Court Opinion

ID: 2789693
Source: CourtListenerOpinion
Date Created: 2015-03-27 17:00:24.513069+00
Date Added: 2024-06-11T11:28:51.927098
License: Public Domain

UNITED STATES OF AMERICA
                       MERIT SYSTEMS PROTECTION BOARD

     BRIAN C. DANAHA,                                DOCKET NUMBER
                  Appellant,                         CH-0841-14-0140-I-2

                  v.

     OFFICE OF PERSONNEL                             DATE: March 27, 2015
       MANAGEMENT,
                   Agency.

                  THIS ORDER IS NO NPRECEDENTIAL 1

           Norman Jackman, Esquire, Cambridge, Massachusetts, for the appellant.

           Cynthia Reinhold, Washington, D.C., for the agency.

                                           BEFORE

                              Susan Tsui Grundmann, Chairman
                                 Mark A. Robbins, Member

                                     REMAND ORDER

¶1        The agency has filed a petition for review of the initial decision, which
     modified the Office of Personnel Management’s (OPM’s) calculation of the
     appellant’s Federal Employees’ Retirement System (FERS) disability retirement
     annuity under 5 U.S.C. § 8452. For the reasons discussed below, we GRANT the

     1
        A nonprecedential order is one that the Board has determined does not add
     sign ificantly to the body of MSPB case law. Parties may cite nonprecedential orders,
     but such orders have no precedential value; the Board and administrative judges are not
     required to follow or distinguish them in any future decisions. In contrast, a
     precedential decision issued as an Opinion and Order has been identified by the Board
     as significantly contributing to the Board’s case law. See 5 C.F.R. § 1201.117(c).
                                                                                       2

     agency’s petition for review, VACATE the initial decision, and REMAND the
     appeal to OPM for recalculation of the appellant’s FERS disability retirement
     annuity.

                                      BACKGROUND
¶2          The essential facts in this appeal, as set forth by the administrative judge,
     are not in dispute. MSPB Docket No. CH-0841-14-0140-I-1, Initial Appeal File
     (I-1 IAF), Tab 13; MSPB Docket No. CH-0841-14-0140-I-2, Initial Appeal File
     (IAF), Tab 9, Initial Decision (ID) at 2. The appellant began employment with
     the U.S. Postal Service on August 5, 2006, as a part-time flexible employee. I-1
     IAF, Tab 13; ID at 2.       On May 7, 2007, he suffered a work-related injury,
     following which he was largely in a leave-without-pay status. ID at 2. Effective
     November 24, 2007, the appellant was converted to a full-time position. I-1 IAF,
     Tab 13.    In July 2010, the appellant’s disability retirement application was
     approved and he received disability retirement benefits retroactive to January 10,
     2009. ID at 2. The appellant’s last day in a pay status was January 9, 2009. I-1
     IAF, Tab 13; ID at 2.
¶3        The appellant filed a Board appeal alleging that OPM had incorrectly
     calculated his disability retirement annuity and failed to respond to his requests
     for reconsideration.    I-1 IAF, Tab 1 at 5. After the appellant filed his Board
     appeal, OPM issued an initial decision setting forth its calculation of the
     appellant’s disability retirement annuity in the amount of $531 per month for the
     first year and $417 per month beginning the second year, based on an average pay
     of $29,603. I-1 IAF, Tab 10 at 6-7.
¶4        The appellant disagreed with OPM’s calculation of his average pay and
     filed a pleading setting forth his own calculations based on an average pay of
     $47,717.95. I-1 IAF, Tab 14. According to the administrative judge, the parties
     agreed that OPM would treat the appellant’s pleading as a request for
     reconsideration of OPM’s decision, and OPM agreed to issue a reconsideration
                                                                                             3

     decision within 60 days. 2 I-1 IAF, Tab 15, Tab 16 at 2. On April 29, 2012, OPM
     issued a reconsideration decision affirming its initial decision. IAF, Tab 6 at 4-6.
¶5         Based on the record, the parties appear to have agreed that the appellant’s
     disability annuity is calculated pursuant to 5 U.S.C. § 8452, as a percentage of the
     appellant’s average pay and that average pay, as defined in section 8401, based
     on an employee’s “rate of basic pay.”         However, the parties disputed how to
     determine the appellant’s rate of basic pay during his part-time flexible service
     performed from August 5, 2006, to November 23, 2007, at various hourly rates.
     OPM utilized the appellant’s actual earnings, which it computed based on his
     retirement contributions during his part-time service.         IAF, Tab 6 at 5.      The
     appellant argued that the proper method to use was the deemed full-time rates of
     basic pay, prorated as set forth in 5 U.S.C. § 8415. IAF, Tab 4 at 4-5.
¶6         After the appellant waived his right to a hearing, the administrative judge
     issued an initial decision based on the written record. IAF, Tab 8 at 4; ID at 1.
     The administrative judge held that OPM improperly used the appellant’s actual
     earnings during his service as a part-time flexible employee to calculate his
     average pay.    ID at 4.    The administrative judge further held that the proper
     method to use is the full-time annual rate of basic pay for the position. 3 ID at 4.
     In so holding, the administrative judge determined OPM’s regulation, 5 C.F.R.
     § 844.102, which defines basic pay as “the pay an employee receives that is
     subject to deductions under FERS,” to be inconsistent with the calculation of

     2
      Accordingly, the administrative judge dismissed the appeal without prejudice for lack
     of jurisdiction. I-1 IAF, Tab 16. After OPM issued its reconsideration decision, the
     appellant re-filed his Board appeal. IAF, Tab 1.
     3
       The administrative judge declined to prorate the appellant’s full-time rates of basic
     pay because he considered the appellant to be “essentially a full-time employee” based
     on the hours he worked during his first 9 months of service prior to his injury. ID at 5.
     Thus, the administrative judge reasoned that even though the appellant was technically
     a part-time flexible employee, use of the full-time rates of basic pay would not result in
     a windfall to the appellant by way of an annuity that exceeds his actual earnings . ID
     at 4-5.
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     average pay contemplated under 5 U.S.C. §§ 8452(a) and 8401(3) which do not
     reference actual earnings or differentiate between part-time and full-time service.
     ID at 3-4. Because the administrative judge found the statute to be inconsistent
     with the regulation, he found the statute controlling. ID at 4.
¶7        Lastly, the administrative judge noted that the Board has previously held
     that a disability annuity calculated under section 8452 is calculated on the basis
     of pay actually received by the annuitant, citing 5 C.F.R. § 844.102. ID at 4; see
     Siefring v. Office of Personnel Management, 94 M.S.P.R. 547, ¶¶ 10-11 (2003).
     However, the administrative judge declined to follow Siefring, stating that it
     failed to consider that 5 U.S.C. § 8401(3), which defines average pay as based on
     an employee’s “rate of basic pay in effect,” is controlling in the face of what he
     viewed as a contrary regulation, 5 C.F.R. § 844.102, which defines basic pay as
     pay an employee receives. ID at 4.
¶8        OPM has filed a petition for review in which it argues that the
     administrative judge erred in calculating the average salary for a part-time
     flexible employee based on full-time rates of pay instead of actual earnings.
     Petition for Review (PFR) File, Tab 1. In support of its argument, OPM cites to
     American Postal Workers Union, AFL-CIO v. U.S. Postal Service, 707 F.2d 548,
     560 (D.C. Cir. 1983), which explains that since 1978, the method for calculating
     annuities of part-time flexible employees has been to use actual pay received.
     PFR File, Tab 1 at 10. In its petition, OPM requests that the Board vacate the
     reconsideration decision and remand the case for recalculation of the appellant’s
     annuity due to an error in its calculation of the appellant’s actual pay for calendar
     year 2007, and an error regarding one of the appellant’s salary figures.          Id.
     at 12-13.   The appellant has filed a response in opposition to the agency’s
     petition. PFR File, Tab 3.
                                                                                             5

                       DISCUSSION OF ARGUMENTS ON REVIEW
¶9          A FERS disability retirement annuity is calculated pursuant to 5 U.S.C.
      § 8452(a) as a percentage of an annuitant’s “average pay.” 4           Average pay is
      defined as, “the largest annual rate resulting from averaging an employee’s or
      Member’s rates of basic pay in effect over any 3 consecutive years of service, or,
      in the case of an annuity under this chapter based on service of less than 3 years,
      over the total service, with each rate weighted by the period it was in effect.”
      5 U.S.C. § 8401(3). The term basic pay is defined as including certain types of
      pay, but excluding bonuses, allowances, overtime pay, and military pay. 5 U.S.C.
      § 8401(4); 5 U.S.C. § 8331(3). OPM’s regulations define basic pay as, “the pay
      an employee receives that is subject to deductions under FERS.”                5 C.F.R.
      § 844.102.
¶10         We agree with OPM that the administrative judge erred in finding that the
      calculation of the appellant’s average pay under section 8452 should be based on
      what the appellant would have earned as a full-time employee and not his actual
      earnings for the period of time that he served as a part-time flexible employee.
¶11         Unlike the provisions for calculating a basic annuity under section 8415, the
      provisions for calculating a disability annuity under section 8452 do not contain a
      specific provision addressing the calculation of average pay for part-time
      employees.     To calculate a basic annuity based on service performed on a
      part-time basis, the statute requires proration of the employee’s average pay
      (based on a deemed full-time rate of pay) to reflect the proportion of service that
      was performed on a part-time basis. Specifically, section 8415(g) states that in
      calculating an employee’s basic annuity, where an employee’s service includes

      4
        We note, however, that the amount of a FERS disability annuity, after reduction for
      any Social Security disability benefits, “shall not be less than the amount of an annuity
      computed under section 8415 (excluding subsection (h) of such section).” 5 U.S.C.
      § 8452(d)(1). Thus, the appellant would be entitled to a disability retirement annuity
      computed under section 8415 if it would result in a benefit amount greater than his
      benefit amount as calculated under section 8452.
                                                                                          6

      part-time service, the average pay is calculated “by using the annual rate of basic
      pay that would be payable for full-time service in the position” and that number is
      then multiplied by a fraction representing the ratio of the employee’s actual
      service to total service creditable, if all service had been performed on a full-time
      basis. 5 U.S.C. § 8415(g).
¶12        In contrast, section 8452 is silent regarding how to calculate average pay
      for part-time employees.      In Siefring, we previously found this distinction
      significant and held that “[t]he absence of such language in section 8452 shows
      that Congress intended for disability annuities to be computed using an average of
      the pay actually received by the annuitant.” 5 Siefring, 94 M.S.P.R. 547 at ¶ 11
      (emphasis added). We disagree with the administrative judge that the decision in
      Siefring failed to consider that 5 U.S.C. § 8401(3), a statute, is controlling over
      5 C.F.R. § 844.102 because we do not view them as inconsistent. See ID at 3-4.
      As set forth above, section 8401(3) simply defines average pay as based on an
      employee’s annual rate of basic pay.             Basic pay is then defined in
      5 U.S.C.§ 8331(3) (basic pay includes certain types of pay, but excludes bonuses,
      allowances, overtime pay, and military pay “given in addition to the base pay of
      the position as fixed by law or regulation”) and 5 C.F.R. § 844.102 (basic pay is
      pay an employee receives), both of which contemplate base pay actually earned
      by an employee.
¶13        As the administrative judge found, the appellant’s period of service was
      from August 5, 2006, to January 9, 2009. ID at 2. Because the appellant had less
      than 3 years of service, his average pay is calculated using a total service average

      5
        We note that the U.S. Circuit Court for the District of Columbia has similarly held
      that “although the definition of “basic pay” does not expressly limit the term to pay
      actually earned, Congress’s intention to do so is clear.” American Postal Workers
      Union, AFL-CI O, 707 F.2d at 562. Other than decisions of the Federal Circuit, the
      decisions of the circuit courts are not binding on the Board, but the Board may follow
      such decisions if it is persuaded by their reasoning. See Bo wman v. Small Business
      Administration, 122 M.S.P.R. 217, ¶ 13 n.8 (2015).
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      pay calculation, that is, the largest annual rate from averaging his rates of basic
      pay in effect over his total service, with each rate weighted by the period it was in
      effect. See 5 U.S.C. § 8401(3).
¶14         Although we find that OPM properly used the appellant’s actual earnings as
      a part-time flexible employee as his annual basic pay for the period from
      August 5, 2006, to November 23, 2007, OPM has indicated in its petition that
      there is an error in the amount of the appellant’s actual earnings in 2007. PFR
      File, Tab 1 at 12-13. We find it necessary under the circumstances to remand the
      case to OPM for recalculation of the appellant’s average pay using the appellant’s
      correct earnings for the period August 5, 2006, to November 23, 2007.
¶15         Effective November 24, 2007, the appellant was converted to a full-time
      position.   I-1 IAF, Tab 12 at 6.      Thus, his annual rate of basic pay used to
      calculate his average pay from that date through January 9, 2009, is, as the
      administrative judge found, his annual salary. 6 ID at 6. Accordingly, with the
      exception of minor rounding errors, we find the administrative judge’s
      calculations with respect to the appellant’s full-time service to be correct. 7

                                             ORDER
¶16         For the reasons discussed above, we REMAND this case to OPM for
      recalculation of the appellant’s FERS disability retirement annuity. OPM shall

      6
       In its average pay calculation, OPM also used the appellant’s annual salary during h is
      service as a full-time employee. IAF, Tab 6 at 15. However, OPM erroneously input
      $43,388 as the appellant’s salary from January 1, 2009, to January 9, 2009, when the
      appellant’s Individual Retirement Record indicates that h is salary during th is time was
      $45,388. I-1 IAF, Tab 12 at 5-6; IAF, Tab 6 at 15. OPM acknowledges its error in its
      petition. PFR, File Tab 1 at 12-13.
      7
        The appellant’s time-weighted salary for the period of November 24, 2007, through
      December 21, 2007, should be $3,163.23, not $3163.22. See ID at 6. From
      February 16, 2008, to March 14, 2008, the appellant’s time-weighted salary should be
      $3,429.27, not $3,429.25. See ID at 6. From March 15, 2008, to July 7, 2008, the
      appellant’s time-weighted salary should be $13,512.61, not $13,512.60. See ID at 6.
                                                                                         8

      recalculate the appellant’s average pay, based on his actual earnings for the
      period from August 5, 2006, to November 23, 2007, in accordance with this
      order. On remand, OPM, within 60 days of the date of this order, shall issue a
      new final decision, explaining fully the basis for its calculation of the appellant’s
      annuity, including its calculation of the appellant’s actual earnings based on his
      retirement contributions. OPM shall advise the appellant of his right to file an
      appeal with the Board if he disagrees with that new decision.
¶17        We also ORDER OPM to tell the appellant promptly in writing when it
      believes it has fully carried out the Board’s Order and to describe the actions it
      took to carry out the Board’s Order. We ORDER the appellant to provide all
      necessary information OPM requests to help it carry out the Board’s Order. The
      appellant, if not notified, should ask OPM about its progress.         See 5 C.F.R.
      § 1201.181(b).
¶18        No later than 30 days after OPM tells the appellant it has fully carried out
      the Board’s Order, the appellant may file a petition for enforcement with the
      office that issued the initial decision on this appeal if the appellant believes that
      OPM did not fully carry out the Board’s Order.         The petition should contain
      specific reasons why the appellant believes OPM has not fully carried out the
      Board’s Order, and should include the dates and results of any communications
      with OPM. See 5 C.F.R. § 1201.182(a).

      FOR THE BOARD:                            ______________________________
                                                William D. Spencer
                                                Clerk of the Board
      Washington, D.C.