Deforest J. Petersdorf v. Office of Personnel Management ( 2015 )

UNITED STATES OF AMERICA
MERIT SYSTEMS PROTECTION BOARD
DEFOREST J. PETERSDORF, DOCKET NUMBER
Appellant, SF-831M-15-0452-I-1
v.
OFFICE OF PERSONNEL DATE: December 8, 2015
MANAGEMENT,
Agency.
THIS FINAL ORDER IS NONPRECEDENTIAL 1
Paul Meadowbrook, Esquire, Albany, Oregon, for the appellant.
Kristine Prentice, Washington, D.C., for the agency.
BEFORE
Susan Tsui Grundmann, Chairman
Mark A. Robbins, Member
FINAL ORDER
¶1 The appellant has filed a petition for review of the initial decision, which
affirmed the reconsideration decision of the Office of Personnel Management
(OPM) denying the appellant’s request for a waiver of the overpayment of
annuity benefits. Generally, we grant petitions such as this one only when: the
1
A nonprecedential order is one that the Board has determined does not add
significantly to the body of MSPB case law. Parties may cite nonprecedential orders,
but such orders have no precedential value; the Board and administrative judges are not
required to follow or distinguish them in any future decisions. In contrast, a
precedential decision issued as an Opinion and Order has been identified by the Board
as significantly contributing to the Board’s case law. See 5 C.F.R. § 1201.117(c).
2
initial decision contains erroneous findings of material fact; the initial decision is
based on an erroneous interpretation of statute or regulation or the erroneous
application of the law to the facts of the case; the administrative judge’s rulings
during either the course of the appeal or the initial decision were not consistent
with required procedures or involved an abuse of discretion, and the resulting
error affected the outcome of the case; or new and material evidence or legal
argument is available that, despite the petitioner’s due diligence, was not
available when the record closed. See title 5 of the Code of Federal Regulations,
section 1201.115 (5 C.F.R. § 1201.115). After fully considering the filings in this
appeal, we conclude that the petitioner has not established any basis under section
1201.115 for granting the petition for review. Therefore, we DENY the petition
for review and AFFIRM the initial decision, which is now the Board’s final
decision. 5 C.F.R. § 1201.113(b).
BACKGROUND
¶2 The appellant retired under the Civil Service Retirement System (CSRS)
effective in March 2008. 2 Initial Appeal File (IAF), Tab 6 at 32-35. At that
point, he elected a partial survivor annuity for his spouse. Id. at 34. In
June 2009, he faxed a request to OPM to increase his survivor annuity. IAF, Tab
6 at 27, Tab 14, Hearing Compact Disc (HCD). According to the appellant, OPM
confirmed receipt of his request over the telephone later that month. HCD; IAF,
Tab 6 at 14. The appellant stated that he again contacted OPM in October 2009
and June 2010 and that OPM assured him at those times that he would be
contacted soon. HCD; IAF, Tab 6 at 14. The appellant stated that he sent
additional information to OPM in April 2011, but, after hearing nothing from
2
Because the regulations relating to overpayments under CSRS and the Federal
Employees’ Retirement System (FERS) are substantively identical, we have relied on
cases involving overpayments under FERS in our analysis of the present appeal.
Compare 5 C.F.R. §§ 831.1401-1407, with 5 C.F.R. §§ 845.301-307; see James v.
Office of Personnel Management, 72 M.S.P.R. 211, 216 n.3 (1996).
3
OPM, assumed that his request was lost or denied. IAF, Tab 6 at 14. OPM
acknowledged the appellant’s request when it issued a letter in August 2014,
sixty-two months after the appellant faxed his request. Id. at 20-21. OPM stated
that it had received the appellant’s request to change his survivor election and
informed him that he should complete and sign the attached election form if he
still wanted to change his survivor election. Id. OPM also informed the appellant
that he had to pay a required deposit of $9,289.50, which covered the first 18
months after his retirement. Id. at 22. OPM further stated that, after the
appellant made this deposit, it then would calculate the overpayment covering the
period after the first 18 months following his retirement until the present (August
2014). Id. at 20-22. The appellant paid the $9,289.50 deposit covering the first
18 months after his retirement. Id. at 15, 22.
¶3 In September 2014, OPM notified the appellant that the overpayment for the
period from September 2009 to August 2014 was $11,948.06 and that it would
collect this overpayment in 36 installments of $331.89 and a final installment of
$0.02. IAF, Tab 6 at 15-16. The appellant requested a waiver of the
overpayment. Id. at 11. In his request, he asserted, inter alia, that the lengthy
delay of more than 5 years in processing his election was not his fault, it would
be unfair to expect him to repay the overpayment since he did not cause the delay,
and timely processing of his original request would have eliminated the
overpayment. Id. at 13. The appellant did not, however, submit a financial
resources questionnaire, which OPM stated was required for waiver requests
based upon financial hardship. Id. at 17. OPM issued a reconsideration decision
in February 2015 affirming its initial overpayment decision. Id. at 6-9.
¶4 The appellant filed this Board appeal challenging the reconsideration
decision. IAF, Tab 1. He requested a hearing. Id. During a telephonic
prehearing conference, the appellant stated that he was not disputing the amount
of the overpayment and was not claiming financial hardship, but that he was
instead asserting that recovery of the overpayment would be unconscionable and
4
that OPM was grossly negligent. IAF, Tab 13. At that time, OPM acknowledged
that the appellant was not at fault in creating the overpayment. Id. After holding
the requested hearing, the administrative judge issued an initial decision
affirming OPM’s reconsideration decision. IAF, Tab 15, Initial Decision (ID).
Specifically, she found that the appellant failed to establish, by substantial
evidence, that he was entitled to a waiver of the overpayment based upon equity
and good conscience. ID at 4-6.
¶5 The appellant has filed a timely petition for review. Petition for Review
(PFR) File, Tab 3. On review, he asserts that: (1) had OPM timely processed his
request, there would be no second overpayment charge of $11,948.06, which, he
presumes, includes principal, interest, and a 24.5 percent service charge; (2) OPM
has not offered an explanation for its delay and was grossly negligent; and (3) the
Board should remand the appeal to OPM to explain why it failed to act on the
appellant’s request in a timely fashion and to state how much additional interest
and service charges resulted from the long delay in acting on the request. Id.
at 6-7. OPM has responded in opposition to the petition for review. PFR File,
Tab 6.
DISCUSSION OF ARGUMENTS ON REVIEW
¶6 OPM bears the burden of proving, by preponderant evidence, the existence
and amount of an annuity overpayment. 3 Davis v. Office of Personnel
Management, 109 M.S.P.R. 48, ¶ 7 (2008) (citing 5 C.F.R. § 831.1407(a)). If the
appellant claims a waiver of the overpayment, he bears the burden of establishing
his entitlement to a waiver by substantial evidence. 4 Id., ¶ 11 (citing 5 C.F.R.
3
A preponderance of the evidence is that degree of relevant evidence that a reasonable
person, considering the record as a whole, would accept as sufficient to find that a
contested fact is more likely to be true than untrue. 5 C.F.R. § 1201.4(q).
4
Substantial evidence is defined as the degree of relevant evidence that a reasonable
person, considering the record as a whole, might accept as adequate to support a
conclusion, even though other reasonable persons might disagree. 5 C.F.R. § 1201.4(p).
This is a lower standard of proof than preponderance of the evidence. Id.5
§ 831.1407(b)). A waiver may be granted when the annuitant is without fault and
recovery would be against equity and good conscience. Id. (citing 5 U.S.C.
§ 8346(b), 5 C.F.R. § 831.1403(a)). Generally, recovery is against equity and
good conscience when: it would cause financial hardship; the annuitant can show
that, because of the overpayment, he relinquished a valuable right or changed
positions for the worse; or recovery would be unconscionable under the
circumstances. Id. (citing 5 C.F.R. § 831.1403(a)).
¶7 Here, we agree with the administrative judge that the existence and amount
of the overpayment is not in dispute and is supported by the record. ID at 3; IAF,
Tab 6 at 10. We also agree with the administrative judge that the appellant was
without fault in creating or contributing to the overpayment, which was due to
OPM’s failure to timely adjust his annuity after he requested to provide an
increased survivor annuity for his spouse. ID at 4; IAF, Tab 6 at 20, 27. Thus,
the only issue for us to decide is whether the appellant is entitled to a waiver
based upon equity and good conscience. The appellant does not assert that
recovery of the annuity would cause him financial hardship or that he
relinquished a valuable right or changed positions for the worse. IAF, Tab 13.
We therefore only must determine whether the appellant has shown that he is
entitled to a waiver based upon the fact that recovery of the overpayment would
be unconscionable. As explained below, we find that the appellant has not shown
that he is entitled to a waiver on this basis.
¶8 The Board will consider all relevant factors under a
“totality-of-the-circumstances” approach to determine whether recovery of an
annuity overpayment is unconscionable. Spinella v. Office of Personnel
Management, 109 M.S.P.R. 185, ¶ 7 (2008). The unconscionability standard is a
high one, and a waiver based on this standard will be granted only under
exceptional circumstances. Id. Such circumstances include, but are not limited
to, cases where there has been an exceptionally lengthy delay by OPM in
adjusting an annuity, or where OPM is otherwise grossly negligent in handling
6
the case. Id. Further, egregious delay by OPM may justify a finding that
recovery would be unconscionable. Id. However, a lengthy delay in adjusting an
annuity is not by itself a finding of unconsionability. Id., ¶ 9.
¶9 We find that OPM’s 62-month delay in processing the appellant’s request
for an increased survivor annuity was lengthy and OPM did not justify the delay.
However, we find that the length of the delay is insufficient on its own to
establish that recovery of the overpayment would be unconscionable. The Board
has previously found that a 55-month delay between the appellant’s election and
the processing of the election was, based on the totality of the circumstances,
egregious and that recovery was thus unconscionable. Cassity v. Office of
Personnel Management, 55 M.S.P.R. 25, 28-29 (1992), overruled on other
grounds by Steele v. Office of Personnel Management, 57 M.S.P.R. 458, 461-63
(1993). Conversely, the Board has found that a 79-month delay in correcting an
appellant’s high-3 average salary and adjusting his annuity did not constitute
gross negligence and that, absent other exceptional circumstances, recovery of the
resulting overpayment was not unconscionable. Spinella, 109 M.S.P.R. 185, ¶ 10.
Thus, although we do not absolve OPM of its unexplained failure to adjust the
appellant’s annuity, we must consider other factors in determining whether
recovery of the overpayment would be unconscionable.
¶10 First, we find that the appellant’s choice to confirm his election after OPM
notified him that he would incur an additional overpayment weighs against a
finding that recovery is unconscionable. In August 2014, OPM notified the
appellant that, if he still wanted to change his survivor annuity election, he should
make the required deposit covering the first 18 months after his retirement. IAF,
Tab 6 at 20-22. OPM also stated that if the appellant made this deposit, it would
then calculate the overpayment he owed for the period after the first 18 months
after his retirement. Id. at 22. If the appellant did not want to incur an additional
overpayment, he could have chosen not to change his election. However, he paid
7
the initial deposit and pursued his election, despite having been notified that he
would later be required to repay an additional overpayment. Id. at 15, 22.
¶11 Second, we find the fact that the overpayment occurred after the appellant
made a voluntary election that was not an attempt to remedy any prior errors also
weighs against a finding that recovery is unconscionable. Although he initially
elected a partial survivor annuity at retirement, the appellant voluntarily decided
to change this annuity to a full survivor annuity. IAF, Tab 6 at 27; see 5 C.F.R.
§ 831.622(b)(1). The appellant does not claim that this change was an attempt to
remedy any prior errors. The U.S. Court of Appeals for the Federal Circuit has
held that recovery of an overpayment is not against equity and good conscience
when the overpayment resulted from the voluntary acts of the appellant. Day v.
Office of Personnel Management, 873 F.2d 291, 293 (Fed. Cir. 1989) (finding that
recovery of an overpayment was not against equity and good conscience where
the overpayment resulted from the appellant’s voluntary acceptance of his
restoration to duty); see Day v. Office of Personnel Management, 833 F.2d 1580,
1581 (Fed. Cir. 1987). Moreover, OPM’s Policy Guidelines state that recovery of
overpayments caused by a nonremedial voluntary election with a retroactive
effective date is automatically not against equity and good conscience. Policy
Guidelines on the Disposition of Overpayments under the Civil Service
Retirement System and Federal Employees’ Retirement System § I.C.5.d (1995)
(hereinafter Policy Guidelines), located in IAF, Tab 6 at 42-76. The Board has
held that the Policy Guidelines are entitled to great deference. See, e.g., Hunter
v. Office of Personnel Management, 109 M.S.P.R. 514, ¶ 14 (2008), aff’d, No.
2008-3354, 2009 WL 174169 (Fed. Cir. Jan. 27, 2009). Thus, we find the
voluntary and retroactive nature of the appellant’s election weighs against a
finding that recovery would be unconscionable.
¶12 We additionally find that OPM’s actions after its discovery of the
overpayment weigh against a finding that collection of the overpayment would be
unconscionable. After OPM formally acknowledged the appellant’s application
8
in August 2014, and he paid the deposit for the 18 months after his retirement,
OPM issued a notice in September 2014 that informed him of the additional
overpayment that he owed. IAF, Tab 6 at 15. The appellant requested a waiver
of the overpayment at the end of September 2014. Id. at 11-12. OPM issued its
reconsideration decision at the end of February 2015. Id. at 6-9. We find that
OPM’s response after August 2014 constitutes relatively prompt action and thus
find that the response time weighs against a finding that recovery would be
unconscionable. 5 See Taylor v. Office of Personnel Management, 87 M.S.P.R.
214, ¶ 20 (2000).
¶13 Finally, although the appellant asserts that OPM’s delay has resulted in an
additional service charge and additional interest that was added to his second
overpayment, this is not the case. PFR File, Tab 3 at 6-7. As required by
regulation, the overpayment of $9,289.50 for the appellant’s first 18 months after
retirement included a principal of $3,404.83, interest of $423.61, and a 24.5%
service charge of $5,461.06 (election survivor base amount of $44,835.03 – prior
survivor base amount of $22,545.00 x 24.5%). IAF, Tab 6 at 22; see 5 C.F.R.
§§ 831.622(b)(1), 831.662. Conversely, the appellant’s overpayment for the time
after the first 18 months was calculated strictly by subtracting the gross annuity
that was due to him if he had elected the maximum survivor annuity from the
annuity that was paid to him during that same period. IAF, Tab 6 at 10-11. Thus,
although the appellant already paid interest and a service charge as part of the
5
Policy Guidelines § 1.C.4. provides that individuals who know or suspect that they are
receiving overpayments are expected to set aside the amount overpaid pending
recoupment and that, absent exceptional circumstances, recovery of such overpayments
is not against equity and good conscience. IAF, Tab 6 at 53; see Zucker v. Office of
Personnel Management, 114 M.S.P.R. 288, ¶ 7 (2010). Here, the appellant stated that
he assumed that his request was denied after OPM did not respond to his April 2011
submission. IAF, Tab 6 at 14. Because we find that recovery of the overpayment is
otherwise not against equity and good conscience, we need not address whether the
appellant should have set aside the overpayment amount.
9
deposit to cover the first 18 months after his retirement, the overpayment at issue
does not include these additional charges.
¶14 In light of the foregoing, including our consideration of the totality of the
circumstances, and the fact that the unconscionability criterion is a high standard
justifying waiver only under exceptional circumstances, we find that the appellant
has failed to meet his burden. Accordingly, we deny his petition for review and
affirm the initial decision. 6
NOTICE TO THE APPELLANT REGARDING
YOUR FURTHER REVIEW RIGHTS
You have the right to request review of this final decision by the United
States Court of Appeals for the Federal Circuit. You must submit your request to
the court at the following address:
United States Court of Appeals
for the Federal Circuit
717 Madison Place, N.W.
Washington, DC 20439
The court must receive your request for review no later than 60 calendar days
after the date of this order. See 5 U.S.C. § 7703(b)(1)(A) (as rev. eff. Dec. 27,
2012). If you choose to file, be very careful to file on time. The court has held
that normally it does not have the authority to waive this statutory deadline and
that filings that do not comply with the deadline must be dismissed. See Pinat v.
Office of Personnel Management, 931 F.2d 1544 (Fed. Cir. 1991).
If you need further information about your right to appeal this decision to
court, you should refer to the Federal law that gives you this right. It is found in
title 5 of the United States Code, section 7703 (5 U.S.C. § 7703) (as rev. eff. Dec.
27, 2012). You may read this law as well as other sections of the United States
6
The appellant has not requested an adjustment of the repayment schedule and has not
submitted either a financial resources questionnaire or other financial data.
Accordingly, we do not address the issue of whether the appellant is entitled to an
adjustment of the repayment schedule based on financial hardship.
10
Code, at our website, http://www.mspb.gov/appeals/uscode.htm. Additional
information is available at the court’s website, www.cafc.uscourts.gov. Of
particular relevance is the court’s “Guide for Pro Se Petitioners and Appellants,”
which is contained within the court’s Rules of Practice, and Forms 5, 6, and 11.
If you are interested in securing pro bono representation for an appeal to
the United States Court of Appeals for the Federal Circuit, you may visit our
website at http://www.mspb.gov/probono for information regarding pro bono
representation for Merit Systems Protection Board appellants before the Federal
Circuit. The Merit Systems Protection Board neither endorses the services
provided by any attorney nor warrants that any attorney will accept representation
in a given case.
FOR THE BOARD: ______________________________
William D. Spencer
Clerk of the Board
Washington, D.C.