MAY 26 1983

L 8 3 - 1 1 4

Bureau of H e a r i n g s and At

Appeals Referee -

General Counsel

>eals

Overpayment Recovery

This is in resp on se to your m e m o r a n d u m of Apri l 5, 1983,

requesting an opinion regarding the interrelationship of the

Railroad Reti re me nt and Railroad Une mployment In su ra nc e Acts in

the above case.

Mr. received $12,750.00 in sickness insurance benefits

under the Railroad Unemployment Insurance Act for the period

July 22, 1975 through July 18, 1977. On April 13, 1976, he filed

for a d i s ab il it y a n n u i t y under the Rai lroad R e t i r e m e n t Act, which

although initially denied was eventually awarded upon

reconsideration on Feb r u a r y 7, 1978. Ben efits r e tr oa ct iv e to

J u l y 22, 1975, a m o u n t i n g to $17,192.28, were p a y a b l e , but

$12,721.67 was withheld and transferred to the Railroad

Unemployment Insurance Account to recover sickness insurance

benefits paid during that period.

On June 27, 1978, Mr. signed a s e t tl em en t agr ee men t with

his former railroad employer which allocated $39,150.00 to pay

for time lost over the period July 1975 through January 1978, and

$54,8 50.00 to o th er factors. It appears that about the time the

settlement was paid, the Bureau of Unemployment and Sickness

Insurance received a further rei mburs eme nt of si c k n e s s benefits

amounting to $70.46 . It also app ears that the Bu rea u of

R e t irement C l aims received first notice of the settlement by

Mr. letter of October 23, 1978, which was referred to

that bureau on November 16, 1978. The Bureau of Retirement

Claims establi she d a new annuity beginning date of F e b r u a r y 1,

1978, which resulted in an over pa ym ent of $1 5, 811.74 in his

annuity payments.
Bureau of Hearings and Appeals

Upon notification of the change in annuity beginning date, the

Bureau of Unemployment and Sickness Insurance credited $8,750.00

back to the Railroad Retirement Account. The Bureau of

R e t irement Claims then issued an overpayment letter to

Mr. for the balance outstanding of $7,241.74.

Based on the above facts, you ask three questions:

1. Is the RR A fund lega ll y liable to abs or b all or

part of an RUIA overpayment when annuities are not

payable for the period for which RUIA benefits were

erroneously paid?

2. Can the appeals referree legally treat with an RUIA

overpayment which has become an RRA overpayment

under circum st an ce s de sc ribed in this mem or andum?

3. Is M r . l e g all y entitled to relief from an

overpayment which has never been explained to him?

Or in the alternative, should the $4,151.67

overpayment which has never been explained, be

returned to the jurisdiction (and fund liability)

of BUSI so they may give Mr. due process

with respect to it, along with their proposed

notice of the $8570 overpayment?

Benefits are payable under the Railroad Unemployment Insurance

Act for days of sickness, defined by section l(k)(2) of that Act

as a day in wh ich the in dividual is incapacitated for work due to

illness and for which no remuneration "is payable or accrues to

him." Section 4(a-l)(ii) provides in pertinent part that:

"SEC. 4. (a-l) There shall not be cons idere d as a

day of unemployment or as a day of sickness, with

respect to any employee—

*****

"(ii) any day in any period with respect

to whi ch the Board finds that he is rec eiving

or will have received annuity payments under

the Rai lro ad Re t i r e m e n t Act of 197 4 * * *."

Section 2(d) of the Act provides that if more than the correct

amount of benefits are found to have been paid, the Board may

recover the erroneous payment by adjustment to other benefits "to

which such individual is ent itled under this Act or any other A c t
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Bureau of Hearings and Appeals

ad min is te re d by the Board * * T h e Board has provided for

recovery of erroneous payments under the Railroad Unemployment

Insurance Act from payments due under the Railroad Retirement Act

in regu lat ion 340.6. Finally, sec ti on 1 2 (o) of the Railroad

Unemployment Insurance Act provides in part that:

" (o) Benefits p a y a b l e to an e m plo ye e wi th respect

to days of sickness shall be payable regardless of the

liability of anv person to pay damages for such

infirmity. The Board shall be entitled to reimbursement

from any sum or damages paid or paya bl e to such employee

* * * through * * * settlement, * * * on ac cou nt of any

liability * * * based upon such infirmity, to the extent

that it will have paid or will pay benefits for days of

sickness resulting from such infirmity. Upon notice to

the per s o n against w h o m such right or c l a i m exists or is

asserted, the Board shall have a lien upon such right or

claim, any judgment obtained thereunder, and any sum or

damages paid under such tight or claim, to the extent of

the am ou nt to which the Board is ent itl ed by way of

reimbursement."

The General Counsel has held in the past that the amount to which

the Board is entitled to r e i mbu rs em en t under section 12 (o) is

limited to the amount of any benefits not recovered by set-off

from benefits due under the Railroad Retirement Act due to the

provisions of section 4(a-l)(ii) and section 2(d). See Legal

Opinions L-49-760 and L-65-122.

Section 2(e)(1) of the Railroad Retirement Act provides that "No

individual shall be entitled to an annuity under subsection

[ 2 ] ( a ) (1) until he shall have ceased to render com pensated

service * * S e c tio n 2 ( e ) (3) pro vi de s that "No annuity * * *

shall be paid with respect to any month in which an individual in

receipt of an annuity * * * s ha ll render c o m p e n s a t e d service to

an emp lo yer * *

The Bureau of Unemployment and Sickness Insurance takes the

position that the $8,570.00 was erroneously transferred to the

Railroad Retirement Account, but has undertaken to recover that

amount as an erroneous payment under the Railroad Unemployment

Insurance Act. The Bureau has declined to transfer the remaining

$4,511.67 on the grounds that the initial recovery of sickness

benefits as not payable due to Mr. receipt of a

disablitv annuity was correct because at the time of the set-off
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Bureau of Hearings and Appeals

recovery, the settlement had not yet been signed. The bureau

reasons that the annuity was properly paid, and the amount

withheld was properly transferred. For this reason, the Board

was entitled to reimb ur sem en t under sec ti on 12 (o) on l y for the

balance of sickness benefits unrecovered from the annuity at the

time the settlement was concluded. Further, with the conclusion

of the settlement, no benefits remained payable to Mr.

under the Railroad Unemployment Insurance Act. Because no

further benefits were payable to Mr. at the time the

Bureau of Retirement Claims requested the re-transfer of the

$12,721.67, there were no funds properly available to transfer,

according to the Bureau of Unemployment and Sickness Insurance.

The first premise, that the recovery of the sickness benefits

from the accrued retirement benefits pai d Febru a r y 7, 1978 is

correct because the annuity did not become erroneous until the

date of the set tlement, is based on a m i s i n t e r p r e t a t i o n of

sections 2(e) and 10(a) of the Railroad Retirement Act. It is in

the nature of an erroneous payment caused by earnings that the

fact of the e r r o n e o u s payment does no t c o m e to the B o a r d ’s

attention until after the earnings are paid. The point in time

at which the ma t t e r is discov ered and the am oun t of errone ous

pay m e n t is as cert ained is imm aterial to the fact that

compensation from an employer has been paid with respect to a

month for which the individual has received an annuity. Section

2(e) of the Act states that an annuitant is not entitled to any

annuity for a period for which he receives compensation from an

employer. An y p a y m e n t co ntrary to these prov i s i o n s is erroneous.

The second premise, that whether or not the transfer was correct,

t h e re c u r r e n t ly remain no funds to tra nsfer back from

Mr. account in the railroad unemployment insurance

account to the Railr oa d Retire me nt Account, is not without meri t

when viewed in the context of the usual recovery situations.

However, application of the recovery provisions of section 2(d)

of the Railroad Unemployment Insurance Act in this situation

results in the recovery of what is u l t i m a t e l y an overpa ym en t of

sickness benefits due to receipt of a settlement from benefits

under the Railroad Retirement Act which are ultimately also not

payable due to the same settlement. This results in the unjust

enrichment of the railroad unemployment insurance account at the

expense of the Rai lro ad Reti re me nt Account, a result that cannot

have been intended by Congress.
Bureau of Hearings and Appeals

In my opinion, the better v i e w is to make a final accounting of

benefits due under both Acts at the conclusion of the

settlement. U n d e r this a p p r o a c h , at the time th e Bureau of

Un e m p lo ym en t and Sic kness Insurance is not ifi ed of the co nc lus ion

of a s e t t l e m e n t pu r s u a n t to the terms of sec ti on 1 2 (o), the

amount of benefits payable under both Acts after allocation of

pay for time lost is ascertained. If the s e t t l e m e n t results in a

new annuity beginning date under the Railroad Retirement Act, the

amount of any sickness benefits originally recovered from the

retirement annuity accrual should be transferred back to the

Railroad Retirement Account. The full amount of sickness

benefits ultimately not payable due to the settlement would then

be recov ere d from the set t l e m e n t under s e c tio n 1 2 (o) of the

Railroad Unemployment Insurance Act. Any balance of the original

annuity accrual which was paid to the employee would be recovered

under section 10(a) of the Railroad Retirement Act.

The above method has several advantages. First, the origin of

the e r r o n e o u s p a y me nt w h ich the individual is re qu es ted to refund

is c l e are r in the case of rec o v e r y under each Act. Situations

such as Mr. case, wher e the retirement an nu itant is

asked to refund an amount greater than the amount he actually

r e c e i v e d , are avoided. Second, the individual is aw are of the

ramifications of his settlement under both Acts concurrently,

rather than in piecemeal fashion. Finally, reimbursement under

se ction 1 2 (o) appe ar s p r e f e r a b l e because w a i v e r o f recov ery is

unav ail ab le under that section. See Legal O p i n i o n L - 4 9 - 7 6 0 . It

ma y be noted that if r e i m b u r s e m e n t is not o bta in ed pur su ant to

12(o), recovery may still be effected as prescribed by section

2(d), including through an adjustment in the individual's

retirement benefit. See Legal Opinion L-50-471.

In my opinion, then, the answers to your questions are as follows:

1. The Rai l r o a d Ret i r e m e n t A c c oun t is not require d to absorb

an overpayment in sickness benefits which are not payable due to

a se ttl eme nt w h ic h also causes an er ro neous p a y m e n t in retirement

benefits.

2. Beca u s e erroneous payments under the Railroad

Unemployment Insurance Act arising in this case should not be

treated as having become erroneous payments under the Railroad

Retirement Act, the remaining $4,511.67 originally transferred to

the Railroad Unemployment Insurance Account should be returned to

the R a i l r o a d R e t ir em en t A c c o u n t , increasing the amount to be

recovered under the Railroad Unemployment Insurance Act to the

amount o r i g i n a l l y w i t h h e l d , or $12 ,721.67.
Bureau of Hearings and Appeals

As an overpayment under the Railroad Unemployment Insurance Act,

recovery is under the jurisdi ct io n of the Bure a u of Unemployment

and Sickness Insurance. The $3,090.07 in erroneous benefits

un der the Rai lroad R e t ir em en t Ac t is with in your jurisdiction.

3. Mr. has received full not ic e of the ov er pa y m e n t

in retirement benef its act ual ly paid him, and, accordingly, he is

entitled to relief from recovery only in accordance with section

10(c) of the Railroad Retirement Act. The Bureau of Unemployment

and Sickness Insurance will initiate recovery of the full

$12,721.67, and Mr. will receive an explanation of the

erroneous benefits under that Act.

I trust that the abov e d i s cu ss io n will be of as s i s t a n c e to you.

cc: Director of Unemployment and

Sickness Insurance

Director of Retirement Claims

KTB-.hro

7167A/9 3A