B-214196, APRIL 30, 1984, 63 COMP.GEN. 331

B-214196, APRIL 30, 1984, 63 COMP.GEN. 331

APPROPRIATIONS - DEFENSE DEPARTMENT - ANNUAL PROVISION V. PERMANENT LEGISLATION THE PROVISIONS OF 10 U.S.C. 1466(A) EXPRESSLY PROVIDE THAT AMOUNTS PAID INTO THE DEPARTMENT OF DEFENSE MILITARY RETIREMENT FUND UNDER THAT SUBSECTION ARE MADE AVAILABLE FROM ANNUAL APPROPRIATIONS FOR THE PAY OF MEMBERS OF THE ARMED FORCES UNDER THE JURISDICTION OF THE SECRETARY OF A MILITARY DEPARTMENT. APPROPRIATIONS - DEFENSE DEPARTMENT - ANNUAL PROVISION V. PERMANENT LEGISLATION AMOUNTS PAID INTO THE DEPARTMENT OF DEFENSE MILITARY RETIREMENT FUND UNDER 10 U.S.C. 1466(B) ARE MADE AVAILABLE BY A PERMANENT APPROPRIATION WHICH THAT SUBSECTION ESTABLISHES. SUBSECTION (B) DIRECTS THAT "THE SECRETARY OF THE TREASURY SHALL PROMPTLY PAY INTO THE FUND FROM THE GENERAL FUND OF THE TREASURY" AN AMOUNT WHICH THE SECRETARY OF DEFENSE HAS CERTIFIED TO HIM. 31 U.S.C. 1301(D) (FORMERLY 31 U.S.C. 627) PERMITS A STATUTE TO BE CONSTRUED AS MAKING AN APPROPRIATION IF IT CONTAINS A SPECIFIC DIRECTION TO PAY AND A DESIGNATION OF THE FUNDS TO BE USED. SUBSECTION 1466(B) MAKES A PERMANENT APPROPRIATION BECAUSE IT CONTAINS BOTH THE REQUISITE DIRECTION AND DESIGNATION. 13 COMP.GEN. 77 (1933); B-26414, JAN. 7, 1944; B-114808, AUG. 7, 1979.

TO THE HONORABLE MARK O. HATFIELD, UNITED STATES SENATE, APRIL 30, 1984:

THIS RESPONDS TO YOUR REQUEST, DATED JANUARY 11, 1984, FOR OUR OPINION ON WHETHER AMOUNTS PAID INTO THE DEPARTMENT OF DEFENSE MILITARY RETIREMENT FUND UNDER 10 U.S.C. SEC. 1466 ARE MADE AVAILABLE TO THE FUND THROUGH ANNUAL APPROPRIATIONS OR WHETHER SUCH PAYMENTS ARE FUNDED BY A PERMANENT APPROPRIATION. UPON RECEIVING YOUR REQUEST, WE SOLICITED THE VIEWS OF THE DEPARTMENT OF DEFENSE (DOD) CONCERNING THE QUESTION YOU RAISE. WE HAVE CONSIDERED THE DEPARTMENT'S COMMENTS IN FORMULATING OUR RESPONSE. EXPLAINED BELOW, PAYMENTS INTO THE FUND REPRESENTING BENEFITS ATTRIBUTABLE TO MILITARY SERVICE PERFORMED ON OR AFTER THE EFFECTIVE DATE OF SECTION 1466 ARE TO BE FUNDED GENERALLY BY ANNUAL APPROPRIATIONS. A PERMANENT APPROPRIATION PROVIDES THE FUNDS FOR PAYMENTS TO COVER RETIREMENT BENEFITS EARNED UP TO THE SECTION'S EFFECTIVE DATE AND TO COVER INCREASES IN FUND LIABILITY DUE TO CHANGES IN BENEFITS OR IN ACTUARIAL ASSUMPTIONS.

BACKGROUND

AS YOU ARE AWARE, 10 U.S.C. 1466 WAS ENACTED AS PART OF SECTION 925 OF THE DEPARTMENT OF DEFENSE AUTHORIZATION ACT, 1984, PUB. L. NO. 98 94, 97 STAT. 614, 644-648 (SEPTEMBER 24, 1983) (CODIFIED AT 10 U.S.C. SEC.! 1461- 1467). SECTION 925 AMENDED TITLE 10 OF THE U.S.C. BY ADDING SECTIONS 1461 THROUGH 1467 AS A NEW CHAPTER 74. BEFORE THE ENACTMENT OF SECTION 925, THE GOVERNMENT FUNDED MILITARY RETIREMENT BENEFITS ON A "CASH" BASIS; THAT IS, IT PAID THE BENEFITS USING FUNDS APPROPRIATED EACH FISCAL YEAR TO DOD FOR THE PURPOSE OF PAYING THOSE RETIREMENT BENEFITS WHICH BECAME DUE AND PAYABLE DURING THAT FISCAL YEAR. /1/ THE AMENDMENT'S PURPOSE WAS TO CHANGE THE WAY IN WHICH THE GOVERNMENT FUNDS MILITARY RETIREMENT BENEFITS FROM THE "PAY AS YOU GO" METHOD TO AN ACCRUAL SYSTEM. H.R. REP. NO. 107, 98TH CONG., 1ST SESS. 225 (1983).

TO ACCOMPLISH THIS CHANGE, SECTION 925 CREATES A STATUTORY SCHEME WHEREBY FUNDS ARE ACCUMULATED ON AN ACTUARIAL BASIS AND THEN PAID TO RECIPIENTS AS THEIR BENEFITS BECOME DUE THROUGH THE USE OF A SEPARATE FUND IN THE TREASURY. SPECIFICALLY, 10 U.S.C. SEC. 1461(A) ESTABLISHES THE DEPARTMENT OF DEFENSE MILITARY RETIREMENT FUND TO "BE USED FOR THE ACCUMULATION OF FUNDS IN ORDER TO FINANCE ON AN ACTUARIALLY SOUND BASIS LIABILITIES OF THE DEPARTMENT OF DEFENSE UNDER MILITARY RETIREMENT AND SURVIVOR BENEFIT PROGRAMS." 10 U.S.C. SEC. 1463 PROVIDES THAT THE FUND SHALL BE USED TO PAY THE RETIRED PAY OF PERSONS ON THE RETIRED LISTS OF THE ARMED FORCES UNDER DOD, THE RETAINER PAY OF FLEET RESERVE AND FLEET MARINE CORPS RESERVE MEMBERS, AND BENEFITS PAYABLE UNDER SPECIFIED DOD SURVIVOR AND FORMER MEMBERS ANNUITY PROGRAMS. IT ALSO MAKES THE FUND'S ASSETS AVAILABLE FOR SUCH PAYMENTS. THUS, DISBURSEMENTS OUT OF THE FUND FOR BENEFIT PAYMENTS CAN BE MADE IN THE FUTURE WITHOUT FURTHER APPROPRIATION ACTION BY THE CONGRESS.

AS YOU NOTE, 10 U.S.C. SEC. 1462 DEFINES THE ASSETS OF THE FUND AS CONSISTING OF THREE ELEMENTS-- AMOUNTS APPROPRIATED TO THE FUND, ANY RETURN ON INVESTMENT OF THE ASSETS OF THE FUND, AND "AMOUNTS PAID INTO THE FUND UNDER SECTION 1466 OF THIS TITLE." YOUR QUESTION CONCERNS THIS LATTER ITEM.

SECTION 1466 IS DIVIDED INTO TWO SUBSECTIONS. SUBSECTION (A) CONCERNS PAYMENTS INTO THE FUND MADE BY THE SECRETARY OF DEFENSE TO COVER DOD'S LIABILITY FOR BENEFITS ACCRUING FOR MILITARY SERVICE PERFORMED ON OR AFTER THE SECTION'S EFFECTIVE DATE, OCTOBER 1, 1984 (REFERRED TO AS THE DOD CONTRIBUTION). SUBSECTION (B) GOVERNS PAYMENTS INTO THE FUND WHICH ARE MADE TO AMORTIZE THE FUND'S LIABILITY FOR BENEFITS ATTRIBUTABLE TO MILITARY SERVICE PERFORMED BEFORE THE SECTION'S EFFECTIVE DATE (THE ORIGINAL UNFUNDED LIABILITY), AND TO COVER CHANGES IN THE FUND'S LIABILITY RESULTING FROM CHANGES IN BENEFITS (THE CUMULATIVE UNFUNDED LIABILITY) AND IN ACTUARIAL ASSUMPTIONS. THE ISSUE YOU RAISE WITHIN THE CONTEXT OF THIS BACKGROUND DISCUSSION IS WHETHER IT IS NECESSARY FOR THE CONGRESS TO ENACT AN APPROPRIATION EACH YEAR IN ORDER FOR THESE PAYMENTS TO BE MADE INTO THE FUND, OR WHETHER SECTION 925 ESTABLISHES A PERMANENT APPROPRIATION FOR THEIR PAYMENT. PAYMENT INTO THE DOD MILITARY RETIREMENT FUND UNDER 10

U.S.C. 1466(A)-- THE DOD CONTRIBUTION

AS DISCUSSED ABOVE, SUBSECTION (A) OF 10 U.S.C. SEC. 1466 IS CONCERNED WITH PAYMENTS INTO THE FUND TO COVER ACTUARIALLY DETERMINED LIABILITY FOR BENEFITS ATTRIBUTABLE TO MILITARY SERVICE PERFORMED ON OR AFTER OCTOBER 1, 1984. THE SUBSECTION'S PROVISIONS, PARTICULARLY WHEN READ TOGETHER WITH 10 U.S.C. SEC. 1465, CLEARLY INDICATE THAT THE DOD CONTRIBUTION IS TO BE MADE FROM FUNDS TO BE APPROPRIATED ANNUALLY TO THE MILITARY DEPARTMENTS.

SECTION 1465 IS ENTITLED "DETERMINATION OF CONTRIBUTIONS TO THE FUND." SUBPARAGRAPH 1465(B)(1) DIRECTS THE SECRETARY OF DEFENSE ANNUALLY TO DETERMINE (BASED ON A PRESCRIBED ACTUARIAL FORMULA) THE AMOUNT OF THE DOD CONTRIBUTION TO BE MADE DURING THE FOLLOWING FISCAL YEAR, AND TO MAKE HIS DETERMINATION "IN SUFFICIENT TIME FOR INCLUSION IN BUDGET REQUESTS FOR THE FOLLOWING FISCAL YEAR." SUBPARAGRAPH (2) PROVIDES:

THE AMOUNT DETERMINED UNDER PARAGRAPH (1) FOR ANY FISCAL YEAR IS THE AMOUNT NEEDED TO BE APPROPRIATED TO THE DEPARTMENT OF DEFENSE FOR THAT FISCAL YEAR FOR PAYMENTS TO BE MADE TO THE FUND DURING THAT YEAR UNDER SECTION 1466(A) OF THIS TITLE. THE PRESIDENT SHALL INCLUDE NOT LESS THAN THE FULL AMOUNT SO DETERMINED IN THE BUDGET TRANSMITTED TO CONGRESS FOR THAT FISCAL YEAR * * * . WE NOTE THAT THE PRESIDENT'S FISCAL YEAR 1985 BUDGET, CITING THE DEFENSE AUTHORIZATION ACT, 1984, AS AUTHORITY, REQUESTS APPROPRIATIONS TO THE VARIOUS ARMED SERVICES TO BE USED FOR FUND CONTRIBUTIONS. /2/

THE NEW 10 U.S.C. 1466(A) DIRECTS THE SECRETARY OF DEFENSE TO MAKE PAYMENTS INTO THE FUND EACH MONTH TO COVER THE ACTUARIAL LIABILITY (AGAIN DETERMINED PURSUANT TO A PRESCRIBED FORMULA) WHICH ACCRUED DURING THE MONTH. IT SPECIFIES THE SOURCE OF THE SECRETARY'S MONTHLY PAYMENTS AS FOLLOWS:

AMOUNTS PAID INTO THE FUND UNDER THIS SUBSECTION SHALL BE PAID FROM FUNDS AVAILABLE FOR THE PAY OF MEMBERS OF THE ARMED FORCES UNDER THE JURISDICTION OF THE SECRETARY OF A MILITARY DEPARTMENT.

ACCORDINGLY, SINCE ANNUAL APPROPRIATIONS PROVIDE THE FUNDS FOR THE PAY OF MEMBERS OF THE ARMED FORCES, AND IN LIGHT OF THE CLEAR IMPORT OF THE PROVISIONS OF SECTIONS 1465 AND 1466(A) DISCUSSED ABOVE, WE CONCLUDE THAT THE DOD CONTRIBUTION TO THE DOD MILITARY RETIREMENT FUND UNDER 10 U.S.C. SEC. 1466(A) REQUIRES ANNUAL APPROPRIATIONS.

PAYMENTS INTO THE DOD MILITARY RETIREMENT FUND UNDER 10 U.S.C. SEC. 1466(B)-- THE ORIGINAL AND CUMULATIVE UNFUNDED LIABILITIES

BEFORE ADDRESSING THE ISSUE OF WHETHER CONTRIBUTIONS UNDER SUBSECTION 1466(B) ARE FUNDED BY ANNUAL OR PERMANENT APPROPRIATIONS, IT MAY BE HELPFUL TO BRIEFLY EXPLAIN WHAT THE ORIGINAL AND CUMULATIVE UNFUNDED LIABILITIES ARE. AS NOTED ABOVE, WHEN THE CONGRESS CREATED THE DOD MILITARY RETIREMENT FUND IT PROVIDED THAT THE FUND'S ASSETS WOULD BE USED TO PAY ALL OF THE COVERED RETIREMENT BENEFITS BECOMING PAYABLE AFTER OCTOBER 1, 1984. HOWEVER, NO FUNDS WERE READILY AVAILABLE TO COVER BENEFIT PAYMENTS ATTRIBUTABLE TO SERVICE PERFORMED BEFORE THAT DATE BECAUSE PREVIOUSLY MILITARY RETIREMENT SYSTEM BENEFITS WERE FUNDED DIRECTLY THROUGH APPROPRIATIONS MADE FOR THE YEAR IN WHICH THEY BECAME DUE. THE ORIGINAL UNFUNDED LIABILITY IS THE TOTAL AMOUNT THAT WOULD NEED TO BE PLACED IN THE FUND ON OCTOBER 1, 1984, TO PAY FOR THE RETIREMENT BENEFITS EARNED TO THAT DATE.

THEORETICALLY, THE CONGRESS COULD HAVE APPROPRIATED AN AMOUNT EQUAL TO THE ENTIRE ORIGINAL UNFUNDED LIABILITY TO THE FUND AT THE TIME IT CREATED IT. /3/ INSTEAD, THE CONGRESS DECIDED TO PROVIDE FOR THE AMORTIZATION OF THE ORIGINAL UNFUNDED LIABILITY THROUGH ANNUAL PAYMENTS INTO THE FUND.

THE CUMULATIVE UNFUNDED LIABILITY IS LIABILITY WHICH ARISES AS A RESULT OF UNANTICIPATED BENEFIT CHANGES WHICH OCCUR AFTER THE FUND IS CREATED. AS WITH THE ORIGINAL UNFUNDED LIABILITY, THE ACT PROVIDES FOR THE CUMULATIVE UNFUNDED LIABILITY TO BE AMORTIZED.

UNDER THE ACT, THE DOD RETIREMENT BOARD OF ACTUARIES, ESTABLISHED BY 10 U.S.C. SEC. 1464, DETERMINES THE AMOUNT OF THE ORIGINAL UNFUNDED LIABILITY AND AN AMORTIZATION SCHEDULE FOR THE LIQUIDATION OF THE LIABILITY OVER THE PERIOD OF TIME IT DEEMS PROPER. 10 U.S.C. 1465(A). THE SECRETARY PERIODICALLY DETERMINES AN AMORTIZATION METHODOLOGY AND SCHEDULE FOR THE CUMULATIVE UNFUNDED LIABILITY AND ALSO FOR ANY CUMULATIVE GAIN OR LOSS TO THE FUND WHICH MAY RESULT FROM CHANGES ACTUARIAL ASSUMPTIONS. 10 U.S.C. SEC. 1465(C)(2), (3). THE ACT THEN REQUIRES THE SECRETARY TO DETERMINE, AT THE BEGINNING OF EACH FISCAL YEAR, THE AMOUNT OF THAT YEAR'S PAYMENT FOR THE ORIGINAL UNFUNDED LIABILITY PLUS THAT YEAR'S PAYMENTS FOR THE CUMULATIVE UNFUNDED LIABILITY AND THE CUMULATIVE GAIN OR LOSS UNDER THEIR RESPECTIVE AMORTIZATION SCHEDULES. 10 U.S.C. 1466(B)(2). THE SECRETARY "PROMPTLY" CERTIFIES THE AMOUNT SO DETERMINED TO THE SECRETARY OF THE TREASURY. U.S.C. SEC. 1466(B)(3).

OF PARTICULAR IMPORTANCE TO THE ISSUE YOU RAISE, SUBPARAGRAPH 1466(B)(1) PROVIDES:

AT THE BEGINNING OF EACH FISCAL YEAR THE SECRETARY OF THE TREASURY SHALL PROMPTLY PAY INTO THE FUND FROM THE GENERAL FUND OF THE TREASURY THE AMOUNT CERTIFIED TO THE SECRETARY BY THE SECRETARY OF DEFENSE UNDER PARAGRAPH (3). SUCH PAYMENT SHALL BE THE CONTRIBUTION TO THE FUND FOR THAT FISCAL YEAR REQUIRED BY SECTIONS 1465(A) AND 1465(C) OF THIS TITLE.

ON THE BASIS OF 31 U.S.C. SEC. 1301(D) AND OUR DECISIONS INTERPRETING IT, WE CONSTRUE 10 U.S.C. SEC. 1466(B)(1) AS ESTABLISHING A PERMANENT APPROPRIATION FOR SUBSECTION 1466(B) PAYMENTS INTO THE FUND. SECTION 1301(D) (FORMERLY 31 U.S.C. 627) PROVIDES THAT "A LAW MAY BE CONSTRUED CONSTRUED TO MAKE AN APPROPRIATION OUT OF THE TREASURY * * * ONLY IF THE LAW SPECIFICALLY STATES THAT AN APPROPRIATION IS MADE * * *." THUS, UNDER SECTION 1301(D), THE MAKING OF AN APPROPRIATION MUST BE EXPRESSLY STATED.

IT IS NOT NECESSARY, HOWEVER, THAT THE STATUTE BEING CONSTRUED ACTUALLY USE THE WORD "APPROPRIATION." WE HAVE LONG HELD THAT SECTION 1301(D) PERMITS A STATUTE TO BE CONSTRUED AS MAKING AN APPROPRIATION IF IT CONTAINS A SPECIFIC DIRECTION TO PAY (AS OPPOSED TO A MERE AUTHORIZATION), AND A DESIGNATION OF THE FUNDS TO BE USED. 13 COMP.GEN. 77 (1933); B-26414, JANUARY 7, 1944; B-114808, AUGUST 7, 1979.

SUBSECTION 1466(B) CONTAINS BOTH THE REQUISITE DIRECTION AND DESIGNATION. IT SPECIFICALLY DIRECTS THE SECRETARY OF THE TREASURY TO PAY INTO THE FUND THE AMOUNT THE SECRETARY OF DEFENSE CERTIFIES TO HIM PURSUANT TO 10 U.S.C. SEC. 1466(B)(3), AND IT DESIGNATES THE GENERAL FUND OF THE TREASURY AS THE SOURCE OF THE PAYMENT. THEREFORE, IT MAY BE CONSTRUED AS PERMANENTLY APPROPRIATING THE AMOUNTS NECESSARY TO PAY INTO THE FUND THE AMOUNTS CERTIFIED EACH YEAR BY THE SECRETARY OF DEFENSE UNDER 10 U.S.C. 1466(B)(3). CONCLUSIONS

IN VIEW OF THE FOREGOING, WE CONCLUDE THAT AMOUNTS PAID INTO THE DEPARTMENT OF DEFENSE MILITARY RETIREMENT FUND UNDER 10 U.S.C. SEC. 146(A) REQUIRE ANNUAL APPROPRIATIONS. HOWEVER, AMOUNTS CERTIFIED UNDER 10 U.S.C. ! 1466(B)(3) MAY BE PAID INTO THE FUND WITHOUT THE NEED FOR FURTHER ACTION BY THE CONGRESS. AS AGREED WITH YOUR STAFF, THIS OPINION MAY BE RELEASED IMMEDIATELY AND WE ARE SENDING A COPY TO THE SECRETARY OF DEFENSE.

/1/ THE CASH BASIS FUNDING OF RETIREMENT BENEFITS ACTUALLY CONTINUES THROUGH FISCAL YEAR 1984. THIS IS BECAUSE THE NEW BENEFIT PAYMENT PROVISIONS DO NOT GO INTO EFFECT UNTIL FISCAL YEAR 1985. PUB. L. NO. 98-94, SEC. 925(B)(2), 97 STAT. 648. CONGRESS SO PROVIDED PRESUMABLY TO GIVE THE SECRETARY OF DEFENSE AND THE DOD RETIREMENT BOARD OF ACTUARIES (TO BE DISCUSSED) SUFFICIENT LEAD TIME TO COMPLETE THEIR DUTIES WHICH ARE PREPARATORY TO IMPLEMENTATION OF THE NEW PROVISIONS. /2/ STARTING WITH FY 1985, THE "RETIRED PAY, DEFENSE" APPROPRIATION WILL BE DISCONTINUED AND THE FUND CONTRIBUTION APPROPRIATIONS INCLUDED IN THE "MILITARY PERSONNEL" APPROPRIATIONS FOR THE VARIOUS BRANCHES. /3/ THAT AMOUNT HAS BEEN ESTIMATED TO BE $431 BILLION. H.R. REP. NO. 107, 98TH CONG., 1ST SESS. 228 (1983).