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IS AN INCOME MAINTENANCE PROGRAM FOR THE SURVIVING DEPENDENTS OF DECEASED SERVICE MEMBERS. IF A MEMBER ELECTS TO HAVE DEPENDENT CHILD ANNUITY COVERAGE WHEN HE BECOMES A PARTICIPANT IN THE PLAN. THAT COVERAGE IS NOT LIMITED TO CHILDREN HE HAS AT THE TIME OF THE ELECTION. ANNUITY COVERAGE AUTOMATICALLY EXTENDED TO THE SON ACQUIRED BY BIRTH IN 1981 FOLLOWING A REMARRIAGE BY A RETIRED ARMY OFFICER WHO HAD ELECTED TO HAVE DEPENDENT CHILD COVERAGE WHEN HE BECAME A PLAN PARTICIPANT IN 1973. PAY - RETIRED - SURVIVOR BENEFIT PLAN - TERMINATION OR REDUCTION - CHILDREN'S BENEFITS THE ELECTION MADE BY A RETIRED SERVICE MEMBER WHO IS MARRIED AND HAS DEPENDENT CHILDREN TO PARTICIPATE IN THE SURVIVOR BENEFIT PLAN WITH FULL SPOUSE AND DEPENDENT CHILD ANNUITY COVERAGE IS BINDING AND MAY NOT BE UNILATERALLY REVOKED BY HIM.

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B-210059, JULY 13, 1983, 62 COMP.GEN. 553

PAY - RETIRED - SURVIVOR BENEFIT PLAN - GUARANTEED MINIMUM INCOME THE SURVIVOR BENEFIT PLAN, 10 U.S.C. 1447-1455, IS AN INCOME MAINTENANCE PROGRAM FOR THE SURVIVING DEPENDENTS OF DECEASED SERVICE MEMBERS. IF A MEMBER ELECTS TO HAVE DEPENDENT CHILD ANNUITY COVERAGE WHEN HE BECOMES A PARTICIPANT IN THE PLAN, THAT COVERAGE IS NOT LIMITED TO CHILDREN HE HAS AT THE TIME OF THE ELECTION, BUT EXTENDS AUTOMATICALLY AND INVOLUNTARILY TO ANY CHILD HE THEREAFTER ACQUIRES. HENCE, ANNUITY COVERAGE AUTOMATICALLY EXTENDED TO THE SON ACQUIRED BY BIRTH IN 1981 FOLLOWING A REMARRIAGE BY A RETIRED ARMY OFFICER WHO HAD ELECTED TO HAVE DEPENDENT CHILD COVERAGE WHEN HE BECAME A PLAN PARTICIPANT IN 1973. PAY - RETIRED - SURVIVOR BENEFIT PLAN - TERMINATION OR REDUCTION - CHILDREN'S BENEFITS THE ELECTION MADE BY A RETIRED SERVICE MEMBER WHO IS MARRIED AND HAS DEPENDENT CHILDREN TO PARTICIPATE IN THE SURVIVOR BENEFIT PLAN WITH FULL SPOUSE AND DEPENDENT CHILD ANNUITY COVERAGE IS BINDING AND MAY NOT BE UNILATERALLY REVOKED BY HIM, SO THAT A RETIRED ARMY OFFICER WHO ELECTED TO HAVE SUCH COVERAGE IN 1973 COULD NOT, AFTER DIVORCE AND REMARRIAGE, WITHHOLD DEPENDENT CHILD ANNUITY COVERAGE FROM A SON HE ACQUIRED IN 1981 EVEN THOUGH BY THAT TIME THE ONLY DEPENDENT CHILD HE HAD IN 1973 WAS NO LONGER ELIGIBLE FOR AN ANNUITY. PAY - RETIRED - SURVIVOR BENEFIT PLAN - CHILDREN - POST-PARTICIPATION ELECTION CHANGES OF MEMBER IN AUGUST 1981 THE CONGRESS GRANTED A 1-YEAR "OPEN ENROLLMENT" PERIOD UNDER THE SURVIVOR BENEFIT PLAN FOR RETIRED MILITARY PERSONNEL WHO HAD PREVIOUSLY ELECTED TO PARTICIPATE IN THE PLAN AT LESS THAN THE MAXIMUM LEVEL, OR NOT TO PARTICIPATE AT ALL. HOWEVER, THE "OPEN ENROLLMENT" LEGISLATION DID NOT GIVE PERSONNEL WHO WERE ALREADY PARTICIPATING IN THE PLAN THE OPTION OF EITHER REDUCING THE LEVEL OF THEIR PARTICIPATION OR WITHDRAWING FROM THE PROGRAM. CONSEQUENTLY, THAT LEGISLATION DID NOT AUTHORIZE A PLAN PARTICIPANT TO REVOKE THE FULL DEPENDENT CHILD ANNUITY COVERAGE HE HAD PREVIOUSLY ELECTED TO HAVE. PAY - RETIRED - SURVIVOR BENEFIT PLAN - CHILDREN - COST OF COVERAGE - ACTUARIAL BASIS STATUTORY PROVISIONS OF THE SURVIVOR BENEFIT PLAN DIRECT THAT COSTS OF DEPENDENT CHILD ANNUITY COVERAGE BE ASSESSED "BY AN AMOUNT PRESCRIBED UNDER REGULATIONS OF THE SECRETARY OF DEFENSE." CONSISTENT WITH EXPRESS CONGRESSIONAL INTENT, THE REGULATIONS PRESCRIBE COMPUTATION OF THOSE COSTS ON AN ACTUARIAL BASIS IN WHICH THE AGES OF THE PLAN PARTICIPANT AND HIS ELIGIBLE DEPENDENTS ARE USED. WHEN A PLAN PARTICIPANT ACQUIRES A DEPENDENT CHILD AND HE HAS NO OTHER CHILDREN REMAINING WHO ARE ELIGIBLE FOR AN ANNUITY, THOSE COSTS ARE TO BE REINSTATED, COMPUTED UNDER THAT PRESCRIBED METHOD BASED ON THE AGE OF THE NEWLY ACQUIRED CHILD. PAY - RETIRED - SURVIVOR BENEFIT PLAN - CHILDREN - BORN AFTER ELECTION IF A SURVIVOR BENEFIT PLAN PARTICIPANT WITH DEPENDENT CHILD ANNUITY COVERAGE ACQUIRES A NEW DEPENDENT CHILD AFTER ALL OF HIS OTHER CHILDREN HAVE BECOME INELIGIBLE FOR AN ANNUITY AND ALL COST ASSESSMENTS FOR THEIR COVERAGE HAVE BEEN TERMINATED, THE NEWLY ACQUIRED CHILD IS ELIGIBLE FOR AN ANNUITY EVEN IF THE PARTICIPANT FAILS TO NOTIFY THE CONCERNED FINANCE CENTER OF THE CHILD'S EXISTENCE. HOWEVER, IN THAT SITUATION THE DELINQUENT COSTS WOULD HAVE TO BE COLLECTED BEFORE ANNUITY PAYMENTS COULD COMMENCE.

MATTER OF: COLONEL ANGUS B. MACLEAN, USA (RETIRED), JULY 13, 1983:

THIS ACTION IS IN RESPONSE TO A REQUEST FOR AN ADVANCE DECISION FROM A SPECIAL DISBURSING AGENT OF THE ARMY FINANCE AND ACCOUNTING CENTER CONCERNING THE PROPRIETY OF APPROVING A VOUCHER IN THE AMOUNT OF $1,295.14 IN FAVOR OF COLONEL ANGUS B. MACLEAN, USA (RETIRED), XXX-XX-XXXX. THAT AMOUNT REPRESENTS REDUCTIONS IN COLONEL MACLEAN'S RETIRED PAY FOR THE PERIOD FROM AUGUST 1, 1981, THROUGH SEPTEMBER 30, 1982, WHICH ARE REFUNDABLE TO HIM IF IT MAY PROPERLY BE CONCLUDED THAT HE IS ENTITLED TO REVOKE HIS 1973 ELECTION TO PROVIDE SURVIVOR BENEFIT PLAN ANNUITY COVERAGE FOR HIS SPOUSE AND DEPENDENT CHILDREN AND THUS WITHHOLD COVERAGE FROM A SON BORN IN 1981. THE REQUEST WAS ASSIGNED SUBMISSION NUMBER DO-A-1410 BY THE DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE.

WE CONCLUDE THAT COLONEL MACLEAN MAY NOT REVOKE HIS ELECTION AND THAT THE VOUCHER MAY NOT BE APPROVED FOR PAYMENT.

BACKGROUND

COLONEL MACLEAN RETIRED FROM ACTIVE ARMY SERVICE IN 1971. IN 1973 HE ELECTED TO PARTICIPATE IN THE SURVIVOR BENEFIT PLAN, AT THE MAXIMUM LEVEL WITH SPOUSE AND DEPENDENT CHILD COVERAGE, THUS CHOOSING TO RECEIVE RETIRED PAY AT A REDUCED RATE IN ORDER TO PROVIDE AN ANNUITY FOR HIS WIFE AND DEPENDENT CHILDREN IF THEY SURVIVED HIM. AT THAT TIME HE HAD ONE DEPENDENT CHILD, AN 18-YEAR-OLD DAUGHTER. THE REDUCTIONS IN HIS RETIRED PAY FOR THE COST OF PROVIDING ANNUITY COVERAGE FOR HER WERE TERMINATED IN 1976 AFTER SHE REACHED THE AGE OF 22 AND WOULD NO LONGER QUALIFY FOR AN ANNUITY AS HIS "DEPENDENT CHILD" UNDER THE PLAN IF SHE SURVIVED HIM.

THEREAFTER, COLONEL MACLEAN WAS DIVORCED AND REMARRIED AND A SONE WAS BORN TO HIM AND HIS WIFE ON JULY 15, 1981. IN A FORM DATED APRIL 28, 1982, COLONEL MACLEAN ADVISED THE ARMY FINANCE AND ACCOUNTING CENTER OF HIS REMARRIAGE AND THE BIRTH AND REQUESTED THAT ANNUITY COVERAGE BE EXTENDED TO HIS WIFE AND SON. ARMY OFFICIALS THEN CALCULATED THE COSTS OF THAT COVERAGE FROM THE TIME OF THE SON'S BIRTH ON AN ACTUARIAL BASIS. BECAUSE OF THE GREATER PROBABILITY THAT THIS SON WOULD SUCCEED TO AN ANNUITY THEN HAD BEEN SO IN THE CASE OF HIS DAUGHTER, THOSE COSTS WERE CONSIDERABLY HIGHER THAN THE AMOUNTS BY WHICH COLONEL MACLEAN'S RETIRED PAY HAD BEEN REDUCED BETWEEN 1973 AND 1976 TO PROVIDE ANNUITY COVERAGE FOR HIS DAUGHTER. COLONEL MACLEAN NOW INDICATES THAT HE DOES NOT DESIRE ANY ANNUITY COVERAGE FOR HIS SON BECAUSE OF THOSE HIGHER COSTS, AND HE ASKS THAT THIS COVERAGE BE CANCELED EITHER UNDER THE "OPEN ENROLLMENT" GRANTED BY THE CONGRESS OR AS MAY OTHERWISE BE PERMITTED.

IN REQUESTING A DECISION IN THIS MATTER THE DISBURSING AGENT NOTES THAT AS A GENERAL RULE SURVIVOR BENEFIT PLAN ELECTIONS TO PROVIDE DEPENDENT CHILD COVERAGE ARE IRREVOCABLE, AND THAT COVERAGE IS AUTOMATICALLY EXTENDED TO ANY CHILDREN BORN AFTER THE ELECTION IS MADE. THE DISBURSING AGENT ALSO NOTES THAT IN MATTER OF PENISTON, 57 COMP.GEN. 847 (1978), WE EXPRESSED THE VIEW THAT BECAUSE COSTS OF DEPENDENT CHILD COVERAGE ARE TO BE DETERMINED ON AN ACTUARIAL BASIS, GENERALLY THOSE COSTS SHOULD BE RECOMPUTED UPON THE HAPPENING OF AN EVENT THAT SIGNIFICANTLY INCREASES OR DECREASES THE PROBABILITY THAT AN ANNUITY WILL BE PAID TO THE CHILDREN. HOWEVER, THE DISBURSING AGENT OBSERVES THAT COLONEL MACLEAN'S SITUATION IS SOMEWHAT UNUSUAL IN THAT HIS SON WAS BORN AT A TIME WHEN HE NO LONGER HAD ANY OTHER DEPENDENT CHILDREN WHO MIGHT QUALIFY FOR THE ANNUITY, AND WHEN HE WAS NO LONGER PAYING FOR DEPENDENT CHILD ANNUITY COVERAGE THROUGH REDUCTIONS IN HIS RETIRED PAY. BECAUSE OF THIS, DOUBT HAS ARISEN CONCERNING THE PROPRIETY OF EXTENDING ANNUITY COVERAGE TO THE SON AGAINST COLONEL MACLEAN'S WISHES, AND CONCERNING THE PROPER METHOD TO BE USED TO COMPUTE THE COSTS OF ANNUITY COVERAGE IF IT IS DETERMINED THAT COVERAGE IS MANDATORY. FOUR SPECIFIC QUESTIONS ABOUT THE MATTER ARE PRESENTED.

IRREVOCABILITY OF ELECTION

THE FIRST QUESTION IS:

A. SHOULD COST FOR CHILD COVERAGE BE REINSTATED UPON THE BIRTH OF A CHILD AFTER THE CHILDREN INITIALLY COVERED HAVE ALL BECOME INELIGIBLE?

THE SURVIVOR BENEFIT PLAN, 10 U.S.C. 1447-1455, IS AN INCOME MAINTENANCE PROGRAM FOR THE SURVIVING DEPENDENTS OF DECEASED SERVICE MEMBERS. THE PLAN WAS ESTABLISHED ON SEPTEMBER 21, 1972, WITH THE ENACTMENT OF PUBLIC LAW 92-425, 86 STAT. 706. UNDER 10 U.S.C. 1448(A) AND IMPLEMENTING REGULATIONS CONTAINED IN CHAPTER 2 OF DEPARTMENT OF DEFENSE DIRECTIVE 1332.27, EVERY ACTIVE DUTY SERVICE MEMBER AFTER THE DATE OF ENACTMENT WHO IS MARRIED AND HAS A DEPENDENT CHILD WHEN HE BECOMES ENTITLED TO MILITARY RETIRED PAY AUTOMATICALLY BECOMES A PARTICIPANT IN THE PLAN WITH THE MAXIMUM SPOUSE AND DEPENDENT CHILD COVERAGE AUTHORIZED, UNLESS HE MAKES AN AFFIRMATIVE ELECTION TO WITHHOLD COVERAGE FROM EITHER HIS SPOUSE OR HIS CHILDREN, TO PROVIDE LESS COVERAGE THAN THE MAXIMUM AUTHORIZED, OR NOT TO PARTICIPATE IN THE PLAN AT ALL. THE ELECTION MADE BY THE SERVICE MEMBER IN THAT SITUATION BECOMES FINAL AT THE TIME HE BECOMES ENTITLED TO RETIRED PAY, AND HE MAY NOT THEREAFTER UNILATERALLY REVOKE OR MODIFY IT. SEE 53 COMP.GEN. 470, 474 (1974).

IN ADDITION, SUBSECTION 3(B) OF PUBLIC LAW 92-425 GAVE SERVICE MEMBERS LIKE COLONEL MACLEAN WHO HAD RETIRED PRIOR TO SEPTEMBER 21, 1972, AN OPPORTUNITY WITHIN CERTAIN TIME LIMITS TO ELECT TO PARTICIPATE IN THE PLAN IN THE SAME DEGREE AS MEMBERS RETIRING AFTER THAT DATE. TIMELY ELECTIONS THEN MADE BY THOSE RETIRED MEMBERS WHO WERE MARRIED AND HAD DEPENDENT CHILDREN TO HAVE SPOUSE AND DEPENDENT CHILD ANNUITY COVERAGE UNDER THE PLAN ARE LIKEWISE BINDING AND IRREVOCABLE, AND MAY NOT BE CHANGED THROUGH UNILATERAL ACTION BY THE PLAN PARTICIPANT. SEE MATTER OF METZLER, 56 COMP.GEN. 1022, 1025-1026 (1977), AND MATTER OF SBP REVOCATION, 55 COMP.GEN. 158 (1975).

IN AUGUST 1981 THE CONGRESS GRANTED A 1-YEAR "OPEN ENROLLMENT" PERIOD FOR THE SURVIVOR BENEFIT PLAN, DURING WHICH RETIRED PERSONNEL WHO HAD PREVIOUSLY ELECTED TO PARTICIPATE IN THE PLAN AT LESS THAN THE MAXIMUM LEVEL, OR NOT TO PARTICIPATE AT ALL, WERE GIVEN AN OPPORTUNITY TO RECONSIDER THEIR ACTIONS AND TO MAKE NEW ELECTIONS. HOWEVER, THE LEGISLATION GRANTING THIS "OPEN ENROLLMENT" PERIOD DID NOT GIVE RETIRED PERSONNEL WHO WERE ALREADY PARTICIPATING IN THE PLAN THE OPTION OF EITHER REDUCING THE LEVEL OF THEIR PARTICIPATION OR WITHDRAWING FROM THE PROGRAM. SEE SECTION 212 OF PUBLIC LAW 97-35, APPROVED AUGUST 13, 1981, 95 STAT. 383, 10 U.S.C. 1448 NOTE. THUS, ELECTIONS PREVIOUSLY MADE BY RETIRED PERSONNEL TO PROVIDE FULL SPOUSE AND DEPENDENT CHILD ANNUITY COVERAGE UNDER THE PLAN REMAINED IRREVOCABLE DURING THE "OPEN ENROLLMENT" PERIOD AND REMAIN SO NOW.

CONCERNING THE STATUS OF A CHILD ACQUIRED BY A SERVICE MEMBER AFTER HE HAS ELECTED TO PARTICIPATE IN THE SURVIVOR BENEFIT PLAN WITH DEPENDENT CHILD AS WELL AS SPOUSE COVERAGE, 10 U.S.C. 1450(A) PROVIDES THAT THE SURVIVORS' ANNUITY AUTHORIZED BY THE PLAN IS PAYABLE IN THE FOLLOWING ORDER TO:

(1) THE ELIGIBLE WIDOW OR WIDOWER;

(2) THE SURVIVING DEPENDENT CHILDREN IN EQUAL SHARES, IF THE ELIGIBLE WIDOW OR WIDOWER IS DEAD, DIES, OR OTHERWISE BECOMES INELIGIBLE * * *

THUS, FOR PURPOSES OF ANNUITY PAYMENTS UNDER THE PLAN, "DEPENDENT CHILDREN" ARE AN INDIVISIBLE CLASS CONSISTING OF THOSE WHO SURVIVE THE PLAN PARTICIPANT RATHER THAN THOSE WHOM HE HAD AT THE TIME HE ELECTED TO PARTICIPATE IN THE PLAN. MOREOVER, UNDER 10 U.S.C. 1447(5) THE TERM "DEPENDENT CHILD" IS DEFINED INCLUDING ANY UNMARRIED CHILD OF A PLAN PARTICIPANT UNDER 18 YEARS OF AGE, AND ALSO BETWEEN 18 AND 22 YEARS OF AGE IF PURSUING A FULL-TIME COURSE OF STUDY OR TRAINING. FURTHER, THERE IS NO PROVISION IN THE SURVIVOR BENEFIT PLAN LEGISLATION WHICH ALLOWS SERVICE MEMBERS TO EITHER GRANT OR DENY ANNUITY COVERAGE TO ANY CHILDREN THEY ACQUIRE AFTER THEY HAVE ELECTED TO BECOME PLAN PARTICIPANTS WITH DEPENDENT CHILD COVERAGE. HENCE, WE HAVE HELD THAT ANNUITY COVERAGE FOR A "DEPENDENT CHILD" UNDER THE PLAN IS NOT LIMITED TO JUST THOSE CHILDREN THAT A SERVICE MEMBER HAS WHEN HE BECOMES A PARTICIPANT IN THE PLAN, BUT EXTENDS AUTOMATICALLY AND INVOLUNTARILY TO ANY CHILDREN HE THEREAFTER ACQUIRES, EVEN TO THOSE IN BEING WHO ARE BORN AFTER HE DIES. SEE MATTER OF ROBERTS, 60 COMP.GEN. 240, 243 (1981).

IN THE PRESENT CASE, THEREFORE, OUR VIEW IS THAT COLONEL MACLEAN'S 1973 ELECTION TO PARTICIPATE IN THE SURVIVOR BENEFIT PLAN WITH DEPENDENT CHILD ANNUITY COVERAGE IS BINDING AND MAY NOT BE UNILATERALLY REVOKED BY HIM, AND THAT THIS ANNUITY COVERAGE AUTOMATICALLY EXTENDS TO THE SONE HE ACQUIRED IN 1981 EFFECTIVE ON THE DATE OF HIS SON'S BIRTH, NOTWITHSTANDING ANY CONTRARY DESIRES HE MAY NOW HAVE IN THE MATTER. WE VIEW IT AS IMMATERIAL THAT THE DEPENDENT DAUGHTER HE HAD WHEN HE ELECTED TO PARTICIPATE IN THE PLAN REACHED AGE 22 AND BECAME INELIGIBLE FOR AN ANNUITY BEFORE HIS SON WAS BORN SINCE, AS INDICATED, THE PLAN IS DESIGNED AS INCOME MAINTENANCE PROTECTION FOR THE SURVIVING DEPENDENTS OF SERVICE MEMBERS RATHER THAN JUST THE DEPENDENTS THEY HAD WHEN THEY ELECTED INTO THE PROGRAM, AND A MEMBER CANNOT CHOOSE TO WITHHOLD ANNUITY COVERAGE FROM ANY DEPENDENT CHILD ACQUIRED AFTER THAT ELECTION.

BECAUSE COLONEL MACLEAN'S SON AT BIRTH AUTOMATICALLY RECEIVED SURVIVOR BENEFIT PLAN ANNUITY COVERAGE, IT NECESSARILY FOLLOWS THAT THE COSTS OF DEPENDENT CHILD COVERAGE SHOULD HAVE BEEN CONCURRENTLY REINSTATED THROUGH APPROPRIATE REDUCTIONS IN COLONEL MACLEAN'S RETIRED PAY. THE ANSWER TO QUESTION "A" IS THEREFORE AFFIRMATIVE.

COST COMPUTATION

THE SECOND AND THIRD QUESTIONS PRESENTED ARE:

B. IF THE ANSWER TO A. IS AFFIRMATIVE, WOULD RECALCULATION OF COST BE MADE IN ACCORDANCE WITH 57 COMP.GEN. 847?

C. IF THE ANSWER TO B. IS NEGATIVE, THEN WHAT WOULD BE THE PROPER METHOD?

THE PROVISIONS OF 10 U.S.C. 1452, RELATING TO THE REDUCTIONS IN RETIRED PAY REQUIRED OF SURVIVOR BENEFIT PLAN PARTICIPANTS, PRESCRIBE A SPECIFIC FORMULA FOR COMPUTING THE COSTS OF SPOUSE COVERAGE. ON THE OTHER HAND, NO FORMULA IS PRESCRIBED FOR CALCULATING THE COSTS OF DEPENDENT CHILD COVERAGE, AND INSTEAD IT IS SIMPLY DIRECTED THAT THOSE COSTS BE ASSESSED "BY AN AMOUNT PRESCRIBED UNDER REGULATIONS OF THE SECRETARY OF DEFENSE." HOWEVER, THE LEGISLATIVE HISTORY OF THE ACT ESTABLISHING THE PLAN DEMONSTRATES A PLAIN INTENT BY THE CONGRESS THAT "(THE COST OF DEPENDENT CHILDREN'S COVERAGE * * * BE BASED ON THE ACTUARIAL COST OF PROVIDING BENEFITS * * * ." SEE MATTER OF SBP, 54 COMP.GEN. 709, 715 (1975). A SET FORMULA FOR COMPUTING THE COSTS OF DEPENDENT CHILD ANNUITY COVERAGE WAS NOT INCLUDED IN THE ACT BECAUSE IT WAS RECOGNIZED THAT THE PROBABILITIES OF ANY GIVEN DEPENDENT CHILD RECEIVING AN ANNUITY WERE SUBJECT TO A GREATER NUMBER OF STATISTICAL VARIABLES THAN THE PROBABILITIES OF A SPOUSE'S RECEIPT OF AN ANNUITY. SEE MATTER OF PENISTON, CITED ABOVE, AT 57 COMP.GEN.PAGE 851.

CONSISTENT WITH THE INTENTIONS EXPRESSED BY THE CONGRESS, THE IMPLEMENTING REGULATIONS CONTAINED IN CHAPTER 5 OF DEPARTMENT OF DEFENSE DIRECTIVE 1332.27 PROVIDE THAT THE REDUCTION OF RETIRED PAY FOR DEPENDENT CHILD ANNUITY COVERAGE UNDER THE SURVIVOR BENEFIT PLAN WILL BE AN ACTUARIAL CHARGE ARRIVED AT THROUGH THE USE OF SPECIFIED COST FACTORS BASED IN PART ON THE AGE OF THE PLAN PARTICIPANT AND THE AGE OF HIS YOUNGEST CHILD. SECTION 501.D OF THOSE REGULATIONS FURTHER PROVIDES THAT:

D. THE COST OF PROVIDING COVERAGE FOR A CHILD OR CHILDREN * * * WILL NOT BE RECALCULATED WHEN A CHILD DIFFERENT FROM THE CHILD INITIALLY ESTABLISHED AS THE YOUNGEST CHILD BECOMES THE YOUNGEST CHILD (FOR EXAMPLE, IF THE INITIALLY YOUNGEST CHILD DIES OR IF A YOUNGER CHILD IS SUBSEQUENTLY ACQUIRED). HOWEVER, FOR THE MEMBER PROVIDING COVERAGE FOR CHILDREN ONLY * * * IF A SPOUSE IS ACQUIRED AFTER RETIREMENT, THE COST OF COVERAGE FOR CHILDREN WILL BE RECALCULATED BASED ON THE AGE OF THE YOUNGEST CHILD AND THE AGE OF THE MEMBER AND SPOUSE * * * AT THE TIME COVERAGE IS ELECTED FOR THE SPOUSE.

WHILE NOT SPECIFICALLY REFERRED TO, THE PROVISIONS OF SECTION 501.D WERE CONSIDERED IN MATTER OF PENISTON, 57 COMP.GEN. 847, CITED ABOVE, IN WHICH WE HELD THAT WHENEVER A SURVIVOR BENEFIT PLAN PARTICIPANT, WITH SPOUSE AND DEPENDENT CHILD ANNUITY COVERAGE, EITHER LOSES OR REACQUIRES AN ELIGIBLE SPOUSE BENEFICIARY THROUGH DIVORCE, REMARRIAGE, ETC., THE COSTS OF THE DEPENDENT CHILDREN'S COVERAGE ARE TO BE RECALCULATED ON AN ACTUARIAL BASIS AND THE AGE OF THE PARTICIPANT'S YOUNGEST CHILD AT THAT TIME IS TO BE USED IN THE NEW COMPUTATION. THE REASON FOR THIS IS THAT THE PARTICIPANT'S LOSS OR REACQUISITION OF A SPOUSE RESULTS IN A SIGNIFICANT CORRESPONDING INCREASE OR DECREASE IN THE STATISTICAL PROBABILITY OF THE CHILDREN AS A CLASS RECEIVING AN ANNUITY, SO THAT A RECOMPUTATION OF THE COSTS OF THEIR COVERAGE THEN BECOMES NECESSARY. SINCE A COMPLETELY NEW COST COMPUTATION IS REQUIRED IN THAT SITUATION, USE IN THE RECOMPUTATION OF THE AGE OF THE YOUNGEST CHILD THE PLAN PARTICIPANT THEN HAS IS WARRANTED ON ACTUARIAL GROUNDS. ALTHOUGH WE HAVE NOT REQUIRED RECALCULATION OF THE REDUCTION TO THE RETIREE'S RETIRED PAY WHEN THERE IS ONLY A CHANGE IN THE AGE OF THE YOUNGEST CHILD BENEFICIARY, WHEN THERE IS ALSO INVOLVED A CHANGE IN SPOUSE BENEFICIARY, THUS INVOLVING MORE RADICAL CHANGES IN ACTUARIAL FACTORS, WE HAVE FOUND THAT A RECALCULATION OF THE REDUCTION IN RETIRED PAY IS REQUIRED.

THE PENISTON DECISION INVOLVED THE QUESTION OF RECOMPUTING THE COSTS OF DEPENDENT CHILD ANNUITY COVERAGE WHEN A SURVIVOR BENEFIT PLAN PARTICIPANT LOSES OR REACQUIRES AN ELIGIBLE SPOUSE BENEFICIARY, BUT WE FIND THAT THE RATIONALE OF THE DECISION IS ALSO APPLICABLE TO THE QUESTION PRESENTED HERE CONCERNING THE RECOMPUTATION OF COSTS AFTER A PLAN PARTICIPANT ACQUIRES A NEW DEPENDENT CHILD AT A TIME WHEN HE HAS NO OTHER ELIGIBLE DEPENDENT CHILD BENEFICIARIES REMAINING. IN THAT SITUATION, THE NEWLY ACQUIRED CHILD WILL GENERALLY HAVE A SIGNIFICANTLY HIGHER STATISTICAL CHANCE OF RECEIVING AN ANNUITY THAN THE OTHER CHILDREN HAD, AND AN ACCOUNT ADJUSTMENT FOR THE REINSTATEMENT OF THE COSTS OF ANNUITY COVERAGE WILL IN ANY EVENT BE REQUIRED, SO THAT THE COSTS ARE PROPERLY FOR RECOMPUTATION ON AN ACTUARIAL BASIS FOUNDED UPON THE AGE OF THAT NEWLY ACQUIRED CHILD, THE PLAN PARTICIPANT AND HIS SPOUSE.

IN THE PRESENT CASE, THEREFORE, WE CONCLUDE THAT IT WAS NECESSARY TO REINSTATE THE COST OF DEPENDENT CHILD ANNUITY COVERAGE IN COLONEL MACLEAN'S RETIRED PAY ACCOUNT UPON THE BIRTH OF HIS SON IN 1981, AND THAT THESE COSTS WERE PROPERLY FOR COMPUTATION UNDER THE ACTUARIAL METHOD PRESCRIBED BY CHAPTER 5, DEPARTMENT OF DEFENSE DIRECTIVE 1332.27, BASED ON THE AGE OF HIS SON RATHER THAN THAT OF HIS DAUGHTER WHO WAS NO LONGER AN ELIGIBLE BENEFICIARY. SINCE THIS WAS, IN FACT, THE METHOD USED TO COMPUTE THE AMOUNT OF THE REINSTATED COSTS, WE FURTHER CONCLUDE THAT THE COSTS WERE PROPERLY COMPUTED AND THAT NO REFUND IS PAYABLE TO COLONEL MACLEAN EITHER ON THE VOUCHER HERE AT ISSUE OR OTHERWISE.

QUESTION "B" AND "C" ARE SO ANSWERED.

PAYMENT OF ANNUITY

THE FOURTH AND FINAL QUESTION PRESENTED IS:

D. IF A MEMBER FAILS TO ADVISE THE FINANCE CENTER OF THE ADDITIONAL CHILD AND CHILD COST HAD BEEN TERMINATED BASED ON CHILDREN OF RECORD, WOULD THE CHILD BE CONSIDERED AN ELIGIBLE CHILD BENEFICIARY?

AS WAS INDICATED IN THE ANSWER TO QUESTION "A," DEPENDENT CHILD ANNUITY COVERAGE EXTENDS AUTOMATICALLY AND INVOLUNTARILY TO EVERY DEPENDENT CHILD THAT A SURVIVOR BENEFIT PLAN PARTICIPANT ACQUIRES AFTER HE ELECTS SUCH COVERAGE, NOTWITHSTANDING ANY PERSONAL DESIRES HE MAY HAVE TO THE CONTRARY AND REGARDLESS OF ANY NOTICE OR ADVICE HE MAY PERSONALLY GIVE TO THE FINANCE CENTER. HENCE, IF A CLAIM FOR AN ANNUITY WERE TO BE ASSERTED BY OR ON BEHALF OF THE DEPENDENT CHILD OF A DECEASED PLAN PARTICIPANT, THE ANNUITY COULD BE PAID EVEN IF THE PARTICIPANT HAD FAILED TO GIVE THE FINANCE CENTER ADVANCE NOTICE OF HIS ACQUISITION OF THE CHILD, PROVIDED SATISFACTORY EVIDENCE WERE PRESENTED TO THE FINANCE CENTER ESTABLISHING THAT THE CLAIMANT WAS IN FACT THE DEPENDENT CHILD OF THE DECEASED PLAN PARTICIPANT, AND PROVIDED ALL NECESSARY COSTS WERE COLLECTED AS REQUIRED BY SECTION 501.J, DEPARTMENT OF DEFENSE DIRECTIVE 1332.27, WHICH STATES:

J. AN ANNUAL INTEREST CHARGE OF 6 PERCENT COMPOUNDED ANNUALLY SHALL BE CHARGED FOR DELINQUENCIES IN THE PAYMENT OF THE COST OF COVERAGE. AT THE TIME OF DEATH OF A RETIREE, ANY DELINQUENCY, PLUS INTEREST, SHALL BE COLLECTED FROM THE ANNUITANT'S BENEFITS PRIOR TO THE PAYMENT OF ANY ANNUITY.

THE FOUR QUESTIONS PRESENTED ARE ANSWERED ACCORDINGLY. THE VOUCHER, WHICH MAY NOT BE APPROVED FOR PAYMENT, WILL BE RETAINED HERE.

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