STATEMENT OF RICHARD HELMS, DIRECTOR OF CENTRAL INTELLIGENCE AGENCY RE COST OF LIVING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84-00780R002400020003-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 28
• Document Creation Date: December 19, 2016
• Document Release Date: October 13, 2006
• Sequence Number: 3
• Publication Date: June 7, 1968
• Content Type: FORM

MR. TURNER - 7 June
MR. COFFj
POPVCDF Pages 3-1
6mwmw~or Release 2
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^ UNCLASSIFIED El NNTERNAL [-] CONFIDENTIAL -I SECR
INI nuly
0 IF
ROUTING AND RECORD SHEET
SUBJECT: (Optional)
Statement of Richard Helms, Director of Central Intelligence
Agency re Cost of Living
FROM:
Deputy Director of Personnel
EXTENSION
NO.
7 Cry ~~ ~~
5E56 Headquarters
DATE
7 June 1968
TO: (Officer designation, room number, and
DATE
building)
OFFICER'S
COMMENTS (Number each comment to show from whom
RECEIVED
FORWARDED
INITIALS
to whom. Draw a line across column after each comment.)
1. Assistant Deputy Director
S
FAT
for Support
This is the "cost of living"
7:D18 Headquarters
amendment package you asked about
2.
the other day. Also attached are
cost estimates. In addition, the
Office of Personnel is providing
3.
backup data concerning our imple-
mentation of the CIARD System.
This Colonel White intends to use
4.
only if asked. STAT
J
who is "case
5.
officer is no sure whether or
not Colonel White will want a
"dress rehearsal" when the hearin
6.
g
date has been set or who he will
want as backup witness from the
Office of Personnel (if any)
7.
.
Bertha stands ready if wanted-she
did it before.
8.
has left to us the job
of keeping you and Mr. Bannerman
informed
The hearin
mi
ht b
.
g
g
e
9.
called any day now -- or a month
from now.
10.
STAT
11.
12.
13.
14.
15.
FORM 610 USE PREVIOUS
3-62 EDITIONS
INTERNAL ^ SECRET ^ CONFIDENTIAL ^ USE ONLY ^ UNCLASSIFIED
IA-RDP84-0078.08002400020003-3
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STATEMENT 'OF RICHARD HELMS, DIRECTOR OF CENTRAL
INTELLIGENCE !AGENCY
Mr. Chairman, we appreciate the opportunity to appear before
your Subcommittee this morning to discuss H.R. 13705, a bill to
amend the CIA Retirement Act of 1964 for Certain Employees.
As you are aware, Mr. Chairman, the Central Intelligence Agency .
Retirement Act of 1964 for Certain Employees was the outgrowth of
extensive hearings by your Committee in 1963 on the Agency's need for
an early retirement program. The Act covers those Agency employees
who serve under conditions of service which shorten their career span.
It authorizes a basis for earlier retirement than is normally possible
under the Civil Service Retirement System which covers the majority
of our employees. It is too early to make a firm determination that
this retirement system will meet all of our contemplated objectives.
Our experience to date, however, has been encouraging.
Many provisions of the CIA Retirement Act were patterned after
the Civil Service Retirement Act. Subsequently, a number of relevant
Civil Service provisions were amended. The principal purpose of
H. R. 13705 is to update the CIA Retirement Act so as to make the
benefits equitable with those of the Civil Service Retirement Act.
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We are aware of the problems involved in dealing with a
comprehensive legislative package this late in the Congress. H. R. 13705
has nine separate sections. All of the sections are important. However,
one section is of overriding importance and at this time we are asking
your consideration of that section only, deferring consideration of the
other sections to a more opportune time.
The matter of overriding importance concerns maintaining the
purchasing power of an annuity. When the CIA Act was passed in 1964
the formula for adjusting annuities for cost-of-living purposes was
identical to that found in the Civil Service Act. In 1965 Congress passed
a law which liberalized this formula for the Civil Service system. The
difference between these formulas has created a very significant gap
between the increases that can and have been granted under the CIA law
and those which can and have been made under the Civil Service law.
If we permit this gap to continue, I am afraid we will be substan-
tially weakening the effectiveness of the CIA Retirement Act and inevitably
creating a situation which will have an adverse effect on the morale of
annuitants and participants involved.
The legislative proposal we are asking you to consider today
simply reestablishes and preserves equity between the CIA Act and the
Civil Service Act on the cost-of-living adjustment of annuities. I strongly
recommend your favorable consideration of this proposal.
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With your permission, I should like to ask Colonel White, who
as you know is the Executive Director of the Agency, to present the
proposal to you in detail.
If I may, Mr. Chairman, I should like to be excused at this time
in order to attend another. important meeting. If you have any further
questions following this hearing, I stand ready to discuss it with you
at your convenience.
Thank you for giving me this opportunity to appear.
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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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who 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.
6
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EXPLANATION OF SECTION 8 BY SUBSECTIONS
Subsection (a) provides that increases shall be based upon
determinations made by the Director pertaining to percentum changes
in the price index.
Subsection (a)(1) authorizes effective 1 January 1967 percentage
increases of annuities under the CIA retirement system equal to those
in force and effect under the Civil Service retirement system as of
1 January 1967.
Subsection (a)(2) provides for subsequent cost-of-living adjust-
ments effective the first day of the third month beginning after the
price index shows a rise of at lease 3 percent for 3 consecutive months
over the base month. All annuities which commence on or before such
effective date will be increased by the percentage rise in the price
index. An increase will be computed on the highest ,percent of the
3 consecutive months, adjusted to the nearest one-tenth of 1 percent.
The month forming the basis for the increase will become the new
base month for determining the next cost-of-living adjustment.
Subsection (a)(2) will produce a 3.9 percent cost-of-living adjustment
as of 1 May 1968.
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Subsection (a)(2) preserves the cost-of-living adjustment
principle for future retirees and survivors of deceased employees
but restricts the amount of increase to only that percentage rise
occurring on or after the commencing dates of their annuities.
Subsection (b)(1) guarantees that survivor annuitants shall receive
the increases granted the annuitant up to the time of his death.
Subsection (b)(2) preserves for surviving children whose annuity
commences after 1 January 1967 the 2 percent and 1 percent percentage
increase reflected in the catch-up increase granted their parents under
Subsection (a)(1).
Subsection (b)(3) provides that the fixed dollar amounts for
children survivors shall be increased along with the cost-of -living
adjustments granted under Section 291.
Subsection (c) offsets any cost-of-living adjustment granted
prior to this amendment. This involves the 4. 6 percent increase granted
on 1 April 1967 to 1965 retirees and their survivors. The rise in the
Consumer Price Index on which the 4.6 percent increase was based is
covered by the catch-up increase provided under subsection (a)(1).
Subsection (d) changes the definition of the term "price index"
from the annual average of the Consumer Price Index over a calendar
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year to that published monthly by the Bureau of Labor Statistics. It
further defines the month used in determining that the price index
warrants a cost-of-living adjustment as the "base month." The base
month for the next increase, if any, is February 1968 which is
established as a result of the operation of subsection (a)(2).
Subsection (e) retains the usual language precluding an increase
on any additional portion of annuity that was purchased by a retiree by
voluntary contributions.
Subsection (f) retains the customary requirement that the monthly
annuity, as increased, be adjusted to the nearest dollar. It provides,
however, for reflecting an increase of at least $1 per month wherever
an increase would not otherwise cause a small annuity to be adjusted
to the next higher dollar.
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90Th CONGRESS
16T SESSION TT
IN THE IIOUSE OF REPRESENTATIVES
Oc'ronr:nn 26, 1)67
Mr. PI1ILBIN introduced the following- bill; which was, referred to the Com-
mittee on Armed Services
L L
To amend the Central Intelligence Agency Retirement Act of
1964 for certain employees, and for other purposes.
1 Be it enacted by the Senate and house of Represent a-
2 lives of the United States of America in Congress assembled,
3 cB cep astral T?+ 11' ,,,, I e-
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3 strl ie , {-S-} his- mai-r-ia , or (-41)- his death, tiw=hiche---er f t-
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5 S-ne. 5. Seet-ion 2-21 of the Gen-t-ra-1 In=-t-el-liggence- .ge-rrey-
6 R-et-i-r-enlenrnt Ac4 0O-T S 1. 403- *at-e-)- - ,s -a-r-ended by de1et-
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8 , nee\- pfflz -graphs 40 a -
9 "-(g }- 4~xee1}t as- c n~ se- p3oi=k tie axl~~~ity +&-ft-
10 ptAteqnt~ shall- ecru-rye en ti-re 4Tfty after sera-tiara fiffrrr-
11 the sei ice, or on ,the, day after- sfa-r ceases a7RJ the parti-el-
12 p t eats the sea--iec a-rid the ae- or- d-i-sa1 i ty
13 for title thereto-. The annuity of -a- pa- tieijia.-n-t ui4dei! seeti.en-
14 sha,tt ~r~e}rse on the -stay af-t-e+_ t4+,- oc_cA+cr4+ee- of t14
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16
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19 "-{-h-) A-n a41-txri-ty 1ni- abte f}eri 44+e en- er after' 4a-te
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i t eme-i+t (5 0 TT403 dote-) is amendeck by 4c ct-?
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-t-e3-11 est timed-# i=ee3}, -egeept vohu=its3 con-ti-ila-t-i -; sh414e
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~ rt3cipa-i t the ~;~~~. h s3 h -Afi'ieer ee e3 4oyee
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"{-e 4)-4?- -a
tr nsf OFFo4 -to--the- f+n4 -of- the ether ?system and his toil ee
H.R.13705 2
-sti~3t -in- -the -system hones -an
-ei eyee i+nder- anothe3 ~zern3nent re.tir$m-en-t system -by
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4-eu?,.n en-t-s eon# i-brztieirs to- the -fu-R4 on Iii,- behalf may be-
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6
t utieis -r l { wits, ire me-vest aecr-tired +h ,
' .- 0I .;=alu-.tai contributions . = be -trans-fe4-z 1 to his
{f- it -j~ the ft+nd of- Stkeh -et her +ZC c7r'rem,(3+A 'system at the-
-reques-t-of-the freer err e l yee efective of the cwte ke-
-h869n eligible to- Vftf ht- 6 h# r1 n sys~
-tei. E-ael-r -su-oh -efeer -0i' employ-ee - request4ig'- Stich
7 tTa sfer o-a4 ],-,& Jeei:fi(~fl to- c t -te- t4a-& tiansfeof-- 1
-?unds au 4 such t fer shall- -he- a-- ezu-fete -Eh -Behar-ge TRJ
9 -of -alb e4ain4s a dem-a ds ga 3e-t the fu
aeeaiiii , of s-en4ee ren4ered- l to- his beeaxirg eligible foi-
pat't eij ation 4t sneh ether syst-oxm ".
- -7 4e4+4R 2-71-- of -tlhe - 1 Intelli-g-erree Agency
Retirement A-et- ki64 TT-C-. 40-3 mate )- i-s- a-meu eEl_ 1byy c1e-
}~ "( ,-rn,nn,j,n,? s~cr~ ,cee hrn, '{l 1-
n 4 'eeTlT-~ r-t7r ,rrz-r*~v ~' v'vcrvi= i.~~' -to- reCZ'El
-(c) -,? and- inserting the f ollo =ing ztew s seetio s -( a ~- a*d
"- }- N~-ot ~; and other p 4sian of law- an
ann 3 -a-nt fie- has retired -under -,his-Acct mid-