PAID ACTIVE RESERVE PROGRAM PROPOSAL AND ITS RELATIONSHIP TO CIA RETIREMENT PROBLEMS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-03091A000200020018-7
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 4
• Document Creation Date: December 9, 2016
• Document Release Date: March 27, 2000
• Sequence Number: 18
• Publication Date: March 29, 1968
• Content Type: MF

Approved For Release 2002/05 THAI'Y> 0-3a9=GU WQZ0?I? 7
2 ~ MAR 1968
MEMORANDUM FOR: Deputy Director for Support
SUBJECT : Paid Active Reserve Program Proposal and Its
Relationship to CIA Retirement Problems
1. The Agency has the need to make voluntary or involunta
retirement under the CIA Retirement System less financially hazardous
or punitive. It is also highly desirable to minimize the resentment of
individuals who may be involuntarily retired and to deter them from taking
adverse action in self-vindication or, retaliation. These objectives would be
attained in part if the individual were to receive supplementary compensation
from CIA In addition to his annuity for a period of several years. In the
first year it is desirable to assure no diminution in the employee's net ex-
pendable income. Since there will be no retirement deductions after retireme
and since the annuity received will be non-taxable for a period of 24-36 months
and since most early retirees will enter other employment before a year has
passed, a sum: considerably less than the difference between the annuity and
former gross salary would be adequate.
2. The Agency recognizes that its age 60 retirement policy for
employees under Civil Service Retirement, although necessary in the Agency's
beat interests, is prejudicial to those of the individual. Not only is the individual
deprived of salary, but his annuity is 2% x high five less by each year of service
he might otherwise have served. Since the average Civil Service retiree does
so between his 65th and 66th year of age, it is a fair assumption that the average
person's annuity will be at least 10% less than it otherwise would have been.
(NOTE: 1070 ignores the probable increase in high five that would occur during
the period of additional employment . )
3. CIA has a need to maintain a reserve corps of personnel. trained
and experienced in Agency methodology, who would be available for immediate
duty in the event of a national emergency or if there were an abrupt Increase
In the need for skills in any particular field of work. Prompt availability would
require continuance of medical and security clearance and willingness to be
recalled either as an employee or in contract status. The problem is to provide
an incentive system that would ensure a viable reserve corps.
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4. It is believed that the incentive/compensatory needs in problems
1 and 2 above can be reasonably satisfied at the same time that a compensation
program is devised for the CIA Reserve Corps.
Proposal and Related Prfnci es
That employees who retire with an immediate annuity for reasons
other than cause and disability be eligible to join the CIA Active Reserve. To
`or reserve compensation they must obligate themselves to return to
duty if asked to do so. If recalled the reservist would receive the then equivalent
of his terminal salary. Additionally and alternatively, the reservist would be
obligated to perform appropriate small tasks and services without fwrther
compensation if not requiring more than 20 hours per month and in the absence
of very special circumstances warranting additional compensation.
2. The maximum period of active reserve status with compensation
years.
3. The maximum age for participation in. the paid active reserve shall
a. Age 60 for retirees in the CIA Retirement System.
b. Age 63 for retirees in the Civil Service Retirement System .
The lower age limit for those in the CIA. Retirement System Is consistent
with the argumentation presented by CIA to Congress justifying retirement as
early as age 50 and the granting of a more favorable annuity formula, i.e.,
CIA's inability to use effectively after age 50 the services of all employees
whose careers have been oriented toward the conduct and support of intelligence
activities abroad. To qualify for the full three year active reserve term, the
employee would have to retire before attaining age 57. Thus, this age 60
maximum age will consistently foster early retirement.
4. For every month an individual in the CIA Retirement System remains
in service after attaining age 57, an equivalent reduction will be made in his
total period of eligibility to participate in the paid Active Reserve. In determining
reserve compensation, such reductions shall first be applied to the compensation
scale for the first 12 months of active reserve status.
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5. For every month an employee in the Civil Service Retirement
System remains in service in excess of three an equivalent reduction
will be made in his total period of eligibility for paid active reserve status.
The three month leeway is to give the Agency some latitude in setting the
retirement date which by law it does not have with respect to the CIA Retire-
meat System.
6. Reserve compensation shall be suspended during periods of
recall to duty, but the permissabie period of paid active reserve status
shall not be extended by reason of recall.
Compensation Formulae Considerations
Problem 1, the encouragement of early retirement, seems to call
for full preservation of the individual's expendable income during the first
year of retirement. 'The individual should be financially unimpaired In
preparing himself for and in locating other employment. Making allowances
for the termination of retirement deductions and a greatly reduced income
tax base, I believe reserve compensation at approximately 80% of the difference
between the former salary and the annuity will leave the individual's expendable
income unimpaired.
To a no less important degree, unimpaired expendable income
equally vital to the age 60 Civil Service retiree who may also need to locate
supplementary employment or who is in the process of adjusting to a lower
standard of living.
In each of the following two years it is logical that there be downward
ogresslon in reserve compensation. The value of a former employee's
services decreases with the individual's loss of current knowledge about
Agency activities, the likelihood that the Agency will need his services
diminishes, and the reservist's willingness to fulfill his obligation will lessen
he establishes himself if a new vocational field or settles into full retire-
'The scale of compensation to be paid must meet numerous tests
It must first. of all be reasonable and defensible in terms of the Active Reserve
program. It should, however, logically be influenced by the need of the Agency
to make our early retirement policies effective and equitable.
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 Approved For Release 2002/05/01 : CIA-RDP78-03091A0002Q 020018-7
ADMINISTRATIVE - INTERNAL USE ONLY
is suggested that sample computations at several grade levels
,
including Agency average grade, be made. I suggest the following formulae
in the initial testing:
lst 2nd ear
80% 40%
80% 60%
20%
40%
It is then suggested that the examples, using estimated Federal and
State tax rates and retirement deductions, demonstrate unimpaired expendable
income in the first year of paid reserve status. To the extent there IS impair-
melt in the 2ud And 3rd years, it can easily be seen how much the individual
will have to reduce his standard of living or earn supplemental funds.
Leo suggested that the annual cost of the reserve program be
projected for a span of years ahead to establish the rough budgetary implications
Special Assistant to the
Deputy Director for Support
for Special Studies
SA-DD/S/SS/EDE:bak(29 Mar 68)
Distribution:
Orig. ;,Addressee (then to DD/S Subject)
STATINTL
1 - DD/S Chrono
1 Mr. Houston
1 Mr. Warner
1 - Mr. Wattles
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