Valdez v. Ramirez

ON MOTION FOR REHEARING

In their motion for rehearing Respondents Ramirez and Valdez, Jr. make two attacks on our treatment of the Civil Service Retirement benefits in this case as a joint survivorship annuity payable solely to Petitioner Lillie Valdez after the death of her husband.

First, Respondents argue that no joint and survivorship annuity option or payment is provided for by 5 U.S.C.A. § 8339, et seq. of the Civil Service Retirement Act. While the Act does not use the explicit term, the effect is to permit the creation of a joint and survivorship annuity, and that is precisely the term and intent which Congressional Committees have applied to the plan since its inception.1

The first joint and survivorship provision was added to the Civil Service Retirement Act by P.L. 76-263, 53 Stat. 1200, effective January 1, 1940. In reporting on the proposed amendment (S. 281), the Senate Committee on Civil Service explained the relevant section 3 as adding “a provision to the existing law permitting an employee to select one of two joint-survivorship annuity plans . . . ” 2 The House Civil Service *752Committee made similar comments in its Report on S. 281.3 The Conference Committee of the two Houses agreed upon the following language which was enacted as Sec. 2(d) of P.L. 76-263:

“(d) Any employee retiring under the provisions of section 1 of this Act may at the time of his retirement elect to receive in lieu of the life annuity described herein a reduced annuity payable to him during his life, and an annuity after his death payable to his beneficiary, duly designated in writing and filed with the Civil Service Commission at the time of his retirement, during the life of such beneficiary (a) equal to or (b) 50 per centum of such reduced annuity and upon the death of such surviving beneficiary all payments shall cease and no further annuity shall be due or payable. The amounts of the two annuities shall be such that their combined actuarial value on the date of retirement as determined by the Civil Service Commission shall be the same as the actuarial value of the single life increased annuity with forfeiture provided by this section: Provided, That no election in lieu of the life annuity provided herein shall become effective in case an employee dies within thirty days after the effective date of retirement, and in the event of such death within this period, such death shall be considered as a death in active service.”

Between 1940 and the time of Mrs. Valdez’s retirement in 1971, Congress made several amendments to the above provision. Each time the legislative history shows that it was described as “a joint and survivorship annuity.” The first of these amendments was contained in Sec. 4(b) of P.L. 80-426, 62 Stat. 48, effective April 1, 1948. It limited the option of a married person’s joint sur-vivorship annuity to his spouse and to an amount equal to 50 percent of the reduced life annuity, with termination on the death or remarriage of the surviving spouse. A subsequent amendment in 1956 left the 1948 provision substantially the same except for dividing the annuity payment provision into two sections, Sec. 9(g) and Sec. 10 of P.L. 84-854, 70 Stat. 736, 752, effective October 1,1956. The annuity provision in existence at Mrs. Valdez’s retirement in 1971 and codified in 5 U.S.C.A. § 8339(i) and § 8341 was enacted in P.L. 87-793, 76 Stat. 832, 868, effective October 11, 1962. This last change consisted of an increase in the surviving spouse’s annuity payments from 50% to 55% of the basic joint annuity and a provision making the survivorship annuity automatic if the retiring married employee elected in writing not to receive the larger single life annuity and not to prevent the survivorship annuity from becoming effective.

The reason for detailing this congressional history of the relevant provisions of the Act is .to demonstrate that Congress has long permitted a retiring federal employee spouse (a) to elect to receive the higher maximum single life annuity (which terminates at death), or (b) to elect, in lieu thereof, to receive a reduced amount as a joint and survivorship annuity which amount is used as the basis for the annuity payable to the retired married employee as long as he or she survives, and also as the basis for the other spouse’s portion of the joint annuity if that spouse should be the survivor. Finally, discussion of legislative history has shown that the provision in question has been consistently termed and treated by the Congress as a “joint and survivor annuity.”4 *753By electing to give up her maximum higher single life annuity which (even though community property) would absolutely terminate at her death, Mrs. Valdez received for herself and her husband a matured right to receive future income from the joint and survivor annuity under the terms of the Civil Service Retirement Act. Since he predeceased her, the Act provides that she shall continue to receive the payments during her lifetime.5

Respondents’ second point urges that Mrs. Valdez could not elect to create a valid joint survivorship in this instance because community property cannot be the subject of a joint survivorship agreement under Texas law. Williams v. McKnight, 402 S.W.2d 505 (Tex.1966); Hilley v. Hilley, 161 Tex. 569, 342 S.W.2d 565 (1961). As indicated in our original opinion, we are dealing here with a type of joint and sur-vivorship annuity which was created by federal law. The Civil Service Retirement Act has a clearly declared federal purpose of providing a definite amount of financial support and security for retired federal employees, their spouses, and certain children of retired employees. A joint survivorship annuity clearly authorized by federal law to serve a federal purpose may preempt conflicting state laws in the absence of its use to perpetuate a fraud by one spouse on the other. Free v. Bland, 369 U.S. 663, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962). In the instant case there has been no suggestion that Mrs. Valdez made the election authorized by the Civil Service Retirement Act for any purpose other than to provide for herself and her husband the broadest possible joint and survivorship benefits payable under the federal Act.

The motion for rehearing is overruled.

. The Civil Service Retirement Act approved May 29, 1930, originally provided for an annuity payable only to and during the life of the retired employee. As early as 1936 amendments were proposed for “a joint and survivor-ship annuity” which would give the retiring employee a choice of receiving the existing maximum life benefits or a lesser “joint and survivorship annuity” of “equivalent actuarial value” but with one-half of the annuity being continued throughout the life of a designated beneficiary. See H.R. 12717, 74th Cong., 2d Sess., 80 Cong.Rec. 9464, June 15, 1936.

. Senate Report No. 122, p. 2, 76th Cong., 1st Sess. 1939. Appended to this Report was a letter from the President of the Civil Service Commission containing the following comment on Section 3, subsequently enacted as Sec. 2(d):

“Referring to section 3 of the proposed amended bill, the Commission has repeatedly expressed itself in favor of joint and survivor-*752ship benefits which will authorize annuities on a reduced basis with continuation of payments to a designated beneficiary, the combined annuities to be the same as the actuarial value of an increased annuity on a forfeiture basis.” (Emphasis supplied).

. House Report, No. 840, p. 6, House Committee on Civil Service, 76th Cong., 1st Sess. 1939.

. See legislative history of P.L. 80 — 426, S.Rep. No. 746, 80th Cong., 2d Sess., reprinted in [1948] U.S. Code Cong. & Admin. News, pp. 1107, 1112; P.L. 84-854 discussed in S.Rep. No. 2642, 84th Cong., 2d Sess., reprinted in [1956] U.S. Code Cong. & Admin. News, pp. 3734-35, where plan is referred to as “a joint and survivorship annuity” six times; P.L. 87-793 discussed in S.Rep. No. 2120, 87th Cong., 2d Sess., reprinted in [1962] U.S. Code Cong. & Admin. News, pp. 3047-48, 3070.

. Mrs. Valdez’s payments continued after her husband’s death on the same reduced basis which she elected upon retirement until Congress amended the Act in 1974 to provide that such payments to widowed retirees shall be recomputed and paid as if the annuity had not been reduced for each month that the retired employee remains unmarried. P.L. 93-474, 88 Stat. 1438, 5 U.S.C.A. § 8339(j).