Should the retirement annuity of a federal employee be based on the amount of pay he actually received or should it be based on the higher pay rate for the job he was performing?
If this sounds confusing, you will begin to understand why the case went to the Federal Circuit Court of Appeals.
John M. Killeen was an air traffic controller from September 6, 1981, until his retirement on September 8, 2001.
Killeen worked full-time until March 30, 1997. At that time, he switched to a part-time schedule working forty-eight hours in an eighty-hour pay period. He continued to work this part-time schedule until he retired.
Before you head to your personnel office to inquire about your annuity, remember that air traffic controllers are not under the usual federal retirement system and this language is unique.
An employee who is voluntarily or involuntarily separated from the service, except by removal for cause on charges of misconduct or delinquency, after completing 25 years of service as an air traffic controller or after becoming 50 years of age and completing 20 years of service as an air traffic controller, is entitled to an annuity.
The law then goes on to state: “That annuity may not be less than 50 percent of the average pay of the employee….”
The employee’s annuity rate is based on “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 creditable service . . . .”
In other words, the average pay of an employee’s “high three” pay rate years is used to calculate his annuity rate.
The applicable statutes are fairly specific about how the annuity for an air traffic controller is calculated. So why is there a dispute?
In this case, Congress passed a law, applicable to air traffic controllers, that reads: “the average pay of the employee, to the extent that it includes pay for service performed in any position on a part-time basis, shall be determined by using the annual rate of basic pay that would be payable for full-time service in the position….”
Don’t get too excited though. This doesn’t mean the employee will automatically receive more money in retirement than he did while working. The actual amount of the annuity is then pro-rated for part-time employees.
The employee calculated the amount of money he would receive in retirement based on the amount of his pay rate. But the Office of Personnel Management came up with a lesser amount. It calculated the employee retirement annuity based on the amount of money he actually received as an employee.
In other words, when the employee was working part-time, he was paid at a high rate but actually received much less than he would have received as a full-time employee.
The Merit Systems Protection Board upheld the decision by OPM to use the amount of pay actually received by the employee as the basis for calculating the annuity.
The Federal Circuit disagreed. It sided with the air traffic controller concluding: “The language of (the statute) is clear and its unambiguous meaning is confirmed by the congressional purpose underlying the provision as reflected in its legislative history.”
The bottom line: this former employee gets more money in his retirement check.
You can read the decision in its entirety by downloading it from the link on the left hand side of the page or clicking on the underlined link below.
John M. Killeen v. Office of Personnel Management, Case No. 04-3033, August 31, 2004.