CIVIL SERVICE RETIREMENT WEDNESDAY, FEBRUARY 8, 1956 UNITED STATES SENATE, COMMITTEE ON THE POST OFFICE AND CIVIL SERVICE, Washington, D. C. Met, pursuant to notice, at 10 a. m., Hon. W. Kerr Scott (chairman of the subcommittee) presiding.. Present: Senators Scott (presiding) and Case. Staff members present: H. W. Brawley, executive director and J. Don Kerlin, assistant staff director. Senator SCOTT. The meeting will please come to order. Mr. BRAWLEY. Mr. Chairman, the first witness will be Capt. Charles Brooks, Secretary of the Academic Board, United States Naval Academy. Senator Scor. All right, Mr. Brooks. Captain Brooks. Good morning, Mr. Chairman. Senator SCOTT. Good morning. We are glad to have you with us. Captain BROOKS. I would like to read a statement I have prepared. Senator SCOTT. Give your name for the record. STATEMENT OF CAPT. CHARLES B. BROOKS, JR., SECRETARY TO THE ACADEMIC BOARD, UNITED STATES NAVAL ACADEMY, ANNAPOLIS, MD. Captain BROOKNS. I am Capt. Charles B. Brooks, Jr., Secretary of the Academic Board, United States Naval Academy. I am appearing before the committee as the Department of the Navy witness only on section 2 of S. 2875. Section 2 would implement the recommendation of the Committee. on Retirement Policy for Federal Personnel (the Kaplan committee) that the members of the civilian faculties of the United States Naval Academy and the United States Naval Postgraduate School be brought under the civil-service retirement system. This section is similar to a Department of Defense proposal which was sent to the President of the Senate on January 9, 1956, and referred to your committee. Retirement and retirement annuities for the members of the civilian faculties of the Naval Academy and the Naval Postgraduate School are now provided by the act of January 16, 1936, as amended, which is administered by the Department of the Navy. The act of January 16, 1936, requires that, as a part of their contracts of employment, the members of the civilian faculties of the Naval Academy and the Naval Postgraduate School carry during 57 their employment a deferred annuity policy having no cash surrender or loan provisions. These contracts are carried with the Teachers Insurance & Annuity Association of America. Each of these employees is required to register with the Navy Allotment Office a monthÎy allotment equivalent in amount to 10 percent of his monthly basic salary and for each monthly allotment so registered the Department of the Navy is required to credit the employee's pay account, from appropriations made for this purpose, with a sum equivalent to 5 percent of his monthly basic salary. The annuities provided are at the rate of 13 percent of the employee's average salary during any 5 consecutive years multiplied by the number of years of his service, and where the annuity purchased from the Teachers Insurance & Annuity Association does not equal that amount, the Department of the Navy is required to pay such additional amount as will bring the annuity to that amount. The members of these faculties who were so employed on January 16, 1936, were permitted upon request to participate in these retirement benefits. The act of January 16, 1936, was amended in 1943 and again in 1946 in an effort to bring it in accord with the then provisions of the Civil Service Retirement Act. Since 1946, however, the Civil Service Retirement Act has been extensively revised to increase its benefits while no corresponding revision has been made in the act of January 16, 1936. There are at present 196 members of the civilian faculty of the Naval Academy and 134 members of the civilan faculty of the Naval Postgraduate School. Subsection (a) of section 2 would bring the present civilian faculty members of the Naval Academy and the Naval Postgraduate School under the terms of the Civil Service Retirement Act. Subsection (b) of section 2 makes special provision for their deposit with the civil-service retirement and disability fund to cover their service before such transfer. In lieu of the deposit prescribed under section 4 (c) of the Civil Service Retirement Act, each faculty member would be required to deposit within 6 months after the bill was enacted, to cover past service, a sum equal to the repurchase price of that portion of the annuity policy carried by him with the Teachers Insurance & Annuity Association which was purchased in accordance with the requirements of the act of January 16, 1936. Should the deposit not be made within the 6 months' period no credit would be allowed under the Civil Service Retirement Act for service as a civilian faculty member of the Naval Academy or Naval Postgraduate School after July 31, 1920, and prior to the date the bill was enacted. The total amount of the repurchase price of the contract of the civilian faculty members as of January 1, 1955, was computed at $1,458,248. The amounts which would be contributed under section 2 represent approximately 10 percent salary deductions during the period covered, 5 percent of which was paid by the faculty member and 5 percent by the Department of the Navy. Thus the factulty member's contribution to the annuity contract with the Teachers Insurance & Annuity Association and that of the Government would be deposited with the civil-service retirement and disability fund. The Teachers Insurance and Annuity Association contracts do not provide any cash surrender provisions and hence cannot be repurchased except at the agreement of the individuals and the Teachers Insurance and Annuity Association. The Teachers Insurance and Annuity Association has agreed to repurchase the contracts provided that the subject proposed legislation is enacted during this session of the Congress. Briefly the advantages of bringing the civilian faculties under the civil-service retirement system include the following: (1) Service which may be credited under the civil-service retirement. system includes military service. Such service may not be credited under the January 1936 act. Since many of the members of the civilian faculties have served periods of military service they are thus handicapped under the present retirement system as compared with the civil-service retirement system; (2) The maximum annuity under the January 1936 act is limited to 50 percent, while under the civil-service system it may reach 75 percent; (3) The civil-service retirement system provides much more liberal benefits for survivors of employees who die in service; and (4) Enactment of this bill will eliminate the necessity of separate legislation to keep the civilian faculties abreast of changes in the civil-service retirement system. The Department of the Navy strongly recommends enactment of section 2 of S. 2875 or of a similar proposal. Mr. Chairman, I have Professor Hawkins and Professor Shields of the Naval Academy faculty here with me and we would be delighted to answer any questions we may be able to. Senator Scorr. Thank you for the statement. Any questions any member of the staff would like to ask? Mr. BRAWLEY. I have no questions, Mr. Chairman. Similar legislation has been officially proposed by the Department of the Navy through the President and the Bureau of the Budget to the Vice President and the Speaker of the House. That request is pending before this committee, but it was also embodied in S. 2875. Senator SCOTT. Thank you very much. Senator SCOTT. Yes, Senator Case. Senator CASE. Captain, do you know whether the situation as applicable to the Naval Academy is also applicable in general to the Military Academy and the Air Force Academy? Captain BROOKS. No, sir; it is not. It is entirely different legislation and laws. Senator CASE. Could you explain just generally what the differences are? Captain BROOKS. I cannot tell you too much about the West Point laws because I am not too familiar with them. Mr. HAWKINS. Might I say West Point does not have civilian faculty members, except for a very few language instructors. Senator CASE. Your faculty are generally, are they not, civil service? Captain BROOKS. No, sir; they are under an excepted status, they are Government employees. Senator CASE. And the contracts are generally how long or do you have that as in regular-that is to say, in civilian institutions of higher learning do you have a system of tenure after you reach associate professor? Captain BROOKS. After 3 years in the grade of associate professor the member is given annual. Senator CASE. This does not relate to any recommendations of academic tenure, so far as you can tell it is satisfactory at the present time? Captain BROOKS. It is. Senator CASE. No questions, sir. Senator SCOTT. Thank you very much. Mr. BRAWLEY. Mr. Chairman, the next witness is Jerome J. Keating, vice president of the National Association of Letter Carriers. While Mr. Keating is taking his seat I think the record should show that in the opinion of the staff and many of the members of this committee Mr. Keating is considered an expert authority on retirement, the retirement system for Federal employees generally, and I think his statement will prove to be very valuable to the committee in this study. Senator SCOTT. As far as your statement is concerned unless you want to read it, if you want to submit it for the record that will be all right. Mr. KEATING. I would like to read it, sir. STATEMENT OF JEROME J. KEATING, VICE PRESIDENT OF THE NATIONAL ASSOCIATION OF LETTER CARRIERS Mr. KEATING. My name is Jerome J. Keating, I am vice president of the National Association of Letter Carriers, an organization having a membership of 105,000 located in every State of the Union, Hawaii, Puerto Rico and Alaska. I am accompanied by Jeter J. Cahill, secretary, and R. B. Kremers, the assistant secretary of the National Association of Letter Carriers. President Doherty would have been with us this morning but he has recently returned from a trip to Brazil where he went with the official Government delegation to the inauguration of President Kubitschek. The delegation was headed by Vice President Nixon and on the way back he stopped off to attend the A. F. of L. council meeting in Miami. I am also chairman of the retirement committee of the Government employees' council of the A. F. of L.-CIO, a council composed or organizations representing more than 500,000 Federal and postal employees. The statement I am about to present reflects the thinking of the 105,000 members of my own association, as well as the 500,000 members making up the constituent membership of the Government Employees' Council. First, Mr. Chairman, I want to express our deepest thanks to the distinguished chairman of the Committee on Post Office and Civil Service, Senator Olin D. Johnston, for introducing in the Congress S. 2875, an excellent bill that will make some sorely needed improvements in the Civil Service Retirement Act. I also want to express my appreciation on behalf of those I represent to the distinguished members of this committee for affording me this opportunity to present our views on this important legislation. Specifically, Mr. Chairman, the Johnston bill, S. 2875, improves the Retirement Act by providing a new formula to be used in computing annuities, it affords substantial improvements in survivorship benefits, and establishes a minimum annuity for those who retire on disability. The need for legislation improving the civil-service retirement law is clearly shown by the fact that 79.7 percent of all annuitants on the rolls as of June 30, 1953, received annuities of less than $2,000, and 49.9 percent received annuities of less than $1,500. These annuities were increased by the passage of legislation in this Congress, providing a 12 percent increase on the first $1,500 and 8 percent on the amount above $1,500. Even with this increase, 49.9 percent of those on the annuity rolls draw $1,680 or less. A new formula to provide a larger annuity is badly needed to provide a standard of living in keeping with the present-day American standard of living. Under our present law, an employee reaching retirement age must take a substantial decrease in his annuity to provide survivorship benefits. Because of this fact, 1 out of every 3 of those who are eligible to select survivorship benefits fail to do so, simply because they need all of their annuity to live on. Those who fail to select survivorship benefits are generally those in the lower salary brackets where the need for survivorship protection is much greater. Before considering S. 2875, the Johnston bill, Mr. Chairman, we wish to make some pertinent observations relative to the recommendations presented to this committee on behalf of legislation to implement the Kaplan report. The Kaplan Committee was provided for in S. 2968, a bill sponsored by Senators Smathers and Duff and passed in the 82d Congress. The report accompanying S. 2968 carried the following statement: Section 2 of the bill would create a Committee on Fiscal Policy for Federal Civilian Retirement Systems, its members being the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve System, and the Director of the Bureau of the Budget. This Committee would survey existing methods of determining and funding the Government's cost of these retirement systems and make reports and recommendations to Congress, on or before June 30, 1954. as to the methods of financing which will result in the proper discharge of the Government's liabilities. The Chairman of the Civil Service Commission has on several occasions expressed the opinion that the civil-service retirement system should be financed on a fully funded reserve basis, that is, that there should be sufficient money in the fund to meet all obligations to persons already retired and now in service. The committee is not convinced that this is the proper and best method. For this reason the bill contains the provision for a special committee of fiscal experts to make a thorough study of the existing methods of financing civilian retirement systems, and report to Congress not later than June 30, 1954, with recommendations as to the method or methods to be adopted. That is the end of the quotation. The idea of a committee to determine how a Federal-operated retirement plan was to be financed was conceived in the Smathers subcommittee. This was to have been the primary function and objective of the committee that came to be known as the Kaplan Committee. No hint of coordination or the necessity for coordination was suggested in either the report or in the bill, but it was clearly evident to those of us who met with Mr. Kaplan shortly after his Committee was formed that the main goal of the Committee was coordination. 75735-565 |