//-->
 

return to www.PostalReporter.com

On this page

A Risk in Going Part-Time

MSPB rules for Injured Carrier in Annuity Dispute

TALKING POINTS for the SOCIAL SECURITY GOVERNMENT PENSION OFFSET (GPO) and WINDFALL ELIMINATION PROVISION (WEP)

Government Pension Offset (GPO)

Present law prevents federal, state and local government retirees (who were first eligible to retire in December 1982 and later) from collecting both a government annuity based on their own work and Social Security benefits based on their spouse's work record.

This law provides that two-thirds of the government annuity offsets whatever Social Security benefits would be payable to the retired government worker as a spouse (wife, husband, widow, etc.).

A federal retiree with a monthly annuity of $900 and no Social Security coverage of her own would receive a greatly reduced widow's benefit from the program on the death of her husband as a result of GPO.

Example: the husband, a private-sector retiree, received a $1,100 monthly Social Security benefit. A spouse who worked in the private sector would be entitled to receive this entire $1,100 per month benefit. However, because the widow is a federal annuitant, she will receive only $500 a month from Social Security, since two-thirds of her own $900 annuity -- $600 - offsets the $1,100.

The Government Pension Offset most drastically affects low-income widows.

Windfall Elimination Provision (WEP)

The Social Security Amendments of 1983 include a provision that greatly reduces the social security benefit of a retired or disabled worker who also receives a federal, state or local government annuity based on his/her own earnings. It applies to anyone who becomes 62 (or disabled) after 1985 and becomes eligible for his/her government annuity after 1985. Both must occur after 1985. Congress provided for a five-year phase-in on the reduction so that the maximum effect would not be felt until 1990. Those who became 62 in 1990 or reached that age after 1990 (and were not eligible for a federal annuity until after 1985), may have their social security benefit decreased by as much as 60 percent. An additional 20 percent is deducted for taking the benefit at age 62.

There are approximately 755,000 beneficiaries currently affected by the WEP, and that number grows by about 60,000 annually.

Action Requested: Legislation to eliminate the GPO, as well as the Windfall Elimination Provision (WEP), has been introduced in the House, by Congressman Howard "Buck" McKeon (R-CA) as H.R. 147 . Senator Dianne Feinstein (D-CA) is expected to introduce the GPO/WEP repeal companion bill in the Senate.  NARFE urges all Members of Congress to support and cosponsor this critical legislation.

National Active and Retired Federal Employees Association

Security Reform and the Budget

There is already widespread support to repeal the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). In January, Rep. Buck McKeon (D-CA) introduced H.R. 147, legislation to abolish these two laws that discriminate against retired public employees. 187 Representatives have cosponsored the McKeon bill. However, the prospects of total repeal remain daunting. Only six cosponsors serve on the Ways and Means Committee, the panel with jurisdiction over the measure, and at this time, there is no Senate companion bill.

During the previous Congress, the Social Security Administration testified that Congress should undertake WEP and GPO changes as part of comprehensive Social Security reform. There does not appear to be a change in the position. Moreover, the Government Accounting Office claimed that repealing the WEP would cost $19 billion, and the Congressional Budget Office estimated that GPO repeal would cost $31.3 billion over the next ten years. In sum, enactment of HR 147 could cost more than $50 billion. The White House and Ways and Means and the Senate Finance Committee members are concerned that WEP/GPO repeal would raise the Social Security deficit. This WEP/GPO byproduct would be problematic, particularly with Congress debating the impact, real or perceived, of the Social Security System’s long-term deficit.

NAPUS is working with members of the House Ways and Means panel and the Senate Finance Committee to construct a viable bill to address the dual challenges presented by the GPO and the WEP. It is important to understand that most of Members of Congress view any type Social Security modification as part of comprehensive reform.

E-NAPUS Legislative Newsletter (2/25/05)

A Risk in Going Part-Time

by APWU Retirees Director John Smith

“What is the Part-Time Pro-ration Factor?” This continues to be the most-asked-about and talked-about subject in our retirement seminars.

It is important that every member who is considering changing to part-time work late in a career be familiar with the following:

With the intent being to fix an inequity in how retirement annuities are calculated for part-time postal and federal employees, a federal law was changed in 1986. In instituting the change to solve a problem, however, Congress wound up creating, for many older workers, a new problem. Many postal workers found that their retirement benefits were drastically reduced because they finished out their careers by working part-time.

Before the law was changed, federal retirement annuities were based on the amount of money employees earned during their “high three years” of service. For most employees, these are the last three years of full-time work before retirement.

The law was changed because government accountants pointed out that employees who worked part-time most of their careers could “game” the system by switching to full-time status for their last 36 months of work: Their pension annuity would be based on their average annual salary during the high three years – they would get credit for full-time work for each of the years they worked, even if all but three were only part-time.

The law Congress passed in 1986 (P.L. 99-272) has changed the way federal annuities are calculated for part-time employees. Under the new rules, the high three salary years are still used in the calculation, but annuities are pro-rated, with the calculation based on the actual number of hours worked. This accounts more accurately for periods when employees worked part-time.

The new problem is the reverse of one that existed before 1986: Employees who switch to part-time status at the end of their careers can find their annuities substantially reduced because their “high three” salary years no longer are their last three.

Working part-time lowers the multiplier used for calculating annuities based on the average number of hours worked during the years since 1986.

Congress often passes vague laws, then leaves it for the federal agencies to sort things out and to develop regulations to properly implement the new laws. In this case, many blame the Office of Personnel Management (OPM) for today’s convoluted, irrational, and inequitable way of calculating annuities.

The main complaint is that OPM solved only half of the problems. While OPM ended part-time workers’ ability to game the system, it perpetuated and exacerbated existing injustices for employees converting from full-time to part-time.

The way it has worked out is that employees who convert from a long career as a full-timer to a few years as a part-timer get roughly the same retirement annuity as those who work part-time their entire careers.

Since most part-time employees are women, insult has been added to injury: The glass ceiling that has kept many women out of management is complemented by a “glass wall” for part-timers.

Needless to say, many full-time workers made the conversion without knowing how it would affect their annuities, which last the rest of their lives. If you feel you are being adversely affected by this law, write to your senators and congressional representatives to encourage them to introduce corrective legislation.

(source:  Jan./Feb. 2005 issue of The American Postal Worker magazine)

H.R.3128
Public Law: 99-272 -Subtitle B: Civil Service Programs
Sets forth the method of computing the retirement annuity for part-time employee

Retirement Benefits: Modification of Civil Service Retirement Benefits for Part-Time Work PEMD-86-2  Summary

GAO reviewed the current retirement rules used for calculating civil service benefits for federal employees and developed a modification to bring retirement benefits in line with work actually performed during a career. A similar provision has been included in the proposed Civil Service Pension Reform Act covering employees hired after 1983.

GAO found that retirement benefits for federal employees hired before January 1, 1984, are based on the highest average salary earned during any 3 consecutive years. The benefit formula has two major effects: (1) in some circumstances, employees with differing total hours of service are eligible for the same initial benefits; and (2) employees who want to reduce their working hours per week during the last few years of their careers lose a portion of their benefits. GAO developed a benefit formula modification that would calculate: (1) the retirement benefit as though the employee had worked full-time during all years of service; (2) the percentage of full-time hours worked during each year of service; (3) the average percentage for all years; and (4) the basic annuity by multiplying the full-time benefit by this average percentage. This would decrease benefits for part-time employees who switch to full-time before retirement and increase benefits for full-time employees who switch to part-time. GAO estimated the modification's financial effect and found that the government's retirement costs would be: (1) reduced for employees who phase their retirement without, in aggregate, either increasing or decreasing their years of service; (2) increased for employees who used phased-employment retirement to reduce their total years of service; and (3) substantially reduced for employees who use the proposed modification to increase their total years of service.

Legal Summary: Retirement Annuities – Proration – Part-Time Employees: Retiree appealed the agency’s decision to credit him only part-time service for his retirement annuity. The MSPB Administrative Judge  reversed, finding that the retiree was entitled to be credited for full-time service. On appeal, the agency argued that the retiree’s entitlement to retirement benefits should have been based on the actual nature of his service, rather than on the basis of the employing agency's characterization of that service. MSPB determined that the retiree was scheduled for a full-time position, but he was given leave 4 hours a day because of his continuing medical inability to work full days. The MSPB concluded that the retiree should have been considered a full-time employee for retirement purposes and entitled to the appropriate benefits. (12/2/04)

Hatch v. Office of Personnel Management (2004),

The MSPB recently issued a favorable ruling granting FULL retirement credit for all time spent on OWCP rolls, provided that the employee was officially carried on the USPS rolls as a Full-Time Regular.  See the board's decision at http://www.mspb.gov/decisions/2004/hatch_bn030056i1.htm.  This has implications for others as well, such as part-time local officers.

 Please notify retirees who had OWCP time of this important decision.  They may have been shorted retirement credit like this appellant was.

 Don Cheney

 

 Hatch v. Office of Personnel Management

BN-0831-03-0056-I-1

November 12, 2004

Retirement Annuities - OWCP benefits

Statutory/Regulatory Interpretation
 - applicability of Chevron deference

HOLDING:  Retirement benefits must be based on the actual nature of an employee’s service, rather than on an incorrect characterization of that service in personnel documents; 5 C.F.R. § 831.703(b) defines full-time service as any actual service in which the employee is scheduled to work the number of hours and days required by the administrative workweek for his or her grade or class, while it defines part-time service as any actual service performed on a less than full-time basis, by an individual whose appointment describes a regularly schedules tour of duty; in determining the appellant’s retirement benefits, the Board will consider the appellant’s personnel documents as evidence concerning the nature of his service; in Chevron, the Supreme Court held that when Congress explicitly left a gap for the agency to fill, there was an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation, and legislative regulations filling the gap were to be given controlling weight unless they were arbitrary, capricious, or contrary to the statute; the Court also indicated that, even when the delegation was implicit, a court was not free to substitute its own construction of a statutory provision for a reasonable interpretation by the agency; Chevron, however, considered the effect of legislative regulations that were the product of the formal notice and comment rulemaking proceedings, and the Court of Appeals for the Federal Circuit in Butterbaugh v. Department of Justice, stated that agency interpretations that are not the product of such proceedings and may not be entitled to the same weight; the court has specifically found that agency personnel policies embodied in informal sources such as handbooks and directives do not ordinarily merit Chevron deference; the Board found that an OPM Retirement and Insurance Letter (RIL) was not entitled to Chevron deference, and accorded only a lesser degree of  deference proportional to its power to persuade, depending on such factors as its thoroughness, logic, expertness, and fit with prior interpretations. 

The appellant began working for the U.S. Postal Service as a full-time employee in September 1966.  He was injured on the job on October 13, 1990, and was carried on the rolls in a LWOP status for nearly 3 years.  During this time, he received payments from OWCP.  On October 12, 1993, he returned to work, and on September 3, 2002, he retired. 

Sometime on or before November 15, 2003, the appellant received an “Annuity Statement” from OPM indicating that his gross monthly annuity was lower than he had expected.  On inquiring into the matter, he was told by an OPM official that the figure was accurate because the appellant had been a part-time employee.  The appellant then informed OPM that he had not been a part-time employee, and he had instead been a full-time employee “receiving partial OWCP payments,” and he enclosed a statement from his former employer indicating that, although he had worked only 4 hours of his 8-hour-a-day shift on his return from LWOP, he had received OWCP payments covering the other 4 hours.  The statement indicated further that the appellant had been assigned to a full-time position with the intent that he would increase his hours to 8 as he recovered. 

OPM responded to the appellant’s assertions by issuing a reconsideration decision affirming its earlier determination.  Specifically, it found that the appellant had been a part-time employee following his return to work in 1993 and that his retirement annuity therefore was to be reduced in accordance with 5 U.S.C. § 8339(p)(1).  The appellant then filed an appeal with the Board, and the administrative judge to whom the appeal was assigned issued an initial decision reversing the reconsideration decision and finding that the appellant was entitled to have his service from October 12, 1993, until his retirement credited as full-time service for retirement purposes.  OPM filed a petition for review of the initial decision

In his initial decision, the administrative judge found that 5 U.S.C. § 8332(f) was applicable.  The first sentence of that paragraph provides that “[c]redit shall be allowed for leaves of absence without pay granted an employee … while receiving benefits under subchapter I of chapter 81 of this title.”  The administrative judge noted that the Postal Service had certified that the appellant served under a full-time appointment; he stated that OPM had identified no authority prohibiting the granting of LWOP to an employee receiving OWCP benefits; and he concluded that OPM was required by 5 U.S.C. § 8332(f) to credit the time during which the appellant was on LWOP and receiving those benefits. 

OPM argued that, despite the Postal Service’s characterization of the appellant’s position as full-time, the appellant in fact held a part-time position from 1993 until his retirement.  In support of this argument, OPM asserted the appellant had a prearranged tour of duty of only 4 hours a day beginning in October 1993; that an employee’s entitlement to retirement benefits must be determined on the basis of the actual nature of the appellant’s service, rather than on the basis of the employing agency’s characterization of that service, and that the appellant’s 4-hour-a-day schedule met the definition of “part-time service” that is stated in 5 C.F.R. § 831.703(b). 

The Board agreed that because the appellant evidently never worked more than 4 hours a day, and because he was not expected to do so until his medical condition improved sufficiently, he could be viewed as having not been “scheduled to work” the normal 8 hours a day expected of full-time Postal Service employees, and his service during the time at issue could be viewed as part-time. 

Nevertheless, in determining the appellant’s retirement benefits, the Board stated it would consider the appellant’s personnel documents as evidence concerning the nature of his service.  In that regard, the Board found nothing in the record indicating the appellant’s appointment was ever changed to part-time, and forms documenting the appellant’s employment in the years prior to his retirement indicate that he was a full-time employee.  The record also did not indicate that the positions to which the appellant was assigned during this period of time were part-time positions.  In fact, a Postal Service human resources specialist stated that the appellant was assigned to “an 8 hour position,” i.e., a full-time position; she stated further that the appellant was expected to increase his work time from 4 to 8 hours a day as his condition improved; and OPM did not challenge the appellant’s assertion that his condition was reevaluated “at least yearly [from October 1993] through his retirement date.”  Under these circumstances, the Board found it seemed more accurate to say that the appellant was scheduled to work the normal administrative workweek of 40 hours, but that he was given leave 4 hours a day because of his continuing medical inability to work full days.  The fact that the appellant never recovered sufficiently to work full 8-hour days, despite expectations that he would do so, did not establish that he was a part-time employee, for retirement purposes, from 1993 until his retirement. 

OPM argued further that 5 U.S.C. § 8332(f) covers employees who return to work following a separation, and that, because the appellant was not separated during the period from October 12, 1993, until the time of his retirement, he could not receive service credit under that paragraph.  The Board found this argument was based on the second sentence of 5 U.S.C. § 8332(f), which provides as follows:  “An employee or former employee who returns to duty after a period of separation is deemed, for the purpose of this subsection, to have been in a leave of absence without pay for that part of the period in which he was receiving [OWCP] benefits ….” 

The Board did not construe 5 U.S.C. § 8332(f) as providing that only employees who have been separated are entitled to receive credit for the time they were receiving OWCP benefits.  The Board noted an agency obviously can grant LWOP only to persons who are on its employment rolls; there would be no need for a person who is not currently employed to be given leave from any position.  The Board found that the purpose of the sentence quoted above is to provide service credit for time when a person did not in fact receive LWOP because he was not an employee.  Because the appellant was not separated, and because he instead continued his employment throughout the time at issue, the Board found the sentence on which OPM relied was simply inapplicable.   

In addition, OPM argued that 5 U.S.C. § 8332(f) “clearly intends that credit be granted only for periods during which the employee cannot report for duty at all,” and that employees receive retirement service credit for LWOP periods only if they return to duty on a full-time basis. 

The Board saw no merit in either of these arguments.  OPM cited no authority in support of the argument that credit may be given only for periods when the employee cannot report for duty at all, and the plain language of 5 U.S.C. § 8332(f) imposes no such limitation. 

Finally, OPM argued that the Board “should defer to [its] implementing regulations unless they are plainly erroneous or inconsistent with the act in question,” and it cited Chevron, U.S.A.
v. Natural Resources Defense Council, 467 U.S. 837, 843 (1984), for the proposition that, “where Congress has not directly  addressed the precise question at issue, a reviewing forum should not simply impose its own construction of a statute, particularly where the administration of a congressionally created program necessarily requires an administrative agency to formulate policy and make rules to fill implicit and explicit gaps.” 

The Board found, however, that the Court in Chevron was considering the effect of “legislative regulations,” i.e., regulations that were the product of formal, “notice and comment” rulemaking proceedings, and noted that the United States Court of Appeals for the Federal Circuit has indicated that agency interpretations that are not the product of such proceedings may not be entitled to the same weight.  In this connection, the Board noted the court has stated “agency personnel policies embodied in informal sources such as handbooks and directives … do not ordinarily merit Chevron deference.”  Id.

In this case, the Board found no basis for finding that Congress “explicitly left a gap” with respect to the crediting of service such as that at issue, or that it otherwise expressly delegated to OPM the authority to promulgate regulations on that particular subject.  More important, the only formally promulgated rule or regulation OPM cited in support of its position was 5 C.F.R. § 831.703(b), in which full-time and part-time service are defined.  The Board found those definitions did not support OPM’s position, and that the only general guidance OPM had issued on the matter at issue was Retirement and Insurance Letter (RIL) 2002-21, issued on October 2, 2002, which appeared to be an internal letter OPM had issued to its employees, providing guidance on the crediting of service for retirement purposes.  The Board stated such a document clearly is not entitled to Chevron deference.  Rather, it is accorded only “a lesser degree of deference proportional to its power to persuade,” depending on such factors as its “thoroughness, logic, expertness, and fit with prior interpretations.”  The Board did not find RIL 2002-21 persuasive. 

Rather, the Board found the plain language of 5 U.S.C. § 8332(f) supported the appellant’s position that an employee who returns to duty in his full-time position following a compensable injury is entitled to full credit for his service in that position, even if he is receiving OWCP benefits for the hours exceeding those he is able to work.  Accordingly, the Board found the appellant was entitled to full credit for his service from October 12, 1993, until September 3, 2002. 

return to www.PostalReporter.com