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GOVERNMEN1

Storage

HEARING

BEFORE THE

1..n

COMMITTEE ON

OFFICE AND CIVIL SERVICE

ISE OF REPRESENTATIVES

rq EIGHTY-EIGHTH CONGRESS

FIRST SESSION

ON

H.R. 5390

A BILL TO AMEND THE CIVIL SERVICE RETIREMENT ACT TO

PERMIT THE RECOVERY BY THE MUNICIPAL GOVERNMENT

OF THE DISTRICT OF COLUMBIA OF AMOUNTS DUE SUCH

GOVERNMENT IN THE ADJUDICATION OF CLAIMS UNDER

SUCH ACT, AND FOR OTHER PURPOSES

H.R. 5569

A BILL TO AMEND THE CIVIL SERVICE RETIREMENT ACT TO

PERMIT THE RECOVERY BY THE GOVERNMENT OF AMOUNTS

DUE THE GOVERNMENT IN THE SETTLEMENT OF CLAIMS

UNDER SUCH ACT, AND FOR OTHER PURPOSES

APRIL 23, 1963

Printed for the use of the Committee on Post Office and Civil Service

U.S. GOVERNMENT PRINTING OFFICE

97549 WASHINGTON : 1963

ii
COMMITTEE ON POST OFFICE AND CIVIL SERVICE

TOM MURRAY, Tennessee, Chairman

JAMES H.`MORRISON, Louisiana ROBERT J. CORBETT, Pennsylvania

THADDEUS J. DULSKI, New York

DAVID N. HENDERSON, North Carolina

ARNOLD OLSEN, Montana

MORRIS K. UDALL, Arizona

DOMINICK V. DANIELS, New Jersey

LINDLEY BECKWORTH, Texas

HARLEY 0. STAGGERS, West Virginia

ROBERT N. C. NIX, Pennsylvania

EVERETT G. BURKFIALTER, California

DON EDWARDS, California

JOE R. POOL, Texas

ALBERT W. WATSON, South Carolina

H. R. GROSS, Iowa

JOEL T. BROYHILL, Virginia

AUGUST E. JOHANSEN, Michigan

GLENN CUNNINGHAM, Nebraska

GEORGE M. WALLHAUSER, New Jersey

ROBERT R. BARRY, New York

KATHARINE ST. GEORGE, New York

EDWARD J. DERWINSKI, fllinois

ROBERT F. ELLSWORTH, Kansas

HOMER E. ABELE, Ohio

SUBCOMMITTEE APPOINTED To CONSIDER H.R. 5390 AND 5569

DOMINICK V. DANIELS, New Jersey, Chairman

LINDLEY BECKWORTH, Texas ROBERT R. BARRY, New York

ALBERT W. WATSON, South Carolina EDWARD J. DERWINSKI, Illinois

II
CONTENTS

Statement of—

Bryan, Irving, assistant corporation counsel, District of Columbia Page

government, accompanied by Barney Farber, deputy accounting

officer, and Samuel J. Kidd, chief, enforcement division 3

Pool, Hon. Joe R., of Texas, member of the full committee 2

Ruddock, Andrew E., director, Bureau of Retirement and Insurance,

U.S. Civil Service Commission 9

GOVERNMENT COUNTERCLAIMS AGAINST AMOUNTS

DUE FROM CIVIL SERVICE RETIREMENT FUND

TUESDAY, APRIL 23, 1963

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10 a.m., in room 215,

House Office Building, Hon. Dominick V. Daniels (subcommittee

chairman) presiding.

Mr. DANIELS. The subcommittee will come to order.

Mr. Beckworth and Mr. Barry have asked to be excused because

they are engaged before other committees.

This subcommittee was appointed to consider H.R. 5390 and 5569,

both sponsored by Mr. Pool.

Without objection, H.R. 5390 and 5569 will be included in the

record at this point.

(H.R. 5390 and H.R. 5569 follow:)

[H.R. 5390, 88th Cong., 1st sass.]

A BILL To amend the Civil Service Retirement Act to permit the recovery by the municipal government of the District of Columbia of amounts due such government in the adjudication of claims under

such Act, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of

America in Congress assembled, That section 15 of the Civil Service Retirement

Act, as amended (5 U.S.C. 2265), is amended by adding at the end thereof the

following new subsection:

"(c) In the adjudication of claims payable under this Act, the Commission,

notwithstanding any other provision of law, shall take appropriate action on

counterclaims, filed by the municipal government of the District of Columbia as

setoffs against amounts in the fund to the same extent and in the same manner

as counterclaims filed by the United States.".

[H.R. 5569, 88th Cong., 1st sess.]

A BILL To amend the Civil Service Retirement Act to permit the recovery by the Government of amounts

due the Government in the settlement of claims under such Act, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of

America in Congress assembled, That section 15 of the Civil Service Retirement

Act, as amended (5 U.S.C. 2265), is amended by adding at the end thereof the

following new subsection:

"(c) Notwithstanding any other provision of law, the Commission is authorized

to take appropriate action on counterclaims filed by the Government as set off

against amounts otherwise due and payable from the fund to the debtors

concerned."

Mr. DANIELS. The purposes of these proposals is to permit amounts

payable to a former employee from the civil service retirement fund

to be used to liquidate amounts the former employee owes the

Government.

1
2 GOVERNMENT COUNTERCLAIMS

H.R. 5390 is based on an official request to the Congress by the

Board of Commissioners of the District of Columbia and applies only

to amounts owed the municipal government of the District of Columbia by former employees of the District.

The Civil Service Commission was asked to furnish their comments

on the proposal and the Commission reported that it would be desirable to have the amendment to the Retirement Act apply to all

former employees of the Federal Government as well as to former

employees of the District of Columbia.

H.R. 5569 was sponsored by Mr. Pool as a result of the recommendation of the Civil Service Commission and will apply to debts owed by

either former Federal employees or former employees of the municipal

government of the District of Columbia.

Mr. Pool, a member of the full committee, could not be here this

morning and asked permission to have his statement included in the

record. Without objection, Mr. Pool's statement will be included in

the record.

We also have the letter of request from the president of the Board

of Commissioners of the District of Columbia dated March 5, 1963,

addressed to Hon. John W. McCormack, Speaker, which will also be

included, without objection, at this point in the record.

(The documents follow:)

STATEMENT BY REPRESENTATIVE JOE R. POOL, OF TEXAS, APRIL 23, 1963

Mr. Chairman, I appreciate the opportunity the chairman of the House Post

Office and Civil Service Committee, Hon. Tom Murray, has afforded me to sponsor

H.R. 5390 as a result of an official recommendation of the Board of Commissioners

of the District of Columbia. I also sponsored H.R. 5569 to carry out the amendment suggested by the Civil Service Commission.

I understand that amounts payable from the civil service retirement fund to a

former employee had been used for many years to set off debts owed by the former

employee to the Government. This rule was applied both in the case of former

employees of the Federal Government and in the case of former employees of the

municipal government of the District of Columbia. However, as to District of

Columbia cases, this practice was overturned as a result of a court case on the

basis that the District of Columbia is a distinct legal entity and not an agency of

the U.S. Government, and, therefore, that there was no legal basis for deducting

the amounts of claims of the District of Columbia for money due a former employee

of the District of Columbia. As a result of the court case, the General Accounting

Office advised the Civil Service Commission to discontinue the practice of setoff

of funds payable from the civil service retirement fund in the case of former employees of the District of Columbia.

Either one of the bills I have sponsored will permit the municipal government of

the District of Columbia to recover on debts owed to them by former employees

in the event there is any amount payable from the civil service retirement fund.

Mr. Chairman, I am sure you and the other members of the subcommittee will

agree that this is desirable legislation and I will leave it up to your good discretion

as to which of the bills will more adequately serve the needs of the Government

after you hear from the witnesses scheduled here today.

MARCH 5, 1963.

The Honorable JOHN W. MCCORMACK,

The Speaker, U.S. House of Representatives,

Washington, D.C.

MY DEAR MR. SPEAKER: The Commissioners have the honor to submit herewith

a draft bill to amend the Civil Service Retirement Act of May 29, 1930.

The purpose of this bill is to permit the government of the District of Columbia

to enter claims for setoff of money in the civil service retirement fund to the credit

of former employees of the District government in liquidation of debts due and

owing to the District by such employees. Although, in most instances, the

District, by agreement with its employees, is able to obtain satisfaction of any
GOVERNMENT COUNTERCLAIMS 3

indebtedness due it by any such employee, legislation is required to permit setoff

in those circumstances when an employee terminates his employment without

discharging the indebtedness due the District.

The rule is well settled, and has been recognized by judicial precedents, that

the amount in the civil service retirement fund to the credit of a former employee

of the U.S. Government, or the amount of his retirement annuities, when either

becomes payable, may be applied in liquidation of the employee's indebtedness

to the United States. The rule is based on the common law right of every creditor

to apply the moneys of his debtor in his possession in extinguishment of the

creditor's claim against the debtor. However, the right of setoff applies only

in cases where there exists a mutuality of parties and demands.

Although the District of Columbia government makes contributions to the

civil service retirement fund for the benefit of its employees, in like manner as the

Federal Government contributes to such fund for its employees, the District is

considered a separate and distinct legal entity and not an agency of the U.S.

Government. Therefore, funds in the civil service retirement fund for the benefit

of District employees or former employees cannot, in the absence of authorizing

legislation, be claimed as setoff by the District for debts due it from such

employees.

Accordingly, the Commissioners recommend that the Civil Service Retirement

Act be amended so as to permit the District to claim by way of setoff against

civil service retirement credits held for the benefit of its employees or former

employees for the payment of debts owed the District by such employees or

former employees.

The Commissioners have been advised by the Bureau of the Budget that, from

the standpoint of the administration's program, there is no objection to the

submission of this legislation to the Congress.

Very sincerely yours,

WALTER N. TOBRINER,

President, Board of Commissioners, District of Columbia.

A BILL To amend the Civil Service Retirement Act of May 29, 1930

Be it enacted by the Senate and House of Representatives of the United States of

America in Congress Assembled, That section 15 of the Civil Service Retirement

Act, as renumbered by the Civil Service Retirement Act Amendments of 1956,

5 U.S.C. 2265, is amended by adding at the end thereof the following new subsection:

"(c) In adjudicating claims payable under this Act the Commission shall, notwithstanding any other provision of law, take appropriate action on counterclaims

filed by the municipal government of the District of Columbia as setoffs against

amounts in the retirement fund, to the same extent and in the same manner as

counterclaims filed by the United States."

STATEMENT OF IRVING BRYAN, ASSISTANT CORPORATION

COUNSEL, DISTRICT OF COLUMBIA GOVERNMENT, ACCOMPANIED BY BARNEY FARBER, DEPUTY ACCOUNTING OFFICER,

AND SAMUEL J. KIDD, CHIEF, ENFORCEMENT DIVISION

Mr. DANIELS. Our first witness is Mr. Irving Bryan, assistant

corporation counsel, District of Columbia. He is accompanied by

Mr. Barney Farber, deputy accounting officer.

Mr. BRYAN. I also have with me Mr. Samuel J. Kidd, who is Chief

of the Enforcement Section of the Finance Office of the District

government.

Mr. DANIELS. Mr. Bryan, if you have a prepared statement you

may read from your statement or summarize your testimony.

Mr. BRYAN. Mr. Chairman, I do not have a prepared statement.

I have a few brief comments to make.

The legislation, as you have indicated, resulted from the request of

the Board of Commissioners of the District of Columbia addressed

to the Speaker of the House under date of March 5, 1963. H.R.:
4 GOVERNMENT COUNTERCLAIMS

5390 was introduced at the request of the Commissioners and H.R.

5569 at the request of the Civil Service Commission.

The legislation has been cleared by the Bureau of the Budget.

The Commissioners very strongly urge enactment of this legislation.

We particularly prefer H.R. 5569, the Civil Service Commission draft,

as being more appropriate to cover the subject. The District of

Columbia government found itself in a very unusual situation a number of years ago when it attempted to collect through setoff an amount

due from an annuitant for his hospital bill which the District of

Columbia paid for this annuitant. This annuitant went to St. Elizabeths Hospital and the District of Columbia paid the bill. After the

annuitant died the District attempted to collect what was owing to

it from the money to the credit of the annuitant in the civil service

retirement fund and the Civil Service Commission honored the District's claim. However, the administrator of the annuitant's estate

went to court and contested the right of the District to have the

money and the court ruled for the administrator. Subsequently the

Comptroller General ruled in 36 Comp. Gen. 457 that the District of

Columbia was not eligible to have setoffs against any amounts due

and owing former employees of the District government for the same

reason that the court ruled against the District in the Sedgwick case

that I mentioned.

That is the genesis of this proposed legislation, Mr. Chairman.

If there are any questions by any member, I shall attempt to answer.

Mr. DANIELS. You made reference to a case reported in 36 Comp.

Gen. 457.

Mr. BRYAN. The Comptroller General's decision, yes. Another

case was involved, but the Comptroller General referred to and relied

upon the decision of the court in the case of Sedgwick v. Young.

Mr. DANIELS. I have before me a copy of that decision. It appears

on the letterhead of the Comptroller General of the United States

and bears the date of December 6, 1956. I would like to offer for

the record the Comptroller General's report of March 27, 1963, forwarding a copy of the decision to the committee, and a copy of a

report from the Civil Service Commission. Without objection the

reports will be included in the record at this point.

(The reports follow:)

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., March 27, 1968.

Hon. Tom MURRAY,

Chairman, Committee on Post Office and Civil Service,

House of Representatives.

DEAR MR. CHAIRMAN: Your letter of March 14, 1963, acknowledged March 19,

requests our comments concerning the necessity for and the adequacy of the draft

language of a legislative proposal you received from the Commissioners of the

District of Columbia, which would authorize the setoff of money in the civil

service retirement and disability fund to the credit °I former District of Columbia

employees in liquidation of their indebtednesses to the District of Columbia.

In our decision of December 6, 1956, 36 Comp. Gen. 457, we advised the Civil

Service Commission that because the District of Columbia is a legal entity,

separate and distinct from the Government of the United States, amounts in the

civil services retirement and disability fund to the credit of former District of

Columbia employees could not be set off—in the absence of a statute so authorizing—by the Civil Service Commission in satisfaction of debts owing the District

of Columbia government by such former employees. A copy of that decision is

enclosed for convenient reference. Consonant with the holding in that decision,

our opinion is that the enactment of legislation is necessary to authorize the Civil

Service Commission to effect setoffs when requested by the municipal government

of the District of Columbia.
GOVERNMENT COUNTERCLAIMS 5

In response to a request by the acting corporation counsel of the District of

Columbia, submitted in June 1962, for our views upon the necessity for and the

form of a legislative proposal to permit the Civil Service Commission to effect

setoffs for the benefit of the municipal government of the District of Columbia,

we advised the corporation counsel that enactment of authorizing legislation

would be necessary and we suggested draft language substantially in the form of

that appearing in the draft of the bill submitted to you by the District of Columbia

Commissioners. We consider that the language of such draft is adequate to accomplish the desired objective of the proposed legislation.

Sincerely yours,

JOSEPH CAMPBELL,

Comptroller General of the United States.

Hon. PHILIP YOUNG,

Chairman, U.S. Civil Service Commission.

DEAR MR. YOUNG: Your letter of November 20, 1956, requests our decision

whether further claims of the District of Columbia for setoff of moneys in the

civil service retirement fund should be honored in view of the opinion of the

U.S. District Court for the District of Columbia, filed December 15, 1955, in

the case of Sedgwick v. Young, civil action No. 917-55.

We understand that the Sedgwick case involved a patient at St. Elizabeths

Hospital, now deceased, for whose care the District of Columbia paid St. Elizabeths Hospital. The patient was a civil service annuitant and, after his death,

the District of Columbia asked your Commission to apply the amount to his

credit in the retirement fund against his indebtedness to the District of Columbia.

That request was honored by your Commission. The administrator of Mr.

Sedgwick's estate filed an action in the U.S. District Court for the District of

Columbia to require payment of the retirement money to him. The court's

opinion is to the effect that the retirement fund credit should be paid to the

administrator of the estate without prejudice to the right of the District of

Columbia to file claim with the administrator for hospital care.

As stated in your letter, it is true that our Office decision, 10 Comp. Gen.

225, held that the amount in the civil service retirement fund to the credit of a

former employee of the District of Columbia may be set off in liquidation of a

debt due the District of Columbia from the former employee. However, our

Office ruled subsequently that the District of Columbia government is a distinct

legal entity—not an agency of the U.S. Government—and, therefore, no legal

basis exists for deducting the amounts of claims of the District of Columbia

from moneys due contractors of the United States. See our decision of February

10, 1944, B-39254. We also have taken the position that, since the District of

Columbia government is a legal entity separate and distinct from the U.S. Government, the accounting officers of the United States have no jurisdiction to

settle claims by or against the government of the District of Columbia. (See our

decisions of February 7, 1952, B-106771, and of July 8, 1955, B-120734.)

In view of the holdings in our decisions rendered subsequent to 10 Comp.

Gen. 225, our decision in 10 Comp. Gen. 225 no longer should be followed. Accordingly, your Commission no longer should honor claims by the District of

Columbia for setoff of moneys in the retirement fund in liquidation of debts due

the District of Columbia government.

Sincerely yours,

4 JOSEPH CAMPBELL,

Comptroller General of the United States.

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., December 6, 1956.

U.S. CIVIL SERVICE COMMISSION,

Washington, D.C., April 3, 1963.

Hon. TOM MURRAY,

Chairman, Committee on Post Office and Civil Service,

House of Representatives.

DEAR MR. CHAIRMAN: This is in response to your letter of March 14 enclosing

proposed legislation to permit the government of the District of Columbia to

enter claims for setoff of money from the civil service retirement fund for liquida-
6 GOVERNMENT COUNTERCLAIMS

tion of debts of former District employees. You requested advice as to whether

the legislation is necessary and, if so, whether the language will carry out the purpose intended.

A long line of decisions by the Comptroller General of the United States establishes existing procedure whereby money due from the retirement fund may be

used to satisfy an indebtedness to the United States in the case. The right of

the Government to apply retirement money to satisfy an indebtedness has been

upheld by (1) the U.S. Circuit Court of Appeals for the Second Circuit on

February 4, 1941, in the case of Edward E. Boerner v. United States (117 Fed. 2d

387), (2) the U.S. District Court for the Southern Division of the Northern

District of Alabama on June 24, 1943, in the case of Bryan Watson v. United

States, and (3) the U.S. District Court for the Southern District of New York on

May 18, 1944, in the case of Emilio Marrero v. United States.

This procedure is not applicable as regards an indebtedness to the municipal

government of the District of Columbia, as noted in Comptroller General's decision dated December 6, 1956 (36 Comp. Gen. 457), based materially on opinion

of the U.S. District Court for the District of Columbia, filed December 15, 1955,

in the case of Sedgwick v. Young, civil action No. 917-55. In the light of these

holdings, the result sought would appear to be available only through legislative

enactment.

President Tobriner's letter to you indicates the bill's purpose as allowing setoff

of retirement money to liquidate debts owed by former District government

personnel. However, the draft bill would amend the Civil Service Retirement Act

to authorize setoff, against annuity or refund otherwise payable thereunder, to

satisfy a District of Columbia government indebtedness owed by either a former

District employee or a former Federal employee. While the Commission dislikes

being in the position of a collection agency, no reason is apparent why the District

government as a creditor should not be on a par with Federal establishments.

Some slight technical changes in the draft appear desirable. Since the Civil

Service Retirement Act enacted in 1956 completely superseded the former May 29,

1930, law and its amendments, the words "of May 29, 1930," should not appear

in the heading. For purposes of clarity and completeness, it is believed that

any statutory amendment in this area should spell out also the Federal Government's right to effect setoff. The Commission therefore recommends that the

draft bill be reworded to read:

"A BILL To amend the Civil Service Retirement Act

"Be it enacted by the Senate and House of Representatives of the United States

of America in Congress assembled, That section 15 of the Civil Service Retirement

Act is amended by adding at the end thereof the following new subsection:

"'(e) Notwithstanding any other provision of law, the Commission is authorized to take appropriate action on counterclaims filed by departments and agencies

of the United States Government and by the municipal government of the

District of Columbia as setoff against amounts otherwise due and payable from

the fund to the debtors involved.'"

By direction of the Commission.

Sincerely yours,

JOHN W. MACY, Jr., Chairman.

Mr. DANIELS. Heretofore, the Federal Government had the right

to set off any claim it had against a Federal employee out of the annuitant's funds?

Mr. BRYAN. As I understand, that is true and the District of

Columbia government is asking to be put in the same status as the

Federal Government in that respect.

Mr. DANIELS. This would apply only to a sum liquidated. That

is, a specific amount of money due, Where there can be no dispute as

to the amount owed?

Mr. BRYAN. I think that is correct. The language says, "Amounts

otherwise due and payable from the fund." Against that may be

set off amounts which the District of Columbia claims. I would say

"Yes" to your question as to whether it applies to liquidated amounts.

Mr. DANIELS. Should there be a dispute between the District and
GOVERNMENT COUNTERCLAIMS

the annuitant or former employee as to whether or not the claim is

justly owed, what would the situation be?

Mr. BRYAN. It would seem to me the Civil Service Commission

under this legislation would be in a position to decide the question as

to whether the amount was due and owing.

Mr. DANIELS. I think that is a very important question as to

whether or not there is a dispute. I don't think the Civil Service

Commission should set itself up as a judge.

Mr. BRYAN. I don't know whether they would or not.

Mr. DANIELS. Would you want to correct your previous answer?

Mr. BRYAN. If I didn't say I feel the Commission would have the

power, I would like the record to show that that is my answer.

Mr. DANIELS. That is your opinion but you are not sure?

Mr. BRYAN. That is my opinion that the Commission would have

the power. As to whether they would exercise the power in a particular case I just cannot answer. Perhaps the Commission can

decide that on the basis of each case.

Mr. DANIELS. I would like to feel that the amount due and owing

should be not only a specific amount but there should be no dispute

as to the right of the District to claim the amount of money from the

employee. If there is any dispute I don't think that dispute should

be resolved by the person who claims the money as a credit for it.

Mr. BRYAN. Disputes can arise in any case or every case, depending

upon the inclination of the employee or the District official involved.

Mr. DANIELS. You made reference to a case where a person went

to the hospital and received treatment. There can be no dispute

there because the services were rendered and there is a schedule of

fees and charges and you just have to multiply the number of days

by the charges per day that the person was in the hospital plus the

other scheduled fees. There can be no dispute as to the amount

owing.

Mr. BRYAN. Generally speaking, the nature of the claims we feel

this legislation is needed for primarily are claims by the District against

employees who owe the District for hospital care or for income tax.

I would say in most of those cases there is not likely to be any dispute'

as to whether the money is owing and how much is owing.

Mr. DANIELS. Are there questions, Mr. Watson?

Mr. WATSON. No questions.

Mr. DANIELS. Mr. Derwinski?

Mr. DERWINSKI. How many claims or incidents do you have annually that would be affected by this bill?

Mr. BRYAN. Mr. Derwinski, may I ask Mr. Kidd, the enforcement

officer in the Finance Office to answer the question, please?

Mr. DERWINSKJ. Yes.

Mr. KIDD. I believe there would probably be no more than 200 of

these claims asserted by the District each year.

Mr. DANIELS. What would be the nature of those claims?

Mr. KIDD. The majority of them, sir, would be for income tax owed

the District.

Mr. DANIELS. How would the District determine the exact amount?

Mr. KIDD. In the case of taxes, of course, this would be based on a

filed return by the employee.
8 GOVERNMENT COUNTERCLAIMS

Mr. DANIELS. In these cases where you profess to have a claim,

would their return be on file or would the District have to determine

what the amount would be due and owing?

Mr. KIDD. No, sir. In most of the cases a return would be on file

with the District government.

Mr. DANIELS. And that return would show what the person would

owe?

Mr. BRYAN. Yes, sir.

Mr. DANIELS. Then there can be no dispute as to the amount

owing?

Mr. KIDD. No, sir.

Mr. FARBER. Mr. Chairman, may I say in all my experience I have

never heard a question as to the amount or as to the debt. Our only

problem arose when we could not set off. We have various types of

claims and those include possibly overpayment of lump-sum leave

when the employee leaves, due to an error in the calculation of their

annual leave, but never have I heard a question as to the amounts or

a dispute as to whether the claim is owed or not. Our problem arose

when we tried to obtain a setoff against the civil service retirement

fund.

Mr. WATSON. Perhaps my question should be directed to Mr. Ruddock of the Civil Service Commission, but perhaps you could give the

answer. In the event you have a claim of—just pulling a figure out of

the air—$1,000 against a former employee and the annuity which he

is receiving amounts to $100 per month, would you take the entire

$100, or what would be the basis? I have a particular case in mind

right now, as the gentleman mentioned a moment ago of an overpayment upon separation and then this man now is faced with the

proposition of having his entire annuity taken up until this overpayment has been completely repaid. I was just wondering what

your disposition toward that would be, of just having him pay back

a certain percentage of his annuity, or do you take the full amount

until such time as the claim is paid?

Mr. FARBER. I can answer that in reference to how we would handle

our current employees in case there is an error. We make arrangements with the employee to pay an amount which he can afford. We

have no desire on our part to reduce the income to an amount where he

cannot live. They arrange for him to pay a minimum amount spread

over a period of time in order to collect. I cannot speak for the Civil

Service Commission as to their actions but I think we would be satisfied if we had a means of recovery.

Mr. WATSON. A reasonable means. But generally you would expect the Civil Service Commission—perhaps Mr. Ruddock can take

care of this but they would honor any arrangement you entered into

with the former employee with regard to method of repayment.

Mr. FARBER. I am sure the District would not want to put the

person in a position where he did not have sufficient means with which

to live.

Mr. DANIELS. Thank you, gentlemen.

Our next witness is Mr. Andrew E. Ruddock, Director, Bureau of

Retirement and Insurance.
GOVERNMENT COUNTERCLAIMS 9

STATEMENT OF ANDREW E. RUDDOCK, DIRECTOR, BUREAU OF

RETIREMENT AND INSURANCE, U.S. CIVIL SERVICE COMMISSION

Mr. RUDDOCK. Mr. Chairman and members of the subcommittee,

it is a pleasure for me to appear this morning to represent the Civil

Service Commission in this hearing. I do not have a prepared statement. I would like to make just a few brief remarks.

The Civil Service Commission has reported on these bills by letter

dated April 22 to Hon. Tom Murray, chairman of the Committee on

Post Office and Civil Service.

With your permission, Mr. Chairman, I would suggest that that

report be made a part of the record.

Mr. DANIELS. Without objection, the report will be made a part

of the record.

(The report follows:)

U.S. CIVIL SERVICE COMMISSION,

Washington, D.C., April 22, 1963.

Hon. Tom MURRAY,

Chairman, Committee on Post Office and Civil Service,

House of Representatives.

DEAR MR. CHAIRMAN: This refers to your requests for Commission report

on H.R. 5390 and 5569, bills to amend the Civil Service Retirement Act to allow

setoff against amounts due from the retirement fund to cover an indebtedness

due the District of Columbia government.

A long line of decisions by the Comptroller General of the United States

establishes existing procedure whereby money due from the retirement fund may

be used to satisfy an indebteness to the United States in the case. The right

of the Government to apply retirement money to satisfy an indebtedness has

been upheld by (1) the U.S. Circuit Court of Appeals for the Second Circuit on

February 4, 1941, in the case of Edward E. Boerner v. United States (117 Fed. 2d

387), (2) the U.S. District Court for the Southern Division of the Northern

District of Alabama on June 24, 1943, in the case of Bryan Watson v. United States,

and (3) the U.S. District Court for the Southern District of New York on May

18, 1944, in the case of Emilio Marrero v. United States.

This procedure is not applicable as regards an indebtedness to the municipal

government of the District of Columbia, as noted in Comptroller General's

decision dated December 6, 1956 (36 Comp. Gen. 457), based materially on opinion

of the U.S. District Court for the District of Columbia, filed December 15, 1955,

in the case of Sedgwick v. Young, civil action No. 917-55.

Either of these bills, if enacted, would amend the Civil Service Retirement

Act to authorize setoff, against annuity or refund otherwise payable thereunder,

to satisfy a District of Columbia government indebtedness owed by either a former

District employee or a former Federal employee. While the Commission dislikes

being in the position of a collection agency, no reason is apparent why the District

government as a creditor should not be on a par with Federal establishments.

Either bill will accomplish the result indicated, but the Commission considers

that H.R. 5569 is in preferred form. For purposes of clarity and completeness

it is believed that any statutory amendment in this area should specify also the

Federal Government's right to effect setoff. H.R. 5569 does this by authorizing

setoff action on counterclaims filed by the "Government," a term defined in section 1(k) of the Retirement Act as including the three branches of the U.S.

Government, Government-owned or controlled corporations, federally supported

Gallaudet College, and the District of Columbia government.

The Commission offers no objection to the enactment of either of these bills.

The Bureau of the Budget advises that from the standpoint of the administration's program there is no objection to the submission of this report.

By direction of the Commission.

Sincerely yours,

(Signed) JOHN W. MACY, Jr., Chairman.
10 GOVERNMENT COUNTERCLAIMS

Mr. RUDDOCK. As this letter indicates, the Commission believes

that of the two bills, H.R. 5569 is in preferred form because it is broad

enough to cover both Federal and District of Columbia governments.

Either bill would accomplish the stated objective.

This report also indicates that the Civil Service gommission has no

objection to the enactment of this legislation. As a matter of fact we.

did make setoffs from retirement funds to recover amounts of indebted--

ness to the District of Columbia government from 1920 until 1955.

There has already been reference to the case of Sedgwick v. Young,

which was in the District Court of the United States and to the decision by the Comptroller General in 1956 that it was not appropriate

to make setoffs to recover indebtedness to the District of Columbia

government.

Enactment of this legislation then would be merely a return to the

practice which was followed from 1920 until 1955.

A question has been asked which I think I can help to clear up:

The Civil Service Commission upon request for recovery does not

adjudicate either the validity of the indebtedness or the amount of the

indebtedness. Claim is filed by the creditor agency, and we are doing

this for all agencies of the Federal Government at the present time.

When there is an amount payable from the retirement fund to the

individual, the debtor, we recover the exact amount which has been

requested by the creditor agency. We advise the individual if he has

any question as to the validity of the debt or the amount of the debt

he should first take it up with the creditor agency and if he does not

receive satisfaction from that source he has the right to appeal to the

Comptroller General. The Comptroller General in cases of this kind

will make a firm determination of the validity of the indebtedness,

and of the amount of the indebtedness.

There is, of course, one further recourse: If an individual is not

satisfied with the decision of the Comptroller General he does have

the right to take the matter to court for a review of the decision by

the Comptroller General.

Over the years some definite procedures for effecting these offsets

have been worked out by the Civil Service Commission and prescribed

by the Comptroller General. Our primary mission, as you know, is

one of administering the Retirement Act rather than serving as a

collection agency for various Federal or District of Columbia agencies.

Under these procedures—and the same procedures would apply to

the District of Columbia government if this legislation is enacted—

we do not accept a request for offset of an indebtedness of less than

$5. This is because of the determination by the Comptroller General

that, if you get into claims smaller than $5 you are going to spend

more money in the collection process than you are going to recover.

Another point is that we do not relieve the creditor agency of its

primary responsibility for making debt collections. Collections by

offset from retirement funds are supposed to be the last resort and

the process is supposed to be used only after all other attempts to

recover the indebtedness have failed.

An earlier witness this morning has mentioned the collection of

District of Columbia income tax. Where an employee of the District

of Columbia has not paid his District of Columbia income tax, there

is a definite responsibility on the part of the District of Columbia

government to make every effort to collect the amount while the
GOVERNMENT COUNTERCLAIMS 11

individual is employed and without filing anything with the Civil

Service Commission. But if the individual, for example, says,

"I am not going to pay you and here is my resignation," so that they

are losing all hold of him as an employee, this is the point at which

it would be appropriate to file a claim for recovery against his retirement account.

The question that you asked, Mr. Watson, as to whether we would

recover by withholding the entire amount of the annuity, this would

depend somewhat on the circumstances of the case. You mention

an incident in which the individual is going to receive an annuity of approximately $100 a month. He probably has somewhere between

$1,500 and $2,000 to his credit in the retirement fund, so that we

could collect at a lesser rate than the total annuity, recognizing that

this balance to his credit is available in the event the annuity is

terminated by death or for some other reason so that recovery would

be certain.

If we have a case in which we cannot be assured of recovery by

virtue of his own individual credit in the retirement fund, we would

have him ask the creditor agency to consent to collecting a lesser

amount than the total indebtedness, or rather collect it in partial

payments over a period of time, rather than to work a hardship on the

individual. In practically every instance the creditor agency is

willing to cooperate in a schedule of collection which is less than the

total annuity.

Mr. DANIELS. Mr. Ruddock, has the Civil Service Commission

many of these cases each year?

Mr. RUDDOCK. Our estimate, Mr. Daniels, is that we get a little

over 3,000 claims in the course of a year. The average amount

of indebtedness seems to work out to about $200 per individual. Of

course many of these are smaller amounts and some of them are larger

amounts.

The principal reasons for the debt seem to be overdrawn leave,

overpayment of salary, nonpayment of taxes, and travel advance

which has not been liquidated. We have rare cases which involve

embezzlement. Any situation which would create a valid debt

would be subject to recovery through this process.

Mr. DANIELS. Could you, Mr. Ruddock, explain to this committee

any differences in procedure between the method of collection that

you employ in the case of overpayment of salary and overpayment

through the military?

Mr. RUDDOCK. I cannot answer that, sir, because I am not familiar

with the collection procedures used by the military.

Mr. DANIELS. The Commission, according to your testimony has

been following this procedure, which we now wish to extend to the

District of Columbia, since 1920 and it has worked out very satisfactorily.

Mr. RUDDOCK,. Yes, sir.

Mr. DANIELS. This bill will implement the practice you have been

engaged in in accordance with decisions heretofore handed down; is

that correct?

Mr. RUDDOCK. That is right.

Mr. DANIELS. By this legislation we are merely extending the

practice that the Federal Government has been engaged in, to the

District of Columbia?
12 GOVERNMENT COUNTERCLAIMS

Mr. RUDDOCK. That is right.

Mr. WATSON. The District does not have a withholding tax system?

Mr. FARBER. We do, sir.

Mr. WATSON. If you have a withholding system, why the shortage

of income tax insofar as Federal employees are concerned?

Mr. BRYAN. I wouldn't want to commit the District on this point

but it might be caused by a person overstating the number of dependents possibly, exemptions, or having other income which he doesn't

report than for which we did not withhold so that his withholding

is less than the actual tax. That might be the case.

Mr. DANIELS. Thank you very much.

That concludes our hearing this morning.

(Whereupon, at 10:30 a.m., Tuesday, April 23, 1963, the subcommittee adjourned.)

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