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Number 2, March 1998:
Pension Credit for Military Service that Predates Civilian Employment
By Capt. Samuel F. Wright, USNR
I received the following letter/inquiry based upon my topic in the Law Review section that ran in the November 1997 issue of The Officer.
QUESTION:
For your Law Review Issue Number 1, in [November 1997, The Officer], you talked about a federal civilian employee who purchased federal civilian retirement credit for three years of active duty that preceded his Federal civilian employment. My situation is somewhat similar. I served on active duty in the Navy from 1964 until 1970, and I was employed by the Tennessee Valley Authority (TVA) from 1970 until I retired in December 1994. After I left active duty, I remained active in the Naval Reserve and retired as a captain. I am currently a "gray area retiree," meaning that I have met all the qualifications for my Naval Reserve retirement except having attained my 60th birthday. I will meet that condition in 5 more years, if I live that long.
In October 1994, the TVA Retirement Board voted to permit TVA employees to purchase TVA retirement credit for military service that predates their TVA employment. The number of years an employee is permitted to purchase depends upon the number of years of TVA service the employee has, as well as the number of years of active duty. To receive TVA retirement credit for a year of active duty, an employee is required to pay 7 percent of the military base pay that the person received in that year, plus interest. For most employees, purchasing such credit is an excellent investment.
Before I retired from TVA, I applied to purchase credit for four of my six years of active duty (the maximum I was permitted to purchase under the newly adopted TVA plan). The TVA Retirement Board turned down my application because of a proviso that a TVA employee is not permitted to purchase TVA retirement credit for a year of active duty if the employee is already receiving credit for that same year under any other Federal retirement system other than Social Security. Of course, my years of active duty helped me to qualify for my Naval Reserve retirement.
There must be scores if not hundreds of other TVA employees and retirees who are in the same boat with me. I think that this proviso is unfair. Is it also unlawful?
Name withheld upon request
First, let me confess an error in Law Review Issue Number 1. More than a dozen ROA members sent me e-mails pointing out this error.
In the second paragraph of Issue Number 1, I said that the ROA member at issue there had "purchased" credit for his three years of active duty that predated his civilian Federal employment. As several members pointed out to me, federal civil servants are not required to purchase such military credit; it is conferred automatically to new federal employees who show evidence (DD-214) of military service that predates their civilian employment.
ANSWER:
What is true of the civil service generally is not true of TVA. TVA is a federal entity, but it has its own personnel and compensation rules. Until October 1994, TVA employees received no credit for military service that predated their TVA employment.
(Civilian retirement credit for military service that interrupts a civilian career is fundamentally different and will be discussed in a later Law Review issue.)
While no law requires TVA to accord retirement credit for military service that predates TVA employment, according such credit but excluding persons like yourself who have chosen to affiliate with a Reserve component after leaving active duty appears to violate Title 10, United States Code, Section 12736, which reads as follows:
No period of service included wholly or partly in determining a person's right to, or the amount of, retired pay under this chapter [Chapter 1223 deals with "retired pay for nonregular service."] may be excluded in determining his eligibility for any annuity, pension, or old-age benefit, under any other law, on account of civilian employment by the United States or otherwise, or in determining the amount payable under that law, if that service is otherwise properly credited under it.
Additionally, 10 U.S. Code 12736 has been held to override conflicting state laws. It may also override conflicting TVA Retirement Board rules. I think that you have a strong case that you are entitled to the benefit of four active-duty years in augmenting your monthly TVA pension check.
I am contemplating a challenge to the TVA rule, and I want to hear from Reservists or retired Reservists who are TVA employees or who retired from TVA after October 1994. I have already done a great deal of research on this matter.
There are probably ROA members who are still employed by TVA but are nearing retirement. Such persons should make formal written applications for TVA retirement credit for pre-TVA military service, and they must do this before retiring from TVA. A telephonic inquiry may not be sufficient. To be safe, such a person should tender a check for 7 percent of military base pay plus interest, even though it is likely that the check will be returned, based upon the arguably unlawful TVA rule.
In my research, I have found 11 states whose laws governing state-local government pensions violate 10 U.S. Code 12736: Alabama, Alaska, Arizona, California, Connecticut, Louisiana, Massachusetts, Oklahoma, Pennsylvania, Tennessee, and Virginia. I want to hear from Reservists or retired Reservists who are state-local government employees or retirees in those states.
Captain Wright is a judge advocate in the Naval Reserve. He was employed as an attorney for the U.S. Department of Labor for ten years (198292), and in that capacity was the principal draftsman of the Uniformed Services Employment and Reemployment Rights Act, 38 U.S. Code 4301-4333. He is now in private practice, and he specializes in cases concerning the relationship between military service and civilian employment.
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