Fed Gets Bill from OPM for $18,112

Silverstein v. Office of Personnel Management, U.S.C.A.F.C. No. 06-3047 (non-precedent), 4/10/06

If a federal disability retirement annuitant is restored to earning capacity before the age of 60, then the annuity payment terminates six months after the end of the calendar year in which the restoration occurs.

“Restored to earning capacity” means receiving wages that exceed 80 percent of the rate of pay of the position occupied immediately prior to the disability retirement. (5 U.S.C. Section 8337(d))

The Office of Personnel Management is the vigilant enforcer of this rule, as a former Distribution Clerk with the Postal Service learned the hard way.

Mr. Silverstein received disability retirement in 1979.

In 2004, OPM, based on a review of his federal income tax records, determined that Silverstein had been restored to earning capacity in 1999, based on the fact that he reported wage earnings of $41,948 on his tax forms. The rate of pay for his former government position that same year was $38,614.

Thus, he more than met the test of restored earning capacity. OPM determined not only that he was ineligible to receive the annuity, but also that he had been overpaid $18,112.

They sent him a bill.

Mr. Silverstein appealed to the Merit Systems Protection Board. His main argument was that, while he had indeed received earnings as found by OPM, he had also reported losses from self-employment expenses that should have been subtracted by OPM from the earnings in determining his actual wage capacity. This would have brought his total income to $7,080, meaning the disability retirement should not have been cancelled. OPM had rejected this argument. The Board rejected it also, as did the appeals court. (Opinion, pp. 1-2)

The court decision points out that the applicable OPM regulations clearly state that a net loss from self-employment will not be applied to reduce the income earned as wages for purposes of making this calculation. (Opinion, p. 3, citing 5 C.F.R. Section 831.1209(c)(2) (2004)) The court obviously has no problem with OPM’s approach, so Mr. Silverstein is going to have to reimburse the overpaid annuity.

© 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.