(H.R. 12323 follows:)

[H.R. 12323, 90th Cong., first sess.]

AN ACT To amend chapter 73 of title 10, United States Code, relating to the retired serviceman's family protection plan, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That chapter 73 of title 10, United States Code is amended as follows:

(1) Section 1431 (b) is amended to read as follows:

"(b) To provide an annuity under section 1434 of this title, a person covered by subsection (a) may elect to receive a reduced amount of the retired pay or retainer pay to which he may become entitled as a result of service in his armed force. Except as otherwise provided in this section, unless it is made before he completes nineteen years of service for which he is entitled to credit in the computation of his basic pay, the election must be made at least two years before the first day for which retired pay or retainer pay is granted. However, if, because of military operations, a member is assigned to an isolated station or is missing, interned in a neutral country, captured by a hostile force, or beleaguered or beseiged, and for that reason is unable to make an election before completing nineteen years of that service, he may make the election, to become effective immediately, within one year after he ceases to be assigned to that station or returns to the jurisdiction of his armed force, as the case may be. A member to whom retired pay or retainer pay is granted retroactively, and who is otherwise eligible to make an election, may make the election within ninety days after after receiving notice that such pay has been granted to him. An election made after the date of enactment of this amendment it not effective if

"(1) the elector dies during the first thirty-day period he is entitled to retired pay as a result of a physical condition which led to his being granted retired pay under chapter 61 of title 10 with a disability of 100 per centum under the standard schedule of rating disabilities in use by the Veterans' Administration at the time of the determination of the per centum of his disability;

"(2) the disability was not the result of injury or disease received in line of duty as a direct result of armed conflict; and

"(3) his widow or children are entitled to dependency and indemnity compensation under chapter 13 of title 38 based upon his death."

(2) Section 1431 (c) is amended to read as follows:

"(c) An election may be changed or revoked by the elector before the first day for which retired or retainer pay is granted. Unless it is made on the basis of restored mental competency under section 1433 of this title, the change or revocation is not effective if it is made less than two years before the first day for which retired or retainer pay is granted. The elector may, however, before the first day for which retired or retainer pay is granted, change or revoke his election (provided the change does not increase the amount of the annuity elected) to reflect a change in the marital or dependency status of the member or his family that is caused by death, divorce, annulment, remarriage, or acquisition of a child, if such change or revocation of election is made within two years of such change in marital or dependency status."

(3) The text of section 1434 is amended to read as follows: "(a) The annuity that a person is entitled to elect under section 1431 or 1432 of this title shall, in conformance with actuarial tables selected by the Board of Actuaries under section 1436(a) of this title, be the amount specified by the elector at the time of the election, but not more than 50 per centum nor less than 12% per centum of his retired or retainer pay, in no case less than $25. He may make the annuity payable

"(1) to, or on behalf of, the surviving spouse, ending when the spouse dies or remarries;

"(2) in equal share to, or on behalf of, the surviving children eligible for the annuity at the time each payment is due, ending when there is no surviving eligible child; or

(3) to, or on behalf of, the surviving spouse, and after the death or remarriage of that spouse, in equal shares to, or on behalf of, the surviving eligible children, ending when there is no surviving eligible child.

If a member elects the annuity provided in clause (3) and, after he becomes entitled to retired or retainer pay, there is no eligible spouse because of death or divorce, upon the retired member's application, the cost of the annuity shall be computed, effective on the first day of the month following the month of such death or divorce, as if the annuity provided in clause (2) had been elected. No amounts by which the member's retired or retainer pay is reduced before that date may be refunded to, or credited on behalf of, that person.

"(b) A person may elect to provide both the annuity provided in clause (1) of subsection (a) and that provided in clause (2) of subsection (a), but the combined amount of the annuities may not be more than 50 per centum nor less than 12% per centum of his retired or retainer pay but in no case less than $25. "(c) An election of any annuity under subsection (a), or any combination of annuities under subsection (b), shall provide that no deduction may be made from the elector's retired or retainer pay after the last day of the month in which there is no beneficiary who would be eligible for the annuity if the elector died.

"(d) Under regulations prescribed under section 1444 (a) of this title, a person may, before or after the first day for which retired or retainer pay is granted, provide for allocating, during the period of the surviving spouse's eligibility, a part of the annuity under subsection (a) (3) for payment to those of his surviving children who are not children of that spouse."

(4) Section 1435 (2) (B) is amended to read as follows:

"(B) under eighteen years of age, or incapable of supporting themselves because of a mental defect or physical incapacity existing before their eighteenth birthday, or at least eighteen, but under twenty-three, years of age and pursuing a full-time course of study or training in a high school, trade school, technical or vocational institute, junior college, college, university, or comparable recognized educational institution ;". (5) Section 1435 is amended by adding the following flush sentences at the end:

"For the purposes of clause (2) (B), a child is considered to be pursuing a fulltime course of study or training during an interval between school years that does not exceed one hundred and fifty days if he has demonstrated to the satisfaction of the Secretary concerned that he has a bona fide intention of commencing, resuming, or continuing to pursue a full-time course of study or training in a recognized educational institution immediately after that interval. However, a child at least eighteen years of age shall not be eligible as a beneficiary of, or to receive payments under, an annuity elected under this chapter, during any period while he is pursuing a course of study or training leading to the award of an academic degree above the baccalaureate level, or during an interval between school years which immediately precedes or immediately follows such a period."

(6) Section 1436 (b) is amended to read as follows:

"(b) Under regulations prescribed under section 1444(a) of this title, the Secretary concerned may, upon application by the retired member, allow the member

"(1) to reduce the amount of the annuity specified by him under section 1434(a) and 1434(b) of this title but not less than the prescribed minimum;

or

equal installments and not later than the fifteenth day of each month following that month. However, no annuity accrues for the month in which entitlement thereto ends.

"(b) If a person has

"(1) met all the age and service requirements prescribed by section 1331(a) of this title for retired pay under chapter 67 of this title;

"(2) applied for retired pay under chapter 67 of this title, to be effective under section 8301 of title 5 on the first day of the month following the month in which he first met all those requirements; and

"(3) elected to provide an annuity under section 1434 of this title; but dies before that day, the annuity shall be paid under this chapter, effective as of that day, upon application by the beneficiary under regulations prescribed by the Secretary concerned. However, the annuity shall be appropriately reduced to recover the amount by which the person's retired pay under chapter 67 of this title would have been reduced under this chapter to provide the annuity elected by him if he had become entitled to that pay on the day he first met all the age and service requirements prescribed by section 1331 (a) of this title. This subsection applies only in the case of a person who dies on or after the effective date of this subsection.

"(c) Each annuity payable to or on behalf of an eligible child as defined in section 1435(2) (B) of this title who is at least eighteen years of age and pursuing a full-time course of study or training at a recognized educational institution, accrues

"(1) as of the first day of the month in which the member upon whose reduced pay the annuity is based dies, if the eligible child's eighteenth birthday occurs in the same or a preceding month.

"(2) as of the first day of the month in which the eighteenth birthday of an eligible child occurs, if a member upon whose reduced pay the annuity is based died in a preceding month.

"(3) as of the first day of the month in which a child first becomes or again becomes eligible, if that eligible child's eighteenth birthday and the death of the member upon whose reduced pay the annuity is based both occurred in a preceding month or months.

However, no such annuity is payable or accrues for any month prior to the effective date of this subsection."

(9) Section 1446(a) (2) is amended by striking out "18" and inserting in lieu thereof "19".

SEC. 2. For members to whom section 1431 of title 10, United States Code, applies on the date of enactment of this Act, the provisions of section 1434 (c) of that title, as amended by this Act, are effective immediately and automatically.

SEC. 3. A retired member who elected an annuity under chapter 73 of title 10, United States Code, before the date of enactment of this Act, but did not make the election that was then provided by section 1434(c) of that title, may. before the first day of the thirteenth calendar month beginning after the date of enactment of this Act, make that election if at the time of making such election he has a living spouse or child, or both, otherwise eligible to receive the annuity. That election becomes effective on the first day of the month following the month in which the election is made. On or before the effective date, the retired member must deposit in the Treasury the total additional amount that would otherwise have been deducted from his retired or retainer pay to reflect such an election, had it been effective when he retired, plus the interest which would have accrued on that additional amount. No amounts by which a member's retired or retainer pay was reduced may be refunded to, or credited on behalf of, the retired member by virtue of an application made by him under this section. A retired member who does not make the election provided under this section, will not be allowed under section 1436(b) of title 10, to reduce an annuity or withdraw from participation in an annuity program under that title.

SEC. 4. Notwithstanding any other provision of this Act, elections in effect on the date of enactment will remain under the cost tables applicable on the date of retirement.

SEC. 5. Clause (6) of section 1, and sections 2 and 3 of this Act are effective on the date of enactment. Remaining provisions of this Act are effective on the first day of the third calendar month following the date of enactment.

Passed the House of Representatives December 4, 1967.
Attest:

W. PAT JENNINGS,

Clerk.

Senator CANNON. The witness on this bill is Maj. Gen. William W. Berg, Deputy Assistant Secretary of Defense (Manpower and Reserve Affairs) (Military Personnel Policy).

You may proceed, General.

STATEMENT OF MAJ. GEN. WILLIAM W. BERG, USAF, DEPUTY ASSISTANT SECRETARY OF DEFENSE (MANPOWER AND RESERVE AFFAIRS) (MILITARY PERSONNEL POLICY)

General BERG. Mr. Chairman and members of the committee, I am Maj. Gen. William W. Berg, Deputy Assistant Secretary of Defense (Military Personnel Policy).

I appreciate the opportunity to appear today in support of this legistion to improve the retired serviceman's family protection plan.

Initiated in 1953, the plan was modified and liberalized in 1961, but despite those changes participation has remained at a low level-currently about 16 percent. The two reasons most often cited are plan inflexibility and cost.

Senator CANNON. General, your prepared statement is not very long. I wonder if you would go through that instead of this. General BERG. All right, sir; I would be glad to.

I shall pick up at the third paragraph, sir.

I will briefly recite the history and background of the retired serviceman's family protection plan, describe some of the problems which we have experienced, and then outline the proposed amendments and how these amendments will improve the plan.

Prior to November 1953, the widow and children of a serviceman who died in retirement were not entitled to any Government-financed benefit payment unless the member died from a service-connected disability or his survivors were, in effect, paupers. This was the case because military retired pay was a personal entitlement to the member himself and that entitlement terminated with the member's death. It was not too uncommon for a retired member who had served many years on active duty to die soon after retirement, without having realized any appreciable benefit from his retirement and in some cases leaving a widow with little, if any, estate. In 1953, Congress enacted legislation now known as the retired serviceman's family protection plan, which permits a member while still in the active service to elect to receive a reduced retired pay in order to provide an annuity for his unmarried widow and dependent children. This annuity is computed on an actuarial equivalent basis, that is, the total value of the payments to the retired member and his surviving beneficiaries would be equal in value to the retired pay which the retired member could on the average have expected to receive. No cost to the Government is contemplated other than the cost of administering the plan. A board of actuaries is charged with monitoring the operatilon of the plan, determining the amount by which the participating members retired pay should be reduced, and advising the President concerning the operation of the plan.

The plan was modified and liberalized in 1961, but, despite those changes, participation has remained at a relatively low level-currently about 16 percent.

There are two principal arguments which are made against the plan. They are that the plan is inflexible and too costly to the member. With regard to the argument that the plan is too costly, it is not possible to reduce the cost to the members without disturbing one of the fundamental concepts of the plan, namely that it will be self-supporting.

However, a number of changes can be made which will increase its flexibility by making it easier to elect participation, to modify the terms of participation, and to withdraw from the plan. We believe that the changes proposed materially increase the flexibility of the plan, will make it more attractive, and will increase the rate of participation.

I will now enumerate the changes in the plan which will result from the legislation now being considered by the committee. These changes will—

(1) Make restoration of full retired pay automatic when an eligible beneficiary no longer exists; (2) Increase from 18 to 19 years of service, the point at which immediately effective elections to participate may be made;

(3) Reduce from 3 to 2 years the delay in the effective date of subsequent elections, modifications, or revocations of elections; (4) Liberalize the current withdrawal procedures for retired participants;

(5) Permit certain modifications and reductions by retired participants in their elected options;

(6) Eliminate possible abuses resulting from so-called deathbed retirements;

(7) Provide annuities for children at least 18, but under 23 years of age pursuing a full-time course of study or training in a recognized educational institution;

(8) Simplify methods of computation to reflect dollar amounts for monthly costs and survivor annuities; and,

(9) Eliminate delays between date of completing requirements for Reserve retired pay at age 60, and effective date of retired pay and RSFPP election.

There are a number of proposed changes in the House-passed bill which we understand are under consideration by the committee, all of which we believe improve the attractiveness of the bill.

Among them are the following:

First, under H.R. 12323 as passed by the House, a retired person may withdraw from participation effective 1 year after notification of intent to withdraw. We believe that a 6 months' notification period is preferable. We would note that the 6 months' notification principle in the case of members desiring to reduce an annuity under the plan, is already incorporated in the House bill.

Second, H.R. 12323 as passed by the House permits those persons with eligible living potential beneficiaries who did not elect the socalled restoration option, a one-time opportunity to purchase that option by paying the total additional amount that would have been withheld from their pay if they had elected that option, plus interest which would have accrued on that amount. We believe this opportunity should be extended on a one-time basis to all retired persons whether or not they have living potentially eligible beneficiaries. Such an action