Settlement of Retirement Disputes

The General Principles set forth in the OPM Guidelines for Settlement of Federal Personnel Actions Involving Civil Service Retirement Benefits found at opm.gov state that "The Retirement Trust Fund is not a Litigation Settlement Fund" and that "A Settlement may not provide Retirement Benefits Beyond What a Court or Administrative Body Could Order as Relief in the Litigation." In regard to disability retirement, the Guidelines state that: "A settlement should not permit the individual to be in a non-pay status for a period designed to meet the statutory one-year requirement, in the absence of compelling evidence that the individual was mentally incompetent at the time of the involuntary separation, or became so within one year after the date of the separation."

This is an unrealistic limitation as the employee admittedly could be "retroactively reinstated on the agency's employment rolls, with full back pay and benefits" to comply with the statutory one-year deadline. In some cases, the appellant's or complainant's representative is unable to convince the agency representative to agree to full back pay and benefits. Restoring the employee in a non-pay status will result in an overall cost savings to the federal government and has been successfully used this approach to settle cases.

OPM had not previously fared well when it tried to block settlement agreements in MSPB and EEOC cases. In the leading case of Jordan v. OPM, 77 MSPR 610 (1998), the Board found that a disability retirement application submitted within one year of the employee's separation was timely although it was based on a settlement agreement providing for leave without pay (LWOP). The Board refused to accept OPM's contentions that the LWOP was a "'fiction of continued service' and 'an artificial situation [created] solely for the purpose of evading the statutory' one-year filing deadline." Rather the Board held that: "when an employee resigns pursuant to a settlement agreement, the date of resignation under the agreement is controlling for determining the retirement entitlement... We also find that OPM's authority to administer the retirement system does not empower it to ignore separation dates effected pursuant settlement agreements entered into a record before the Board.

OPM requested reconsideration in Jordan v. OPM, 86 MSPR 144 (2000), but was again unsuccessful in a split decision. Beth S. Slavet, then Board Acting Chairman, pointed out that the Board's decision "does not allow agencies and employees to conspire to obtain retirement benefits whenever its suits their purposes." Rather, "the Board decision merely holds that OPM may continue to give effect to a canceled removal merely because the cancellation was carried out pursuant to a settlement agreement." While reiterating that OPM does not have authority to "disregard an agency's cancellation of an adverse action," it "may deny the appellant's request for an annuity if it determines that she is not disabled or is otherwise ineligible for an annuity, subject, of course, to the Board's review." Acting Chairman Slavet concluded that: "There is no discernible reason to disallow as untimely a disability retirement application from an individual who receives a retroactive grant of extended leave in a settlement agreement, while allowing an individual who is removed after an equally long or longer period of leave to make a timely filing."

A similar result was reached in Bynum v. OPM, 89 MSPR 1 (2001), where the Board upheld the terms of a settlement agreement between an applicant for disability retirement and the agency that provided for a removal due to "termination/disability." This resulted in the application of the Bruner presumption of a rebuttable prima case of eligibility for disability retirement as the employee was removed for a medical condition rather than for cause. Bruner v. OPM, 966 F.2d 290, 293-94 (Fed. Cir. 1993). The Board went on to determine that the employee met her burden of persuasion "because the medical evidence unambiguously indicates that her medical condition as diagnosed by her psychiatrist renders her unable to meet the requirement of her position that she be emotionally stable."