INVESTIGATION OF DISABILITY RETIREMENT SYSTEMS IN THE ARMED SERVICES FRIDAY, MARCH 5, 1948 HOUSE OF REPRESENTATIVES, Washington, D. C. The subcommitte met at 10 a. m., pursuant to recess, Hon. Charles H. Elston (chairman) presiding. Mr. ELSTON. The committee will come to order. We are very glad this morning to have with us the Secretary of Defense, Mr. Forrestal. Mr. Forrestal, you wrote a letter to the chairman of the committee some time ago and outlined your position with respect to retirement disability pay. We would have called you in the beginning to start our hearings but the committee felt that after we had heard the testimony of all of the witnesses it would be much more helpful if you testified at the conclusion and give your recommendations. I am sure we can understand your recommendations much more clearly after having heard from a number of witnesses. I want to take this opportunity to thank you for the cooperation you have given the committee and to tell you how much we have appreciated the testimony of representatives of the Army and Navy who have appeared before the committee. The testimony has been very helpful and will greatly aid the committee in coming to some conclusion on this very controversial matter. Now, Mr. Secretary, if you have any statement to make to the committee we will be very glad to hear from you at this time. STATEMENT OF SECRETARY OF DEFENSE JAMES FORRESTAL Mr. FORRESTAL. I wish to thank you, Mr. Chairman, for this opportunity, and without offering any gratuitous comment on your legislative procedures, I think the method you have followed has been a good one, and has enabled you, and, for that matter, myself, to take a comprehensive look at the whole question of retired and disability pay, and I think that this is a more appropriate time for me to speak than it would have been earlier. I would like to make it clear that we feel-and when I say that, I mean the services in general--that the great majority of personnel who are now in a retired status because of physical disability are bona fide physical disability cases. We also feel that all personnel, those who have already retired and those who may be retired in the future, must be dealt with with fairness and justice, and must not be denied any rights to which they legitimately may be entitled. And I may say I am confident that is the attitude of the members of the committee. I think you deserve credit for the hearings which you have conducted. They have been objective and. I think, fair. The detailed study that you have made, in a field where the reflection of your findings and recommendations will have major effects upon a large number of individuals, has contributed largely to the efficiency of the military services and to public confidence in them. It is obvious, I believe, that the way in which the Federal Government deals with problems such as this, has a direct bearing on recruiting, on applications for West Point and Annapolis, and a host of similar matters. Begging your indulgence, Mr. Chairman, I will refer to the letter which I wrote you on the 29th of January, and which is the basis for whatever contribution I can make to your study. As you know, that letter was originally prepared for oral presentation. After it was written for that purpose I, with your permission, sent it to you as a letter. I should like to read certain parts of the letter, those parts which seem to me to be relevant to today's hearings. I quote now from my letter of January 29: Our recommendation is that a modern retirement and physical disability statute be enacted along these lines: 1. That benefits for phsyical disability be related to the percentage of actual incapacity for duty-as it is true of Veterans' Adrainistration disability cases today. 2. That every person retired for physical disability since 1939 be reexamined— and that provision be made for periodic reexaminations in the future. 3. That physical disability benefits-and other provisions of the retirement laws as well be applicable on the same basis to the personnel of all the armed services, both Regular and Reserve, officer and enlisted. 4. That tax-exemption, if it is to apply at all be applicable only to payments representing benefits for actual physical disability, on the percentage basis referred to above. You will note that in referring to tax exemption, I said that if it is to apply at all, it should apply only to payments for actual physical disability. The basic question of whether or not there should be any tax exemption at all for physical disability is an issue on which the Treasury Department is the logical spokesman for the executive branch of the Government-for the tax exemption accorded to disabled personnel is merely a part of the general tax law of the country, under which sickness and disability payments are tax-exempt if derived from workmen's compensation laws, accident or health insurance policies, or veterans' pensions. Obviously, any change in this basic provision of our tax law would be of interest to a large number of people, of whom the disabled and retired veterans would be a distinct minority--and in view of this fact, I feel that in this area the Treasury Department could supply your committee with helpful testimony. You will also note that I have spoken of "physical disability" and "retirement" as though they were two different things. It is our belief that, properly viewed, they are different. Thus an officer who has served 30 years can "retire", and can thereupon receive "retired pay" which amounts to 75 percent of his active duty pay. In speaking of active duty pay it should be noted that allowances, which active duty personnel receive to make up total remuneration, are not included. The figure of 75 percent represents the present ceiling on retired pay, and it is our recommendation that this ceiling be maintained. It is arrived at, as you know, by multiplying the 30 years of service by 21⁄2 percent for each year served-which gives the figure of 75 percent as the maximum result. Twenty years' service, by the same token, would yield "retired pay" of 20 times 22, or 50 percent. Under existing law, an officer who is "retired" for "physical disability”-no matter what the length of his service or the degree of his incapacity-receives the 75 percent maximum as his "retired pay.' This results from the language of the 1861 statute which does not distinguish between "retirement" and "physical disability." In order to correct this situation, our recommendation, as I have already mentioned, is that physical disability compensation shall represent the percentage of actual disability. To this shall be added retirement pay based on length of service. In no event shall the maximum of 75 percent be exceeded. Perhaps an illustration will serve to clarify the change that we have in mind. Suppose that Commander Jones has served 10 years, and at the end of that time has been seriously wounded, but not totally incapacitated-with a resulting disability, say, of 40 percent. Under present law, he would be "retired" for physical disability, at the 75 percent rate-with the entire 75 percent tax-exempt. Under our recommendation, he would receive 40 percent as compensation for his 40 percent incapacity-and in addition he would receive retired pay for his 10 years service at 21⁄2 percent a year, or 25 percent. In other words, he would receive a total of 65 percent-of which the 25 percent would be subject to tax, and the 40 percent would be tax-exempt. The material I have quoted represents the recommendations of the National Military Establishment. From our standpoint, there is nothing hard and fast about these recommendations. We regard them as a place to begin, in considering any revision of existing law. It may be that your committee, based on your hearings and your research in this field, will conclude that some of our recommendations are outweighed by other considerations. It may be, even from our standpoint, that some of our recommendations will prove to be abstractly desirable but difficult of attainment as a practical matter. Our recommendation for reexamination of all persons retired since 1939, for example, brings us face to face with the fact that already we have an acute shortage of doctors, even without imposing this additional task of reexamination. I mention this as an illustration of the practical problems inherent in this field. As I said in my letter, "This is a complex problem and some of the details are unavoidable." You have already heard extensive testimony on these details by witnesses from the services who have greater personal knowledge of the details than I do. I shall, nevertheless, be glad to attempt to answer any questions, and I shall ask your indulgence if I have to refer to some of the personnel of the Army, Navy, and Air Force to help me in giving you intelligent responses. Mr. ELSTON. We will be glad to have you do that. Mr. Secretary, first of all I would like to ask you when you think the examination of persons who have been retired for physical disability should cease? In other words, would you have them continue during the lifetime of the recipient of the benefits, or would you have them stop after a certain number of years, and from that time on assume that the disability was permanently incapacitating? Mr. FORRESTAL. In other words, a cut-off date on the process? Mr. ELSTON. Yes, sir. Mr. FORRESTAL. That is a very interesting and intelligent question. I think I should be inclined to take a cut-off date after experience had demonstrated that at a certain time-say, if a man has had some organic disability-that after a certain time, say, 3 to 5 years, it is clear that he will not make a recovery from such an organic illness or disability. I think that I would value the advice of the doctors on this. For example, Admiral Swanson in the Navy has done some of those reexaminations. At my own instance, we started some reexaminations in 1945. Maybe some of the witnesses have already spoken to the point, but I would think that the Navy's experience and observations would be useful. 74494-48-24 Mr. ELSTON. Would it be your idea, Mr. Secretary, to have the examinations conducted by the services or would you have them conducted by the Veterans' Administration, or some other civilian organization? Mr. FORRESTAL. I would be inclined to follow the advice of a composite panel of the surgeons of the services and of the Veterans' Administration. As you know, I have now a committee making a study, under the Unification Act, of the possibility of consolidations, elimination of duplications, and so forth, which is headed up by Dr. Hawley, who has as his executive assistant Admiral Boone. Your inquiry provokes me to the thought that I would like to ask that particular group's advice on this question, because we have wrapped up there two of the elements that we might conceivably turn to, a man who has had experience in the Veterans' Administration and also representatives of the services. Mr. ELSTON. Have you any idea when that committee might have some recommendations which might be helpful to this committee? Mr. FORRESTAL. Well, I have-I am due to receive an oral report from Admiral Boone when I return to my office today. Mr. ELSTON. There is another matter that has given us some concern. If your recommendations should be followed we are wondering what would happen to the man receiving a pension who has incurred certain obligations, financial obligations, under the belief that his disability compensation was going to continue for life. I think the checks that they receive indicate that the payments are for life. Now, some of them bought homes and have incurred other financial obligations of a permanent nature. How would you How would you handle the cases of those persons? Mr. FORRESTAL. Well, I think that one would have to be guided by the general rule of equity and common sense. Certainly any statutory changes which would flow from your inquiry would put on notice anyone who, from now on, should receive such retirement benefits. He should, properly, take note of the possible cessation of those benefits. As to those cases that have been processed, who have already received their retirement certification, I would like to think that over, if I might, Mr. Chairman. I would be inclined to say that where there had been neither fraud nor neglect, nor carelessness I think there is a lot of substance to your caveat. Mr. ELSTON. Another subject we have discussed somewhat, and I think it has given us a great deal of concern, and will give us more concern, is the tax-exemption feature. I appreciate that you have suggested that the tax exemption correspond with the degree of disability. That is, if a man is only 25 percent disabled, he should receive tax exemption based upon that 25-percent disability. But tax exemptions, obviously, do not work equitably. A man who receives some income in addition to his disability pay would necessarily receive a greater benefit than one who receives a small compensation, because of the fact that one would be in a higher income price bracket. I am wondering if you have given thought to the fact that there should be no tax exemptions but that if additional compensation is due it should be given in dollars and cents, rather than in the form of tax exemption. |