Deputy Secretary of Defense Ashton B. Carter said waiver requests for individuals who erroneously received Living Quarters Allowances will by considered on their own merits. (Colin Kelly/Staff)
When Steve Ewell, a retired Navy captain, took an Army civilian executive job in Germany in 2005, he started receiving a monthly housing allowance that now amounts to about $3,200 a month.
But now that benefit, for which the Army said he was eligible, has become a life-altering debt for Ewell — a GS-15 who learned Friday that his potential exposure is more than $336,000.
That is because the Defense Department in May ruled that 659 overseas civilian employees erroneously received a living quarters allowance (LQA) that the department had said they were eligible for but now must pay back. Ewell said some employees expect their debt to top $1 million.
Last week, affected employees got more bad news: Deputy Defense Secretary Ashton Carter said in a memo the department cannot provide blanket debt relief to them.
Instead, employees must apply individually for a waiver to release them from debt.
Each waiver request “must be considered on its own merits,” Carter told the chiefs of the European, Africa and Pacific commands in a memo last week.
DoD, however, will endorse individual debt waiver requests as long as there is no evidence the employees got their LQAs without resorting to misrepresentation or fraud, Carter added. The final decision on granting relief rests with the Defense Office of Hearings and Appeals, an independent review authority.
Troubling to many affected employees is that, in seeking a waiver, they must sign a form acknowledging the debt the Defense Department says they owe is legitimate. If they do not, Carter said in his memo, the department “will begin to recoup the indebtedness approximately 6 months after the employee has been notified of the debt amount.”
Carter said the employee’s signature on the waiver application form “does not constitute an admission of liability for the debt. Rather, it acknowledges that he or she does not intend to dispute the validity or the amount of the debt during the waiver process.”
Carter said the department cannot retroactively authorize the LQA or “grandfather” the affected employees because they do not meet eligibility criteria spelled out in the State Department regulation that sets LQA policy.
That regulation states that employees hired overseas after working for more than one employer — such as a contractor, an international organization or the military — are not eligible to receive LQA. Nevertheless, the Defense Department interpreted the regulation differently for years, resulting in thousands of employees getting the allowance over many years.
Commanders plea for a fix
With his memo, Carter rejected pleas from top commanders in Europe, Korea and Africa to continue the housing allowance for their affected employees and suspend the debt repayment process. The commanders said many affected employees will no longer be able to afford living overseas and will be forced to return to the U.S., causing havoc on their personal lives and hurting readiness at their commands.
“The net result of what is essentially a clerical error will be a significant loss of expertise and experience at a time Korea can least afford to have this impact,” said Army Gen. James Thurman, commander of U.S. Forces Korea, in an April 30 memo.
“This action will result in significant increased costs to DoD at a time we are trying to reduce spending. We anticipate that the replacements for the current employees will be awarded LQA, so the net result of this current action will be additional [permanent-change-of-station] costs with no change in personnel costs.”
Army Gen. David Rodriguez, commander of U.S. Africa Command, told Carter in a June 19 memo that canceling LQA benefits for affected employees will result in a $35,000 to $50,000 penalty per year for each employee.
“Most will likely depart the command, leaving gaps in talent and experience vital to mission accomplishment, and I am concerned about the potential operational impact,” Rodriguez said.
“Moreover,” he added, “bringing suitable replacements on board will impose costs far greater than granting a one-time exception to policy to cover these employees, especially when newly-hired personnel will receive LQA.”
Air Force Lt. Gen. Noel Jones, vice commander of U.S. Air Forces in Europe, said, in an April 17 memo to Jessica Wright, the acting undersecretary of Defense for personnel and readiness, who has spearheaded DoD’s move to cancel LQA for affected employees and recoup those erroneous payments: “We need to take the necessary steps to prevent our civilians from ‘breaking’ under this pressure, and we would appreciate your help by delaying the repayment process.”
'A 'scheme' to avoid responsibility
One affected employee is Pete McCollaum, a retired Army officer stationed in Vicenza, Italy, where he works as a GS-13 branch chief for North Africa security cooperation at U.S. Army Africa.
He said in an interview that he will be responsible for repaying roughly $65,000 in erroneous LQA.
McCollaum voiced anger over the way the department has handled the matter, especially its assigning of debt to employees who received the housing allowances through no fault of their own.
In a paper he authored on the matter, McCollaum said forcing employees to sign forms acknowledging their debts “is, in every sense of the word, a scheme devised by lawyers and bureaucrats to avoid corporate responsibility at the expense of ruining careers, finances and livelihood of DoD employees, people who have devoted their entire adult lives in service to the government.”
He pointed to written guidance that DoD provided to supervisors who must advise employees who will be losing their LQA, which says that “many employees will be concerned about the impact of this action on their financial situation and perhaps react with severe depression up to the point of becoming aggressive or suicidal.”
“It is most ironic that the DoD, within weeks of an Army-wide safety stand down for suicide prevention, did knowingly and willingly enact a policy designed to protect themselves from legal liability by inflicting severe and perhaps suicidal or homicidal stressors on their employees,” McCollaum said.
Two weeks ago, the Defense Finance and Accounting Service dispatched a four-person team to Germany to help at-risk employees apply for waivers and plans to do the same for affected civilians in the Pacific Rim in September.
In the meantime, DoD is delaying any debt collection efforts until the waiver process runs its course, a spokesman, Navy Lt. Cmdr. Nathan Christensen, said in an email. DoD has also extended LQA eligibility for the 659 employees for one year, Christensen said, adding that those funds will not be subject to repayment.
For about two-thirds of those affected, Christensen said, the impasse stems from misinterpretation of the regulations governing LQA eligibility. The remainder erroneously received the allowance for other reasons, such as their commands failing to follow department policy on when LQA can be granted.
While the bulk of the affected employees are based in Europe, some are also stationed in Japan, South Korea and other countries. ■
Steve Watkins contributed to this article.