29

30

PAY PAY

MONTHLY AMOUNT OF MILITARY RETIRED PAY FOR PERSONS RETIRING WITHOUT DISABILITY UNDER VARIOUS PAY SCALES

GRADE SCALE

20

21

22

23

24

• THIS SCALE WAS EFFECTIVE FOR THOSE RETIRING BETWEEN 1 OCT 71 AND 31 DEC 71 INCLUSIVE.

NOTE: AS A RESULT OF CERTAIN PROVISIONS FOR SAVED PAY OR FOR ADVANCEMENT ON THE RETIRED LIST. SOME INDIVIDUALS RECEIVE AMOUNTS DIFFERING FROM THOSE SHOWN ABOVE. ALSO, THE FIGURES SHOWN ASSUME THAT ACTIVE SERVICE AND PAY SERVICE ARE EQUAL.

General BENADE. With that for background, sir, to answer your question directly, if we assume the case of a Chief of Staff who retired under the 1959 pay scale, his rate of retired pay is $2,003.37 a month today.

Under the 1971 pay scale that we are referring to under the administration's proposal, the new rate of retired pay would become $2,525.71, or an increase of $522 a month. This is for a former Chief of Staff, sir. Mr. LENNON. Yes, which would be in excess of $5,000 a year, or $500 a month.

General BENADE. Yes, sir.

Mr. LENNON. Off the record, please. (Discussion off the record.)

Mr. LENNON. Back on the record.

On line 3, in your conclusion, and I read :

The recommendation I have outlined here would have the greatest impact on those retirees who retired years ago under significantly lower pay scales, and it would have a lesser impact on those who retired recently with the full benefit of recent pay raises.

Let me say off the top of my head, I think that is a very significant part of your statement, because it does recognize the living standards that people have to live under today, compared to what they lived under and the cost, 20 years ago or more.

I believe you said, General, that over the life of this program, that the administration is suggesting that it will result in an additional cost of some $17 billion. Now, presently, the retirement pay is to my recollection just about $4 billion on an annual basis.

Mr. FORD. 4.3, I believe.

Mr. LENNON. 4.3, to be exact, but by 1973 or 1974, it is projected a little over $5 billion-5.4 billion or 5.2 billion, without any changes. Now, in the anticipation that you will have a continuous rather precipitous increase in retirements over the next 3 years, have you taken that into consideration in anticipating the cost of the administration's proposal-say by 1974, what do we expect our retirees to be in total ball park figures. It is 800,000 now, I believe you said, in 1971.

General BENADE. Yes, sir. The current number on the retired rolls would be about 900,000, and as I indicated, sir, the annual number of retirements normal for a force of the size we have, is about 63,000 to 65,000. Those are the numbers that are retiring presently.

Mr. LENNON. Now, if the Congress followed the administration's recommendation and its proposal that you addressed yourself to here today, do you think that will to any degree alleviate the question that you raised when you stated earlier in your statement about the difference between active-duty basic-pay increases and retired-pay increases is the heart of the issue surrounding recomputation?

Do you think that is going to get rid of this basic issue on recomputation?

General BENADE. Well, it would, Mr. Lennon, in that it would move everyone on the retired rolls to the 1971 pay levels, except for some members retired before 1949.

Mr. LENNON. Now, as I understood you in your additional statement, you indicated that the administration would likely present to the Congress, the 93d Congress, some changes in the basic retirement law. How can the Congress act on this proposal here, or any one of the

numerous proposals that you know have been introduced by various Members, without knowing what is in the administration's mind with respect to the recommendation it intends to make early next year related to the basic problems of military retirement? Aren't they inexorably tied together?

General BENADE. I don't believe so, Mr. Lennon, in that the present consideration before the committee and the administration's proposal for a retired-pay adjustment address only those individuals already retired, and who are not affected by any changes that are made with respect to the retirement system for the active-duty force today.

Mr. LENNON. What you are saying is you can assure this subcommittee, the full committee and the Congress, that the proposed changes in basic retirement pay for military personnel would not create any inequity or discrimination or any questions on the part of the 900,000 retirees by the time maybe this next legislation is considered by the Congress and passed, if it considers this at this point in time?

I don't see how you can completely separate them. I think it appropriate that the administration, since the legislation will have to be initiated either through the Senate or the House Armed Services Committees, sit down with the counsel and the chairman of the committee, of the full committee, and the chairman of this subcommittee, who certainly will be back next year, and sort of in confidence give them what you are thinking about, because I know these questions, if the word gets out, and this is an open session, that the administration is thinking in terms of bringing to the Congress next year a slightly different however slight it might be concept of military retirement, then the average Member is going to say "That is inevitably going to affect this."

I mean Members who are not familiar, that would be the average thinking of the average Member. After all, you have 535 Members of Congress, and there are less than 60 of them, 65 of them that are members of the two Armed Services Committees.

So I think it would be very helpful if in confidence you sit down with the chairman of this subcommittee, the chairman of the full committee and the staff, and sort of let them know what you are thinking about.

I would sort of hesitate to act on this unless I knew what you had in mind, what questions would be raised.

Thank you very much, Mr. Chairman.

Mr. STRATTON. Thank you very much, Mr. Lennon. You made a very good point, I think, which I just got into, and that will be kept very carefully in mind.

I might just say this is a quorum call, and apparently there will next be a vote on the previous question on the rules, so we may be running back and forth a couple of times.

Mr. Ford, do you have some other questions?

Mr. FORD. Yes, Mr. Chairman.

General Benade, in regard to what Mr. Lennon said concerning the indications that retirees here would indicate in a poll that they were influenced by recomputation in a career situation, if that were correct, it would seem to follow there would be concern among those who were still on active duty who had a vested interest in the system. In other

12 years of service, and had another 8 or 12 to go before retirement. They would have been interested in it if it were in fact important to their decision, and therefore they would have complained.

I don't recall any record of complaints to this committee, or any degree of mail of any significance to this committee by active-duty personnel complaining about the lack of recomputation, either in early years or recently when we have been getting a great deal of mail from the retired community.

Are you aware of any such complaints from the active duty force in the Defense Department?

General BENADE. Certainly not on anything like the scale of unhappiness in the retired community, Mr. Ford.

Mr. FORD. I don't remember any complaints from the active-duty force back in the early sixties, as far as the military newspapers were concerned.

I want to ask you a little bit on how the cost analysis was done on these various recomputation proposals.

Yesterday we heard Members of Congress who testified on bills they had introduced, and we presented in our committee print an analysis of each bill, including the cost of each bill, and the cost of course was done for us by the Department of Defense.

Some Members of Congress questioned the validity of the cost estimates, and the figures we fed into the computer and so on. They indicated they thought the cost would be too high. What bothered me a little bit at the same time they indicated they thought the bills would be of great value to the personnel involved.

It seems to me you can't have it both ways. If it is going to be of great benefit to the retired community, and you have 900,000 retirees, necessarily it is going to be very expensive. Would you take a few minutes to tell us what the assumptions were, and how these cost analyses are arrived at and how dependable you feel they are?

General BENADE. I feel that the cost estimates, Mr. Ford, are very dependable. The techniques, the methodology that are employed are in accordance with sound actuarial principles.

The basic data are derived from the data that we have with respect. to the persons presently on the retired rolls. We know the grade of the individual; we know the age of the individual; we know the rank of the individual; and we know the rate of retired pay of the individual. It is the total of these at any one point in time which constitutes your total obligation on an annual appropriation basis.

The assumption is made that the CPI, cost-of-living index, will increase by 1.5 percent per year. The assumption is further made that deaths will occur on the retirement rolls according to tables of mortality experience which are used in the actuarial and insurance area. The calculations that flow from these are a straightforward mathematical calculation which can be duplicated by anyone working from the same assumptions. I believe the cost projections are as sound as any projections years out into the future can be, if the validity of the assumptions are accepted.

Mr. FORD. Now, the point was made yesterday we could not predict how big the Armed Forces would be 10 or 20 years from now. I made the point that the reductions in the Armed Forces per se would make little difference in the retired population. I would feel very good if you would confirm that.