Mr. MACY. We conduct the investigation. If the investigation reveals any information of a loyalty nature it is then turned over to the FBI.

Senator SALTONSTALL. So you come first.

Mr. MACY. And then the report comes back to us and we make a review and the results of our review are then communicated through the State Department to the individual international agencies. Senator SALTONSTALL. Thank you very much, Mr. Chairman. Senator MAGNUSON. Any other questions?

(No response.)

ANNUITIES UNDER SPECIAL ACTS

Senator MAGNUSON. All right, the next item is the "Annuities under special acts" and that item is dropping every year, I see. Mr. MACY. That is right, Mr. Chairman; that is a self-liquidating group.

Senator MAGNUSON. Yes, a self-liquidating group.

Now, "Government payment for annuitants, employees health benefits fund." Now who does that include?

Mr. MACY. This includes, Mr. Chairman, the annuitants

Senator MAGNUSON. Well, go ahead and read your statement under that heading.

Mr. MACY. All right. This appropriation covers the contribution of the Government toward the cost of health benefits for annuitants participating in this program, and these funds are placed in the employees health benefits fund.

The number of annuitants enrolled in this program increases each year resulting in an increase in the Government's contribution required. The enrollment of 116,300 on June 30, 1963, is expected to increase to over 200,000 by 1965.

The Government's share of the cost in 1965 is estimated to be $11,469,000. However, utilization of an expected unobligated balance in the fund of $805,000 brings the appropriation request down to $10,664,000.

An expense limitation of $1,151,000 is requested to provide for the administration of the employee health benefits program in fiscal year

1965.

A word of further explanation outside the statement might be helpful to the committee, Mr. Chairman, since I believe this is a bit confusing.

PROVISION OF SPECIAL ACT APPROPRIATIONS

This particular appropriation provides for the Government contribution for the health benefits of Federal employees who have retired and are on annuitant rolls, but retired subsequent to the passage of the Federal Employees Health Benefit Act in 1959.

During their active service the Government contribution for their health benefit is covered by the appropriation of the departments and agencies in which they are employed. Once they are retired, however, it is necessary to meet the Government's contribution requirement by direct appropriation to the fund.

Senator MAGNUSON. Well now, let me clear that up. If this is true, a person, let us say, retires next year-you say it is going to increase to 200,000-would he be someone that would be under this

fund or the addition of these people with people who have long since retired but never picked it up?

Mr. MACY. No, these will be the people who are retiring currently. Senator MAGNUSON. Currently. Well, wouldn't they be contributing to their fund when they are working?

Mr. MACY. Yes, they contributed while they were working, but once they retire-they will continue to contribute as individuals, but the Government's share of the contribution has to be made up through this appropriation.

Senator MAGNUSON. After they retire?

Mr. MACY. After they retire. While they are active, the Government's share is coming out of an appropriation item that is made for each agency. We have provisions for that in the Civil Service Com

mission requests.

Senator MAGNUSON. Yes.

Mr. MACY. In our S. & E. Appropriation.

Senator MAGNUSON. If we are keeping Government employment at a reasonable plateau, why would the amount of retirees increase almost 100 percent?

BASIS OF RETIREES' INCREASE

Mr. MACY. The increase in retirees is based upon the rate of retirement under the provisions of the Retirement Act. The estimate is that there will be an increase in retirements between 1963 and 1965. This is a net increase of 84,000 retirees during this period.

Now, we are adding to the annuity rolls at a rate of 40,000 to 42,000 names a year.

Senator MAGNUSON. Is that pretty constant?

Mr. MACY. It has been relatively constant.

Senator MAGNUSON. Well, if it is relatively constant, why wouldn't you have the same number on the rolls all the time?

Mr. MACY. Because there are those that are going off the annuitant rolls, because of death-but there is a larger number that are coming on because of retirements.

Senator MAGNUSON. Then that would be because the ones that go off the rolls are, let us say, living longer and you have them on the rolls much longer than the amount that are coming in?

PROBABLE INCREASE IN RETIREES

Mr. MACY. There is another feature involved here too, Mr. Chairman. For those who retired prior to 1959, there is a separate program. This is the program I referred to. Those that are in this group we are discussing are those who have retired in 1960, 1961, 1962, and 1963 and there is less attrition in that group than there is in the older group that is covered in the

Senator MAGNUSON. Well, will this go up every year?

Mr. MACY. This will go up every year, Mr. Chairman.

Senator MAGNUSON. Well, you have got to reach a point some time when the

Mr. MACY. For 20 years.

Senator MAGNUSON. Where the same amount go out as the amount that comes in, you should reach that point sooner or later.

ESTIMATED ANNUAL APPROPRIATION

Mr. MACY. We are estimating that there will have to be an annual appropriation of $12 million or more in order to take care of this amount.

Senator MAGNUSON. Well, when do you reach the point where it becomes stable?

Mr. MACY. About 20 years.

Mr. IRONS. Where your deaths balance your intake.

Senator MONRONEY. But you have your $11 million now, you are up to $11 million now. You think it is going higher?

Mr. MACY. It is going up, you see, it has gone up $1 million this year.

Senator MONRONEY. Yes, sir.

Mr. MACY. And I would anticipate that it will probably go up $1 million each year for about 20 years. I think that the ultimate, the maximum amount is about $25 million in the program as planned.

QUESTION ON LONG-TERM CONTINUANCE IN HEALTH PROGRAM

Senator MONRONEY. I thought, when we passed this in the Civil Service and Post Office Committee, that we separated these two so that those not then retired would have prepaid, or would have had a special rate available after retirement, but apparently that is not so, apparently we are going to have no benefits from the continuing or the long-term membership in the health program.

Mr. IRONS. I wonder if I could tackle this. Let me use Mr. Cooper and myself as examples, we are the two oldest gentlemen here. Senator MAGNUSON. All right.

Mr. IRONS. We are both subject to the Health Benefits Act. While we are on the rolls I would make a contribution and the Civil Service Commission pays for one-third of the cost and I pay two-thirds. The legislative branch pays a third of Mr. Cooper's and he pays two-thirds. Now, we retire.

Senator MAGNUSON. Yes.

Mr. IRONS. He is no konger employed by the legislative branch and I am no longer employed by the Civil Service Commission. He continues to pay his two-thirds and I continue to pay my two-shirds. And the Civil Service Commission comes up here and asks for an appropriation to cover the Government's one-third of that cost, as long as we are on the retired rolls, in lieu of the legislative branch paying it.

Senator MAGNUSON. You are still paying two-thirds after you retire?

ESTIMATING PREMIUM COSTS

Mr. IRONS. I still pay my two-thirds after I retire. Now, going to Senator Monroney's point, in calculating the premium cost, we estimated a cost that would be level for the employees while they are in the active service and to continue after retirement so that a retired person would not have to pay a substantially increased rate. Senator MONRONEY. Then the third that the Government pays would be about the same amount as the Congress is paying on its employees?

Mr. IRONS. Exactly.

Senator MONRONEY. It is not costing us any more in other words, is it?

Mr. IRONS. No more, that is right.

Senator MONRONEY. Per employee.
Mr. IRONS. No more.

ACTUARIAL COMPUTATION OF FEDERAL SHARE

Senator MAGNUSON. What I cannot get straight yet is if you get 45,000 added, approximately every year to this group-that is your figure?

Mr. MACY. Yes.

Senator MAGNUSON. In 20 years you would have 900,000 people. Mr. MACY. Yes.

Senator MAGNUSON. In retirement.

Mr. IRONS. Well, some are going to die off, you know.

Senator MAGNUSON. Yes. But, say, 800,000 or 900,000. All right. Now, at the end of 20 years you have still got 45,000 coming in; you have 45,000 then going out?

Mr. IRONS. Going out.

Senator MAGNUSON. You have reached a plateau, then.

Mr. IRONS. That is right.

Senator MAGNUSON. But you're going to have to handle 800,000 retired employees for health benefits when the program finally reaches that

Mr. IRONS. That is right, using your figure as an example.

Mr. MACY. And the actuaries have computed that this would be about $25 million.

Senator MONRONEY. But actually this is more than 800,000 persons because it represents employees and dependents.

Mr. MACY. Yes.

Senator ALLOTT. Is the reason that there are not more in this that they do not choose to make the payments after they retire?

Mr. IRONS. You see, this did not start until 1959.

Senator ALLOTT. It did not start until 1959?

Mr. IRONS. Yes.

RESUMPTION OF EARLIER RETIREMENTS

Senator ALLOTT. Well now, let me ask you the $64 question. If the Congress should weaken and let people resign or retire at the end of 30 years of service regardless of their age, then this situation would be greatly accentuated, wouldn't it?

Mr. MACY. You would have some increase in the numbers that are retired as a result of that

ADDED COST MERELY TRANSFER

Mr. IRONS. But I do not want Senator Allott to feel that there would be an increase in cost to the Government as far as health benefits are concerned merely because you had 30-year retirement. The cost would be transferred from the active payroll to the retired rolls.

Senator MONRONEY. The active payroll would fill up by the number that had retired over the year, so you would still have thatMr. IRONS. You are right there.

Senator ALLOTT. And you say it would not increase the total cost

Senator MAGNUSON. You would have one-third for the retired man and one-third for the man who takes his place working there. Mr. IRONS. That is right.

POSSIBLE ESCALATION IN FIGURES

Senator MAGNUSON. But here is the thing that is somewhat startling. Suppose at the end of 20 years we still only had this 2,500,000 people working in the Government. Also we would have 800,000 retired.

Mr. MACY. Oh, yes; we have at the present time 700,000 people on the annuity rolls, covering all of the retirements now in effect.

Senator MAGNUSON. So about one-third of the people that work for the Government, two-thirds are working and one-third are retired?

Senator ALLOTT. Yes.

Senator MAGNUSON. This will be when you reach the apex of this period.

Mr. MACY. Right. The more money that we put into medical research, the longer they will live and the greater the

Senator MAGNUSON. Yes; I know.

Mr. MACY. Or, as Senator Allott has pointed out, the earlier we permit retirement, the larger the percentage will be.

Senator SALTONSTALL. May I say something off the record, Mr. Chairman?

Senator MAGNUSON. Yes.

(Discussion off the record.)

LEGISLATIVE RETIREMENT FUND

Senator MAGNUSON. Now, for the record, do you handle the legislative retirement fund?

Mr. IRONS. Yes, sir.

Senator MAGNUSON. We pay in what-7 percent?

Senator ALLOTT. 7%1⁄2 percent.

Senator MAGNUSON. 71⁄2 percent. And how many people do you need to handle that congressional retirement?

Mr. MACY. It is included in the total.

Senator MAGNUSON. In the total?

Mr. MACY. In the total program. This is activity 4 of our budget. It is a very minor percentage of the total coverage of the Civil Service Retirement Act.

Senator MAGNUSON. That is, of administrative employees. But here the administrative employees run about 10 percent of-oh, I see, that is only one-third.

Mr. MACY. That is the limitation for the

Senator MAGNUSON. For the one-third, I see. Actually, this program would be about $33 million and it would cost about $1 million to administer the $33 million.

Mr. MACY. That is a complicated program to administer because of the large number of different plans that are involved.

Senator MAGNUSON. All right. Are there any more questions on this one?

(No response)