COST-OF-LIVING ADJUSTMENT OF ANNUITIES UNDER CIA RETIREMENT ACT (SECTION 291 (A) (2) OF P.L. 88-643)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP71B00364R000500220011-7
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 9, 2016
• Document Release Date: August 21, 2000
• Sequence Number: 11
• Publication Date: November 17, 1966
• Content Type: MFR

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17 November 1966
MEMORANDUM FOR THE RECORD
SUBJECT: Cost-of-Living Adjustment of Annuities Under CIA Retirement Act
(Section 291 (a) (2) of P. L. 88-643)
1. In all probability, a cost-of-living adjustment will be due under the CIA
Retirement Act on 1 April 1967. This adjustment will be an approximate 4. 2 per
cent increase and will be applied against those annuities having a commencement
date earlier than 2 January 1966 (about 45 in number). The increase, if due, is
obligatory upon the CIA Retirement and Disability Fund. However, recent amend-
ments to the Civil Service Retirement Act raise certain questions in the effecting
of this increase.
2. The determining factor in triggering an adjustment under Section 291
is the "percentum change in the price index" which is determined under Section
18 of the Civil Service Retirement Act. Unfortunately (as a result of the 1965
Daniels Bill amendment to the Civil Service Retirement Act), Section 18 of the
Civil Service Retirement Act is no longer responsive to the requirements of
Section 291 of the CIA Retirement Act. (Pertinent statutory language is attached.)
3. The building blocks for an adjustment under Section 291 are annual
average changes in the Consumer Price Index. However, as a result of the Daniels
Bill, Section 18 of the Civil Service Retirement Act no longer provides a basis for
the Civil Service Commission to make this determination. Since such a determina-
tion is the triggering mechanism for adjustments under Section 291, a technical
nullity results.
4. The Department of State faces the same problem with respect to the
Foreign Service Retirement System. P. L. 89-308, approved 31 October 1966,
adopted language for the Foreign Service Retirement System practically identical
to Section 291 of the CIA Retirement Act. However, a practical difference does
exist. On 1 April 1966 State granted a 3.1 per cent annuity increase under their
cost-of-living adjustment provision. While it is touch and go as to whether the
annual average change in the Consumer Price Index between 1965 and 1966 will
support another increase by State on 1 April 1967, it is apparent that if it does
State will overcome the technical statutory problem in 1967 as they did in 1966.
Reason appears to be on their side.
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5. The use of the Civil Service Commission's determination under Section
18 of the Civil Service Retirement Act for the CIA Retirement Act and the Foreign
Service Retirement System was primarily one of convenience. Nothing unique to
the Commission's powers or responsibilities was involved in taking the Consumer
Price Index, an official publication of the Bureau of Labor Statistics, and computing
the percentum change from one year to the next. Consequently, there appears to
be a strong basis for holding that, irrespective of the changes made in Section 18
of the Civil Service Retirement Act by the Daniels Bill, those operating factors in
Section 18 before the Daniels amendment which are critical to the implementation
of Section 291 of P. L. 88-643 may still be resorted to for the purposes originally
intended. Once this conclusion is agreed to, the method for doing so should be
easy to work out.
6. Statutory language pertinent to the above and calculations involved in
estimating the 4. 2 per cent increase are attached.
Office of Legislative Counsel
Distribution:
Orig - Subj
1 - Ch r ono
1 - Signer
OLC/LLM:dsw (17 Nov 1966)
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P. L. 87-793 (OCTOBER 11, 1962) ADDED SECTION 18 TO THE CSRA WHICH, IN
PERTINENT PART, READS AS FOLLOWS:
"Sec 18 (a): After January 1, 1964, and after each succeeding January 1,
the Commission shall determine the percentum change in the price index from
the later of 1962 or the year preceding the most recent cost-of-living adjust-
ment to the latest complete year. On the basis of such Commission determina-
tion, 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 percentum, each annuity....
"2) Effective April 1 of any year other than 1964 after the price index
change shall have equaled a rise of at least 3 percentum, each annuity.... "
THE TERM "PRICE INDEX" WAS ALSO DEFINED IN P. L. 87-793 TO 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. " (Underlining supplied)
CIA RETIREMENT AND DISABILITY ACT FOR CERTAIN EMPLOYEES, P. L.
88-643 (OCTOBER 13, 1964):
"Sec 291 (a): On the basis of determinations made by the Civil Service
Commission pursuant to Section 18 of the Civil Service Retirement Act, as
amended, pertaining to percentum change in the price index, the following ad-
justments shall be made:
"1) Effective April 1, 1966, if the change in the price index from 1965 to
1966 shall have equaled a rise of at least 3 percentum, each annuity....
"2) Effective April 1 of any year other than 1966 after the price index
change shall have equaled a rise of at least 3 percentum, each annuity...."
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THE CHANGES MADE BY THE DANIELS BILL IN SECTION 18 OF THE CSRA
PERTAINING TO PERCENTUM CHANGE IN THE INDEX ARE EXC PTED
"Sec 18 (a): ... (1) The percentum rise in the price index.. determined by
the Commission on the basis of the annual average price index for a calendar year
1962 and the price index for the month latest published on the date of enactment of
this amendment....
"b) Each month after the first increase under this section, the Commission
shall determine the percentum 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 percentum for three consecutive months over the price index for the base
month, each annuity.... "
THE DANIELS BILL, P. L. 89-205 (27 SEPTEMBER 1965) REDEFINED PRICE
INDEX AS USED IN THE CSRA (5 USC 2251) AND ADDED A DEFINITE "BASE
MONTH":
"1) The term "price index" shall mean 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 percentum rise forming the basis for a cost-of-living annuity
increase."
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CALCULATIONS FOR 1 APRIL 1967 ANNUITY ADJUSTMENT
1. It is assumed that the base year for any increase under
Section 291 (a) (2) is 1964. The Consumer Price Index for 1964 is
108.1. Based on only the first nine months of 1966, it is estimated
that the Consumer Price Index will at least equal or exceed 112.6.
2. The point rise in the price index from 1964 to 1966 amounts
3. The per cent rise, 1964 through 1966, equals 4.16 per
cent and rounded to the nearest tenth of 1 per cent, equals 4. 2
per cent.
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TRANSMITTAL SLIP
DATE
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ROOM NO.
BUILDING
REMARKS:
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FROM: LL14
ROOM NO.
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EXTENSION
FOR
1 FEB 55'241
REPLACES FORM 38-8
WHICH MAY BE USED.
21 Nov 1966
This day discussed this with
Mr. Warner and
Mr. Warner will take this up
with Mr. Echols, Director of
Personnel.
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