Rev. Rul. 61-6

Advice has been requested as to the "retirement age" of a so-called "investigatory" employee of the United States Government, for the purpose of excluding disability pension payments from gross income pursuant to section 105(d) of the Internal Revenue Code of 1954 and section 1.105-4(a)(3)(i) of the Income Tax Regulations.

"Investigatory" employees of the United States Government are, generally speaking, those engaged primarily in the investigation, apprehension, or detention of persons suspected or convicted of offenses against the criminal laws of the United States.

Subject to certain limitations, section 105(d) of the Code excludes from gross income amounts received by an employee pursuant to the provisions of a wage continuation plan if such amounts constitute wages or payments in lieu of wages for a period during which the employee is absent from work on account of personal injuries or sickness.

Section 1.105-4(a)(3)(i) of the regulations provides, in effect, that the exclusion allowed by section 105(d) of the Code is applicable to disability pension payments received by an employee under a wage continuation plan until he reaches "retirement age," but does not apply to any such payments he receives after he reaches "retirement age."

Revenue Ruling 57-76, C.B. 1957-1, 66, provides, in part, that, for the purpose of excluding an employee's disability pension from gross income pursuant to section 1.105-4(a)(3)(i) of the Income Tax Regulations, "retirement age" will be deemed to be the lowest age specified in the appropriate written employees' pension or annuity plan at which the employee, had he not been disabled and had he continued in such employment, would have had the right to retire without the consent of the employer and receive retirement benefits based on service to date of retirement computed at the full rate set forth in the plan.

The application of the rules stated in Revenue Ruling 57-76 is illustrated by examples. Example (3) provides, in part, as follows:

Example (3) The Civil Service Retirement Act * * * provides among other things, that certain service or disability retirement benefits will be paid to eligible civilian employees of the United States Government. In general, an employee may elect to retire and receive an immediate service annuity, the amount of which is not actuarially or similarly reduced, at any time after he meets one of the following age and service conditions:

(1) Age 50 with 20 years of service as an investigatory employee.

(2) Age 60 with 30 years of service.

(3) Age 62 with 5 years of service.

* * * * * * *

For the purpose of excluding disability annuity payments pursuant to section 1.105-4(a)(3)(i) of the Income Tax Regulations, a civilian employee of the United States Government reaches retirement age at the earliest applicable age described in conditions (1), (2) and (3) above.

Section 6 of the Civil Service Retirement Act of May 29, 1930, as amended, 5 U.S.C. 2256 (1958 edition), provides, in pertinent part, that any employee who attains the age of sixty years and completes thirty years of service shall, upon separation from the service, be paid an annuity. Likewise, any employee who attains the age of sixty-two years and completes five years of service shall, upon separation from the service, be paid an annuity. However, any employee the duties of whose position are primarily the investigation, apprehension, or detention of persons suspected or convicted of offenses against the criminal laws of the United States, including any employee engaged in such activity who has been transferred to a supervisory or administrative position, who attains the age of fifty years and completes twenty years of service in the performance of such duties, may, if the head of his department or agency recommends his retirement and the United States Civil Service Commission approves, voluntarily retire from the service and be paid an annuity.

The current regulations on the retirement of investigatory (or law-enforcement) employees from the United States Government provide, in pertinent part, that the purpose of such provision is to allow the earlier retirement of certain employees whose duties are primarily the investigation, apprehension, or detention of persons suspected or convicted of offenses against the criminal laws of the United States and who, because of the physical requirements of their positions and the hazardous activities involved, are no longer capable of carrying on efficiently. Their replacement by younger men would improve the service. A more generous method of computing the amount of annuity is provided, not as a special reward for the type of service involved, but rather because a more liberal formula is usually necessary to make the earlier retirement economically possible.

Such regulations further provide that the agency head's recommendation for retirement under this provision is discretionary, and he should exercise this discretion to recommend favorably only when he determines that the public interest would be best served by the employee's retirement, with annuity computed under the generous formula applicable. Furthermore, the regulations on the retirement of investigatory employees state that the Commission will carefully review each claim and withhold its approval unless it is clear that the retirement of the applicant is consistent with the intent of Congress in enacting this law.

In the case of United States v. Oren E. Cummins, 265 Fed. (2d) 763, it was held that even though an employee had attained age 50 and had 20 years of qualifying "hazardous" service he was not entitled to obtain the larger retirement benefits provided by the Civil Service Retirement Act unless he had the recommendation of the head of his agency and the approval of the Civil Service Commission and that such recommendation and approval were entirely discretionary. The employee was not entitled to this retirement as a matter of right.

In view of the foregoing, it is held that, for purposes of the exclusion from gross income allowed by section 105(d) of the Code with respect to sick pay under a wage continuation plan, an investigatory or law-enforcement employee of the United States Government reaches "retirement age" on the date that he attains age 60 with 30 years of service or on the date that he attains age 62 with at least five years of service, whichever is earlier, and not at age 50 with 20 years of service, since he cannot retire at that time without the consent of his employer.

Revenue Ruling 57-76 is accordingly modified to eliminate from example (3) therein condition (1) to the effect that a Civil Service employee reaches retirement age at age 50 with 20 years of investigatory service.