(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-03721A000500040010-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 12, 2016
• Document Release Date: February 19, 2002
• Sequence Number: 10
• Publication Date: August 12, 1962
• Content Type: REPORT

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C O N T E N T S
TAB DESCRIPTION
A - Revised statement of Explanation and Justification
(Consolidation of both subnnissiona to the Bureau of the
Budget. Classified portions bracketed.)
B - Revised Bill with changes suggested by BOB.
C - Proposed statement for information of senior Agency
officials.
D - Proposed points to be covered by the Director of Central
Intelligence in briefing Congressional Committees.
S Drafts General pollioies and administrative concepts in
connection with the proposed CIA Intelligence
Operations Retirement System
1. Tab A has been sent to the Director of Security for review and
agreement that the text can be considered unclassified if the
bracketed portions are deleted.
2. Tabs A and B have been sent to Colonel Grogan for information.
12 August 1962
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(Note: Bracketed portions only are classified.)
1. Purpose of Proposed Bill
a. The proposed bill permits the Central Intelligence Agency to improve
its retirement program by authorizing the establishment of a retirement
system corresponding to that of the Foreign Service. The Agency needs to
attract and retain a force of highly qualified careerists in spite of its
inability in fact to provide full-term careers for many individual officers.
In order to minimize the adverse effects of necessary programs of managed
attrition and to preserve its ability to recruit and retain the high caliber
personnel it needs, the Agency must make reasonable provision for the future
of those individuals who must be separated before completing a full-term
career of thirty or so years. Therefore, Section 3 of the proposed bill adds
a new paragraph (g) to Section 5 of the Central Intelligence Agency Act of
1949, as amended, authorizing the Director of Central Intelligence to exer-
cise the authority available to the Secretary of State under the Foreign
Service Act of 1946, as amended, in order to establish a retirement and disa-
bility system corresponding to that available to Foreign Service Officers for
limited numbers of Agency employees.
b. Since all provisions pertaining to the retirement of Foreign Service
Officers are not contained in Title VIII (which is entitled "The Foreign Ser-
vice Retirement and Disability System") of the Foreign Service Act and since
it is possible that future amendments relating to retirement may occur else-
where than in such act, it is necessary to make general provision for the
Director of Central Intelligence to adopt provisions of law applicable to
Foreign Service Officers for Agency employees. Additionally, most of the
basic travel allowances and overseas benefits available to Foreign Service
personnel are authorized for Agency employees by existing Section 4 of the
Central Intelligence Agency Act of 1949, as amended. However, amendments
to the Foreign Service Act over the years have of necessity required the
Agency to seek legislation periodically in order to keep such authorities
up to date and uniform with those available to Foreign Service personnel.
Consequently, it is now proposed that the existing Section 4 of the Central
Intelligence Agency Act be rescinded by Section 2 of the proposed bill. In
lieu of the rescinded authorities, the new Section 4 of the Central Intelli-
gence Agency Act authorizes the Director to adopt and apply to Agency
employees provisions of law applicable to Foreign Service personnel and to
exercise with respect to Agency employees the authority available to the
Secretary of State for the purpose of having Agency employees accorded
appropriate benefits, rights, and allowances now authorized for Foreign
Service Officers.
V~Ll-k; A-25-1 GROUP 1. Excluded from
automatic downgrading
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All regular employees of the Central Intelligence Agency are at present
covered by the provisions of the Civil Service Retirement Act. Such coverage
is appropriate for those whose conditions, obligations, and terms of service
are comparable to those of federal employees generally. However, the Agency
has a serious problem in its need to make more adequate provision for certain
of its employees who should be retired at an earlier age and with a more
equitable annuity than can be provided under the Civil Service Retirement Act.
This need stems from the fact that the Agency cannot provide to or expect
from many individuals in its service a full-term working career of thirty or
so years.
3. Background
a. The conditions underlying this situation are complex. For some years,
the Agency has recognized that it faces a serious dilemma. On the one hand,
the nature of its mission requires the employment of people who are highly
motivated and who develop unique and specialized abilities through their con-
tinuing training and service over the years. Moreover, the nature of the
Agency's mission requires people who, like members of the military services
and the Foreign Service, accept the obligation to serve anywhere in the world
at the Agency's direction---not at their own will---and to be available for
duty on a 24-hour-a-day basis. In sum, the employment of people to serve on
a career basis is essential to f fill the majority of the Agency's require-
ments for personnel. On the other hand, factors directly related to the
nature and conditions of service in the intelligence field and factors affect-
ing the ability and desire of individuals to remain in such work on a long-
term basis make it infeasible to provide full-term career employment for all
careerists.
b. The nature of the work involved in the Agency's operations requires
people who have a high degree of vigor, vitality, endurance, resilience, and
adaptability. Such traits are required to cope with the stresses and strains
occasioned by uneven and uncertain hours and days of work, duty in unhealth-
ful locations with less than adequate medical facilities, and arduous and,
not infrequently, hazardous assignments.
c. There is a further requirement that officers serving overseas must
normally perform their work under the cover of employment with some other
organization, a requirement which limits their long-term utility. The use-
fulness of an officer is seriously impaired if not destroyed if his true
employment affiliation is revealed. However, the longer he serves under
cover, and particularly if his cover must be changed in the course of moves
from one post to another, the greater becomes the risk that his true affilia-
tion will be inadvertently revealed to or inferred by hostile parties.
Finally, since most positions in cover organizations which can be made avail-
able for the Agency's use are those which would normally be manned by junior
2
1,FLDENTIAL
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personnel of the host organization, it is difficult to find appropriate cover
for any substantial number of officers of middle-age or over.
dJ There are other factors pertaining to the individuals themselves
which, over the years, limit their ability and desire to continue in overseas
service. First, there is "motivational exhaustion." This term is used to
describe a gradual lessening of interest and enthusiasm of an officer as a
result of impingements on his personal and family life. These stem from the
transient nature of his assignments, the complications and restrictions of
cover and security requirements, and intrusions on his family life 5ccasioned
by the requirement that he spend his apparent "leisure time" in performing
additional Agency duties after completing his cover workdail. Further, while
all Agency employees are subject to security restrictions which place severe
limitations on their personal freedoms, employees serving abroad are subject
to even greater restrictions and, in addition, must conduct their personal
affairs in a manner consistent with their cover employment. These factors
tend to lessen the enthusiasm and willingness of the family to accompany the
officer on further assignments overseas. Lastly, our experience has shown
that many employees or members of their families will in time incur physical
impediments which limit or preclude further assignment overseas.
e. Lastly, the dynamic nature of intelligence produces sudden and some-
times radical shifts in the types of personnel required. Completion of a
mission of a temporary nature or a shift in emphasis or direction of opera-
tions may result in an rabundance of officers who are skilled in a rela-
tively narrow field. ff alifications thus become obsolete or unneeded
and they become "occupationally surplus." or example, the responsibility
of the Agency for covert cold war functions and continuance of counter-
insurgency activities require the Agency to employ numbers of individuals
whose skills are not necessarily adaptable to full-term careers]
4. Manpower Control
a. The Agency finds it increasingly necessary to impose manpower con-
trols to ensure appropriate alignment as to age, qualifications, and other
characteristics of its employees Engaged in conducting or supportgg foreign
intelligence operationsJ. Insofar-as possible, imbalances should;:/and will
- s-
e corrected by the reassignment of officers who cannot or should not continue
in such work to other fields of work in the Agency. It is a certainty, none-
theless, that encouraged and induced attrition will be necessary. A program
of managed attrition, however, is feasible only if it is linked with asystem
of retirement benefits which are sufficient to induce an employee or a pros-
pective employee to take the risk that he may be one of those individuals who
cannot serve a full-term career.
b. The seriousness of this risk to the individual is greatly augmented
by the difficulty which he will encounter in effecting a transfer from intel-
ligence operaTions to other government or commercial fields. The principal
reason for this is that the special skills required for intelligence work
are not ordinarily required in other fields. Other reasons are the inability
of employees for security reasons to describe or confirm to a prospective
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employer the scope and level of his duties and responsibilities. Further,
there is a reluctance on the part of other employers, both government and
private, who are engaged in business overseas to hire a former intelligence
officer. This reluctance stems from their concern that the attitudes of
foreign officials toward their enterprises might be adversely affected if
they were known to employ "former spies."
c. As part of its manpower control program, the Agency has instituted
administrative procedures for identifying employees who become surplus to
its needs because of the several factors described above and has recently
engaged in an exercise which will result in the separation of approximately
150 such individuals. This process was made the more painful because of
the relatively inadequate assistance which the Agency could offer those
separated in making occupational transfers or in retiring prematurely. The
benefits available were limited to those provided under the discontinued
service provisions of the Civil Service Retirement Act and to modest sepa-
ration compensation payments from the Agency which are related to years of
service and salary.
5. Proposed Retirement System
a. In order to minimize the adverse effects of such programs on the
Agency's ability to recruit and retain the caliber of personnel needed, and
particularly to minimize their effects on the dedicated personnel already
in the service of the Agency, better provision must be made for the futures
of those individuals who are separated before completing a full-term career.
An important means for doing so is to establish a retirement system permit-
ting earlier retirement with a more nearly adequate and equitable annuity
than is possible under the civil service retirement system. The Foreign
Service system is more suitable for those Agency employees whose careers
have involved comparable conditions of service. Appendix A compares the
pertinent provisions of the Foreign Service and the civil service retire-
ment systems. This chart is based on a similar chart appearing in the
Report of the House Committee on Foreign Affairs in the 2nd session of the
86th Congress. It was prepared at that time in connection with proposed
amendments to the Foreign Service Act of 1946, as amended, relating to the
retirement system which proposals were subsequently enacted into law.
b. Aside from the additional special requirements applicable to Agency
employment, employees who serve overseas are subject to essentially the
same conditions of service which were the basis for the development of the2 5X1 C
Foreign Service retirement system. By adopting a system corresponding to
the Foreign Service system, the Agency can take advantage of the consider-
able study and experience which have gone into its development.
c. Such a retirement system would not be appropriate for all Agency
employees and it is not the Agency's intention in r uesti ority to
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establish such a system to apply it to all. The employees who are to be
designated for coverage under this system will undergo a rigid selection
process. CThe essential criteria for coverage under the proposed retire-
ment system would be as follows)
5i) Career employees whose duties and responsibilities are pre-
dominantly concerned with the conduct and support of intelligence operations
in foreign countries or with covert support in the United States of such
operations under comparable conditions]
52) Career employees whose duties are so specialized that they
are placed at a special disadvantage when required to seek other employment]
6. Estimated Number of Employees under Proposed System
25X9 a. he careers of employees are directly oriented to
intelligence operations abroad. any moment in time, approximate X9
are serving abroad while the balance are at headquarters as replacements.
25X9 It is estimated that a maximum o_mployees will qualify for coverage
under the new system; civil service retirement will remain the retirement
system for all other employees.
b. ,ormally, we would anticipate that an average of about 27 of these
employees would become eligible for optional retirement under the civil
service retirement system during each of the next five years. For the
reasons presented in justification of our need for a retirement system com-
parable to that of the Foreign Service, and to correct imbalances in the
age make-up of this group, we would hope, under the new system, to increase
the average number of retirements from this group by about 40 in each of
these years] During the past year the average age of Agency personnel who
retired under the Civil Service Retirement System was 66. We hope, in time,
to lower the average retirement age of those under the new retirement system
to about 55 years which is comparable to the average retirement age in the
Foreign Service.
7. Cost Estimates
a. There will be certain increased costs for the administration of the
retirement system. For reasons of efficiency and security, it is considered
essential that full administration of the program excluding maintenance-of
the fund by the Department of the Treasury (as required by law in the case
of the Foreign Service Retirement Fund) be accomplished within the Agency.
It is estimated that by the end of the first five years the administration
of the proposed program would cost approximately $80,000 per year with an
increase of approximately eight man years. Internal administration of the
program would include determinations of eligibility and entitlements, pay-
ment of retirement benefits, and all related administrative matters.
Ad6daT1A
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b. Program costa cannot be estimated with comparable precision. Never-
theless, reasonably valid estimates have been made on the basis of actuarial
experience of the civil service and Foreign Service systems. Based on the
cost differential of the differing benefits of the two programs and applying
it to the estimated maximum of 4,500 eligible for the proposed retirement
system, we compute that a maximum additional Government contribution of $4.6
million annually would be required. However, it has not been government
practice for many years to fully fund its retirement programs. Further,
there have been special charges against the Foreign Service Retirement Fund
which go beyond the basic benefits of the proposed CIA system.
f. A more realistic estimate can be made of the increased payout in
basic annuity benefits under the proposed system over the civil service
retirement system for the next five fiscal years. The estimate assumes a
target rate of 67 retirements per year. Other assumptions, based upon
manpower studies and age and grade characteristics of the eligible group,
contemplate an average retirement age of 55 years with 25 years of service
and an average high-five salary of $11,000 (about the second step of grade
GS-13). Basic annuities computed under the new system would be $5,500 as
against $4,829 under the civil service system. The difference of $671
applied to the estimated average of 67 retirements per year would result
in the following total increased annuity payments for the years shown:
FY Year
Annuitants
Increased
Annuity Payments
(Cumulative Totals)
(Cumulative Totals)
1963(one-half year)
34
$ 22
814
1964
101
,
67,771
1965
168
112,728
1966
235
157,685
1967
302
202,642
563,640
The chain of recruitment, reassignment, and promotion actions created
by this annual retirement of officers would result in a considerable saving in
salaries. Assuming an average lapse of six months in this process, the saving
would approximate $2,300 per retirement and would total approximately $414,000
over a five-year period. This saving would almost offset the estimated in-
crease in annuity payments for the first five years that the new system was in
operation]
CONHHD 1 L
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Appendix A is the printed chart "Comparison
of Foreign Service Retirement and Disability System
with Pertinent Provisions of the Civil Service
Retirement System."
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fr
To amend the Central Intelligence Agency Act of 1949, as amended, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That this Act may be cited
as the "Central Intelligence Agency Act Amendments of 1962."
Sec. 2. Section 4 of the Central Intelligence Agency Act of 1949,
as amended, and the heading thereto is amended to read as follows:
"Officer and Employee Allowances and Benefits
"Sec. 4. In the performance of the functions of the Central
Intelligence Agency, the Director is authorized:
(a) to adopt or apply to officers and employees of the Agency
such provisions regarding officer and employee allowances and
benefits, as he may determine to be necessary and appropriate,
of the Foreign Service Act of 1946, as heretofore or hereafter
amended, and of any other law pertaining specifically, or
generally applicable, to Foreign Service officers, Foreign
Service reserve officers, and Foreign Service staff officers
and employees;
(b) to exercise with respect to officers and employees
of the Agency such authorities, as he may determine to be
necessary and appropriate, available to the Secretary of
State under provisions of any such laws in order to make
available to Agency officers and employees similar benefits,
rights, privileges, and allowances authorized thereunder;
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(c) to prescribe regulations for the granting of officer
and employee allowances and benefits and for the exercise
of the authorities set forth in this section."
Sec. 3. Section 5 of the Central Intelligence Agency Act of 1949,
as amended, is amended by the addition of a new paragraph (g) as follows:
"(g) Under such regulations as the Director may prescribe the
Director is authorized to exercise the authority available to the Secretary
of State with respect to the establishment of a retirement and disability
system under the Foreign Service Act of 1946, as heretofore or hereafter
amended, in order to establish a corresponding retirement and disability
system for such individuals and classes or groups of Agency officers and
employees as he may designate from time to time."
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EARLY RETIREMENT PROPOSAL
The purpose of the proposed legislation (HR ) is to make
available to limited numbers of Agency employees a retirement system
similar to that of the Foreign Service. The Agency has concluded that
this system is urgently needed and basically fits our requirements.
Since Mr. McCone took over, he has conducted a thorough review of
Agency management and personnel. While the Director has found that the
people in the Agency are of unusual competence and dedication, the nature
of the work involved in our operations calls for a young and resilient
group of employees. A certain percentage of people will not be able to
look forward to a full working career of 30 or more years.
Those Agency employees affected are obligated to serve anywhere in
the world as in the Foreign Service and the military and unlike the normal
Civil Service employee. The Civil Service Retirement Act is not designed
for such people. The Foreign Service retirement system has been developed
over the years to meet the needs of a service consisting of people who
are required and do spend the major part of their careers abroad. The
civil service retirement system was not designed for such people and
consequently we believe that adopting a system similar to the Foreign
Service will fulfill our needs.
We are Just finishing an Agency reduction-in-force program involving
about 150 people. These were occupationally surplus, i.e., based on our
specialized needs and in accord with our manpower alignments they were
excess. This exercise has created considerable restiveness among some of
our employees and we feel that a new program such as this will reassure
this group that their dedication is being recognized by the provision of
a more appropriate retirement system.
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NOTES FOR PRESENTATION BY DCI
1. Appropriate greeting.
2. Note that many members of the Committee already have a statement
of explanation and justification.
3. Remark on review of management and personnel of Agency; competence
and dedication of personnel.
TINTL
4. Summarize proposal: For a number of years the Agency has been
studying the early retirement question and as has been pointed
out in our explanation so man eo 1
have additional secur y restrictions
imposed on them we feel that the Foreign Service retirement system
will basically meet our needs. It has distinct advantages: it'is
not a new system but has been evolved over the years to meet the
situation of many people who have the same needs as we have.
5. Give an example or two.
6. Urgency.
7. Questions.
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J- - - 11
GENERAL POLICIES AND A] INIS ATIVE CONCEPTS IN CONNECTION
WITH THE PROPOSED CIA INTELLIGENCE OPERATIONS RETIREINT SYSTEM
1. The civil service retirement system remains as the basic retirement
system for the Central Intelligence Agency. Employees will enter on duty
as participants of the civil service retirement system and formal adminis-
trative action will be required to transfer eligible employees to the
Intelligence Operations Retirement System at the appropriate time.
2. Specific criteria of eligibility will be prescribed by regulations
issued by the Director of Central Intelligence. These regulations will
govern the blanketing into the IORS of employees whose past service has
already satisfied the minimum criteria and whose future careers are clearly
directed toward continuing service in qualifying areas of work.. The regu-
lations will also prescribe a mechanism for the timely and thoughtful con-
sideration of individuals who subsequently satisfy the minimum service
requirements. Lastly, the regulations will provide separate criteria and
machinery to determine whdch other individuals, in the event of forced
attrition programs, will be eligible for the selection-out benefits of the
IORS rather than those benefits provided for in the civil service retire-
ment system. In no event will such an individual be deprived of his civil
service system discontinued service benefits by arbitrary transfer to the
IORS.
3. Specific administrative provision will be made for the rare instance
wherein an individual who has been taken into the IORS will demonstrate his
future unwillingness to fulfill his service obligations and who may seek to
continue in Agency employ in a nonqualifying area of work. If such indi-
vidual's period of qualifying service is less than an amount deemed per-
manently qualifying, it is contemplated that he will be required to apply
for reversion to the civil service system as a requisite to reassignment
and continuing employment.
The criteria for identifying those employees who would become eligible
for coverage under such a retirement system rather than under civil service
retirement would be as follows:
Career employees of the Agency would be eligible for annuities computed
at the rate of 2% of the average salary of their "high-five" years of serv-
ice multiplied by the number of their years of Federal service under the
following conditions:
(1) Optional Retirement
Career Employees may apply for and normally be granted
retirement on such annuities at age 50 if they have completed
20 years of Federal service of which 10 were with CIA and 5
were overseas with CIA.
~~~~~ GROUP 1. Excluded from
automatic downgrading
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(2) Discontinued Service (other than for cause)
(a) The DCI may retire eligible Career Employees of
supergrade rank on such annuities when he determines this
action to be in the interest of the Agency.
(b) The DCI may retire Career Employees in grades
GS-14 and GS-15 on such annuities when he determines that
their employment must be discontinued and their service
in the Agency was of such a nature as to (1) require the
acquisition and application of skills for which require-
ments in other Government or commercial fields of employ-
ment are either rare or non-existent, or (2) effectively
prevent them from studying, practicing, or otherwise
developing or retaining proficiency in an established
occupation or profession, or (3) prevent the individual,
for reasons of operational cover or security, from
describing or confirming to a prospective employer the
scope and level of his duties and responsibilities.
(c) Those Career Employees grade GS-13 and below
whose employment must be discontinued and whose service
meets the criteria in (b) above will receive separation
compensation and either a refund of retirement contribu-
tions or a deferred retirement annuity at age 60 such as
provided in Section 632 of the Foreign Service Act as
amended.
2
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