TREND OF RETIREMENTS Mr. ANDREWS. For the purpose of this discussion, have you revised last year's estimates of the amounts to be required in fiscal year 1963 and the years thereafter? Mr. WYLIE. Yes, sir. Mr. ANDREWS. What do you now estimate the level-off point to be? Mr. WYLIE. Well, sir, by that I would interpret you mean that point where we reach this high peak of World War II annuitants coming on and when we will reach a normal attrition of those coming on and going off the rolls? Mr. ANDREWS. That is right. Mr. WYLIE. Sir, the World War II retirements will probably continue for the next 5 years. This trend of increasing numbers will continue for that period. Mr. ANDREWS. For 5 years? Mr. WYLIE. I would say it would be probably 1965 or 1966 before this influx of World War II retirements reaches a peak. Mr. ANDREWS. Then at that time you can expect a decline in the number? Mr. WYLIE. Sir, it will probably not decline in total number; because, based on the force levels that we are retaining, there will be a continued number of accessions to the retired rolls which I believe will more than compensate for the members we would lose by attrition or death. EFFECT OF LEGISLATION FOR EQUALIZATION OF RETIRED PAY Mr. ANDREWS. You mentioned proposed legislation to provide for equalization of retired pay. Mr. WYLIE. That is correct, sir. Mr. ANDREWS. Do you anticipate sending a supplemental if this is enacted and if so, in your opinion, what will the amount of it be? Mr. WYLIE. Sir, if the legislation were enacted, say, retroactively to July 1960, it would cost approximately $31 million. If it were to be enacted and effective March 1 of this year, it would cost approximately $10,400,000. In 1962 it would cost approximately $30,694,000, in 1963 it would cost approximately $30,080,000; in 1964, $29,478,000. In other words, there would be some reduction year by year because of the age group of those on the rolls prior to 1958. Mr. ANDREWS. What is the status of that legislation at the present time? Mr. WYLIE. Sir, I believe the status of that legislation is contingent upon the study that is being conducted in the Senate under the direction of Senator Stennis. Mr. ANDREWS. Have any bills been introduced? Mr. WYLIE. There is a bill in Congress at the present time. Mr. ANDREWS. Introduced in this session? Mr. WYLIE. It was introduced on February 15, 1961, by Mr. Kilday as H.R. 4331. Mr. ANDREWS. Last year on page 734 of the record Mr. Sikes asked this question: Could you estimate what the peak will be when we reach a peak? I know we are reaching out now into thin air, but have you made an estimate of the amo that we will reach before these payments begin to level off? Would it be 2: billion or more? Mr. WYLIE. Yes, sir. It would be closer to $3 billion in my judgment. Mr. WYLIE. Probably a little beyond that. Mr. WYLIE. That is true, sir. Mr. ANDREWs. Have you changed your opinion about the date and the amount? Mr. WYLIE. No, sir. As I understood your question just a few moments ago, sir, we are having quite a rise in the number of retirements as a result of World War II. I estimate that the influx wil level off and then continue on a level plane for the next 5 years. You are still going to have some increase in the number of retirements by virtue of the number of members we have in the Armed Forces, but it won't rise as drastically as it will in the next 5 years. Mr. ANDREWS. Do you still think by 1975 the amount necessary to pay retirement benefits will be approximately $3 billion? Mr. WYLIE. Yes, I do. Mr. ANDREWS. Is that taking into consideration legislation that might be enacted into law increasing those rates? Mr. WYLIE. No, sir. That is based on the present rates. Mr. WYLIE. Yes, sir. Any increase, for example, this recomputa tion legislation we are talking about would have some effect on it, sir. Mr. ANDREWS. The Department of Defense has been very alert to the importance and equity of pay equalization for its military personnel. Have you also considered the possibility of its application to your civil service people? If you have, how much do you estimate it would cost? Mr. WYLIE. Sir, that information could be furnished, I am sure, but it would have to come through our Assistant Secretary for MaLpower who handles the legislation for civilian personnel. Mr. ANDREWs. You cannot answer it? Mr. WYLIE. No, sir. I do not know that figure and I do not know how that would apply to the Department of Defense. Mr. ANDREWS. Can you tell us a little more about the Fleet Reserve, its basis in law and its relationship to the mobilization planning of the Navy? Mr. WYLIE. Sir, I would like to have our Navy representative reply to that if you wish. Mr. ANDREWS. Do you understand the question? Mr. MITCHELL. The Fleet Reserve is composed of enlisted personnel who enter the Fleet Reserve after 20 years service and who remain on the Fleet Reserve rolls until such time as they complete a total of 30 years active and inactive service at which time they go onto the permanent retired list. They draw retainer pay during those 10 years. RETAINER PAY Mr. ANDREWS. What do you mean by "retainer pay"? Mr. MITCHELL. Retainer pay is compensation paid to the member vho has completed 20 or more years active service and is retained in he Fleet Reserve as a ready source of trained manpower in the event is services are required during war or a national emergency. Mr. ANDREWS. Is that different from retirement pay?. Mr. MITCHELL. Yes, sir.. In legislation it is called retainer pay. Mr. ANDREWS. As I understand it, if a man serves in the Navy or Marine Corps for 20 years, he can retire and become eligible for retirenent benefits, based on 20 years of service. Mr. MITCHELL. Yes, sir. This man is in a different category; he s drawing a retainer for being available to the Navy. Mr. ANDREWS. Is that in addition to his retirement pay after 20 rears' service? Mr. MITCHELL. No, sir. Mr. FORD. Does he attend drills? Does he participate in any way n Navy activities during his 10-year period? Mr. MITCHELL. He may, sir. He could be voluntarily recalled to ictive duty, and he may be required to perform 2 months of active luty during any 4-year period. Mr. FORD. But it is not mandatory on a weekly or monthly basis. it is purely optional with him? Mr. MITCHELL, Yes, sir. Mr. ANDREWs. Let me see if I understand this retirement for the Navy personnel and Marine Corps personnel. If a man serves 20 years in the Marine Corps or the Navy and retires, he is eligible for etainer pay, is he not? Mr. WYLIE. That is correct, sir. Mr. ANDREWS. It is based on a percentage of his pay that he got. it date of retirement? Mr. WYLIE. Yes, sir. Mr. ANDREWS. What percentage is that? Mr. MITCHELL. 50 percent. Mr. ANDREWS. After retiring from the Navy, or the Marine Corps, is it mandatory that he join the Fleet Reserve? Mr. WYLIE. No. It is not a mandatory retirement. The object of the Fleet Reserve, sir, is to provide a ready source of trained manpower in the event their services are required during war or national emergency. It is for Regular and Reserve enlisted personnel of the Navy and Marine Corps only. Mr. ANDREWS. At 20 years the retired pay is 50 percent of his pay at time of retirement? Mr. WYLIE. That is correct, sir. Mr. ANDREWS. Then by having remained in the Fleet Reserve for a period of 10 years, he gets retirement pay. What percentage of his pay does he receive at the end of 30 years' service, 20 of which was in the Regular Forces and 10 years in the Fleet Reserve? Can you answer that? Mr. MITCHELL. I cannot tell you the exact percentage, but it would not change appreciably unless he had been recalled to active duty for an extended period. Mr. ANDREWS. I am assuming he is not recalled to active duty. I he served 30 years and retired, he would get what-75 percent of his pay? Mr. WYLIE. It is not that high. Mr. ANDREWS. I was under the impression that any man who served 30 years was entitled to 75 percent of his pay that he received at date of retirement. Mr. SPENCE. An individual in the Navy or Marine Corps, an enlisted man, who completes 20 years of active Federal service is eligible at that time to be transferred, in the case of a Navy individual to the Fleet Reserve or in the case of an individual in the Marine Corps, to the Fleet Marine Corps Reserve. They are not technically retired. While in the Fleet Reserve or the Fleet Marine Corps Reserve, they are entitled to a retainer pay which is computed on the basis of 21⁄2 percent times their years of active service. While in the Fleet Reserve or Fleet Marine Corps Reserve, they are subject to being called to perform tours of active duty, if deemed necessary or appropriate. When they have served 30 years, the combined active service plus time in the Fleet Reserve, they are then dropped from the Fleet Reserve rolls and transferred to the Regular retired rolls. Their retired pay at that time, based upon the information that I have, is that it is 21⁄2 percent at that time, times their years of active service. There is no increase solely by virtue of having been in the Fleet Reserve or the Fleet Marine Corps Reserve. An increase would accrue only in the event there is active duty performed I want to put one qualification in here: For a small group of individuals, and I cannot remember the date, who transferred into the Fleet Reserve or who were in the Navy prior to 1925, there is a little different method of computation but for the individuals who today are going in the Fleet Reserve or Fleet Marine Corps Reserve the situation is as I described it. Mr. ANDREWs. Ten years' service in the Fleet Reserve entitles him to the same benefit that he would get if he remained in the Navy? Mr. SPENCE. No, sir. Mr. SIKES. That is not the way I understand it. Tell us what he gets per year additional retirement benefit for staying in the Fleet Reserve. Mr. SPENCE. Let's take an individual who transfers to the Fleet Reserve at 20 years of active service and his retainer pay at that time is $150 a month. Mr. ANDREWS. That is 21⁄2 percent times the number of years he served. That is 50 percent at the end of 20 years service. Mr. SPENCE. That is correct. I am assuming that it is $150 for simplicity's sake. If that individual stays in the Fleet Reserve, per forms no active service, and at the end of 30 years then is retired, his retired pay is the same amount, $150 a month. Mr. SIKES. $150 a month. Mr. SPENCE. Yes, sir. Mr. SIKES. He does not gain any additional retirement pay as å result of being in the Fleet Reserve? Mr. SPENCE. That is right. Mr. ANDREWS. I understood you to say that at the end of the 30 years he would get 2% percent of the number of years. Mr. SPENCE. Times the number of his years of active service, sir. I may have misstated that. Mr. ANDREWS. What is the inducement for him staying in the Fleet Reserve? Mr. SPENCE. An enlisted man in the Navy or Marine Corps with 20 years of active service, who is physically qualified, has no option to retire. He cannot retire. There is only one thing he can do, and that is go into the Fleet Reserve. Mr. ANDREWS. It does not help him from a retirement standpoint? Mr. SPENCE. No, sir. STUDY ON MILITARY RETIRED PAY SYSTEM Mr. ANDREWS. Would you comment on the study currently being conducted for the Senate Armed Services Committee by a group from the University of Michigan? Mr. WYLIE. I have not seen a copy of the study that is being developed by the University of Michigan. I have a copy of a news clipping that was based on Senator Stennis' press release in December in which he cites estimates of what the volume of retired payments will be between now and 1983. I have not seen any other reports, sir. Mr. FORD. Mr. Chairman, may I suggest that we include in the record at this point a copy of this press release, which I believe is that which I have in my hand here. Mr. ANDREWS. Without objection, we will insert it in the record. (The information referred to follows:) On August 20, 1960, the Senate Committee on Armed Services authorized a study of the military retired pay system and related matters by a nongovernmental organization. The University of Michigan has agreed to undertake the project. A military retirement study committee, consisting of seven faculty members from various university departments, has been formed. The chairman is Dr. Carl H. Fischer, professor of actuarial mathematics and head of the University of Michigan Insurance Department, who was a member of the statutory Advisory Council on Social Security Financing from 1957 to 1959. He has acted as consultant to a number of State retirement systems and numerous private retirement plans. Also included among this distinguished group is Dr. Paul W. McCracken, who was a member of the Presidential Council of Economic Advisors from December 1956 to February 1959. The university committee has been in operation for a number of weeks and considerable progress has already been made. It is anticipated that the final report will be submitted to the Committee on Armed Services by late next spring. The scope of the committee's study and analysis will include, although it is not necessarily limited to, the following aspects of military retired pay: A. THE TREMENDOUS FUTURE INCREASE IN COSTS OF MILITARY RETIRED PAY If there are no increases in military retired pay, the present annual cost of $775 million will increse to $1 billion annually by July 1, 1964; $2 billion by 1972: $3.4 billion by 1983. If there is a 6-percent cost-of-living increase every 4 years, this annual rate will rise to $2.4 billion annually by 1972 and $4.8 billion by 1983. If the recomputation system for retired pay is reenacted, and if over the next 15 years military pay increases in the same magnitude that have already been passed since the end of World War II are granted, the military retired pay costs by 1972 will be $3 billion annually and will continue to rise until the annual cost will be $7.8 billion by July 1, 1983. During the period from July 1, 1960, to July 1, 1983, the total anticipated costs of military retired pay under the stated conditions are as follows: (1) 847.2 billion if there are no future increases in military retired pay; (2) $58.2 billion if there is a 6-percent increase for those on the retired list every 4 years beginning July 1, 1962; and (3) $80.5 billion if the recomputation system is |