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Mr. CARR. I am very glad to do that. We have, of course, assumed that if this bill were put into operation the adjustment would throw a certain number of men into each class, that number depending upon length of service and relative efficiency and present classification. We have assumed that certain men would, on account of their age, retire from the service when this bill is put into operation. Their salaries now being known, and their length of service being a matter of record, it is not difficult to calculate when they reach the age of 65 and retire what amount they would draw from the retirement fund. Basing our calculations upon the men whom we think would unquestionably be retired, the salaries which they now enjoy, the length of service which they have had, we get a figure which brings the cost of the retirement for the first year within $50,000. Then calculating the contributions from the service at 5 per cent of the salaries to be paid, plus 4 per cent interest, and deducting the annual retirement pay from that we find that the first appropriation from the Government after the $50,000 required for the year 1924 would be due between 1935 and 1938. The maximum appropriation would be reached in 1958 or 1960. The appropriation required would be progressive from 1935 to 1938, and reach in 1958 or 1960 the maximum, $378,000, the highest annual amount that this system will cost the Government with the number of men we have now, and based on the retirement of approximately 18 men a year.
Mr. ROGERS. That $378,000 includes the element of expense in this bill and not really the retirement element?
Mr. CARR. The $378,000 I have just mentioned is the maximum Government share of the retirement cost in 1958 or 1960. The $378,000 of which you are now speaking is the total immediate cost for 1924, of which only $50,000 is for retirement pay. In order to ascertain just what the last-mentioned $378,000 means, let us deduct $50,000 required for 1924 for starting the retirement system. Then we have left $328,000, made up of a small increase of 14 per cent in salaries in the Consular Service and a much greater increase in the salaries of diplomatic officers in order to bring the personnel of both services into this unified single-salary scale. We figure that we will have a certain number of men in each one of these classes of foreign-service officers under this new classification, a certain number to be assigned to the consular branch and a certain number to the diplomatic branch. We do not contemplate having any more men, but do contemplate bringing about a single-salary scale; bringing about interchangeability between the two services; breaking down the wall between the two services which now seems to separate them into water-tight compartments, and have men in one branch unavailable for the other branch; produce better morale; afford opportunity for greater experience, for broader training, and give a greater incentive to men to come into the service and a greater incentive to men to stay in the service once they are in.
The CHAIRMAN. Assume this bill would become a law. Who would actually classify these men?
Mr. CARR. I could not positively tell you that, but I should say that probably the Secretary of State would appoint a board of officers, in whom he had confidence, to recommend a classification of officers on as just and as equitable a basis as possible.
The CHAIRMAN. And the action of that board would be submitted to the President for approval?
Mr. CARR. Yes, sir. This bill provides that before it shall take effect the Secretary of State shall report to the President the names of those men who, because of their efficient service, should be classified and recommissioned as stated in this bill, and to report the names of those other men, who because they have not measured up to the required standard of efficiency should be either reclassified in lower classes than those specified, or some other disposition be made of them. In other words, it would put into law the principle of classification and of promotion for efficiency, which is not now in the law and which is required only by Executive order, and which, I assume, all of you agree is the proper thing to do. It would place upon the Secretary of State in his recommendation to the President the responsibility for the determination of the just and proper classification of each officer and then leave the President in a position to act in whatever way he might deem proper. Do I make myself clear?
Mr. COLE. What proportion of the retirement fund comes out of the employees?
Mr. Carr. The proportion at the maximum in 1958 or 1960 would be 58 per cent from the Government and 42 per cent from the employees.
Mr. ROGERS. How does that compare with the proportion under the Lehlbach Act? Mr. Carr. There would be $50,000 contributed by the Government for the
After that the contributions from the men would carry it until 1942 or 1943.
Then there would become necessary a small annual contribution from the Government, which would reach the maximum I spoke of in 1958 or 1960.
Mr. MOORE. Could you not put into the record a statement showing the forecast in detail of the net amounts that the Government would have to pay out from year to year after the plan gets into operation, assuming that it will become operative?
Mr. Carr. I am glad to be able to submit this statement.
FOREIGN SERVICE RETIREMENT SYSTEM.
Statement showing estimated annuities payable to foreign-service officers under
the proposed retirement system prior to the year 1944, which will be paid solely from the contributions, with interest thereon, of such officers.
NOTE.—At present there are 120 diplomatic secretaries and 520 consular officers of career in the service, making a total of 640 officers who would be recommissioned as foreign-service officers under the proposed act. The average age of entry into the service of these officers, who have entered after examination since the reorganization act of April 5, 1906, is 30 years; and it is assumed that this average will change very little in the future, if at all.
The estimated average annual salary at the age of retirement of those foreign-service officers who will retire during the next 20 years, assuming that the salary schedule of the proposed act becomes effective, will be about $5,300, and it is believed that this figure will not vary much in the future. Its maximum certainly will not rise above $5,500.
Assuming that 97 per cent of the 640 foreign-service officers who enter the service at the average age of 30 years will complete 35 years of service before retirement and be entitled to the maximum pension of the salary class under the proposed act, the result will be that an average of 621 officers will serve 35 years each and receive the maximum pension of their respective salary class. Dividing 621 officers by 35 years gives 17.7, the average number of officers retiring annually, and 17.7 multiplied by 11.1 years, or the average years of expectancy of life at 65 years of age, gives 196 as the number of officers who will be on the pension list when the maximum is reached in 1959, the date on which the officers now entering the service become pensionable.
Assuming that when the service reaches its highest point of efficiency under the proposed act, the average maximum salary per officer will reach $5,500, the average annuity under the proposed act of each officer will then be 60 per cent of $5,500, or $3,300. This multiplied by 196 officers, the highest number which will ever be receiving a pension at one time, gives $646,800 as the maximum amount payable in any one year for pensions.
The salary schedule in the proposed act aggregates $2,850,000 annually for foreign-service officers. A 5 per cent contribution for this will amount to $142,500 annually. Therefore when the contributions, plus interest thereon from 1923 to 1943, inclusive, are absorbed, as shown in the above table, the Government will have to appropriate annually for pensions the difference between the annual contribution of $142,500 and the total due. As already stated, this total in 1958 will reach approximately $646,800. In that year and for all following years the appropriation by the Government will have to be $646,800 less $142,500, or $504,300.
If the service were at its beginning in 1923 and all officers should enter at the age of 30 years and pay their contributions of 5 per cent per annum of their salaries until retirement, the Government would, of course, pay out nothing until 1959, but would have the use of the contributions plus 4 per cent compound interest thereon until that date, at which time the contributions plus interest would amount to 42 per cent of the total to be paid out as annuities. Therefore the actual proportion of the annuities payable to foreignservice officers under the proposed act by such officers and by the Government, respectively, after taking care of those officers now in the service who will make no contributions to the retirement fund or will contribute for a part only of their term of service, will be about 42 and 58 per cent.
This is to some extent conjectural, because obviously one can not know what will be the exact condition in years to come. What I have said to you has been said with the idea that it is a conservative statement and well within the probable facts.
Mr. TEMPLE. You speak of it as conjectural. The uncertainty arises out of such changes of personnel as might come which can not be foreseen?
Mr. CARR. Certainly.
Mr. CARR. It does not take into consideration expansion of the service. We are dealing now with a given number of men and apply this classification to tliese men, adding the number of men who would come into the service from year to year. The average age of new appointees Mr. Stewart figures as 30, who would presumably stay in the service 35 years. The conjectural part of this estimate is how many would drop out on account of illness and death and resignation.
Mr. MOORES. The expansion of the service would be another factor that you can not add in your present calculations.
Mr. CARR. We do not feel in position to make prediction about that. If we could get this service with the existing maximum number of men, developed up to the standard of excellence that we ought to attain, I doubt whether we should want many additional men. I can not look forward to the time when any particular increase would be necessary, unless changes in world conditions call into existence new nations, making necessary new embassies, legations, and consulates, in which case Congress would naturally provide for increased personnel.
Mr. MOORES. I should venture the opinion that the lapses would be just about the same as in life insurance.
Mr. ROGERS. Mr. Skinner suggests that there is heavier mortality in any foreign service.
Mr. MOORES. I did not mean just that.
Mr. ROGERS. The longevity ought to be the same as in general walks of life, except in the Tropics, where men are exposed to the many tropical diseases not encountered elsewhere.