The MSPB recently held that a former Department of the Interior employee was entitled to a discontinued service retirement (DSR) annuity after he was removed and subsequently appointed to a term position per a settlement agreement meant to provide him adequate time to meet age and service requirements to qualify for the DSR annuity.(2014 MSPB 19, March 21, 2014).

DSR provides an immediate, possibly reduced, annuity for employees who are separated involuntarily for reasons other than misconduct or delinquency.5 U.S.C. § 8414(b)(v) dictates that such employees must meet age and service requirements to qualify: employees must be either 50 years of age with 20 years of service or any age with 25 years of service.The appellant was approximately 46 years old and had 18 years of federal service when he was removed on performance grounds, thus making him ineligible for a DSR annuity for failure to meet the age and service requirements.

After filing an initial appeal of his removal, the appellant entered into a settlement agreement with the agency that allowed him to continue working for a term of four years, at the expiration of which, the agency extended the appointment for an additional year. The agency separated the appellant from service in 2010, citing the expiration of his term appointment, and the appellant applied for an immediate DSR annuity with OPM.At the time of his application, the appellant had over 23 years of federal service and was 51 years old.

OPM issued an initial decision denying the appellant’s application for a DSR annuity and issued a final reconsideration decision again finding that the appellant was ineligible for such an annuity.OPM determined that it would not credit the five years the appellant had served in the term position toward his DSR annuity eligibility, arguing that the settlement agreement “was an artifice designed to evade the statutory [DSR] requirements” which gave the appellant a right to receive retirement benefits where one did not otherwise exist.OPM later argued on appeal that the appellant was not involuntarily separated from employment in 2010 because he voluntarily accepted a term position which he knew was limited in duration pursuant to the terms of the parties’ settlement agreement, further justifying his lack of eligibility.

The Board rejected OPM’s arguments, finding that since the appellant was assigned to a position of employment in the federal service and actually served in that position, OPM could not “deny [the appellant] an annuity based on its subjective determination that [the appellant’s] federal service fails to qualify him for an annuity when he otherwise objectively satisfies the statutory annuity formula” (internal quotations omitted).The Board also held that the appellant’s separation from employment was involuntary since the expiration of a term appointment is included in OPM’s enumeration of involuntary separations.In addition, the agency extended the appellant’s term position for a year, indicating that the decision to separate the appellant from employment rested with the agency, not the appellant.

This case shows a creative, legal settlement option for employees removed for reasons other than misconduct or delinquency who fall short of age and/or service requirements for a DSR annuity.

* This information is provided by the attorneys at Passman& Kaplan, P.C., a law firm dedicated to the representation of federal employees worldwide. For more information on Passman& Kaplan, P.C., go to http://www.passmanandkaplan.com.

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