Not infrequently, agencies and employees or retirees get into disputes over eligibility, earnings history or some other point that is important in determining a retirement benefit. In some cases these disputes turn into formal legal challenges but agencies do have the authority in some cases to reach settlements that avoid the formal process.

Office of Personnel Management guidelines advise agencies about appropriate settlement terms when the settlement affects retirement benefits. They say, for example, that because of differences in statutory authority, certain settlement terms may be acceptable in settling a discrimination-based appeal that are less appropriate in settling other personnel action appeals.

OPM’s guidance states that in general agencies are bound by these rules: the retirement trust fund is not a litigation settlement fund; a settlement may not provide retirement benefits beyond what a court or administrative body could order as relief in the litigation; a settlement cannot be implemented which conflicts with express provisions of a retirement system; settlement of personnel actions should include consideration of the total cost to the government; the employing agency or the judgment fund must make all employee and employer contributions to employee benefits programs under a settlement; and there are special considerations in settlement of cases involving reemployment or back pay of an annuitant.