B-218737, JUL 3, 1985

B-218737, JUL 3, 1985

PAY - RETIRED - WAIVER FOR CIVILIAN RETIREMENT BENEFITS - CIVIL SERVICE ANNUITY PURPOSES DIGEST: AN EMPLOYEE WHO IS ENTITLED TO MILITARY RETIRED PAY AND WAIVES SUCH RETIRED PAY IN ORDER TO BECOME ELIGIBLE FOR AN INCREASE IN HIS CIVIL SERVICE RETIREMENT ANNUITY, MUST PAY 7 PERCENT OF HIS BASIC MILITARY PAY INTO THE CIVIL SERVICE RETIREMENT FUND OR BE SUBJECT TO A REDUCTION OF HIS ANNUITY AT AGE 62 ON BECOMING ENTITLED TO SOCIAL SECURITY OLD AGE BENEFITS. SUBSECTION 8332(J) OF TITLE 5 REQUIRES THE DEDUCTION OF MILITARY SERVICE FROM THE COMPUTATION OF THE CIVIL SERVICE ANNUITY AT AGE 62, IF THE PAYMENT HAS NOT BEEN MADE.

THE HONORABLE CHARLES E. BENNETT: HOUSE OF REPRESENTATIVES

THIS IS IN RESPONSE TO YOUR LETTER DATED APRIL 15, 1985, CONCERNING YOUR CONSTITUENT, MR. H. W. CARNES OF 6805 SNOW WHITE DRIVE, JACKSONVILLE, FLORIDA 32210. MR. CARNES IS A CIVILIAN EMPLOYEE OF THE GOVERNMENT AND HE IS A RETIRED MEMBER OF THE ARMED SERVICES. APPARENTLY HE IS CONTEMPLATING WAIVING HIS MILITARY RETIRED PAY IN ORDER TO GAIN ELIGIBILITY FOR, AND INCREASE, A CIVIL SERVICE RETIREMENT ANNUITY. HIS QUESTION RELATES TO WHETHER IT WOULD BE BENEFICIAL FOR HIM TO PAY 7 PERCENT OF HIS 20 YEARS OF MILITARY PAY IN ORDER TO QUALIFY FOR A CIVIL SERVICE ANNUITY AT AGE 55. HE QUESTIONS WHETHER PAYING THIS SUBSTANTIAL SUM WOULD BE WORTHWHILE IF SOMETHING SHOULD HAPPEN TO HIM OR, FOR SOME REASON, HE DID NOT RETIRE FROM CIVILIAN SERVICE AT AGE 55. WE CANNOT RESPOND DEFINITIVELY ON THE BASIS OF THE LIMITED INFORMATION AVAILABLE. HOWEVER, WE HAVE SET OUT CERTAIN POINTS WHICH MR. CARNES SHOULD CONSIDER BEFORE MAKING A DECISION.

INITIALLY, WE WOULD LIKE TO POINT OUT THAT ALTHOUGH WE RENDER DECISIONS CONCERNING MILITARY RETIRED PAY MATTERS, THE OFFICE OF PERSONNEL MANAGEMENT IS BY LAW VESTED WITH THE AUTHORITY TO ADMINISTER THE CIVIL SERVICE RETIREMENT PROGRAM AND PRESCRIBE REGULATIONS AS ARE NECESSARY AND PROPER TO CARRY OUT THAT PROGRAM. 5 U.S.C. SEC. 8347(A). THEREFORE, WHILE WE ARE FURNISHING THE FOLLOWING INFORMATION WHICH WE HOPE WILL BE HELPFUL TO MR. CARNES, THE OFFICE OF PERSONNEL MANAGEMENT IS THE AGENCY WITH THE AUTHORITY TO MAKE BINDING DETERMINATIONS CONCERNING THE CIVIL SERVICE RETIREMENT SYSTEM.

AS MR. CARNES IS APPARENTLY AWARE, RECENTLY THERE HAVE BEEN PROPOSALS TO MODIFY THE CIVIL SERVICE RETIREMENT SYSTEM TO INCREASE THE AGE AT WHICH ONE MAY RETIRE AND RECEIVE FULL RETIREMENT BENEFITS, BUT TO DATE NO ACTION HAS BEEN TAKEN IN THAT REGARD. CURRENTLY, AN IMMEDIATE CIVIL SERVICE ANNUITY IS PAYABLE UNDER 5 U.S.C. SEC. 8336 TO AN EMPLOYEE WHO IS SEPARATED FROM THE SERVICE AFTER BECOMING 55 YEARS OF AGE AND COMPLETING 30 YEARS OF SERVICE; 60 YEARS OF AGE AND COMPLETING 20 YEARS OF SERVICE; OR 62 YEARS OF AGE AND COMPLETING 5 YEARS OF SERVICE. MILITARY SERVICE IS CREDITABLE UNDER 5 U.S.C. SEC. 8332 TOWARDS ELIGIBILITY FOR CIVIL SERVICE RETIREMENT WITHOUT DEDUCTION OF MILITARY RETIRED PAY ONLY IN LIMITED CIRCUMSTANCES. /1/ HOWEVER, THE OFFICE OF PERSONNEL MANAGEMENT REGULATIONS IMPLEMENTING 5 U.S.C. SEC. 8332(C), MAKE IT CLEAR THAT AN APPLICANT FOR A CIVIL SERVICE ANNUITY WHO IS IN RECEIPT OF MILITARY RETIRED PAY WHICH WOULD BAR CREDIT FOR HIS MILITARY SERVICE, MAY ELECT TO SURRENDER THE RETIRED PAY AND TO HAVE HIS MILITARY SERVICE ADDED TO HIS PERIOD OF CIVILIAN SERVICE FOR THE PURPOSE OF OBTAINING A GREATER BENEFIT IN THE FORM OF A CIVIL SERVICE ANNUITY. SEE 5 C.F.R. SEC. 831.301(C) (1984).

MR. CARNES APPARENTLY FALLS WITHIN THIS LATTER GROUP, THAT IS, HE MUST COMBINE HIS 20 YEARS OF MILITARY SERVICE WITH HIS CIVILIAN SERVICE IN ORDER TO BE ELIGIBLE FOR A CIVIL SERVICE ANNUITY AT AGE 55. ACCORDINGLY HE WOULD BE REQUIRED TO WAIVE RECEIPT OF MILITARY RETIRED PAY IN ORDER TO QUALIFY FOR A CIVIL SERVICE ANNUITY AT THAT TIME. THERE IS NO REQUIREMENT THAT HE CONTRIBUTE 7 PERCENT OF HIS MILITARY PAY IN ORDER TO QUALIFY FOR SUCH RETIREMENT, BUT AS EXPLAINED BELOW HE WOULD FACE A REDUCTION IN HIS SERVICE ANNUITY AT AGE 62, IF HE DID NOT MAKE THAT CONTRIBUTION.

MILITARY SERVICE PERFORMED AFTER DECEMBER OF 1956 IS CREDITABLE FOR SOCIAL SECURITY PURPOSES. HOWEVER, PRIOR TO OCTOBER 1, 1982, SECTION 8332(J) OF TITLE 5, U.S.CODE, REQUIRED THAT MILITARY SERVICE PERFORMED AFTER DECEMBER 1956 BE EXCLUDED IN DETERMINING CREDITABLE SERVICE IN THE COMPUTATION OF A CIVIL SERVICE ANNUITY WHEN THE ANNUITANT OR HIS WIDOW OR CHILD RECEIVES OR IS ELIGIBLE TO RECEIVE MONTHLY OLD-AGE OR SURVIVOR SOCIAL SECURITY BENEFITS. THUS, IN THE ORDINARY CASE THE OFFICE OF PERSONNEL MANAGEMENT WAS REQUIRED TO EXCLUDE CREDIT FOR MILITARY SERVICE WHEN THE ANNUITANT BECAME 62 YEARS OLD. ADDITIONALLY, WE HAVE HELD THAT WHEN THE PERIOD OF MILITARY SERVICE FOR WHICH RETIRED PAY IS GRANTED AND THEN WAIVED IS USED TO ESTABLISH ELIGIBILITY FOR CIVIL SERVICE RETIREMENT, AS DISTINGUISHED FROM MERELY INCREASING THE ANNUITY, THE WAIVER OF MILITARY RETIRED PAY MAY NOT BE REVOKED. SEE 52 COMP.GEN. 429 (1973).

THUS AN INDIVIDUAL WHO HAD WAIVED HIS MILITARY RETIRED PAY IN ORDER TO GAIN ELIGIBILITY FOR A CIVIL SERVICE ANNUITY WOULD, AT AGE 62, HAVE HIS CIVIL SERVICE ANNUITY REDUCED. HE WOULD NOT BE ABLE TO RECEIVE MILITARY RETIRED PAY, ALTHOUGH HE WOULD BE ENTITLED TO SOCIAL SECURITY BENEFITS. THIS SITUATION WAS COMMONLY REFERRED TO AS "CATCH 62."

THE OMNIBUS BUDGET RECONCILIATION ACT OF 1982, PUBLIC LAW 97-253, SEPTEMBER 8, 1982, 96 STAT. 763, AMENDED THE PROVISIONS IN QUESTION TO ALLEVIATE THIS PROBLEM. EMPLOYEES WHO WERE IN GOVERNMENT SERVICE AT THE TIME OF ITS ENACTMENT MAY DEPOSIT IN THE CIVIL SERVICE RETIREMENT FUND AN AMOUNT EQUAL TO 7 PERCENT OF THE BASIC MILITARY PAY THEY RECEIVED. WHEN THIS DEPOSIT IS MADE THE EMPLOYEE SUFFERS NO REDUCTION IN HIS OR HER CIVIL SERVICE ANNUITY AT AGE 62. IF THE DEPOSIT IS NOT MADE THE CIVIL SERVICE ANNUITY WILL BE REDUCED AT AGE 62.

THUS, IF AN EMPLOYEE CHOOSES TO WAIVE MILITARY RETIRED PAY IN ORDER TO BE ELIGIBLE TO RECEIVE A CIVIL SERVICE ANNUITY AS WELL AS TO INCREASE THE ANNUITY, HE OR SHE MAY MAKE THE 7 PERCENT DEPOSIT FOR THE MILITARY SERVICE. THIS WOULD PROBABLY APPLY IN MR. CARNES' CASE SINCE HE INDICATES THAT HE PLANS TO RETIRE AT AGE 55. HE MUST THEREFORE DECIDE WHETHER HE SHOULD MAKE THE REQUIRED DEPOSIT OR ACCEPT A REDUCED CIVIL SERVICE ANNUITY AFTER HE REACHES 62.

IF AN EMPLOYEE CAN ESTABLISH ELIGIBILITY TO RECEIVE A CIVIL SERVICE ANNUITY WITHOUT USING THE CREDIT FOR MILITARY SERVICE-- I.E., HE WILL HAVE 20 YEARS CIVIL SERVICE AT 60, OR 5 YEARS AT AGE 62-- IT MAY NOT BE IN HIS BEST INTERESTS TO MAKE THE REPAYMENT. FACTORS WHICH MUST BE CONSIDERED ARE THE AMOUNT OF RETIRED PAY TO WHICH HE IS ENTITLED; THE AMOUNT OF CIVIL SERVICE ANNUITY TO WHICH HE WOULD BE ENTITLED BASED ONLY ON CIVIL SERVICE AND WHAT IT WOULD BE IF HE WERE TO USE HIS MILITARY SERVICE IN THE COMPUTATION; AND THE AMOUNT OF SOCIAL SECURITY BENEFITS. WE DO NOT HAVE ENOUGH INFORMATION CONCERNING MR. CARNES' STATUS FOR US TO FORM ANY JUDGMENT AS TO WHICH COURSE OF ACTION WOULD BE MORE TO HIS ADVANTAGE.

IT SHOULD BE NOTED THAT THERE IS NO REQUIREMENT THAT MR. CARNES MAKE THE DEPOSIT AT THIS TIME. HE CAN MAKE DEPOSIT AT ANYTIME PRIOR TO HIS CIVIL SERVICE RETIREMENT. IF, HOWEVER, HE MAKES THE DEPOSIT PRIOR TO OCTOBER 1, 1985, OR WITHIN 2 YEARS FROM WHEN HE FIRST BECAME AN EMPLOYEE, WHICHEVER IS LATER, NO INTEREST WOULD BE ASSESSED. 5 U.S.C. SEC. 8334(J)(2). DEPOSITS MADE AFTER THAT PERIOD WOULD BE SUBJECT TO AN INTEREST CHARGE SET BY THE SECRETARY OF THE TREASURY BASED ON THE OVERALL AVERAGE YIELD OF THE INVESTMENT OF THE CIVIL SERVICE RETIREMENT FUND DURING THE PRECEDING FISCAL YEAR. SEE 5 U.S.C. SEC. 8334(E). REGULATIONS PERTAINING TO DEPOSIT ARE CONTAINED IN 5 C.F.R. SECS. 831.2101-2107, COPY ENCLOSED. ARE ALSO ENCLOSING A COPY OF FEDERAL PERSONNEL MANUAL LETTER 831-83, NOVEMBER 19, 1984, WITH ATTACHMENT, WHICH CONTAINS ADDITIONAL INFORMATION.

WE TRUST THE FOREGOING WILL BE OF ASSISTANCE TO YOU IN RESPONDING TO YOUR CONSTITUENT.

/1/ IF AN EMPLOYEE IS AWARDED RETIRED PAY ON ACCOUNT OF MILITARY SERVICE, HIS SERVICE MAY NOT BE CREDITED WITHOUT DEDUCTION UNLESS THE RETIRED PAY IS AWARDED ON ACCOUNT OF A SERVICE-CONNECTED DISABILITY INCURRED IN COMBAT WITH AN ENEMY OF THE UNITED STATES, OR CAUSED BY AN INSTRUMENTALITY OF WAR AND IS INCURRED IN THE LINE OF DUTY.