Another retiree appears to have been caught by “Catch 62“. In October 2008, an  MSPB Administrative Judge found that the retiree did not prove “administrative error” that would require him to order OPM to reverse its decision.

Civilian employees of the federal government who have served in the military may, by making a pre-retirement deposit, buy their post-1956 military service into their federal retirement annuity. By paying a percentage of their military earnings to their employing agency before they retire, Federal employees get the benefit of an increased annuity for the duration of their retirement. However, if a Federal employee fails to make the deposit prior to retirement, their retirement annuity is reduced by OPM if and when they become eligible for Social Security benefits at age 62.

Since the Federal Circuit Court ruled on the matter in 2006, the rule has been that if an Executive Agency commits “administrative error” and as a result of that “administrative error” the employee does not make the deposit, the MSPB will order OPM to accept a late deposit and reverse the reduction in the annuity. McCrary v. Office of Personnel Management, 459 F.3d 1344, 1349 (Fed. Cir. 2006). The question has always been what will rise to the level of “administrative error”.

In this case, the MSPB Administrative Judge found that there was no administrative error, and to rule this way, he relied on the fact that the employee signed OPM Standard Form 2801, Revised January 1990 (SF-2801), ‘Application for Immediate Retirement,‘ containing ‘Schedules A, B and C.‘, as well as the relevant portions of those forms that at least appear to counsel an employee about the need to make the deposit and the failure of the consequences of making the deposit.

While I agree that these retirement forms generally help employees make an informed decision, I am of the opinion that a retiree cannot make an informed decision about the military service deposit unless he (or she) knows a few key things:

1) How much he has to deposit. A CSRS employee deposits 7% of post-1956 military earnings (plus interest). A FERS Employee need only deposit 3% of the post-1956 military earnings. (plus interest). There is a process, however, by which the employee must request this information, and very few Agencies are actually helping employees actually find this information out.

2) What the consequences are to his or her retirement annuity.

While the forms and instructions mentioned above suggest a reduction in annuity is likely at age 62, many Agencies are telling their employees that it “isn’t much of a reduction” or that “social security will make up for the loss” or some other such nonsense. Except in rare situations, the misinformation doesn’t appear malicious – mostly it seems to grow out of ignorance of how Catch-62 works. The reduction can easily be $500 – $2000 a month, depending on how long you served in the military.

3) When and how to make the military service deposit. Many employees aren’t told that they can make this payment – interest free – in the first three (3) years of their federal civil service. Many employees aren’t told that they can make this deposit by having it withheld from their paycheck. This alone will probably not amount to administrative error – but if an employee is standing, holding a check to make the deposit, and nobody tells him or her where or how to make the deposit, this could well be administrative error.

No post on this website is legal advice, is meant to be legal advice, and certainly does not serve as a substitute for legal advice. Information is power, and we are providing this information to give you, the federal employee, with some power. This information is not widely or easily accessible to Federal Employees.

It is best to consult with a lawyer familiar with Merit Systems Protection Board (MSPB) appeals to discuss the facts and law of your particular case. If you have questions about Catch 62 issues, or OPM’s reduction of your retirement annuity at age 62, contact an MSPB attorney at the Attig Law Firm, PLLC, to schedule a telephone consultation.