B-178884, APR 1, 1974, 53 COMP GEN 733

B-178884, APR 1, 1974, 53 COMP GEN 733

PAY - RETIRED - ANNUITY ELECTION FOR DEPENDENTS - SURVIVOR BENEFIT PLAN SOCIAL SECURITY OFFSET OFFSET OF AMOUNT FROM ANNUITY PAYABLE UNDER SURVIVOR BENEFIT PLAN, 10 U.S.C. 1447 ET SEQ. REPRESENTING SOCIAL SECURITY BENEFIT PAYABLE TO WIDOW AT AGE 62 AND WIDOW WITH ONE DEPENDENT CHILD MUST BE CALCULATED ON THE BASIS OF WAGES ATTRIBUTABLE TO MILITARY SERVICE ONLY, AND THE FORMULA USED TO CALCULATE WAGES ATTRIBUTABLE TO THE MILITARY SERVICE MAY NOT INCLUDE WAGES FROM NONMILITARY EMPLOYMENT.

TO THE SECRETARY OF DEFENSE, APRIL 1, 1974:

FURTHER REFERENCE IS MADE TO LETTER FROM THE ACTING ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER), RECEIVED HERE JUNE 13, 1973, REQUESTING A DECISION CONCERNING THE PROPER METHOD OF COMPUTING THE AMOUNT OF SOCIAL SECURITY BENEFITS ATTRIBUTABLE TO MILITARY SERVICE FOR THE PURPOSE OF EFFECTING A REDUCTION IN SURVIVOR BENEFIT PLAN ANNUITIES AS REQUIRED UNDER THE PROVISIONS OF 10 U.S.C. 1451(A), AS ADDED BY PUBLIC LAW 92-425. COPY OF DEPARTMENT OF DEFENSE MILITARY PAY AND ALLOWANCE COMMITTEE ACTION NO. 478 SETTING FORTH AND DISCUSSING THE QUESTION WAS ATTACHED.

SPECIFICALLY, THE QUESTION PRESENTED IS:

WHAT IS THE PROPER METHOD FOR COMPUTING THE AMOUNT OF SOCIAL SECURITY BENEFIT "ATTRIBUTABLE TO MILITARY SERVICE" FOR THE PURPOSE OF A REDUCTION IN THE SURVIVOR BENEFIT PLAN (SBP) ANNUITIES WITHIN THE MEANING OF SECTION 1451(A), U.S.C. 10, AS ADDED BY PUBLIC LAW 92-425, WHERE THERE ARE BOTH MILITARY AND NONMILITARY COVERED EARNINGS?

THE DISCUSSION IN THE COMMITTEE ACTION STATES THAT UNDER THE PROVISIONS OF 10 U.S.C. 1451(A), WHEN A WIDOW OR WIDOWER REACHES AGE 62, AND THERE ARE NO LONGER DEPENDENT CHILDREN, THE MONTHLY ANNUITY SHALL BE REDUCED BY AN AMOUNT EQUAL TO THE AMOUNT OF SURVIVOR BENEFIT, IF ANY, TO WHICH THE WIDOW OR WIDOWER WOULD BE ENTITLED UNDER SUBCHAPTER II OF CHAPTER 7 OF TITLE 42, U.S. CODE, BASED SOLELY UPON SERVICE BY THE PERSON CONCERNED AS DESCRIBED IN SECTION 410(1) (1) OF TITLE 42 AND CALCULATED ASSUMING THAT THE PERSON CONCERNED LIVED TO AGE 65. IN THE COMMITTEE ACTION IT IS ALSO STATED THAT THE LAW PROVIDES THAT WHEN A WIDOW HAS ONE DEPENDENT CHILD, THE MONTHLY ANNUITY SHALL BE REDUCED BY AN AMOUNT EQUAL TO THE MOTHER'S BENEFIT, IF ANY TO WHICH THE WIDOW WOULD BE ENTITLED UNDER ABOVE-MENTIONED PROVISIONS OF TITLE 42 AND CALCULATED ASSUMING THE PERSON CONCERNED LIVED TO AGE 65.

IN THE DISCUSSION CONTAINED IN THE COMMITTEE ACTION THE FOLLOWING EXCERPT FROM SECTION 401(A)(1) OF THE IMPLEMENTING DEPARTMENT OF DEFENSE REGULATION FOR THE SURVIVOR BENEFIT PLAN IS QUOTED:

*** THE SOCIAL SECURITY PAYMENTS BASED SOLELY UPON THE RETIREE'S ACTIVE MILITARY SERVICE WILL BE CALCULATED USING THE SAME BASIC PROCEDURE USED BY THE SOCIAL SECURITY ADMINISTRATION BUT WILL BE BASED ON AN ASSUMED EARNINGS PATTERN.

FOR THE PURPOSE OF THIS CALCULATION, THE MEMBER IS ASSUMED TO LIVE TO AGE 65 AND TO HAVE WORKED IN SOCIAL SECURITY COVERED EMPLOYMENT ONLY WHILE ON ACTIVE DUTY.

THE DISCUSSION INDICATES THAT THE FOLLOWING FORMULA APPLIES TO THE ESTABLISHING OF SURVIVOR BENEFIT PLAN ANNUITIES IF THE AMOUNT OF REDUCTION FROM SBP ANNUITIES IS BASED ON SOCIAL SECURITY BENEFITS ATTRIBUTABLE SOLELY TO MILITARY SERVICE:

A. DETERMINE THE AGGREGATE AMOUNT OF MILITARY SOCIAL SECURITY COVERED EARNINGS FOR THE PERIOD 1 JAN 1957 (OR AFTER AGE 21 IF LATER) THROUGH RETIREMENT DATE, INCLUDING ANY FREE WAGE CREDITS ALLOWED FOR THAT PERIOD.

B. DETERMINE THE YEAR IN WHICH THE RETIREE WOULD HAVE ATTAINED AGE 65.

C. SUBTRACT 1951 FROM THE YEAR IN WHICH AGE 65 WOULD BE ATTAINED.

D. SUBTRACT 5 FROM THE RESULT IN "C" ABOVE. CONVERT THIS RESULT (YEARS) TO MONTHS.

E. DIVIDE THE RESULT IN "A" ABOVE BY THE NUMBER OF MONTHS IN "D" ABOVE. THIS ESTABLISHES THE AVERAGE MONTHLY EARNINGS (AME) ATTRIBUTABLE TO MILITARY SERVICE.

F. FIND THE PRIMARY INSURANCE AMOUNT (PIA) FOR THE AME, USING A TABLE (42 U.S.C. 415) THAT RELATES AME TO PIA FOR THIS PURPOSE.

G. REDUCE THE SBP ANNUITY BY 82 1/2% OF PIA UNDER THE "WIDOW'S BENEFIT" PROVISIONS AT HER AGE 62, AND BY 75% OF PIA UNDER THE "MOTHER'S BENFIT" PROVISIONS.

IT IS NOTED IN THE COMMITTEE ACTION THAT IN INSTANCES WHERE THE MEMBER HAD SOCIAL SECURITY COVERED EARNINGS ONLY ON MILITARY SERVICE THE AFOREMENTIONED METHOD FOR CALCULATING THE REDUCTION SEEMS PROPER. HOWEVER, IT IS POINTED OUT, THAT WHEN BOTH MILITARY AND NONMILITARY COVERED EARNINGS ARE INVOLVED THE QUESTION ARISES AS TO WHETHER THAT METHOD OF COMPUTATION IS CONSISTENT WITH THE INTENT OF PUBLIC LAW 92 425.

THE DISCUSSION INDICATES THAT ANOTHER METHOD OF CALCULATING THE REDUCTION WHEN BOTH MILITARY AND NONMILITARY COVERED EARNINGS ARE INVOLVED COULD BE USED AND UNDER THIS METHOD MILITARY WAGES ARE CONSIDERED TO BE ADDITIVE FOR THE SPECIFIC PURPOSE OF DETERMINING THE REDUCTION OF THE SURVIVOR BENEFIT PLAN ANNUITIES. THE METHOD PROPOSED IS AS FOLLOWS:

A. OBTAIN THE AMOUNT OF THE SOCIAL SECURITY BENEFIT PIA FOR THE TOTAL EARNINGS AND THE INCLUDED COVERAGE.

B. FROM THE SSA TABLE, DETERMINE THE AME FOR TOTAL EARNINGS. NOTE THAT THIS TOTAL EARNINGS INCLUDE BOTH MILITARY AND NONMILITARY EARNINGS.

C. FROM DOD SOURCE DETERMINE THE MILITARY EARNINGS.

D. INCREASE THE YEARS OF COVERAGE TO AGE 65 IN ACCORDANCE WITH SECTION 1451 OF U.S.C. 10, TO DETERMINE THE DIVISOR. CONVERT YEARS TO MONTHS.

E. DIVIDE "C" BY "D" TO DETERMINE THE AME ATTRIBUTABLE TO MILITARY SERVICE.

F. SUBTRACT "E", THE AME DUE TO MILITARY SERVICE, FROM "B" THE AME DUE TO TOTAL EARNINGS. THIS WILL BE THE AME DUE TO NONMILITARY EARNINGS.

G. FROM THE SSA TABLES, DETERMINE THE SOCIAL SECURITY BENEFIT PIA FOR "F."

H. SUBTRACT "G" FROM THE PIA FOR MEMBER ALONE DETERMINED FROM THE AME IN "B." THIS IS THE PIA DUE TO MILITARY EARNINGS.

I. REDUCE THE SBP ANNUITY BY THE APPLICABLE PERCENTAGE OF THE MILITARY EARNINGS PIA ("H").

THE DISCUSSION IN THE COMMITTEE ACTION STATES THAT BY USING THIS LATTER METHOD OF CALCULATING THE REDUCTION IN THE ANNUITY, SUCH A REDUCTION WOULD BE LESS THAN IT WOULD BE BY USE OF THE FORMER METHOD. FURTHER, IT IS CLAIMED THAT SINCE THE COMPUTATION IS FOR THE PURPOSE OF CALCULATING A DEDUCTION FROM A BENEFIT RATHER THAN A BENEFIT ITSELF, USE OF THE FORMER METHOD WOULD CAUSE A HIGHER PROPORTIONATE DEDUCTION WHICH IN EFFECT WOULD BE OPPOSITE TO THE INTENT OF SOCIAL SECURITY OF PROVIDING HIGHER BENEFITS FOR LOWER WAGES. IT IS FURTHER CLAIMED THAT WHEN THE FIRST METHOD IS USED IN THE CASES WHERE BOTH MILITARY AND NONMILITARY COVERED WAGES ARE TO BE CONSIDERED, IT SEEMS TO CREATE AN INJUSTICE TO THE WIDOW, WHEREAS THE LATTER METHOD IS MORE IN LINE WITH THE INTENT OF THE LAW PROVIDING THE WIDOW WITH MAXIMUM BENEFITS FOR WHICH THE RETIREE PAID.

IN THE COMMITTEE ACTION IT IS EMPHASIZED THAT SOCIAL SECURITY PAYMENTS TO THE SURVIVORS ARE NOT AFFECTED BY THE ABOVE AND THAT FULL BENEFITS WILL BE PAID BY THE SOCIAL SECURITY ADMINISTRATION ON TOTAL WAGES, BOTH MILITARY AND NONMILITARY. IT IS ALSO INDICATED THAT THE DEDUCTION MADE BY THE MILITARY FROM THE SURVIVOR'S ANNUITY UNDER THE PLAN ARE SIMPLY DROPPAGE AND ARE NOT PROVIDED, NOR SHOULD THEY BE PROVIDED TO THE SOCIAL SECURITY ADMINISTRATION.

SECTION 1451(A) OF TITLE 10, U.S. CODE, PROVIDES IN PART THAT WHERE A WIDOW OR WIDOWER REACHES AGE 62, OR THERE IS NO LONGER A DEPENDENT CHILD, WHICHEVER OCCURS LATER, THE MONTHLY ANNUITY SHALL BE REDUCED BY AN AMOUNT EQUAL TO THE AMOUNT OF THE SURVIVOR BENEFIT, IF ANY, TO WHICH THE WIDOW OR WIDOWER WOULD BE ENTITLED UNDER THE SOCIAL SECURITY SYSTEM BASED SOLELY UPON THE SERVICE OF THE MEMBER CONCERNED IN THE UNIFORMED SERVICES AND CALCULATED ASSUMING THAT PERSONS LIVED TO AGE 65.

AS WE UNDERSTAND THE FORMULAS AS PRESENTED IN THE COMMITTEE ACTION, THE FIRST FORMULA REFERRED TO CALCULATES THE SOCIAL SECURITY OFFSET TO THE SURVIVOR BENEFIT PLAN ON THE BASIS OF MILITARY COVERED EARNINGS ONLY AND THE ASSUMPTION THAT A MEMBER LIVES TO AGE 65. THE OTHER FORMULA REFERRED TO IN THE COMMITTEE ACTION CALCULATES THE SOCIAL SECURITY OFFSET TO THE SURVIVOR BENEFIT PLAN BY USING THE MEMBER'S TOTAL EARNINGS COVERED BY SOCIAL SECURITY AND REDUCING THIS FIGURE TO ARRIVE AT THE MILITARY COVERED EARNINGS.

WE BELIEVE THAT CONGRESSIONAL INTENT CONCERNING THE MANNER IN WHICH THE SOCIAL SECURITY OFFSET IS TO BE DETERMINED FOR THE PURPOSES OF 10 U.S.C. 1451(A) IS CLEARLY EXPRESSED IN THE LEGISLATIVE HISTORY OF THE ACT.

IN HOUSE REPORT NO. 92-481, SEPTEMBER 16, 1971, TO ACCOMPANY H.R. 10670, WHICH EVENTUALLY BECAME PUBLIC LAW 92-425, IT IS STATED ON PAGE 14 THAT:

THE DETERMINATION OF THE PORTION OF THE SOCIAL SECURITY BENEFIT TO THE WIDOW AT AGE 62 WHICH IS ATTRIBUTABLE TO HER HUSBAND'S ACTIVE MILITARY SERVICE ASSUMES THAT THE MILITARY RETIREE HAD NO EMPLOYMENT COVERED BY SOCIAL SECURITY SUBSEQUENT TO MILITARY SERVICE AND THAT HE LIVED TO AGE 65. THIS IS THE MOST FAVORABLE WAY THAT COULD BE DEVISED FOR DETERMINING THE PERCENTAGE OF SOCIAL SECURITY ATTRIBUTABLE TO MILITARY SERVICE. *** SINCE SOCIAL SECURITY BENEFITS ARE REDUCED SOMEWHAT BY ALL THE YEARS AFTER THE INITIAL YEAR OF COVERAGE IN WHICH THERE ARE NO EARNINGS *** THE ASSUMPTION THAT THERE IS NO COVERED EMPLOYMENT FOLLOWING MILITARY RETIREMENT WILL LOWER THE RELATIVE VALUE OF THE SOCIAL SECURITY ATTRIBUTABLE TO MILITARY SERVICE AND, IN TURN, RESULT IN THE LOWERING OF THE OFFSET FROM THE WIDOW'S SOCIAL SECURITY PAYMENTS.

IN THE GREAT MAJORITY OF CASES THE MILITARY RETIREE WORKS SUBSEQUENT TO ACTIVE MILITARY SERVICE; AND IN THE GREAT MAJORITY OF INSTANCES WHERE THE RETIREE CONTINUES TO WORK THE EMPLOYMENT IS COVERED BY SOCIAL SECURITY.

HOWEVER, THE COMMITTEE HAS CHOSEN TO USE THE MOST GENEROUS FORMULA FOR DETERMINING SOCIAL SECURITY WIDOW'S BENEFITS ATTRIBUTABLE TO THE SPOUSE'S MILITARY SERVICE TO BE ASSURED THAT MILITARY ANNUITIES WILL NOT BE REDUCED BECAUSE OF SOCIAL SECURITY EARNED OUTSIDE GOVERNMENT SERVICE AND TO ASSURE THAT A WIDOW WILL RECEIVE AT LEAST 55 PERCENT OF THE MAN'S MILITARY RETIRED PAY.

AND ON PAGE 15 OF THAT REPORT IT STATES:

THERE IS NO REDUCTION IN THE SOCIAL SECURITY BENEFITS THAT MAY HAVE BEEN EARNED AS THE RESULT OF THE HUSBAND'S EMPLOYMENT IN HIS POST RETIREMENT YEARS ***. IT CANNOT BE OVEREMPHASIZED THAT THE ONLY SOCIAL SECURITY PAYMENTS WHICH ARE TAKEN INTO ACCOUNT IN THIS INTEGRATION OF BENEFITS ARE THE PAYMENTS TO THE WIDOW BASED ON HER HUSBAND'S SOCIAL SECURITY EARNED WHILE HE WAS ON ACTIVE DUTY IN MILITARY SERVICE.

SIMILAR STATEMENTS WERE MADE ON PAGES 30 AND 31 OF SENATE REPORT NO. 92- 1089, SEPTEMBER 6, 1972, TO ACCOMPANY S. 3905.

AN ADDITIONAL DEFINITIVE STATEMENT CONCERNING THE CALCULATION OF THE SOCIAL SECURITY OFFSET ATTRIBUTABLE TO MILITARY SERVICE IS SET FORTH ON PAGE 53 OF THE AFOREMENTIONED SENATE REPORT AS FOLLOWS:

SOCIAL SECURITY PAYMENTS CONSIDERED IN DETERMINING THE AMOUNT OF THE OFFSET FROM THE ANNUITY ARE CALCULATED USING TWO ASSUMPTIONS:

(1) THAT THE MEMBER LIVED UNTIL AGE 65.

(2) THAT THE MEMBER'S ONLY SOCIAL SECURITY COVERED WAGES WERE THOSE RECEIVED FROM A UNIFORMED SERVICE.

THE HOUSE OF REPRESENTATIVES RECOGNIZING THAT OTHER DEFINITIONS COULD BE EMPLOYED, FOUND THAT THIS DEFINITION, ALONE, (1) WOULD ASSURE THAT MILITARY ANNUITIES WOULD NOT BE REDUCED BECAUSE OF SOCIAL SECURITY EARNED OUTSIDE OF GOVERNMENT SERVICE AND (2) WOULD FURTHER ASSURE THAT A WIDOW WILL RECEIVE AT LEAST 55 PERCENT OF RETIRED PAY. IT ALSO AVOIDS COMPLICATED ADMINISTRATIVE PROBLEMS.

IN LIGHT OF THE FOREGOING, THERE APPEARS TO BE LITTLE DOUBT THAT THERE WAS NO CONGRESSIONAL INTENT TO HAVE THE SOCIAL SECURITY OFFSET BE DETERMINED BY USE OF A FORMULA WHICH INTERJECTS A MEMBER'S TOTAL EARNINGS, BOTH MILITARY AND NONMILITARY, INTO THE CALCULATION.

ACCORDINGLY, IT IS OUR VIEW THAT SECTION 1451(A) OF TITLE 10, U.S. CODE, AND ITS LEGISLATIVE HISTORY REQUIRE THAT THE AMOUNT OF THE REDUCTION FROM THE SURVIVOR BENEFIT PLAN ANNUITY WHICH REPRESENTS THE SOCIAL SECURITY BENEFIT BE CALCULATED SOLELY ON THE BASIS OF A MEMBER'S WAGES ATTRIBUTABLE TO MILITARY SERVICE, WITHOUT CONSIDERATION OF ANY SOCIAL SECURITY COVERED WAGES ATTRIBUTABLE TO NONMILITARY SERVICE.

FURTHERMORE, WE INVITE YOUR ATTENTION TO THE FACT THAT THE SURVIVOR BENEFIT PLAN IS INTENDED TO BE COMPARABLE TO THE CIVIL SERVICE SURVIVOR ANNUITY PLAN FROM THE POINT OF VIEW OF THE PERCENTAGE OF COSTS ATTRIBUTABLE TO THE PARTICIPANTS AND TO THE GOVERNMENT. ALSO FOR CONSIDERATION IS THE FACT THAT THE SURVIVOR BENEFIT PLAN BY DESIGN IS INTENDED TO PROVIDE 55 PERCENT OF A DECEASED MEMBER'S RETIRED PAY TO HIS WIDOW DURING THE GAP YEARS BEFORE AGE 62 WHEN THE WIDOW IS NOT ENTITLED TO SOCIAL SECURITY AND TO ASSURE THAT AFTER AGE 62 BOTH THE MILITARY RETIRED PAY AND THE SOCIAL SECURITY BENEFITS WILL AT LEAST EQUAL 55 PERCENT OF THE MEMBER'S RETIRED PAY. SEE PAGE 15 OF HOUSE REPORT NO. 92-481, SEPTEMBER 16, 1971.

IN VIEW OF THIS, WE SEE NO MERIT TO THE CONTENTION THAT AN INJUSTICE IS CREATED BY USING A FORMULA FOR COMPUTING THE OFFSET BASED SOLELY ON WAGES ATTRIBUTABLE TO MILITARY SERVICE.