Stephenson v. Office of Personnel Management , 705 F.3d 1323 ( 2013 )

United States Court of Appeals
for the Federal Circuit
__________________________
KELLY L. STEPHENSON,
Petitioner,
v.
OFFICE OF PERSONNEL MANAGEMENT,
Respondent.
__________________________
2012-3074
__________________________
Petition for review of the Merit Systems Protection
Board in case no. PH0841100307-I-1.
__________________________
Decided: January 18, 2013
__________________________
ROBERT R. MCGILL, Attorney at Law, of Walkersville,
Maryland, argued for petitioner.
MATTHEW F. SCARLATO, Trial Attorney, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for respond-
ent. With him on the brief were STUART F. DELERY,
Acting Assistant Attorney General, JEANNE E. DAVIDSON,
Director, and KIRK T. MANHART, Assistant Director.
__________________________
STEPHENSON v. OPM 2
Before NEWMAN, PROST, and REYNA, Circuit Judges.
PROST, Circuit Judge.
This appeal presents an issue of statutory interpreta-
tion arising from 5 U.S.C. § 8452 and section 223 of the
Social Security Act, 42 U.S.C. § 423. Pursuant to § 8452,
the Office of Personnel Management (“OPM”) must reduce
a Federal Employees Retirement System (“FERS”) disa-
bility retirement annuity for any month in which the
recipient is also “entitled” to Social Security Administra-
tion (“SSA”) disability benefits under section 223. Kelly
L. Stephenson petitions for review of a final decision of
the Merit Systems Protection Board (“Board”), which
affirmed a decision by OPM denying Mr. Stephenson’s
request to have his FERS disability retirement annuity
recalculated to account for the cessation of his monthly
SSA disability benefits. Because the Board erred in
determining that Mr. Stephenson remained “entitled” to
SSA disability benefits under section 223 of the Social
Security Act and that his monthly FERS disability annui-
ty was therefore correctly offset, we reverse and remand.
BACKGROUND
Mr. Stephenson began receiving a FERS disability re-
tirement annuity on May 4, 2005. He also applied for
SSA disability benefits, as he was required to do as an
applicant for FERS disability retirement, and SSA deter-
mined that he was entitled to receive monthly SSA disa-
bility benefits beginning July 2005. As required by
statute, OPM reduced Mr. Stephenson’s FERS disability
annuity to account for the monthly SSA disability benefits
to which he was entitled. See 5 U.S.C. § 8452(a)(2)(A); 42
U.S.C. § 423.
The Social Security Act allows a person receiving SSA
disability benefits to test his or her ability to work during
3 STEPHENSON v. OPM
a period of nine months, referred to as a “period of trial
work” or “trial work period,” without losing his or her
benefits. See 42 U.S.C. §§ 422, 423. In May 2009, Mr.
Stephenson completed a nine-month trial work period in
which he demonstrated his ability to work. Following the
completion of his trial work period, SSA notified Mr.
Stephenson that because he was able to perform “sub-
stantial work,” it had determined that his disability had
ended, and that he was “not entitled to Social Security
disability payments beginning September 2009.” Resp’t’s
Supplemental App. 3 (emphasis added). SSA further
noted:
You get an extended period of eligibility that be-
gins right after the trial work period. This is a 36-
month period when we restart payments for any
month(s) your work is not substantial if your
health problems still meet our rules. Your extend-
ed period of eligibility months are June 2009
through May 2012.
Id. (emphases added).
Because Mr. Stephenson stopped receiving SSA disa-
bility benefits, he requested that OPM terminate the
offset in his FERS annuity. On September 21, 2009, OPM
denied Mr. Stephenson’s request, explaining:
Federal law (section 8452[a][2][A] of title 5, Unit-
ed States Code) requires that FERS disability
benefits be reduced if the disability annuitant is
also eligible to receive benefits from the Social Se-
curity Administration (SSA). Your FERS disabil-
ity benefits were reduced because you are eligible
to receive benefits from SSA. The law requires
that the reduction be based on eligibility for Social
Security benefits, not the actual receipt of Social
Security benefits.
STEPHENSON v. OPM 4
Since you retain full eligibility of your Social Se-
curity benefits, we cannot honor your request to
eliminate the Social Security offset of your FERS
annuity.
Id. at 5. Mr. Stephenson sought reconsideration, which
OPM denied on February 25, 2010, explaining:
Your annuity was reduced because you were eligi-
ble to receive benefits from SSA. The law requires
that the reduction in your annuity remain based
on entitlement to Social Security benefits and not
the actual receipt of such benefits. Though your
employment resulted in the suspension of your
SSA benefits, you still retained eligibility because
you are still deemed disabled.
Id. at 8.
Mr. Stephenson appealed OPM’s decision to the
Board. An administrative judge denied the appeal. Mr.
Stephenson then filed a petition for review, which two of
the three members of the Board denied in a final nonprec-
edential order dated December 13, 2011. See Stephenson
v. Office of Pers. Mgmt., No. PH0841100307-I-1 (M.S.P.B
Dec. 13, 2011) (“Final Order”). The majority acknowl-
edged § 8452’s use of the word “entitled,” not “eligible,”
but nevertheless found that Mr. Stephenson remained
“entitled” to SSA disability benefits during the 36-month
period following his trial work period. Id., slip op. at 3-6.
For support, the majority cited a prior Board opinion in a
case involving overpayment to a woman whose SSA
disability benefits were suspended because she was found
to be “doing substantial work.” Cohron v. Office of Pers.
Mgmt., 96 M.S.P.R. 466 (2004). In Cohron, the Board
found that the petitioner “‘continued to be entitled to, or
eligible for, SSA disability benefits . . . despite the sus-
pension of those benefits,’ and that during that time,
5 STEPHENSON v. OPM
OPM was required to pay her a reduced FERS annuity
amount.” Final Order, slip op. at 4 (quoting Cohron,
¶ 16). The Cohron Board found further support for this
result in “42 U.S.C. § 423(a)(1), the Social Security Act,
which states that termination of SSA benefits shall not
occur at any time before the first month following the 36-
month extended period of eligibility.” Id., slip op. at 4-5.
In view of the above, the Board majority in the present
case found that OPM’s interpretation of the FERS disabil-
ity statute—which OPM is charged with administering—
was reasonable and therefore entitled to deference. See
id., slip op. at 5.
In a footnote at the end of its opinion, the Board ma-
jority also expressed concern that if OPM did not continue
to deduct the Social Security disability benefits from Mr.
Stephenson’s FERS disability payments, he would “re-
ceive an unwarranted windfall”—i.e., “the unreduced
FERS annuity and the money earned from working.” Id.,
slip op. at 6 n.4. As an additional concern, the majority
noted that during the 36-month extended period of eligi-
bility, SSA would restart payments for any month in
which Mr. Stephenson’s work was not substantial and his
health problems continued to satisfy SSA’s rules. This,
according to the majority, “could well cause an unworka-
ble administrative hardship for OPM, resulting in con-
stant litigation about whether OPM was correctly off-
setting SSA benefits for any given month during the 36-
month period.” Id.
Board Vice Chairman Anne Wagner filed a dissenting
opinion. She read the plain language of the Social Securi-
ty Act to mean that Mr. Stephenson did not have a legal
right to payment for any month in which he performed
substantial work, and therefore he was not “entitled” to
receive SSA disability benefits for the period in question.
She reasoned that OPM “has conflated the concepts of
STEPHENSON v. OPM 6
‘entitlement’ and ‘eligibility’ when they are clearly sepa-
rate concepts under the SSA statute.” Id., dissent slip op.
at 2. After analyzing the relevant statutes and SSA
regulations, she concluded that because Mr. Stephenson
was performing substantial gainful activity, “the plain
language in SSA’s statute does not entitle him to any
benefits; rather, it merely provides a mechanism for
prompt resumption of such benefits in the event an indi-
vidual becomes unable to perform substantial gainful
activity.” Id., dissent slip op. at 4.
Mr. Stephenson filed a petition for review of the
Board’s final decision. We have jurisdiction pursuant to
28 U.S.C. § 1295(a)(9).
DISCUSSION
This court will set aside a decision of the Board only if
it is “(1) arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law; (2) obtained with-
out procedures required by law, rule, or regulation having
been followed; or (3) unsupported by substantial evi-
dence.” 5 U.S.C. § 7703(c). We review questions of law,
such as statutory interpretation, de novo. Kindall v.
Office of Pers. Mgmt., 347 F.3d 930, 932 (Fed. Cir. 2003).
“In construing a statute, our analysis begins with the
language of the statute, and where the statutory language
is clear and unambiguous, it generally ends there as
well.” Langston v. Office of Pers. Mgmt., 395 F.3d 1349,
1351 (Fed. Cir. 2005).
The computation of a FERS disability annuity is gov-
erned by 5 U.S.C. § 8452. Relevant to this appeal, § 8452
requires OPM to reduce a FERS disability annuity “[f]or
any month in which an annuitant is entitled both to an
annuity under this subchapter as computed under para-
graph (1) and to a disability insurance benefit under
section 223 of the Social Security Act.” 5 U.S.C.
7 STEPHENSON v. OPM
§ 8452(a)(2)(A) (emphases added). The amount of the
reduction is equal to a certain percentage (either 100% or
60%, depending on the timing) of “the annuitant’s as-
sumed disability benefit,” which is defined as “the amount
of the disability insurance benefit to which the annuitant
is entitled under section 223 of the Social Security Act.”
Id. § 8452(a)(2)(B)(i).
Section 223 of the Social Security Act, which is codi-
fied at 42 U.S.C. § 423, provides that an individual who is
under a disability as defined in subsection (d) 1 and meets
certain other criteria:
shall be entitled to a disability insurance benefit
(i) for each month beginning with the first month
after his waiting period . . . in which he becomes
so entitled to such insurance benefits, or (ii) for
each month beginning with the first month during
all of which he is under a disability and in which
he becomes so entitled to such insurance benefits,
but only if he was entitled to disability insurance
benefits which terminated, or had a period of dis-
ability . . . which ceased, within the 60-month pe-
riod preceding the first month in which he is
under such disability, and ending with the month
preceding whichever of the following months is
the earliest: the month in which he dies, the
month in which he attains retirement age . . . , or,
subject to subsection (e) of this section, the termi-
nation month. For purposes of the preceding sen-
1 Subsection (d) defines “disability” to mean the
“inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or
which has lasted or can be expected to last for a continu-
ous period of not less than 12 months.” 42 U.S.C.
§ 423(d)(1)(A).
STEPHENSON v. OPM 8
tence, the termination month for any individual
shall be the third month following the month in
which his disability ceases; except that, in the
case of an individual who has a period of trial
work which ends as determined by application of
section 422(c)(4)(A) of this title, the termination
month shall be the earlier of (I) the third month
following the earliest month after the end of such
period of trial work with respect to which such in-
dividual is determined to no longer be suffering
from a disabling physical or mental impairment,
or (II) the third month following the earliest
month in which such individual engages or is de-
termined able to engage in substantial gainful ac-
tivity, but in no event earlier than the first month
occurring after the 36 months following such peri-
od of trial work in which he engages or is deter-
mined able to engage in substantial gainful
activity. No payment under this paragraph may
be made to an individual who would not meet the
definition of disability in subsection (d) of this sec-
tion except for paragraph (1)(B) [an exception for
blindness] thereof for any month in which he en-
gages in substantial gainful activity . . . .
42 U.S.C. § 423(a)(1) (emphases added). Subsection (e),
referred to above in connection with the “termination
month,” is titled “[e]ngaging in substantial gainful activi-
ty,” and provides that “[n]o benefit shall be payable . . .
under subsection (a)(1) of this section to an individual for
any month, after the third month, in which he engages in
substantial gainful activity during the 36-month period
following the end of his trial work period.” Id. § 423(e).
Thus, section 223 creates a statutory scheme that governs
when an individual becomes “entitled” to SSA disability
benefits, when the individual’s entitlement to such bene-
9 STEPHENSON v. OPM
fits ends, and when an individual can receive benefits
during the 36-month period following a recipient’s trial
work period.
There is no dispute that from July 2005 through Au-
gust 2009, Mr. Stephenson was entitled to SSA disability
benefits under section 223 of the Social Security Act. The
parties also agree that Mr. Stephenson is not entitled to
SSA disability benefits after the completion of his 36-
month period of eligibility ending in May 2012. Finally,
the parties do not dispute that Mr. Stephenson could have
received SSA disability benefits during the period from
September 2009 through May 2012, which SSA called his
“extended period of eligibility,” for any month in which he
was unable to engage in “substantial gainful activity.”
The only dispute is whether Mr. Stephenson was “enti-
tled” to SSA disability benefits during his extended period
of eligibility for any month in which he did not receive
SSA disability benefits because he was working. Accord-
ing to OPM, he continued to be “entitled” to SSA benefits
even for those months in which he could not receive them.
Thus, an offset in his FERS annuity for his SSA benefits
was appropriate. Mr. Stephenson argues on appeal that
under the plain language of section 223, he was not
“entitled” to SSA disability benefits during the period in
question. No offset thus should have been made for SSA
benefits he did not receive. We agree with Mr. Stephen-
son.
We begin with the meaning of the word “entitled.”
SSA’s implementing regulations define “entitled” to mean
“that a person has applied and has proven his or her right
to benefits for a period of time.” 20 C.F.R. § 404.303.
OPM’s brief also cites dictionary definitions of the verb
“entitle,” such as “‘to furnish with proper grounds for
seeking or claiming something.’” Resp’t’s Br. 12 (quoting
Entitle Definition, MERRIAM-WEBSTER,
STEPHENSON v. OPM 10
http://www.merriam-webster.com/dictionary/entitle (last
visited Aug. 21, 2012)). 2
By its express terms, section 223 of the Social Securi-
ty Act prohibited SSA from paying Mr. Stephenson SSA
disability benefits for any month during the period at
issue—between September 2009 and May 2012—in which
he performed “substantial gainful activity,” even though
he had previously applied for, and been granted, SSA
disability benefits. If Mr. Stephenson had requested
benefits for any such month, SSA would have been re-
quired to deny his request. In other words, during the
period in question, he had no “right to benefits” or “proper
grounds for seeking or claiming” benefits. Thus, under
either SSA’s definition or the dictionary definition cited
by OPM, Mr. Stephenson was not “entitled” to SSA disa-
bility benefits under section 223 for any month in which
he performed substantial gainful activity.
OPM argues that its position is supported by the text
of section 223 of the Social Security Act because the
statute provides that the entitlement to benefits “end[s]
with the month preceding . . . , subject to subsection (e)
[concerning an individual who engages in substantial
gainful activity], the termination month,” where the
“termination month” can be “in no event earlier than the
first month occurring after the 36 months following such
period of trial work in which he engages or is determined
able to engage in substantial gainful activity.” OPM notes
that subsection (e) provides only that “[n]o benefit shall be
payable,” and is silent as to the termination of entitle-
2 OPM also quotes the definition “to give a title to.”
Webster’s indicates, however, that this definition of
“entitle” is more akin to “designate,” and it provides the
example “He entitled his book ‘My Life on Mars.’” This
definition is not relevant to the use of the word “entitle” in
the statutes at issue here.
11 STEPHENSON v. OPM
ment. According to OPM, “[p]ut together, these provisions
demonstrate that Mr. Stephenson remained entitled to
SSA benefits at least until 36 months after his trial work
period was completed, which was in May 2012.” Resp’t’s
Br. 15.
It is true that Mr. Stephenson’s “termination month”
was May 2012, and that until then, Mr. Stephenson could
have received SSA disability benefits for any month in
which he did not work. OPM’s argument, however, gloss-
es over the language in subsection (a)(1), which makes the
entitlement to SSA disability benefits during the period
leading up to the “termination month” explicitly “subject
to subsection (e).” 42 U.S.C. § 423(a)(1). By making Mr.
Stephenson’s entitlement “subject to subsection (e),”
subsection (a)(1) conditions his entitlement on whether he
“engages in substantial gainful activity.” Accordingly, the
plain language of section 223 is clear: during the 36-
month period following his trial work period, Mr. Ste-
phenson was not “entitled” to SSA disability benefits
during months in which he worked.
Having found that the plain language of section 223 of
the Social Security Act and SSA’s definition of “entitled”
favor Mr. Stephenson, we turn to OPM’s remaining ar-
guments in support of the Board’s decision. OPM cites an
SSA regulation that provides an example of calculating
the “termination month” for a person engaging in sub-
stantial gainful activity, and which makes clear that “the
termination month cannot occur before the first month
after the end of the 36-month reentitlement period.” 20
C.F.R. § 404.325. OPM also cites an SSA regulation titled
“[t]he reentitlement period,” which provides that SSA will
resume paying disability benefits “during the reentitle-
ment period,” without requiring the recipient to file a new
application, “if after the month for which we found that
your disability ceased because you performed substantial
STEPHENSON v. OPM 12
gainful activity, you stopped engaging in substantial
gainful activity.” 20 C.F.R. § 404.1592a(a). These regula-
tions, however, simply demonstrate that a person who
stops working during the 36-month period following the
end of the trial work period can regain entitlement to SSA
disability benefits, as implied by the term “reentitlement
period.”
OPM also argues that decisions of this court and the
Board make clear that an individual can be “entitled” to
SSA disability benefits without actually receiving pay-
ment during the period in question. OPM cites Leighton
v. Office of Personnel Management in which this court
addressed “the meaning of the word ‘entitled’ as used in
section 223.” 529 F.3d 1071, 1074 (Fed. Cir. 2008). In
Leighton, the petitioner was receiving a FERS disability
annuity under § 8452, SSA disability benefits under
section 223 of the Social Security Act, and an Office of
Workers Compensation Programs (“OWCP”) schedule
award. Under section 223, the petitioner was entitled to
$1,855 per month. However, section 224 of the Social
Security Act 3 requires that SSA payments be offset by an
OWCP schedule award. As a result, the petitioner’s
actual SSA payments were reduced to $175 per month.
OPM nevertheless used the full $1,855 when calculating
the reduction of his FERS annuity. We affirmed OPM’s
use of the higher amount, noting that § 8452 “refers to
SSA payments as computed under section 223 of the
Social Security Act, not under section 224,” and finding
that “OPM, therefore, reasonably calculated the amount
to be deducted from Leighton’s FERS disability annuity
based upon section 223, without considering the deduc-
tions required under section 224.” Id.
3 Section 224 of the Social Security Act is codified at
42 U.S.C. § 424a.
13 STEPHENSON v. OPM
OPM argues that “Leighton affirms that section
8452’s use of the word ‘entitled’ can encompass individu-
als who are not actually paid for the benefits to which
they are entitled.” Resp’t’s Br. 20. OPM, however, reads
Leighton too broadly. Leighton instructs that when OPM
is calculating the amount to deduct from an individual’s
FERS annuity payments, it should look only to the
amount of SSA disability benefits as computed under
section 223, regardless of whether those benefits are
reduced by operation of another statute. Here, in con-
trast, for months in which Mr. Stephenson worked, his
SSA disability benefits as computed under section 223
were $0. Under Leighton, this is the amount OPM should
have used when determining whether to continue to offset
his FERS annuity. 4
OPM also cites the Board’s decision in Cohron, which
the Board relied on in its final decision in this case. As
OPM correctly notes, other than Cohron being an over-
payment case, it is “on all fours with this case.” Resp’t’s
Br. 23. However, we are not bound by Cohron and do not
4 In discussing Leighton, OPM also repeats the
Board’s concern that ruling in favor of Mr. Stephenson
would result in a “windfall” because he would receive a
full FERS annuity plus the income he earns from work-
ing. Resp’t’s Br. 21-22. But that is exactly what Mr.
Stephenson would have received if his application for SSA
disability benefits had been denied from the outset.
Similarly, he will receive both the full FERS annuity plus
his earned income after the conclusion of his 36-month
extended period of eligibility if he continues to work. To
the extent this could be characterized as a “windfall,” it is
a result of the different requirements for receiving FERS
and SSA disability benefits.
We also note that OPM conceded during oral argu-
ment that it is not pressing the Board’s concern with
administrative hardship as an independent reason to
affirm the Board’s decision.
STEPHENSON v. OPM 14
find it persuasive for the same reasons we reject Board’s
decision in this case.
Finally, OPM argues that under the standard set
forth in Skidmore v. Swift & Co., 323 U.S. 134 (1944), and
later reaffirmed by United States v. Mead Corp., 533 U.S.
218 (2001), this court should defer to OPM’s and SSA’s
interpretations that Mr. Stephenson remained entitled to
SSA disability benefits. The Skidmore standard “requires
courts to give some deference to informal agency interpre-
tations of ambiguous statutory dictates, with the degree of
deference depending on the circumstances.” Cathedral
Candle Co. v. U.S. Int’l Trade Comm’n, 400 F.3d 1352,
1365 (Fed. Cir. 2005). As the Court explained in Mead,
“[t]he fair measure of deference to an agency administer-
ing its own statute has been understood to vary with
circumstances, and courts have looked to the degree of the
agency’s care, its consistency, formality, and relative
expertness, and to the persuasiveness of the agency’s
position.” Mead, 533 U.S. at 228.
As an initial matter, we disagree with OPM’s initial
premise that SSA has found that Mr. Stephenson re-
mained entitled to SSA disability benefits. In fact, SSA
explicitly told Mr. Stephenson in its August 7, 2009 letter
that he was “not entitled” to SSA disability benefits
during the period at issue:
We have decided that your disability has ended
and that you are not entitled to Social Security
disability payments beginning September 2009.
....
You are not entitled to payments beginning Sep-
tember 2009 because you were doing substantial
work.
....
15 STEPHENSON v. OPM
You get an extended period of eligibility that be-
gins right after the trial work period. This is a 36-
month period when we restart payments for any
month(s) your work is not substantial if your
health problems still meet our rules. Your extend-
ed period of eligibility months are June 2009
through May 2012.
Resp’t’s Supplemental App. 3 (emphases added). Nor do
the SSA regulations cited by OPM in its brief indicate
otherwise. Rather, they merely indicate that Mr. Ste-
phenson could have regained entitlement to SSA disabil-
ity benefits during his 36-month extended period of
eligibility or reentitlement period if he had stopped work-
ing.
In addition, we disagree that OPM’s interpretation
should be accorded Skidmore deference. First, as dis-
cussed earlier, the statutory dictates of 5 U.S.C. § 8452
and section 223 of the Social Security Act are clear. Thus,
there is no reason to defer to agency interpretations. See
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 842-43 (1984) (“If the intent of Congress is
clear, that is the end of the matter; for the court, as well
as the agency, must give effect to the unambiguously
expressed intent of Congress.”). Second, Skidmore defer-
ence applies to “an agency administering its own statute.”
Mead, 533 U.S. at 228. Here, the dispositive issue of
statutory interpretation involves the Social Security Act,
which is administered by SSA, not OPM. Finally, even if
Skidmore applied, we conclude that OPM’s position is
unreasonable and unpersuasive and therefore not entitled
to deference.
In sum, we hold that for those months during the 36-
month period following the end of Mr. Stephenson’s trial
work period in which he did not receive SSA disability
STEPHENSON v. OPM 16
benefits because he performed substantial gainful activi-
ty, he was not “entitled” to SSA disability benefits under
section 223 of the Social Security Act. Accordingly, OPM
erred in denying Mr. Stephenson’s request to recalculate
his FERS disability retirement annuity to account for the
cessation of his monthly SSA disability benefits.
CONCLUSION
We reverse the Board’s decision and remand the case
for further proceedings consistent with this opinion.
REVERSED AND REMANDED