July 22, 2024


World's finest Law

Government Promises of Pension Benefits – Beware!

Federal employees and their family members run into this situation, which unfortunately is not so uncommon. In planning for retirement, the federal employee seeks verification of the amount of money to be received upon retirement. In some cases, a government agent with the Office of Personnel Management (“OPM”) or other agency will notify the employee of a guaranteed sum of monthly pension benefits. There are even cases in which the government will make this promise to the employee in writing. When the employee retires however, the government argues that the promise was made in error and that employee is not in fact entitled to the promised amount.

An equally frustrating situation involves the employee’s family members, typically the employee’s spouse, who may be planning for her future upon the death of her husband. In some cases, the spouse will make inquiry to OPM to determine her survivorship benefits upon the death of her husband. OPM may also promise her guaranteed benefits. Sure enough, upon death of the spouse, the government retracts its promise, claiming that it was made in error and that the promise actually violated a government policy or statute. The question thus arises as to whether there are any legal rights to the federal employee or his family members to enforce the ill made promise.

In the private sector, people to whom promises have been made are protected by the legal doctrine of promissory estoppel, which means that if such person reasonably relied on the promise to his or her detriment and the promise was not fulfilled, that person has a cause of action for damages incurred as a result of such reliance. This situation typically occurs during a career change, where the highly recruited employee is promised a much better position, ends up relocating, selling his or her home, etc., only to find that the new job did not materialize. Even though the employee is at-will, nonetheless, the employee has a cause of action against the new employer for promissory estoppel.

Unfortunately, with respect to federal employees and their pensions, this issue was decided against them in the U.S. Supreme Court’s decision in Office of Personnel Management v. Richmond, 496 U.S. 414 (1990), where the claimant sought advice from a federal employee and received erroneous information about the value of pension benefits. The claimant contended that the erroneous and unauthorized advice should give rise to equitable estoppel against the government, and that the Court should order payment of benefits contrary to the statutory terms. The United States Court of Appeals for the Federal Circuit agreed with him and applied promissory estoppel against the government, entitling him to a monetary payment not otherwise permitted by law. However, the Supreme Court reversed this decision and held that estoppel could not be applied to entitle the respondent claimant to benefits.

The Supreme Court primarily relied on the Appropriations Clause of the U.S. Constitution for its reasoning which states “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Thus, “payment of money from the Treasury must be authorized by a statute.” Richmond, 496 U.S. at 424. In short, promissory estoppels, a common law remedy cannot be the basis for collecting a government pension.

If you or a close family member is employed with the federal government, the best thing to do is to have your pension benefits reviewed by an attorney who practices in this area. Don’t rely on promises made to you by a government agency.