LETTER TO HONORABLE CARL ALBERT FROM VERNON A. WALTERS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78M02660R000800040017-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 19, 2016
• Document Release Date: July 14, 2005
• Sequence Number: 17
• Publication Date: March 24, 1976
• Content Type: LETTER

OLC 75-2498/b
Approved lGETMJJ&Je NU3IMICEi3l1 2660R000800040017-9
WASHINGTON,D.C. 20505
AR 1976
Honorable Carl Albert
Speaker of the House of Representatives
Washington, D.C. 20515
Dear Mr. Speaker:
This letter transmits for the consideration of the Congress it draft:
bill to amend the Central Intelligence Agency Retirement Act of 1969: for
Certain Employees, as amended, which implements the President's recom-
mendations in his message of 24 March 1976 that the one percent add--on
in annuity adjustments be repealed.
The proposed bill alters the formula for computing cost-of--living
adjustments to retirement annuities authorized by the Act. The original 1964
CIA Retirement Act provision authorizing cost-of-living adjustments was
based upon a 1962 amendment to the Civil Service r. eti.rement system. The
formula for computation of the adjustment was altered, in 1969 for both the
Civil Service and CIA Retirement. Acts, by authorizing the addition of an
extra one percent of the base annuity to each cost-of-living increase.
The rationale for this bonus was to compensate retirees for the built-in
delay between the actual increase in their cost-of-living, reflected in -the
monthly Consumer Price Index figures, and the date their annuities are
increased to compensate for the rise. .
In practice, however, the extra one percent has overcompensated
annuitants. Since November 1969, the Consumer Price Index has risen
50 percent, while Federal annuities tied to the index have risen 63 percent.
The fundamental problem with the one percent feature is that it corrects
a temporary problem (a maximum few months delay in cost-of-living increases)
with permanent compensation. The one percent figure continues to be paid
to annuitants or their survivors long after it has offset their temporary loss.
The CIA Retirement System can no longer afford the luxury of the
one percent bonus. The drain on retirement funds because of the cost-of-
living increases has been unprecedented. The one percent add--on feature
is an unreasonable windfall which adds dramatically to the drain of retirement
funds.. I have attached an estimate of the savings to the CIA retirement fund
which passage of this legislation would occasion.
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While similar legislation eliminating the one percent add-on is being
proposed for all Federal retirement systems, the CIA system has lagged
behind the other major systems in a number of important areas. A proposal
to equalize benefits in the CIA and Civil Service systems is pending in the
Congress.
We would appreciate early and favorable consideration of the proposed
bill. The Office of Management and Budget has advised that enactment of
the proposed bill would be in accordance with the program of the President.
Sincerely,
Vernon A. Walters
Lieutenant General, USA
Acting Director
Distribution:
Orig Addressee, w/encls
I - DCI, w/encls
1 - DDCI, w/encls
1 - ER, w/encls
1 - DDA, w/encls
1 - OGC, w/encls
1 - OF, w/encls
1 - OP, w/encls
1 - Compt, w/encls
1 - OLC Subject, w/encls
1 /- OLC Chrono, w/encls
~Y"- OLC.OMB Liaison, w/encls
OLC: DFM: sm (retyped 23 Mar 76)
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To amend the Central Intelligence Agency Retirement Act of 1964 to
eliminate the extra one per centum. added to each cost-of-living
annuity adjustment.
1 Be it enacted by the Senate and House of Representatives of
2 the United States of America in Congress assembled,
3 Section 1. That Section 291(a)(2) of the Central Intelligence Agency
4 Retirement Act of 1964 for Certain Employees, as amended, (78 Stat. 1043;
5 50 U.S. C. 403 note) is amended by deleting the phrase "1 per centum
6 plus" from the second sentence of that section.
7 Section 2. This Act is effective July 1, 1971.6.
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This bill would alter the formula for computing cost-of-living adjust-
ments to retirement annuities under the Central Intelligence Agency Retire-
ment and Disability System (CIARDS). Under the current formula, annuities
are adjusted when the Consumer Price Index has risen at least 3 percent
above the point which triggered the last adjustment, and the Index has remained
at the higher level for three consecutive months. Under these circumstances,
the annuity increase equals the highest percentage increase in the Index
during the three-month period, plus 1 percent. This bill would not change
the circumstances bringing about a cost-of-living increase, but would eliminate
the 1. percent extra which has been added to each increase.
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Existing law proposed to be eliminated is enclosed in brackets.
CENTRAL INTELLIGENCE AGENCY RETIREMENT ACT
OF 1964 FOR CERTAIN EMPLOYEES, as amended
(78 Stat. 1043; 50 U.S.C.A. 403 Note).
TITLE II--THE CENTRAL INTELLIGENCE AGENCY
RETIREMENT AND DISABILITY SYSTEM
PART J--COST OF LIVING ADJUSTMENT OF ANNUITIES
SEC. 291 (a) On the basis of determinations made by the Director
pertaining to per centum change in the price index, the following adjust-
ments shall be made:
(1) Each annuity payable from the fund on January 1, 1967,
shall be increased on that date by (a) 12.4 per centum for annuities
which commence on or before January 1, 1966, or (b) 4.9 per centum
for annuities which commence on or between January 2, 1966, and
January 1, 1967.
(2) Each month beginning with November 1966, the Director
shall determine the per centum 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 per centum for three consecutive
months over the price index for the base month, each annuity payable
from the fund which has a commencing date not later than such effective.
date shall be increased by [ 1 per centum plus] the per centum rise
in the price index (calculated on the highest level of the price index
during the three consecutive months) adjusted to the nearest one-tenth
of 1 per centum.
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Enactment of this proposed legislation would result in the following
estimated reductions in outlays through 1981 from the CIARDS fund. The
1977 figure assumes the legislation is enacted by July 1, 1976.
Fiscal Year
1977
1978
1979
1980
1981
Reduction in Outlay
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