Federal Circuit Reverses MSPB Order to Repay OPM Overpayment
After the Merit Systems Protection Board found that a retired federal employee failed to prove that the recovery of overpaid benefits from the Federal Employee Retirement System (“FERS”) would be against equity and good conscience, the Court of Appeals for the Federal Circuit reversed the MSPB’s decision, finding that the Administrative Judge’s analysis (which the full Board accepted) was not supported by substantial evidence, was erroneous, and that recovery of the overpayment was unconscionable given the “inexplicable” three-year delay by OPM to finalize the retiree’s benefits, and the additional four-year delay between the retiree’s request for reconsideration and OPM’s decision.
In February 2009, a federal employee filed a FERS application for immediate retirement and disability retirement benefits. On April 3, 2009, OPM notified the employee that it had approved his application for disability retirement, and authorized monthly interim FERS benefits while it finished processing his retirement application. OPM also informed the retiree that he must apply for Social Security disability benefits, and notify OPM should they award him monthly benefits, explaining that any Social Security disability benefits received would offset FERS benefits. OPM also directed the retiree not to negotiate Social Security checks until after the FERS benefits had been reduced, given that the Social Security checks would be needed to pay OPM for the reduction which should have been made in the FERS annuity. Despite that direction, the retiree negotiated the Social Security checks and began receiving both the Social Security and interim FERS payments.
In January 2012, OPM completed its review of the retiree’s application, and calculated that it had overpaid the employee by $33,127.42 in total. The retiree requested reconsideration, and submitted a Financial Resources Questionnaire in February 2012. In August 2014, OPM notified the retiree that it was reviewing his request for reconsideration and requested updated financial information, which the retiree refused to provide, claiming that he was entitled to a waiver of the overpayment amount because of his disability, financial situation, an inability to receive financial assistance from the Veterans Administration and state and local organizations because the overpayment had ruined his eligibility.
On December 28, 2015, OPM issued its decision declining the retiree’s request for reconsideration, which the retiree appealed to the Merit Systems Protection Board. An MSPB administrative judge found that the retiree “did not establish a claim for detrimental reliance,” finding that the retiree’s failure to heed OPM’s warning about negotiating Social Security checks was an intervening circumstance causing his failure to receive state, local, and Veterans Administration aid because he “likely could have qualified for the aid had he not negotiated the Social Security benefits.”
Although the Administrative Judge found that OPM was “not a model of expediency” in notifying the employee of the overpayment, the delay was not “so monstrously harsh” that a collection of the overpayment would be “unconscionable.” The retiree appealed to the full Board, which affirmed the Administrative Judge’s decision. The retiree then appealed to the United States Court of Appeals for the Federal Circuit.
The appeals court agreed with the Board that the retiree failed to show his financial ability to pay at the time of the appeal when he refused to update his Financial Resources Questionnaire, even despite the Administrative Judge’s urging. But the appeals court disagreed with the Board’s disposal of the question of whether the overpayment had caused the retiree to relinquish a valuable right or changed his position for the worse. While the Administrative Judge found “substantial proof in the record that the [retiree] knew that his FERS annuity payments were subject to reduction upon receipt of a Social Security benefits award, the appeals court disagreed, finding that the Board had already ruled that no fault rested with the retiree, and reintroducing fault in discussion of whether an intervening circumstance (the retiree’s alleged knowledge that his benefits may be reduced) precluded good faith reliance to the retiree’s detriment was improper.
The appeals court also found that the totality of the circumstances made recovery of the overpayment unconscionable, citing Aguon v. OPM, 42 M.S.P.R. 540, 550 (1989) for its inclusion of “exceptionally lengthy delay by OPM in adjusting an annuity” in a totality of the circumstances unconscionability determination. The appeals court found that OPM had provided no reason for either its three-year delay in notifying the retiree of the overpayment or its four-year delay in responding to the retiree’s request for reconsideration, and that the effect of those delays made the retiree unable to qualify for benefits he likely would have received.
The appeals court noted that “OPM did not learn from its initial delay” and “waited another three years and almost eleven months to respond to [the retiree’s] request for reconsideration,” falling just forty days short of the automatically inequitable four-year delay under OPM Policy Guidelines § I.F.3. Although neither of the two delays qualified for the automatically inequitable four-year delay, the combined delay was near seven years. The appeals court did not endorse a rule that adds up delays when calculating whether a presumptively unconscionable time period had passed, but nevertheless found that the elements of 5 U.S.C. § 8346(b) had been met, and that recovery would be against equity and good conscience.
For the above stated reasons, the United States Court of Appeals for the Federal Circuit reversed the Board’s Final Order adopting the Administrative Judge’s initial decision as the Board’s final decision, and directed the Board to instruct OPM to waive recovery of the $33,127.42 claimed as overpayment.
Read the full case: Gordon v. OPM
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