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actively. A provision is included to permit an election to be made within 90 days from the date of the awarding of the retired pay. Under advice of the Comptroller General we are now accepting elections if made within 30 days. This does not give sufficient time to process the case, compute costs and properly advise the individual. Section 3 contains a provision to permit a member to allocate an annuity between a surviving spouse and his surviving children who are not children of that spouse. Fortunately, so far as we have knowledge, cases of this nature have been resolved amicably but we believe the member should have the right only to make such an allocation where this situation exists.

Section 3 also contains language to remove the 50 percent limitation on multiple options. This can best be explained by stating that under the law as written, a member may elect option 1 for one-fourth, and option 2 for one-fourth, however, the combined amount of the annuity may not exceed 50 percent of the reduced retired pay. By computing each annuity separately, which we are required to do, and then adding them, in some cases, the total exceeds 50 percent of the reduced retired pay. This requires each annuity to be adjusted downward in a sufficient amount to meet the 50 percent limitation. By removing it computation of costs could be simplified.

Following enactment of Public Law 239, this committee and the several services were made aware of certain hardship situations created by a member electing to participate without a full understanding of the impact the cost would have on their retired pay. These cases prompted enactment of Public Law 696, 83d Congress, granting the Secretaries of the several Departments authority to make determination of hardship in individual cases, and authorize their withdrawal from further participation.

These hardship situations still continue to arise. For that reason, section 4 was included in the bill to permit the Secretary concerned, under regulations prescribed under section 1444(a), title 10, to allow withdrawal from participation in hardship cases. This section follows closely the intent of Public Law 696 as permanent legislation, with the safeguard that additional monitorship by the Secretary of Defense is assured because of the delegation to him by Executive Order 10499, November 4, 1953, of the functions vested in the President to prescribe regulations by section 1444(a) of title 10, United States Code. As a further precaution section 5 of the act amends section. 1444(b) relating to reports of administration to require a detailed account, including an actuarial analysis of every case in which relief is granted from participation in the act except those based upon administrative error.

Section 6 of this act is a new section (sec. 1445) which would grant authority to the Secretary concerned, under regulations prescribed under section 1444(a), to correct administrative errors. Except when procured by fraud the correction would be final and conclusive. This would permit the correction of purely administrative errors by the Secretary concerned without having to resort to considering them under authority granted by section 1552, title 10, United States Code. One of the most critical situations that could be eliminated by enactment of this section is in connection with computation of service at the time of retirement. Several instances have been called to our attention

where an individual is found to have more service than his records have indicated. Usually this is National Guard or Reserve time that has not been credited. In the recomputation, his election is frequently found to have been made after 18 years' service as corrected. In all fairness his election should be recognized and this section would grant this authority. There are other perfectly human errors by which an individual's service is improperly recorded which prejudice participation.

Section 6 also proposes to add another new section (sec. 1446) to provide a system of annuities to be paid only to survivors of personnel who retired with less than 18 years of service and who died of other than service-connected causes. All of the individuals in this category would have been retired for physical disability and if death is on account of service-connected causes as determined by the Veterans' Administration, the survivors would be entitled to dependency and indemnity compensation. We refer to this section as "option 5"; however, we think it is best described as DIC protector.

This is how it would work: An individual retired with less than 18 years of service would be permitted to make the election at the time of retirement. If at the time of his death it was determined that dependency and indemnity compensation was payable by the Veterans' Administration, then, no annuity would be paid. Instead the beneficiary would be refunded the amount of the member's contributions after first deducting the cost of term insurance for the amount of the annuity during the period that he participated. Much thought was given to this option; however, it was determined that something must be done to provide increased participation on the part of enlisted personnel, especially those retiring with less than 17 years of service and who, under the present cost tables, would find their cost of participation increased to almost prohibitive amounts. For example, a member retiring with 16 years of service at age 34 with a wife 3 years younger and a child 7, would have to pay $32.81 for each $100 of retired pay awarded him.

However, if this same individual is retired with 17 years' service his cost would be only $12.48 per month for each $100 of retired pay. It is believed that by introducing this new concept the cost could be materially reduced below this figure. The plan has the advantage of permitting the election to be made at the time of retirement, and would provide a cash payment to the widow should dependency and indemnity compensation be awarded.

For personnel retired with less than 18 years' service it would assure some income to the survivors in event of death without forfeiting from 25 to 50 percent of the retired pay awarded. This provision was developed by the Department of Defense at the request of the Bureau of the Budget.

Section 7 is a transitional provision. In section 2 the 5-year waiting period, before a change or revocation is effective, is reduced to 3 years. Section 7 provides that changes or revocations pending on the effective date of the law will be effective on that date or 3 years from the date of the change or revocation whichever is later.

Section 8 is a savings proviso applicable to personnel who have an effective election on the date of enactment and who may thereafter be retired for physical disability. Individuals in this situation would

have applicable to them the provisions of chapter 73, title 10, United States Code (the chapter being amended), as it existed on the date of enactment except for a change or revocation coming under section 7 above. This would permit the payment of annuities to survivors who had a valid election in effect upon date of enactment even though retired prior to completion of 18 years. Otherwise the restrictions imposed by the new section 1446 would be applicable.

Chairman RUSSELL. Admiral Houser, I understand, wants to make a statement on this bill.

Have a seat, Admiral.
You may proceed, sir.


Admiral HouUSER. Mr. Chairman and members of the committee; I am Rear Adm. Harold A. Houser, U.S. Navy, retired, legislative counsel of the Retired Officers Association, with headquarters in this city. Our association consists of over 49,000 members, representing retired officers of all of the seven uniformed services, including both Regulars and Reserves.

The association appreciates the opportunity to present its views in connection with the committee's consideration of the bill, H.R. 6668, a bill to amend title 10, United States Code, with respect to annuities based on retired or retainer pay, and for other purposes.

It appears that enactment of this bill would accomplish its purpose of increasing the attractiveness of the program established by the Uniformed Services Contingency Option Act of 1953. This law authorized members of the uniformed services to make an election whereby they agree to forego a certain amount of their retired pay in return for annuities their widows and other dependents receive upon the death of the persons concerned, after retirement. The Contingency Option Act set up a self-sustaining program involving no direct contribution on the part of the Government.

The receipt of the annuity provided by the above law was not intended by the Congress to prejudice the right of the recipient to receive any pension to which otherwise entitled under the existing law. The enactment of a subsequent law, however, did bring about this unfortunate result.

It is desired to invite the committee's attention to the language in the Contingency Option Act covering this point. It is found in section 11, and reads, as follows:

Annuities payable under this act shall be in addition to any pensions or other payments to which the beneficiary may now or hereafter be entitled under any other provision of law, and shall not be considered income under any law administered by the Veterans' Administration.

After the enactment of the above law, the heads of the uniformed services, through appropriate means, acquainted personnel of the several services as to the various provisions contained in that law. In so doing, it was made clear that the payments to be made under this law would not be interpreted as "income" in determining the qualifications for a pension.

This was a very important consideration because of the income limitation a person must meet in order to qualify for a pension. As an illustration, a widow (without dependents) of a World War I veteran cannot qualify for a pension if her income exceeds $1,800 per annum. The Veterans Pension Act of 1959, effective June 1, 1960, has been construed as requiring that the annuities paid under the Contingency Option Act be considered income in determining qualification for a pension. This is in direct conflict with the plain language on this subject which was contained in the Contingency Option Act of 1953, as quoted above. The question of electing to participate in the program provided in the 1953 law posed a very difficult question for many officers. Among the points they took into consideration was the effect it might have on other benefits available to dependents, including the right to a pension. The official assurance that participation in the Contingency Option Act would not prejudice this right was one of the strong motivating causes and, in many instances, the determining factor that was involved in this decision.

It is submitted, Mr. Chairman, that the legislative history as outlined above demonstrates that there has been a unilateral modification of a contract entered into in good faith by many members of the uniformed services. This, obviously, is true as to those who elected to come under the contingency option program prior to July 1, 1960.

It is, therefore, recommended, with respect to this group, that the bill, H.R. 6668, be amended to reenact, with appropriate language, the substance of section 11 of the Uniformed Services Contingency Option Act of 1953, to which the committee's attention has been invited. Subject to the foregoing, the Retired Officers Association urges favorable consideration of the bill by the Congress.

Thank you, Mr. Chairman.

Chairman RUSSELL. Thank you for your able statement, Admiral Houser.

Admiral HOUSER. Thank you, sir.

Chairman RUSSELL. Any questions?

Senator SALTONSTALL. This question, Mr. Chairman: I have just been informed by our expert in charge of this matter that this suggestion or recommendation that you make is not within the jurisdiction of this committee; that it is a question of the Veterans' Administration and the Finance Committee; and that if we pass this bill or make this suggestion or recommendation here, that we are putting ourselves in conflict with the Veterans' Administration.

Admiral HOUSER. Senator Saltonstall, might I comment on that, sir?

The basic law originated in the House Armed Services Committee and hearings were held, as I understand it, in this committee when it was enacted in 1953.

I just assume that modification of a bill which had its inception in these two committees would be properly before these committees. Senator SALTONSTALL. But what is considered as income and not considered as income in connection with a pension, as I understand it, is under the Veterans' Administration, if I am correctly informed, so that if we pass this bill and put in an amendment such as you suggest, then we are in direct conflict or we may be in direct conflict with the Veterans' Administration and its laws as to what is or is not income.

That is what I am informed. I do not know whether that is right or not, but I trust our expert.

Admiral HOUSER. I do not think I could add anything to what I have said, Senator Saltonstall. I believe I have said all I can say on that point, sir.

Chairman RUSSELL. Senator Byrd?

Senator BYRD of West Virginia. No, thank you.

Chairman RUSSELL. Senator Smith?

Senator SMITH. No questions.

Chairman RUSSELL. Thank you very much, Admiral Houser. We are very glad to hear from you.

Admiral HOUSER. Thank you, Mr. Chairman.


Mr. Chairman and members of the committee, we appreciate the opportunity to appear before your committee and present our views on this most important piece of legislation.

H.R. 6668 will give individuals who desire to exercise the contingency option sufficient time so that they can fully determine their needs and act accordingly.

We have had a standing mandate from our national convention for several years requesting the Defense Department and Congress to make a study in order to ascertain if the time element in which the option had to be exercised could be shortened. H.R. 6668 will accomplish this.

We feel that H.R. 6668 will permit officers to make the election more judiciously than the present law, whereby they have to exercise the option many years prior to retirement.

We are in full support of this bill and hope that your committee will see fit to favorably report the same.

We want to thank you for permitting us to express our views.


Chairman RUSSELL. Senator Goldwater is here with respect to a brief statement to the committee on Senate Joint Resolution 108. There has been some confusion, Senator Goldwater.

As I told you yesterday, we had no report from the Department on it. Then I called and read the report and it turns out the report was from the Department of the Air Force but we have not yet received any report from the Department of Defense.

Despite that, however, we are perfectly willing to have a hearing on this bill. We are glad to hear from you.

(S.J. Res. 108 is as follows:)

[S.J. Res. 108, 87th Cong., 1st sess]

JOINT RESOLUTION To authorize the presentation of the Distinguished Flying Cross to Major General Benjamin D. Foulois, retired

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of the Air Force is hereby authorized and directed to present the Distinguished Flying Cross to Major General Benjamin D. Foulois (AO1590), United States Air Force, retired,

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