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Gebbie v. United States Railroad Retirement Board

September 29, 1980


On Review of a Decision by the United States Railroad Retirement Board.

Before Cummings, Pell and Bauer, Circuit Judges.

Author: Pell

The primary issue presented by these petitions for review of a decision of the Railroad Retirement Board*fn1 is the eligibility of the petitioners for so-called "windfall" or "dual" benefits under the Railroad Retirement Act of 1974. This Act provides for payment of these dual benefits to certain railroaders if they are entitled to spousal benefits under the Social Security Act "as in effect on December 31, 1974." The petitioners are men whose eligibility for Social Security spousal benefits came to light in the Supreme Court's March 1977 decision striking certain Social Security dependency requirements for widower's benefits as unconstitutional. Califano v. Goldfarb, 430 U.S. 199, 97 S. Ct. 1021, 51 L. Ed. 2d 270 (1977).*fn2 On the basis of the language in the Railroad Retirement Act limiting recipients of dual benefits to those eligible under the Social Security Act "as in effect on December 31, 1974," the Board ruled that the dependency requirement was applicable to petitioners, and that the petitioners were therefore entitled to no dual benefits. The petitioners argue that the Board has erroneously interpreted the Railroad Retirement Act, or, if the Board's interpretation is correct, the requirement is unconstitutional.

Three petitions have been consolidated for the purpose of our review. The three petitioners, Donald Gebbie, Marvin Stille, and John Holmes all began to receive Social Security spousal benefits after the Supreme Court's Goldfarb decision. The Railroad Retirement benefits of each were reduced, however, by an amount corresponding to the Social Security spousal benefits. Furthermore, the Board informed each that delay in processing the reduction in Railroad Retirement benefits had resulted in the incorrect payment to the petitioners of dual benefits and that recoveries of the overpayments were necessary.

The Railroad Retirement Act of 1974 was designed to phase out the dual benefits scheme established in the predecessor Railroad Retirement Act of 1937. Under the dual benefit system established in the 1937 Act, individuals fully insured under the Railroad Retirement system and the Social Security system were entitled to benefits under both. The 1974 Act established a system to phase out this practice. Two sections of this Act set forth this phase-out plan, sections 3(m) and 3(h), 45 U.S.C. §§ 231b(m) and 231b(h). Only a brief summary of the statutory plan is necessary for an understanding of the issues: for purposes of calculating Railroad Retirement benefits, section 3(m)*fn3 of the 1974 Act subtracts from the worker's Railroad Retirement benefits the amount he collects each month from Social Security, thus precluding collection under both systems. Section 3(h) of the 1974 Act, however, adds back a certain amount of Social Security benefits, that is, those to which the worker would have been entitled under the Social Security Act as in effect on December 31, 1974. Section 3(h) also sets forth service-related requirements for eligibility for the dual benefits. Section 3(h) is directed at two forms of Social Security coverage. The first form of coverage is set forth in sections 3(h)(1) and (2), 45 U.S.C. §§ 231b(h)(1) and (2), and is generally referred to as "primary coverage" because it arises from a worker's own employment in a job covered by Social Security.*fn4 The second form of Social Security benefits covered by the section 3(h) add-back provision is generally referred to as "auxiliary coverage" because the benefits derive from the employment of a spouse in services covered by Social Security. This form of benefit is covered in sections 3(h)(3) and (4). The petitioners claim eligibility for dual coverage under section 3(h)(3), but apparently there is no dispute that both sections raise the same problems of interpretation.*fn5 In describing the add-back computation for auxiliary Social Security benefits, section 3(h) (3) uses the language relied on by the Board in denying benefits to the petitioners: section 3(h)(3) provides that benefits "shall be increased" by "the wife's, husband's, widow's, or widower's insurance benefit to which such individual would have been entitled, upon attaining age 65 . . . under the provisions of the Social Security Act as in effect on December 31, 1974." 45 U.S.C. § 231b(h)(3) (emphasis supplied). According to the Board, "(technically), a male railroad employee who is entitled to (a Social Security spousal) benefit . . . as a result of the Goldfarb or Jablon decisions and who meets the requirements of sections 3(h)(3) and 3(h)(4) of the Railroad Retirement Act is eligible for a windfall benefit. However, the computations required under Sections 3(h)(3) and 3(h)(4) . . . would render that benefit as zero." The Board submits that the "as in effect" language requires inclusion of the dependency requirements of the Social Security Act as they existed in 1974, prior to the Goldfarb decision. The petitioners argue, and we agree that this narrow reading of the Railroad Retirement Act has no merit in light of this court's recent decision in Wright v. Califano, 603 F.2d 666 (7th Cir. 1979), cert. denied, 447 U.S. 911, 100 S. Ct. 2999, 64 L. Ed. 2d 862 (1980).

Wright was a class action filed on behalf of applicants for Social Security husband's benefits whose applications were rejected by the Secretary for not meeting the dependency requirements later declared unconstitutional in the Goldfarb line of decisions. The action sought direct review under 42 U.S.C. § 405(g) of the Secretary's eligibility determination. The action in Wright was pending before the district court at the time Goldfarb was decided. After that decision the district court certified the class action and ordered the Secretary to pay the class members the benefits they would have received had their applications originally been granted. We affirmed the decision of the district court ordering benefits to relate back before the Goldfarb decision:*fn6

The Secretary's decision denying an applicant benefits under 42 U.S.C. § 402(j)(1) (the retroactive relief provision of the Social Security Act quoted in the margin) solely on the basis of 42 U.S.C. § 402(c)(1)(C) (the unconstitutional dependency requirement) is no less erroneous or subject to correction in a proceeding under 42 U.S.C. § 405(g) than a decision under 42 U.S.C. § 402(c) generally. Reversal of the Secretary's decision as to eligibility necessarily requires the award of "retroactive" relief. It is the date on which the application is filed, and not the date on which the claimant is ultimately determined to be eligible that triggers his entitlement to benefits under the Act. See, e.g., 42 U.S.C. § 402(c), (j)(1). Subject to certain exceptions that are irrelevant here, the language of (the retroactive relief) provision (42 U.S.C. § 402(j)(1)) is mandatory . . . a claimant is entitled to "retroactive" benefits for a period of up to twelve months preceding his application.

Thus, although the applicants in Wright in the literal sense were not entitled to benefits at the time of the Secretary's eligibility determination, this court nevertheless reversed the Secretary's decision, in effect reading the dependency requirements out of the Act.

Wright would appear to require us to eliminate the unconstitutional dependency provisions from the Social Security Act in determining the correctness of the Board's determination of ineligibility. There is no dispute that the wives of the petitioners were fully insured for these Social Security benefits. Indeed, the petitioners are now receiving the Social Security benefits. The Board, however, argues that the "as in effect" language of section 3(h)(3) of the Act compels continued application of the invalid dependency requirements when the benefits in question are sought under the Railroad Retirement Act instead of the Social Security Act. We are not convinced that the effect of this language is as plain as the Board submits.

The basis for the Board's proposed distinction between the Acts is the purpose of the Railroad Retirement Act of 1974 to restore the retirement fund to a financially sound position. See S.Rep. No. 93-1163, 93d Cong., 2d Sess. (1974) reprinted in (1974) U.S.Code Cong. & Admin.News, p. 5702. Particularly damaging to the integrity of the fund was the payment of dual benefits under both the Railroad Retirement system and Social Security. Id. at 5703-10. Congress therefore determined that the dual benefits system would have to be phased out, and provided for this in the 1974 Act.

In response to this argument, however, the petitioners emphasize that the financial difficulties prompted only a phasing out of dual benefits, and not their elimination. The Board's argument thus cannot stand solely on the basis that it conserves funds by denying dual benefits. The fact of the statute indicates Congress' intent that some workers continue to be entitled to these benefits. Congress decided to draw the line according to whether workers had satisfied the vesting requirements for benefits by the effective date of the Act:*fn7

"(An) employee with "vested rights" to benefits under both the Railroad Retirement Act and the Social Security Act as of a specified date . . . would receive an additional benefit amount based on his employment prior to 1975. This amount is intended to preserve an eligible employee's "right" to such dual benefits as had accrued prior to the effective date of the new Railroad Retirement Act."

Id. at 5721.

The Board argues that this class of vested beneficiaries should be narrowed further in light of Congress' intention that "a "windfall' no longer . . . be possible except insofar as the bill expressly preserves benefits for those beneficiaries . . . whose equities entitled them thereto." (Emphasis added). Id. at 5710. According to the Board, the reference to "equities" limits the class of beneficiaries to those workers with "expectations" of benefits in 1974. The Board reasons that the petitioners could not have known ...

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