SOCIAL SECURITY COVERAGE FOR CIA EMPLOYEES ENTERING ON DUTY ON OR AFTER 1 JANUARY 1984

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87-00868R000100110017-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: September 8, 2009
• Sequence Number: 17
• Publication Date: May 13, 1983
• Content Type: REPORT

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13 MAY 1983
SOCIAL SECURITY coyER GH FOR CIA
EMPLOYEES ENTERING ON DUTY ONOlt. WFER 1-JANUARY 1984
This paper is directed at the impact-of Social Security coverage
of new Agency employees as of 1 January 1984, with particular focus on the
adverse effect of this coverage on the ability of CIA management to recruit
and maintain the quality of work force essential to the effective performance
of the Agency's mission.
The impacts that are cited are limited to those relative to Social
Security coverage; they do not include the more imminent problems that would
be experienced should proposals for changing the provisions of Civil Service
and other civilian federal retirement systems- be enacted.
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V
SOCIAL SECURITY COVERA.G'F FOR CIA
EMPLOYEES ENTERING ON DUTY ON OR AFTER 1 JANUARY 1984
REFERENCE: Social Security Amendments of 1983
I. Background
The recently enacted Social Security Amendments of 1983 include the
provision that all new federal employees hired as of 1 January 1984 will be
covered under Social Security. This Social Security legislation also provides
covered new hires as of 1 January 1984 with eligibility to participate in
current civilian federal retirement systems. Such participation would be
authorized until new legislation is enacted instituting a supplemental
retirement system for these new employees. This "bridging" authority may
prove to be of relatively short duration, because the supplemental retirement
plan legislation is expected to be introduced in the immediate future and
could be in place prior to 1 January 1984. The details of this supplemental
plan have not been made available, nor has the Administration introduced any
legislation on the array of other retirement related changes proposed in the
President's FY 1984 Budget.
In recent testimony before the Senate Finance Committee, the Director
of the Office of Personnel Management stated that the employee cost for the
supplemental plan-would be 5.61 of salary. Since the intent.of the new
retirement plan is to supplement Social Security benefits at retirement, it
will provide considerably reduced annuities as compared to current retirement
systems and full benefit pay-offs will begin at the same age (now 65) as
Social Security.
It must further be expected that, like Social Security, there will be
some form of early retirement option available to employees, but that severe
reduction, penalties of-the annuity will be applied.
II. General Effects Produced by Social Security Coverage of New Federal
Employees
The primary effects of the new Social Security legislation and the
effort to establish some form of reduced benefit supplemental retirement plan
will be to:
A. Essentially eliminate early retirement by employees who decide to
spend a working career in federal service; retirement will normally be at 65
years of age or later, with 35 to 40 years of service for full annuities.
B. Establish the portability of Social Security coverage from federal
employment to private sector careers. The experience and training gained at
government expense will greatly stimulate movement of mid-level and younger
employees from federal service to nongovernment competitors offering higher
salaries and more attractive retirement plans.
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C. Sharply increase the salary deductions of new recruits for retirement
related coverage from the current 7% (9% in 1984 and 11% in 1985 if the President's
FY 1984*Budget proposals are enacted) to 11.3% for Social Security/supplemental
plan or 12.7% for Social Security and interior regular Civil Service coverage
in the event the supplemental plan is not enacted, This would rise to 14.7%
in 1984 and 16.7% in 1985 if current proposals prevail.
Social Security coverage of Agency employees and. the effects cited above
are viewed with considerable concern by CIA management as serious impediments
to the support of the President's efforts to revitalize and enhance the Agency's
intelligence capability and product
III. Early Retirement as a Management Tool in the CIA
The CIA has a long established policy which encourages employees to
retire at ages substantially earlier than elsewhere in government. The average
retirement age in CIA in 1982 was 56.9 under Civil Service and 52.8 under the
Central Intelligence Agency Retirement and Disability System (CIARDS).
This policy has been based on recognition that the Agency's vital missions
require that the corps of careerists perform their operational, analytical or
support duties with sustained high motivation and undiminished effectiveness
from their initial entry assignment throughout a preferably brief career of 20
to 30 years. The. early retirement provisions of the Civil Service Retirement
and CIARDS systems have served the Agency exceedingly well to attract new
recruits, provide timely career progression, and encourage retirement of personnel
when Agency management prefers that they retire. Extension of the retirement
age for full annuities would seriously impair the ability of Agency management
to maintain the employee flow-through which is essential, to maintaining maximum
effectiveness in meeting requirements.
The predictability of early retirement has provided Agency management
with the ability to offer our personnel essential developmental assignments and
promotion within reasonable time frames to reward. excellence of performance.
The institution of retirement. changes whereby full benefits would not accrue.
until age 65 would impose prohibitive penalties for early retirement and result
in extreme blockages both as regards developmental assignments, promotion
headroom, and the resultant extension of service of large numbers of employees
well beyond their currency in the state-of-the-art in substantive areas and
their capacity to handle the milieu of clandestine operations.
The specific impacts of Social Security coverage of new employees on the
CIA as regards recruitment, the extension of retirement age for full annuities
and other complications are outlined in the subsequent section.
IV. Impacts of Social Security Coverage of New Employees on the CIA
A. Recruitment of New Employees
1. The Agency recruits approximately anew technical and professional
employees each calendar year. In spite of numerically high numbers of job
seekers in the labor market because of economic conditions, the specific types
and caliber of people sought by the Agency are extremely difficult to recruit.
Particular problems are encountered in a wide spectrum of high competition
areas for critically needed subject and area analysts, computer specialists,
advanced scientific and high technology personnel, communications specialists
and operations officer trainees.
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The majority of the Agency's recruits for experienced professional
area experts, economic, political and military intelligence analysts, and
scientific and technical analysts are drawn from the ranks of private enterprise
and/or academic and research facilities. The inducement to join CIA is made
up of a combination of interests in serving the Nation in a vital capacity,
the opportunity for a career where their experiences and knowledge will be
fully utilized, reasonable compensation, and, retirement at a relatively young
age permitting a return to academia or other pursuits.
2. The Career Trainee Program, which provides the entry group for young
operations officers, must necessarily be highly selective from among the best
qualified and most sought after young people from the graduate schools of the
Nation. Even with continuous special and concentrated recruitment efforts to
attract qualified career officer trainees it is extremely difficult to recruit
the types and numbers of these young people that we need to meet our requirements.
This difficulty is occurring in spite of the attractiveness of the current
Agency career development programs, which offer opportunity for desirable
rotational assignments, timely promotion, and the prospects of future retirement
with a full annuity under CIARDS at a relatively young age (50) after a minimum
of 20 years of service.
3. The Agency's ability to meet its "new hire" requirements will be
critically weakened by any dilution of the combined career and benefit "package"
currently available. The cost of Social Security coverage and the supplemental
retirement system to new employees would total 11.3% of salary, and this could
be exacerbated by a possible 12.7% cost for Social Security and interim coverage
under current Civil Service. There is no doubt that a sizable increment of
qualified and interested young officer candidates would decline employment
simply because of these cost factors. An additional number of candidates
would lose interest as the prospect of affordable future retirement was extended.
to age.65.
4. While the option for early retirement can be anticipated within the
proposed supplemental retirement plan, we must expect prohibitive annuity
reductions for such an election. Early retirees would be faced with a fragmentation
of the annuity benefits with a deferral of the full Social Security portion
until age 65 (66 in the year 2009 and 67 by the year 2027). An estimated
comparison of employee costs, options, and retirement benefits under current
Civil Service retirement provisions with those under Social. Security and the
probable provisions of a supplemental plan are presented in the attachment.
5. The recruitment of both analytical and operational personnel is
conducted in a most competitive market. The combined attractiveness of the
Agency's current opportunity and benefits package has greatly assisted in
offsetting the high cost of.living in the Washington area and the relatively
low starting salaries (1982 average annual salary was approximately $23,500)
per year for approximately= new professionals and technical recruits.
B. The Extension of Retirement Age for Full Annuities and Other Impacts
Mandatory Social Security coverage and the lengthening of service of new
Agency employees by up to ten years would create the following problems as
regards maintenance of the quality of personnel so essential to meeting our
requirements:
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1. Create severe future blockages in all career paths and. seriously
impair-the ability of Agency management to move promising individuals up
through needed rotational and developmental assignments.
2. Essentially dry up promotion headroom in future years as employees
defer their retirement to age 65 with 35 to 40 years of service.
3. The CIA Retirement and Disability System was established by law in
1964 in recognition of the special circumstances of service with the Clandestine
side of the Agency abroad. This special retirement system offers nonreduced
annuities for members (approximately 20 percent of the work force) at age 50
with 20 years of service. The circumstances of frequently dangerous and
adverse working and living conditions can lead to early burnout or compromise
of personnel carrying out the overseas activities of the Agency. The absence
of early retirement incentives for these employees would be severely incompatible
with effective staffing of our overseas stations.
4. Personnel who join CIA on or after 1 January 1984 will, under
current CIARDS provisions, remain eligible for participation in this system
when qualifying conditions are satisfied. The substantial Social Security
contributions by both the individual and the Agency will not, however, be
recoverable for transfer to the CIARDS fund as are Civil Service Retirement
funds under current law.
5. The portability of Social Security coverage, combined with experience
and training gained at government expense will stimulate midlevel employee
movement to private sector employment.
6. Increased turnover from the ranks of intelligence personnel will
make it increasingly difficult to safeguard national security information.
7. Inclusion of CIA personnel whether overt, covert or potentially
covert in the Social Security data base poses severe security risks in terms
of protecting the identities of individuals under cover and the access by
unauthorized persons to complete listings of all CIA personnel.
V. Conclusions and Recommendation
There is no question that Social Security coverage and its provisions for
full retirement benefits at age 65 (or later) and reduced benefits at age 62
will present strong disincentives for employees to consider or afford retirement
at earlier ages. The proposed supplemental retirement plan provisions for
full annuity entitlement must be anticipated as coinciding with Social Security
ages for. benefits.
The effect of these factors in themselves will deny Agency management a
most important tool in recruiting and maintaining the type of work force
essential to meeting its requirements.
It is recommended that employees entering on duty with the CIA on or
after 1 January 1984 be covered exclusively by a retirement program essentially
similar to that currently provided for Agency employees by the Civil Service
Retirement and Disability System and by CIARDS. This would necessitate amending
CIARDS to encompass all Agency employees, with different provisions and benefits
for varying types of service.
SEC"
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1. BACKGROUND
COMPARISON OF RET I
~1p
~'
y
TT~
s~il~l7 BITS
Federal Em to ee Under Current Civil Service
Fede
l
ra
~"~Ploee [trader Social Securityan
Coverage anZd:Supplemental Ret~,rement Fl,
a. Based upon the
assumption that Social Security coverage will be
extended to all new federal employees hired as of 1 January enters on duty at age 22 in 198
l
4 will be eligible for a reduced Social Security
oyee who
annuity benefit in 40 years (age 62) in the year 2024 reduced emp
at age 67 in 2029. It is further assumed that by 1 ana a 1984 all new hii s
will also participate in a Supplemental Federal January all plan. new Rihi
supplemental retirement plan will cost employees Employee 6% of sar Director of
OPM in recent testimony before the Senate Finance Committee). The Social Security
system changes coupled with the Administration's plans to introduce legislation to
change major provisions of Federal Civilian retirement system, will have a major
adverse impact on the Agency's personnel manpower management system.
b. The recruitment of new'personnel into the CIA has been greatl
facilitated by the promise and predictability of the ultimate retirement benefits
and provisions for early retirement without reductions of earned annuities for
employees at age 55 with 30 years of service (Civil Service) and for CIARDS at
age 50 with 20 years of service.
The Central Intelligence Agency's managerial concerns most certainly
include the retention of strong inducements for new professionals to join the in the first place. More importantly to maintain a vigorous, effective andhighlycy
motivated work force to meet the stressful demands of intelligence requirements, a
retirement system must be retained that will encourage career progression and "flow
through" to retirement at fairly early ages after 20 to 30 years of service.
The Administration's proposed retirement system reforms, particularly as
regards the extension of nonreduced annuity retirement from 55 to 65 with sevee
penalties for early retirement will, if enacted, present a different and fragmented
dual-source benefit program for new employees
.
Early retirement at 55 w
ld
ou
still be permitted subject, we must assume,
to severe reductions in the earned supplemental annuity with a delay of seven years
(i.e. age 62) for a reduced Social Security benefit and ten to twelve years befor
full Social Security benefits would accrue
e
.
2. COMPARISON OF BENEFITS
A comparison of employee retirement options and benefits under cu
upplemental retirement rules vis-a-vis the proposed Social Securit S Vent
Plan is needed to determine whether the current retirement Pro-visions p proven tirementso
useful in the recruitment and future management of new personnel tod
negated should the proposed changes be ennrtA,~ ay will be
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? U
It is not possible to construct an applicable model for the actual options
or benefits which may be in being forty years from now, but a useful theoretical
comparison can be developed on the basis of the current legal provisions of both.
Civil Service Retirement and Social Security with some application of the proposed
changes that have been announced at this point in time.
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COMPARISONS OF RETIREMENT OPTIONS AND BENEFITS
A. Current provisions of Civil Service Retirement.
B. Current Social Security provisions to cover new federal employees; current
Social Security contribution rates for 1984 and; current pay-off maximums of
Social Security Benefits.
C. Assumptions that the proposed Supplemental Retirement Plan will include
same basic provisions as cited in Presidential FY.-1984 Budget proposals
regarding extending retirement age, imposition of early retirement penalties,
and using high-5 year average salary as annuity base.
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 rnkr ADTQnXTQ nP RPTTRPMPNT fPTTfNS ANl1 RPNPPTTS
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Federal Employee Under Current Civil Service
Compared With
Federal Employee Under Proposed Social Security
Coverage and. Supplemental Retirement Plan
CASE EXAMPLE: 55 Year Old with 30 Years of Service--Retired as GS-12, Step 5
GJRREN ' CIVIL SERVICE (CSR)
Employee Cost 7% of Salary
High-3 Average - $30,331
Basic Annuity - $17,061 per year (b)
$ 1,421 per month
Penalty for Early Retirement - 0%
Monthly Annuity at Age 55 $1,421 per month
COMBINED SOCIAL SEC-LJRITY AND SUPPLEMENTAL RETIREMENT PLAN (SRP)
Employee Cost - 11.3% (5.7% Social Security and 5.6% SRP) of Salary
PART I - Supplemental Retirement Plan
High-5 Average - $28,088 (a)
Basic Annuity - $12,640 (c)
Less 50% Penalty for Early Retirement $6,320 (d)
$ 527 per month
PART II - Social Security
Annual Salary Last Year of Work - $33,290 (e)
Eligibility for Reduced Benefits at Age 62 - $6,108 per year (e)
$ 509 per month
Eligibility for Full Benefits at Age 67 - $8,748 per year (e)
$ 729 per month
Monthly Supplemental Retirement Plan at Age 55 -.$527 per month s
Total Combined Annuity/Social Security at Age 67 - $1,256 per month
NOTES: (a) A high-5 average salary base for annuity computation rather than high-3 can be assumed based upon the
retirement proposals announced by the Administration.
(b) Currently based on 7% employee contributions.
(c) Supplemental Retirement Plan is proposed at 5.6% employee contribution. This can be assumed to produce
a reduced basic annuity in proportion to the difference between what the current 7% employee contribution
may earn compared to a 5.6% contribution.
(d) Early retirement penalty of 50% of annuity.
(e) Current (1983) maximum annual earnings allowed for Social Security benefit computation is $35,700.
Maximum annuity at age 62 is $509 per month and maximum at age 65 is $729 per month. Full benefit age
will be extended to age 66 in the year 2009 and to age 67 in 2027. Age 62 for reduced benefits
(70% of full benefits) will continue to be retained.
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