B-118480, APRIL 19, 1954, 33 COMP. GEN. 491

B-118480, APRIL 19, 1954, 33 COMP. GEN. 491

RETIRED AND RETAINER PAY - ANNUITY DEDUCTIONS - PAY CHANGES UNDER THE SURVIVORSHIP ANNUITY PROVISIONS OF UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, MEMBERS WHOSE RETIRED PAY IS SUBSEQUENTLY CHANGED (INCREASED OR DECREASED) IN AMOUNT WILL CONTINUE TO HAVE DEDUCTIONS MADE FROM RETIRED PAY AT THE SAME DOLLAR VALUE AS WAS COMPUTED AT TIME OF RETIREMENT OR TIME OF ELECTION AND THE ANNUITY PAYABLE WILL BE THE AMOUNT WHICH WOULD HAVE BEEN PAYABLE HAD NO CHANGE IN RETIRED PAY OCCURRED. IN THE CASE OF A FLEET RESERVIST ON ACTIVE DUTY, WHO ELECTED TO RECEIVE REDUCED RETIRED PAY (WHICH INCLUDES RETAINER PAY) UNDER SURVIVORSHIP ANNUITY PROVISIONS OF UNIFORMED SERVICES CONTINGENCY ACT OF 1953, THE RATE OF RETAINER PAY TO WHICH THE REDUCTION SHOULD BE APPLIED IS THE RATE WHICH WOULD HAVE BEEN PAYABLE TO SUCH RESERVIST HAD HE BEEN RELEASED FROM ACTIVE DUTY THE DAY PRIOR TO THE DAY ON WHICH THE ELECTION WAS MADE.

ASSISTANT COMPTROLLER GENERAL WEITZEL TO THE SECRETARY OF DEFENSE, APRIL 19, 1954:

REFERENCE IS MADE TO LETTER OF JANUARY 25, 1954, FROM THE ASSISTANT SECRETARY OF DEFENSE, REQUESTING DECISION ON CERTAIN QUESTIONS WHICH HAVE ARISEN UNDER THE UNIFORMED SERVICES CONTINGENCY OPTION ACT OF 1953, 67 STAT. 501, AS SET FORTH IN COMMITTEE ACTION NO. 84 OF THE MILITARY PAY AND ALLOWANCE COMMITTEE, DEPARTMENT OF DEFENSE.

IT IS STATED THAT CASES HAVE BEEN OR WILL BE ENCOUNTERED OF RETIRED MEMBERS WHO ARE RECEIVING REDUCED RETIRED PAY BY REASON OF HAVING ELECTED ONE OR MORE OF THE OPTIONS PROVIDED BY THE ACT, AND WHOSE RETIRED PAY IS SUBSEQUENTLY CHANGED IN AMOUNT, AND THAT QUESTIONS HAVE ARISEN AS TO WHAT ADJUSTMENT, IF ANY, IS REQUIRED IN THE AMOUNT OF THE DEDUCTION WHEN THE AMOUNT OF RETIRED PAY IS SO CHANGED, AS WELL AS IN THE AMOUNT OF "REDUCED RETIRED PAY" UPON WHICH THE ELECTED ANNUITY IS TO BE BASED UPON THE DEATH OF THE RETIRED MEMBER.

THREE POSSIBLE METHODS OF HANDLING SUCH CASES ARE SUGGESTED BY THE COMMITTEE:

(1) APPLY THE PERCENTAGE FACTOR APPLICABLE AT THE TIME OF RETIREMENT OR AT THE TIME OF ELECTION, AS THE CASE MAY BE, TO THE NEW RATE OF RETIRED PAY, AND BASE THE ANNUITY UPON THE NEW AMOUNT OF REDUCED RETIRED PAY.

(2) CONTINUE THE DEDUCTIONS AT THE SAME DOLLAR VALUE AS WAS COMPUTED AT TIME OF RETIREMENT OR TIME OF ELECTION, AS THE CASE MAY BE, BASED UPON ATTAINED AGES AND RETIRED PAY EXISTING AT THAT TIME, AND BASE THE ANNUITY UPON THE AMOUNT OF REDUCED RETIRED PAY IN EFFECT PRIOR TO THE CHANGE IN AMOUNT OF RETIRED PAY. UNDER THIS METHOD A CHANGE IN AMOUNT OF RETIRED PAY WOULD HAVE NO EFFECT UPON EITHER THE MONEY AMOUNT OF THE REDUCTION IN RETIRED PAY OR IN THE AMOUNT OF ANNUITY PAYABLE TO ELECTED DEPENDENTS AFTER THE DEATH OF THE RETIRED MEMBER.

(3) APPLY THE PERCENTAGE FACTOR APPLICABLE AT TIME OF COMMENCEMENT OF THE NEW RATE OF RETIRED PAY BASED UPON THE THEN ATTAINED AGES OF THE MEMBER AND APPROPRIATE DEPENDENTS ONLY TO THE DIFFERENCE BETWEEN THE OLD AND NEW RATES OF RETIRED PAY. THE AMOUNT OF DEDUCTION THUS COMPUTED WOULD BE ADDED TO OR SUBTRACTED FROM, AS THE CASE MAY BE, THE AMOUNT OF DEDUCTION PREVIOUSLY IN EFFECT TO ESTABLISH THE TOTAL DEDUCTION FROM THE NEW AMOUNT OF RETIRED PAY. THE ANNUITY WOULD BE BASED UPON THE NEW AMOUNT OF REDUCED RETIRED PAY.

IT IS STATED THAT ADVICE HAS BEEN RECEIVED THAT ONLY THE FIRST OF THE THREE METHODS IS ACTUARIALLY UNSOUND.

SECTION 4 (C) OF THE ACT, 67 STAT. 503, PROVIDES FOR COMPUTATION OF THE AMOUNT OF THE REDUCTION IN RETIRED PAY, MADE NECESSARY BY AN ELECTION UNDER SECTIONS 3 AND 4 (A) OF THE ACT, 67 STAT. 2,"IN EACH INDIVIDUAL CASE, AS OF THE DATE OF RETIREMENT IN THE CASE OF AN ACTIVE MEMBER AND AS OF THE DATE OF ELECTION IN THE CASE OF A RETIRED MEMBER," BY AN ACTUARIAL EQUIVALENT METHOD, USING THE TABLES AND INTEREST RATE MENTIONED THEREIN, AND IT IS FURTHER PROVIDED THAT " IN THE CASE OF AN ACTIVE OR RETIRED MEMBER THE COMPUTATION SHALL BE MADE AT THE TIME OF RETIREMENT, OR ELECTION, AS APPROPRIATE, AND THE ACTUARIAL EQUIVALENT METHOD AND ACTUARIAL TABLES SHALL BE THOSE IN EFFECT AT THAT TIME.'

THESE STATUTORY PROVISIONS CLEARLY INDICATE THAT ONLY ONE COMPUTATION OF THE AMOUNT OF REDUCTION IN RETIRED PAY IS CONTEMPLATED, AND THAT THE AMOUNT OF REDUCTION IN RETIRED PAY IS CONTEMPLATED, AND THAT THE AMOUNT OF ANNUITY TO BE PAID TO THE DESIGNATED DEPENDENTS OF THE MEMBER MAKING THE ELECTION--- EXPRESSED AS A PERCENTAGE OF THE AMOUNT OF RETIRED PAY LEFT AFTER DEDUCTING THEREFROM THE AMOUNT SO COMPUTED, PER SECTION 4 (A) OF THE ACT--- IS TO BE BASED ON THE RETIRED PAY OF THE MEMBER AT THE TIME SUCH COMPUTATION IS MADE. HENCE, IT APPEARS THAT IN ENACTING THE STATUTE THE CONGRESS INTENDED TO PROVIDE A MEANS BY WHICH EACH "RETIRED MEMBER," AS DEFINED IN SECTION 2 (D), 67 STAT. 501, MAY PURCHASE AN ANNUITY FOR HIS DESIGNATED DEPENDENTS AND THAT THE AMOUNT OF THE DEDUCTION AND AMOUNT OF THE ANNUITY FINALLY ARE TO BE DETERMINED AND FIXED IN EACH CASE ON THE BASIS OF THE AMOUNT OF HIS RETIRED PAY (WHICH TERM INCLUDES RETAINER PAY) AT THE TIME OF THE COMPUTATION PROVIDED IN SECTION 4 (C). OF THE THREE METHODS MENTIONED ABOVE, ONLY METHOD (2) MEETS THE REQUIREMENTS OF THE ACT IN THAT RESPECT AND THAT METHOD IS FOR APPLICATION IN ALL CASES. THE COMMITTEE'S QUESTIONS 1, 2, 3B AND 4 ARE ANSWERED ACCORDINGLY, THE REASON FOR ANY INCREASE OR DECREASE IN THE RETIRED PAY OR RETAINER PAY AFTER THE ORIGINAL COMPUTATION NOT BEING MATERIAL.

QUESTION NO. 3A RELATES TO A CHIEF BOATSWAIN'S MATE WHO WAS TRANSFERRED TO THE FLEET RESERVE WITH 20 YEARS, 1 MONTH AND 10 DAYS' SERVICE ON JANUARY 1, 1950, AT WHICH TIME HE WAS RELEASED TO INACTIVE DUTY. HE WAS RECALLED TO ACTIVE DUTY ON JANUARY 1, 1951. ON NOVEMBER 15, 1953, WHILE STILL SERVING ON SUCH ACTIVE DUTY, HE ELECTED TO RECEIVE REDUCED RETIRED PAY TO PROVIDE AN ANNUITY FOR HIS WIFE IF SHE SURVIVED HIM.

SECTION 516 OF THE CAREER COMPENSATION ACT OF 1949, 63 STAT. 832, PROVIDES THAT A MEMBER OF THE FLEET RESERVE ENTITLED TO RECEIVE RETAINER PAY, WHO IS RECALLED TO ACTIVE DUTY, SHALL BE ENTITLED TO RECEIVE AN INCREASE IN RETAINER PAY FOR ALL SUCH ACTIVE DUTY, AND IT IS FURTHER PROVIDED THAT THE RETAINER PAY TO WHICH SUCH MEMBER "SHALL BE ENTITLED UPON HIS RELEASE FROM ACTIVE DUTY" SHALL BE COMPUTED IN ACCORDANCE WITH THE FORMULA THERE STATED, ONE OF THE FACTORS OF WHICH INCLUDES THE PERIOD OF SUCH ACTIVE DUTY. SECTION 5 OF THE " CONTINGENCY OPTIONS" ACT, 67 STAT. 504, PROVIDES THAT A "RETIRED MEMBER"--- A FLEET RESERVIST IS A RETIRED MEMBER UNDER SECTION 2 (D) OF THE ACT--- WHO HAS MADE AN ELECTION UNDER SECTION 3 OF THE ACT "SHALL, DURING ANY PERIOD IN WHICH HE IS NOT RECEIVING RETIRED PAY, DEPOSIT WITH THE UNITED STATES TREASURY THE AMOUNT WHICH WOULD HAVE BEEN WITHHELD FROM HIS RETIRED PAY HAD HE BEEN RECEIVING THAT PAY.'

DECISION IS REQUESTED AS TO WHICH OF THE FOLLOWING METHODS SHOULD BE UTILIZED IN DETERMINING THE "RETIRED PAY" TO WHICH THE PERCENTAGE COST FACTOR FROM THE ACTUARIAL TABLES SHOULD BE APPLIED AT TIME OF ELECTION:

(1) APPLY THE PERCENTAGE REDUCTION TO THE RETIRED OR RETAINER PAY TO WHICH THE MEMBER WAS ENTITLED AT THE TIME OF TRANSFER TO THE FLEET RESERVE, RETIREMENT, OR RECALL TO ACTIVE DUTY AS THE CASE MAY BE (IN THE EXAMPLE CITED THIS AMOUNT IS $137.50 ($137.59) PER MONTH.)

(2) APPLY THE PERCENTAGE REDUCTION TO THE AMOUNT OF RETIRED OR RETAINER PAY TO WHICH THE MEMBER WOULD HAVE BEEN ENTITLED CONSTRUCTIVELY AT TIME OF ELECTION, I.E., THE RETIRED OR RETAINER PAY TO WHICH HE WOULD BE ENTITLED HAD HE BEEN RELEASED FROM ACTIVE DUTY ON A DATE PRIOR TO THE DATE OF ELECTION (IN THE EXAMPLE CITED THIS AMOUNT WOULD BE $167.02 PER MONTH).

WHILE UNDER THE PROVISIONS OF SECTION 516 OF THE 1949 ACT, A PERSON WHO MAY QUALIFY FOR INCREASED RETIRED PAY OR RETAINER PAY FOR ACTIVE DUTY PERFORMED AFTER RETIREMENT OR TRANSFER TO THE FLEET RESERVE IS NOT ENTITLED TO SUCH INCREASED PAY UNTIL "HIS RELEASE FROM ACTIVE DUTY," SECTION 4 (C) OF THE " CONTINGENCY OPTIONS" ACT INDICATES THAT IT IS THE RETIRED OR RETAINER PAY TO WHICH ENTITLED ON THE DATE OF ELECTION WHICH IS TO BE USED IN MAKING THE REQUIRED COMPUTATIONS UNDER THAT ACT. A FLEET RESERVIST IS NOT ENTITLED TO RETAINER PAY WHEN ON ACTIVE DUTY. HOWEVER, IT APPEARS THAT A RESERVIST SO SITUATED IS AUTHORIZED TO MAKE AN ELECTION WHILE ON ACTIVE DUTY AND TO HAVE A RATE OF RETAINER PAY DETERMINED FOR HIM. SINCE THE COMPUTATION CONTEMPLATED BY THE SAID SECTION 4 (C) IS TO BE MADE AT THE TIME OF ELECTION, IT WOULD APPEAR THAT THE RATE OF RETAINER PAY TO BE USED WOULD BE THE RATE OF SUCH PAY WHICH WOULD HAVE BEEN PAYABLE TO THE PARTICULAR INDIVIDUAL HAD HE BEEN RELEASED FROM ACTIVE DUTY THE DAY PRIOR TO THE DAY ON WHICH HIS ELECTION WAS MADE.