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-RDP87-00868R000100110018-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 22, 2016
• Document Release Date: September 8, 2009
• Sequence Number: 18
• Content Type: REPORT

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SOCTAL SECtJRTTY CO~TEI~AG~ T'OR CTA
EMPLOYEES ENTERING ON DUTY ON OR AI~7:ER 1 JAN>JARY 1984
This paper is directed at the impact of Social Security coverage
of new Agency employees as of 1 January 1984, with.particulax focus on the
adverse effect of this coverage on the ability of CIA management to recruit
and maintain the c{uality of work force essential to the effective pexfa~?mance
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 irimtinent 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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SOCIAL SECURITY COVERAGE I"OR CIA
EMPLOYEES ENTERING ON DUTY ON OR `AFTER 1 JA~'~'UAP.Y 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 I 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 futuxe and
could be in place priox to 1 January 1984. The details of this supplemental
plan have not been made available, nor has the Administxation 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 5.6a 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 ~;o current retix~ment
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 b5
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 fox retirement
related coverage from the current 7a (9a in 1984 and I.1o in 1985 if the President's
FY 1984 Budget proposals are enacted) to 11.30 for Social Security/supplemental
plan or 12.7a for Social Security and interim regular Civil Service coverage
in the event the supplemental plan is not enac~:ed. This would rise to 14.78
in 1984 and 16.70 in 1985 if current proposals prevail.
Social Security coverage of Agency employees and. the effects cited above
axe 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 vztal 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 i.xi 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 reivaxd excellence of performance.
The institution of retirement changes whereby full berxefits 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 clandestar,e operations.
Th.e 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 Neva Employees on the CIA
A. Recruitment of New Employees
1. The Agency recruits approximately0new 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 far. experienced professional
area experts, economic, political and military intelligence analysts, and
scientific. and technical analysts are drawn fram the ran}ES 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 tiation II'i a vital capacity,
the opportunity for a career where their experiences and l~awledge 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 yaung
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 i,ri11 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 intexim coverage
tuzder 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 retiremel~.t 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 Linder current.
Civil Service. retirement provisions with those under Social Security and the
probable provisions of a supplemental plan are presented in the attacY~nent.
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 dear for approximately 900 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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to Create severe future blockages in all career paths and seriously
impair the ability of Agency management to move promising individua7_s up
through needed rotational and developmental assignments.
2. Essentially dry up promotion headroom in future years as employees
defer their retirement ~a 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 nanreduced
annuities for members (approximately 20 percent of the work force) a.t 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 kill 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 securiay information.
7. Inclusion of CIA personnel whether overt, covert or potentially?
covert in the Social Security data base poses severe secuxz.ty risks in te~.~ns
of protecting the identities of individuals under cover and the access by
un~.uthorized persons to complete listings of all CTA personnel.
V. Conclusions and Recommendation
There is no question that Social Security coverage and its prav7.sians fox.
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 ~~roxk 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.
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COMPARISON OF RETIREMEN'C OPTIONS AND BEi\TEFITS
Federal Employee Under Current Civil Service
wit
Federal Employee Under Social Security
Coverage an Supplemental Retirement Plan
1. BACKGROUND
a. Based upon the assumption that Social Security coverage will be
extended to all new federal employees hired as of 1 January 1984, an employee who
enters on duty at age 22 in 1984 will be eligible for a reduced Social Security
annuity benefit in 40 years (age 62) in the year 2024 and a nonreduced annuity
at age 67 in 2029. It is further assumed that by 1 January 1984 all new hires
will also participate in a Supplemental Federal Employee retirement plan. This
supplemental retirement plan will cost employees 5.6% of salary (per 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 greatly
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 Agency
in the first place. More importantly to maintain a vigorous, effective and highly
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 severe
penalties for early retirement will, if enacted, present a different and fragmented
dual-source benefit program for new employees.
Early retirement at 55 would 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 ttiaelve years before
full Social Security benefits would accrue.
2. COMPARISON OF BENEFITS
A comparison of employee retirement options and benefits under current
retirement rules vis-a-vis the proposed Social Security/Supplemental Retirement
Plan is needed to determine whether the current retirement provisions proven so
useful in the recruitment and future management of new personnel toda}~ will be
negated should the proposed changes be enacted.
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It is not possible to construct an applicable model. f_or the actual opt:~.or~:3
or benefits which may be in being forty years Pram now,. but a useful theoretical.
comparison can be developed can the basis of tl~e current, lega.I provisions of both
Civil Service Retiremerft and Social Security with some application. of the proposed-
changes that have been announced at this point in times
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COMPARISONS OF RETIREh9ENT OPTIONS AND BENEFITS
BASED UPON:
A. Current provisions of Civil Service Retirement.
13. 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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Federal Employee Under Current .Civil Service
Compared With
Federal Employee Under Proposed Social Security
Coverage and Supplemental Retirement Plan
CASE EY~1flLE: 55 Year Old with 30 Years of Service--Retired as CS-12, Step 5
CURRF~.rIT CIVIL SERVICE (CSR) COMBINED SOCIAL SECURITY AND SUPPLEMEI~ITAL RETIRENN~ENT PLAN (SRP)
Employee Cost - 7a of Salary
High-3 Average - $30,331
Basic Annuity - $17,061 per year (b)
$ 1,421 per month
Penalty for Early Retirement - Oo
Monthly Annuity at Age 55 - $1,421 per month
Employee Cost - I1.3% (5.7% Social Security and 5.6% SRP} of Salary
PART I - Supplemental Retirement Plan
F~igh-5 Average - $28,088 (a)
Basic Annuity ~- $12,640 (c)
Less 50o 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
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 7o 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 7o employee contribution
may earn compared to a 5.6% contribution. '
(d) Early retirement penalty of 50a 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 pex month. Full benefit age
will be extended to age 66 in the year 2009 and to age 67 in 2Q27. Age 62 fpr reduced benefits
(70% of full benefits) will continue to be retained.
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11ETIlIEMEI~i'T ItATIC}~T.la~7;~E
1. The production of intelligence beaxixig on the x~.ational
security for use at the highest levels of lacal.i,cy detern~.i.~.~.tion of
the LTxsited States Government is a responsirality of the gxavest
note. The organisation bearing this respox~sit~ility shauld be
staffed with persons of.the highest available intellect, integrity,
professionalism, dedication, perspicacity, and dynamism. The
Central Intelligence Agency's retirement policy is an essential
element of its program fox ensuring that its staff possesses these
attributes to the highest degree feasible.
2. The personnel staffing program of the Agency is based on
the concept of selective recruitment for careex employment and
managed career development. Selection standards axe designed
to?accept only persons with the highest c~t~a.lificatians and potentia].
fore development:'"The' Agency's developrneraf: program provides a
caxeex-long-blend of formal training and mazagad progression
through appropriate assignments of incxeasing breadth and respon-
s ibility.
3. The goal of the Agency's clevelopxr~ent pxogxan~ is to place
the best available employee in every position. 1'roixiation policy-
reinforces career development by advancing those whey excel and
have the capacity for further gxowtha Tk~e ~:gency's rigorous
system for evaluating the performance of its en~.ployees as clesign?d
to assure high levels of effectiveness. Thane wha axe unsatisfac-
-tort' are separated; those who axe marginal ax unlikely to find full
career satisfaction are counseled to resign
4. Intelligence activities are characterized. by continuous
changes--in requirements, methods, techniques, processes, and.
emphases. As .these changes occux, the Agency reassigns its
career staff employees and provides supplementary training as
required. To the extent that these measures do-.not xn.eet the needs,
requisite skills, experience, and special abilities are acquired by
the, employment of new personnel.
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5. 73ecause there are practical limits to the size caf the .A.gency,
the xequirement for. never employees and the operation: of the careen
development program cannot be accomplished without attrition..
Part of this attrition is pr?vided by involunt~.a.?y sepa.rations ax~.cl.
resignations through the Agency?s system fox evaluating employee
performance. Other vacancies are provided by voluntary retire
ment and resignation and by death and disability. But together these
do not create a sufficient number of vacancies.
6. The Agency's retirement policy is an integral part of its
program to maintain the high level of performance required by its
mission and responsibilities. It also provides the. additional attrition
necessary for. career development and the acquisition of new em-
ployees. This policy, adopted in 1959, generally limits the career
span of its employees to age 6.0.
_ 7. Agency employees, with some exceptions, have alI attained. -
their career peaks several years. before reaching age o0. They have
-.had a full CIA career and have made their maxi~s~i.urn. individual con-
tribution to their Government. Exceptions spzcifically contemplated
are individuals who possess rare scholarship and talents that would
be difficult to replace in the normal course of career development
and whose retirement would not be in the best interests of the Gov-
ernment. In some cases retirement at 60 may result i.n Ioss of
valuable experience and kzaow-how and only generate a r. ecruitm.ent
and training requirement.
8. It is recognized that enforcement. of the policy to retire
employees at age 60 occasionally subordinates the personal desires
of the individual to the best interests of the Government. This is
usually the case when it is necessary for any reason to .separate an
employee. The normal voluntary retirement age for most Federal
employees is b5, and the compulsory age under the Civil Service
system is ?Q. Similar retirement ages for CZA would result in the
gradual accumulation of an excessive number of employees of de-
clining performance, whether due to declining health, motivation,
or drive or to inability to adapt to change. The effectiveness with
which the Agency fulfills its extraordinary responsibilities depends
entirely upon the highest possible level of effectiveness in staffing
the. Agency. Consequently, extraordinary action toward attaining
as ~ i g~j t
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and maintaining this goal-such as effecting a; retirement policy
more stringent than that for the ~?ederal see?vi.ce in ge~~eral--is
warranted.
9. Retirement at age 60 may appea~? less apprap~?iate for those
Agency employees who are in positions that are not unique to intelli-
gence activities. In theory, it rxi.ight be possible to identify all such
positions and exempt the incumbents thereof from the retirement
policy.
10. There are two -reasons for not doing so, Attempts to for-
mulate criteria of differentiation would generate new problems of
:morale and administration. The creation of .exempt categories of
employees would foster odious comparisons. Zt would thwart the
implementation of the general retirement policy indefinitely as
groups and individuals pleaded their individual cases.
.. 11. The .more fundaxnental reason for not exempting certain
categories of Agency ernplayees is that the.work of the Agency must
be performed with utmost responsiveness. This requires a general
state of mind on the part of all employees that timeliness is critical;
accuracy is imperative; and absorption with the task at hand takes
priority over personal distractions. Advancing years inevitably bring
about a lessening of work vigor and enthusiasm. 'The larger the proms
portion of older employees, the greater the debilitating effects on the
tenor of the.Agency.
12. In summary, the age 60 retirement policy is a key element
of the. Agency?s efforts to attain excellence in its staffing." .Without
the policy the entire personnel program of the Agency would be im-
paired. The most vigorous and productive individuals, finding
themselves stymied, will leave the service or will never be per-
suaded to enter in the first place. By shortening the career span
of all employees, service in intelligence will continue to be highly
attractive to outstanding young men and women. In the end, our
national intelligence objectives will be best served.
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