B-165437, FEB. 12, 1969

B-165437, FEB. 12, 1969

TO MR. EDWARD J. MURPHY:

REFERENCE IS MADE TO SETTLEMENT OF OUR CLAIMS DIVISION DATED MARCH 14, 1967, BY WHICH YOU WERE ALLOWED THE AMOUNT OF $2,587.47 REPRESENTING THE DIFFERENCE IN RETIRED PAY FOR THE PERIOD FROM NOVEMBER 15, 1956, THROUGH DECEMBER 31, 1966, COMPUTED UNDER SECTION 511 (B) OF THE CAREER COMPENSATION ACT OF 1949, AND THE RETIRED PAY RECEIVED BY YOU UNDER THE RATES IN EFFECT ON SEPTEMBER 30, 1949, WITH INCREASES AS AUTHORIZED BY SUBSEQUENT LEGISLATION.

THE SETTLEMENT WAS ISSUED AS A RESULT OF YOUR LETTER DATED OCTOBER 27, 1966, IN WHICH YOU REQUESTED AN EXAMINATION OF YOUR RECORDS. YOU SAID YOU HAD 25 YEARS, 1 MONTH AND 7 DAYS OF SERVICE, BUT HAD BEEN RECEIVING CREDIT FOR ONLY 24 YEARS OF SERVICE FOR PAY PURPOSES FROM THE TIME YOU WERE SEPARATED (RETIRED) ON OCTOBER 1, 1946. SINCE, FOR LONGEVITY PAY PURPOSES, YOUR RETIRED PAY COMPUTED ON THE RATES OF PAY IN EFFECT AT THE TIME OF YOUR RETIREMENT WAS THE SAME FOR A PERSON WITH OVER 24 YEARS AS FOR A PERSON WITH OVER 25 YEARS OF SERVICE, NO ADDITIONAL AMOUNT WAS DUE BY REASON OF YOUR YEARS OF SERVICE. HOWEVER, YOUR LETTER WAS CONSIDERED AS A REQUEST FOR ADJUSTMENT OF YOUR RETIRED PAY UNDER SECTION 511 OF THE CAREER COMPENSATION ACT OF 1949, APPROVED OCTOBER 12, 1949, CH. 681, 63 STAT. 829, AS INTERPRETED BY THE COURT OF CLAIMS. UPON RECONSIDERATION OF THE MATTER, IT APPEARS THAT YOU DID NOT ELECT RETIRED PAY AS AUTHORIZED IN THE MENTIONED SECTION 511.

THE RECORD SHOWS THAT YOU WERE RETIRED FOR DISABILITY ON OCTOBER 1, 1946, WITH 25 YEARS, 1 MONTH AND 1 DAY OF ACTIVE SERVICE. ON JUNE 14, 1951, THE DEPARTMENT OF THE NAVY ADVISED YOU THAT YOU WERE ENTITLED TO RECEIVE RETIRED PAY IN THE AMOUNT OF $174.56 COMPUTED UNDER THE RATES ESTABLISHED BY THE 1949 ACT, WHICH IN YOUR CASE WOULD BE ENTIRELY SUBJECT TO INCOME TAX SINCE YOUR PERCENTAGE OF DISABILITY WAS ZERO, OR YOU COULD CONTINUE TO RECEIVE RETIRED PAY AT THE RATE OF $163.35 PER MONTH BASED ON THE LAWS IN EFFECT PRIOR TO OCTOBER 1, 1949, FREE OF ANY INCOME TAX LIABILITY. JULY 20, 1951, YOU ELECTED TO CONTINUE TO RECEIVE RETIRED PAY IN THE AMOUNT OF $163.35 PER MONTH UNDER THE RATES IN EFFECT PRIOR TO OCTOBER 1, 1949, AND YOU HAVE BEEN PAID AT THAT RATE, AS INCREASED BY SUBSEQUENT LEGISLATION, TO THE PRESENT TIME EXCEPT FOR THE PERIOD FROM NOVEMBER 15, 1956, THROUGH DECEMBER 31, 1966, COVERED BY THE SETTLEMENT OF MARCH 14, 1967. THAT SETTLEMENT, IF PROPERLY REPRESENTING RETIRED PAY UNDER SECTION 511, SHOULD HAVE INCLUDED AN APPROPRIATE DEDUCTION FOR INCOME TAX.

IT IS APPARENT THAT YOU ELECTION TO RECEIVE "SAVED PAY" WAS MADE FOR THE REASON THAT THE RETIRED PAY TO BE RECEIVED ON THAT BASIS WAS COMPLETELY TAX FREE WHEREAS RETIRED PAY COMPUTED UNDER METHOD (B) OF SECTION 511 OF THE 1U949 ACT WOULD HAVE BEEN WHOLLY TAXABLE IN YOUR CASE. ON THE BASIS OF YOUR ELECTION, THE SETTLEMENT OF MARCH 14, 1967, WAS ERRONEOUS AND YOU SHOULD HAVE BEEN ADVISED THAT NO ADDITIONAL RETIRED PAY WAS DUE YOU. ACCORDINGLY, IT IS REQUESTED THAT YOU REFUND THE AMOUNT OF $2,587.47 OR ADVISE US TO THE MANNER IN WHICH YOU WILL LIQUIDATE THIS INDEBTEDNESS. SHOULD YOU WISH TO REPAY THE AMOUNT BY DEDUCTION FROM YOUR RETIRED PAY, PLEASE ADVISE AS TO THE AMOUNT OF REDUCTION YOU ARE WILLING TO ACCEPT. THIS CONNECTION, YOUR ATTENTION IS INVITED TO 5 U.S.C. 5514 (A) WHICH AUTHORIZES THE COLLECTION OF ERRONEOUS PAYMENTS FROM CURRENT PAYMENTS OF RETIRED PAY IN AN AMOUNT NOT TO EXCEED TWO-THIRDS OF THE PAY FROM WHICH DEDUCTION IS MADE.