The immediate effect of a change in the Active Forces on retired pay disbursements is likely to be very small and in the opposite direction. Personnel on the retired list are there by reason of service performed in the past, sometimes in to rather remote past, and not by reason of any current service. Under the is they would continue to receive retired pay until death or recovery from disability even though the Active Forces were greatly reduced. However, in a mobilization many of them would be recalled to active duty, thereby reducing retired pay costs. Thus, a change in the Active Forces would have no effect on those alread retired, except in event of a mobilization. If the Active Forces is increased, the number of new retirements is likely to be reduced. The increased opportunities for assignment and promotion, and the need for additional personnel will delay retirements. However, the number of new disability retirements, which is more or less proportional to the size of the Active Forces, will be increased. This increase probably will not be as large as reduction in the number of other retirements, however, and the net effect is like to be a reduction in the total number of new retirements. Thus, the immediate effect of an increase in the Active Forces is likely to be a reduction in retired pay disbursements. A reduction in the Active Forces can be brought about by reducing procure ment, or by releasing personnel who want to be released, or by releasing personnel who would like to continue on active duty (either in a localized fashion or acrossthe-board), or by any combination of these. A reduction in procurement will have relatively little effect on retirement costs for a long period, as the minimum eligibility for nondisability retirement is 2) years of service. To the extent that procurement consists of personnel with prior military service, the size of the retired list can be affected in less than 20 years. Also, the number of disability retirements would be reduced, more or less immediately. The release of personnel who want to be released will affect the retired list only to the extent of the number that would otherwise be retired for disability befor the time when they would be eligible for separation. A forced reduction in force is likely to have the immediate effect of increasing the retired list, by hastening the retirement of persons already eligible. Generally, the long-term effect of a reduction in force will be to reduce the retired pay costs, though the effect may be smaller than might be supposed. A reduction in force reduces the retired list eventually only to the extent that it separates persons who would otherwise remain to retirement, and then only from and after the time when they would otherwise have retired. 6. LIMITATIONS OF THE PROJECTION The projection represents the amounts to be paid in retired pay from Defense Department appropriations, and excludes amounts to be paid by the Veterans' Administration. In some instances, particularly the disability retirement among enlisted personnel, the amount an individual can receive from the Ve erans' Administration is larger than the military retired pay; in such instances the individual will waive the military retired pay in order to receive the larger amount from the Veterans' Administration. As a consequence of these waivers the pro jected disbursements amounts to something less than a complete pricing of the military retirement system. The amounts payable to the survivors of retired military personnel under the Contingency Option Act are not shown explicitly, owing to the complexity of the calculations that would be necessary. However, the projection should be regarded as including them, as the retired pay figures have not been reduced t reflect the deductions under this act. In the long run, the deductions will offe the disbursements for this item, though there will be differences in timing. 7. EXPLANATION OF TABLES The following tables show the projected number of persons receiving milita retired pay and the disbursements for each year to 1983, both in total and in var ous categories. Table 1 shows the projected numbers and disbursements by service, table 2 separately for officers and enlisted, table 3 by type of retirement, disability o* nondisability, and table 4 according to the status of the individuals on June 30. 1958. Table 5 shows the numbers and disbursements under the law that pro vides retired pay beginning at age 60 for persons who do not have 20 years of active service, but who have 20 years of active plus creditable inactive service. This law was intended primarily for the benefit of Reserve or National Guard >ersonnel not on active duty. Table 6 compares the latest projection with the wo earlier ones. TABLE 1.-Projected number of persons receiving military retired pay, and annual disbursements for retired pay, by service, Department of Defense [Number of persons in thousands, disbursements in millions] Fiscal year! Total Army Navy Marine Corps Air Force Nm-Amount Num-Amount Num-Amount Num-Amount Num-Amount ter ber ber ber ber 1 The number of persons is the number at the end of the fiscal year. CABLE 2.—Projected number of persons receiving military retired pay, and annual disbursements for retired pay, by category, Department of Defense [Number of persons in thousands, disbursements in millions] 1 The number of persons is the number at the end of the fiscal year. TABLE 3.-Projected number of persons receiving military retired pay, and annual disbursements for retired pay, by type of retirement, Department of Defense [Number of persons in thousands, disbursements in millions] 1 The number of persons is the number at the end of the fiscal year. TABLE 4.-Projected number of persons receiving military retired pay, and anand disbursements for retired pay, by status on June 30, 1958, Department of Defense [Number of persons in thousands, disbursements in millions] The number of persons is the number at the end of the fiscal year. * Retired payments to persons entering the service after June 30, 1958. TABLE 5.-Projected number of persons receiving military retired pay under tille III, Public Law 810 (10 U.S.Č. 1331), and annual disbursements for retired pay, by service, Department of Defense [Number of persons in thousands, disbursements in thousands] Total Army Navy Marine Corps | Air Force Num-Amount Num-Amount Num- Amount Num- Amount Num- Amount ber ber ber ber ber NOTE: The above amounts are included in the other tables, and are not in addition thereto. ¡BLE 6.-Comparison of 1953, 1957, and the latest projections of disbursements under the military retirement system Mr. FORD. Thank you. Mr. ANDREWS. Mr. Ostertag. Mr. OSTERTAG. If I recall correctly, the projection ultimately led for a cost for retirement pay upward of $3 billion annually? Ir. WYLIE. That is right, sir. The projections based on the uping of Kaplan Committee report indicated that between 1975 and 0 retired pay would cost approximately $3 billion annually. pies of the report were furnished to the committee staff. UNDERESTIMATION OF RETIREMENTS Mr. FORD. Mr. Chairman, last year on page 723 of the hearings a projection for fiscal years 1960 through 1965 was included showing the average number that would be eligible for retired pay. The figure for Fiscal Year 1962, as I read from this chart, was 301,437 at a total estimated cost for Fiscal Year 1962 of $860 million. Mr. WYLIE. That is right. That is average number, sir. Mr. FORD. In the various charts you have supplied for this hearing for fiscal year 1962, approximately 12 months later, the average number is 320,437, at a cost of $895 million. Mr. WYLIE. That is correct, sir. Mr. FORD. How can we be almost 10 years off in the projections of the number? Mr. WYLIE. I mentioned this in my prepared statement, sir. An increasing number of personnel who entered on active duty during and immediately prior to World War II are electing to retire immediately upon completing 20 years of active duty. Apparently, we are dealing with a different type of person than we are with Regular officers of the Army, Navy, Marine Corps and Air Force who retire with 30 years service or at the mandatory retirement age. Personnel who were called to active duty, were drafted, or enlisted immediately prior to World War II or during the war years-1941 through 1945 are now completing 20 years service. Individuals who decided to stay in the service after the war ended are now retiring in 1961, 1962, 1963, 1964, and 1965. Most of the retirements are in the non-Regular officer and Regular enlisted categories. A greater number are electing to retire than was anticipated. Mr. FORD. That is just one illustration. Mr. WYLIE. That is correct, sir. Mr. FORD. What confuses me is the number of people in the Department of Defense who were going to be eligible about this time. Why couldn't they have cranked in this factor and come up here with a more accurate forecast? That is a pretty bad guess. Mr. WYLIE. Sir, when you try to estimate the number of nonRegular officers and Regular enlisted personnel (our major increases are in these categories) there is no certainty that you can predict what the individual will decide to do upon completion of 20 years' service. His decision is contingent on the economic conditions at the time. There are many factors that may influence his decisionwhether or not he has a civilian job, where he wants to live, his opportunity for further advancement in the service, et cetera. For example, we have a large number of enlisted personnel who are reenlisting; but in the officer category a tremendous number are completing their 20 years and leaving the service. This may be due to current economic conditions. Mr. FORD. Supposing a man on April 1, 1961, was eligible for retirement at the end of 20 years, and he thinks it over and decides. "I don't want to retire April 1." Can he retire any time thereafter on simple notification to the Defense Department? Could he retire if he changed his mind May 1? Could he wait 6 months and do it then? Once he makes a decision not to do it at 20, how much option does he have thereafter under the existing laws and regulations? |