HAVE CERTAIN PROVISIONS OF THE SOCIAL SECURITY ACT EXTENDED TO SERVICE PERFORMED BY ITS EMPLOYEES.