BNUMBER:  B-266280
DATE:  March 8, 1996
TITLE:  [Letter]

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B-266280

March 8, 1996

The Honorable Paul D. Coverdell
United States Senator
100 Colony Square, Suite 300
1175 Peachtree Street, NE
Atlanta, Georgia  30361

Dear Senator Coverdell:

This is in response to your letter of September 13, 1995, on behalf of 
Mrs. Mary Gralley, who is seeking a reduction in the amount of the 
social security offset (SSO) being applied to her Survivor Benefit 
Plan (SBP) annuity, based on the calculations of the Defense Finance 
and Accounting Service (DFAS).  Mrs. Gralley's husband, Technical 
Sergeant Phillip W. Gralley, retired from the Air Force in 1962.  
Subsequently, he elected an SBP annuity for his wife payable following 
his death; he died on May 8, 1994.

Congress established the SBP (10 U.S.C.  sec.  1447-1455) in 1972 to 
complement the social security benefits of surviving military 
dependents.  It was intended to provide a bridge for survivors by 
providing them income for the period between the death of the member 
and date of the widow's or widower's eligibility for social security 
benefits.  Once the surviving spouse is eligible for social security 
benefits, the SBP annuity is offset, in recognition of the fact that 
social security benefits are available.  See 10 U.S.C.  sec.  1451.  Mrs. 
Gralley accepts the appropriateness of the offset, but questions the 
rules governing the manner in which it is applied and calculated.

There are two methods provided for in the SBP statute by which social 
security benefits are considered in determining the amount an SBP 
annuity should be reduced.  In the case of members who did not become 
eligible for retirement until after October 1, 1985, a surviving 
spouse receives 55 percent of the base amount of the member's retired 
pay until he or she reaches age 62.  After age 62, the annuitant 
receives 35 percent of the base amount of the member's retired pay.

For survivors of members eligible to receive retired pay on or before 
October 1, 1985, an optional offset calculation is available if it is 
more advantageous to the annuitant.  This method assumes that the 
member lived to age 65 and that social security benefits as a result 
of his or her spouse's earnings begin at age 62, the age when the 
offset commences.  Department of Defense Directive 1332.27, which 
describes the calculation of the offset, states that "For the purpose 
of this calculation, the member is assumed . . . to have worked in 
social security covered employment only while on active duty."  DOD 
Directive 1332.27  sec.  401a.(1) (1974).

The DFAS calculation therefore bases the offset solely on social 
security benefits a survivor received for the decedent's active 
military service and does not account for the survivor's benefits 
attributable to social security payments resulting from any employment 
in which the member engaged as a retiree.  Thus, if a military retiree 
contributed substantially to social security after leaving the armed 
forces, these post-military contributions are not part of the 
calculation.

Mrs. Gralley's annuity amount is based on the first of these methods, 
35 percent of the base amount, because DFAS found that method more 
favorable to her.

Mrs. Gralley questions DFAS' conclusion.  She contends that if the 
offset were properly calculated, the use of the second method would be 
more beneficial to her.  In calculating the offset, she believes, DFAS 
should have considered her husband's post-military contributions to 
social security as well as his military contributions.  Thus, 
according to her, the offset should have been calculated based on her 
husband's earnings from both military and civilian employment and the 
two should have been prorated to determine the amount of benefits 
attributable to military service.  If DFAS had done the calculation on 
this basis, she reports, the amount of the offset would have been $53, 
instead of the $162.40 used by DFAS.

As indicated, however, Mrs. Gralley's method of calculating the offset 
is contrary to the DOD regulation.  In contrast, the method of 
calculation used by DFAS is consistent with the governing statute and 
has been approved by the United States Claims Court (now the United 
States Court of Federal Claims) and our Office.  See Kinne v. United 
States, 21 Cl. Ct. 104 (1990) and 53 Comp. Gen. 733 (1974).  (Copies 
enclosed.)

Mrs. Gralley has raised an additional point.  Sergeant Gralley 
accumulated only 24 quarters of contributions to social security based 
on his active duty military service.  For his survivor to be eligible 
for social security benefits based solely on his pre-retirement 
military earnings, he would have had to accumulate 26 quarters of 
contributions.  Mrs. Gralley asks why any offset applies in her 
situation, if under the social security program, she would not have 
been eligible for any social security benefits based solely on his 
earnings during active duty.  Sergeant Gralley worked approximately 15 
years in private sector employment as a retiree, from 1962 to 1977, 
according to Mrs. Gralley.  Thus, in answer to Mrs. Gralley's 
question, benefits based on the 24 quarters accrued once Sergeant 
Gralley worked an additional 2 quarters in post-retirement employment.  
When an individual, such as Mrs. Gralley, becomes eligible for a 
widow's social security benefit, all quarters of her deceased spouse's 
coverage, both military and nonmilitary, are taken into account before 
the amount of the social security benefit to which she is entitled is 
established; however, as noted, only the military quarters are used to 
compute the offset amount.  See Marjorie S. Nester, 58 Comp. Gen. 795 
(1979), copy enclosed.

We trust this answers your inquiry.

Sincerely yours,

/s/Seymour Efros
for Robert P. Murphy
General Counsel

Enclosures
B-266280
March 8, 1996
DIGEST

In establishing widow's social security benefit, her spouse's military 
and nonmilitary earnings are considered.  Once this benefit is 
established, the fact that spouse's military earnings alone were not 
sufficient to establish the benefit does not relieve widow's survivor 
benefit (SBP) from the requirement of the social security offset.  
Calculation of the SBP offset is proper where only post-1956 military 
earnings are used in making offset calculation without consideration 
of post-retirement civilian earnings, which formula has been approved 
by General Accounting Office and the United States Claims Court.