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STATEMENT OF LEO L. GEORGE, PRESIDENT OF THE NATIONAL FEDERATION OF POST OFFICE CLERKS

Mr. GEORGE. Leo E. George, president of the National Federation of Post Office Clerks.

First, I want to deliver a message to the committee from Mr. Paul Castiglioni, legislative director of the National Federation of Motor Vehicle Employees who, unfortunately, became a victim of one of his own engines over the weekend and is unable to be here.

Also, I will say that I am here because of the serious illness in the family of Mr. Hallbeck which made it impossible for him to be here. He has a prepared statement.

Senator Scorr. Would you like to read that or just submit it for the record?

Mr. GEORGE. I do not think, Mr. Chairman, it would be necessary to read it.

I want to mention two of the points brought up by Mr. Deedle that we, as well as the rest of those in the Government Employees Council are wholeheartedly opposed to any coordination or you might say confusion with social security, and we are also under the present circumstances not only in favor of Mr. Johnston's bill, S. 2875.

Senator SCOTT. Would counsel like to ask any questions?

Mr. BRAWLEY. I would just like to ask Mr. George the same question I asked of Mr. Keating.

If you had your choice between no liberalization at all in the retirement system and S. 3041, which would you choose?

Mr. GEORGE. The membership of our organization are on record as absolutely opposed to coordination with social security under any circumstances, and my reply would be that I am speaking for 100 percent of our organization saying that we would prefer no legislation at this session as to any coordination with social security.

Mr. BRAWLEY. That is all.

Senator SCOTT. We will have the statement of Mr. Hallbeck now.

STATEMENT OF E. C. HALLBECK, LEGISLATIVE DIRECTOR, NATIONAL FEDERATION OF POST OFFICE CLERKS

Mr. HALLBECK. In order to identify myself for the record, I am E. C. Hallbeck, legislative director of the National Federation of Post Office Clerks, with offices at 711 14th Street NW., Washington, D. C.

I should say at the outset that we are highly pleased and gratified at the prompt action this subcommittee and the Senate Committee on Post Office and Civil Service, is taking on the retirement question. Certainly, insofar as postal and other employee groups are concerned, it is one of the most important questions before the 84th Congress.

A rather surprisingly large number of bills to amend the Civil Service Retirement Act are before the committee and of all these bills, S. 1153 is beyond all doubt the most desirable from the employee standpoint. On the other hand, the latest bill introduced, S. 3041 is, in the view of virtually every employee, the least desirable.

In between these two poles, so to speak, is the bill, S. 2875, which would provide many needed improvements in the retirement struc

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ture, including a new and more logical formula for the computation of annuities; an improved optional retirement procedure; much needed liberalization of the widow and dependent benefit features; improved disability retirement benefits with a much needed minimum benefit provision; a sound mandatory retirement feature, and several administrative improvements.

I understand that this subcommittee would prefer to confine testimony to the bill, S. 2875, but I hope that this will not preclude consideration of some of the more desirable features of the earlier bill, S. 1153. Particularly, I believe you should give very serious, and I would hope, favorable consideration to the matter of computing all annuities on the same formula that is provided for Members of the Congress. In other words, on the basis of 21/2 percent of salary rather than 2 percent as provided in the bill, S. 2875.

I have said that the bill, S. 3041, is the least desirable in the view of virtually every employee. As a matter of fact, I do not know of a single employee or employee organization in sympathy with the view that there should be a joint coverage of employees under the civilservice retirement and social-security systems. The employees take the position that any benefits which would be made possible by such joint coverage could just as readily and as cheaply be made available through proper amendment of the Retirement Act.

Employees have a real and very valuable stake in civil-service retirement because they have been making important contributions to that fund for more than 35 years. They started making those contributions before social security was ever heard of and they have paid to date more than $5 billion as their share of the cost. With an investment of that sort, they are understandably suspicious of anything that would in the slightest degree detract from its value. They feel something like the wealthy widow who was being courted by an insolvent bum. They cannot be sure whether it is love or avarice that makes them so desirable. Not being sure Federal employees are noticeably shy about any understanding let alone an engagement or marriage between civil-service retirement and social security.

We know that there is nothing in the bill S. 3041 which would actually merge the two systems. However, we are mindful of the old Arab proverb: "Once a camel gets his nose under your tent, you are soon living with a camel." We sincerely believe that S. 3041 is only the opening wedge, and that once such legislation is enacted the day of the actual "marriage" or merger of social-security and civil-service retirement will not be too distant. I think it is safe to say that postal employees do not want such a merger or S. 3041 at any price.

What we do want is a modern retirement system, within the framework of the present act, which will provide a reasonable annuity after 30 years of loyal and faithful service, with adequate provisions for the widows and dependents of employees or annuitants and protection against the hazards that make disability retirement necessary before a normal retirement age, at a price which the employee can afford to pay. These benefits can be provided under the Civil Service Retirement Act and the bills S. 1153 and S. 2875 most nearly approach that objective.

If, as I suspect, S. 2875 is to be the principal vehicle considered by this subcommittee, I suggest that you seriously consider amendments which we believe will strengthen and improve the bill.

Because some pay acts define "basic salary" to exclude longevity pay and since there is no desire to exclude longevity pay from average salary for purposes of computing annuities, we suggest an amendment to section 1 (e), adding after the words "basic salary" on line 12, the words "including longevity or meritorious pay."

Under the Railroad Retirement Act, officers of the railroad employee organizations are covered for the purposes of that act while so engaged. We believe similar consideration should be extended to officers of the Federal employee organizations and suggest that this purpose can be accomplished by amending section 3 (c) to add the words, "while serving as an officer of an employee organization, or" after the word "or" on line 11.

We are particularly pleased with some of the optional features of section 6 of S. 2875. Certainly this section is a considerable improvement over present law. It will provide for what amounts to an optional retirement after 30 years of service with a reduction in annuity based on the age of the employee. Frankly, we take the position that there should be no reduction in annuity, regardless of the age of the employee, after he has performed 30 years of service. We know that there are some who will claim that the cost of such a program would be prohibitive. However, experience with optional retirement to date indicates that only a relatively small minority of employees elect to retire at an early age unless there is some all-compelling reason for such action. The principal reason is the health of the employee or his family. The number of employees who would actually retire at an early age is necessarily limited by the laws of economics. The man of 50 to 55, for example, ordinarily has family responsibilities such as children in school or college, a home only partly paid for, and things of that sort, which make it virtually impossible for him to even think of anything which would have the effect of reducing his take-home pay. The jobs which people of that age could obtain in private industry usually pay a wage so low that the combination of that wage with an annuity is actually less than the employee receives in Government work. For that reason, we feel that optional retirement at an early age would be limited to those for whom there was a compelling necessity and the ultimate cost to the retirement system would be much less than commonly estimated.

Section 7 deals with retirements caused by disability of the employee. In this field, there is a notable need for improvement. The provisions of present law, particularly in cases where the employee has only limited service, are woefully inadequate. By providing for a minimum annuity of 40 percent of average salary, in cases of disability retirements, section 9 of the bill S. 2875 goes a long way in the right direction. My own view is that it would be entirely just and equitable to retire an employee on a minimum of half pay whenever permanent disability makes retirement necessary. In this respect, the provisions of S. 1153 are far superior.

There is one feature of section 7, however, with which we are not in agreement. I refer to section 7 (d) which deals with the partial recovery of a disabled annuitant and which would discontinue an annuity whenever the income of the annuitant for 2 succeeding calendar years is equal to 80 percent of his salary immediately prior to retirenent. This provision would be bad enough if wages were at all times

stable, but I invite the subcommittee's attention to the fact that a post-office clerk who was retired on acocunt of disability in 1943 would be dropped from the annuity rolls whenever his income approximated $1,600 a year, despite the fact that $1,600 per year today is actually only about 30 percent of the wage the same annuitant would be receiving if his enforced retirement had not been necessitated by reason of disability. Thus, employees whose annuities, based on their average wage at time of retirement, were meager, at best, would be further penalized whenever their earning capacity from the operation of a newsstand, for example, approached $125 per month. I cannot believe that this is what Senator Johnston intended and I recommend that the last sentence in section 7 (d) be stricken from the bill.

The survivor benefits provided by S. 2875 are greatly to be desired. In addition to providing an automatic coverage for the widow of an annuitant, the bill provides for increased benefits for the surviving widow and children of an employee who dies before becoming eligible for retirement. It is in this field that the benefits of the Social Security Act are generally more liberal than the benefits provided under the Civil Service Retirement Act. This is probably the major factor in the argument in support of coordination of the two systems. The proponents of coordination would have us believe that there is some magic formula in the social-security structure which makes these benefits possible at a cost below the costs of these same benefits provided in any other system. We take the position that the costs of like benefits would be the same under any system and that any seeming difference in favor of social security occurs only because the socialsecurity rate at the present time does not truly reflect the costs of these benefits.

Section 9 (a) of the bill S. 2875 provides that in the computation of annuities the annuity shall be the larger of "(1) 2 per centum of the average salary multiplied by the total service, of (2) 1 per centum of the average salary: ****9 We strongly urge that this section be amended by striking out the figure "2" in line 13 on page 21 of the bill, inserting in lieu thereof the figure "212" and that the figure "75" in line 16, page 21 of the bill be stricken, inserting in lieu thereof the figure "80." These amendments will have the effect of providing the same formula for the computation of employees' annuities as that provided for Members of Congress in section 9 (c) of the bill and retaining the present maximum annuity of 80 percent of average salary.

Section 9 (g) of the bill provides for the designation by unmarried employees of a beneficiary having an insurable interest to receive an annuity after the death of an annuitant. In order to establish such a joint annuity, it is necessary that the employee be in good health at time of retirement and that he take a 10-percent reduction in annuity, plus an additional 5 percent reduction for each full 5 years the person designated is younger than the retiring employee.

In most instances that have come to my attention, the people who would take advantage of this provision are those who have dependent parents. That is particularly true of women employees. Under the circumstances, it appears inequitable to require an employee to take a reduction of 10 percent in order to protect people who are older than he and whose normal life expectancy is considerably less than the employee.

We suggest, therefore, that this section be amended to provide that a parent or parents may be designated by an unmarried employee to receive an annuity after death of an annuitant under the same conditions as those applicable to a wife or husband in section 9 (f).

Section 15 of the bill deals with exemption from legal processes. We feel that this section should be amended to provide an exemption from Federal income taxes in the same manner and to the same extent as exemptions are granted to beneficiaries of the Railroad Retirement. and Social Security Acts.

With these suggested amendments, we feel that the bill S. 2875 would receive the complete endorsement of every employee and that its enactment in that form would make the career service of our Federal Government much more desirable.

In closing, I want to thank the members of this subcommittee for the time and attention being given to this very important subject and to express the hope that this legislation will be enacted during the current session of the Congress.

Thank you.

Senator Scorr. The next witness, please.

Mr. BRAWLEY. The next witness is Mr. William Thomas, president of the National Postal Transport Association.

Senator SCOTT. I want to thank you for your snappy appearance. Mr. GEORGE. Thank you.

Mr. RILEY. Mr. Chairman, my name is John L. Riley, and I am submitting this statement for the record in behalf of W. M. Thomas, our national president who was taken suddenly ill this morning, but in order to expedite the hearings I am just going to submit the statement for the record with the brief observation that the members of the National Postal Transport Association are heartily in favor of S. 2875 and counterwise we are opposed to the provisions of S. 3041 which would consolidate or coordinate the civil-service system with the social security under the Social Security Act. (The statement is as follows:)

STATEMENT OF W. M. THOMAS, PRESIDENT, NATIONAL POSTAL TRANSPORT ASSOCIATION, PRESENTED BY JOHN L. RILEY

Mr. Chairman and members of the subcommittee, for the purpose of identifi cation, my name is W. M. Thomas. I am president of the National Postal Transport Association, with a membership of approximately 28,000. Our members perform service around the clock in railway post offices, highway post offices, air mail fields, terminal RPO's, transfer offices, and as clerks assigned to the various regional offices of the postal trasportation service.

We desire to commend Senator Johnston for the introduction of S. 2875. We believe the liberalizing provisions of S. 2875 will bring the Civil Service Retirement Act abreast of present-day needs.

Members of our association are especially pleased by the proposed amendments to the Retirement Act which increase the formula for computing annuity from 11 percent to 2 percent of the highest average salary for 5 years; the automatic survivorship benefits for windows, up to $4,000; minimum annuities for those who are compelled to retire on disability; increased benefits for widows and children of those who die in service; and many other liberalizing amendments provided for in the bill. These amendments will go far to bring the Retirement Act nearer to the goal of perfection. With three minor changes or clarifications, the National Postal Transport Association supports S. 2875 wholeheartedly. We are apprehensive as regards the definition of "basic salary" as set forth in section 1 (d). Present law defines "basic salary" as meaning average basic salary, pay, or compensation received by the officer or employee during any 5 years of allowable service. When the longevity grades were established, the

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