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

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75B00380R000700120009-7
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 16, 2016
• Document Release Date: June 1, 2005
• Sequence Number: 9
• Content Type: STATEMENT

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STATEMENT OF LAWRENCE K. WHITE, EXECUTNE 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, basically designed to update
the Central Intelligence Agency Retirement Act. As the Director has
indicated, one section is of immediate concern. This is Section 8
which deals with the cost-of-living formula for CIA annuitants. 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.
STAT
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The purpose of Section 8 of H. R. 13705 is to bring the cost-
of-living feature of the CIA retirement system into consonance with
other major Federal retirement systems. Specifically, as of
1 January 1967 Section 8 increases annuities under the CIA retirement
system by the same percentage increase in force and effect for
comparable annuities under the Civil Service retirement system. It
also authorizes future cost-of-living adjustments under the CIA
retirement system to be made under the same formula which applies
to military retirement pay and to Civil Service annuities.
As the Director has noted, the principle of adjusting retirement
pay on the basis of increases in the Consumer Price Index was established
in Government for the Civil Service retirement system in 1962 and for
the military retirement system in 1963. This principle was adopted
for the CIA Retirement Act when it was passed in 1964. Following the
adoption of the cost-of-living principle on a Government-wide basis and
before any actual increases had been granted the formula for granting
these increases was modified. This was accomplished first for military
retirees in late 1965 and for Civil Service retirees soon thereafter.
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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.
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 per-
cent 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
retirees, 9 percent for 1966 retirees, and 3.9 percent for 1967 and
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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 between the original cost-of-living formula and the
new formula comes about as follows: Under the new formula for military
and Civil Service when there is a 3 percent increase in"the Consumer
Price Index for a period of three months, the cost-of-living increase
is automatic and becomes effective two months later. On the other
hand, under the old formula still in the CIA system the cost-of-living
for an entire calendar year must average a 3 percent increase and the
actual adjustment in the annuity does not become effective until 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 to cause an adjustment.
The cumulative increases in 1965 and 1966 resulted in a 4.6 percent
adjustment 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 percenturn.
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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 thus fell
. 2 short of the mark, which would have triggered an adjustment.
Almost certainly there will be an adjustment as of`l 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 the Civil Service system 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.
In summary, Section 8 of H. R. 13705 will conform the cost-
of -living feature of the CIA Retirement Act to that found in the other
major Federal retirement systems and will assure that future cost-
of-living adjustments under the CIA retirement system will be precisely
in phase with those granted under the Civil Service system.
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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