Third Circuit: Federal Civilian Dual Status Technicians Not Covered under the Uniformed Services Exception to Reduced Social Security Benefits
This case law update was written by Michael J. Sgarlat, an attorney at the law firm of Shaw Bransford & Roth, where he has practiced federal personnel and employment law since 2015. Mr. Sgarlat works with federal employees to respond to proposed disciplinary and adverse actions, and has experience litigating cases before the U.S. Merit Systems Protection Board.
Floyd Douglas Newton worked as a National Guard dual status technician from 1980 until 2013. A dual status military technician is a federal civilian position supporting the Selected Reserve or armed forces. Though civilians, dual status technicians are required to maintain National Guard membership, hold a particular military grade, and wear appropriate military uniform, among other requirements.
Prior to becoming a dual status technician, and during his time as one, he served as a New Jersey Army National Guard member, a military position involving weekend drills. He received separate military pay for this work.
In July 2013, Newton retired from both his National Guard and dual status technician service. He then began to receive retirement benefits, consisting of a pension paid by the Defense Finance and Accounting Service for his military service and annuity paid by the Office of Personnel Management for his service as a dual status technician.
In June 2015, Newton applied for Social Security benefits with the Social Security Administration (SSA). SSA told Newton he qualified for retirement benefits, but that the benefits were subject to a reduction under the Windfall Elimination Provision (WEP). WEP modifies the usual statutory formula to reduce Social Security benefits for those who receive a separate pension payment “based in whole or in part upon his or her earnings” for which the recipient did not pay Social Security tax. Because Newton was receiving civil service annuity, SSA determined this was a payment “based in whole or in part upon his or her earnings,” and the WEP applied.
Newton requested reconsideration with SSA, contending that his civil service pension from his dual status employment triggered an exception to the WEP. Yet, an SSA Administrative Law Judge, and thereafter an SSA Appeals Council upheld the original determination.
Newton sought district court review. The district court held that Newton’s Social Security retirement benefits are subject to a reduction under WEP and not eligible for the uniformed services exception because his pension is not “based wholly on service as a member of the uniformed service.”
Newton appealed the district court decision to the U.S. Court of Appeals for the Third Circuit. The court began by explaining that the purpose of the WEP is to prevent “double-dipping.” By considering both covered and uncovered earning, the WEP ensures that individuals like Newton, who receives a separate pension, will receive a smaller percentage of his covered earnings than he would receive if his uncovered earnings were not taken into consideration.
The court also noted that the WEP includes several exceptions. Here, Newton was contending that the uniformed services exception should apply to pension payments that are “based wholly on service as a member of a uniformed service.” Per the court, application of this exception would ensure that pensions for uniformed will not result in a reduction of Social Security retirement benefits even though they are based on uncovered earnings.
The court stated that the narrow question before it was whether National Guard dual status technicians qualify for the uniformed services exception. The court stated that this is a question of first impression in the Third Circuit. However, five Circuit Courts have already addressed this question. One, the Eighth Circuit, found that dual status technicians qualify for the uniformed services exception. The others, the Sixth, Ninth, Tenth, and Eleventh Circuits, all found that they do not.
Here, the Third Circuit was reviewing the district court’s adoption of the Eleventh Circuit’s rationale, finding that a pension from service as a dual status technician is not based “wholly” on service in a uniformed service. While the Third Circuit disagreed with the district court’s reasoning, it affirmed its conclusion and held that dual status military technicians are not covered by the uniformed services exception.
In contrast to the district court, the court of appeals said that it cannot rely on the meaning of the word “wholly.” The court explained that it remains a question whether to read “wholly” to modify the type of service, requiring the entire service to uniformed service, or to modify the pension payment itself, requiring the entire payment to be for uniformed service. The district court assumed that “wholly” modified the nature of the service covered by the exception. But the court of appeals stated that it does not know whether, to be exempt from the WEP, the service that gives rise to the pension must be a uniformed service in its entirety, or if the service could have been partially a uniformed service.
The court of appeals found that other textual indicia establishes that dual status technicians are excluded from the uniformed services exception. The court stated that the exception is triggered by “payment[s] based wholly on service as a member of a uniformed service,” and the term “service” in the context of the exception means employment, while the ordinary meaning of the word “as” is “in the capacity of.” Thus, according to the court, the exception appears to be limited only to payments for work performed in one’s capacity or role as a member of the uniformed services.
The court noted that dual status technicians are appointed to their civilian positions under the civil service appointment authority, and Congress has expressly stated that “[f]or purposes of any provision of law, a military technician (dual status) is a Federal civilian employee.” Here, the court mentioned that though Newton also served in the National Guard, he received two separate salaries and now receives separate pensions. Thus, the court found that Newton’s civil service pension may be based on service he provided while also serving in the National Guard, but not for “service as a member of a uniformed service.”
The court held that Newton’s OPM civil service annuity based on his dual status technician work does not constitute a payment based on “service as a member of a uniformed service.” Accordingly, Newton was not covered by the uniformed service exception to the WEP. The Third Circuit affirmed the district court decision, holding it was not covered.
Read the full case: Newton v. Commissioner Social Security
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