Fired Fed Reluctantly Retiring With an Annuity Reduction

By on December 9, 2005 in Current Events, Retirement with 0 Comments

It’s important to keep your eye on the ball when making major decisions such as retirement from the federal service. As illustrated by this recent case decided by the U.S. Circuit Court of Appeals for the Federal Circuit, losing track of the effective date of retirement can result in an annuity reduction. (Modrowski v. Office of Personnel Management, U.S.C.A.F.C., No. 05-3183, 12/8/05 (Non-Precedential))

In this case the employee challenged the decision of the Office of Personnel Management to reduce his annuity by 2 percent because he was under the age of 55 when his retirement took effect. OPM denied his request for reconsideration and he appealed that denial to the MSPB. The Board affirmed OPM’s decision, so the employee took his appeal to the Federal Circuit where he had no better luck.

As just about every federal employee can tell you, full retirement is earned at the age of 55 with 30 years service. If an employee retires under an early out in accordance with 5 U.S.C. 8336(d), then the annuity is adjusted downward if the employee is less than 55 years of age as of the date of separation. (see 5. U.S.C. 8339(h)).

As part of a settlement agreement with the Department of Veterans Affairs, resulting from its decision several years before to remove him from his position, Mr. Modrowski agreed to retire effective December 28, 1999. As it turns out he was 54 years of age on this particular date. At the time the settlement agreement was reached, he was 56 years old. He argued that the date of separation should be the date of the settlement agreement and not the effective date of his retirement as set forth in that agreement. Nice try, but no one, including the Federal Circuit, bought this argument. The effective date is what it is and in this case it was December 28, 1999. Thus the 2 percent reduction in annuity was properly applied to him.

The lesson here is to pay attention to the details that can end up biting you if you are not careful in crafting a settlement agreement.

© 2016 Susan McGuire Smith. All rights reserved. This article may not be reproduced without express written consent from Susan McGuire Smith.

About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.