STATEMENT OF LAWRENCE K. WHITE, EXECUTIVE DIRECTOR, CENTRAL INTELLIGENCE AGENCY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-03721A000500080006-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 9, 2016
• Document Release Date: May 7, 1999
• Sequence Number: 6
• Content Type: STATEMENT

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STATEMENT OF LAWRENCE K. WHITE, EXECUTIVE DIRECTOR,
CENTRAL INTELLIGENCE. AGENCY
Mr. Chairman, the bill before you, H. R. 13705, proposes a
number of amendments to the Central Intelligence Agency Retirement
Act of 1964 for Certain Employees (P. L. 88-643, 13 October 1964).
That Act was the outgrowth of extensive hearings by your Committee
in 1963 on the Agency's need for an early retirement program.
H. R. 13705 contains nine sections. The first eight sections
are designed to update the Central Intelligence Agency Retirement Act.
The last section clarifies the Agency's exemption from the Federal
Employees Pay Act.
As the Director has indicated, one section is of immediate
concern. This is Section 8 which deals with maintaining the purchasing
power of an annuity granted retired employees. In weighing the respective
priorities, we believe that we should pursue action on Section 8 and defer
consideration of the other sections at this time.
The basic purpose of Section 8 of H. R. 13705 is to reestablish and
preserve equity between the Civil Service and CIA retirement systems
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with respect to cost-of-living adjustments. Specifically, Section 8 would
authorize future cost-of-living adjustments under the CIA retirement
system to be made under the same formula which applies to Civil Service
annuities. Section 8 also provides a catch-up increase so that as of
1 January 1967 annuities under the CIA retirement system are increased
by the same percentage increase in force and effect for comparable
annuities under the Civil Service retirement system.
Section 291 of the Central Intelligence Agency Retirement Act
now authorizes automatic cost-of-living adjustments on the basis of
yearly average Consumer Price Index increases of at least 3 percent.
This automatic adjustment principle was approved by the Congress for
the Civil Service retirement system in 1962 and extended to retired
members of the Armed Forces in 1963. It was incorporated into the
Agency Retirement Act when that Act was passed in 1964.
During the first session of the 89th Congress the cost-of-living
provision for military retirees was amended (P. L. 89-132) to gear
increases to quarterly rather than average calendar year Consumer
Price Indexes.
Later on in the first session of the 89th Congress similar
legislation for the benefit of the Civil Service retirement system was
approved (P. L. 89-205, 27 September 1965 and P.L. 89-314, 1 November
1965.)
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You will recall, Mr. Chairman, that on 11 August 1966 you
reported out for the Committee a bill, H. R. 16306, which in Section 208
amended the CIA Retirement Act cost-of-living provision to bring it into
line with the new cost-of-living provisions which had been approved for
the benefit of Civil Service and military retirees. H. R. 16306 was
approved by the House on 3 October 1966, but there was no further action
before the close of the 89th Congress.
The new military and Civil Service formula is more responsive
to cost-of-living changes than the old formula of the CIA retirement
system. Since 1965 three cost-of-living adjustments have been granted
under the Civil Service retirement system but only one increase has
been granted under the CIA retirement system.
The one cost-of-living increase granted under the CIA retirement
system amounted to 4. 6 percent and was restricted to 1965 retirees and
paid on 1 April 1967. This compares with increases in force and effect
under the Civil Service system of 16.8 percent (cumulative) for 1965
retirees, 9 percent for 1966 retirees, and 3. 9 percent .for 1967 and
some 1968 retirees.
The difference in formula has contributed to an ever-widening
percentage increase gap between the Civil Service and CIA retirement
systems. On 1 May 1968 this gap amounted to 12.2 percent for 1965
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retirees, 9 percent for 1966, and 3.9 percent for 1967 and some 1968
retirees. Under the CIA system the next adjustment cannot become
effective before 1 April 1969 and the gap may well become wider in
the meantime. Knowledge of this gap inevitably has an adverse effect
on the morale of annuitants and participants in the CIA system.
The disparity in the two systems comes about as follows: Under
the Civil Service system when there is a 3 percent increase in the
Consumer Price Index over the base at the time of the last cost-of-
living increase and this level is sustained over a period of three months,
the cost-of-living increase is automatic and becomes effective two
months later. On the other hand, under the CIA system the cost-of-
living increase for the entire calendar year must average 3 percent
above the Consumer Price Index base at the time of the last increase,
in which case the increase is effective on 1 April of the following year.
The CIA Retirement Act was passed in 1964 and in 1965 the
Consumer Price Index did not increase sufficiently. The cumulative
increases in 1965 and 1966 resulted in a 4. 6 percent increase as of
1 April 1967 for 1965. retirees.
The annual average Consumer Price Index for 1966 was 113. 1
and is the new base for determining the next rise of at least 3 percentum.
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Thus the next annuity adjustment would take place when a subsequent
year annual average Consumer Price Index equaled at least 116.5. The
annual average Consumer Price Index for 1967 was 116.3 and fell .2
short of this mark, but almost certainly there will be an adjustment as
of 1 April 1969. In theory, however, if at the end of December 1968 the
Consumer Price Index should be less than 116.5, CIA annuitants would
get no increase on 1 April 1969, whereas those under CSC already have
it as of 1 May 1968.
The three cost-of-living adjustments produced by the more
responsive Civil Service formula were a 6. 1 percent increase to 1965
retirees in 1965; a 3.9 percent increase to 1965 and 1966 retirees on
1 January 1967; and a 3. 9 percent increase to 1965, 1966, and 1967
and some 1968 retirees on 1 May 1968. An additional increase of
2 percent for 1965 retirees and 1 percent for 1966 retirees had been
granted by P. L. 87-793 which established the cost-of-living adjustment
principle for the Civil Service system.
Section 8 of the bill would, from 1 January 1967, provide the
same cumulative percentage increase of annuity in force and effect
for 1965 and later retirees under the Civil Service system. More
specifically, Central Intelligence Agency Retirement Act retirees
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whose annuities commenced prior to'2 January 1966 would receive an
increase of 12.4 percent effective 1 January 1967 less the 4.6 percent
increase paid 1 April 1967 under current law. Those whose annuity
commenced on or between 2 January 1966 and 1 January 1967 would
receive an increase of 4.9 percent from 1 January 1967. Retirees
whose annuities commenced on or between 2 January. 1967 and 1 May
1968 along with 1965 and 1966 annuitants would receive, an increase
of 3.9 percent effective 1 May 1968.
Section 8 of H. R. 13705 also assures that future increases will
be in phase with those granted Civil Service retirees.
In addition, survivors would receive similar cost-of-living
adjustments.
This concludes my general remarks Mr. Chairman. If you
desire, I would be pleased to go over each subsection of the proposal
to explain its effect.
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