Chara Cordova v. Office of Personnel Management

UNITED STATES OF AMERICA

MERIT SYSTEMS PROTECTION BOARD

CHARA L. CORDOVA, DOCKET NUMBER

Appellant, SF-0845-21-0545-I-1

v.

OFFICE OF PERSONNEL DATE: February 15, 2023

MANAGEMENT,

Agency.

THIS ORDER IS NONPRECEDENTIAL 1

Chara L. Cordova, Arcadia, California, pro se.

Jane Bancroft, Washington, D.C., for the agency.

BEFORE

Cathy A. Harris, Vice Chairman

Raymond A. Limon, Member

Tristan L. Leavitt, Member

REMAND ORDER

¶1 The agency has filed a petition for review of the initial decision, which

reversed a reconsideration decision issued by the Office of Personnel

Management (OPM) that concluded that the appellant had received an

overpayment of Federal Employees’ Retirement System (FERS) disability

1

A nonprecedential order is one that the Board has determined does not add

significantly to the body of MSPB case law. Parties may cite nonprecedential orders,

but such orders have no precedential value; the Board and administrative judges are not

required to follow or distinguish them in any future decisions. In contrast, a

precedential decision issued as an Opinion and Order has been identified by the Board

as significantly contributing to the Board’s case law. See 5 C.F.R. § 1201.117(c).

2

retirement benefits and was not entitled to a waiver of the overpayment. For the

reasons discussed below, we GRANT the agency’s petition for review, VACATE

the initial decision, and REMAND the matter to the Western Regional Office for

further adjudication in accordance with this Remand Order .

ANALYSIS

¶2 Neither party disputes the administrative judge’s conclusion that OPM

proved the existence and amount of the $21,102.00 overpayment at issue, which

occurred as a result of the appellant’s concurrent entitlement to FERS disability

retirement benefits and Social Security Administration (SSA) disability insurance

benefits for the period of January 1, 2018, through March 30, 2020. Initial

Appeal File (IAF), Tab 12 at 29-34, Tab 29, Initial Decision (ID) at 6-7; see

5 U.S.C. § 8452(a); Johnston v. Office of Personnel Management, 70 M.S.P.R.

109, 112-17, aff’d, 99 F.3d 1160 (Fed. Cir. 1996) (Table); 5 C.F.R. § 844.302.

Thus, the dispositive issue in this matter is whether the appellant is entitled to a

waiver of the overpayment.

We vacate the administrative judge’s conclusion that the appellant is entitled to a

waiver of the overpayment and remand the matter for further adjudication.

¶3 The appellant bears the burden of establishing her entitlement to a waiver

by substantial evidence. 2 5 C.F.R. § 845.307(b). To establish entitlement to a

waiver of an overpayment, the appellant must show (1) that she was without fault

and (2) that recovery of the overpayment would be against equity and good

conscience. 5 U.S.C. § 8470(b); Knox v. Office of Personnel Management,

107 M.S.P.R. 353, ¶ 5 (2007); 5 C.F.R. § 845.301. Here, the administrative judge

concluded both that the appellant was without fault in creating the overpayment

and that recovery of the same would be against equity and good conscience. For

2

Substantial evidence is defined as the degree of relevant evidence that a reasonable

person, considering the record as a whole, might accept as adequate to support a

conclusion, even though other reasonable persons might disagree. 5 C.F.R. § 1201.4(p).

3

the reasons set forth herein, we vacate these findings and remand the matter for

further adjudication.

The administrative judge applied an incorrect legal standard in determining

whether the appellant was at fault in creating the overpayment.

¶4 The administrative judge concluded that the appellant was without fault in

creating the overpayment because, although it was undisputed that she had been

advised of her obligation to immediately inform OPM of her receipt of SSA

benefits, she was not awarded SSA benefits until January 2020, “only several

months before” April 25, 2020, when OPM notified her of the overpayment. ID

at 7-8. The administrative judge reasoned that the appellant “had no control over

the fact that, as a result of SSA’s decision to award her benefits retroactive to

January 1, 2018, she had received two full years of FERS disability retirement

overpayments that occurred between January 1, 2018, and December 31, 2019.” 3

ID at 8.

¶5 In determining fault, pertinent considerations generally include the

following: (1) whether payment resulted from any statement the appellant should

have known to be incorrect; (2) whether payment resulted from any failure on her

part to disclose material facts in her possession that she should have known to be

material; and (3) whether she accepted a payment that she knew or shoul d have

known to be erroneous. Knox, 107 M.S.P.R. 353, ¶ 6; 5 C.F.R. § 845.302(a). The

recipient of an overpayment is deemed to be without fault if the individual

“performed no act of commission or omission which resulted in the

overpayment.” 5 C.F.R. § 845.302. OPM guidelines clarify that an individual is

held to be without fault, even if she knew or should have known that the payment

3

We find the administrative judge’s characterization of the appellant having received

“two full years of FERS disability retirement overpayments that occurred between

January 1, 2018, and December 31, 2019” imprecise. ID at 8 (emphasis added).

Indeed, although the appellant was awarded SSA benefits retroactive to January 1,

2018, the administrative judge found that substantial evidence established that she did

not receive any money from SSA until January 2020. See ID at 7-8.

4

was erroneous, if she contacted OPM within 60 days of the receipt of an

overpayment to question the correctness of the payment. Policy Guidelines on

the Disposition of Overpayments under the Civil Service Retirement System and

Federal Employees’ Retirement System (OPM Policy Guidelines), § I.B.6 (1995)

(located at IAF, Tab 12 at 90). Here, the appellant never notified OPM of the

overpayment. Instead, approximately 4 months (i.e., more than 60 days) after the

appellant was awarded SSA benefits, OPM independently learned of the same.

IAF, Tab 12 at 36. Thus, applying the correct legal standard, the appellant has so

far failed to show that she was without fault in creating the overpayment. See

Ewing v. Office of Personnel Management, 100 M.S.P.R. 224, ¶ 5 (2005)

(concluding that the appellant was at fault regarding an overpayment when he

failed to follow the directions provided in OPM’s notification); cf. Boyd v. Office

of Personnel Management, 851 F.3d 1309, 1313 (Fed. Cir. 2017) (explaining that

an appellant who promptly notifies OPM of an overpayment is categorically

deemed to be “without fault”).

¶6 However, our inquiry does not end here. To this end, the appellant argued

before the administrative judge that, at the time she was approved for disability

retirement under FERS, she was undergoing intense psychiatric treatment that

prevented her from understanding the paperwork she had received from OPM; in

other words, the appellant contended that her mental condition caused her to

accept an erroneous payment. 4 IAF, Tab 1 at 5; see 5 C.F.R. § 845.302(b)

(stating that an individual’s mental condition may mitigate against finding fault if

it contributed to the appellant’s acceptance of an erroneous payment). Because

resolving the factual question of whether the appellant’s mental condition

rendered her incapable of knowing or suspecting that she had received an

overpayment may require credibility determinations that are best made first by

the administrative judge, we remand the matter for further adjudication.

4

Although the administrative judge acknowledged this argument, ID at 4, he did not

consider it in his analysis of fault, ID at 7-8.

5

The administrative judge applied an incorrect legal standard in determining

whether recovery would be against equity and good conscience.

¶7 The administrative judge concluded that recovery of the overpayment would

be against equity and good conscience because it would create a substantial

financial hardship for the appellant. ID at 8-17. In so concluding, he reasoned

that the appellant was not required to set aside the overpayment because her

January 2020 award of SSA benefits was retroactive and, therefore, she “was not

aware that she was receiving an overpayment until nearly all of the overpayment

had already occurred.” 5 ID at 8-9.

¶8 Recovery of an overpayment is against equity and good conscience if an

appellant can establish the following: (1) recovery would cause her financial

hardship; (2) she relinquished a valuable right or changed positions for the worse

because of the overpayment; or (3) recovery would be unconsci onable under the

circumstances. 6 Markanich v. Office of Personnel Management, 104 M.S.P.R.

323, ¶ 14 (2006); 5 C.F.R. § 845.303. In assessing these factors, the Board has

found that Federal annuitants who know or suspect that they are receiving

overpayments are expected to set aside the amount overpaid pending recoupment

and that in the absence of exceptional circumstances 7—which do not include

financial hardship—recovery in these cases is not against equity and good

conscience. Knox, 107 M.S.P.R. 353, ¶ 8.

5

Again, the administrative judge’s phrasing is imprecise. As stated, although the

appellant was awarded SSA benefits retroactive to January 1, 20 18, the administrative

judge found that substantial evidence established that she did not receive any monetary

benefits from SSA until January 2020. See ID at 7-8.

6

We discern no basis to disturb the administrative judge’s conclusions that the

appellant failed to show either (1) that she relinquished a valuable right or changed

positions for the worse because of the overpayment or (2) that recovery would be

unconscionable under the circumstances. ID at 9-10. Thus, the dipositive issue for

purposes of determining whether recovery would be against equity and good conscience

is whether recovery of the overpayment would cause the appellant financial hardship.

7

OPM Policy Guidelines explain that “[e]xceptional circumstances would involve

extremely egregious errors or delays by OPM—e.g., a failure to issue a written decision

within 4 years of a debtor’s request for waiver.” IAF, Tab 12 at 93.

6

¶9 Here, it is unclear why the administrative judge concluded that the

retroactive nature of the appellant’s SSA benefits rendered the set-aside rule

inapplicable to her; indeed, the Board has previously found that the rule applies

in such circumstances. E.g., Gulan v. Office of Personnel Management,

86 M.S.P.R. 16, ¶¶ 3-4, 9 (2000). Thus, applying the correct standard, we would

agree with OPM’s contention that the appellant should have set aside any

disbursement from SSA in order to repay OPM for the corresponding reductions

that should have been taken from her disability retirement benefits. IAF, Tab 12

at 14, 66. However, as stated, the appellant argued that her mental conditions

precluded her from understanding correspondence from OPM. IAF, Tab 1 at 5.

Accordingly, on remand, the administrative judge shall determine whether the

appellant’s mental conditions precluded her from knowing or suspecting that she

was receiving an overpayment and, therefore, whether the set-aside rule should

apply to her. See Zucker v. Office of Personnel Management, 114 M.S.P.R. 288,

¶¶ 8-10 (2010) (remanding an overpayment appeal for further adjudication

regarding the set-aside rule when the administrative judge failed to consider the

appellant’s claim that his deteriorating mental conditions led him to erroneously

believe that he had not received an overpayment).

On remand, the administrative judge shall further develop the record regarding

the appellant’s finances.

¶10 As stated, the administrative judge concluded that the appellant showed by

substantial evidence that recovery of the overpayment would create a financial

hardship for her. ID at 10. Although the administrative judge found that the

appellant’s monthly living expenses exceeded her monthly income, ID at 15 -16,

he also acknowledged that, at the time she filed her Board ap peal, she had “a

substantial amount of personal savings,” i.e., approximately $52,000.00 as of

October 2021, ID at 16; IAF, Tab 24 at 5. The administrative judge expressed

7

uncertainty as to the source of some these savings, 8 a large portion of which

stemmed from recent deposits. ID at 12; IAF, Tab 24 at 10, Tab 25 at 5, Tab 26

at 6. To this end, the administrative judge acknowledged that the appellant had

testified that some of these deposits reflected her sale of a diamond ring;

however, he found it “largely improbable that she was able to generate nearly

$20,000.00 from the sale of diamonds from a single ring.” ID at 12.

¶11 Financial hardship may be deemed to exist when the appellant “needs

substantially all of [] her current income and liquid assets to meet current and

ordinary living expenses and liabilities.” 5 C.F.R. § 845.304. However, when

information submitted by the appellant is incomplete, the adm inistrative judge

should request additional information so that he can make a reasoned

determination on the question of financial hardship. Zelenka v. Office of

Personnel Management, 107 M.S.P.R. 522, ¶ 15 (2007).

¶12 Here, we find the information concerning the appellant’s financial status to

be incomplete; accordingly, we vacate the administrative judge’s conclusion that

the appellant showed by substantial evidence that recovery of the overpayment

would create a financial hardship for her. On remand, the administrative judge

shall further develop the record regarding the appellant’s finances and provide the

appellant an opportunity to submit an updated Financial Resources Questionnaire

(FRQ). 9 See Zucker, 114 M.S.P.R. 288, ¶ 9 (instructing the administrative judge

8

The appellant indicated on a July 7, 2021 Financial Resources Questionnaire that she

had $39,000.00 in savings. IAF, Tab 12 at 17. Banking statements that she provided

indicated that, as of September 2021, she had over $54,000.00 in savings. IAF, Tab 24

at 9. The appellant also seemingly paid off a $7,528.32 car loan during the pendency of

her appeal before the administrative judge. IAF, Tab 12 at 17, Tab 24 at 4.

9

To the extent the administrative judge concludes on remand that the appellant is not

entitled to a waiver of the overpayment, this additional evidence will be relevant for

purposes of the repayment schedule. Indeed, even if an appellant is not entitled to a

waiver of recovery of the overpayment, she is entitled to an adjustment of OPM’s

recovery schedule if she is able to show that recovery under that schedule would cause

her a financial hardship. Malone v. Office of Personnel Management, 113 M.S.P.R.

104, ¶ 4 (2010); 5 C.F.R. § 845.301.

8

to provide the appellant an opportunity to submit an updated FRQ when

remanding an overpayment appeal).

¶13 Accordingly, we remand this appeal to the Western Regional Office for

further adjudication. On remand, the administrative judge shall apply the legal

standards set forth above, further develop the record as described, and, if

necessary, hold a supplemental hearing. See Spithaler v. Office of Personnel

Management, 1 M.S.P.R. 587, 589 (1980) (explaining that an initial decision must

identify all material issues of fact and law, summarize the evidence, resolve

issues of credibility, and include the administrative judge’s c onclusions of law

and his legal reasoning, as well as the authorities on which that reasoning rests ).

ORDER

¶14 For the reasons discussed above, we remand this case to the Western

Regional Office for further adjudication in accordance with this Remand Order.

FOR THE BOARD: /s/ for

Jennifer Everling

Acting Clerk of the Board

Washington, D.C.