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GOVERNMENT

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CLARIFICATION OF CERTAIN ANNUITY •

INCREASE LEGISLATION

P94-/JO 

An Th

HEARING

BEFORE THE

ca

Cri3j COMMITTEE ON

OFFICE AND CIVIL SERVICE

ISE OF REPRESENTATIVES

' 1 EIGHTY-EIGHTH CONGRESS

SECOND SESSION

ON

H.R. 8373

A BILL TO CLARIFY THE APPLICATION OF CERTAIN

ANNUITY INCREASE LEGISLATION

APRIL 21, 1964

Printed for the use of the

Committee on Post Office and Civil Service

U.S. GOVERNMENT PRINTING OFFICE

31-844 WASHINGTON : 1964
COMMITTEE ON POST OFFICE AND CIVIL SERVICE

TOM MURRAY, Tennessee, Chairman

JAMES H. MORRISON, Louisiana

THADDEUS J. DULSKI, New York

DAVID N. HENDERSON, North Carolina

ARNOLD OLSEN, Montana

MORRIS K. UDALL, Arizona

DOMINICK V. DANIELS, New Jersey

LINDLEY BECKWORTH, Texas

HARLEY 0. STAGGERS, West Virginia

ROBERT N. C. NIX, Pennsylvania

JOE R. POOL, Texas

ALBERT W. WATSON, South Carolina

EDWARD R. ROYBAL, California

CHARLES H. WILSON, California

CHARLES E. JOHNSON, Staff Director

JOHN H. MARTINY, COUrt8e/

B. BENTON BRAY, Professional Staff Member

WILLIAM A. IRVINE, Professional Staff Member

•

ROBERT J. CORBETT, Pennsylvania

H. R. GROSS, Iowa

AUGUST E. JOHANSEN, Michigan

GLENN CUNNINGHAM, Nebraska

GEORGE M. WALLHAUSER, New Jersey

ROBERT R. BARRY, New York

KATHARINE ST. GEORGE, New York

EDWARD J. DERWINSKI, Illinois

ROBERT F. ELLSWORTH, Kansas

HOMER E. ABELE, Ohio

ALBERT W. JOHNSON, Pennsylvania

SUBCOMMITTEE APPOINTED To CONSIDER H.R. 8373

DAVID N. HENDERSON, North Carolina, Chairman

MORRIS K. UDALL, Arizona AUGUST E. JOHANSEN, Michigan

ALBERT W. WATSON, South Carolina HOMER E. ABELE, Ohio

TI

4"..4
‘

CONTENTS

Page

H.R. 8373 2

Civil Service Commission report 2

STATEMENT

Andrew E. Ruddock, Director, Bureau of Retirement and Insurance, U.S.

Civil Service Commission 1

III

N
:
CLARIFICATION OF CERTAIN ANNUITY INCREASE

LEGISLATION

TUESDAY, APRIL 21, 1964

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10 a.m., in room 215,

Cannon Building, Hon. Morris K. Udall, of Arizona (acting chairman

of the subcommittee), presiding.

Mr. UDALL. The subcommittee will come to order.

This subcommittee was appointed to consider H.R. 8373, a bill to

clarify the application of certain annuity increase legislation. In the

absence of Subcommittee Chairman David N. Henderson I will

preside this morning. The other members of the subcommittee are

Mr. Watson, Mr. Johansen, and Mr. Abele.

The purpose of this legislation is to close a loophole in the Civil

Service Retirement Act which, if unchanged, will leave the way open

to additional claims that may total as much as $65 million on the

already heavily overburdened civil service retirement and disability

fund.

We have with us this morning the Director of the Bureau of Retirement and Insurance of the U.S. Civil Service Commission, Mr.

Andrew E. Ruddock.

We will be glad to receive your testimony at this time, Mr. Ruddock.

STATEMENT OF ANDREW E. RUDDOCK, DIRECTOR, BUREAU OF

RETIREMENT AND INSURANCE, U.S. CIVIL SERVICE COMMISSION

Mr. RUDDOCK. Thank you, Mr. Chairman.

I do not have a prepared statement. I would like to suggest that

the letter dated August 22, 1963, from Chairman Macy addressed to

the Speaker of the House of Representatives, the Honorable John W.

McCormack, a letter which sent up this proposed legislation, be made

a part of the record at this point.

Mr. UDALL. Without objection, the bill, H.R. 8373, sponsored by

Mr. Murray, the chairman of the full committee, and the letter from

the U.S. Civil Service Commission dated August 22, 1963, addressed

to the Speaker of the House of Representatives, will be printed in the

record at this point.

(The documents follow:)
4

2 CLARIFICATION OF ANNUITY INCREASE LEGISLATION

[H.R. 8373, 88th Cong., 1st sess.]

A BILL To clarify the application of certain annuity increase legislation

Be it enacted by the Senate and House of Representatives of the United States of

America in Congress assembled, That for the purposes of section 1(a) of the Act of

June 25, 1958 (Public Law 85-465), and section 1101(a) of the Act of October

11, 1962 (Public Law 87-793), the words "entitled to receive an annuity" shall,

from and after the respective effective dates (August 1, 1958, and January 1,

1963) of the annuity increases provided by such Acts, not include any person

whose annuity commencing date occurs after the effective date of the annuity

increase involved.

U.S. CIVIL SERVICE COMMISSION,

Washington, D.C., August 22, 1963.

Hon. JOHN W. MCCORMACK,

Speaker of the House of Representatives.

DEAR MR. SPEAKER: The Commission herewith presents for consideration by

Congress a draft bill designed to clarify beyond any possibility of misinterpretation

the intent of Congress in certain civil service annuity increase enactments.

In providing annuity adjustments under the Civil Service Retirement Act,

Congress has since 1948 applied a policy of affording increases only to persons

who were annuitants as of the effective date of an increase. Each annuity which

vests under the Civil Service Retirement Act has a specific commencing date,

and the annuity becomes payable from the applicable commencing date regardless

of delay in filing application for the benefit. In recognition of this and to assure

increases not only to annuitants currently on the roll, but also to persons who

would have been annuitants on the effective date of increase had they not delayed

filing until after that date, Congress has used and relied on the words "receiving

or entitled to receive an annuity" to designate the class to which it was granting

increases.

This wording has been used, with this purpose in mind, in four annuity increase

enactments: Act of July 16, 1952 (Public Law 82-555), act of August 11, 1955

(Public Law 84-369), act of June 25, 1958 (Public Law 85-465), and act of

October 11, 1962 (Public Law 87-793). In each instance where the point arose

under the first three of these laws, the Commission administratively interpreted

the clause "receiving or entitled to receive an annuity" as including persons whose

annuity commencing dates were on or before the effective date specified for

increases. That such interpretation was in strict accord with the expressed

intent of Congress is amply evidenced by the legislative reports, excerpts from

which are cited in the attachment titled "Notes on Legislative Background."

Further wording in the 1952 and 1955 enactments affirmatively prevented any

other interpretation.

This established meaning and interpretation has been nullified in part by a

November 7, 1962, decision, No. 345-61, of the U.S. Court of Claims in the

case of Ethel R. Hurtt v. The United States. Based on the service of Russell D.

Hurtt, who died March 6, 1955, the retirement law then in effect afforded his

widow title to a survivor annuity commencing the 1st of the month following

her attainment of age 50. Mrs. Hurtt became 50 years of age on August 16,

1958, and was granted her widow's annuity commencing September 1, 1958. In

line with consistent Commission procedure and the evident intent of Congress,

her annuity award did not include the 10 percent increase authorized by the

act of June 25, 1958, to each "survivor who on August 1, 1958, is receiving or

entitled to receive an annuity based on service which terminated prior to October

1, 1956." Mrs. Hurtt's request for the increase was denied under original and

appellate Commission decisions, and her suit in the Court of Claims followed.

The court held that the widow was a survivor who, on August 1, 1958, was

"entitled to receive" an annuity within the meaning of the 1958 act and entered

judgment awarding her the 10-percent increase accordingly.

On the basis of a review of the situation, the Commissioners were persuaded

(after consultation with the Solicitor General, Department of Justice) that further judicial proceedings offered little prospect of corrective action and authorized

the following steps:

1. Pay Mrs. Hurtt increased annuity as decreed by the court, with a cost

to the Government estimated at $1,450.

2. Apply the Hurtt decision to all similar cases without necessity of

request from the affected widows. This involves about 2,000 potential

deferred-to-age-50 widows and an estimated Government cost of $2,200,000.
No.

CLARIFICATION OF ANNUITY INCREASE LEGISLATION 3

3. Request the Congress to specifically express its intention regarding the

meaning of the wording "entitled to receive an annuity" in the 1958 and

1962 increase laws as it affects increase entitlement for approximately 185,000

deferred-to-age-62 employee-annuitants. A Hurtt-type decision or interpretation in respect to these former employees with deferred annuity title would

involve an estimated Government cost of about $65 million.

A draft bill to produce the result stated in item 3 above is attached. Enactment of this proposal would allow the Court of Claims decision to stand in

respect to Mrs. Hurtt and all similar survivor cases but would forestall any

attempt to expand the meaning of the Hurtt decision beyond that class of annuitants. This court decision was widely publicized, and it may be anticipated

that other actions will be brought by deferred annuitants in an effort to gain

the 1958 increase of 10 percent in annuities which began after August , 1958,

of the 5 percent increase under the 1962 law in annuities which commenced

after January 1, 1963. The Commission accordingly recommends introduction

or the draft bill and urges its early enactment into law.

The Bureau of the Budget advises that from the standpoint of the administration's program there is no objection to the submission of this proposal.

By direction of the Commission:

Sincerely yours,

JOHN W. MACY, Jr., Chairman.

A BILL To clarify the intent of Congress with respect to certain annuity increase legislation

Be it enacted by the Senate and House of Representatives of the United States of

America in Congress assembled, That the words "entitled to receive an annuity'

appearing in section 1(a) of the Act of June 25, 1958 (Public Law 85-465), and

in section 1101(a) of the Act of October 11, 1962 (Public Law 87-793), shall,

from and after the effective dates of the annuity increases provided by said Acts,

August 1, 1958, and January 1, 1963, respectively, be construed as excluding any

person whose annuity commencing date is after the applicable effective date of

the annuity increase.

NOTES ON LEGISLATIVE BACKGROUND

In Hurtt v. The United States, the U.S. Court of Claims held that plaintiff,

whose deferred widow's annuity under the Civil Service Retirement Act commenced September 1, 1958, was eligible for the 10-percent annuity increase provided by the act of June 25, 1958 (Public Law 85-465), section 1(b) (1) of which

accorded the increase to "each survivor who on August 1, 1958, is receiving or

entitled to receive an annuity based on service which terminated prior to October

1, 1956, * *

Contrary to this holding, the legislative record shows that the Congress intended

the 10-percent increase in annuities to be applied under section 1(b) (1) to those

survivors who either were on the annuity roll August 1, 1958, or were eligible, upon

filing application, to be placed on the roll as of a date occurring on or before August

1, 1958.

S. 72 and H.R. 607 of the 85th Congress led up to enactment of Public Law

85-465. H.R. 607, as amended and reported favorably by the House Committee

on Post Office and Civil Service, proposed a 10-percent raise in the annuity of

each retired employee "who, on October 1, 1956, was receiving or entitled to receive

an annuity" [italic added] and to each survivor whose annuity commenced on or

prior to October 1, 1956. Committee Report No. 1211, dated August 21, 1957,

noted the amended bill's purpose as being 'to provide a cost-of-living increase in

the civil service retirement annuities of annuitants and survivors who were on the

'annuity roll on or before October 1, 1956". [Italic supplied.] This report then

stated that the amended bill provided "a moderate, fair, and reasonable annuity

increase for those civil service retirement annuitants and survivors who now are

receiving * * * annuities." [Italic added.]

Similarly, S. 72 as reported by the Senate Post Office and Civil Service Committee on July 25, 1957 (Rept. No. 706) proposed increasing the annuity of "each

individual who, prior to October 1, 1956, was receiving or entitled to receive an

annuity." [Italic added.] Said report noted that the bill was designed "to increase the benefits of annuitants and their survivors who were receiving or who

were entitled to receive an annuity from the civil service retirement and disability

fund prior to October 1, 1956." This bill was passed by the Senate and (after
4 CLARIFICATION OF ANNUITY INCREASE LEGISLATION

being amended to incorporate H.R. 607 provisions) by the House of Representatives.

Congressional intent is clear from Report No. 1848 issued on June 5, 1958, by

the committee on conference (incorporating the language which was thereupon

enacted), reading in pertinent part:

"Subsection (a) of the first section of the House amendment provided an

increase of 10 percent in the annuity of each employee who retired with an annuity,

or entitlement thereto, beginning on or before October 1, 1956, the effective date

of the Civil Service Retirement Act Amendments of 1956. Such proposal provided no increase in the annuity of any employee who has retired or retires with

annuity or entitlement to annuity on or after such effective date.

"Subsection (a) of the first section of the conference substitute, with respect to

the identification of the class of annuitants who will receive annuity increases, is

to the same effect as subsection (a) of the first section of the House amendment

with technical changes to clarify the purpose and intent of such subsection that

such increases be paid to annuitants who are receiving annuities on August 1,

1958—the effective date of the annuity increases provided by section 3 of the

conference substitute—based on service which terminated prior to October 1,

1956.

"Subsection (b) of the first section of the conference substitute, with respect to

the identification of the class of survivors who will receive annuity increases, is

to the same effect as subsection (b) of the first section of the House amendment

with technical changes (conforming to the technical changes made by subsection

(a) of the first section of the conference substitute) to clarify the purpose and

intent of such subsection (b) that such increases will be paid to (1) survivors who

are receiving annuities on August 1, 1958—the effective date of the annuity

increases provided by section 3 of the conference substitute—based on service

which terminated prior to October 1, 1956, and (2) survivors of those employees

who on August 1, 1958, are receiving or entitled to receive annuities based on

service which terminated prior to October 1, 1956."

The legislative history of similar annuity increase laws shows that the Congress

used the same words with the same meaning intended by the act of June 25, 1958.

Act of July 16, 1952, Public Law 82-555.—Section 1 of Public Law 82-555 added

a new subsection (c) to section 8 of the then-existing Civil Service Retirement

Act to provide stipulated increases in:

"(1) The annuity of any retired employee or of any survivor of a deceased or

retired employee who, before the date of enactment of this amendment, was

receiving or entitled to receive an annuity from the civil-service retirement and

disability fund, * * *". [Italic added.]

The bill (S. 2968) which became Public Law 82-555 originally proposed to

begin section (c) (1) with the words "The annuity of any employee who.' Senate

Report No. 1481 dated April 24, 1952, noted that the bill would "not increase

annuities to survivors now on the roll or to those added to the roll in the future."

Report No. 2407 of July 1, 1952, is to the same effect. Each report in effect then

construes the "was receiving or entitled to receive" clause by stating that the

bill would provide an increase to employees receiving annuity from the fund who

retired on or before April 1, 1952, the increase to be effective the first day of

second month after enactment; Report No. 2407 further stated that "No provision is made under the bill for increases in annuities " * for Federal

employees who retire subsequent to April 1, 1952."

Under suspension of rules, the House on July 2, 1952 (pp. 8991-8997, Congressional Record), inserted the wording respecting survivors and passed the bill.

Conference report dated July 4, 1952, noted acceptance of the House amendment,

commenting that it "granted such increases to survivors now receiving or entitled

to receive annuities." [Italic added.]

Legislative understanding as to the effect of this law was reiterated during consideration of S. 72. Previously-cited Senate Report No. 706 stated that the act of

July 16, 1952 "Gave each retiree then on the civil service annuity roll an increase."

[Italic supplied.]

Act of August 11, 1955, Public Law 84-369.—A language difference in Public

Law 84-369 highlights congressional intent and the lack of any basis for the court's

conclusion. That law set up a sliding scale of increases for annuitants then on

the roll and those to go on the roll in the limited future, and Congress expressed

its clear intention by authorizing the benefit to "any person who now or hereafter

is receiving or entitled to receive an annuity." [Italic supplied.] Had the legis-
CLARIFICATION OF ANNUITY INCREASE LEGISLATION 5

lative body in 1958 intended the result deemed by Court of Claims, wording as

noted would have turned the trick.

Act of October 11, 1962, Public Law 87-793.--Section 1101(a) of Public Law

87-793 further illustrates the same situation. Congress here accorded a 5-

percent increase to persons "receiving or entitled to receive an annuity" on

January 1, 1963. Section 1101(b) then incorporates a sliding scale (4, 3, 2, and 1

percent) under which each person "who receives or is entitled to receive an

annuity from the civil service retirement and disability fund during" a limited

period is granted a designated percentage increase from commencing date of

annuity.

We read the clear intent of Congress as authorizing the 5-percent increase only

in those annuities payable from the fund with commencing dates of January 1,

1963, or earlier, with the lower percentages operating for annuities commencing

thereafter during the stated periods. However, the Court of Claims decision

establishes a rationale under which a deferred annuity commencing after January

1. 1963, and during the sliding scale increase period could be subject to both the

5-percent increase and the percentage increase applicable to the commencing

date of the annuity, a patently absurd and unintended result.

Other developments further establish that Congress was fully aware of the

existing situation and did not desire to change it. H.R. 7822, introduced in the

86th Congress, proposed to amend Public Law 85-465 by extending its 10-percent

increase provision to each retired employee who "effective from any subsequent

[to August 1, 19581 date, is receiving or entitled to receive an annuity." The

Commission reported adversely on this bill June 23, 1960, in the following terms:

"The Commission opposes this bill. It proposes to institute a policy of annuity

adjustment—that of increasing separation benefits due former employees not yet

annuitants—which would depart completely from the policy hitherto applied

by the Congress. Since 1948, Congress has provided four general increases in

annuities payable under the Retirement Act. Such increases were largely the

result of congressional recognition of the pressures of cost-of-living rises on

annuitants as a class. In each instance the adjustment afforded was specifically

to assist individuals who at time of the increase were relying on their annuities

as income; and no justification was found for benefiting persons outside this class.

"We agree with this consistent attitude of the Congress and believe that the

Government fulfills any reasonable obligation it may have to provide retirement

benefits to an individual who spends only part of his working life in the Federal

service and later works for other employers by (1) vesting annuity benefits at

age 62 after a minimum of 5 years' service, and (2) the assurance that once on

the annuity roll he will participate in such adjustments as may thereafter be

afforded annuitants generally."

Failure of Congress to enact H.R. 8722 in effect signified concurrence with the

understanding of its position and policy as outlined in the Commission's report.

Mr. RUDDOCK. On June 25, 1958, the President signed Public Law

85-465, which included a provision that the annuity of each survivor,

who on August 1, 1958, "is receiving or entitled to receive annuity,"

would be increased. The Commission consistently construed that

phrase "receiving or entitled to receive" as meaning a person who on

a given date, was (1) an annuitant on the rolls currently receiving

checks or (2) a person who had met all requirements for title to annuity, but either because the claim was pending or because the

application had not yet been filed, was not in an actual state of

receiving annuity on that date.

Mrs. Hurtt, who was the widow of Mr. Russell D. Hurtt, applied

for survivor annuity. Mr. Hurtt had died in 1955. Mrs. Hurtt, as

his widow, became eligible to receive annuity when she reached the

age of 50, which was on August 16, 1958. We granted her annuity

beginning September 1, 1958. She asked for the annuity increase

granted by Public Law 85-465, basing her application for the increase

on her belief that on August 1 she was entitled to receive annuity

even though she did not reach the age of 50 until August 16, 1958.

We denied her request for the increase in annuity. She appealed,

and the Board of Appeals and Review sustained the decision of the
6 CLARIFICATION OF ANNUITY INCREASE LEGISLATION

Retirement Division, as it was called at that time. She took her

appeal to the Court of Claims, which agreed with her in a decision.

dated November 7, 1962, and held that she was entitled to an increase because as of August 1, 1958, the date required by the statute,

she was entitled to receive annuity even though she had not attained age 50.

The language "receiving or entitled to receive" was first used in

annuity increase legislation in 1952, but was used in the 1952 law in

connection with other language which made it crystal clear that it

was the commencing date of the annuity which was the determining

factor. It was used in the 1955 law, used in the 1958 law, and used

again in the 1962 law.

After the decision by the Court of Claims in favor of Mrs. Hurtt,

the Civil Service Commission decided that it would not appeal the

case to the Supreme Court, and that it would pay Mrs. Hurtt increased

annuity as decreed by the court. In her particular case, this was at

a tOtal added cost of $1,450.

The Commission decided that it would apply this decision .to all

similar cases of widows who, on August 1, 1958, were waiting to attain

the age of 50. We estimated this would involve about 2,000 widows

and would cost the taxpayers approximately $2,200,000. We decided

at the same time to ask Congress to specifically express its intention

regarding the meaning of the words "entitled to receive an annuity"

in the 1958 and 1962 annuity increase laws because this language was

also used in connection with persons who had left Federal employment

with more than 5 years' service and who would become eligible to

receive annuity at age 62.

The court decision was not made with respect to the deferred employee annuitants. The Department of Justice agreed with the

Commission that the decision should not be applied to the deferred

employee annuitants, but also agreed with the Commission that it

would be wise to ask Congress to reaffirm what we know to have been

the intent of Congress in originally using that language, namely, that

it would apply only to people whose annuity commencing date was

on or before a legislatively specified date.

There are now two cases pending in the Court of Claims: One is

Margaret E. Schellfeffer and the other is George M. Fox. In each of

these cases, the claimant was separated from Federal employment

before August 1, 1958, had more than 5 years of service, and would

become eligible for an annuity to begin at age 62. In each of theese

cases, the attainment of age 62 occurred after August 1, 1958.

The bill which has been introduced by Mr. Murray, if enacted,

would express the intent of Congress as not intending to extend the

annuity increase of 1958 and 1962 laws to persons who, on the specified

dates in those acts, had not yet attained the age at which annuity

would begin.

We appreciate Mr. Murray's introducing this bill, Mr. Chairman,

and we appreciate your having this hearing this morning. We respectfully request tht you consider favorably this legislation which

the Commission has sent up, and we urge its early enactment.

Mr. UDALL. Mr. Ruddock, is the actuarial principle involved here

the fact that, when an increased annuity is provided for, those who

benefit from the increase are generally those who make contributions

under the new formula rather than those who would receive a windfall

A
CLARIFICATION OF ANNUITY INCREASE LEGISLATION 7

as old employees who have never contributed or been under the

system when the new increase was provided for?

Mr. RUDDOCK. I think this is a part of it. Actually the principle

involved came up for some debate in connection with amendments to

the Retirement Act in 1948. The 1942 law had established the class

of deferred annuitants, because it had provided for a vesting of

deferred annuity in a person separated after 5 or more years of service.

The 1948 law was going to provide some annuity increases. It was

also going to provide some changes in the method of computing

annuities.

After some debate, Congress specifically decreed that the deferred

annuitants who would come on the rolls after the enactment of the

1948 law, would have their annuities computed under the law in effect

at the date of their separation and that they would be paid as if

the 1948 law had not been enacted. That was very specific. And

the same principle was followed when increases were granted to people

already on the rolls in 1952, 1955, 1958, and 1962.

Now part of the thinking, particularly with respect to the separated

employees who are waiting attainment of age 62, is the presumption

that after they have left Federal service, they are probably working

for some other employer. Whatever changes take place in the economy are reflected in wage levels and they benefit from them while

they are working for another employer. The obligation of the Federal

Government as an employer ceases when a person resigns. The

Government in certain cases resumes an obligation to pay a deferred

annuity upon the attainment of age 62, but so far has not undertaken

any responsibility for inflation, changes in cost of living, or whatever

may have occurred in the period between separation from Federal

service and the commencing date of a deferred annuity.

Consistently after attainment of age 62, after a person gets on the

annuity roll, any annuity increases that come along are given to that

person because such increases presumably reflect changes that have

occurred since the Government once again assumed some responsibility and is paying at least a part of his retirement income.

We estimate that in the category of deferred employee-annuitants

potentially involved are approximately 185,000 people waiting for

age 62, and that to pay the annuity increases to them would cost

approximately $65 million.

Mr. UDALL. The Hurtt case involved a widow who was entitled to

annuity because of service of her deceased husband, did it not?

Mr. RUDDOCK. That is right.

Mr. UDALL. And if the principle of the Hurtt case is applied

not only the widows, but to the separated employees who are waiting

qualification—waiting to attain the necessary age—this would have

much further ramifications than simply applying it to widows. Is

that right?

Mr. RUDDOCK. Very much more.

Mr. UDALL. What is the percentage of people who would be affected

who are widows as against those who are former employees, roughly?

Mr. RUDDOCK. Two thousand widows and one hundred and eightyfive thousand deferred employee annuitants.

Mr. UDALL. This potential cost of $65 million that you are talking

about would occur only if both classes took this matter to court and

it were resolved against the interpretation of the Commission?
8 CLARIFICATION OF ANNUITY INCREASE LEGISLATION

Mr. RUDDOCK. We have already adopted and are applying the

Hurtt decision to the widows at a cost of $2,200,000, but the $65

million cost estimate is an additional cost attributable to the deferred employee annuitants.

Mr. UDALL. The gentleman from Michigan.

Mr. JOHANSEN. Let me see if I understand this thing. What is the

import of an annuity increase voted by Congress as it relates to

persons not yet retired? In other words, assume I am a civil service

employee and I am within 2 years of retirement. Congress votes

an annuity increase effective July 1, 1964. Now what is the import

of that congressional action with respect to me?

Mr. RUDDOCK. It would have absolutely none if it is legislation of

the type which says, "All persons who, on July 1, 1964, are receiving

or entitled to receive annuity, will get a certain increase." It would

have no effect whatsoever. Now there have been annuity increase

laws which, in addition to giving an increase to people on the rolls as

of a certain date, have also provided that the annuity of a person

retiring in the near future would be increased.

Mr. JOHANSEN. Or hereafter retiring.

Mr. RUDDOCK. We did have that type of legislation in Public

Law 87-793 dated October 11, 1962. That provided an increase of

5 percent for all persons receiving or entitled to receive annuity as of

January 1, 1963. It also provided that any person retiring during

the calendar year 1963, would have his annuity in&eased by 4 percent.

Anyone retiring in 1964, would have it increased by 3 percent, 1965

2 percent, and 1966 1 percent.

Mr. JOHANSEN. Is the theory back of it that I, as a person who is

going to retire 2 years from now, have had the benefit of higher

salary and retirement benefits than a person who retired 10 years

ago?

Mr. RUDDOCK. Precisely.

Mr. JOHANSEN. So that this particular legislation, which applies to

persons who are already annuitants, is sort of a catchup for them,

due to the fact that they have not had the advantage of increased

salary and retirement benefits under improved plans subsequent to

their retirement?

Mr. RUDDOCK. That is right.

Mr. JOHANSEN. Of course, what I can't understand—I'm sure

that is the point of this whole proceeding—is how the court could

hold that this person was entitled to receive an annuity 15 days before

eligibility. Isn't that the nub of the problem?

Mr. UDALL. I share the gentleman's puzzlement and dismay.

(Discussion off the record.)

Mr. JOHNSON (staff member). May I ask a question, Mr. Chairman?

Mr. UDALL. Yes.

Mr. JOHNSON. In further extension of your suggestion, Mr. Johansen, I would like to ask Mr. Ruddock this: Assuming, in the case of

Mr. Johansen, that he had 30 years of service and attained age 60,

for example, but wasn't going to retire for 2 more years, is it possible

that, by some process of reductio ad absurdum, the Hurtt decision

could even be extended to a case of that kind? That is to say, to a

ruling that he is just as much entitled to receive an annuity when he

decides to retire 2 years hence as would be the deferred employee
CLARIFICATION OF ANNUITY INCREASE LEGISLATION 9

annuitant who is not yet 62 or a widow such as Mrs. Hurtt who had

not yet reached age 50 on the effective date spelled out in the act?

Would not this cause a tremendous additional cost?

Mr. RUDDOCK. If that were to happen, it would indeed involve a

tremendous cost. It would also involve some extension of the logic

used by the court in the Hurtt decision.

Mr. JOHNSON. Would not that be spurious logic? 

Mr. RUUDDOCK. Once you get started in this direction it is difficult

to draw a line and say, 'This is where I stop."

Mr. UDALL. In line with what Mr. Johnson says, it could be

argued that he put in 30 years, that he has complied with every

necessary requirement to become eligible for an annuity and that the

only thing that has to happen is for the clock to turn around for

2 more years.

Mr. JOHNSON. Or he could decide that he wants to retire tomorrow.

He is "entitled" to an annuity.

Mr. RUDDOCK. A part of the decision written by the court in the

case of Mrs. Hurtt I think clearly expresses the thought that she

was one of a very small handful of widows and she was one of a very

small group left out by the Commission in its application of this

law. In other words, I think some sympathy or equity was expressed

and I believe' that was at least as strong as any logical interpretation

of the law.

Mr. JOHANSEN. This is another case in which the courts are going

to repair the alleged failures or the defaults of the legislative branch,

isn't it? If you would rather not answer, that is all right.

Mr. RUDDOCK. Let me say this Mr. Johansen. I have personally

participated and have worke4,-4414 the committees and with staff

in the drafting of all annujityAnWeagikkgislation beginning in 1948,

and there is no question in my mind about what was intended by the

words "receiving or entitled to receive."

Mr. UDALL. If I could interrupt, there is an old maxim widely

known in Arizona legal circles which declares that the good Lord and

the courts take care of orphans, widows, and drunk Indians. This

decision may have been based on this maxim, although it isn't widely

known throughout the country.

Mr. JOHANSEN. I would say my confidence in the Lord's wisdom is

greater than in that of the courts. I think the case is very clear here.

We have to take this action.

Mr. UDALL. I agree.

Mr. JOHNSON. I would like to say for the record, if I may, that we

contacted Mr. Glen Simcox, president of the National Association of

Retired Civil Service Employees—the largest organization of retirees—

and that organization has no objection to this legislation.

Mr. UDALL. In that connection, I was going to ask staff before we

we finished here if there has been any widespread dissemination of the

fact that this proposal was before us and that hearings would be held.

As chairman of the subcommittee, I am always reluctant to close

hearings if there are groups that this affects who might wish to be

heard. You are satisfied at least the organized groups are aware of

this legislation?

Mr. JOHNSON. Yes, Mr. Chairman, the staff called this to the

attention of large active employee unions and also the principal

retiree association.
10 CLARIFICATION OF ANNUITY INCREASE LEGISLATION

Mr. JOHANSEN. I assume this legislation, if enacted, wouldn't alter

the decision in the Hurtt case since the Constitution prohibits ex post

facto legislation?

Mr. JOHNSON. It would not.

Mr. RUDDOCK. It is not worded in such a way that it would affect

in any way the decision of the Hurtt case. That was construction

of section 1(b) of Public Law 85-465, and we are asking Congress to

express its intention with respect to section 1(a), so it would not

affect the Hurtt decision.

Mr. UDALL. Are there any further questions or staff comments?

Mr. JOHNSON. NO, sir; thank you.

Mr. UDALL. I am satisfied for the need for legislation.

(Discussion off the record.)

Mr. UDALL. The public hearing will be closed. Those who are

not staff or members of the committee will retire and we will have a

brief executive session.

(Whereupon, at 10:30 a.m., the hearing was adjourned.)

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