Mr. MCAFEE. Senator Fong, as Mr. Hughes said, in private industry 65 is considered the normal retirement age. Now generally in private industry as far as we have been able to find out there is nothing quite equivalent to the way early retirement is handled in the Federal Government. Under the social security system, as he points out, early retirement in terms of age 62 rather than 65 has been adopted, but if one elects to take a retirement at age 62 under social security he qualifies for only about 80 percent of the pension that he would get at 65. In other words, the annual reduction is about 623 percent between ages 62 and 65.

Senator FONG. I am trying to establish the basic premise; that is, in private industry you retire at 65, in the Government you can retire at 60.

Mr. MCAFEE. That is right.

Senator FONG. How do you relate the two in terms of compensation?

Mr. MCAFEE. In terms of advantage. Since the Government's plan does not require any reduction in annuity at age 60 with 30 years' service, whereas the reduction in private industry would be something like 22 to 25 percent if someone retired voluntarily at age 60. In the Government you can retire at age 55 with a reduction of only 5 percent; in other words, get 95 percent of the annuity to which you would be entitled at age 60. In private industry with a straight actuarial reduction, which is the normal practice, the annuity would be 50 percent of the amount that one would draw at age 65.

In terms of comparability, this is one area where the Federal Government is far, far ahead of private industry. So, in effect, what Mr. Hughes was saying was if you look at this on the basis of the principle of comparability, this is not an area where the Government is in need of further improvement in order to match private industry.

Senator FONG. When you relate 60 years or 65 years, would you say the Government employee is already far ahead?

Mr. MCAFEE. Yes.

Senator FONG. Then when you relate 55 years to 60 years, 65 years, then he is much further ahead?

Mr. MCAFEE. Yes.

Senator FONG. And the Government has asked for a reduction of 1 percent per year from 60 to 55 whereas private industry from 65 to 62 has taken away 5 percent per year.

Mr. MCAFEE. Social Security takes off about 6% percent per year between 62 and 65.

Senator FONG. Thank you.

Mr. HUGHES. Thank you, sir.

Senator MCGEE. Mr. James Rademacher, vice president, National Association of Letter Carriers, AFL-CIO.

STATEMENT OF JAMES RADEMACHER, VICE PRESIDENT, NATIONAL ASSOCIATION OF LETTER CARRIERS, AFL-CIO, ACCOMPANIED BY J. DON KERLIN, LEGISLATIVE LIAISON DIRECTOR

Mr. RADEMACHER. Mr. Chairman and members of the committee, I am James H. Rademacher, vice president of the National Association of Letter Carriers. I am accompanied by our legislative liaison director, Mr. J. Don. Kerlin.

99-880-63- 5

Our organization with headquarters in Washington, D.C., represents 165,000 members, 15,000 of whom are retirees, and the other 150,000 of whom are covered under the Civil Service Retirement Act making them eligible for benefits under the legislation being discussed here today.

We are pleased to have this opportunity to publicly endorse S. 176 which was introduced by the distinguished chairman of the Senate Post Office and Civil Service Committee, Olin D. Johnston. As we testify today, we also desire to go on record as strongly supporting S. 620, similar legislation introduced by Senator Hiram L. Fong of Hawaii. We appreciate the interest of Senator Johnston and Senator Fong in the welfare of Federal employees which is evidenced by their introduction of these meritorious bills. And, further, we commend all members of the Senate Post Office and Civil Service Committee for their continuing dedication to the improvement of the welfare of those employees who have chosen the Federal service for their careers.

For many years the members of our great organization have been urging legislation which would provide for retirement after 30 years of service. In fact, many resolutions have been approved by our national conventions urging 25-year retirement.

I might say there is increasing ethusiasm for 30-year retirement. This morning's mail brought me this pin which indicates "I am for 30-year retirement." It seems there is a national club now organizing to increase the enthusiastic interest in this.

Senator McGEE. I would like to extend that club to the Senate.
Mr. RADEMACHER. We would be very happy to have you.

Senator MCGEE. We want to have the assurance for 30 years first though.

Mr. RADEMACHER. We concur.

At the outset it is the firm belief of the National Association of Letter Carriers that when an employee has served faithfully for 30 long years, he should be afforded the opportunity to retire especially when he has contributed during all those years to the civil service retirement fund-without having his annuity reduced because of an age factor.

Attitudes change through the years and the reasoning of people likewise changes. Where we might have appeared before this committee and pointed out how the retirement of thousands of Federal employees might vitally aid in the employment of the unemployed, we choose to introduce an equally serious thought on the subject at this hearing today.

Making it possible for thousands of Federal employees to leave the postal service after 30 years of service certainly would provide vacancies which could be filled by the unemployed. We certainly would add our sympathetic understanding to this problem and can readily see how the passage of S. 176, and other similar bills, would be beneficial.

Our main theme, as we urge the enactment of an earlier optional retirement law, is that some immediate attention can be given to the ever-growing problem of the retiree who has been forced to leave his Federal position for reasons of disability. Each year the number of employees retiring for reasons of disability increases. The total number of retirees added to the retirement rolls during the past fiscal year was 50,524.

Shocking as it may appear to this committee, one-third of all retirees who left the service during fiscal 1962 did so for reasons of disability. There were 16,728 applications for disability retirement approved during the last fiscal year. The average age of these employees was

55.4 years.

The current records indicate one-third of retirements to be for reasons of disability.

It would, therefore, appear that disability annuities are extremely costly to the civil service retirement fund. If the law would provide optional retirement without deductions at age 55, it is natural to assume that there would be less disability retirements. This assumption comes from the fact that many disabilities occur in later years. In the Post Office Department, the pressures of increased mail volume, continuing increased productivity, and the transition to mechanization and automation cause the senior employee to be more vulnerable to ailments such as heart disease, back problems, and mental fatigue.

If the employee retired after 30 years of service, the risk of ending a Government career on an annuity, based upon the disability provisions of the law, would be very minute.

In the case of the disabled veteran, compensation benefits are paid on the basis of "degree of disability." There are those who are entitled to 10 percent, while those who are more disabled receive a higher benefit based upon their military service-connected disability. Meanwhile, in the Federal service under provisions of the Civil Service Retirement Act, an employee must be totally disabled before his application for disability retirement is approved.

Section 1(g) of the act states that

the terms "disabled" and "disability" shall mean totally disabled for useful and efficient service in the grade or class of position last occupied by the employee or member by reason of disease or injury not due to vicious habits, intemperance, or willful misconduct on his part within the 5 years next prior to becoming disabled.

There are many Federal employees today who are disabled but who do not qualify under the provision of being totally disabled. Therefore, this employee is forced to remain in Government employment despite aggravation or discomfort, unless he chooses a deferred annuity. In order to eke out a livelihood, we find there are many Federal employees who are actually unable to perform their full 8 hours daily, and who are required to either use up their sick leave or be placed in a without-pay status for those hours during which their physical condition does not permit them to work.

Actually the enactment of S. 176 would not produce wholesale retirements but would permit those employees who, for physical reasons or otherwise, desire to leave their employment, to do so.

One of the most important inducements to enter the Federal service should be the retirement program; and certainly a liberalization of the present law would attract more employees, and at an earlier age. We understand the average age of entry into Federal service to be 27 years. With 30 years of service, most employees would be close to age 60 but would find their annuity reduced at age 57 under existing law. If a person interested in Government employment were to find a retirement program which provides for optional retirement after 30 years of service, more and more young people would be recruited directly from high school or college, as the case may be. The

Government would benefit from the employment of people during their most productive years.

As the Federal employee ages, especially in the postal service, it becomes more and more difficult for him to perform at the required capacity. After pounding the pavements for 30 years, most letter carriers find increased pressures upon them to compete in such a productive agency. Many become discouraged that their maturing bodies can no longer cope with the strenuous performance which is necessary in the postal service regardless of age.

In an agency such as the Post Office Department, where a very small percentage of employees is ever promoted to higher level positions, earlier optional retirement would definitely be an incentive for seeking such Government employment. It would be an attraction just as the earlier retirement plans in the military and city governments are an incentive.

I would like to mention, before concluding my remarks on this most important and timely proposal, the economic value to the Government of permitting Federal employees to retire on an optional basis, at an earlier age, without reducing their annuities. For example, in the Post Office Department if an employee is 55 years of age and does have 30 years of service, his present salary (although considered to be inadequate) is $6,165. If the law permitted this employee to retire under the provisions of S. 176, the vacancy would be filled by an employee whose salary would begin at $4,565. This would be a saving to the Government of $1,000 annually for each employee. In addition, the fringe benefits are far less for the new employee than for the senior employee. For example, the replacement of the retiree would receive only 13 days annual leave while his predecessor earned 26 days' annual leave.

Of course, there is also the income tax factor where the retiree would unfortunately find his annuity taxed after the third year following his retirement. The Government would likewise receive taxes from the wages of the replacement. The above are serious economic factors that will prove to be sound arguments for the economy which can be derived from the enactment of S. 176.

I would like to cite an example of the savings to the Government if 1,000 postal workers retired under the provisions of S. 176. With the stated savings of $1,000 per new employee, there would be a saving of over $1.5 million annually on just the retirements and replacements involved. It can be anticipated that more than 1,000 persons shall take advantage of such legislation; but as stated above, there would not be a wholesale exodus of Federal workers as a result of this legislation.

Mr. Chairman, and members of the subcommittee, our organization stands firmly behind the proposals to permit Government employees to retire after 30 years of service, without having to suffer a reduction in their annuities. We appreciate the opportunity granted us today to present our views on this important subject. The enactment of S. 176 would not only be the passage of progressive legislation, but actually it would be an act of mercy which would promulgate efficiency and economy in Government.

Mr. Chairman, if I may permit or if the Chair will permit a few very brief observations by Mr. J. Don Kerlin who is, as I said, our legislative liaison director.

Senator MCGEE. All right.

Mr. KERLIN. Thank you.

Mr. Chairman, thank you for permitting me to make a few remarks in connection with this very important measure. It feels rather natural and comfortable to again be back in this room where I spent so

many years.

When Senator Johnston first introduced this bill a number of years ago, I was convinced then that it was a sound, wise, and progressive measure. Since that time I have become even more convinced with the wisdom of the measure.

I think Chairman Macy of the Civil Service Commission and Mr. Hughes of the Bureau of the Budget made a splendid case for enactment of this bill. If we were talking about creating a new right, I would not make that observation but we are not talking about a new right under existing law. Under existing law an employee with 30 years service may retire optionally at age 55. To do so at that age he would take a 5-percent reduction in his earned annuity. Thus, eliminating all the fuss and feathers, we come down to one essential fact. We are simply talking about whether or not he must suffer a reduction in his annuity. That is all that is involved.

Very careful studies of those on the retirement roles divulge a number of very pertinent facts. One, 28 percent of those now on the retirement role are there because of disability. This it seems to me should disabuse the idea that Federal employees quit willy-nilly when they have reached retirement age. This simply is not the case. Federal employees retire for four principal reasons: (1) Advanced age; (2) poor health; (3) dissatisfaction with the job; or (4) to accept a better job in private employment.

Now let us look at those four reasons and analyze them. If a person has reached advanced age, this or any other bill is not going to change the situation. If a person is offered a better job, this or any other bill is not going to change his accepting the better job. So we get down to two things: poor health or dissatisfaction with the job. Mr. Chairman, I would contend that if an employee is in poor health or dissatisfied with his job, it is in the public interest to let him go. Let him go quietly.

Under the Retirement Act you must suffer 100-percent disability in order to retire. The committee many times has been faced with consideration of whether retirement should be based on 10, 20, 30, 40 or a percentage of disability. The Congress has never favored that, and I think wisely so. I think we all recognize that a man may be partially disabled, may not be able to perform up to the full expectation of himself or the Government or the public, and in those instances it would be in the public interest to let him go.

The chairman asked about what is the employment record of the retirees. I happen to know many instances where persons have retired and have gone into private employment, but here is what happened. The rural letter carrier, for example, who is unable because of arthritis or other illness to work 8 hours a day will quit the Government and he will work 2 hours perhaps driving a bus during rush hours. We may have a customs inspector who cannot board ships and work 8 hours a day but will serve 2 hours a day as security officer at some plant. We may have firefighters who cannot do the job 8 hours