McCrary v. Office of Personnel Management

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United States Court of Appeals for the Federal Circuit

05-3290

MARCUS L. MCCRARY,

Petitioner,

v.

OFFICE OF PERSONNEL MANAGEMENT,

Respondent.

Robert S. Morris, Hammerle Finley, of Denton, Texas, for petitioner.

Gregory T. Jaeger, Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, DC, for respondent. With him on the brief
were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, and
Donald E. Kinner, Assistant Director.

Appealed from: United States Merit Systems Protection Board
 United States Court of Appeals for the Federal Circuit

05-3290

MARCUS L. MCCRARY,

Petitioner,

v.

OFFICE OF PERSONNEL MANAGEMENT,

Respondent.

__________________________

DECIDED: August 16, 2006

__________________________

Before NEWMAN, LOURIE, and LINN, Circuit Judges.

LINN, Circuit Judge

Marcus L. McCrary (“McCrary”) appeals a final decision of the Merit System

Protection Board (“Board”), McCrary v. Office of Personnel Management, DA-0831-04-

0438-I-1 (M.S.P.B. May 25, 2005) (Final Decision), denying McCrary’s petition for

review of the Administrative Judge’s (“AJ”) decision, McCrary v. Office of Personnel

Management, DA-0831-04-0438-I-1 (M.S.P.B. Aug. 25, 2004) (Initial Decision), which

affirmed the Office of Personnel Management’s (“OPM”) decision to reduce his annuity

benefits by eliminating credit for his post-1956 military service. Because the Board’s

decision is both arbitrary and not supported by substantial evidence, we reverse the

decision on waiver and remand to the Board with instructions to set a time limit under
5 C.F.R. § 831.2107(a)(1) (2006), before which McCrary may make a deposit of the

amount needed to claim credit for his prior military service.

BACKGROUND

On January 22, 2002, after having served on active duty in the United States

Navy between 1963 and 1967 and in civilian employment with the Department of

Transportation and the Department of the Air Force for nearly 30 years, McCrary retired

under the Civil Service Retirement System (“CSRS”). Prior to his retirement, McCrary

completed an application for retirement (Standard Form 2801) and a military service

deposit election form (OPM Form 1515). On both documents, McCrary elected not to

make a deposit to claim credit for his post-1956 military service. McCrary admits that

he did not timely make the deposit, but asserts that he did not do so because, when he

asked how much the deposit will cost, he was told by a government counselor that it

would cost “a lot.” See Initial Decision, slip op. at 6.

Upon his retirement in 2002, McCrary began receiving annuity payments each

month. On April 4, 2004, McCrary became eligible for Social Security benefits. With

Social Security benefits in place, it was necessary for the government to recalculate

McCrary’s annuity under applicable statutory provisions, which permit credit of both

civilian and military service toward an annuity only if the required military deposit was

made before retirement.

Thus, on April 20, 2004, OPM notified McCrary that his monthly Civil Service

annuity benefit had been recomputed to exclude his military service years and was

being reduced by $398 per month because of his election at the time of his retirement

not to make the deposit. Id., slip op. at 7. The required deposit would have been seven

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percent of his military pay of $8,000, or a lump sum of $560, plus interest. Id. Seven

days later, surprised at the effect of his election on his retirement annuity, McCrary filed

an appeal of OPM’s decision with the Board. In his appeal, McCrary sought waiver of

the deposit deadline to permit late payment of the deposit, with interest, and

reinstatement of his full annuity. Before the Board, McCrary argued that he was

“grossly misinformed as to the dollar amount” of the deposit, and that, had the amount

of deposit and reduction been effectively explained to him, he “would surely have

elected to buy back [his] military time.” Id., slip op. at 5-7. McCrary asserted that OPM

failed to provide proper counseling when, in response to McCrary’s inquiry regarding

how much it would cost to make the required deposit, an OPM employee answered

“something like, ‘A lot.’” Id., slip op. at 6 (emphasis in original). McCrary argued that

the deadline should be waived because OPM committed administrative error in

characterizing a deposit of $560, plus interest, as “a lot” when the consequence of his

election not to make the deposit was a reduction of $398 per month in his annuity. In

support of his argument for waiver of the deadline, McCrary asserted that in Riddick v.

Office of Personnel Management, 85 M.S.P.R. 472, 476 (2000), the Board waived the

military deposit deadline due to administrative error where the agency “materially

misinformed” the appellant as to the amount of the deposit. OPM contended that

McCrary’s request to make a deposit should be denied because the Standard Form

2801 and OPM Form 1515 explain the consequences of failing to make a deposit prior

to retirement and McCrary indicated, on those documents, his election not to make a

deposit. Initial Decision, slip op. at 2-3.

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 On August 25, 2004, the AJ decided that the deadline for making the deposit

should not be waived and affirmed OPM’s decision to reduce McCrary’s annuity benefits

by eliminating credit for his post-1956 military service. Id., slip op. at 1. The AJ

acknowledged that, if McCrary could show that he did not make the deposit due to

administrative error, “he may be permitted to make a deposit within a time limit set by

OPM.” Id., slip op. at 3. The AJ further recognized that certain decisions of the Board

hold that administrative error “occurs when OPM or the employing agency affirmatively

misleads an annuitant regarding his retirement rights.” Id., slip op. at 3-4 (citing

Zimmerman v. Office of Pers. Mgmt., 80 M.S.P.R. 512, 516 (1999); Riddick, 85

M.S.P.R. at 476; Pinkston v. Office of Pers. Mgmt., 57 M.S.P.R. 347, 350 (1993)). The

AJ noted that, in Riddick, “the retirement counselor told the employee that the required

deposit ‘would probably total thousands of dollars’ when it would only have been

$355.27 plus interest,” but distinguished Riddick on the ground that, in that case, a

specific representation regarding the dollar consequences of the deposit was made,

whereas, in this case, no specific amount was represented. Initial Decision, slip op. at

8. The AJ did not distinguish Zimmerman or Pinkston, but instead based her decision

on this court’s decision in Collins v. Office of Personnel Management, 45 F.3d 1569,

1573-74 (Fed. Cir. 1995), which held that, where an annuitant receives full and fair

notice of the requirement to make a deposit, the government is not required to inform an

annuitant about the dollar consequences of electing not to make the deposit. The AJ

concluded that, because McCrary “was properly advised and understood that he must

pay a deposit for this post-1956 military service and of the consequences for failing to

make such a deposit,” and because, under Collins, the government was not required to

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inform McCrary of the precise dollar consequences of not making the deposit, the

deadline should not be waived. Id., slip op. at 8.

On May 25, 2005, the Board denied McCrary’s petition for review, making the

Initial Decision the final decision of the Board. Final Decision, slip op. at 1-2. McCrary

timely filed an appeal with this court. We have jurisdiction pursuant to

28 U.S.C. § 1295(a)(9).

DISCUSSION

1. Standard of Review

Our review of this appeal is limited in scope. We must affirm the decision of the

Board unless we find it to be arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with the law; obtained without procedures required by law, rule, or

regulation having been followed; or unsupported by substantial evidence. See 5 U.S.C.

§ 7703(c) (2000); Cheeseman v. Office of Pers. Mgmt., 791 F.2d 138, 140 (Fed. Cir.

1986). The petitioner bears the burden of establishing error in the Board’s decision.

See Cheeseman, 791 F.2d at 140.

2. Statutory and Regulatory Background

A civil service annuitant who retires after September 7, 1982 is entitled to receive

credit for active duty military service performed after 1956 under both the CSRS and the

Social Security System, but only if the annuitant deposits with the Civil Service

Retirement Fund an amount equal to seven percent of the person’s total post-1956

military pay. See 5 U.S.C. § 8334(j) (2000). Moreover, the amount of the deposit

accrues interest until deposited. See id.. § 8334(e), (j). If, before retirement, the

individual does not make the required deposit with interest, OPM must recompute the

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individual’s retirement annuity when the individual becomes eligible for Social Security

benefits, so as to exclude any post-1956 military service from the computation of the

civil service retirement annuity benefit.

OPM has promulgated regulations regarding the deposit requirement. See

5 C.F.R. §§ 831.2101-.2107 (2006). Those regulations provide that, while an individual

generally must make a deposit prior to retirement from a position subject to coverage

under the CSRS, the time limit requiring that the deposit be made before retirement may

be waived if the failure to make the deposit prior to retirement from service was the

result of an administrative error. See id. § 831.2107(a)(1). If a separated employee,

through administrative error, did not make or complete the deposit prior to his

retirement, the deadline may be waived and the deposit, with interest, may be paid in a

lump sum within a time set by OPM. Id. The regulations do not define “administrative

error.”

3. Analysis

This appeal presents the question whether OPM committed administrative error

when, in response to McCrary’s inquiry as to the amount of the deposit, OPM answered

that the required deposit is “a lot” when, in fact, the amount of the required deposit was

$560, plus interest. For the reasons below, we find that the retirement counselor’s

statement that the required deposit would cost “a lot” constitutes administrative error

such that the deadline for making the deposit should be waived.

As discussed above, the Board held that the deadline should not be waived

because the government was not required to inform McCrary of the precise dollar

consequences of not making the deposit, citing Collins, 45 F.3d at 1573-74. In Collins,

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the annuitant, Bennie Collins, claimed that he made a “mistake” in electing not to make

the required deposit because “he was not specifically informed about the dollar

consequences of his election at the time it was made.” Id. at 1573. This court held that

Collins was not entitled to a waiver of the time limit within which to make a deposit

because Collins freely made a written election not to make the deposit. Id. at 1573-74.

We further concluded that, under the facts of the case, the government was not required

to inform an individual of the dollar consequences of failing to make the required

deposit. Id. In that case, however, “Collins [did] not contend that he requested and was

denied any specific information before making his election” not to make the required

deposit. Id. Nor did he make a specific claim of administrative error. Id. at 1572.

Unlike Collins, the issue before us in this case requires us to examine the

government’s obligations when responding to a direct inquiry regarding the retirement

deposit. While our case law is silent as to this issue, the Board has long held that it is

administrative error for the government to mislead or misinform an employee who

inquires about military deposit requirements. See Gilliam v. Office of Pers. Mgmt., 91

M.S.P.R. 352, 355 (2002) (finding administrative error where annuitant was informed

that, when he reached age 62, his annuity without making the deposit “would stay close

to the amount” of what he had been receiving before age 62, when, in fact, the failure to

make the deposit resulted in a loss of $372 per month); Sutcliff v. Office of Pers. Mgmt.,

86 M.S.P.R. 101, 106 (2000) (finding administrative error where the employing agency

stated that the reduction in annuity was something like “not much,” when in fact it was

$134, especially because the amount of his deposit “would have been minimal

compared to the return the appellant might expect over the life of the annuity”); Riddick,

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85 M.S.P.R. at 476 (finding administrative error where annuitant was informed that the

deposit “would probably total thousands of dollars” when it would only have been

$355.27, plus interest); Zimmerman, 80 M.S.P.R. at 514 (finding that the employing

agency materially misinformed employee regarding the amount of his annuity reduction

by stating that the reduction “would be no more than a one for one dollar reduction in

[his annuity]” when in fact it was almost a two for one reduction); Owens v. Office of

Pers. Mgmt., 76 M.S.P.R. 543, 550-51 (1997), abrogated in part on other grounds by

King v. Office of Pers. Mgmt., 97 M.S.P.R. 307, 317 (2004) (finding administrative error

where annuitant was advised that his reduction would be $100 per month when in fact it

was $290 per month and agency acknowledged that it “may have misled” annuitant);

Fleak v. Office of Pers. Mgmt., 57 M.S.P.R. 338, 340 (1993) (finding administrative error

where employee did not make the required deposit because he relied on an estimated

statement of benefits that misinformed him that he did not have sufficient credits to

qualify for social security); Pinkston, 57 M.S.P.R. at 350 (finding administrative error

where employee did not make the required deposit because agency erroneously stated

that if he elected to receive payment of his retirement contributions in a lump sum

retirement, he would not have to make a deposit when, in fact, he was required to make

the deposit); see also Coffey v. Office of Pers. Mgmt., 79 M.S.P.R. 429, 433 (1998)

(finding that it was “highly plausible” that the employee would have made the deposit, if

he had been aware of the need to do so, where he had 11 years and 6 months of

military service, and elimination of that credit for that service would have reduced his

annuity by approximately $800 per month).

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 The consistent holdings of this long line of Board decisions make clear that the

government commits administrative error if it misrepresents the deposit requirement or

gives a misleading answer to a question about the deposit requirement. In some of

these cases, exemplified by Riddick and Owens, the government responded to an

employee’s inquiry by making a specific statement regarding the dollar consequences of

the deposit requirement. In others, exemplified by Gilliam and Sutcliff, the government

responded to an inquiry by making a generalized statement as to the effect of not

making the required deposit. The common position of the Board in all of these cases is

that the government commits administrative error by answering employees’ inquiries

about annuities with misleading responses, whether they be specific (as in Riddick and

Owens) or general (as in Gilliam and Sutcliff). Thus, the longstanding policy articulated

by the Board is that military veterans are entitled to expect that the government will

provide them with accurate answers to questions concerning the deposit requirements

to enable them to make informed decisions on matters that may significantly affect their

annuities.

Consistent with the Board cases cited herein, we hold that when an employee, at

the time of an election, asks for information regarding the amount of the military deposit

or the consequences of failing to make the deposit, the government commits

administrative error under 5 C.F.R. § 831.2107(a)(1) if its response either misrepresents

the dollar amounts in question or is so indirect, inaccurate, or incomplete as to confuse

or mislead the employee as to the amount of the deposit or the effect of any failure to

make the deposit on the annuity recalculation. The government will best avoid

administrative error by giving the individual a direct answer and providing the exact

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amount needed for the deposit as well as at least a reasonably accurate estimate of the

annuity adjustment likely to result from a decision not to make a deposit. These

numbers should be readily available to the government and normally will impose no

unreasonable burden upon it.

Here, the Administrative Judge found that McCrary “asserted in a sworn,

unrebutted statement that he was affirmatively misled when his retirement counselor

told him it would cost him ‘a lot’ to make the deposit for his military service.” Initial

Decision, slip op. at 7. The Board also found that the advice McCrary received was

material to his decision to retire without making the required deposit. Id. slip op. at 5

(finding that McCrary stated that if the deposit information “had been effectively

provided to me, I would surely have elected to buy back my military time”). The Board

opines that because McCrary “has not defined what he or the counselor considered to

be ‘a lot’ at the time of his retirement in January 2002,” “[i]t is conceivable that $560.00,

plus interest, could have been ‘a lot’ to both the counselor and [McCrary] in 2002.” Id.

at 7-8. However, it is equally conceivable that $560, plus interest, would not be

considered “a lot,” particularly because the amount of his deposit “would have been

minimal compared to the return the appellant might expect over the life of the annuity.”

Sutcliff, 86 M.S.P.R. at 106. The government chose to respond indirectly to McCrary’s

request for the cost of the deposit with only the relative expression “a lot.” This indirect

response left the question of the dollar consequences of the deposit decision faced by

McCrary unsettled. Moreover, it left the implication that the deposit amount was not

worth paying. The Board’s holding of no administrative error is not supported by

substantial evidence. The government’s response was both indirect and incomplete as

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to the amount of the deposit, and there is no basis to conclude that the government’s

response was anything other than misleading. A payment of $560, plus interest, is not

“a lot” to pay for McCrary to avoid a reduction to $398 per month in the annuity to which

he is entitled. It was administrative error for the government to respond the way it did to

McCrary’s inquiry about the dollar consequences of the deposit requirement.

Moreover, when the Board takes a position inconsistent with its longstanding

practice, without any explanation for the shift, the Board’s action “is not reasoned

decision-making and is arbitrary.” Schucker v. Fed. Deposit Ins. Corp., 401 F.3d 1347,

1356 (Fed. Cir. 2005) (holding that the Board acted arbitrarily where it acted contrary to

longstanding precedent and gave no reason for deviating from that precedent) (citing

M.M. & P. Mar. Advancement, Training, Educ. & Safety Program (MATES) v. Dep’t of

Commerce, 729 F.2d 748, 754-55 (Fed. Cir. 1984) (holding that the agency acted

arbitrarily in acting contrary to its precedent and without explanation)). In McCrary’s

case, although the Board attempted to distinguish Riddick, it made no attempt to

distinguish the other two cases it cited, namely Zimmerman and Pinkston, and failed to

discuss the other Board decisions cited supra. Moreover, the Board’s distinction of

Riddick—drawing a dividing line between an agency’s specific versus generalized

statement regarding the dollar consequences of the deposit requirement—overlooks

Gilliam and Sutcliff. For these reasons, the Board’s decision is arbitrary.

We also disagree with the Board’s suggestion that McCrary’s failure to ask for

clarification of the term “a lot” should foreclose his ability to seek waiver of the deadline.

Initial Decision, slip op. at 7-8. While McCrary could have, and perhaps in hindsight

should have, asked a follow-up question of what was meant by “a lot,” his failure to

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follow up does not excuse the government’s misleading response in the first instance

and does not forfeit McCrary’s right to seek a waiver of the deadline for making the

deposit needed to avoid recalculation of his annuity. McCrary seeks only to make late

payment of the deposit so that he can receive the benefit earned by his prior military

service. Permitting McCrary to make a late deposit exposes the government to no more

expense than if the deposit had been timely made. Under these circumstances, lack of

follow-up seeking clarification of the ambiguous term “a lot” does not excuse the

government’s misleading response and should not prevent his seeking a waiver of the

deadline for making the deposit needed to avoid recalculation and consequent reduction

of his annuity.

CONCLUSION

Because the decision of the Board denying McCrary’s request for waiver of the

deposit requirement deadline was arbitrary and not supported by substantial evidence,

we reverse and remand to the Board with instructions to set a time limit under

5 C.F.R. § 831.2107(a)(1) (2006), before which McCrary may make the military deposit.

REVERSED AND REMANDED.

COSTS

Costs are awarded to McCrary.

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