SOCIAL SECURITY COVERAGE FOR NEW FEDERAL EMPLOYEES AND IT'S IMPACT ON THE CIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89-00066R000900110003-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 10
• Document Creation Date: December 22, 2016
• Document Release Date: January 11, 2011
• Sequence Number: 3
• Content Type: MISC

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A. The recent enactment of the Social Security Amendments of 1983 requires
that all new federal employees hired after 31 December 1983 must be covered under
Social Security. In addition to establishing mandatory Social Security coverage
for new federal employees, this legislation removed the previous statutory
prohibition against federal employees concurrently participating. in civilian
federal retirement systems. Under current provisions of federal civilian
retirement system law, all regular civilian federal employees must participate
and contribute to applicable civilian retirement plans. Effective 1 January 1984
therefore, all new hires must participate in both Social Security and current
federal retirement systems until such a time as retirement system statutes are
amended.
B. In the same timeframe that the Social Security Amendments of 1983
were being considered in the Congress, the Administration expressed the intention
of introducing companion legislation for the institution of a new supplemental
retirement system for these new employees. This new plan would require lower
employee contributions and lower future benefit pay-offs than current federal
retirement plans. Unfortunately, the Administration has not introduced any
legislation proposals relative to the supplemental plan as of this time.
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C. Action has recently been initiated in both the Senate (Governmental
Affairs Committee) and the House (Post Office Committee) for in-depth studies of
pension systems leading to the development of a supplemental plan appropriate to
the needs of future federal employees.
II. GENERAL EFFECTS OF SOCIAL SECURITY COVEPAGE OF NEW EMPLOYEES
A. Under Current Statutes and Under the Concepts of'the Administration's
Supplemental Plan
1. Increased Cost of Coverage to Employees
a. Under present circumstances cost for retirement related
programs for new employees hired after 31 December 1983 will increase
from the current 7% of salary to 12.7% (5.7% Social Security and
7% federal retirement).
b. Under the Administration's supplemental plan the employee
payroll costs would be 11.3% (5.7% for Social Security and 5.6% for
the supplemental plan). According to statements before the House
Post Office and Civil. Service Committee by Dr. Donald Devine, Director,
Office of Personnel Management, the supplemental plan would incorporate
the same "reforms" proposed for the regular Civil Service retirement
system which would impose severe penalty reductions in annuities for
early retirement before age 65. The comparative impacts on CIA
employees should this approach be adopted are presented in Tab
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2. Other Effects on Work Force Management
a. Essentially eliminate inducements for early retirement
by employees who decide to spend a working career in the federal
service. Retirement can be. expected at 65 years of age or later,
with 35 to 40 years of service to qualify for full annuity pay-offs.
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 non-
government competitors offering higher salaries and more attractive
retirement plans.
III. SPECIFIC IMPACTS ON CIA AND NEEDS OF THE AGENCY
A. 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
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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 timeframes 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.
B. Recruitment of'New Employees
1. The Agency recruits approximately 900-new 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
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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
Administration's 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 Tab
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 900 new professionals and technical recruits.
C. 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.
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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.
IV. ACTIONS TAKEN AND RESULTS OF PRESENTATIONS OF CIA'S MANAGEMENT NEEDS
TO KEY ADMINISTRATION PNn CONGRESSIONAL OFFICIALS
A. Actions Taken
1. During the period January through May 1983, the Agency has worked
closely with the Senate Select Committee on Intelligence and the House Permanent
Select Committee on Intelligence to insure the retirement program needs of the
CIA and our employees are understood. Both the potential problems inherent in
the Social Security amendments and the more extensive problems associated with
the President's "reforms" proposed in the FY-1984 budget were stressed in a
number of briefings held with Congressional Staff members. A series of
memorandums were also forwarded providing detailed information. See Tab
2. The Di.rpctor discussed his concerns with the President and key
Congressional and Administration officials.
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B. Responses to Actions Taken
1. Top Congressional leaders were unanimous in their support of the
Social Security Amendments of 1983 and coverage of all new federal employees
because of the critical need to provide monies into the Social Security Trust
Fund. Informal queries regarding the possibility of exemption of the CIA from
the Social Security legislation clearly indicated that exemptions for any Agency
would not be supported in the Congress at large.
2. The respect, support, and understanding by both the Senate and
House Intelligence Committee Staffs of the CIA's needs for preserving the
essential features of the Civil Service and CIARDS system (as regards the current
statutory systems and prospective supplemental plans) was consistently evident
and most gratifying. Particularly gratifying were formal expressions of support
from Representative Edward P. Boland, Chairman of the House Permanent Select
Committee on Intelligence (See Tab ) and Senator David Durenberger of
the Senate Select Committee on Intelligence (See Tab
Preservation of age and service eligibility and non-reduced annuity
provisions for early retirement under the civil service retirement system and
the CIARDS, for current on-board employees and; provide similar provisions for
future Social Security covered employees in special supplemental plans enacted
into law. It is essential that the current early retirement provisions of both
the Civil Service and CIARDS systems be retained as vital management tools for
the recruitment and maintenance of the type of dynamic workforce essential to
meeting CIA requirements.
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A. The civil service "reform" proposals outlined in the President's FY-1984
budget met such extensive opposition in both the Senate and House in early 1984
that the Administration did not introduce formal legislation. It can be expected
that such legislation will be introduced at some future date.
B. The passage of the Social Security Amendments of 1983 without concurrent
additional legislation to provide the intended supplemental plan, has now
triggered Congressional action in compiling information leading to the
development of a supplemental plan. The product of these efforts may not be
fully flushed-out until mid-1984 or early 1985 but this interim period can
provide the opportunity for the Agency to develop understanding and support for
CIA's needs among a broader spectrum within the Administration and the Congress.
Such support during the design and development phase of the supplemental plan
could assure protection of CIA's interests at the onset and preclude future
issues.
C. Action already initiated by the Office of Personnel toward the design
of a CIA supplemental retirement plan should be continued to completion with a
full plan in hand for future input when Congress begins formulation of the
actual provisions of their proposals.
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