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under this bill would never exceed 5 per cent. The actuaries find that the bill you passed last year compares relatively very favorably with the operation of the civil service retirement act. For example, they say that the rate of cost, would be 5.12 per cent of salary roll for the civil service, and would be 10.79 per cent for the foreign service, and bearing in mind that the rate and contribution for the foreign service is double that for the civil service, you see they compare very closely in their operation.

Mr. ROGERS of Massachusetts. I do not understand what you mean by the rate of salary roll.

Mr. CARR. I mean basing the rate of contribution upon the total salaries utilized as shown by the salary roll. Therefore, assuming that the employees should pay the whole cost of the annuities, they would

pay in the civil service 5.12 per cent of the total salaries, and in the foreign service 10.79 per cent. Now, the Government does not require that the civil-service employees shall pay the entire 5.12 per cent, but limits their contribution to 24 per cent; deducting that from the total cost of 5.12 per cent you get a contribution by the Government during the whole period of time of 2.62 per cent, which is but 0.12 per cent greater than the contribution of the employees. In the same manner the foreign-service officer is to be required to make a contribution of 5 per cent, which, deducted from the total cost of 10.79 per cent, would leave a contribution to be made by the Government of 5.79 per cent. Thus the plan proposed by this bill would practically cost relatively no more than the retirement system which you have already authorized with reference to the civil service.

These figures show, however, that for the retirement of foreignservice officers under this bill the Government would pay 0.79 per cent more than the officers themselves. Mr. Rogers's new draft provides that 0.79 per cent shall be provided through contributions from the annuities of men who are retired without having paid their contribution of 5 per cent during the entire period of their service. That is to say, the man who has 30 years' service, and has reached the age of 65 and is therefore eligible to retirement, and retires the day after this act becomes effective, but who has not contributed a cent, would be taxed 5 per cent of his annuity, so long as he continues to draw it, and that would be covered into the fund to reduce the cost to the Government and bring it to an amount not more at any time than the amount paid in by the man himself. That is an advance over the present civil-service plan.

Mr. Rogers. This bill provides specifically, in section 16, subdivision (a), of my substitute section, that “In no case shall the annual cost to the Government of the United States exceed the total annual contributions of foreign-service officers."

The CHAIRMAN. In a case such as you have just cited, you would take 5 per cent out of his annuity? For instance, assume that Mr. MacMurray retired?

Mr. CARR. We would take 5 per cent or the proper proportion of it, of his annuity every year, while he continued to draw it and leave it' in this fund to offset to that extent the cost to the Government, because unlike men who had contributed from the date of his entry into the service, he would be receiving an annuity without having contributed a cent to the fund in order to get it. It seems fair and just to do that.

The CHAIRMAN. Would the 5 per cent be based on his salary or the amount of the annuity?

Mr. CARR. On the annuity. Assuming he should be entitled to the higher annuity provided in this bill, 60 per cent, or $5,400. The deduction would amount to only $270 out of the $5,400, and would be perfectly fair, and that would go into the fund and tend to make it possible to keep the cost to the Government down to an amount not exceeding that which the men themselves contributed. After all the men who are in service who have not contributed for the full time of their service are out of the service, the cost of this plan, according to the actuaries would be 6.94 per cent of the salary roll. That is to say, if the men were paying the whole cost, they would carry this by 6.94 per cent of their salaries. Inasmuch as they are in any event to contribute 5 per cent, the cost to the Government after that point is reached would be reduced to 1.94 per cent.

Mr. ROGERS of Massachusetts. What is the relative percentage! Mr. CARR. The relative total cost?

Mr. Rogers of Massachusetts. The relative percentage of the Government to the individual cost.

Mr. CARR. Seventy-two per cent for the employee and 28 per cent for the Government.

Mr. ROGERS of Massachusetts. You testified last year that under the Lehlbach law the comparative figures were 58 per cent for the Government and 42 per cent for the employees?

Mr. CARR. Yes.

Mr. ROGERS of Massachusetts. When this plan gets ultimately under way, the Government will pay only 28 as compared with the 58, and the employee 72 as compared with 42.

Mr. CARR. Of course, that would depend in considerable degree upon whether the Government should begin its contribution now with the passage of the act and contribute its proportion every year, or whether the Government should wait until the contributions of the men had been exhausted by the payment of annuities and then begin the appropriation of its contribution. The latter is precisely what it is doing with reference to the civil service employees. That raises the cost of the plan but it does not make it relatively more costly than the system you have created for the civil service. It would be somewhat less even for the foreign service with these new contributions from annuities which we have been discussing.

Mr. ROGERS of Massachusetts. At no time and under no circumstances can it be less favorable to the Government than a 50-50 basis?

Mr. Carr. Precisely. It is more favorable to the Government than the plan for the civil service employees.

The CHAIRMAN. That is extremely favorable.

Mr. CONNALLY. When a man withdraws from the service he gets back what he paid in.

Mr. CARR. Ỹes; with 4 per cent interest, and if he dies in the service, his family gets what he pays in.

Mr. CONNALLY. With 4 per cent interest. Does the general retirement act provide that this fund shall be invested in Government securities so as to bring in interest?

Mr. CARR. Yes. The Secretary of the Treasury is required to do that, and that is one of the provisions in this amendment.


Mr. MOORES. If we pursue that second plan, such as the Government is pursuing now with regard to the present retirement law, how long will it be before any appropriation is called for, according to the actuary?

Mr. CARR. According to our figures last year, which are in the hearings, we calculated that the plan would operate to pay the annuities up until 1944 without any contribution from the Government; that thereafter some contribution would be necessary, and that that contribution would reach a maximum of half a million dollars in 1959, approximately. Those figures were reached by taking the 640 men to which this bill would be immediately applicable, man by man, considering their ages, their condition and probable length of service, calculating when each of them would go on the retirement list, assuming that they would continue on the retirement list for 11 years, which would presumably be about the length of their natural life, and when they would probably cease to draw annuities. That

gave the results which are printed in the hearing of last year, on page 30, but the actuaries say that those figures are considerably larger than they should be, because we have not taken into consideration the probability of men dying before the expiration of the 11 years after they go on the retirement roll. The actuaries state that those estimates of ours were outside estimates, and that the actual cost would be very considerably below that.

Mr. MOORES. Which method, in your opinion, would save us-this is selfish only-from the enormous propaganda that the civil service employes under the present law are putting forth because of the fact that as they contend the civil service retirement act is profitable to the Government and the Government is making money out of it, and is not paying out nearly as much as it gets? Anybody can understand where that comes from, and I get letters of that sort all the time, and I suppose all the other Members of Congress do, stating that the $720 maximum should be doubled or tripled or quadrupled, because the Government was making money out of it. Explain which way would save us that trouble.

Mr. CONNALLY. Neither one.
Mr. CARR. That is, I am afraid, deeper than I am prepared to go.

Mr. MOORES. The honest method is for the Government to contribute right along.

Mr. CARR. The most economical course to take is for the Government to contribute annually its share and put that at interest, and in the final outcome the Government will spend a great deal less money; but that, apparently, has not been the policy of Congress so far, and until it is the policy of Congress, we can not do better than to ask for a system based upon principles which Congress has already approved. That which is proposed here has a great many advantages which the civil service system does not possess and it has the added advantage of very considerable moment to Congress, and that is, it includes a guarantee that the total cost to the Government shall not be beyond the amount contributed by the men, namely, 5 per cent. That is more than you have in the plan you have already authorized for the civil service.

Mr. ROGERS of Massachusetts. If I understand this proposal, which is printed in part 1 of the hearings, there are three differences between it and the plan which has already met the approval of this

committee and the House last year: first, the limitation of responsibility financially to a 50-50 basis, which was not in the old proposal; second, the complete separation of this fund and the civil service fund in its administration.

Mr. CARR. Quite so.

Mr. Rogers of Massachusetts. Third, the proposal that we shall not exclude from the benefits of the retirement law service men promoted who are now ambassadors or ministers. Otherwise and in all respects, the substance of the two plans is identical.

Mr. COOPER. This provides that the benefits shall not accrue also to the civil service employee who has been appointed to the grade of ambassador or minister, or appointed to any official position in the Department of State, so that if any diplomatic secretary or consular officer is appointed to any official position under the Department of State, and that might not be a promotion, he might be appointed to some subordinate position in the Department of State, which would not amount to a promotion, but a clerkship here, still he would be entitled to the foreign service retirement provision of the law.

Mr. CARR. Because he had made his contribution to the foreign service allowance, just exactly as if he were taken from the Department and put into the foreign service. In order to get the benefits of the foreign service annuities, he would have to put into the foreign service fund the difference between the annuity and the contribution to the civil service retirement fund. It works both ways. For example, as to what is meant there are Mr. Leland Harrison, present Assistant Secretary of State; Mr. Wright, present Third Assistant Secretary; Mr. William Phillips, Undersecretary of State; and Mr. McMurray, Chief of the Division of Far Eastern Affairs; Mr. White, Chief of the Latin-American Division; and so on, who have spent their lives in the foreign service. Under such a bill as this they would have been contributing all these years to the foreign service fund.

Mr. COOPER. Just what is meant? Will you please define what is meant by official position in the Department of State? What officers does that include? How low and how high! Would it include clerkships?

Mr. CARR. I think that is not the intention. Mr. COOPER. Some one who would be a subordinate employee and direct some division?

Mr. CARR. A chief of division, chief of bureau, assistant secretary, etc.

Mr. COOPER. It would not include clerks?
Mr. CARR. No.
Mr. CONNALLY. They would be covered by the other act.
Mr. CARR. Clerks; yes.

Mr. CONNALLY. I was wondering what official position in the State Department meant.

Mr. CARR. The practical working out of it would be inevitably the bringing back of men from the foreign service as is now done.

Mr. COOPER. You might use an ambassador in a position in the State Department. The point is what is meant by Official position in the Department of State?

Mr. CARR. I had assumed a position above that of a clerkship was meant. I am not at all particular about the language.

Mr. MOORE. The comptroller would undoubtedly construe that as meaning a position for which the Senate would have to confirm an appointee, and you would have trouble with the comptroller all the

It is not what you and I and Mr. Carr would think, but what the comptroller would think.

Mr. CARR. If that is so the language ought to be changed.
Mr. MOORE. I think so.

Mr. CARR. Because it would work an injustice to the officer who is brought back from the field.

Mr. Moore. Do you not know that the comptroller would so construe it?

Mr. CARR. I did not know it.

Mr. CONNALLY. Why not say “assigned to duty in the State Department”?

Mr. Carr. Because it might so happen as in the case of Mr. McMurray, that the officer would not be assigned to duty as some of the other secretaries are, but would have resigned his place in the diplomatic service and have been appointed to another office in the State Department. Mr. Wright resigned his place in the diplomatic service to be made Third Assistant Secretary.

Mr. MOORE. He was confirmed.

Mr. CARR. In each case the officer assumed a different office from that which he held in the foreign service.

Mr. COOPER. A man in China rendering efficient service might not want to be brought back here, and might be in a subordinate capacity doing consular work in Shanghai, say. He is brought back here and assigned to a position in the department, but the moment you begin to use the expression “official position, then you meet the suggestion of Mr. Moore in the legal interpretation of that, because there is a difference between an office in the State Department and an official position.

Mr. CARR. Why would not your objection be disposed of by making it "assignment or appointment to a position in the State Department ?"

Mr. MOORE. I think that would be better. It will be safer.

Mr. COOPER. If the department wishes to retain his services and to justify his transfer to Washington, so as to give him the benefit of the proposed act, then say official position.

Mr. CARR. That would be entirely agreeable to me.
The CHAIRMAN. I think that ought to be done.

Mr. CARR. There is one other thing, if I may just take a moment of your time, one other difference between this section and the one in the bill last year, on page 32, which is as follows:

(1) Whenever any foreign service officer, after the date of his retirement, accepts a position of employment the emoluments of which are greater than the annuity received by him from the United States Government by virtue of his retirement under this act, the amount of the said annuity during the continuance of such employment shall be reduced by an equal amount: Provided, That all retired foreign service officers shall notify the Secretary of State once a year of any positions of employment accepted by them, stating the amount of compensation received therefrom, and whenever any such officer fails to so report it shall be the duty of the Secretary of State to order the payment of the annuity to be suspended until such report is received.

It is understood that there was objection in this committee last year to the provision permitting gentlemen going on the retired list,

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