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December 21, 2016
Document Release Date: 
June 9, 2008
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September 9, 1970
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Approved For Release 2008/06/09: CIA-RDP74B00415R000600030043-2 rir. Snyder C- 0 September 9, 1.979 Central Int:e1.1i ;once Areucy draft bill, 'To amend tine Central Intelligence A;elac - f.'.eti_ze~:sc,nt Act of 19,"w4 for Certain L , ; , , , as ane.lded, and for other ,u.rescs.SO Section 102 of the draft bill would nod a new s.ect:i.on 201(c) to the Central liltelli 'enc2 Agency Act of i5(;4 ;71iic:. would require the Director of the Central 1.IIt:eI.1 L,:ence A:;enr_; (CIA) to notifp the Sccrctr ry of the Treasury at the end of each fiscal year of the aGlount equivalent to (. ) interest on the unfunded li-ahil.ity Coi:Inuted for that year at the inter .-t rate used in t: lie thei,. ,.lost rO Cent valuation c. rile CIA het: raneil~ and. Di.;; .bi.1ity S y- teia, anci (Z ) t- liat p ort on of dislbur :c r, nt. for annuities for that year [Iih:!_c the D1.1:#'_Ctcr fst]I-:atcs ?. ttI"4.?h-- utablc to credit allowed for i':ilitary c -osin;; the accounts for each fiscal yen? the ?t'cret:cry wou16 i e rLgitiaec7 to Cr- CdL~t to to C11, r r1. .. .. T? ~... as a GavernaeIit coil,tri_but:i_t . out. cf 11I.7 ne i n til._ 3:3S, I" of the United Staters not c'tliorui ,C --DV ror r:i atcCd the aJ.1o::l perce'.ilt:a.''es. of such aI?fount:.. . 10 pcrccut. ioi: 3.971; 2t pt:r'cent for 1972; 30 percent for 1973; 40 percent for 1974, 50 p rceilt for 1975; 60 percent for 1976; 70 percent. for 1977; 30 percent for 1978; 90 percent for 1979; and 100 percent for 196.0 and for each fiscal year thereafter. Unfunded liability would be defined in the draft bill as the estimated excess of the present value. of all benefits. i7;)'rrahle from the fund to par ticipants and for er )Ilrti capa 1t. s, sub lect TREA has not to the Act, and to their survivors, over the sio:' of -- (a) the reviewed. present value of deductions to be withheld #rol~i the future basic Processed pay of participant currently subject to the Act and of future IAW CIA agency contributions to be I!iade in their heilaif ; plus (ID) the TREA present value of Government payments to the fund under section arrangement 261 of the Act: (presur. sbl.y should reed `' :-action 261(b) ") ; plus (c) the fund bnl ance as of the date the unfunded liability is letter dtd determined. 4/11/08. The draft bill would add a new section 261(b) to authorize appropriation:, to the Fund to finance they unfunded li :bi.lity created by a statute that authorizes new or liberalized benefit.,, extension of covcr.lge to new groups of cr::ployces, or increases in pay on which benefits are computed. uCil appropriations Approved For Release 2008/06/09: CIA-RDP74BOO415R000600030043-2 Approved For Release 2008/06/09: CIA-RDP74BOO415R000600030043-2 woul.,? be .nt;ac;e points, the unfunded liability wouldi be increased by thout 85 percent of the nnouut stated in the letter from CIA to the Bureau of the z3ud;et. This overstntement of unfunded liability would result in the payment of interest by Treasury under section 261(c) on liability not yet accrued -- #11.1lo,ours to paying interest on debt not yet incurred --- and Would correspond- in,,ly reduce the estimate prepared by the Director under -lection 261(a) of annual appropriations required to be grade to the fund. The existing Foreign Service Act contains the same defect, because normal premiums are 31.22 percent of aggregate basic pay and Agency-employee contributions are only 16.28 percent. Approved For Release 2008/06/09: CIA-RDP74BOO415R000600030043-2 Approved For Release 2008/06/09: CIA-RDP74B00415R000600030043-2 The defect i., only te1:7-)o).arily avoided in the Civil Service r. (:t l.r~:I:lflli Al.1endliii:nt:$ of 1969. If the nor ial Cost of that syfiten i s rl:coi,lplltod using a :iiore r0i'llis tic vn.iuat.iColl than the 3-.142 per emit: 7:o?w er;lploycd, normal cost would fell) onC, tthE: unfunded ].iatii.Lityy, 1000rC1a.11 ; to accepted acturtI:'i3.1. }`tract 1c.; "Ouid be Very much ui icrrltatod under tilt.: c}.i titl;; dcfinition. The till4er:1t:r1Lcrlr pit c,f unfunded liah.i.l tty. would result in tpi',: Treasury pray ills interest on sometihizi,. less than the generally rcico,uized accrued (i.e.., past service) liability. In addition, the definition of unfunded liability in the Civil Service,, Forcin Service, and CIA draft legislation pro- v9.d a s for the deduction oi, the present value of a,)propriatiolis which wo.t1C Ue deened: to be authorized by future 1e at:1oli which crc.7stes new unfunded liability fro:;'= the pri3se t. valuu of bell efit: payable frori the fund. Such a QC-411 u.ct:iol: C01121Ilctc.ly a is re ;';ards the accrual bat is o f the actuarial definition of unfunded liability, and 1:7 analo^oua to not rcco` ,'zing a debt because a promise has een made to pay t e echt in the future. In order to i)e consisten t: ..it accei,t'eci actuarial practice, unfunded liability should be redefined. in the Civil ,+crv:ice Act, the. 1roroi_ u S ervilce r,ct, andi tee CIA draft: ttlon the following lines Unfunderd liability c:'ca,ls the estimated exces of the present value of all benefits payable froi:I the fund over the sum of - (a) the present value of future normal premiums; plus (b) the fund balance as of the date the unfunded liability is deter mined. A return to this standard definition of unfunded liability would also imply that the 30-year arnnor.tization paytr.cnts provided for. in the Acts and tile draft bill should be reduced to principal only, since the unaamortized obligation ,would be included properly as a part of the total unfunded liability on which interest would be paid currently. In view of the foregoing, we would be opposed to the draft Office of Debt Analysis ,f /rte t Approved For Release 2008/06/09: CIA-RDP74B00415R000600030043-2 Approved For Release 2008/06/09: CIA-RDP74BOO415R000600030043-2 ll t'vl . I.J . y !\ 1, la\l v.a\~'.a~.. Y r+? Y . ` 1 P `.` n r r~i., r. ^~ rrr Fr. /fr I~ ? nrrn I ?~! // I. r n r. f I /~ r ?. r .~. ~~ . w, of w er-&' J a (// t v Lf/ v ' ~' I ~/ The Department cf the vaslltilL" ton; D.C. C The Office of Management andBudget has requested the views of this Department on the Civil Service Commission. comments on Treasury views concerning retirement financing. A copy of the Civil Service Commission comments are attached. Mr. Victor Zafra (395-3736) or Miss Hilda Schreiber (395-4650) t d d B . ge u handling this matter at the Office of Management an Approved For Release 2008/06/09: CIA-RDP74B00415R000600030043-2 I would appreciate your comments to assist this office in the preparation of a report. DATE: December 8, 1970 Approved For Release 2008/06/09: CIA-RDP74BOO415R000600030043-2 Ui~'1`I"emu 5 ~., :A. VIL SEFZVIC; COivi(v{1SS1ON WASH N: TON, D.C. :_Q-11157 Mr, Wilfred JIL. Assi:;t~'.Ilt Director for X1egisi. a i'~re }{'~fe'rcnce Office of ii^.Il ?c .cnl: 4nd. Budget Wastiingbon, U. C. 20503 before ';i :v a reco:rzuend:ition on the. CIA fin Mains. r. .r e r3 j i- for Cirt~: i.r~ +L'.:;plo;,; ee ,, as ~ ~..~letl~, ,:.l, .d for purposes " The bill would apply the of the Civil Service Re- ti.ren ent Syste::7, as provided in Public 1,:w 91-93, to the CIA system. e e i a.v O' s ? J n c or .^, ~. o,-..,.. T ese .. pr ...~ C.cd into f1ln Foreign 77r o' / i`", i, ns h ''r e 1 e n .~t~^...a :tC:;l. The ~.'c 'U letter Service iiet . e t :s'; `r ry 1`ep rE:::. t C s ?~'~ 7 .crr; ' >r that ccntr,:I-y "0 i:(>C l Ul C Cl c ci:ila2 ia). l?ri nci.rloo ised. as r: C:1J. Ca1.should be ., revised. and the~1.~..iS and a : a'i .:i"~ f Gi"i,, this lc:';'~?', r ill di cu..r_s the principles involved Oo tabor 8, ~.c+(0 The CO: .' '~ ssion has been asked to CO: L ent Un a '.l.'rCesury Department letter referring to the Central Intelligence ,;c;ency draft bill, "To c- 1:r.nC.l the Central Intelligence A~,cn_y Retirement Act of i 6 There is no one accepted actuarial principle which applies to all 'Plans. vivcn one of the major typ?s of actuarial methods, there are prob bli as many different dcscriptioris of the method as there are actuaries . All I e;?iloa s must equate the present value of future benefits to be paid with the present value of an exist.,ng fund plus future scheduled Contributions. The actuarial ^.t}YCd singly determines n t?h,nr?r;`n s .+ the t~i.. .:...Cl fro,-1 the na. J. T: e ISCI.'efi~s ..a t? the t.~r,.~.:'1;; of t, .e' into vl,_,. .~.~ pa f uri. lust ;"I(. ,t by the contributions and the interest earned on the if n4 no ,:latter what method of payment is employed., Under this broad criteria, the fun dill; method: can range from one ira- i,,ediate 3,..yment which, with ir>tere.s.., will ray all future benefits to a pay-as-you-`o system which mcets all benefits directly as they fall due and, then fore, no fund is developed.. This latter m: tihod is that v; probably ca1pJ.U3?-~a b;?' the :11i.1.2tL:1'y retirement the f0~:s?::I' 2!:.'', ?never been used for P. going pluIi ,because of tale ?prohibiti'/e cost. i ethods e ncrally I.. ;.- ,,loaf plans are fand;:d by other which try to attain 0,:o coals. ? i first, the method should attcmpt to level out the payments level. no that Cecil yC'.'Lr lu is at 0. and Approved For Release 2008/06/09: CIA-RDP74BOO415R000600030043-2 Approved For Release 2008/06/09: CIA-RDP74BOO415R000600030043-2 Second, i.tywliicl.h will not be paid for by schccl,led contributions, a schedule of 1 avments should be ScL up for -hi