GOVERNMENT CONTRIBUTION, RETIRED EMPLOYEES HEALTH BENEFITS FUND Senator MAGNUSON. Let us go to the next item, the "Government contribution, retired employees health benefits fund." Mr. MACY. Yes, Mr. Chairman. This next one is related. You see, the year following the passage of the Health Benefit Act in 1959, Congress passed the Retired Employees Health Benefit Act for those who were already retired at the time the original act was passed. REQUEST FOR EARLIER RETIREES' FUND So, this appropriation provides the Government's share of the cost of health benefits coverage to those annuitants not eligible to participate in the employees' program. An appropriation of $14,840,000 is requested based on current premium rates and the number of participants. An expense limitation of $348,000 is requested for administration of the program in fiscal year 1965. As in the past 2 years, the Commission is requesting a dollar limitation to cover administrative expenses of the retired employees health benefits program in lieu of the limitation of 2 percent of the Government's contribution as provided in the basic act. The bill, H.R. 3517, to remove the 2percent limitation has been approved by the House and is now pending in the Senate. Senator SALTONSTALL. Mr. Chairman, one question. ANTICIPATION OF REDUCTION IN FUND Senator SALTONSTALL. Won't this fund gradually come down? Senator SALTONSTALL. As the people who were on it before the act are no longer with us? Mr. MACY. That is entirely correct, Senator Saltonstall. Senator MAGNUSON. Probably at the end of the 20 years, this would not be here at all. Mr. IRONS. You have two conflicting factors here. One is that, of course, you have a closed group which is getting smaller every year, but you also have the fact that the older they get the more medical expenses they have, so you have a somewhat offsetting factor. Senator MONRONEY. Now, they do not pay two-thirds of the cost? Mr. IRONS. About 50 percent. Senator MONRONEY. And the Government would have to pick up more because those were not covered and therefore it would have raised the cost of the program too much for the working employees who would have to contribute that. Mr. MACY. That is correct. EFFECT OF H.R. 3517 Senator MAGNUSON. Is this amount based upon the anticipation that the Senate will pass H.R. 3517? Mr. UHLENHOP. No. Mr. MACY. No, this is based on what the Commission estimates its actual administrative expenses will be 31-706-64-pt. 1——12 Senator MAGNUSON. Oh, 2 percent? Mr. MACY. The 2-percent limitation has to be exceeded in order to cover the cost of administering this program. Senator MAGNUSON. Well, suppose the bill does not pass? You are limited under the act to 2 percent. Mr. MACY. There would be appropriation language to override the substantive legislation. Senator MAGNUSON. Oh, I see. Mr. MACY. Yes. Senator MAGNUSON. Well, if they make a point of order, then you are back where you started. Mr. MACY. That is right, Mr. Chairman. Senator MAGNUSON. And that is 2 percent. Mr. MACY. That is right, and that is why we have endeavored to get the legislation. LANGUAGE OF LEGISLATION Senator MAGNUSON. Well, will you present the language to the committee, or is it already in the House? Mr. MACY. It is already in the House bill. Senator MAGNUSON. I see, it is already in the House bill, so if we agree to it but it is subject to a point of order. Mr. WILLIAMS. It has been effective for the last 2 years, Mr. Chairman. Mr. MACY. This is now before the Senate Post Office and Civil Service Committee and I assume that it will be relatively noncontroversial legislation. Senator MAGNUSON. All right. Any more questions? Senator SALTONSTALL. Mr. Chairman, I have a very brief question. Senator MAGNUSON. Yes. FEDERAL VERSUS PRIVATE INSURANCE Senator SALTONSTALL. How does this expense request differ from the insurance companies, is it higher or lower? In other words, do you administer the fund as cheaply as insurance companies? Mr. MACY. Mr. Irons, could you respond to that? Mr. IRONS. Well, this is a combination, of course, of private insurance-we do not self-insure this program. Senator SALTONSTALL. But I was just wondering whether your expenses were higher. Mr. IRONS. No, our expenses are exceptionally low, and we could demonstrate that by comparison with life insurance company costs. Senator SALTONSTALL. Well, that is what I am trying to find out. Mr. IRONS. We went through that with Metropolitan and Aetna. Senator SALTONSTALL. Well, have you made those comparisons? Mr. IRONS. Yes, we have made those comparisons. Senator SALTONSTALL. Thank you. So it is still a combination with private companies and FEDERAL SHARE OF PRIVATE CONTRACTS Senator ALLOTT. In other words, just so that I know that I have got it straight, what you are saying in effect is that for this particular program this money will go to pay the Government share of the purchase of private contracts? Mr. IRONS. Yes, sir. Senator ALLOTT. At one place or another. Mr. IRONS. Yes. On the retired health benefits fund the contract is with Aetna. Senator ALLOTT. So, referring to Senator Saltonstall's question, you cannot really compare your administrative cost with the costs of an insurance company, because your administrative cost is absorbed in collecting and keeping account of the insurance contract rather than in the administration of the contract; is that not correct? GROUP INSURANCE PROGRAM Mr. IRONS. We went through this exercise. A group insurance cost is a combination of two things, the one being the cost that you have to reimburse the insurance company for, plus the employer's cost, and we in this case are the employer. Before we ever engaged in any of these contracts, I went through a considerable exercise with a group of large corporations, General Motors, General Electric, Armstrong Cork, those being the three that occur to me right now, to determine how much their program cost plus what they had to pay to the insurance companies and Senator MAGNUSON. What you are talking about is the comparative services that you are doing in relation to, for example, General Motors? Mr. IRONS. That is right; yes. Senator MAGNUSON. All right, fine. Any more questions on this item? (No response.) Senator MAGNUSON. All right, let us get to the payment to civil service retirement and disability fund. Mr. MACY. Funds in the amount of $65 million are requested to cover the cost of increased benefits in fiscal year 1965 payable under part III of Public Law 87-793. PART III, PUBLIC LAW 97-793 Senator MAGNUSON. We will put part III of Public Law 87-793 in the record. (The information referred to follows:) PART III-ADJUSTMENT OF ANNUITIES SEC. 1101. (a) The annuity of each person who, on the effective date of this section, is receiving or entitled to receive an annuity from the civil service retirement and disability fund shall be increased by 5 per centum of the amount of such annuity. (b) The annuity of each person who receives or is entitled to receive an annuity from the civil service retirement and disability fund commencing during the period which begins on the day following the effective date of this section and ends five years after such date, shall be increased in accordance with the following table: If the annuity commences between January 2, 1963, and December 31, 1963. The annuity shall be 4 per centum 2 per centum (c) In lieu of any other increase provided by this section, the annuity of a survivor of a retired employee or Member of Congress who received an increase under this section shall be increased by a percentage equal to the percentage by which the annuity of such employee or Member was so increased. (d) No increase provided by this section shall be computed on any additional annuity purchased at retirement by voluntary contributions. (e) The limitation reading "or (3) the sum necessary to increase such annuity, exclusive of annuity purchased by voluntary contributions under the second paragraph of section 10 of this Act, to $2,160" contained in section 8(c)(1) of the Civil Service Retirement Act of May 29, 1930, as amended by the Acts of July 16, 1952 (66 Stat. 722; Public Law 555, Eighty-second Congress), and August 31, 1954 (68 Stat. 1043; Public Law 747, Eighty-third Congress), shall not be effective on or after the effective date of this section. (f) The limitation contained in the next to the last sentence of section 8(d) (1) of the Civil Service Retirement Act of May 29, 1930, as amended, as enacted by the Act of August 11, 1955 (69 Stat. 692; Public Law 369, Eighty-fourth Congress), shall not be effective on and after the effective date of this section. (g) The increases provided by this section shall take effect on the effective date of this section, except that any increase under subsection (b) or (c) shall take effect on the beginning date of the annuity. (h) The monthly installment of annuity after adjustment under this section shall be fixed at the nearest dollar. SEC. 1102. (a) Section 1 of the Civil Service Retirement Act is amended by adding at the end thereof the following new subsection: "(t) The term 'price index' shall means the annual average over a calendar year of the Consumer Price Index (all items-United States city average) published monthly by the Bureau of Labor Statistics." (b) Such Act is further amended by redesignating section 18 as 19, and by inserting after section 17 the following new section: "COST-OF-LIVING ADJUSTMENT OF ANNUITIES "SEC. 18. (a) After January 1, 1964, and after each succeeding January 1, the Commission shall determine the per centum change in the price index from the later of 1962 or the year preceding the most recent cost-of-living adjustment to the latest complete year. On the basis of such Commission determination, the following adjustments shall be made: "(1) Effective April 1, 1964, if the change in the price index from 1962 to 1963 shall have equaled a rise of at least 3 per centum, each annuity payable from the fund which has a commencing date earlier than January 2, 1963, shall be increased by the per centum rise in the price index adjusted to the nearest one-tenth of 1 per centum. "(2) Effective April 1 of any year other than 1964 after the price index change shall have equaled a rise of at least 3 per centum, each annuity payable from the fund which has a commencing date earlier than January 2 of the preceding year shall be increased by the per centum rise in the price index adjusted to the nearest one-tenth of 1 per centum. "(b) Elibibility for an annuity increase under this section shall be governed by the commencing data of each annuity payable from the fund as of the effective date of an increase, except as follows: "(1) Effective from the date of the first increase under this section, an annuity payable from the fund to an annuitant's survivor (other than a child entitled under section 10(d)), which annuity commenced the day after the annuitant's death, shall be increased as provided in subsection (a) (1) or (a) (2) if the commencing date of annuity to the annuitant was earlier than January 2 of the year preceding the first increase. "(2) Effective from its commencing date, an annuity payable from the fund to an annuitant's survivor (other than a child entitled under section 10(d)), which annuity commences the day after the annuitant's death and after the effective date of the first increase under this section, shall be increased by the total per centum increase the annuitant was receiving under this section at death. "(3) For purposes of computing an annuity which commences after the effective date of the first increase under this section to a child under section 10(d), the items $600, $720, $1,800, and $2,160 appearing in section 10(d) shall be increased by the total per centum increase allowed and in force under this section, and, in case of a deceased annuitant, the items 40 per centum and 50 per centum appearing in section 10(d) shall be increased by the total per centum increase allowed and in force under this section to the annuitant at death. Effective from the date of the first increase under this section, the provisions of this paragraph shall apply as if such first increase were in effect with respect to computation of a child's annuity under section 10(d) which commenced between January 2 of the year preceding the first increase and the effective date of the first increase. "(c) No increase in annuity provided by this section shall be computed on any additional annuity purchased at retirement by voluntary contributions. "(d) The monthly installment of annuity after adjustment under this section shall be fixed at the nearest dollar." SEC. 1103. (a) Section 9(g) of the Civil Service Retirement Act is amended to read as follows: "(g) The annuity as herein before provided (excluding any increase because of retirement under section 7) for any married employee or Member retiring under this Act, or any portion of such annuity designated in writing for purposes of section 10(a) (1), shall be reduced by 21⁄2 per centum of so much thereof as does not exceed $3,600 and by 10 per centum of so much thereof as exceeds $3,600, unless the employee or Member notifies the Commission in writing at the time of retirement that he does not desire his wife or husband to receive an annuity as provided in section 10(a) (1)." (b) Section 10(a)(1) of such Act is amended to read as follows: "(1) If an employee or Member dies after having retired under any provision of this Act and is survived by a wife or husband to whom the employee or Member was married at the time of retirement, such wife or husband shall be paid an annuity equal to 55 per centum of an annuity computed as provided in subsections (a), (b), (c), (d), (e), and (f) of section 9, as may apply with respect to the annuitant, or of such portion thereof as may have been designated in writing for such purpose by the employee or Member at the time of retirement, unless the employee or Member has notified the Commission in writing at the time of retirement that he does not desire his wife or husband to receive such annuity." (c) Section 10(b) of such Act is amended by striking out "50 per centum" and inserting in lieu thereof "55 per centum". (d) Section 10(c) of such Act is amended by striking out "50 per centum" and inserting in lieu thereof "55 per centum". (e) Section 10(e) of such Act is amended by striking out "50 per centum" and inserting in lieu thereof "55 per centum". (f) (A) Section 1(j) of the Civil Service Retirement Act is amended by substituting a comma for the period at the end thereof and adding the following: "or such unmarried child between eighteen and twenty-one years of age who is a student regularly pursuing a full-time course of study or training in residence in a high school, trade school, technical or vocational institute, junior college, college, university, or comparable recognized educational institution. A child whose twenty-first birthday occurs prior to July 1 or after August 31 of any calendar year, and while he is regularly pursuing such a course of study or training, shall be deemed for the purposes of this paragraph and section 10(d) to have attained the age of twenty-one on the first day of July following such birthday. A child who is a student shall not be deemed to have ceased to be a student during any interim between school years if the interim does not exceed four months and if he shows to the satisfaction of the Commission that he has a bona fide intention of continuing to pursue a course of study or training in the same or different school during the school semester (or other period into which the school year is divided) immediately following the interim." (B) The third sentence of section 10(d) of the Act is amended to read as follows: "The child's annuity shall commence on the day after the employee or Member dies, and such annuity granted under this Act or under the Act of May 29, 1930 as amended from and after February 28, 1948, or any right thereto shall terminate on the last day of the month before (1) his attaining age eighteen unless incapable self-support, (2) his becoming capable of self-support after age eighteen, (3) his marriage, or (4) his death, except that the annuity of a child who is a student as described in section 1(j) shall terminate on the last day of the month before (1) his marriage, (2) his death, (3) his ceasing to be such a student, or (4) his attaining age, twenty-one." SEC. 1104. Section 1101 of this part shall take effect on January 1, 1963. The amendments made by section 1103 (except subsection (f)) shall not apply in the case of employees or Members retired or otherwise separated prior to the date of enactment of this Act, and the rights of such persons and their survivors shall con |