CIVIL SERVICE RETIREMENT ANNUITY INCREASES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP67B00446R000600030007-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 21, 2016
• Document Release Date: August 16, 2006
• Sequence Number: 7
• Publication Date: August 30, 1965
• Content Type: REGULATION

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Calendar Noe 635
89TH CONGRESS
1st Session
SENATE REPORT
No. 653
CIVIL SERVICE RETIREMENT ANNUITY INCREASES'
AUGUST 30, 1965.-Ordered to be printed
Mr. YARBOROUGH, from the Committee on Post Office and Civil
Service, submitted the following
REPORT
[To accompany H.R. 8469]
The Committee on Post Office and Civil Service, to which was
referred the bill (H.R. 8469) to provide certain increases in annuities
payable from the civil. service retirement and disability fund, and for
other purposes, having considered the same, reports favorably thereon
with amendments and recommends that the bill as amended do pass.
The committee has striken out section 2 of the bill as passed by
the House of Representatives.
This provision would, after the effective date, of this act, increase
from 55 to 60 percent the amount of a survivor's annuity. It would.
have no effect on presently existing survivor annuities or upon future
survivor annuities based on annuities which commenced prior to the
effective date of this act.
Last February, President Johnson appointed the Cabinet Committee
on Federal Staff Retirement Systems. This Committee will report to
the President not later than becember 1, 1965. In 1966, Congress
will have the benefit of their research and opinions concerning the full
scope of Federal retirement systems. Rather than make changes at
this time--changes which would affect only future survivor annui-
tants-the committee prefers to defer action until a comprehensive
study of the provisions of the Retirement Act can be made.
PURPOSE OF THE BILL.
Section 1 of H.R. 8469 will accomplish three things:
(1) Increase all annuities having a commencing date prior to
October 1, 1956, by 11 percent.
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2 CIVIL SERVICE P.I:TI1 EMENT ANNUITY INCREASES
(2) Increase all annuitie:; having a commencing date after October
1, 1956, by G percent.
(3) Revise the method cf determining cost-of-living increases.
Congress in 1956 complc-tely revised the Civil Service Retirement
Act. Among other changes enacted was an upward revision of the
formula used to compute annuities. This upward adjustment meant
that all persons who retired after October 1, 1956, received a larger
annuity than one who retired prior to that date even though both
annuitants ma have had the same high 5-year average salary and
the same number of years of service. Ad'ustment in pre-1956 an-
nuities were made in 1958, but the disparity between the two annuities
has continued. To resolve this problem, at least in part, II.R. 8469
grants a greater increase -o those who retired under the pre-1956
provisions of the law.
The increase in annuities for those who retired and received the
benefits of the 1956 Retirement Act Amendments are increased by 6
percent.. Section 1 also provides that survivor annuitants who receive
an annuity based on the anauity of a deceased employee who died or
retired prior to the enactment of the survivor annuity provisions of
the 1948 Retirement Act Amendments shall receive an increase of
15 percent of the annuity or $10, whichever is the lesser. These
survivor annuitants receive an average of $44 a month and are, in
the opinion of the committee, deserving of special consideration.
There are about 15,000 such survivor annuitants.
II.R. 8469 provides that instead of making an annual determina-
tion for adjusting civil service annuities in accordance with cost-of-
living increases, tino Commission shall make a monthly determination.
Whenever the Consumer Price Index shows an increase of at least
3 percent for each of 3 consecutive months, all annuities shall be
increased by the highest percentage (to the nearest tenth) shown in
the 3-month period. This amendment will guarantee adjustments
when prices go up and will eliminate the timelag now existing in
the law.
The Subcommittee on Retirement held public hearings August 12
and 13, 1965, on H.R. 8469. Representatives of Government
agencies and many empl,hyeo organizations testified in favor of
enactment of this legislation. Evidence presented to the committee
demonstrates the necessity for action to increase annuities for retired
civilian employees of tics Government. President Johnson has
stated that, it married couple living on less than $3,000 a year is
living on a poverty level. The committee heard evidence indicating
that 62 percent of all civil service annuitants and 97 percent of all
survivor annuitants receive less than $200 a nmonth.
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The annual cost of H.H. 8469 is $101.9 million. The increases
authorized by this legislation will increase the unfunded liability
of the civil service retirement and disability fund by $1,040 million.
SECTIONAL ANALYSIS
Section 1(a) redefines the Consumer Price Index to mean the
monthly price average instead of the average over a full calendar year.
Section 1(a) also defines a new ' term, "base month" to mean the
month referred to for determining an increase in annuities after the
first increase granted by this act.
Section 1(b) would allow the Commission to use money in the retire-
ment fund to pay the administrative expenses of increasing annuities
instead of paying such expenses out of the Commission's budget.
This language is considered necessary because of the virtual im-
possibility of determining when a future increase will occur. Without
adequate funds to pay the salaries and other expenses of administer-
ing an increase, delay in providing the increases could occur.
Section 1(c) increases the annuities of all persons who are entitled
to receive a civil service annuity on the effective date of this act:
L All annuities which commenced (or, if a survivor annuity,
are based on annuities which commenced) on or before October 1,
1956 (the date of the major amendments to the retirement act),
shall be increased by 6.5 percent of the annuity plus the increase
in the cost of living as reflected in the Consumer Price Index
from December 31, 1962, until the latest report of the Bureau of
Labor Statistics. This will be an additional 4.5 percent, for a
total increase of 11 percent.
2. All annuities which commenced after October 1, 1956, shall
be increased by 1.5 percent plus the same increase in the cost of
living noted immediately above. This will be a total increase of
6 percent.
Section 1(c) guarantees that any survivor whose annuity is based
on the "free survivor annuity" language of the 1948 amendments or
the "forgotten widow annuity" language of the 1958 amendment shall
be increased by 15 percent of the annuity or $10, whichever is the
lesser.
Section 1(c) provides that the new "base month" for determining
future increases shall be the month which showed the highest percent-
age increase in the cost of living over 3 percent during a period of
3 consecutive months which showed an average increase of at least
3 percent.
Existing law on the cost-of-living increase in retirement annuities
provides that the Commission shall determine annually whether the
cost of living has increased at least 3 percent from the base year
(now 1962) until the year of the determination. If the increase is
not 3 percent, the Commission waits until the following January 1
for another determination.
If the average increase is 3 percent, all annuities which commenced
before January 2 of the preceding year are increased on April 1 follow-
ing the determination. Under present law, therefore, there is a
built-in, 15-month lag.
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4 CIVIL SERVICE RETIREMENT ANNUITY INCREASES
Section 1(e) changes this by providing for a monthly determination
instead of an annual determination. Whenever the cost-of-living
index shows for 3 consecutive months a rise of at least 3 percent
from the "base month," annuities payable on the first day of the third
month thereafter shall be increased by the highest percentage (to the
nearest tenth) shown in any one of the 3 months. That month then
becomes the new base month.
Section 1(c) (1) clarifies present law on the eligibility for receiving
an annuity increase, elimiiates the 15-month lag in receiving in-
creases, and guarantees that survivor annuitants shall receive the
increases previously received by the annuitant himself under this
act up to the time of his death.
Section 1(c)(2) provides that the children survivors of deceased
Federal employees who in the future will receive an annuity shall have
the annuity increased by the percentage of increase given to annuitants
who retired after October 1, 1956. If this language were not included,
children survivors whose annuities commence after the effective date
of the act would not receive the proper percentage relationship of
annuity to salary as those children survivors whose parent died before
the affective date of the act.
Section 1(d) prohibits inclusion of annuity purchased by voluntary
contributions from the annuity upon which the increases are calculated..
Section 1(e) provides for calculation to the nearest dollar and guar-
antees everyone at least 1 dollar.
Section 2 provides that. to benefits authorized by this act shall be
paid out of the civil service retirement and disability fund. This
provision will avoid the prableln which faced all of our civil service
retirees in 1963 when their annuity increases were delayed by 6 months
because of the necessity of an appropriation by the Congress before
the increases could be paid.
Following are letters from the Chairman of the U.S. Civil Service
Commission and the Bureau of the Budget on H.R. 8469.
U.S. CIVIL SERVICE COMMISSION,
Washington, D.C., August 11, 19G5.
Hon. A. S. MIKE MONRONES,
Chairman, Cbtnmiffee on Pest Office and Cuff Service,
U.S. Senate.
DEAR MR. CHAIRMAN : This is in response to your request for the
official views of the Commission on H.R. 84G9, a bill to provide certain
increases in annuities payable from the civil service retirement and
disability fund, and for other purposes.
Effective the first day of the third month which begins after enact-
ment, section 1 of H.R. 8469 would provide the following adjustments
in existing annuities:
1. All annuities would be increased by the sane percentage as
(lie rise in the Consumer Price Index from the annual average of
calendar year 1962 to the month latest published on date of enact-
ment. Through June 1965, this rise has been 4,2 percent.
2. Annuities which began, or survivor annuities deriving from
annuities which began, on or before October 1, 1956, would be
further increased by 6). percent; annuities which began after
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CIVIL SERVICE RETIREMENT ANNUITY INCREASES 5
October 1, 1956, would be further increased by 1;< percent. When
combined with the 4~2 percent cost-of-living increase, the total
increase to each of these annuitant groups would be 11 and 6
percent, respectively.
3. Annuities of widows and widowers of former employees who
died or retired before the survivorship amendments of 1948,
which annuities were later awarded as gifts limited to $50 or
$63 a month, would be further increased by an amount sufficient
to make the total increase equal the lesser of 15 percent or $10 a
month.
For the future, annuities would be increased automatically to
reflect changes in the cost of living. Such increases would occur when-
ever the monthly price index showed a rise of at least 3 percent for 3
consecutive months over the base month used for determining the
most recent cost of living adjustment.
The bill would make the retirement fund available for the payment
of benefits resulting from its enactment, and also for the payment of
administrative expenses incurred by the Civil Service Commission in
putting into effect the first and all subsequent annuity increases.
Section 2 of H.R. 8469 proposes that the annuities of eligible widows
and widowers of employees who die in service or who retire and die
after enactment will be 60 percent of the earned annuity or of the
survivor base selected by the employee, instead of the 55 percent
provided by existing law.
The initial annual cost of the annuity increases proposed by section
1 of H.R. 8469 is estimated to be $101.9 million, with an increase in
the unfunded liability of about $1,040 million. Section 2 would in-
crease the normal cost of the system by 0.18 percent of payroll.
It would add $817 million to the unfunded liability, and would incur
an annual cost of approximately $58 million on the normal cost plus
interest basis. The total first-year cost of sections 1 and 2 would be
$102.4 million, and the unfunded liability would be increased by a
total of $1,857 million.
By memorandum dated February 1, 1965, the President created
the Cabinet Committee on Federal. Staff Retirement Systems under
the chairmanship of the Director of the Bureau of the Budget. In
that memorandum he directed a review of the whole structure of our
retirement policies, including the pattern and amounts of benefit
payments. He specifically requested. examination of survivor
benefits available under the various plans.
The Commission is of the opinion that it would be best to defer
retirement legislation until it can be considered in the light of the
findings and recommendations which will be included in the Committee
report scheduled for completion by December 1, 1965. However,
some justification can be found for immediate adjustment of existing
annuities. In 1962 the Commission devised and submitted a plan
for permanent adjustment of annuities to reflect changes in the cost
of living, and that plan with minor revision was enacted as part of
Public Law 87-793. Experience to date has shown that the mechanics
for adjusting annuities to reflect living costs can be improved and,
the time element shortened by using the monthly price index instead
of an annual average. Accordingly, the Commission will not object
to enactment of H.R. 8469 insofar as it proposes adjustment of
existing annuities to reflect changes in the cost of living.
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G CIVIL SERVICE I(LTIRENIENT ANNUITY INCREASES
We strongly recommend that section 2 be deleted from H.R. 8469.
Section 2 is totally unrelated to the adjustment of existing annuities
and proposes a major permanent liberalization in the retirement sys-
tem. The proposal is made without regard to its relationship to
other fAnge benefits and without any denwnst atian of a need which
would in any way justify is cost. It is the sort of piecemeal approach
to retirement legislation which this administration seeks to check b1-
the formulation of up-to-date policies in the light of the Cabinet
Committee's study of the whole Federal retirement structure.
The Bureau of the Budget advises that enactment of H.R. 8469
would be inconsistent with the program of the President if it includes
the provisions now in section 2 of the bill.
By direction of the Commission.
Sincerely yours,
JOHN W. MACY, Jr., Chairman.
EXECUTIVE OF ICE OF TTIE PRESIDENT,
BUREAU OF TIIE BUDGET
11'ash.ingtan, D.C., August 11, 1.9Gu.
IIon. A. S ,
S. MIKE; \f{)NRO`:EY,
Chairraian, Committee on Post Office and Civil Service,
New Senate Office Building, Washington, D.C.
DLAR VIII. CHAIRMAN; Reference is made to the committee's re-
quest for the views of the Bureau of the Budget respecting II.R. 8469,
to provide certain incr~asos in annuities payable from the civil service
retirement and disability fund, and for other purposes.
The bill would increase all annuities payable to employees or their
survivors who have retired under the Civil Service Retirement Act
before the first char of the third month beginning after date of enact-
ment. The annuity increase would be composed of two portions;
first, an increase equal to the percentage increase in the Consumer
Price Index since 196' (which was 4.5 percent as of June 1965) plus
an increa=se of either W;" percent. for persons whose annuities commenced
on or before October 1, 1956, or 111: percent for (hose whose annuities
commenced after that dr.te. Another adjustment is provided for
certain pre-194s survivors w11o were specially provided coverage under
previous amendments. The bill would also revise the 1962 formula
for future automatic cost-of-living adjustments in annuities. The
Civil Service Commission estimates tll-~ first-year cost of these an-
nuity increase provisions to be $101.9 million, and the increase in the
unfunded liability of the svstem to be about $1,040 million.
Section 2 of the bill would increase the ceiling on the survivor
annuity payable on death of an employee or annuitant, to 60 percent
of the earned annuity, or of the base selected for unnluty, instead of
the present 55 percent. II a report which the Chairman of the Civil
Service Commission is submitting to your committee on this bill,
opposed to this provision, he, estimates it would increase the normal
cost of the system by 0.18 percent of payroll, adding approximately
$85 million to the annual ^ost on the normal cost-plus-interest basis,
and adding $ti17 million -.o the unfunded liability. The Chairinv.n
states plat this provision is unrelated to the annuity adjustment
problem. has not been demonstrated to nacet a need which would justify
its cost, and represents time piecemeal approach to retirement Iiberali-
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CIVIL SERVICE RETIREMENT ANNUITY INCREASES
zation which the President's Cabinet Committee study is designed to
prevent. The Bureau of the Budget concurs in the views expressed
by the Civil Service Commission.
Accordingly there would be no objection to enactment of H.R.
8469 provided section 2 is deleted, as its enactment would not be con-
sistent with the administration's program.
Sincerely yours,
PHILLIP S. HUGHES.
Assistant Director for Legislative Reference.
CHANGES IN EXISTING LAW
In compliance with subsection 4 of rule XXIX of the Standing
Rules of the Senate, changes in existing law made by the bill, as
reported, are shown as follows (existing law in which no change is
proposed is shown in roman, existing law proposed to be omitted is
enclosed in brackets, and new matter is printed in italic) :
CIVIL SERVICE RETIREMENT ACT
DEFINITIONS
SECTION 1. Wherever used in this Act-
(t) The term "price index" shall mean the [annual average over a
calendar year of the] Consumer Price Index (all items-United
States city average) published monthly by the Bureau of Labor
Statistics. The term "base month" shall mean the month for which the
price index showed a per eentum rise forming the basis for a cost-of-living
annuity increase.
* * * * * * *
SEC. 17. (a) The fund is hereby appropriated for the payment of
benefits as provided in this Act, and for payment of administrative
expenses incurred by the Commission in placing in effect each annuity
adjustment granted under section 18 of this Act.
* * * * * * *
COST-OF-LIVING ADJUSTMENT OF ANNUITIES
[SEC. I.S. (a) After January 1, 1964, and after each succeeding
January. 1, the Commission shall determine the per centum change in
the price index from the later of 1962 or the year preceding the most
recent cost-of-living adjustment to the latest complete year. On the
basis of such Commission determination, the following adjustments
shall be made:
[(1) Effective April 1, 1964, if the change in the price index
from 1962 to 1963 shall have equaled a rise of at least 3 per
centum, each annuity payable from the fund which has a com-
mencing date earlier than January 2, 1963, shall be increased by
the per centum rise in the price index adjusted to the nearest
one-tenth of 1 per centum.
[(2) Effective April 1. of any year other than 1964 after the
price index change shall have equaled a rise of at least 3 per
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centum, each annuity payable from the fund which has a conn-
mencing date earlier than January 2 of the preceding year shall
be increased by the per centum rise in the price index adjusted
to the nearest one-tenth of I per centum.
[(b) Eligibility for an annuity increase under this section shall be
governed by the commencing date of each annuity payable from the
fund as of the effective date of an increatse, except as follows:
[(1) Effective from the date of the first increase under this
section, an annuity payable from the fund to an annuitant's sur-
vivor (other than it child entitled under section 10(d)), which
annuity commenced the day after the annuitant's death, shall be
increased as provided in subsection (a)(1) or (a)(2) if the com-
mencing date of annuity to the annuitant was earlier than
January 2 of the year preceding the first increase.
[(2) Effective from its commencing date, an annuity payable
from the fund to an annuitant's survivor (other than a child en-
titled under section 10(d)), which annuity commences the day
after the annuit.ant'3 death and after the effective date of the
first increase under this section, shall be increased by the total
per contuun increase the annuitant was receiving under this
section at death.
[(3) For purposei of computing an annuity which commences
after the effective dite of the first increase under this section to
a child under section 10(d), the items $600, $720, $1,800, and
$2,160 appearing in section 10(d) shall be increased by the total
per centuiru increase allowed and in force under this section, and,
in case of a deceased annuitant, the items 40 per centurn and 50
per centuun appearing in section 10(d) shall be increased by the
total per centunn increase allowed and in force under this section
to the annuitant at death. Effective from the date of the first
increase under this section, the provisions of this paragraph shall
apply as if such first. increase were in effect with respect to com-
putation of a child'3 annuity under section 10(d) which com-
menced between January 2 of the year preceding the first increase
and the effective date of the first increase.
[(c) No increase in annuity provided by this section shall be com-
puted on any additional annuity purchased at rctirenient by voluntary
contributions.
[(d) The monthly installment of annuity after adjustment under
this section shall be fixed at the nearest dolfar.
SEC. 18. (a) Effective the first day of the third month which begins
after the date o f enactment of this amendment, each annuity payable from
the fund which has a commencing date not later than such effective date
shall be increased by (1) the per cent um rise in the price index, ad,iitsted
to the nearest one-tenth of 1 per ccntum, determined by the Commission on
the basis of the annual average price index for calendar year 1962 and
the price index for the month latest published on date of enactment of this
amendment, plus (2) 6i.2' per centum if the commencing date (or in the
case of the survivor o a Deceased annuitant the commencing date of the
annuity of the retiredfempwoyee) occurred on or before October 1, 1936, or
11-~ per centum if the commencing date (or in the case of the survivor of a
deceased annuitant the commencing date of the annuity of the retired
employee) occurred after October 1, 1956. The month used in deter-
mining the increase based on the per centum rise in the price index under
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CIVIL SERVICE RETIREMENT ANNUITY INCREASES 9
this subsection shall be the base month for determining the per centum
change in the price index until the next succeeding increase occurs. Each
survivor annuity authorized (1) by section 8 of the Act of May 29, 1930,
as amended to July 6, 1950, or (2) by section 2 of Public Law 85-465,
shall be increased by any additional amount which may be required to
make the total increase under this subsection equal to 15 per centum or
$10 per month, whichever is the lesser.
(b) Each month after the first increase under this section, the Commission
shall determine the per centum change in the price index. Effective the
first day of the third month which begins after the price index shall have
equaled a rise of at least 3 per centum for three consecutive months over
the price index for the base month, each annuity payable from the fund
which has a commencing date not later than such effective date shall be
increased by the per centum rise in the price index (calculated on the
highest level of the price index during the three consecutive months)
adjusted to the nearest one-tenth of 1 per centum.
(c) Eligibility for an annuity increase under this section shall be
governed by the commencing date of each annuity payable from the fund
as of the effective date of an increase, except as follows:
(1) Effective from its commencing date, an annuity payable from
the fund to an annuitant's survivor (other than a child entitled under
section 10(d)), which annuity commences the day after annuitant's
death and after the effective date of the first increase under this section
shall be increased by the total per centum increase the annuitant was
receiving under this section at death, except that the increase in a sur-
vivor annuity authorized by section 8 of the Act of May 29, 1930, as
amended to July 6, 1950, shall be computed as if the annuity com-
mencing date had been the effective date of the first increase under
this section.
(2) For purposes of computing an annuity which commences
after the effective date of the first increase under this section to a child
under section 10(d), the items $600, $720, $1,800, and $2,160
appearing in section 10(d) shall be increased by the total per centum
increase allowed and in force under this section for employee annuities
which commenced after October 1, 1956, and, in case of a deceased
annuitant, the items 40 per centum and 50 per centum appearing in
section 10(d) shall be increased by the total per centum increase
allowed and in force under this section to the annuitant at death.
(d) No increase in annuity provided by this section shall be computed
on any additional annuity purchased at retirement by voluntary con-
tributions.
(e) The monthly installment of annuity after adjustment under this
section shall be fixed at the nearest dollar, except that such installment
shall after adjustment reflect an increase of a least $1.
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