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are not readily available. I do have a table which I will submit for the record which shows the causes of physical disability retirements and separation for all of the Armed Forces for the period January 1, 1970 through June 30, 1970.

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Acute, subacute or chronic disease..
Amputations or loss of use of extremities.
Conditions of skeletal system...
Muscle injuries...
Diseases of the eye and disabilities related thereto..
Diseases of the ear and related conditions.
Systemic d.seases...
Conditions of nose and throat.
Conditions of trachea and bronchi.
Conditions of lungs and pleura.

Conditions of heart..
Conditions of arteries and veins.
Conditions of mouth and esophagus.
Conditions of Digestive System.
Conditions of genitourinary system.
Gynecological conditions..
Conditions of hemic and lymphatic systems.
Conditions of skin.
Conditions of endocrine system..
Neurological conditions and convulsive disorders.

Conditions of cranial nerves.
Conditions of peripheral nerves:


Psychotic disorders.
Organic brain disorders.
Psychoneutotic disorders..
Psychophysiologic disorders.
Dental and oral conditions.
Dental and oral conditions.

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15 375 2, 256

162 611 67 30

30 1,876

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Chairman ELLENDER. At this point in the record there will appear a tabulation from the justifications indicating the number of enlisted personnel listed in the Fleet Reserve for fiscal years 1970, 1971, and 1972.

(The information follows:)


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Mr. SPENCE. The Fleet Reserve category is composed of Navy and Marine Corps enlisted personnel having 20 but less than 30 years of service who elect to transfer from active duty to the Fleet Reserve. Upon completion of 30 years of combined active service and service in the Fleet Reserve or upon being found physically unfit for further military service, such personnel are transferred to the regular retired rolls. It is estimated that $363.2 million or 9.6 percent of the appropriation request will be required in fiscal year 1972 to provide for an average of 107,859 Fleet Reservists. This compared with an average of 107,929 now estimated for fiscal year 1971.

Chairman ELLENDER. The pay for those people in that category is the same as in other categories?

Mr. SPENCE. Yes; they are receiving so-called retainer pay, and that is computed in exactly the same fashion as the retired pay of Army and Air Force enlisted personnel and others who in fact retire.


Senator ELLENDER. I note that for fiscal year 1972 the average number of personnel in the Fleet Reserve is approximately the same number as that estimated for fiscal year 1971. Do your projections indicate that the number will probably level off at something approaching that figure?

Mr. SPENCE. Yes, sir. As I mentioned previously, the maximum period a Navy or Marine Corps member is in the Fleet Reserve is 10 years. He is then transferred to the retired list. It is believed that for the next few

years, the new entrants into the Fleet Reserve and the transfer to the retired list from the Fleet Reserve will be approximately in balance.


Senator ELLENDER. Have there been any recent instances in which substantial numbers of the Fleet Reserve have been called back into active duty ?

Mr. SPENCE. Yes, sir, in the years 1965-69 there were over 750 Navy and Marine Corps enlisted men with skills which were in short supply who were recalled to duty from the Fleet Reserve. There were also 500 or 600 Army and Air Force retired enlisted men recalled for service during those years.


Senator ELLENDER. As I understand it, the members of the Fleet Reserve are all enlisted personnel. How would additional officers be provided in the event of need?

Mr. SPENCE. Fleet reservists are all enlisted men. If there is a need for officers, there is of course, the Reserve which could be called into service. Retired personnel of the Army and Air Force can be called into active service by the President at any time. Navy and Marine Corps retired personnel can be called to active duty in time of war or national emergency.

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Chairman ELLENDER. At this point in the record there will appear iuformation from the justifications showing the average number of participants in the survivors' benefits program for fiscal years 1970, 1971, and 1972.

(The information follows:)

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Mr. SPENCE. The survivors' benefits category includes the amounts estimated to be required to make payments to survivors of retired personnel pursuant to the retired servicemen's family protection plan. This is a self-supporting plan which permits members of the uniformed services to receive a reduced amount of retired pay in order to provide one or more annuities specified in the plan for his survivors. The amount of the reduction in each member's case is computed by the actuarial-equivalent method; that is, the total amount of reduced retired pay received by the member and the benefit payments made to his survivors will, on the average, not exceed the total amount of retired pay the member would have received had he not participated in the program plus interest on the amounts so withheld.

It is estimated that $12.9 million or 0.3 percent of the total appropriation

request will be required to provide for an average of 9,123 in fiscal year 1972. This compares with an average of 8,277 now estimated for fiscal year 1971.

COMPUTATION PROCEDURE The amounts included for each of the categories are mathematical computations of averages of the rates presently prescribed by law applied to the best available projections of the number of personnel to be carried on the rolls in fiscal years 1971 and 1972.


Payments under this appropriation are required by law and any funds not required revert to the Treasury at the end of the fiscal year.


Senator ELLENDER. I note that the benefits due survivors are not tied in with cost of living retirement benefits. Would you explain what the reasoning is in this respect?

Mr. SPENCE. The retired serviceman's family protection plan was originally enacted in 1953 to provide a means whereby retired military personnel could purchase from their retired pay an annuity for their

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survivors. That plan was and is required to operate on the actuarial vzor equivalent basis, that is on the average the plan will be self supporting from the contributions of the retired members. Adjusting annuities SE based on increases in the cost of living would be difficult if not impossi- tate i ble in the case of an actuarial equivalent plan. The continuing erosion of the purchasing power of fixed annuities such as are provided by the 3,40 retired serviceman's family protection plan is a real problem.

Senator ELLENDER. Last year there was testimony to the effect that only 17 percent of all retired personnel participate in this survivors' benefits plan. What is the reason that this percentage is so low!

Mr. SPENCE. Mr. Chairman, we have no specific data which indicates ks the reason for the low participation in this survivors benefit plan. However, the complaint which we hear most frequently is that the plane is so costly that most retirees feel they cannot afford what in most cases is a rather substantial reduction in their current retirement in order to provide an annuity for their dependents in the event of their death. Except for the cost of the plan which is computed on the actuarial equivalent basis, we believe the plan is a good one.

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Mr. SPENCE. Mr. Chairman, Col. Thomas J. Money, USAF, the Director of Compensation Affairs of the Office of the Deputy Assistant Secretary of Defense for Military Personnel Policy, and Mr. Carl M. Detwyler, Director of the Military Personnel Directorate of the Office of the Deputy Assistant Secretary of Defense (Comptroller) are with me today. We will attempt to answer any questions the chairman or committee members may have.

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Chairman ELLENDER. Please provide a statement of the unfunded liability of the Federal Government similar to that given last year.

Mr. SPENCE. Yes; we will submit it for the record.

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Senator Young. Please describe specifically what is meant by "unfunded liability.”

Mr. SPENCE. The accrued past service cost "unfunded liability". on any date is an amount of money which, if invested in a fund earning 31/2-percent interest, would be sufficient, together with the interest earned, to pay that portion of future retired pay attributable to service performed prior to that date. Chairman ELLENDER. What figure do you have there now? Mr. SPENCE. I do have a figure on that. Just a moment, sir. Chairman ELLENDER. I think last year it was a large figure. Mr. SPENCE. Mr. Chairman, I have a table here which we can include in the record, which shows that in fiscal year 1972, the unfunded past service liability is estimated to be $118,592 million. By fiscal year 1976, we anticipate that it will be $129,156 million.

Chairman ELLENDER. Do you have a further projection? Mr. SPENCE. We can project it further on out, but it begins to be rather imprecise after you get past the first 5 or 6 years.

Chairman ELLENDER. Could you provide an estimate for the next 10 years?

Mr. SPENCE. You would like us to submit that?

10-YEAR PROJECTION Chairman ELLENDER. You did last year. Let us now pick it up from 1971 to 1981, indicating what the amount will be.

Mr. SPENCE. Yes.

Chairman ELLENDER. And if we continue to carry the number of military personnel we have now, this amount is likely to increase considerably.

Mr. SPENCE. That is right, it will.

(The information follows:) Projected acorued past service "unfunded liabilitycosts for military personnel

Amount Fiscal year:

(millions) 1971

$115, 327 1972

118, 592 1973

121, 533 1974

124, 270 1975

126, 807 1976

129, 156 1977

131, 331 1978

133, 385 1979

135, 270 1980

137, 049 1981

138, 697 NOTE : The amount of unfunded liability set forth in this table is based on a 34-percent Interest rate. This rate, which is typically used for this purpose, is, of course, a very conservative assumption. Since the unfunded value of military retirement is very sensitive to the Interest rate assumed, it should be pointed out that if interest rates closer to the current long-term Treasury rate are assumed, there is a significant reduction in the amount of unfunded liability. For example, the $115,327,000,000 shown in the table for 1971 would be reduced to $89,375,000,000 if a 5-percent rate is assumed and $62,394,000,000 if a 742-percent rate is assumed.

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