■3K 1907 CORNELL UNIVERSITY LIBRARY Cornell University Library JK649C .R43 1908 Hearings before the Committee on Reform olin 3 1924 030 470 714 Cornell University Library The original of tiiis book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/cletails/cu31924030470714 HEARINGS BEFORE THE COMMITTEE ON REFORM IN THE CIVIL SERVICE OF THE HOUSE OF REPRESENTATIVES, UNITED STATES RETIREMENT FUND FOR SUPERANNUATED EMPLOYEES IN THE CIVIL SERVICE MARCH 10, 11, 13, 20, and 21, and APRIL 13, 1908 WASHINGTON GOVERNMENT PRINTING OFFICE 1908 iqoS 32cfSoC y CONTENTS Statement of Mr. Herbert D. Brown, of Chicago, 111 5 and 109 Statement of Mr. Charles Lyman, Treasury Department 28 Statement of Mr. John W. Holcombe, Interior Department 33 and 43 Statement of Hon. Joseph A. Goulden, M. C 55 and 59 Statement of Mr. Jacob W. Starr, representing the United States Civil Service Retirement Association ' '. 72 and 99 Statetnent of Mr. Llewellyn Jordan, Treasury Department 80 Statement of Mr. NeUson Falls, War Department 87 and 101 Statement of Mr. Pickens Neagle, president of the United States Civil Service Retirement Association 87 Statement of Mr. M. F. O'Donoghue, Interior Department 102 Statement of Mrs. J. M. Monroe, vice-president of the United States Civil Service Retirement Association. ., 103 Statement of Mr. Fred Brackett, Treasury Department 104 Bill proposed by Mr. Herbert D. Brown and introduced by Hon. F. H. GUlett (H. R. 18982), Appendix A 115 Bill proposed by subcommittee of' Keep Commission and introduced by Hon. J. A. Goulden (Hi R. 17969), Appendix B 117 Tables showing salary deductions under proposed bUls, Appendix 119 Actuary's statement on plan, by Benedict D. Flynn, Appendix D ,. 121 Table submitted by Mr. J. W. Starr, showing number of separations from the classified service. Appendix E 128 Executive order prohibiting influencing of legislation. Appendix F 128 Analysis of plans, by Mr. Fred Brackett, Appendix G 129 Bill suggested by Mr. Fred Brackett, Appendix H 138 Computation of assessments, by Mr. Fred Brackett, Appendix I. 139 Table prepared by Mr. Fred Brackett, showing separations from the classified civil service, Appendix J 139 Table showing existing retirement systems, Appendix K 142 Letter from the deputy minister of finance, Canada, on cost of administering funds. Appendix L 144 Digest of Census Bulletin 94, on civil-service statistics, Appendix M 144 American mortality tables and interest tables. Appendix N '. 147 Basis of actuarial study of plan, by Benedict D. Flynn, Appendix 148 ■ 3 RETIREMENT FUND FOR SUPERANNUATED EMPLOYEES IN THE CLASSIFIED CIVIL SERVICE. The Committee on Reform in the Civil Service, Tuesday, March 10, 1908. The committee this day met (Hon. Frederick H. Gillett in the chair) for the consideration of measures to establish a retirement fund for superannuated employees in the classified civil service. The measures immediately before the committee were the report of the subcommittee on personnel, of the Committee on Department Meth- ods, the so-called Keep Commission, with an accompanying bill (Ap- pendix B), and the bill suggested by Mr. Herbert D. Brown, of Chicago, formerly of the Department of Commerce and Labor, and introduced by Hon. F. H. Gillett (Appendix A). There were present : Messrs. Herbert D. Brown, of Chicago ; John W. Holcombe, Intierior Department; A. Zappone, Department of Agriculture; George W. Leadley, Department of Commerce and Labor; and John C. Scofield, War Department, of the Committee on Department Methods. The Chairman. Mr. Brown, will you kindly explain your scheme to the committee? STATEMENT OF MR. HERBERT D. BROWN, OF CHICAGO. , Mr. Chairman and gentlemen of the committee,' it may not be out of place to preface what I have to say in regard to the retirement plan I wish to present to you by a brief reference to some of the other plans of retirement that have been proposed, in order that the basis of this plan may be more easily understood. When I first came to Washington, five or six years ago, the subject of retirement for the aged Government employees was receiving much attention, and a number of plans had been proposed. The subject being kindred to that of insurance, I was naturally interested in it. I accordingly made an examination of the various plans, and, on analysis, I found that, in a general way, they fell into two classes: First, those proposing the payment of annuities to the superannu- ated out of the Federal Treasury ; and, Second, those proposing a uniform deduction of a given per cent — more or less adequate for the purpose in view — from the salaries of all employees to create a general fund out of which to pay annuities to retiring employees. This second class may properly be subdivided into two divisions : {a) Those proposing a uniform deduction of a given per cent from all salaries and the payment of annuities based upon length of service; and 5 D BBTIKBMENT FUND SUPERANNUATED EMPLOYEES. (J) Those proposing a uniform deduction of a given per cent from all salaries and the payment of a uniform annuity regardless of length of service. The first group of plans — those proposing the payment of annuities out of the Federal Treasury — ^are, of course, civil pensions, and, in view of the public sentiment against such measures, need not be dis- cussed. The second group of plans — ^those proposing a uniform deduction of a given per cent from all salaries to provide a general fund out of which to pay annuities to employees — aside from their financial uncertainties, proved in every instance, on analysis, to be inequitable as between employees of different ages. This is true whether the an- nuity paid is uniform or is based on length of service. To illustrate the unfairness of this group of plans, let us consider, first, the results of plans proposing a uniform deduction of a given per cent from all salaries and the payment of annuitiies based upon length of service. Let us see, for instance, if by making a uniform deduction of 5 per cent from salaries of $100 per month it will be possible to establish annuities for men entering the service at differ- ent ages on that salary, and what the annuities will amount to. Take two men entering the service, one aged 20 and the other aged 60, each receiving $100 a month, and deduct 5 per cent of that salary, or $5 a month, with the object of paying each man on retirement an annu- ity based on his length of service. Is it feasible? The man of 20 will have fifty years to serve before reaching the age of retirement and the man of 60 only t«n years. Now, a deposit of $5 a month will earn much more interest in a period of fifty years than it will in ten years. Just what is the difference in this concrete case? Ref- erence to an interest table shows us that a deposit of $5 a month for fifty years, improved by 4 per cent compound interest, amounts to $9,357.40, which is sufficient to purchase from most insurance com- panies a life annuity of $1,261.10, beginning at age 70, first payment in one year; but the same table shows also that a deduction of" 5 per cent from the same salary beginning at the age of 60 years will provide a fund, on retirement at age 70, of only $735.90, and this amount would purchase an annuity at age 70 of but $99.18 a year, a sum too small to support any employee, however simple his needs. To make this plan practical it would therefore be necessarv to put the deductions from all employees' salaries -into a general fund and divide it among all the annuitants in proportion to their length of service. This arrangement would be exceedingly unfair, however, to the men who entered the service at an early age, as part of their savings would go to make up the annuities for the men already old in the service when the plan was put into operation, or who came into the service at an advanced age. Under such an arrangement the man who entered the service at 60 and served only ten years would be retired on more than $99.18 it is true, but to have it so, the man who had entered at 20 and worked for fifty years would have to give' up part of the $1,261.10 his savings had earned and content himself with a smaller annuity, a plan that seems indefensible, as it actually takes the money of one man to put it into the pocket of another who is less meritorious, judged by the standard of length of service. CAn- pendix C, Table IV.) ^ ^ RBTIEEMENT FUND SUPERANNUATED EMPLOYEES. 7 Consider next the second class of plans under this group, namely, those proposing a uniform deduction of a given per cent from all salaries for the purpose of creating a general fund out of which to pay uniform annuities to all employees on retirement. This is still more unfair to the long-service men, as we shall see. Suppose it is desired to retire all employees receiving $1,200 salary on three-quar- ters pay, or $900 a year. The price charged by many. of the insur- ance companies for a life annuity of $900 a year, beginning at age 70, first payment in one year, is $6,678. To accumulate $6,678 dur- ing a service of fifty years requires a monthly deduction from a monthly salary of $100 of but $3.57 if the deductions are improved by 4) per cent compound interest. That is all the man beginning at age 20 would have to set aside each month. But, on the other hand, to accumulate $6,678 during the ten years of service of a man who entered the service at 60, or who was already 60 years of age when the plan was put into operation, would require a deduction from a monthly salary of $100 a month of $45.37, or 45.37 per cent — an impossible deduction under any circumstance. To make this plan practical it is therefore necessary to decide upon a per cent to be deducted from all salaries which shall be sufficiently large to accum- ulate not merely annuities for those entering the service at an early age, but also to provide the amounts that the older men lack to retire themselves on the same annuity. It thus appears that this plan puts even a greater penalty than does the first on entrance into the service at an early age. (Appendix C, Table V.) These illustrations are sulRcient, I think, to show liow impossible it is to devise an equitable plan as between all employees of various ages, based upon a uniform deduction of a given pfer cent from all salaries, either to pay annuities based upon length of service or to pay uni- form annuities to all employees upon retirement at a given age. Aside from the inequitable phase of all of these plans, there arises the very difficult and perplexing actuarial problem of what annuity could safely be paid where the fund is created by a uniform deduction of a given per cent from all salaries, or what per cent of salaries would be required to create the fund when more or less uniform annuities are paid. In many instances the uncertainty of these com- plex problems is further complicated by relying for a portion of the fund upon forfeiture of interest or principal, or both, by those who resign or die prior to reaching the retirement age, and if the estab- lishment of the fund has any influence upon resignations, as it is intended to have, the very foundation of this estimate is entirely undermined. Besides, these plans usually put a premium on entering the service at advanced ag:es, since the total contributions by persons so entering are much less in proportion to the annmties they receive by reason of their shorter period of service, whereas the interests of the service demand that the reverse should obtain. Since any error of judgment as to what might be accomplished in the way of annuities by a uniform deduction of a given per cent from all salaries would undoubtedly mean a call upon Congress for assist- ance, and possibly lead to the establishment of a civil pension, it seemed probable that any plan that contemplated the commingling of assets and that was dependent upon uncertain elements, such as length of service, resignations, salary increase, deaths, forfeitures, and the like could not meet with favor on final analysis. 8 EETIREMBNT FUND SUPEBANNUATED EMPLOYEES. After considering all these facts, I came to the conclusion that any plan for the retirement of superannuated civil-service employees for which the approval of employees themselves and the public alike is desired must meet the following conditions: (1) The funds necessary for the payment of the annuities must be furnished by the employees themselves without expense to the Gov- ernment othea* than possibly the payment by the Government of a reasonable rate of interest on the money held by it and the payment of salaries to the clerical force required to keep the accounts and distribute the fimds. (2) Each employee must set aside the amount necessary to create his own annuity, without regard to the deposits of others, so that each employee may receive full return on the money set aside by him. (3) The annuities to be paid employees on retirement must be graduated according to length of service and amount of salary, and in such manner that the monthly deposits required from employees for the creation of such annuities shall be in no case excessive. (4) The annuities, if any, for services rendered prior to the adop- tion of the plan should be paid by the Government, rather than by any form of tax upon the younger employees. (It was for this last reason I decided that the plan should be divided into two parts : That the first part, which is really the plan proper — since the operation of the second part will ultimately cease with the death or separation from the service of all the present employees — should provide annuities for employees rendering service from now on, and the second part should provide annuities for em- ployees who rendered service prior to the adoption of the plan. This sharp division was made primarily in the interest of the long-service employee — and incidentally the public service also — so that every employee would receive the full benefit of his savings and every employee receive the same annuity as if his deposits had begun with his entrance into the service. Let us consider at present only Jthe first part of the plan.) Having adopted these principles as essential to an equitable plan of retirement, the practical question presents itself of what annuity may be thought reasonable for a person who has given his entire working life — from the age of 20 to 70 years — to the Government service. It seemed to me that such a person should be retired on at least " three- quarters pay," or 75 per cent of his salary. If this is a reasonable assumption, a convenient basis for computing annuities for periods of service longer or shorter than fifty years may be established by dividing 75 per cent by fifty years of service. This gives 1.5 per cent for each year of service as the basis for computing annuities for all other periods of service. For example, the annuity for forty years of service — that is, for a person entering the service at age 30 and re- tiring at age 70— would be determined by multiplying 40 by 1.5, which would give us 60 per cent of salary. For a person entering the service at age 40, and having thirty years to serve before reaching the retirement age, the annuity would be computed by multiplying 30 by 1.6, which would give us 45 per cent of salary., And so on down, so that a person entering the service at 60 years of age, and having ten years to serve, would provide an annuity for himself equal to 1.5 per cent of his pay for each of his ten years of service, or 15 per EBTIEBMBNT FUND StrPEEANHTUATED EMPLOYEES. 9 cent. This provision has the advantage of giving the largest annuity in proportion to salary to the employee serving the longest period. The second practical question is to determine what per cent of salaries at various ages of entrance into the service would have to be set aside by each individual in order to provide himself with an annuity equal to 1.5 per cent of his salary for each year of service. To illustrate: If a person enters the service at the age of 20 years and retires at 70 years of age, he will have been in the service fifty years. To make the illustration simple, let us assume that he received a salary of $1,200 per annum straight through. One and one-half per cent of this annual salary is $18. By multiplying this amount, $18, by 50, his number of years of service, we have $900, or the amount of the annuity we wish to provide for on arrival of the employee at the age of retirement. The price charged a male by many of the insurance companies for $100 annuity at the age of 70 years is $742. Therefore, on this basis the cost of an annuity of $900 beginning at age 70 would be 9 times $742, or $6,678. This last-named figure is accordingly the amount that the employee would be required to accumulate during his fifty years of service to purchase this annuity. Now, the next step in our calculation is to ascertain the amount the employee would be required to lay aside monthly in order to accumulate $6,678 during his fifty years of service. . By referring to an interest table we find that a deposit of $1 a month improved by 4 per cent interest, compounded annually, in fifty years amounts to $1,871.48. Therefore it would require a deduction fr'om, this employee's pay of as many dollars a month as $1,871.48 is contained in $6,678, or $3.57 a month. Three dollars and fifty-seven cents being the deduction from a salary of $100, it also represents the p6r cent to be deducted from all other salaries of persons entering the service at 20 years of age where the retirement age is to be 70 years. This process of obtaining the required deduction from the employee's pay seems rather complicated, but in actual practice the operation is very simple, and may be further simplified by reducing the deductions from various salaries at all ages to a set of tables. The figures on this slip of paper are all that are necessary to determine the amount. Mr. Douglas. How do you get the divisor? Mr. Beown. The divisor, $1,871, is the amount of $1 per month compounded at 4 per cent per annum for fifty years. If you divide $6,678, the necessary amount to purchase the annuity, by $1,781, you get the monthly deduction. Mr. Douglas. What is the average length of service in the Depart- ments ? Mr. Brown. I have not any idea. That would be very difficult to tell. Mr. Douglas. I presume very few of the employees remain fifty years ? Mr. Beown. That is almost the maximum. I might be able to ascertain the average length of service by making a study of the records of the Civil Service Commission, but so far I have not done that. Mr. Edwards. The deduction amounts to $3.57 cents a month? Mr. Brown. Yes, sir; that is the deduction that would be made from the salary of a person entering the service at 20 years of age at a 10 KETIKEMENT FUND SUPERANNUATED EMPLOYEES. salary of $100 per month. The deduction, of course, increases as the age of entering the service increases. The deduction from a salary of a person entering the service at a given age remains the same and only increases as his salary increases. The Chairman. Suppose a man had only twenty years service; give us an illustration of that. Mr. Brown. If a man entered the service at 50 years o± age and retired at 70 years of age, he would be required to provide for him- self an annuity of 30 per cent of his salary, that is, 1^ per cent of his salary for each of the twenty years, and the cost of that would be de- termined in the same way as the illustration I have just given. In this instance, if the employee's salary was $1,200 per annum, the annuity to be provided would be determined by multiplying IJ per cent of $1,200, or $18, by 20, his y^ars of service between the ages of 50 and 70. This gives us $360, which is the amount of the annuity to be provided for. As in the former instance, the cost of an annuity of $100, beginning at age of 70, is $742. By multiplying $742 by 3.6, the number of hundred dollars of annuity, we determine the amount to be accumulated during the employee's twenty years' of service, or $2,671. This figure, divided by the amount to which a deposit of $1 per month will accumulate in twenty years if compounded annually at 4 per cent, or $365, gives us the monthly deduction from his salary, which is $7.32. Mr. Douglas. As I understand it, this is a suggestion that the Government or the employee shall voluntarily deduct, this amount -each month from his salary? Mr. Brown. It should be a compulsory deduction. Mr. Douglas. You deduct from his salary each month such a sum as will purchase for him an annuity at the end of a given period of service ? Mr. Brown. Yes, sir. Mr. Edwards. The services are in three groups, as I understand it? Mr. Brown. Yes, sir. The Chairman. Will you please read the bill which you have sug- gested ? Mr. Brown. Yes, sir. That begiuning witli the first day of July next following the passage of this act there shall be deducted and withheld from the monthly salary, pay, or com- pensation of every officer or employee of the United States to whom this act applies an amount that will be sufficient, with interest thereon at four per cen- tum per annum, comijounded annually, to purchase from the United States, under the provisions of this act, an annuity for every such employee ou ar- rival at the age of retirement as hereinafter provided equal to one and one- half per centum of his annual salary, pay, or compensation for every full year of service or ma.i'or fraction thereof between the date of the passage of this act and the arrival of the employee at the age of retirement. The Chairman. "What is the age of retirement ? Mr. Brown. Three ages of retirement are contemplated — 60, 65, and 70 years of age. A man engaged in one of the more strenuous occupations, such as the railway mail service, would require an earlier retirement age than a person employed as a clerk. It would seem that a man actively engaged in the railway mail service up to 60 years of age would be ready to retire. The age of 65 would apply to employees such as letter carriers, and 70 years of age to clerks. HETIEEMENT FUND SUPERANNUATED EMPLOYEES. 11 Mr. Edwards. It is compulsoiy at those ages, under this bill, for them to retire ? Mr. Brown. Yes, sir ; It is compulsory, but there is a provision in the bill that the employee may be retained in the service after that time if he is mentally and physically qualified to perform his duties. The deductions hereby provided for shall be based on such annuity table as the Secretary of the Treasury may direct, and interest at the rate of four per centum per annum, compounded annually, and shall be varied to correspond to any change in the salary of the employee. The Chairman. What do you mean Ly that last sentence? Mr. Brown. At each increase in salary the deduction from the employee's pay would be correspondingly increased. The increased deduction would be based on the amount of the increase in salary and the term of years remaining before attaining the age of re- tirement. The amount thus obtained would be added to the deduc- tion that was being made under the old salary. For example, let us take an employee receiving a salary of $1,200. At age 35 this em- ployee was promoted to $1,400. The amount of increase in his salary is $200, or $16.66 per month. The deduction from salaries of persons entering the service at 35 is 5.2 per cent. Therefore 5.2 per cent of $16.66, or 87 cents, would be the amount to be added to whatever monthly deduction was being made before his promotion. The Chairman. Is the annuity to be based upon the salary he re- ceives at the time of retirement ? Mr. Brown. No, sir; the annuity would be based on the salary actually received by him from time to time during his entire service. Mr. Edwards. As I understand, the amount of deduction from his salary is based upon the salary he is getting each year ? Mr. Brown. That is correct. The Chairman. The amount deducted from each man's salary goes into a general fund and he gets back exactly what he contributes ? Mr. Brown. Yes, sir ; he gets back exactly what he contributes with interest at 4 per cent compounded annually. The Chairman. He does not get anything from anyone else? Theoretically each man provides an annuity for himself?' Mr. Brown. Yes, sir. His annuity is not dependent upon contri- butions from any other person. Mr. Douglas. I do not see why the deductions should increase with the increase of his salary. On this basis $3.57 would produce $6,678 at the end of fifty years. If that is the sum that is necessary to pro- vide him an annuity of $900, why, because his salary. is increased, should the deduction be increased ? Mr. Brown. You want the annuity on retirement to be equal to 1^ per cent of his salary for each year that he has been in the service. If he entered the service at 20 years of age at a salary of $1,200 per annum, the amount deducted from his salary would be the amount you stated, $3.57, and the deduction would continue at that amount as long as his salary remained at $1,200, because a monthly deduction of $3.57 between the ages of 20 and 70, if improved by 4 per cent compound interest, will amount to $6,678, which is the price of an annuity of $900 per annum beginning at age 70, and $900 is equal to 1^ per cent of his salary for each of his fifty years of service. Now, if at the age of 35 his salary were increased to $2,000, the monthly deduction from his salary would have to be increased in order that 12 EETIREMENT FUND SUPERANNUATED EMPLOYEES. Ms annuity, on retirement, should be equal to 1^ per cent of $2,000 for the years that he received that salary. The increase in the de- duction from the employee's salary would be based on his net increase in salary and the number of years remaining before attaining the age of retirement. In this instance the eniployee's salary was in- creased from $1,200 to $2,000. The net increase was $800. If the pro- motion from $1,200 to $2,000 was made when he was 35 years of age he would still have thirty-five years to serve before retirement, and the amount of the increase in his annuity to correspond to his increase in salary would be ascertained by taking 1^ per cent of the increase, $800, which would be $12, and multiplying it by 35, the remaining years of service, and this gives us $420. Now the cost of $420 annuity beginning at age 70 is ascertained by multiplying $420 by the price per $100 of an annuity beginning at age 70, which we will say is $742, the price per $100 charged by a number of the lead^ ing insurance companies. If an annuity of $100 costs $742, then 4.2 hundred will cost 4.2 times $742, or $3,116.40, and this is the ad- ditional amount of money that must be accumulated between the age of 35, when his salary was increased, and the retirement age of 70. By reference to an interest table we find that a deposit of $1 per month for thirty-five years, improved by 4 per cent compound interest, will amount to $902.87. Therefore, to "provide the annuity corre- sponding to this employee's increase in salary of $800 will require a monthly deduction of as many dollars as $902.87 is contained in $3,116.40, which is $3.45, and this amount, plus the deduction of $3.57 that was being made before the increase in salary was made, gives us the proper deduction to be made after the increase in his salary took place. This makes a total monthly deduction of $7.02, or 4.21 per cent of the employee's salary thereafter, until another promo- tion takes place. In actual practice the process is much simpler than the one I have described, for the deductions from a salary of $100 beginning at all ages would be reduced to a set of tables, and to de- termine the increased deduction to be made when a promotion took place would require only a simple multiplication of the amount of the increase by a certain per cent shown in the table. In the illustra- tion just considered the process would be simply that of multiply- ing the monthly increase of $66.67 (which is one-twelfth of $800) by 5.117. This process may be still further simplified by preparing a set of tables showing the amount to be deducted from various pro- motion salaries at various ages. The Chairman. In other words, he would get a larger annuity? Mr. Brown. Yes, sir; to correspond to his salary and length of service. Mr. Edwards. Did I understand you to say that he would get back just what he had paid in, plus 4 per cent interest? Mr. Brown. Yes, sir; plus 4 per cent interest, compounded an- nually. Mr. Edwards. No clerk would contribute to the annuity of another clerk, nor will the Government contribute more than the interest it allows ? Mr. Brown. No clerk would receive any benefit from the contribu- tions of any other employee. As I have" amended the bill the Gov- ernment guarantees 4 per cent interest on the savings of the employ- ees. If the fund earned less than 4 per cent the Government would RETIREMENT EUND SUPERANNUATED EMPLOYEES. 13 pay the difference between the interest earned and 4 per cent. The bill also provides that the Government shall bear the expense of ad- ministering the fund. Mr. Haedt. What provision have you made where the insured dies? Mr. Bbown. The contributions, with the interest credited to them, shall be returned at death. Mr. Hakdt. To his family or estate? Mr. Brown.. To his estate. Mr. Edwards. Any man, if he is thrifty, can get more than 4 per cent, and so I can not get the force of this scheme. The Chairman. While it is true that a man could probably get more than 4 per cent interest, it has been found in experience that the men in Government positions will not save, and the result is that when they get old and incompetent and should be put out of the service Congress and the heads of the departments will not put them out of the service because they have not anything to live on, and it is considered merciless. This is really a proposition to make the Gov- ernment employee save and protect himself from old age. Mr. Brown. It is a compulsory savings arrangement. Mr. Edwards. But this is a free country and a man has the right to use his money as he wants to. I am frank to say that at present I can not see the force of the scheme. You might as well say : " We will make you save your money, whether you will or not." Of course it is commendable to try to make them save. The Chairman. It is being done in Europe. Mr. Douglas. It is being done on the great railroads. Mr. Edwards. That is somewhat of a charitable relief. I know that the Atlantic Coast Line has a hospital relief fund and that, I think, is a very good thing. Mr. Douglas. All the employees of the Pennsylvania Eailroad Company, as I understand it, after they have been with the company a certain time are required to contribute to a fund for their own annuities. The Chairman. And the railroad contributes a still further fund ? Mr. Douglas. Yes, sir. Mr. Edwards. Are you not trying to get the Government into an insurance scheme? Mr. Brown. There is no element of insurance in this plan until the employee reaches the retirement age. If he elects to take an annuity at retirement then there is an element that you might call insurance, but up to that point it is merely a savings account. Sec. 2. That tlie amounts so deducted and withheld from the salary, pay, or compensation of each employee shall be deposited in the Treasury of the United States and shall be credited, together with interest at four per centum per annum, compounded annually, to an individual account of the employee from whose salary, pay, or compensation the deduction is made. The Chairman. You will keep an account with each man ? Mr. Brown. Yes, sir. Mr. Dawson. How many accounts will be necessary ? Mr. Brown. About 150,000. The moneys so deducted and the income derived therefrom may be invested from time to time by the Secretary of the, Treasury by the purchase of bonds of the United States, bonds or other interest-bearing obligations of any State of the United States, or any legally authorized bonds issued for municipal purposes by any city in the United States which has been in existence as a city for a period 14 EETIBEMENT FUND SUPERANNUATED EMPLOYEES. of twenty-five years, and which for a period of ten years previous to sucli pur- chase by the Secretary of the Treasury has not defaulted in the payment of any part of either principal or interest of any funded debt authorized to be con- tracted by it, and which has at such date more than one hundred thousand in- habitants as established by the last national census, and whose net indebtedness does not exceed five per centum of the valuation of the taxable property therein, to be ascertained by the last preceding valuation of property for the assessment of taxes; or the first-mortgage bonds of any railroad compauy, not including street-railway bonds, which, in compliance with existing law, reports regularly to the Interstate Commerce Commission a statement of its coudition and earn- ings, and which has paid dividends of not less than four per centum per annum regularly and continuously on its entire capital stock for a period of not less .than ten years previous to the purchase of the bonds by the Secretary of the Treasury. I took that from Senator Aldrich's currency bill. Mr. Dawson. Wherein does that provision differ from the savings bank provision, we will say, of the State of Connecticut? Mr. Beown. That is substantially the same, I think. Of course the State laws are much more elaborate, but these provisions are substan- tially the same as the Massachusetts savings-bank laws. Of course the Massachusetts savings-bank laws enumerate the bonds that may be purchased. Mr. Hahdy. They name the bonds and stocks of certain roads, etc. ? Mr. Beown. Yes, sir. Mr. Haedt. At the end of twenty years, compounded at 4 per cent interest, how many times the contribution does the lump sum amount to? Mr. Beown. A deposit of $1 per annum for twenty years, com- pounded annually at 4 per cent, amounts to approximately $31. Mr. HoLCOMBE. The Government employees do invest more or less. Almost all of them invest little sums in one thing or another. Many of them try investments in real estate, town lots, and things of that sort. They lack the experience and judgment. Their lives and occupations are such that they do not acquire business acumen. They are the victims of every possible kind of promoter and sharper, and whatever little surplus they painfully save from their salaries and make investments in ninety-nine cases out of a hundred is lost. That has been my observation in the Departments in twenty years. They do the best they can. Then at the end of a long life the Gov- ernment has them on its hands as old people, who, if discharged, will be left to want and suffer. Mr. ScoFiELD. I would like to emphasize the point that this bill is not drawn primarily in the interest of the Government clerk. It is -drawn in the interest of the Government. It is to protect the Gov- ernment by compelling a man when he comes into the service to guard agamst becoming a charge, as in practice we find to be the case, when he reaches a period where his usefulness if not departed is materially lessened. It is to guard against that. It is, to use a familiar quota- tion, " a condition and not a theory." Mr. DAA^'S0N. As a matter of fact we now have a very large per cent of the clerks who have reached that point in the service in Washington. Mr. ScoriELD. In my judgment, the superannuation difficulty in the Government service is not nearly so bad as a good many people seem to think. I think it will compare very favorably, and I speak from an observation of nearly a quarter of a century, with other occupations. The fact is that the Government wants their very best EETIBEMENT FUND SUPEKANNUATED EMPLOYEES. 15 and it should be enabled to get that by at least getting rid of people when their services have become' lessened in value, so as allow new people to come in and to develop. Mr. Douglas. Then there is another thing. This bill applies to hundreds, if not thousands, of women who have no aptitude for in- vesting and a good many of whom are not much inclined to save and whose condition becomes the most pathetic when they are old. Mr. ScoriiDLD. That is true, and they are frequently the sole sup- port of dependent relatives. Mr. Haedy. There is one suggestion which occurs to me. Is not the whole scheme practically a civil-pension list? Mr. Brown. No, sir ; this plan is not, in any sense, a civil pension, for the reason that every employee provides for his own annuity on retirement by savings from his monthly salary. It might more properly be called a savings and annuity plan. Mr. Hardy. And will not the Government after a while arrange its scale of wages or salaries so that the salary would be about the same with the deduction taken off as it would otherwise have been without that deduction ? Mr. Douglas. But of course Congress is the Government. Mr. Brown (reading:) Tbe tooneys so deducted from salaries and the income derived therefrom shall be held and Invested by the Secretary of the Treasury until paid out as herein- after provided. Any deficiency in the fund hereby created to carry out the pro- visions of this act shall be paid out of any money in the Treasury not otherwise appropriated. The Chairman. What is the purpose of that clause ? Mr. Brown. The purpose of that clause is to provide for any de- ficiency that there might be between the income earned on the fund created by the deductions from salaries and the rate of interest guar- anteed by the plan, 4 per cent. Sec. 3. That upon retiring at the age of retirement the employee may with- draw his savings, with the increment of interest as herein provided, under one of the following options, and receive in addition thereto such sum, if any, as may be apportioned by the Secretary of the Treasury out of interest accumulations In excess of the four per centum guaranteed by the provisions of this act, and apportionment by the Secretary of the Treasury shall be conclusive. The Chairman. The purpose of that section is that if the fund earns more than 4 per cent they can give it to the persons whose money has earned it? Mr. Brown. Yes, sir. Option I. In one sum. Option II. In an annuity payable quarterly throughout life. Option III. In an annuity payable quarterly throughout life, with the pro- vision that in case of the death of the annuitant before he has received in annui- ties the amount of his savings, plus the interest credited thereon, the balance shall be paid to his estate. In determining at his death the amount due to his estate no account shall be taken of the annuities paid to him by the United States, as hereinafter provided. Option lA''. In an annuity certain for a limited term of years, payable quar- terly. These are the optional settlements ordinarily contained in life insurance policies. If after retirement the employee does not avail himself of one of the fore- going options, but leaves the amount due him on deposit, interest at the rate of two per centum per annum on the original sum so left on deposit on retire- 16 EETIBEMBNT FUND StTPERANNUATED EMPLOYEES. ment shall be credited thereto for a period not exceeding twenty years, and if not then withdrawn the money so left on deposit and the interest credited thereon shall be covered into the Treasury as a miscellaneous receipt. Mr. Dawson. You do not require the beneficiary to take advaixtage of any of those options, you say " may," not " shall " ? Mr. Brown. I changed the bill to " may." If he leaves his money on deposit, he gets 2 per cent simple interest and the general fund would get the benefit of any earnings over and above that rate. Mr. Hardy. That is where he does not take the money? Mr. Brown. Yes, sir. The Chairman. I see that you have left out the clause that the an- nuity shall be based on mortality tables, etc. ? Mr. Brown. I changed the form; that is in the first paragraph of the bill, as I have changed it. Sec. 4. That upon absolute separation from the civil service prior to the retire- ment age, and only upon such separation, the employee may withdraw his savings, with the increment of interest credited thereon, in one sum, or, in case his savings amount to at least one thousand dollars, and he has been in the service not less than twenty years, he may withdraw the same under any one of the foregoing options computed on the basis of his attained age. In case of the death of an employee while in the service the amount of his savings, together with the interest credited thereon, shall be paid to his estate. Mr. Edwards. " Shall be paid to his estate." This is a provision, as I understand it, to care for the man and his family, or for the employee and his family. Of course, we are not amending the bill now, but I thinlc when it is put into shape it should be changed so that the money is to be paid to his family. Mr. Douglas. And not to his creditors? Mr. Edwards. Leave it to his wife or children or family. The Chairman. Have you considered the question of when a man leaves the service after a short period that he should not forfeit his fund? Mr. Brown. The draft as I have it here contemplates that he shall be permitted to withdraw his savings, plus the interest thereon, upon absolute separation from the service at any time. . Mr. Edw;ards. What provision do you make about illness? Sup- pose a man is ill for a month or two months and he does not draw any salary, is there a forfeiture under that? Mr. Brown. No, sir ; his account is credited when the deduction is made from his salary. If he draws no salary and no deduction is made, the amount to his credit is simply that much less. Mr. Douglas. There are no deductions made for illness? Mr. Brown. No, sir. Mr. HoLcoMBE. An employee may have thirty days' annual leave and thirty days' sick leave, and after that period is exceeded then the deductions are made. Mr. ScoFiELD. He can not under the law have leave with pay to exceed sixty days in. any one year. The Chairman. The class I was speaking of is the young men who come to town to study in the universities and who go into the service for two or three or four years and then expect to leave. My questioil'f'^'^'i: was whether in those cases it would be fair that they should forfeit the accumulation ; in other words, whether they should get the salary j , minus what thev contributed ? " , , RETIREMENT FUND SUPERANNUATED EMPLOYEES. 17 Mr. Brown. I think all employees who contribute to this fund should receive all their contributions with interest whenever they retire, regardless of the length of service. Sec. 5. That in case of reinstatement in the classified civil service of any per- son who at the time of his separation therefrom received a refund under section four of this act, his period of service for the purpose of retirement and of making the monthly deduction from his salary shall be computed from the date of such reinstatement, unless he shall within ninety days after reinstatement pay to the Secretary of the Treasury the amount refunded to him, in which case the same shall be replaced to' the credit of his account, and the former period of service shall also be counted. Mr. Hardy. In the bill as printed it says that if one retires before reaching the age -of 45 he forfeits any interest. You changed that? Mr. Beown. Yes, sir; but the bill as printed (House bill 17969) I do not indorse in that respect. The bill, as I have drawn it, is based on the idea of returning to every man his savings with interest, and in my opinion there should be no departure from this rule. That forfeiture provision was put in by the Keep Commission's subcom- mittee after I turned the bill over to them. It was because of this and other amendments which I did not approve, that I prepared the bill I am reading."* Mr. Habdt. Whereas this puts him into the same position. Your provision provides for that with accumulated interest? Mr. Beown. Yes, sir. This provision as it was before I changed it, would also work a hardship upon the Government where an em- ployee was disqualified for any cause prior to the age of 45. Mr. Dawson. You would hardly want anything in the bill that would force a young man to remain in the service if he wanted to go out. Mr. Haedy. That is only the interest? Mr. Beown. It amounts to 50 per cent in twenty years. A deposit of $1 per year for twenty years at 4 per cent compound interest amounts to $30.97 — $20 principal and $10.97 interest. If he had been in the service twenty years, his interest accumulations might amount to $500 or $600, or even more. Mr. Douglas. I do not believe the Government will be able to earn 4 per cent on this money, and that ultimately it will become something of a charge upon the Government. Might not that be met in a meas- ure by providing that an employee who did not serve beyond a short period, say, two years, or who did not remain in the Government service beyond a period of one year, should forfeit what he paid in ? Mr. Edwaeds. And let it go into the general fund ? Mr. Douglas. Yes, sir. Mr. Beown. Is not that subject to the game criticism? I think the appropriation of one man's interest to benefit another is wrong in principle. It does not make any difference whether the amount appropriated is much or little. The objection you make Mr. Douglas. I do not make it as an objection. Mr. Beown (continuing). Might more easily be met by reducing the rate of interest from 4 per cent to 3^ per cent. Such a reduction "The bill as amended by Mr. Brown and read by him at this hearing, was later in the same day introduced in the House by Mr. Gillett, and printed as H. R. 18982. (See Appendix A,) 38257—08 2 18 RETIREMENT FUND SUPERANNUATED EMPLOYEES. would not materially increase the amounts withheld from the .em- ployees' salaries. Mr. Douglas. I do not think it should be reduced from 4 per cent, . but I think some plan could be provided by which in case a man or woman only remains in the service a year that he or she should for- feit at least some part of the amount paid in, which in the course of years would provide a fund to protect the Government against loss. Mr. Beown. That would not amount to very much, and an em- ployee might be tempted to remain two or three months longer and get it back. Mr. Douglas. Yes, sir; that is true. _ Mr. ScoFiELD. I do not see how that would be a hardship if he understands it when he accepts the position. Mr. Douglas. And if he does not stay two years, all that he pays in shall remain to the credit of the Government. Mr. ScoriELD. He would simply agree to take a salary of $1,000 a year and stay five years in the service, or take so much less each year. It does not actually go to paying the other people, but it goes to reim- bursing the Government. Mr. Douglas. I think that suggestion is worthy of consideration.' Mr. Brown (reading) : Sec. C. That the retirement nge hereiu referred to shall be sixty years for group one, sixty-five years for group two, and seventy years for group three. And the President of the United States shall designate the branches of the service to be Included In each group. Mr. Douglas. I think that is better tha.n the way it is here. (Ap- pendix B, sec. 5.) Mr. Edwards. Why not fix the three groups in the bill so that there would be no question about them? Mr. Brown. It is rather difficult to do that. For instance, the occupation of watchman can hardly be said to " require great physical activity," or even a " moderate amount of physical activity," neither can it be said to be " mainly intellectual." Yet, as a matter of fact, the occupation seems to be one fairly well suited to men well advanced in years, and for that reason the retirement age for them, in the majority of cases, might properly be fixed at 70 years. The Presi- dent has authority to say what group any class of employee shall be placed in. Mr. Douglas. He would probably do it upon the basis of the state of physical activity in the service; c Mr. Brown. That would be the only basis. fSEC. 7. That every eraplo^-ee to whom this act applies shall be entitled, on reaching the retirement age, or having already passed that age, to retire from the service under the provisions hereinbefore contained, and also. In addition to the annuity herein provided for by his own contributions from his salai'y, to receive from the United States, during the remainder of his life, an annuity equal to one per centum for group one, one and one-fourth per centum for group two, and one and one-half per centum for group three of his average salary, pay, or compensation, during the last ten years of service, for every year that he shall have been in the service prior to the passage of this act; and the Secretary of the Treasury is hereby authorized and directed to pay such annuity quarterly, from any money in the Treasury not otherwise appropriated, upon proper certification of the retirement of such employee by the appointing oflicer under whom he last served. Annuities from the United States for the period of service prior to the passage of this act shall be payable only on con- dition that the employee remains in the service until he reaches the age of retirement. RETIREMENT FUND SUPERANNUATED EMPLOYEES. 19 If the records showing the actual salary received by an employee fifty or sixty years back are available, I think the amendment as con- tained in bill H. E. 17969 is better than this. This paragraph, as I have it, provides for an annuity equal to 1 per cent, 1^ per cent, and 1^ per cent of the average pay during the last ten years of service for every year that the employee shall have been in the service prior to the passage of the bill. Mr. Dawson. Would not that bring an additional charge upon the Federal Government ? You put the annuity on the basis of his last ten years of service, whereas he had forty years' service in all, thirty years prior to this, and the last ten years may be at a reduced salary 'i Mr. Brown. Yes, sir; I think it would be better to take the entire period into account if the records are available. Mr. Hardy. The provision contemplates giving an annuity by the Government without any former deduction? Mr. Brown. Yes, sir. The Chairman. That is to provide for the present einployees? Mr. Brown. That is to hasten the benefits under the plan. That feature is not at all essential to the operation of the plan, but it hastens the results. If you do not pay something to the employee for past services, the full benefit of the plan will not become effective for twenty or thirty years. Mr. ScoFiELD. The idea is for the Government to take care of the employees now in the service to the extent of their past services and from this time on everybody, including the old and new employees, will take care of themselves. The only tax on the Government in the line mentioned by Mr. Brown is the present evil to which the Government has in some measure contributed. The Chairman. How much do you calculate that Avill cost? Mr. Brown. I will tell you. Mr. HAEor. Did you say that the Government had contributed to the present evil? Mr. ScoFiELD. I mean it has contributed, as suggested by the chair- man, by the failure of Congress and the Executive to dismiss them; contributed by being humane. Mr. Hardy. That is the trouble with a lot of us. Mr. Brown. We made an estimate of the cost for annuities for past services based on Bulletin No. 12 published by the Census Office in 1903, and that estimate shows that for the first year the maximum appropriation required would be about $725,000, and that the annual appropriation would gradually increase for about thirty years up to about $1,750,000 and then gradually run off to nothing. The Chairman. How long would it take to " run off to nothing?" Mr. Brown. In 1974 the appropriation by the Government would be $163. Those figures are based upon the maximum in every in- stance. They make no allowance for the resignation of anyone now in the service. They assume that every man, if he does not die, will continue in the service until he retires at the retiring age. The Civil Service Eeform League states that the resignations from the service are about 8 per cent a year. The Chairman. That would not be the case if a man knew that he was going to get a pension if he remained in the service ? Mr. Brown. I do not think that would have any material effect upon a man who had been in the service only two or three years. 20 RETIREME]STT FtrND-^-SUPEEANNUATED EMPLOYEES. The Chairman. But the older men ? Mr. Brown. It would undoubtedly have a material effect in holding the men who had served long periods. Mr. Hardy. Is this scheme based on the idea that the Government will earn 4 per cent on the money ? Mr. Brown. Yes, sir. Mr. Hardy. Is it a reasonable assumption that the Government can make that amount of interest ? Mr. Brown. All of the insurance companies of the country, on very conservative investments, earn 4 per cent and a little more, and the Government has the same opportunity to invest funds that the insurance companies have. The Chairman. According to your best information, what will the sum* total be in all those years ? Mr. ScoFiELD. Something like $70,000,000 or $80,000,000. Mr. Brown. No ; the tables that were prepared under my direction show the highest possible cost to be $66,985,776, the greater part of the expense being incurred in the first fifty years. The resignations and removals among those now in the service would, I believe, bring this total very much below the amount stated. The Chairman. You have a table, I suppose, of the annual cost? Mr. Brown. Yes, sir. The Chairman. Please hand that to the stenographer. Mr. Brown. Yes, sir. The table referred to is as follows : Maximum amount of annual appropriation by the Federal Government necessary to provide a monthly annuity to each person in its classified civil service July 1, 1903, upon attaining the retirement age of 70 years (the amount of annuity to Be 1.5 per cent of the employee's salary July 1, 1903, for each year of service completed prior to that date). £ear. Amount oJ appropria- tion. Tear. Amount of appropria- tion. Tear. Amount of appropria- tion. 1907 $725,110 811,840 908,188 1,025,293 1,157,181 1,258,726 1,370,710 1,466,424 1,526,651 1,570,768 1,579,132 1,564,974 1,650,742 1,634,636 1,531,861 1,612,169 1,661,679 1,646,866 1,550,718 1,565,588 1,571,682 1,589,167 1,617,302 1930 $1,663,981 1,699,374 1,713,036 1,724,3^5 1,734,603 1,736,047 1,744,612 1,746,561 1,736,974 1,718,542 1,684,723 1,636,423 1,568,188 1,492,830 1,406,199 1,314,000 1,211,837 1,103,182 990,583 889,324 772,736 669,126 572,770 1953 $484,069 1908 1931 - - 1964 403,305 1909 1932 1955 331,667 1910 1933 1934 . 1956 269,380 1911 1967 216,046 1912 - . 1935 3958 J. 170,947 1913 1936 . 1969 133,347 1914 1915 - - . - 1937- 1938- ^— 1960- ..- .- 1961 102,460 77,434 1916 1939 1962 67,499 1917 . . - 1940 . 1963 41,884 1918 - ' 1941 1964 29,877 1919 1920 - - 1942 1943 . - 1965 1966 . . . 20,829 14,162 1921 ._ 1944 . 1967 9,354 1922 1945 1968 1969— 1970 5,971 1923 _ 1946-^ . 3,697 1924 1947 2,199 1925 1948 1971 1972 1973 1,261 1926 1949 _ 679 1927-' 1950 . 346 1928 , 1951 . 1974 168 1929 1962 Mr. Dawson. It will average about $1,000,000 a year? Mr. Brown. Yes, sir; or less. Mr. ScoFDELD. The loss by superannuation is $1,200,000, as esti- mated by ,the civil-service board, and it is a very low estimate. EETIEEMENT FUND SUPEEANNUATED EMPLOYEES. 21 The Chairman. That hardly corresponds with what you said a few moments ago. Mr. ScoFiELD. That is not a very large percentage, considering the number of people and the total cost. The Chairman. Would there be any opposition to having this apply simply to the future — in other words, to the new clerks as they come in — and not have it apply to the present force ? Mr. Brown. Part 1 of the plan is not at all dependent on part 2. Part 2 provides for annuities for past services and is merely in the interest of the Government to hasten the results of the plan. Part 1 is the plan proper, but by the adoption of part 2 you put the plan into full operation immediately instead of having its benefits come about gradually in the next thirty or forty years. By eliminating part 2 the Government would not be called upon to pay any part of the $66,985,778 estimated as the maximum cost of annuities to present employes for service prior to the adoption of the plan. The Chairman. You could arrange it so as to cover only persons who now come into the service? Mr. Brown. Yes, sir. This estimate of $66,985,778 is- much too high, because it contemplates the retirement of every person 70 years of age. That would be altogether unnecessary, because there are many persons in the service 70 years of age who are very efficient and ought to be retained. Eetirement should be made only after a very careful investigation of each individual case. The Chairman. In your plan does it provide that everybody shall retire at 70 years of age ? Mr. Brown. It makes retirement compulsory at 70 years of age, but it provides that the head of the Department may retain an in- dividual in the service by making a proper certificate to the Secretary of the Treasury, and upon such certification the employee may be con- tinued for periods of two years, and so on. Mr. Hardy. Would not that leave us with the same humanitarian consideration ? Mr. Brown. No, sir. Mr. Hardy. He would not want to quit? Mr. ScoriELD. But the head of the Department would not want to certify that his employment was necessary. Under this arrange- ment' he could only keep him by affirmatively stating that it was in the interest of, the service. Mr. Brown (reading) : On the death of the employee the payment of annuities piovidea for by this section shall cease and determine. Annuities payable by the United States under this section on salaries in excess of two thousand five hundred dollars per annum shall be based upon an annual salary of two thousand fire hundred dollars. The Chairman. That is, nobody is to get more than a percentage on $2,500? Mr. Brown. No one shall receive an annviitv at Government expense under this plan based on more than $2,500 a year. If he receives a salary of more than that amount he should save part of it. Sec. 8. That the period of service upon which the annuity to be paid by the United States is based shall be computed from original employment, whether as a classified or unclassified employee, and shall include periods of ser^■ice at dif- ferent times and service In one or more departments, branches, or independent 22 RETIREMENT FUND SUPERANNUATED EMPLOYEES. offices of the Government, the Signal Corps prior to July first, eighteen liundred and. ninety-one, and the general service in or under the War Department prior to May sixth, eighteen hundred and ninety-six- Mr. Dawson. Will you explain the two exceptions about the Sig- nal Corps and the general service in or under the War Department ? Mr. Brown. That was incorporated in the bill by the Keep Com- mission's subcommittee. Mr. Zappone. In 1891 the Signal Corps was under the War De- partment, but the employees performed clerical work almost entirely. There were exceptions; a few men were detailed to the line of tjie Army in connection Avith signaling, but for the most part the men were performing clerical work and performing the same work that the employees of the Weather Bureau are performing now. They were stationed all over the country at the various meteorological points, taking observations of the weather, and they were enlisted and were under the War Department and subject to strict discipline, which was believed to be necessary to hold those men at their points, of duty. It was thought at that time if an employee was a civihan employee that he would not get up in the Far West at 5 o'clock and take the morning observation, which would be 8 o'clock seventy-fifth meridian time, and for that reason they were enlisted, so that they might be subject to that very strict discipline. It was felt as a mattpr of justice to them, as it has always been considered in the prepara- tion of other retirement bills, that they should be classed as -civilian employees rather than enlisted men, and I think that point will prob- ably be made by Mr. Scofield in regard to enlisted men in the War Department. Mr. Scofield. It is understood that these people are now civilians. They were formerly enlisted men, but by transfer to other Depart- ments they have become civilian clerks. This provision is to allow credit for that service. Mr. Dawson. Did they derive any retirement benefit ? Mr. Scofield. No, sir ; none whatever. The Chairman. I do not suppose there are many of them ? Mr. Scofield. A comparatively small number — 500 perhaps. Mr. Hardy. When was the change made? Mr. Scofield. In the Signal Corps, on the transfer of the Weather Bureau to the Agricultural Department in 1891. Mr. Hardt. Would not that go back beyond the ten years which this bill is intended to apply to ? Mr. Scofield. Yes, sir. The object was to give what seemed to our committee a just and equitable privilege to the people who had always done clerical duty. Mr. Hardy. But if you limit this, to ten years, all this is unneeded because these men have been in the classified service for more than ten years ? Mr. Scofield. I never heard of that bill until I came here and I would not want to make a statement. I think, however, you are probably right. Mr. Brown: Sec. 9. That, the Secretary of the Treasury shall prepare and keep all neefl- ful tables, records, and accounts required for carrying out the provisions of this act. The records to be kept shall include data showing the mortality ex- perience of the employees in the various branches of the service and. in differ- ent localities through the country and the rate of withdrawal from the classi- EETIEEMENT FUND SUPERANNUATED EMPLOYEES. 23 fled service, and any other information that may be of value and may serve as a guide for future valuations and adjustments of the plan for the retirement of employees. Mr. Dawson. Have you made any estimate as to how large an ad- ministrative force would be required ? Mr. Beown. No, sir ; I have not. I do not think it would require a very large force because one clerk in a bank can take care of a good many open, checking acounts that have a great many entries each month. In this case there would be but one entry for each employee a month. A fairly good bookkeeper iii a savings bank can easily post 400 items a day. On this basis, counting twenty-five days a month, a bookkeeper could handle 10,000 accounts. So that to handle 150,000 accounts would require only about 15 bookkeepers. It would, of course, be necessary to have a head to the office, and probably a chief clerk, and also several stenographers. If the handling of the finances were placed under this office some additional force would be required for that. Sec. 10. That within thirty days before the arrival of an employee at the age of retirement, the head of tlie Department or independent office shall certify to the Secretary of the Treasury regarding the efficiency of such employee, veith a statement whether the public interest requires liis continuance in the service or his retirement, and such certificate and statement shall be conclusive. If he certifies that by reason of the efficiency of an employee vrho bas reached the retirement age, and is willing to remain in the service, his continuance therein would be advantageous to the public service, such employee may be retained for a term not exceeding two years ; and at the end of the two years he may by similar certification be continued for an additional term of t\xo years, and so on. Upon the failure of the head of the Department or independent office to make the above-described certificate it shall be the duty of the Secretary of the Treasury to place such employee upon the retired list in acordance with the provisions of this act. Sec. 11. That if an employee is retained in the service after reaching the re- tirement age, a deduction of ten per centum of his monthly salary, pay, or com- pensation shall thereafter be made while he remains in the service, and the same shall be treated as other deductions under this act. Section 1 contemplates a deduction sufficient to provide an annuity of 1^ per cent of salary for each year of service between the date of entering the service and the date of retirement. Section 11 covers employees remaining in the service after the age of retirement. The reason for this deduction of 10 per cent from the employee's salary if he remains in the service after reaching the retirement age is that if the employee entered the service late in life and on reaching the retirement age he did not have a sufficient sum to his credit to pur- chase an annuity that would retire him comfortably, and through humanitarian considerations he was kept in the service, this deduc- duction of 10 per cent from his salary, added to his savings that were already to his credit drawing interest, would sooii provide a fund that would take care of him. The cost of his annuity also decreases very materially for every year that it is deferred. If his annuity began at 75 the cost per hundred dollars would be $630, whereas the cost at age 70 is $742 per hundred dollars. Sec. 12. That the provisions of this act shall apply only to the classified civil service, which is hereby defined to include all officers and employees in the executive civil service of the United States, except persons appointed by the President and confirmed by the Senate, and mere unskilled laborers. No person serving in a position excepted from examination or registration as defined in the civil-service rules shall be included within the provision of this act unless he has served in a competitive position for at least one year. Whenever any 24 KETIEEMENT FUND SUPEEANNUATED EMPLOYEES. person becomes separated from the classified service by reason of appointment in the unclassified service, such separation shall not operate to take him out of the provisions of this act. The President shall have power, in his discretion, to exclude from the operations of this act any groups of employees whose tenure of office is necessarily intermittent or of uncertain duration. Sec. 13. That none of the moneys mentioned in this act shall be assignable either in law or equity or be subject to execution or levy by attachment, garnish- ment, or other legal process. Sec. 14. That for the clerical and other service and all other expenses neces- sary in carrying out the provisions of this act, during the fiscal year nineteen hundred and nine, including salaries and rent in the city of Washington, there is hereby appropriated the sum of fifty thousand dollars ; and also the amounts necessary for the annuities to be paid by the United States, under section seven of this act, from year to year, are hereby appropriated, out of any money in the Treasury not otherwise appropriated, to be available until expended. Sec. 15. That the Secretary of the Treasury is hereby authorized to perform or cause to be performed any and all acts, and to make such rules and regula- tions as may be necessary and proper, for the purpose of carrying the provisions of this act into full force and effect. The bill presented by the Keep Commission's subcommittee (House bill 17969), in my opinion, is subject to the following criticisms: First. The rate of interest to be paid the employees on their savings is not guaranteed. Inasmuch as the employees would be compelled by law to enter into the arrangement, if the bill became a law, it would be only just to guarantee a reasonable rate of interest. Second. Sufficient restrictions are not placed on the Secretary of the Treasury in regard to the investments to be made of the employees' funds. The responsibility of investing these funds without restric- tion as to the class of investments would be altogether more than most Secretaries of the Treasury would care to assume. Third. The clause providing retirement "by reason of disability not due to vicious habits," etc., would, I believe, mean the immediate retirement of a great many employees now in the service who are less than 70 years of age, and, by reason of the higher cost of annuities for persons retiring prior to the age of 70, would result in a very considerable expense to the Government above the estimate that has been made of the cost of annuities for service prior to the adoption of the plan. Fourth. The bill contemplates the appropriation of interest on the deposits of employees leaving the service before reaching the age of 46. Besides being" wrong in principle, this would seem to put a premium on disorderly conduct in the service, since dismissal for cause would be the only means through which a person retiring before that age could obtain the interest that his deposits had earned. Mr. Haedy. If he retires under 45 years he gets no interest? Mr. Beown. If he voluntarily retires he forfeits his interest, but if he is compulsorily retired he secures his interest. Fifth. The bill makes no provision for deductions after reaching the age of retirement. This might put a premium on remaining in the service after reaching the retirement age, for the discontinuance of deductions after that time would be the equivalent of an increase in salary. Mr. Haedy. That is your 10 per cent, is it not? Mr. Beown. Yes, sir. Mr. Dawson. Do you think that this law if enacted could be admin- istered for $50,000 a year? EETIEEMBNT FUND STJPERANNTJATED EMPLOYEES. 25 Mr. Brown. Yes; very easily. The major portion of the work would be don^ by the disbursing officers and clerks already employed. The additional cost would be in keeping a record of the amounts deducted from salaries and in making the disbursements from the fund. Twelve or 15 bookkeepers ought to be able to handle the accounts, and these could be had, I should say, for an average of $1,400 each. This would require hot over $21,000. The remainder of the force could be hired for less than $29,000 a year. Mr. Dawson. Have you ever estimated what this fund would amount to? Mr. Beown. No, sir ; that would depend on the length of service. Mr. Haedy. How many Government employees does this bill cover ? Mr. Beown. It would affect, perhaps, 150,000 employees. It would affect more as the service grew. The Chaieman. It could be limited to the Departments here in the city of Washington? Mr. Beown. Yes, sir. Mr. Edwaeds. On a salary of $100 a month what would be the de- duction ? Mr. Beown. If an employee entered the service at 20 years of age, the deduction would be $3.57 a month. The deduction is greater where the employee enters the service at a more advanced age. Mr. Edwaeds. Does this deduction continue at that rate? Mr. Beown. Yes, sir ; and is only increased with increase in salary. The Chaieman. In other words, he gets $96.43 instead of $100 a month ? Mr. Beown. Yes, sir. Mr. Dawson. Would this organization be comparable with any in- surance company that you have in your mind ? Have you compared it with any existing institution? Mr. Beown. In point of cost of administration ? Mr. Dawson. Yes, sir. Mr. Beown. You, can not very well compare it with an insurance company, because one of the principal items of expense with an in- surance company is agency force, and here there would be nothing of that kind. Mr. Dawson. Have you any data or information regarding the re- tirement system in vogue on various railroads? Mr. Beown. No, sir. Mr. ScoFiELD. I have the last publication of the Pennsylvania Eail- road Company, which gives their system and the systems of other rail- roads in the United States. Mr. Dawson. Will you please give us the title of it ? Mr. ScoFiELD. Yes, sir. [Eeads:] Railway provident institutions in English-speaking countries, being a con- solidation of reports submitted to tbe permanent international commission of tbe International Railway Congress at Brussels, Belgium, Europe, under date of July 1 and October 22, 1904, respectively, conformably with appointment in April, 1902 (wbile holding the office of assistant comptroller of the Pennsylvania Rail- road Company), as " reporter for countries using the English language," in con- nection with the seventh session of the International Railway Congress, to be held in Washington, D. C, United States of America, May 3-13, 1905. M. Riebenack, comptroller Pennsylvania Railroad Company, Philadelphia, Pa. 26 RETIREMENT FUND SUPERANNUATED EMPLOYEES. Railroads interested in " Insurance or relief,'" " Pension or retirement," and Roads. Mileage. Employees. Miscellaneous PftnTi.v that the maximum cost of this retire- ment plan to the Government will be as follows : Maximum amount of annual appropriation by the Federal Government neces- sary to provide a monthly annuity to each person in its classifle4 civil service July 1, IQOS, upon attaining the retirement age of 70 years {the amount of annuity to 6e' 1.5 per cent of the em.ployee's salary July 1, 1903, for each year of service completed prior to that date). Tear. Amount ol appropria- ' tion. Year. Amount of appropria- tion. Tear. Amount oi appropria- tion. 1907 $725,110 811,840 906,188 1,025,293 1,157,181 1,258,725 1,370,710 1,466,424 1,526,551 1,570,768 1,679,132 1,564,974 1,650,742 1,634,636 1,631,851 1,512,159 1,554,679 1,546,866 1,550,718 1,666,688 1,571,682 1,589,167 1,617,302 1930 $1,663,981 1,699,374 1,713,035 1,724,385 1,734,603 1,736,047 1,744,612 1,746,661 1,736,974 1,718,542 1,684,723 1,635,423 1,568,188 1,492,&30 1,406,199 1,314,000 1,211,837 1,103,182 990,683 889,324 772,736 669,126 572,770 1963 $484,069 1908 ^ 1931 1932 - 1933 - 1954 1955 403,305 1909 331,667 1S;0!-. 1911 1956 1957 269,380 1934 _ 216,046 1912 i937iri;iiiiiiiiir' 1938 1958 170,9i't 1913 1959 1960 133,347 1914- 102,460 1915 1?61„^ 1962 1963 77,434 19i6 1917 1939 1940 67,499 41,884 1918 19a . 1942 1964 1965 29,877 20,829 1919 - 1920 - 1943 1966 14,152 1921 1944 1945 1967 1968 9,354 1922 — 6,971 1823 ^ 1946 1969 3,697 1924 1947 1970 2,199 1925 1926— , 1948-.__ J949 1971 1972 .. - 1973 1,251 679 1927 1960 - 346 1928 1951 1952 _ 1974 „ - 163 1929 It should not be forgotten that this is a maximum cost, and that the real cost will probably be greatly less, since many employees who enter into this competition will leave the service before reaching the age of 70. Compare this maximum cost of considerably less than $2,000,000 annually for a term of forty years with that of any other plan e^ er proposed, and it will be seen how little is asked of the Government. Thesa quotations, from one of the best and most conclusive reports fhat I have ever read, will do much to give a proper conception of the purposes of the bill referred to. It settles the question of a civil pension list, to which I woukl be unalterably opposed as such, and makes it possible to provide relief for a deserving class of Govern- ment "employees. This measure is a humane one and in keeping with the spirit of a free. God-fearing, liberty-loving people. To turn out on the cold charity of the world the old employees who have faithfully and honestly served the Government that many of them have helped to save would be repugnant to every patriotic man and woman in the country. As other governments, States, municipalities, and even corporations (who are popularly supposed not to have souls to save or bodies to kick) are doing this, an act of common justice, why should Congress hesitate? I beg leave to add these statistics and at the same time acknowledge my indebtedness to the various gentlemen associated Avith the special committee before referred to. RBTIEEMENT FUND SUPERANNUATED EMPLOYEES. 6l I have a mass of statistics which I trust will not bore the committee. ^ Take the city of New York. First, the police paision fund, city of New York, charter of Greater New York, sections 351-367. The receipts in 1907 were $1,516,945.56. The balance left over on Decem- ber 31, 1906, was $63,719.98, so that we had a total amount available on the 1st of January, 1907, of $1,580,665.54. The disbursements fOF 1907 wfere, pensions paid to policemen retired, $1,510,230.23. Mr. Foster. Do you take out something. from the pay? Mr. GouLDEN. Yes, sir; I think it is 1 per cent. Refunded to policemen for sick benefits, etc., $19,816.13. The num- ber of male pensioners is 1,768; widows, 1,039 The Chairman. How long has it been in operation ? Mr. GouLDEN. It runs back at least twenty years. Children, 155, or a total number receiving benefits from the police pension fund of 2,962. Fire department. New York City, 1907, Greater New York charter, subdivision 8, section 789 : Receipts for 1907, bureau of combustibles, $92,340.50 ; contributions from various people who are kindly disposed toward the fire department in one way and another, $24,648; excise licenses, $369,073.52; foreign fire insurance tax, $127,162.72; penalties, etc., fines of policemen of ten, twenty, or thirty days' pay, $51,002.71, making a total of $664,227.45. We had a balance on December 31, 1906, of $853,112.63. There was retired men during the year paying out $429,131.95 ; pensions for widows and orphans, relieved men, etc., $225,173.25, making a total amount paid out of $654,305.20. Public school-teachers' retirement fund, provided for under section 1092, charter of city of New York, amended, chapter 167, laws of 1907. The retirfement fund shall consist of—: 1. All money, pay, or income forfeited, deducted, etc., from, the teachers. 2. All moneys received from donations, etc. 3. Five per cent annually of all excise moneys or license fefes. . 4. One per cent of the salaries of teachers and principals. 5. All such other methods of increment as may he duly and legally devised for the increase of said fund. The receipts for 1907 were $784,364.89. The Chairman. The great bulk of that amount, if it had not gone there, would have gone into the city treasury ? Mr. GouLDEN. Yes; and the fines and deductions would not per- haps have been so large. Those who were fined for absence or for any other cause were willing to pay the amount because they knew that it went into a fund which would benefit themselves. • The balance oh January 1, 1907, was $1,102,028.19, giving us £6. total of $1,886,383.08. The disbursements in 1907 were $689,390.64, leaving a balance on hand on January 1, 1908, of $1,196,992.44. The Chairman. That is invested separately? Mr. GbULDEN. Yes; invested separately in the bonds and stocks of the city of New York. Mr. Kimball. Is any of this fund invested in any other bonds? Mr. GouLDEN. I think not. The total number of teachers in the system is 15,000. Mr. Foster. Is it compulsory ? Mr. GouLDEN. Yes. The total number of annuitants February, 1908, were 966. 62 BETIBEMENT FUND SUPERANNUATED EMPLOYEES. The Chairman. How long has the law been in existence ? Mr. GouLDEN. Since 1905. I was somewhat instrumental in bring- ing that about. The amount paid in February, 1908, was $60,072.07. The average annuity is $621.86. The Chairman. How do they decide when the teachers are to be retired ? Are you going to tell us that later ? Mr. GouLDEN. Yes. First, let me say that the minimum annuity for teachers is $600 and the maximum for a principal $1,500, and for a superintendent, whose salary is $6,500, $2,000. There are only two superintendents retired, and a very limited number of principals, as you can understand. That is decided upon by a report made first by the district superintendent. We divide the territory up into dis- tricts, and each district has a superintendent, and there is a certain number of districts, so that each one has a superintendent over, say, 20 schools. • His special duty is to look after those 20 schools and re- port to the associate superintendent, who has charge of 3 districts. He in turn reports to the city superintendent. Then the matter goes before the board of superintendents, made up of all the associate superintendents, 8 in number, and the city superintendent, who decide upon the matter of retirement. The Chairman. Is there any age limit? Suppose a teacher is 30 years of age and gets an illness from which she can not recover. Is she retired ? Mr. GouLDEN. The time is thirty years for a woman and thirty- five years for a man. If they have been in the public school system of New York City at least ten years and the balance of the time, twenty years for a woman and twenty-five years for a man, in any other State or city in the country, so long as they have been engaged in teaching in the public schools. The Chairman. And they get the New York annuity? Mr. GouLDEN. Yes ; if they have complied with the above require- ments. I have a letter from Prof. Lyman A. Best, who has taken a very active interest in the matter, and who is one of the principals. It is dated March 19, 1908, and reads : I have your letter of March 17, in which you make certain inquiries about the New York City teachers' retirement fund, and take pleasure in furnishing you the information desired. New York City teachers* retirement law — retirements, deaths, income, disbursements from 1895 to 1907; also retirements and deaths during 1908 to date. In 1895 there were 35 teachers retired, 2 died, and 33 on the roll at the end of the year. In 1896, 62 retired, 2 died, and 93 on the roll. In 1897, 76 retired, 1 died, and 168 on the roll. In 1898, 31 retired, 11 died, and 188 on the roll. In 1899, 130 retired, 8 died, and 130 on the roll. In 1900, 46 retired, 10 died, and 346 on the roll. In 1901, 78 retired, 9 died, and 415 on the, roll. In 1902, 121 retired, 20 died, and 516 on the roll. In 1903, 97 retired, 13 died, and 598 on the roll. In 1904, 112 retired, 31 died, and 679 on the roll. In 1905, 38 retired, 23 died, and 694 on the roll. In 1906, 197 retired, 18 died, and 873 on the roll. In 1907, 86 "retired, 29 died, and 930 on the roll. In 1908 up to date 44 retired, 9 died, and 965 on the roll. The total number on the roll is 965. Mr. Foster. How manv are there on the active list? •RETIREMENT FUND SUPERANNUATED EMPLOYEES. 63 Mr. GouLDEN. Fifteen thousand. The net disbursements, begin- ning with 1899 were $123,524.18. At that time tliey had 310 on the roll; m 1900, $209,702.86; 1901, $245,570.08; 1902, $371,832.89; 1903, $420,026.99; 1904, $477,418.74; 1905, $526,502.36; 1906, $616,984.54, and 1907, $689,390.54. Then we have the receipts in detail if you are interested in them. The Chairman. Just hand those to the stenographer. The statement referred to follows : Dbpaktment of Education, Board or Retihemest, 'New York, Miirch 19, J908. Hon. Jos. A. GouLDEN, M. C, Washington, D. C. Deab Mb. Gotjlden: I have your letter of March 17 in which j'ou make cer- tain inquiries about the New York City teachers' retirement fund, and take pleasure in furnishing you the Information desired. NEW YORK CITY TEACHEBS' BETIBEMBNT I.A^V. Retirements, deaths, income, and -disbursements from J895 to .1.907; also re- tirements and deaths during 1908 to date {March 19, 1908). Year. Retired. Died. On roU De- cember 31. Income ■ .(net). Disburse- ments (net) . Balance, De- cember 31. 1896 — 35 62 76 31 130 46 78 121 97 112 38 197 86 44 2 2 1 11 8 10 9 20 »13 ■ 31 23 18 29 9 33 93 168 188 310 848 416 516 598 670 694 873 930 966 (?) (?) (?) (?) $381,213.69 397,993.23 492,711.32 422,363.65 426,463.45 516,684.42 647,392.38 706,072.86 784,364.89 (?) (?) (? (?) $123,624.38 209,702.86 245,570.08 371,832.89 420,026.99 477,418.74 626,602.86 616,984.54 689,390.64 (?) (?) (?)' (?) $360,516.35 648,746.72 795,887.06 846,407.72 862,834.18 892,049.86 1896 „ 1S97. „ 1898 1899 L - _ . 1900 1901 - 1902 1903 1904 _ - - 1906 1,012,989.83 1906 1907 . 1908 (to date, March 19, 1908) _ 1,102,028.19 1,196,992.44 Total on roll at date, March 19, 1908 1,153 «186 966 "2 dr. NEW YORK CITY TEACHERS' RETIREMENT FUND. Receipts in detail (auditor's figures) from T)cginning to January 18, 1908. Year. Net absence deductions. One per cent deductions. Excise moneys^ 6 per cent. Interest. Dona- tions. Total. 1894 $25,082.51 (?) (?) (?) (?) 106,374.23 131,073.86 200,883.04 146,703.70 160,535.67 193,062.99 186,727.32 211,976.05 274,743.13 None. None. None. None. None. None. None. None. None. None. ■None. $92,638.93 169,064.42 178,214.73 None. None. None. None. None. $269,094.83 266,859.37 266,853.17 262,066.04 266,917.78 281,964.66 281,973.60 285,275.64 287,853.89 None. None. None. None. None. $5,744.53 None. None. None. None. None. None. None. None. ■ None. $300.00 $25,082.61 1895 - _.. 1896 (?) (?) 1897 (?) 1898 1899 (?) 381,213.69 1900 397,993.28 1901 : 1902 25,978.11 13,683.81 492,711.32 422,353.56 1903 426,4.53.45 41,606.77 86,052.63 89,766.84 43,155.13 516,634.42 1905 647,392.38 700,072.8.5 190T . 388.01 784,364.89 Many other facts are included In my annual report as secretary of the board of retirement, which is now being printed. Will send you a copy as soon as it is out. If I can be of help to you in any other way, please command me. Very truly, yours, Lyman A. Best. 64 RETIREMENT FUND SUPERANNUATED EMPLOYEES. The Chairman. Suppose a teacher who has served ten years be- comes inefficient and the superintendent wants him dropped ; he does not get any annuity? Mr. GouLDEN. No. The Chairman. That must make it pretty hard? Mr. GouLDEN. No, sir; that would be putting a premium upon inefficiency, to retire them with an annuity. Tl^e inefficient teachers usually take a summer course at one of the universities. There is a large class of teachers attending the New York and Columbia universities, people who want to become principals or others who are deficient. Mr. Foster. I assume from your statement with reference to the police and fire force that there are sums of money Returned? Mr. GouLDEN. In those departments because they are liable to be injured in the discharge of their duty. Department of health. New York City, Greater New York charter, sections 1319-1324. The receipts in- 1907 were $42,018.67. That is a new retirement fund, recently created. The amount on hand is $222,823.73. On the 1st of January, 1907, the total amount on hand was $264,842.40. The disbursements were $25,271.78, leaving a bal- ance of $239,570.62. The number of pensioners in 1907 were 37 and the average annuity $683. Here is something new. which was enacted into law quite recently, I think last year — retirement from active service of officers, clerks, and employees in the department of finance. I will say that the legislature passed a bill tAvo years ago providing a retirement fund or a civil pension to all employees of the city of New York, but the mavor vetoed it. This, however, was not vetoed. (Charter, Greater New York, sections 165-168.) The comptroller is authorized, when it shall be to the interest of the public service, to recommend to the board of estimate and apportionment the retirement of any em- ployee who shall have become physically or mentally incapacitated. In the event of the employee performing duty in the office of the chamberlain, then the chamberlain is authorized to make the recom- mendation to the board of estimate and apportionment for such retirement. The employee must have been employed for at least ten years.. Under this laAv so far but one employee has been retired. Philadelphia : The city of Philadelphia Police Pension Fund Asso- ciation. The object of this association is to accumulate a fund from the dues of its members, and from legacies, bequests, gifts, a;rid other sources, in order that frorti this fund pensions may be paid to ' the members of the association and to the families of deceased mem- bers, said payment to be determined by the by-laws of the association. The city appropriates $50,000 per year for the fund. The pension is one-half pay. A member can retire after twenty years' service and must be at least 50 years of age. There is accompanying that the by-laws, etc., of that association. Philadelphia further. The firemen's pension fund is supported by private contributions, by the payinent of 2 per cent of their salaries, i and an appropriation of $15,000 per year by the city councils; also ' the appropi^iation of one-half of the 2 per cent paid the State for ' ] . foreign insurance. The average amount from this last source is ; $33,000 per year. The members are retired after twenty years of I J service or an account of disablement in the line of duty, the pension ' EETIKBMBNT FUND SUPERANNUATED EMPLOYEES. 65 amounting to one-half of the regular pay. In the case of death of members as a result of injuries received in the line of duty, widows receive $20 per month and children $6 per month until 16 years of age. Philadelphia continued. A teachers' retirement fund, under the authority of section 6 of the act of assembly of April 22, 1905. This fund went into operation on the 1st of January, 1907. The board of education appropriated $50,000 in 1907, and a like appropriation for 1908. The 1 and 2 per cent collected monthly from the teachers produce a revenue of about $50,000 yearly. The law provides for the retirement of teachers voluntarily after they become 60 years of age with thirty years of service to their credit. They may also be retired after thirty years of teaching re- gardless of their age. Partial annuities are also provided for those who become disabled, with five years and less than thirty years of service to their credit. The minimum annuity is $400 and the maxi- mum $800. The State of Illinois. Formation and disbursement of police pen- sion fund. In accordance with State law, in each city, village, or in- corporated town, having a population of 50,000 inhabitants or more, there shall be paid to the treasurer thereof the following moneys to constitute a police fund, viz : First. Two per cent of all moneys received from licenses for the keeping of saloons or dramshops. Second. Three- fourths of all moneys received from taxes or from licenses upon dogs. Third. All moneys received from fines imposed upon members of the police force of sai deity, village, or town for violation of the rules and regulations of the police department. Fourth. All proceeds of sales of unclaimed stolen property. Fifth. One-fourth of all moneys received from licenses granted to pawnbrokers, secondhand dealers, and junk stores. Sixth. All moneys received as fees and from fines for carrying con- cealed weapons. Seventh. One-half of all costs collected in money for violation of city ordinances. Eighth. All rewards given or paid to members of such police force, except such as shall be excepted by the chief officer of police. Ninth. One per cent per month, which shall be paid by or deducted from the salary of each and every member of the police force of such city, village, or town, provided no such member shall be compelled to pay more than $2 per month from his salary. Beneficiaries: Physical disability after twenty years' service, one- half pay; death in performance of duty, one-half pay; widows and children of members who lose life in performance of duty, one-half pay. Then there is the law from which I have quoted. I think that covers all of that. This is a letter addressed to Hon. J. W. Holcombe, "Washington, D. C, under date of March 5, 1908, and is from Mr. F. G. Blair, superintendent of public instruction, State of Illinois : I liaie your letter making inguli-ies about several matters. The city of , Chicago has a pension law which seems to be working fairly well. It is basejl 38257—08 5 66 EETIBEMENT FUND SUPEBANNUATED EMPLOYEES. upon the assessment plan, but by a recent amendment the city is supposed to turn into the fund certain fees. I wish I could give you the facts concerning it, but you would better write to Supt. E. G. Cooley, of Chicago, who can furnish you with the exact data. The police and members of the fire department of Sprmgfleld have a mutual insurance and protective association. It is mutual and has no connection either with the city or with the State. Here is a letter addressed to Hon. Elton Lower, president civil service commission, dated Chicago, March 7, 1908, from the deputy comptroller, department of finance. It reads : In response to your recent request I beg to submit the following synopsis of provisions of act "establishing revenues to police pension fund (as amended by act approved Jlay 16, 1903) and statement of amount and sources of revenue on account of year 1907 : Three per cent of wholesale liquor licenses, $990.25; 3 per cent of saloon licenses, $216,540; 75 per cent of dog licenses, $92,274; 25 per cent of pawn brokers' licenses, $6,300 ; 25 per cent of second-hand dealers' licenses, $2,956.25 ; 25 ^r cent of junk dealers' licenses, $2,037.50; 3 per cent of all licenses not mentioned above, provided that receipts under this item shall not exceed $25,000 per annum, $18,805.17; all special details, $35,350.92; proceeds of sales, unclaimed, lost, or stolen property, $1,245.37; all of fees and fines for car- rying concealed weapons, $10,448; one-half of costs collected for violations of city ordinances, $43,71^.75; all rewards given or paid to members of force, except such as shall be excepted by chief of police. Mr. Hardy. What does that mean ? Mr. GoTJLDEN. Rewards to members of the force for heroic conduct on duty. Mr. Hardy. Is that put into the fund for the general benefit? Mr. GouLDEN. Yes ; but there is none recorded. Evidently the chief of police excepts them all. One per cent of pay roll, provided no member shall pay more than $1 monthly, and all fines on members of force, $42,648.86 ; 1 per cent per month of pensions, $2,022. State of Illinois, senate, No. 408, March, 1907. An act to authorize the retirement from service of members of the fire department in aU cities whose population exceeds 60,000 inhabitants having a fire de- partment (approved May 13, 1887, in force July 1, 1887, and as amended by an act approved March 28, 1889, in force July 1, 1889) : Fund, how created: In all cities, villages, and incorporated towns whose population exceeds 5,000 having a paid fire department, 1 per cent of all revenues collected or received by such city, village, or in- corporated towns from licenses issued by such cities, etc., also all fines imposed for violations of fire ordinances. Rewards, gifts, devises, etc. : All rewards in money, gifts, fees, and all emoluments to be added to said fund. Beneficiaries: Substantially under the same rules and regulations of the State governing the retirement of members of the police de- partment. That is about the same thing. Indiana teachers' pension fund. Chapter 170 (approved March 9, 1907) . In all cities of the State having a population of 100,000 or more there shall be created a teachers' pension fund. Fund, what constitutes it: 1. All moneys that may be given to trustees for teachers' fund by any person or persons. 2. Every teacher shall be assessed upon his or her salary as fol- lows: 1 per cent per annum (but not more than $10) upon the salary of every teacher who shall not have taught in excess of fifteen years, EBTIEBMENT FUND SUPERANNUATED EMPLOYEES. 67 and 2 per cent per annum (but not to exceed $20) upon the salary of every teacher who shall have taught longer than fifteen years. Uses of fund : First, The niaximum pension to be paid any teacher shall be $600 per annum, which amount shall be based upon a service of forty years as such teacher, and every pensioner of said fund shall be entitled to and shall receive such percentage of said sum of $600 as the number of years of said pensioner shall bear to the term of forty years, sub- ject, however, to all the provisions of the act. Second. Any aged, infirm, diseased, or disabled teacher who is now or hereafter may be employed in the public schools of such city, hav- ing served as such teacher for not less than fifteen years, shall be entitled to receive a disability pension. Indiana police pension fund. Chapter 19, an act to amend sections 177, 178, and 179, approved March 6, 190.5. Police pension fund — moneys of fund : First and second. Of all moneys that may be given for the use of the police pension fund ; also any gifts, grants, personal property, real estate, etc. ; also all fines imposed upon members of the police force. Third. Every member, in accordance with the by-laws, shall be as- sessed not less than 1 per cent nor more than IJ per cent per annum of salary. Beneficiaries : 1. Whenever any member of the forpe may be physically or men- tally disabled in the performance of duty, said member shall receive a sum not less than $10 nor more than $50 per month. 2. Any member of force who shall have been in the service for twenty years and less than twenty-five years, upon his written appli- cation, shall be retired and shall receive the sum of $30 per month, and any member who shall have been in the service for over twenty- five years, upon his written application, shall be retired and shall receive $50 per month. 3. Upon the death of any member there shall be paid for funeral expenses a sum not to exceed $150 ; and should such deceased member leave a widow or child or children under the age of 16 years, or both, there shall be paid to the widow $30 per month and such children each $6 per month until they arrive at the age of 16 years, respec- tively. 4. If any member of the force shall die, not leaving a widow or children under 16 years of age, but leaving a father or mother de- pendent upon him, such father or mother shall receive a sum not ex- ceeding $20 per month. I think I have covered in a hurried manner all the different cities and States from which I have obtained information. There is addi- tional information coming for which I have written, but at the request of the chairman of the committee I brought this matter up this morn- ing so you might have it before you, thinking that it might, perhaps, be considered a sufficient amount to show the trend of public action and interest throughout the country. In most places the subject is comparatively a new one and in the experimental stage. I find that 70 leading corporations in the United States, embrac- ing great railroads of the qountry, street railways in the large cities, banks steamship companies, and manufacturing and miscellaneous 68 RETIKEMENT FUND SUPEEANKUATED EMPLOYEES. industrial companies, provide retirement and competency for their superannuated emploj'ees. A list of such companies f oIIoavs : Illinois Central Eailroad Company; Delaware, Lackawanna and Western Eailroad Company ; Southern Pacific Company ; Baltimore and Ohio Railroad Company; Philadelphia and Reading Railway Company; the Pennsjdvania Company— the Pennsylvania Railroad Company, the Philadelphia, Baltimore and Washington Railroad Company, the Northern Central Railway Company; the West Jersey and Seashore Railroad Company; the Philadelphia and Camden Ferry Company; the Pittsburg, Cincinnati, Chicago and St. Louis Railway Company; the Pennsylvania lines west of Pitts- burg; Grand Rapids and Indiana Railway Company; Terre Haute and Logansport Railway Company; the Cincinnati and Muskingum Valley Railroad Company; Waynesburg and Washington Railroad Company; the Cincinnati, Lebanon and Northern Railway Company; the AVheeling Terminal Railway Company ; San Antonio and Aran- sas Pass Railway ; the Houston East and West Texas Railway Com- pany; the St. Louis Transit Company; Boston Elevated Railway Company; Metropolitan Street Railway Company, of New York City ; Denver City Tramway Company ; the Atlantic Refining Com- pany; Andrew Carnegie Relief Fund — Carnegie Steel Company, Carnegie Natural Gas Company; Pittsburg Limestone Company (Limited) ; H. G. Frick Coke, Company ; Oliver Iron Mining Com- pany; Regent Iron Company; Lake Superior Iron Company; Bes- semer and Lake Erie Railroad Company ; Union Railroad Company ; Pittsburg Steamship Company; Pittsburg and Conneaut Dock Com- pany; Union Supply Company; Mingo Coal Company; the Midvale Steel Company ; American Express Company ; the Procter and Gam- ble Company, Cincinnati, Ohio ; the Mutual Life Insurance Company, of New York ; the Union Mutual Life Insurance Company, of Port- land, Me.; the Old Dominion Steamship Company, of New York; the Clyde Steamship Company; the First National Bank of Chicago; Girard National Bank, of Philadelphia; the Fourth National Bank of Philadelphia ; and the National Bank, of St. Joseph, Mo. The Grand Trunk Railway Company of Canada and the Canadian Pacific Railway Company also retire and pension their employees. Most of these companies provide entirely at their own expense the funds from which the allowances to retired employees are paid, while others require the active employees to share the expense by contribu- tion of certain percentages of their salaries. It is not practicable to exhibit here the numerous plans with their differing details according to which retirement is effected by the sev- eral companies, but these plans are somewhat similar in their general tenor, and it will, therefore, aid to an understanding of the scope of all if a representative example be given. The Pennsylvania Railroad Company's plan affords a good illustration. According to this plan retirement is compulsory at 70 years of age, and any employee that has been thirty years in the service of the com- pany and is 65 to 69 years old may retire if incapacitated for active service. The allowance authorized in any case is, " for each year of service 1 per cent of the average regular monthly pay for the ten years preceding retirement." Mr. Hardy. That is very nearly Mr. Brown's proposition ? RETIREMENT FUND SUPERANNUATED EMPLOYEES. 69 Mr. GouLDEN. Yes ; approximately close to it. For example: If an employee has been in the service forty years, and his average salary for the last ten years was $75 a month, his allowance on retirement would be 40 per cent of $75, or $30 a month. Retired employees may engage in any business, but may not reenter the service of the company. Most of the companies have adopted 1 per cent of the average pay received for the ten years last preceding retirement as the basis of pen- sion, but the age and the length of service vary, and in some cases the same company retires different classes of employees at different ages, according to character of service. The National Bank of St. Joseph, Mo., pays 50 per cent of the salary received before retirement, and the Midvale Steel Company pays the highest salary the employee earned at any time during his service to the company. It is worthy of observation that the practice of pensioning super- annuated employees has grown in favor with corporations rapidly in recent years. The first company to begin it was the Grand Trunk Railway of Canada, in 1874. The next was the Baltimore and Ohio Railroad Company, in 1889. Then the Pennsylvania Railroad Com- pany and the First National Bank of Chicago, in 1900, and after that the number increased rapidly every year. It has proven a good investment from a business standpoint for all who have adopted it. I will now give the foreign countries, showing what the govern- ments are doing to provide for the retiring or pensioning of their civil-service employees and the conditions of such service. I quote from the eleventh report of the United States Civil Service Com- mission, July 1, 1893, to June 30, 1894, published in 1895. The Chairman. That is 13 years old? Mr. GouLDEN. Yes; but I am told there has been no radical change in the system. Retirement with pension for length of service or infirmity, Australia (South), Australia (AVest), Austria-Hungary, Bavaria, Belgium, Bolivia, Brazil, British India, Canada, China, Cuba; Ecuador, not stated; Egypt, France, Great Britain; Hawaiian Islands, not stated; Holland, Italy, Japan, Manila, Morocco, Norway, Persia, Peru, Prussia; Russia, extended to widows and minor chil- dren; Sweden, Switzerland, Turkey in Asia; Venezuela (after thirty years of service an employee may appeal to the Congress for a pen- sion), and West Indies (Danish), extended to widows and minor ^ children. In most of the small colonies retirement and pensions are on a basis similar to that of the home country. In India the practice is some- what similar to that in Great Britain, but complicated by numerous conditions and requirements affecting age, length of service, and character of duties as well as salary. In Australia employees are required to take out deferred annuity policies with insurance com- panies. I think that covers the statistics which I have here To me it seems that this is a matter that demands most serious consideration. Some- thing ought certainly to be done in order to relieve the Government in all its various branches and departments from what is an incubus to frompt and efiicient service. It was so found in New York City when entered the board of education in 1893 as a commissioner. Quite a number of principals and teachers were an injury to the children's 70 KBTIEEMENT FUND— SUPERANNUATED EMPLOYEES. development and training, and as the schools exist only f^L^'is children something had to be done to relieve the situation. With the other members of the board we brought about the retirement fund, which has worked such splendid results for the system in New York City. We were forced to create a retirement fund or turn them out on the cold charity of the world. When I asked the city superin- tendent why certain principals and teachers who had outlived their usefulness were not relieved and younger people put in he said : "What will become of them if you turn them out? They have been getting only moderate salaries, but they have either raised families or been compelled to take care of invalid mothers or sisters, aiid if you turn them out you are simply going to throw these persons into the poor- house or upon the charity of unfeeling relatives, which is worse." So, in my judgment, with the employees of the classified service of the Government something should be done to relieve the situation. As was suggested the other day, that you would perhaps be able to decrease the number of employees of the Government materially by getting a younger, more active set of employees to relieve the persons who have served their country for many years so well and faithfully, and again in addition I think you would obtain a better class of men and women to enter the service. The salaries are not large, as you all know, but entirely inadequate. I understand there has really been no increase in salaries in the various Departments among the clerks since 1854. If that is true, it does seem that Congress has been somewhat derelict in its duty. I take as much blame for that as anybody else, because I have been here five years, and I should have been awakened to this matter before this. Mr. Hardy. The general salaries of the employees of the Govern- ment have not been increased ? Mr. GouLDEN. So I have been informed. They have been de- creased. Mr. Faunoe. When I entered the service in 1865, there was no clerical salary below .$1,200. Since there have been several salaries established below that figure — from $660 to $1,000. That decreases the salaries. Mr. Hardy. In 1865 the salaries were paid in depreciated currency? Mr. Faunce. That did not make any difference; it cost just as much to live. Mr. Hardy. And possibly more? Mr. Faunoe. It did. Mr. Hardy. The salary then was based upon a 40-cent dollar? Mr. Faunce. Yes, sir. Mr. Allen. I would like to inquire how this matter is taken by the clerks generally, and whether this question of making reductions from their salaries has been canvassed. I have a letter from two employees which says that many of the clerks are insured in insurance companies and are now paying all that they can afford to, and that others have people dependent upon them, and so forth. Mr. Goulden. I think what the committee has to deal with is not so much what will please the clerks, but what will give us the very best and most efficient service without doing anybody any injustice. That is my position. I am not considering simply the clerks and employees, but the people of the country who are interested in all RETIREMENT FUND SUPERANNUATED EMPLOYEES. 71 affairs of the Government. What is the best way to provide an effi- cient service and at the same time do justice to all concerned. I desire to add the following as a part of my remarks: Department of Commerce and Labor, > Division op Appointments, Washington, March 24, 1908. Dear Colonel: I am just in receipt of a letter from Mr. Murray, who is now at Atlantic City, directing me to bring the inclosed editorial, taken from yesterday's New York Sun, to your attention. It seems to me that the French old-age pension scheme referred to in the editorial IS very much like the plan recommended by the Keep committee, in this respect, that provision IS made to have the plan become operative speedily by requiring the Govern- ment to contribute the IJ per cent for each year of service of those now employed. It IS expected, of course, that the plan of the Keep committee will eventually become self-sustaining. You will notice that the French system referred to in the clipping provides that the employees shall eventually create their own pension fund, but that, m case of deficit, the State must make good. Very truly, yours, Geo. W: LeadlbYj Chief of Appointment Division. Hon. Joseph A. Goulden, House of Representatives, Washington, D. C. The following is the inclosure spoken of and is from an editorial in the New York Sun of a recent date: AN OLD AGE PENSION SCHEME TO BECOME A LAW IN FRANCE. _ The old-age pension bill which was passed in 1906 by the French Chamber of Depu- ties, but which, on the ground of the immense fiscal burden which it would impose, has since been held up in the Senate, will shortly become a law, but in a modified form, the two houses having agreed upon a compromise. Before pointing out the details of the amended project we should recall that France has had on the statute book since 1905 a provision for giving pecuniary aid to all per- sons over 70 who are infinn, incapacitated, or suffeiring from an incurable disease. Asthe age limit is higher by five years than that which is contemplated in Great Britain, and as compliance with the other conditions is exacted, the number of bene- ficiaries by this law is, according to the last returns, not much over 350,000 annually, and the total yearly outlay on their account is about $12,000,000. The bill which was passed by the Chamber in 1906 is supplementary to the existing statute just men- tioned and differs materially from it. The age when pensions are to become payable is reduced to 60 years, and there are to be no conditions as to infirmity, incapacity, or disease. On the other hand, it embodies the contribution principle, which is repu- diated by British socialists and laborites, but which forms the basis of the old-age pension law operative in the German Empire. Like the German precedent, the French bUl when it is in full operation will require workmen, if they are to qualify themselves for the receipt of pensions at the age of 60 and thereafter, to contribute 2 per cent of their wages annually during a period of thirty years. Again, in accord- ance with the German pattern, a precisely equivalent contribution is imposed upon the ernployers of labor. So long as the compulsory savings of the workmen and the compulsory contributions of the employers do not create a fund large enough to fur- nish a pension of at least 172 a year, the State must make good the deficit. In order, however, that the old-age pension law may become operative speedily, instead of being applicable only after three decades from the date of its enactment shall have elapsed, there is a clause granting pensions smaller than |72 to all existing workmen over 60 years old who can prove that they have worked continuously thirty years. It is this clause which the French Senate has firmly refused to approve, for the reason that, though estimates vary as to the extent of the pecuniary liability which the State would thus incur, nobody disputes that the liabhity would be very great. The Senate, however, has consented to pass the bUl if it be amended so as to limit the State's liability to $20,000,000 annually until the compulsory savings of workmen and compulsory contributions of employers shall have amounted with interest to a considerable fund. The Chamber of Deputies has agreed to the amend- ment. The workings of this old-age pension law will be watched with keen interest, not only by French taxpayers, but also on the northern side of the Channel, where many 72 RETIREMENT FUND SUPERANNUATED EMPLOYEES. Englishmen oppose tlie noncontributory plan demanded by the laborites and insist that the habit of thrift ought to be encouraged and enforced. It is unreasonable, they say, that industrious and economical laborers who from their savings help to bear the national and local fiscal burdens should be taxed in order to give pensions after the age of 65 to members of the lazy, wasteful, improvident, and dissolute class of the British proletariat, especially as no correspondent demand is made by the represent- atives of labor in Germany and France. Mr. Jordan. I would like to state that the scheme which we have presented here, known as the Bro\vn scheme, meets with less objec- tion than any scheme which has thus far been suggested, particularly among the younger clerks. The scheme which had the tontine feature or the commingling of assets was particularly distasteful to the younger people, because they felt that thej would be contributing for the retirement of the old., I can say that this retirement association has been in existence some eight years and that we have pretty thor- oughly canvassed the civil-service employees of this coimtry, and in branch organizations which have taken up this work in cities, big and httle, and they are generally in favor of a scheme which secures to ' them a return of their money kept separate and distinct from that of anyone else. STATEMENT OF MR. JACOB W. STARR, REPRESENTING THE UNITED STATES CIVIL SERVICE RETIREMENT ASSOCIATION, WASHINGTON, D. C. Mr. Starr. In answer to the question of Mr. Allen, I would say that we have 140 different branches in the Philippines, Porto Rico, and all over the country, and consequently this matter has been canvassed thoroughly many times. I shall confijie myself to some remarks on the cost of retirement as we have found it through our inquiries. There are 150,383 persons in the classified service of the Govern- ment, as shown by Bulletin No. 12, issued by the Bureau of the Cen- sus July 11, 1904. In tabulating the statistics you will notice that of that number 50,047, drawing a salary of $700 and less, were frouped in one body. (See p. 23.) Since the issuing of Bulletin To. 12 the United States Civil Service Retirement Association requested the segregation of the number and salaries that are involved in that group. Witness the following letter from the Director of the Census : Depaetmbnt £>f Commerce and Labor, Bureau of the Census, Washington, December 20, 1905. Mr. Wallace W. Hite, Patent Office, Washington, D. C. Dear Sir: In deference to the request of the United States Civil Service Retire- ment Association I have had the statistics for the 50,047 civil-service employees shown in Census Bulletin No. 12 as receiving less than $720 per annum segregated, so as to eliminate 5,958 of them which received less than $100 per year, and tabulated the remainder according to the amount of salary that each received. The totals for all classes of employees included in this group, whether employed in the District of Columbia or elsewhere, are summarized in the following statement: Receiving $100 but less than $200 per annum 1, 964 Receiving $200 but less than $300 per annum ..,. ij 686 The Chairman. Are those employees in the classified service receiving less than $200 and $300 per annum? Mr. Starr. Yes, sir. Mr. Kimball. In what capacity do they labor ? EETIEEMENT FUND SUPEKANNUATED EMPLOYEES. 73 _ Mr. Starr. In various capacities; I do not know exactly. That IS stated in Bulletin No. 12. I do not think, however, they give the occupation. Mr. Allen. In the classified service there are classified clerks and some classified laborers. A laborer can not be appointed in the Departments without being classified or skilled. Mr. Stare [reading]: Receiving $300 but less than $400 per annum 2, 372 Receiving |400 but less than $500 per annum 3, 101 Receiving $500 but less than $600 per annum 2, 916 Receiving $600 but less than $700 per annum 28, 936 Receiving $700 but less than $720 per annum 3, 114 Total 44, 089 The CHAiRMAisr. You would not include those of the laboring class, those receiving but $200? Mr. Staee. Those are permanent people, in the service all the tipae. They are in the competitive service. The Chaieman. They do not come in the competitive service? Mr. Staee. Yes, sir; they have to stand a competitive examination. The Chairman. Are you sure of that? Mr. Staee. This information is from the Civil Service Commission and the Bureau of the Census. The Chaieman. I think there must be some mistake about that. The Bureau of the Census has refrained from calculating the total amount paid annually to the civil service employees because it was believed the information in the possession of the office was not sufficiently accurate to justify such a computation, but, in compliance with your request, the computation has been made and the results are furnished in the following statement: In the District ol Columbia. Elsewhere. Number ol employees. Estimated average salary. Total amount paid. Number of employees. Estimated average salary. Total amount paid. 5,643 2,033 491 1,742 2,131 5,104 2,471 1,194 1,020 767 538 S533 720 840 900 1,000 1,200 1,400 1,600 1,800 2,000 2,500 S3, 007, 719 1,463,760 412,440 1,567,800 2,131,000 6,124,800 3,459,400 1,910,400 1,836,000 1,534,000 1,345,000 38,446 11,017 8,438 8,849 20,780 8,199 5,186 1,150 1,025 984 890 1533 720 840 900 1,000 1,200 1,400 1,600 1,800 2,000 2,600 $20,491,718 7,932,240 7,087,920 7,964,100 20,780,000 9,838,800 7,260,400 1,840,000 1,845,000 1,968,000 2,226,000 24,792,319 89,233,178 The total amount paid in salaries to the employees of the Executive civil service was calculated by multiplying the number of employees in each group by the esti- mated average salary. In computing the total salaries separately for the employees in the District of Co- lumbia it was found that, by taking for the average salary the minimum rate in all groups except the group of employees receiving less than $720, a total amount was obtained approximately the same as that given in. the Official Register for 1903, and the same rates were therefore used for employees elsewhere than in the District of Columbia. By the segregation in $100 groups of the employees receiving less than $720, it was found that the average salary less than $720 is about $533. This average salary was therefore used for the less than $720 group in calculating the total salaries. In making the calculation no account was taken of the employees receiving less than $100; those whose salaries were not reported, or who received no compensation; piece workers, and 613 special agents paid on a per diem basis, who received compen- sation only for such time as they were actually employed. 74 RETIREMENT FUND SUPERANNUATED EMPLOYEES. By this estimate, it appears that the annual salaries of the employees in the District of Columbia approximated 124,792,319, and of the employees engaged elsewhere than in the District $89,233,178, making a total of $114,025,497. That letter was signed and sent to us by the Director of the Census. The average salary of the Government employee in the District of Columbia, as shown by Bulletin No. 12, is $1,072. This amount is much larger than the average salary of the entire service, but it is the average salary taken into consideration in the calculations and preparation of the bills under consideration. The average annual salary of the entire classified civil service of the Government is $758.23, being $313.77 less than the average salary of those in the District of Columbia; consequently, the amount the Government will have to contribute will be lessened by an amount equal to as many times $313.23 as there are employees retired annually. The Keep Commission bill, which is the "Brown bill" amended, states that $3.57 of the salary of $100 per month will purchase the annuity of $900 when the employee is retired with fifty years of service, being 75 per cent of his aimual salary of $1,200. We beUeve that this 3.57 per cent will be more than necessary, as the statements of the eminent actuaries the United States Civil Service Retirement Association employed to make the calculations to prove the feasibil- ity, practicability, and absolute safety of the plan and provisions of b£l H. R. 19375, being the bill drafted by our association and in- troduced by Mr. Fowler in the Fifty-ninth Congress. Mr. Walter C. Wright, of Boston, Mass., is a son of Mr. Elizur Wright, the foremost actuary of his day. Walter C. Wright was associated with his father in his business and is an actuary of great experience. Mr. Wright made a thorough analysis of the conditions of our bill and pronounced those conditions feasible. In his state- ment to our association, he says : A 5 per cent collection will, on the whole, be abundant to fulfill the proposal of the bill, which is that each annuity to be paid shall equal one-sixtieth of the average salary of the last ten years of service, for each year of service, not exceeding forty years, which would be 66f per cent in every case of forty or more years of service. Indeed, the probability is that an annual allowance of 5 per cent to produce annuities of 66f per cent of the average salary for the last ten years, after at least forty years of service, and proportionately less percentages after shorter terms of service, would prove superabundant on the whole and create some surplus. In a subsequent statement to our association, Mr. Wright says : I am so well satisfied that 5 per cent will prove the most popular contribution rate which could be fixed upon, and that it will prove sufficient for all purposes, that I have not considered any other rate. Mr. Hardy. Five per cent of the annual salary? Mr. Starr. Yes, sir. Mr. Hardy. That is a great deal more than the percentage spoken of by Mr. Goulden? Mr. Starr. Yes, sir; but we put the whole expense in the bill; clerk hire and everything else connected with it. Mr. Hardy. It is also greater than Mr. Brown suggested to this committee ? Mr. Starr. Yes, sir. There is another thing I want to call your attention to, that our bill provided for persons who were disabled in the service. These bills provide only for retirement upon reaching the retiring age. Mr Hardy. They do provide for voluntary withdrawal. Mr. Starr. But they eliminate those injured or disabled in the service. I speak of that because it would reduce the cost, I think. BETIBEMBNT FUND SUPERANNUATED EMPLOYEES. 75 Mr. Haedy. In case of disability? Mr. Starr. Yes, sir. Mr. Hardy. Would that be very difficult to arrange? Mr. Starr. No, sir; we could arrange it in the bill introduced and known as the Fowler bill. Mr. Hardy. Is it intended that the whole service shall pay the annuity and not the particular individual by his payments ? Mr. Starr. No, sir. Mr. Jordan. That is the commingling of assets. Mr. Starr. James Howard Gore, Ph. D., of George Washington University, Washington, D. C, and Fellow of the Actual Society, also consulting actuary of the Mutual Life, New York Life, and Equi- table Life Insurance Association, of New York, the three largest and most successful in this country, says of our bill: I am convinced that the assessment proposed will be adequate and that it will be found that the machinery you suggest will be satisfactory. Mr. Gore was so well satisfied that a surplus would accrue that he strongly recommended to us the "adoption of a section to our bill that would increase the benefits or reduce the taxation after five years." _ Mr. Miles N. Dawson, consulting actuary, New York City, basing^ his calculations upon the unofficial data we had collected prior to the issuing of Bulletin No. 12, finds that an assessment of 5.6 per cent will produce an annuity equal to one-sixtieth of his average annual salary for the ten years preceding retirement for every year of service rendered in any and all departments of the Government, plus a death benefit of 1900 and a sick benefit of $6 per week. The calculations of Mr. Dawson are concurred in by Henry Moir, actuary. New York City. In a statement to the Committee on Reform in the Civil Service, House of Eepresentatives, February 12, 1904, Maj. Gen. F. C. Ainsworth, the Adjutant-General in the Army of the United States, submitted a memorandum in which the estimated cost of retirement at 70 on one-half pay would not exceed 3.5 per cent of the active list. These figures are the result of calculations based upon known data respecting the active and retired service of the United States Army, and covering about forty-five years' experience. The Chairman. Do you mean that you advocate that bill in pref- erence to the bill before us? Mr. Starr. No, sir; We have found here, first, the maximum cost, and second, the men are rather appalled at the amount of contribu- tions fixed by the Keep bill or the Brown bill. I do not believe that it is going to cost nearly so much as they have stated, that is, on the part of the Government, because there is going to be separations from the service. These calculations have been based upon an average annual salary of $1,072, when it is $313.77 less than that, and that would make quite a difference in the cost. Mr. Hardy. Have you ever ascertained how much a man would pay on that 5 per cent or even 3 per cent basis, if he should enter the service at 20 years and retire at 70 years, whatever would be necessary to give him an annuity ? Mr. Starr. We have never figured out just that amount. We saw no other way of fixing it, . but taking them all in. Mr. Hardy. You would average the long service and pay for the short service ? Mr. Starr. To a certain extent we did, but to offset that, retire- ment, when it is enforced, will cause promotion to be so much faster that 76 RETIREMENT FUND SUPERANNUATED EMPLOYEES. many of these men by reason of these retirements will receive a pro- motion that will pay all they have to pay to give them a surplus which they would not receive as the service is now. Mr. Hakdy. You have a sort of equal assessment at different ages ? Mr. Starr. Yes, sir. Mr. Hardy. A man who enters at 60 years of age would pay no more assessment upon his salary than the man who enters at 20 years of age. That is a little contrary to the general insurance plan. Mr. Faunce. Can a man enter the service at 60 years of age? Mr. HoLCOMBE. He can, but it is unusual. Mr. Starr. I think the civil-service law limits it. The Chairman. No, sir; there is no law which limits it. Mr. Hardy. Your proposition is different from the ordinary insur- ance or annuity plan, which bases its assessment according to age? Mr. Jordan. I understand Mr. Starr is not advocating that bill. His purpose is merely to point out the relative cost. The association is standing behind Mr. Brown's bill. Mr. Faunce . We were expected to bring in a bill which would be satis- factory to the retiring clerks and be without any cost to the Government. Not that we preferred that, but that was what we were requested to do, and we have been in a way hampered by that requirement. The Chairman. Requested by whom? Mr. Faunce. The organic law of our association required that. It was the general feeling of everybody, you gentlemen as well as the people outside, that any amount we might ask from the Government would be a very unpopular move for us to make. Therefore we con- cluded that we would not ask the Government for any money, but would make a direct assessment upon ourselves. However, since then the sentiment in the country has changed very much. Mr. Brown. I would like to ask Mr. Starr if he refers to the figures that are embodied in the report submitted by the Keep Commission? Mr. Starr. Yes, sir. Mr. Brown. Those figures are as nearly accurate as it is possible to make them. Mr. Starr. I would also invite your attention to the letter of Mr. Frank Scott, treasurer of the Grand Trunk Railway of Canada, which letter embodies a tabulated experience with the Grand I'runk Railway of twenty-eight years. This table shows you that after paying aU expenses the Grand Trunk Railway of Canada Superannuation and Provident Fund Association has a surplus five times as great as all of their expenditures. This association is incorporated separate and apart from the railroad company and is controlled and operated by a board of directors appointed by the railway company and from its employees. The company makes a deduction of 2^ per cent from all salaries of their employees and the railroad company adds a like sum, equaling 5 per cent. An official report of the Civil Service Commission, showing the number of separations from the service by death, resignation, and removal for the years 1898 to 1905, inclusive, as shown in the table submitted herewith, will show the number of separations from the service in the eight years to have been 60,994, an average of 7,624 plus, for each year. These persons, separated from the service by death, resignation, or removal, will never be placed on a retired list, conse- quently reducing the amount that is proposed to be contributed by the Government by the bills under consideration. Thus it will be seen RETIREMENT FUND SUPERANNUATED EMPLOYEES. 77 that the estimates for the contributions by the Government are 30 per cent too great by reason of the high average upon which this state- ment was based and 5 per cent by the separations from the service, making this statement 35 per cent greater than is required. I will submit a tabulated form for each year's separations. (Ap- pendix E.) Mr. Hardy. Does that compilation of separations include those who have been a long time in the Government service, or rather those who have been a short time as well as those who have been a long time in the service? Mr. Starr. It includes those who have died, resigned, or been removed. Mr. Hardy. Many of them have been in the service a little while? Mr. Starr. Certainly; from all causes. This is furnished by the Civil Service Commission. The bills for the retirement of the classified civil service include in the number provided for the Life-Saving Service and the railway mail service. The data herewith submitted would indicate that the railway mail service is far more hazardous than the occupation of a soldier in the Regular Army in time of peace, and I am informed that the Life-Savmg Service is more hazardous than even the rail- way mail service. Yet Congress has enacted a retirement law .for the soldiers after thirty years of service, but none for the more hazard- ous occupation of the life saver or the railway mail clerk. I submit a statement of casualties in the railway mail service. DIVISION OF EAILWAY MAIL SERVICE. The following is a statement of casualties from 1875 to 1907 : Year ended June 30 — Total clerks. Acci- dents. Clerks killed. Clerks seriously injured. Clerks slightly injured. 1875 . . :. 2,238 2,415 2,500 2,608 2,609 2,946 3,177 3,570 3,855 3,963 4,387 4,673 4,851 6,094 5,448 6,836 6,032 6,417 6,646 6,866 7,046 7,408 7,573 7,999 8,388 8,695 8,978 9,485 10,262 11,270 12,110 13,317 14,009 1 1 2 2 3 1876 1877 . 27 36 35 26 62 83 114 154 102 211 244 248 193 261 219 345 403 362 497 495 589 597 799 697 825 o296 372 378 357 328 470 10 15 14 14 15 16 36 28 35 56 45 63 95 41 68 60 66 48 60 47 33 34 50 57 63 88 78 90 125 77 125 4 1878 3 1879 . . . 13 1880 15 1881 . 7 3 1 7 2 22 1882 20 1883 42 1884 60 1885 66 1886 60 1887 5 4 10 4 13 5 10 4 7 5 14 7 6 4 7 9 !'18 cl8 12 i216 21 72 1888 - 46 1889 40 1890 63 1891 84 1892 112 1893 115 1894 99 1895 ...L 128 1898 66 1897 75 1898 146 1899 - 162 1900 187 1901 229 1902 302 1903 398 1904 348 386 1906 414 1907 662 o The number of accidents shown since 1902 are those in which clerks were killed or injured or in which mail was lost or damaged. The accidents in years prior to 1902 represent those of every kind, mostly in which the car was damaged to some extent. !> Also 1 substitute and 3 maU weighers. c Also 2 substitutes and 1 mail weigher. d Also 1 mail weigher. _ . _ 78 EETIEEMENT FUND SUPERANNUATED EMPLOYEES. Following that, I hare a table showing deaths from injuries in the United States Army in time of peace. Deaths from injuries in the United States Army. Year. Mean strength. Homicide. Suicide. Others not on sick report. Cases treated be- fore death. Total. 1885 26,542 26,096 26,366 26,739 27,206 26,684 26,460 26,861 27,659 27,674 11 9 6 5 5 7 8 5 5 10 16 18 19 8 21 16 22 22 22 18 22 27 22 28 22 :UATED EMPLOYEES. order that there might not be any particular hardship in the deduc- tion of the first month's salary, it occurs to me that that deduction could be wisely distributed over the probationary period, or m case of the reinstatement of a person leaving the service and commg back again you could, under departmental discretion, distribute that oyer an equal period so that it would be a very small part of his deduction and he would not feel it. In the case of the promotion feature my scheme would be to take 25 per cent, possibly a little bit more than the one-twelfth which the French system has adopted, of the promotion salary, and in actual practice it would work like this: If you were getting $1,200 and were promoted to $1,400, and that scheme of deducting 25 per cent of the $200 annual increase was in operation, it ■would simply have the effect of taking away from you $50 and dis- tributing that amount over a period of three months, sixteen dollar? and something for each of those three months. In other words, it would defer tbe actual beginning of the promotion for a period of three months. Now, then, that deduction, plus what would be given under the Brown bill, would very materially reduce, I am satisfied, the cost of the flat assessment or, as Mr. Goulden has stated, 1^ per cent, ranging as high as 10.5 per cent. Nobody would object, as far as I know, to the deduction on promotions. We are all anxious to get promotions; and if we are not willing to suffer that deduction, we can pass it on to our friends. But there will never be any question in the mind of a new man who enters the service. He knows when he comes in that he has got to give up the first month's pay for the retirement fund and that it will materially swell what he will get in the end. The Chairman. But there is the drawback of a man starting in in debt. Mr. Jordan. I do not follow the chairman in that suggestion. The Chairman. Suppose a man enters the service and has no money on hand. Mr. Jordan. The Government is the paymaster, and it simply deducts that amount during a period of six months. The Chairman. Suppose he goes into the service and has just enough money to Uve the first month. Mr. Jordan. You would give him a proportion of that, five-sixths, so he would not feel it. Mr. Hardy. Is it not more than Hkely that a man entering the Government service would make some preparation to have some little money? Mr. Jordan. That has been probably the case with the French Government, though I have no statistics on that point. Suffice to say that these particular features have never met with any objection at the hands of the employees in the French Government. I want to say that the reason the 5 per cent has never been sufficient under the French system and why they have supplemented it by this additional source of revenue was because under that system they take care of the widow and minor children. The amount of money deducted from the French employee is much greater under this system than if you were simply taking care of the individual himself and not some one dependent upon him. If the chairman will permit me, I would like to introduce this pam- phlet, Senate Document No. 509, Fifty-ninth Congress, first session, RETIREMENT FUND SUPERANNUATED EMPLOYEES. 83 which contains some very good tables and which may be of interest to the committee in its worli. (Appendix G.) I want to call the attention of the committee briefly to the attitude of the Canadian government. This particular proposition is no more- or less than a compulsory saving proposition. The Canadian govern- ment started a system m 1874, almost coincidently with the Grand Trunk Railway. It started a system of retirement and deducted a proportion of the salary of the employee. In other words, in order to get the benefit of that retirement fund you had to stay in the serv- ice; if you resigned, just as under the French system, you got nothing. It led to great trouble. That is, it gave great concern to the younger employees. They have a large number of women in the Canadian civil service, who were anxious at times to separate themselves and upon separation the money which they paid in was absolutely for- feited. That of course would be true under any bill other than the one which has been presented to your committee here. Mr. Hardy. That was rather a restriction on matrimony? Mr. Jordan. Yes, sir. The Canadian government appointed a committee, and I shall not do more than to refer to that volume, the Report of the Royal Com- missioners of Civil Service of Canada, 1892, in which this committee went into the whole subject of civil pensions of countries all through the world, and as a result of their inquiry, boiled down to a few words, they concluded that the best way was to establish a bank, wliich is in existence at Ottawa, known as the Governmental Savings Bank, and to make a flat reduction of 5 per cent from the salary of every em-, ployee from and after the date that law went into effect, however preserving the rights of all those who had been contributing under the former system. The money thus deducted was put into this bank and compounded semiannually at 4 per cent, and an individual sepa- rate account, which is contemplated by the Brown bill, is kept with every Canadian civil employee. That money he can not touch under any condition as long as he remains in the service. Mr. Brown and I conferred at great length about this feature and we think we have protected the Government against all those possi- bihties in this pending bill. The Brown bill is similar in that par- ticular to the Canadian government, and that law which was passed by the Canadian government has been in existence since 1898. Mr. Hardy. Does not Mr. Brown's bill contemplate an assessment of 3^ per cent or 4 per cent? Mr. Jordan. I am glad the gentleman has referred to that. Under the Canadian government it is a flat deduction of 5 per cent, and here it is a graded tax. The Chairman. Can you refer to that law? Mr. Jordan. It is found in the Civil Service List of Canada for 1905. The law referred to is as follows: Chapter 17. — An act to provide for the abolition of the civil service superannuation act and for the retirement of members of the civil service. (Assented to 13th June, 1898.) , , , ^ Her Majesty, by and with the advice and consent of the senate and house of com- mons of Canada, enacts as follows: 1. This act may be cited as the civil-service retirement act, 1898. 2. This act shall apply, instead of the civil-service superannuation act — (a) to every person hereafter appointed to the civil service; (b) to every person no w in the civil service who, before the 1st day of January, 1899, with the consent of 84 RETIREMENT FUND SUPERANNUATED" EMPLOYEES. the governor in council, elects to accept the provisions of this act in lieu of those of the civil-service superannuation act. 3. The civil service for the purposes of this act shall include all officers, clerks, employees, and other persons mentioned or referred to in section 2 of the civil-service superannuation act. 4. A fund, to be called the "retirement fund," shall be formed for the retirement of the persons to whom this act applies, subject to the conditions and qualifications here- inafter contained. 5. The said fund shall be created by the reservation out of the salary of each person of 5 per cent of his salary; in addition to which, in the case of any person now in the service who has been subject to any such deduction, and who, with the consent of the governor in council, elects to accept the provisions of this act in lieu of those of the civil-service superannuation act, there shall be transferred to his credit and form part of the said fund a sum equal to the amount of all such deductions from his salary and interest, compounded half-yearly, at the rate of 4 per cent per annum. 6. The amount reserved in the case of each person, together with any sum trans- ferred to his credit as in the next preceding section mentioned shall be entered in a separate account; and interest at the rate of 4 per cent per annum shall be computed on the 1st days of January and July in each year on all sums, whether of piincipal or inter- est, to the credit of the retirement fund, and such interest shall be credited thereto and form part thereof. 7. No person shall, during his continuance in office, have any claim or right to any part of the retirement fund. 8. On the retirement or dismissal of any person the amount to his credit in the retire- ment fund shall be payable to him; Provided always, That if he is; in the opinion of the governor in council, unfit to manage his own affairs, such amount may be dealt with the benefit of such person, or of his wife or children or other next of kin, in such manner as the governor in council determines. 9. If a person dies while in the civil service, the amoimt to his credit in the retire- ment fund shall be paid to his legal representatives. 10. This act shall come into force on the 1st day of July, 1898. As to the English Government, it may be well known to you that the original scheme of 1829 was the same scheme that we have been attempting until recently to adopt ourselves. It was nothing more or less than an attempt to assess the salary for a certain sum of money which they thought was sufficient, the Government contrib- uting nothing whatever toward that fund, but after a period of time ranging from 1827 to 1859, there were numerous petitions presented to Parliament with a view to extending the scope of the original law to bring in new classes of employees, and Parliament appointed a commission at that time that took up all the pending petitions, and after an exhaustive study of the subject they concluded that the wisest and best thing to do was for the Government to pay the pen- sions themselves, and from 1857 until the present time the English Government has paid the pensions directly out of the English ex- chequer. It happened that at the time the English Government took over this retirement proposition there was existing to the credit of the employees, expressed in our money, about $5,000,000. The Eng- lish Government just turned it in and has held it ever since. There was some complaint, but it made no difference, because the English Government stood for the taking care of all of them. Since the pres- ent English monarch has been on the throne a committee of some ten or more were appointed to investigate still further the question as to the wisdom of the present system of pensioning civil-service employees in that country, and that committee went into the subject very exhaustively in a report which is called the Report of the Royal Commission on Superannuation in the Civil Service, published in 1903, and I shall just read one paragraph from that report. Speaking par- ticularly about the principle of the existing system, it says: The undertaking of the State with an established servant is, during good behavior, to provide for him throughout his life, whether that life be long or short, continuing to RETIREMENT FUND SUPERANNUATED EMPLOYEES. 85 him when his powere begin to fail a means of hvelihood sufficient to enable him to maintain himself in the social position he may have reached by his good service. This follows very much the analogy of what has been done by the best employers of the commercial classes in civil life— when a servant is no longer able to do his full duty satisfactorily he is placed on less exacting work, passing the years of old age on a lower wage, and even when he becomes physically unable to do any work he, in many cases, draws a small rate of pay in return for hardly any labor at all. I regret to say that that is the condition in some of the Depart- ments to-day, though the people have not been dropped, but have been lowered. We do, in some cases, of course, drop them. What is called a pension in the civil service is merely the continuance, during the latter years of life, of pay promised for a whole life service, during a period when services, if rendered, would probably be useless, and, in many cases, worse than useless. The payments made for the sixty-first or sixty-sixth years of life are no more deferred pay than those made for the sixtieth or sixty-fifth. This is the present excellent charter of the civil service, and it is not only under this system, but because of it that the English civil service has earned its high repu- tation for fidelity, zeal, and independence. The advantages of this life provision are given wholly at the charge of the State and in their present form they have attained the objects in view. The same system has been introduced into very many estab- lishments of the highest standing in the country, where continuous, zealous, and thoroughly honest services are the main requirements. Mr. Hardy. Is it not true that England is now struggling with the old-age proposition? Mr. Jordan. Not only that, but in France they have passed an old-age pension law by which the people are required to give a certain amount of money and the State supplements that. I want to conclude my remarks by referring to one other way by which, in my judgment, you can take care of the question of ap- propriating money. It may be known to the chairman, who is a member of the legislative, executive, and judicial appropriations subcommittee, that large sums of money annually lapse into the Treasury of the United States. I have taken the greatest pains to ascertain the amount of that lapsed salary fund for the last two fiscal years, arising from various sources, sujch as resignations, failure to fill positions, and in other ways. Last year we found that the amount covered into the Treasury at the expiration of the two years was $802,000. Now, mark you, for the fiscal year 1906 you ap- propriated $133,000,000 for the classified service of this country, and that is growing from year to year. I will digress long enough to say that I tried to induce the chairman of the Appropriations Committee of the House to make it mandatory upon the heads of the various Executive Departments and independ- ent commissions to annually furnish to Congress, with their estimates, a statement on the money paid in salaries so that Congress itself might know what they are paying out for this increasing force of civil-service employees from year to year. To return, this $802,000 lapsed and went into the Treasury of the United States. Those who remained behind, if there were vacancies in a particular office, did the work and kept it up, despite the fact, as the chairman will say, that Congress is constantly importuned for more clerical help. If Congress were to give the retirement fund the benefit of this lapsed fund instead of having it carried back into the Treasury of the United States — and I am satisfied, as Mr. Brown has stated, that his estimates are necessarily high — it would be sufficient to care for this project so far as the Government is con- cerned for an indefinite period of time. If, however, you wish to 86 EETIBEMENT FUND SUPERANNUATED EMPLOYEES. adopt the suggestion which I first ofFef ed and which would in no way conflict with what has been suggested, taking the first month's salary and making the deductions on promotions, you have another way. Either plan, if adopted, would take care of the situation until toe system got on its feet. I have been associated with those who have been actively and zealously interested in the accomplishment of some retirement system. Each year we have had our annual meetings and kept up an organization. We try to hold the organization together and intact, and it has been somewhat difficult to do so. The gentleman [Mr. Allen] has referred to two employees who have protested, and there may be others, but, speaking for the men and women of my age in the Departments, I want to say that the great majority of the employees are greatly in favor of and want some scheme of retirement in old age that will be satisfactory to Congress and as satisfactory as it may be to ourselves. You have either got to do that, if you are going to maintain the civil-service law, or you will have to do what I fear may be done, establish a tenure of office. And that, I trust, you will never do. I thank you, gentlemen. Mr. Brown has reminded me that I did not make my statement about the lapsed fund entirely clear. It was my understanding and desire to state that if the committee saw fit to give the retirement fund the benefit of the lapsed fund it would provide for the past services. In other words, it would take the place of the amount that Congress would directly appropriate as now contemplated under the Brown bill. Mr. Haedy. Is the lapsed fund actually due to any employee? Mr. Jordan. No, sir; it is simply unused money. Mr. Haedy. The appropriation was not required for the service? Mr. Joedan. It was not used. The Chaieman. It is just the same as making an appropriation out of the Treasury ? Mr. Joedan. It is simply appropriating by indirection; that is all it amounts to. I simply felt that Congress might not in its present temper feel disposed to appropriate the money which has been sug- gested, and we are anxious to get some bill on the statute books. The committee has but one aim, and that is the success of this scheme, and I considered that it would work in perfect harmony with the Brown bill. Mr. Beown. I would like to ask Doctor Jordan if he has made any estimate as to whether the deduction from increases in salary would be sufficient to take care of the cost for past services? Mr. Joedan. The estimates made upon the deductions for the fiscal year 1906, which was the most available material we had at that time, amounted to practically $1,500,000; more than sufficient. The Chaieman. That refers to the deductions from promotions ? Mr. Jordan. And the first month's salary, as well. Mr. Haedy. And the 5 per cent. Mr. Joedan. No ; there is no reference whatever to the 5 per cent. The Chairman. You expect the first month's salary of the new- comer will be applied to the past services of those already in exclu- sively ; it would not go to his fund ? RETIREMENT FUND SUPERANNUATED EMPLOYEES. 87 Mr. Jordan. The deductions from first month's salaries and pro- motions should be placed in a special fund to pay annuities for services rendered prior to the enactment of the law. This would relieve th« Government of the expense originally contemplated for annuities for such past services. The Chairman. Is that your theory, that in order to supply a fund for the past services the first month's salary of the beginner shall go to the fund for the retirement of those already in the service ? Mr. Jordan. Yes, sir. STATEMENT OF MR. NEILSON FALLS, WAR DEPARTMENT. Mr. Falls. I think that any bill formulated upon the lines of the Brown bill or the Keep Commission bill would be satisfactory to our committee. Of course you have our bill to fall back upon, if it is necessary. There is just one thought, and that is the humanitarian view. I could almost preach a sermon to you gentlemen on the humanitarian side. That is something that must appeal to you all. The public service demands action. We are perfectly willing to go out, I for one, upon the Very smallest basis of annuity. We feel that our work is almost done, and we know that younger men can do the work better and the «ituation in the Government service will greatly improve as soon as there is something for them to work up to. Thereupon the comnaittee adjourned to meet to-morrow, Saturday March 21, 1908, at 11 o'clock a. m. Committee on Reform in the Civil Service, Saturday, Manli21, 1908. Committee called to order at 11 o'clock a. m., Hon. Frederick H. Gillett in the chair. The Chairman. We have met this morning to hear the officers of the United States Civil Service Retirement Association, and I think probably this will be our last hearing. We will hear Mr. Neagle first. STATEMENT OF MR. PICKENS NEAGLE, PRESIDENT OF THE UNITED STATES CIVIL SERVICE RETIREMENT ASSOCIATION, OF WASHINGTON, D. C. The Chairman. Mr. Neagle, you are the president of your asso- ciation ? Itlr. Neagle. Yes, sir. I think it advisable, in order to facilitate matters and also to spare the time of the committee somewhat, that I should read what I have to say rather than undertake to state it orally. Representing the United States Civil Service Retirement Associa- tion, I may say that the association is not in the attitude of opposing any fair and reasonable measure that will provide a sure and lasting means of retiring the civil service employees at their own expense. It has not sought the enactment of a law that would impose upon the Government any part of the cost at any time of the retirement of such employees, but is, in fact, committed by its organic law — that is to say, its constitution — to the purpose of aiding to devise a means of retirement without cost to the Government. 88 EETIREJLEXT FUND SUPEEANN-^- VTeD EMPLOYEES. It views with favor, however, the plan now under consideration by the committee by which the Government is to facilitate the establish- ment of a scheme of retirement by bearing the burden of caring for those that are now superannuated and by bearing a constanth' diminishing part of the cost of retirement of those who will become superannuated from time to time before their own contributions for that purpose will become sufficient. This plan seems to the associa- tion to be the best one presented and appears to be the only one that is founded on justice and the right principle, and not at all unreason- able, because the Government would derive from the operation of the plan both an immediate benefit commensurate with the cost to it and a continuing benefit without giving an equivalent in return. The committee has probably received about all the desirable iirfor- mation, facts, and figures relating to this subject that it is practicable to obtain, and I have nothing of that kind to offer in addition to what was submitted to the committee yesterday at my request and in my unavoidable absence by representatives of the Retirement Associa- tion, but I desire to make some deductions from the information already in the committee's possession and to emphasize some points that seem to me to have direct bearing and great weight upon the considerations that favor the general principles embodied in both the bills, H. R. 17969 and H. R. 18982, now before the committee. As to the matter of cost to the Government : The report, dated February 18, 1908, of the Committee on Depart- ment Methods, with which its proposed bill (now H. R. 17969) was submitted to the President, states that the possible loss to the Gov- ernment through the superannuation of its employees is estimated by the National Civil Service Reform League to be about $400,000 in the Departments at Washington and about $800,000 outside of Wash- ington, or in the whole classified service about $1,200,000. This amount is said to be a fraction of 1 per cent of the Government's annual pay roll, and it may be accepted as not at all overdrawn from the data it was based on, because the Reform League at that time, last November, was opposed to the plan, then formulated somewhat as it now stands, of the Committee on Department Methods, and was desirous of showing that the evil sought to be remedied thereby was a comparatively minor one. The Chairman. Do you know what data that was based upon? Mr. Neagle. That embodied in Census Bulletin No. 12. Mr. Mann. Who says that $1,200,000 is 1 per cent of the Govern- ment pay roll? Mr. Neagle. The National Civil Service Reform League. Mr. Mann. Are they just as far off on other things as they are on that? Mr. Neagle. Upon some things they are; yes, sir. Mr. Mann. That is as wide of the mark as it could well be. Mr. Neagle. That was the estimate they made, and I understand that at the time they made it they had no accurate information as to what was the actual amount of the pay roll. I think that in- formation has been available for the public only a very short time. Mr. Edwards. You do not represent the National Civil Service Reform League ? Mr. Neagle. No, sir. RETIREMENT FUND SUPERANNUATED EMPLOYEES. 89 The Chairman. Do you know what the annual pay roll of the Government is? Mr. Neagle. Somewhere about $114,000,000, I think. It was stated yesterday in one of the papers submitted by our association. Mr. Starr. Mr. North, the Director of the Census, has fijced the amount in a special report at $114,000,000. Mr. Mann. But the pay roll of the Post-Office Department alone would amount to that, and I think more. Mr. Edwards. Do you know what the annual pay roll is, Mr. Mann? Mr. Mann. I should suppose it was in the neighborhood of $300,- 000,000. Mr. Neagle. But not in the classified civil service. Mr. Mann. Not all in the classified civil service; no. Mr. Hardy. What would be the amount of the post-office pay roll in the classified service ? Mr. Mann. I think probably over $75,000,000 of it is in the classi- fied serAdce. Mr. Hardy. The entire postal service is about $180,000,000, is it not? Mr. Mann. I think this next year it will be about $224,000,000. Mr. Neagle. The pay roll is a very difficult matter to figure out, but I think we would be safe in accepting the statement of the Direc- tor of the Census that it is about $114,000,000 for the classified service. Mr. Mann. I do not think you would be safe in accepting it if it is contrary to the facts. Mr. Neagle. Of course, but we have no better way of ascertaining the facts. Mr. Mann. But we should make a proper effort to get a fair idea of what it is. Mr. Neagle. I did not intend to set up a different idea from what the committee already knows. I was only attempting to illustrate the effect of the information that we have in hand. It should be borne in mind that under existing conditions a drain from this cause is continuous, occurring every year and provided for every year by appropriations of public money. It should also be remembered that the civil-service force is growing constantly both by reason of increasing numbers required in many of the Depart- ments and offices already existing and by the establishment from time to time of new bureaus and offices and sometimes whole Depart- ments. And with this growth comes the proportion of superan- nuation. It is also true, I dare say, that within twenty-five or thirty years superannuation in the service will begin to increase rapidly and will become much more extensive than it now is because by that time the great bulk of the appointees under the civil-service law of 1883 will begin to reach the age of superannuation. Supposing that the above T stated annual loss to the Government should continue for sixty-seven years without increase, the total loss from superannua- tion in that time would be $82,400,000. But there is an increase in superannuation, as I have pointed out, and I think a fair estimate justifies adding to said sum 5 per cent thereof, or $4,120,000, to cover the loss by such increase of superannuation, arising from the causes I have stated. This would make a total of $86,520,000 the Govern- 90 RETIREMENT FUND SUPERANNUATED EMPLOYEES. ment stands to lose in sixty-seven years. But the estimate of $1,200,000 made by the Civil-Service Reform League as the annual loss is based, as stated by it, upon the reports of the various heads of Departments as embodied in Census Bulletin No. 12, and I -venture the assertion that those heads of Departments, in view of their having ignored the law requiring them to disencumber the service of useless material, give every old employee the benefit of the doubt as to his superannuation. For this reason I think it not at all unlikely that the loss to the Government considerably exceeds the estimate above made and would in reahty reach $90,000,000 in sixty-seven years. Mr. Mann. Would it bother you if I would ask you a question there? Mr. Neagle. No, sir. Mr. Mann. Do you base your figures upon the loss to the Govern- ment entirely upon those over the age of 70 years ? Mr. Neagle. No, sir; I was referring to incapacity. Mr. Mann. I understand. Do you make your estimate as to superannuation or incapacity wholly regardless of age? Mr. Neagle. No, sir; but we take age as the principal cause. Mr. Mann. But wholly regardless of any fixed age? Mr. Neagle. Yes, sir. Mr. Mann. That is, if you find a man incapacitated you call him superannuated regardless of whether he is 50, 60, 70, or 80 years of age? Mr. Neagle. Yes; but we do not provide for retirement for him on that ground. Mr. Mann. You provide for retirement for him on another basis? Mr. Neagle. Yes, sir. Mr. Mann. So that you are not estimating the loss to the Govern- ment now upon the same basis that you estimate the cost to the Government under the bill? Mr. Neagle. It is very nearly the same ; the difference is slight. ilr. Mann. How nearly? Mr. Neagle. If I had a copy of the report of the Committee on Department Methods I could show you better. Mr. Mann. I have a copy here, but that will not give any informa- tion on the subject. The Chairman. The only difference there would be, that I can see, is that if men were incapacitated under 65 years of age, the bill does not apply to them. Mr.' Neagle. It applies to all others. Mr. Mann. The bill takes fixed ages of course. Mr. Neagle is talking about the cost to the Government by way of superannuation, and I want to ascertain whether his figures as to the cost to the Gov- ernment were based on the same set of facts that we have presented to us as to the cost under this bill. Mr. Neagle. The figures that I have taken are under the heading of: "Maximum amount of annual appropriation by the Federal Gov- ernment necessary to provide a monthly annuity to each person in its classified civil service July 1, 1903, upon attaining the retirement age of seventy years (the amount of annuity to be 1 .5 per cent of the employee's salary July 1, 1903, for each year of service completed prior to that date)." ' ^^ EETIREMENT EUND SUPERANNUATED EMPLOYEES. 91 Mr. Mann. You do not presume to say that your figures as to the present loss to the Government by reason of superannuation are based upon estimates as to those over 70 years of age only? _ Mr. Neagle. Not absolutely, but the difference is slight. There IS no way of ascertaining the difference that I know of. Mr. Mann. How do you ascertain the figures as to what it costs the Government? Mr. Neagle. These figures are given as approximate. Mr. Mann. But how are your estimates approximate unless you have some basis to go on? Mr. Neagle. The loss of the difference between the figures given by the Committee on Departmental Methods and those given by the heads of Departments in the census bulletin is probably not greater than a very small fraction of 1 per cent, and that is derived from the figures shown in the Census Bulletin No. 12. Mr. Mann. Then all the information you have on the subject comes from Census Bulletin No. 12? Mr. Neagle. Yes, sir. The Chairman. Let me see if I understand you. I understand you to mean that there would be hardly any incapacity in the men under 70? Mr. Neagle. Practically negligible. The Chairman. How do you get at that? Mr. Neagle. From the information given in Census Bulletin No. 12, where they give tables showing the ages and the conditions, and by deductions from those. The Chairman. In Bulletin No. 12 do they give statistics as to incapacity ? Mr. Neagle. The reports of the Departments are embodied in that book. The Chairman. On that subject? Mr. Neagle. Yes. Mr. Mann. If it be the fact that the present cost to the Govern- ment by way of superannuation, as you say, is negligible below the age of 70, why do you propose to retire people at the age of 60 or 65 ? Mr. Douglas. Is not that a different class? Mr. Neagle. Those classes are included in the retirement provi- sion because of the difference in character of service. Mr. Mann. I understood you to reply in answer to a question of the (Chairman that the present cost to the Government by super- annuation was practically negligible as to the persons below the age of 70. Mr. Neagle. Yes; as shown by the figures on which we are working. Mr. Mann. Then why do you propose to retire people at the age of 60 to 65? Mr. Neagle. Because the service would be benefited by getting them out of the way and by getting other people in. Mr. Mann. And yet you think that the present figures that you are estimating upon, which would make the cost negligible as to those people, are incorrect ? Mr. Neagle. The reports of the Departments err in that respect. I think that the heads of Departments in making those reports were lenient. 92 RETIREMENT FUND SUPERANNUATED EMPLOYEES. Mr. Hardy. In other words, you think there are people on the pay roll in the employ of the Government who have passed the time when they should have been retired 1 Mr. Neagle. Yes, sir. Mr. Hardy. If you adopt a proper method would you have a greater per cent ? Mr. Neagle. More rapidly. Mr. Hardy. But as it is now there would not be much loss to the Oovemment on account of retirement below 70 ? Mr. Neagle. No. Mr. Mann. You question the accuracy of the figures upon which you make your estimate ? Mr. Neagle. Yes, sir. Mr. Hardy. I did not miderstand him to question the accuracy so much as the propriety of the action of the Government in retaining these people on the pay roll. Mr. Neagle. Yes; and giving them full pay. Mr. Mann. You give us certain figures as to what it is costing the Government now on superannuation as it now exists, and then as to what it would cost under this bill to retire them. Then you say that the figures upon which these estimates are made are wholly unrenable? Mr. Neagle. Not wholly unreliable ; I did not go to that extent. Mr. Mann. But inaccurate. Mr. Neagle. Inaccurate, as they necessarily must be, and for that reason the figures that I have taken to explain this by must be accepted as approximate. Mr. Mann. Is there any way by which we can obtain accurate information? Mr. Neagle. No, sir; I think it is impracticable, because it would require such an interminable amount of time and such expensive labor to do it. The details that would have to be gone through ia order to obtain it are very great and intricate and very hard to secure. Mr. Mann. I do not think there would be very much difficulty about it. Mr. Neagle. It took a good while and cost a good deal of time and money for the Census Office to get what information it has. Mr. Dawson. Does not the head of each Department inquire as to the incapacity of each clerk above the age of 70 years, and is not that done without any trouble ? Mr. Neagle. Yes, sir; I think so; but that would not reach the question of incapacity of those below. Mr. Douglas. It is pretty difficult to express that in figures, because some men not over 50 are not as efiicient as some over 70. Mr. Cocks. And some are never efiicient. Mr. Mann. It would simply be a matter of obtaining the figures so far as the age is concerned. Mr. Neagle. Yes, sir. Mr. Mann. And that has not been done excepting as to the age of 70 ; that is your estimate. Mr. Neagle. That is my understanding; yes. Mr. Mann. That there has been no effort made to make a report as to what this bill would cost, if enacted, to retire people under the age of 70? ' f f 5 Mr. Neagle. Yes; with regard to the ages of those in the service. RETIREMENT FUND SUPERANNUATED EMPLOYEES. 98 Mr. Mann. You are estimating now on a fixed age — that is, you are making a comparison of the relative cost to the Government under two propositions from two entirely different standpoints. Mr. Neagle. It would be easy enough to get the people in the service above these ages and estabhsh the cost of retmng them on that basis. Mr. Mann. As a matter of fact, was not there a circular letter sent to every employee of the Government a few years ago in reference to these things ? Mr. Neagle. It was sent to the various Departments; yes, sir. Mr. Mann. What became of that, do you know? Mr. Neagle. My understanding is that that was what was embodied in Census Bulletin No. 12. Mr. Mann. But have they embodied that; have they not embodied simply the negligible portion of that information? Mr. Neagle. I have never examined it in comparison with the reports in such a way as to be able to speak accurately with reference to that. Mr. Hardy. If I understand it, they have made an investigation which shows how many there are in the service, of these respective ages, but they have not attempted to determine the question of capacity or incapacity of these employees by any method that is tangible. Mr. Neagle. Yes, sir. It is a matter of common repute, and I think it is true, that there are more people incapacitated in the service than are given out by the heads of Departments. Mr. Hardy. In other words, that it is somewhat covered up ? Mr. Neagle. Yes; and for several reasons. Mr. Hardy. Do you think the passage of this bill would result in eliminating a whole lot of that incapacity ? Mr. Neagle. It would undoubtedly, because then there would be no reason for limiting or restricting the inquiry, and the determination of a man's incapacity might be made without regard to age if he were below the retiring age. Mr. Hardy,. Can you tell us anything of the character of those employees, some 5,000, I think, who receive as little as $100 a year, and under that in some cases ? No one here yesterday could tell us who they were or what they were. Mr. Starr. I have some information on that. Mr. Mann. As to the men appointed through the Civil Service Commission there is a great deal of information given out that is incorrect. Mr. Neagle. We will give you information upon that point in a few moments. The Committee on Department Methods says that if its plan should be adopted the Government would have to bear expense for a period of sixty-seven years and that the amount would be $67,000,000. But this estimate is considerably in excess of the probable expense, be- cause, as stated by that committee, no allowance is made for the fact that many employees who enter its computation will leave the serv- ice before reaching 70, to be replaced by appointees to whom the Government would have to pay no gratuity. This number is shown by the Civil Service Commission's records to average about 7,000 a vear, and it is plain that such a large number of changes every year 94 RETIREMENT FUND SUPERANNUATED EMPLOYEE-. for sixty-seven years would naturally make a very considerable difference in the number to be retired at the Government's ex- pense. Besides, the estimate in question is based on statistics de- rived fifteen years ago, and during that time great numbers of younger people have entered the service who will not require so large a pro- portion of aid from the Government as would those who were in the service fifteen years ago, because the new people will have a longer time to contribute to the fund for their retirement. Moreover the average salary taken by the Department committee of which the Government is to pay IJ per cent for every year of serv- ice before the passage of the act is much greater than the real aver- age. It was based on the salaries of the relatively few employees in Washington, which are higher than those received by the great mass of the employees, which lives outside of Washington. This con- venient average is $1,072, whereas the true average for the whole service is only $768.33, or about 26 per cent less. The Chairman. What do you include in that; do you include the men engaged in the navy-yards and arsenals in the classified service? vice ? Mr. Neagle. Yes; such as come under the classified service. The Chairman. They are really mechanics; the 3^ do not pass a competitive examination. Mr. Neagle. I am not quite clear as to just, the line of demarcation in the classified service at the navy-yards. The Chairman. Do you include skilled workmen in the Depart- ments ? Mr. Neagle. I am not sure; I think so, but the point at which the civil service begins to take up those men I am not quite famihar with. Mr. Cocks. It takes in the laborers in the custom-houses and those working on the docks. They pass an examination. Mr. Mann. But they are not in the classified service; the skilled, laborers are not in the classified service. They are appointed through an examination by the Civil Service Commission, but they are not in the classified service. Mr. Cocks. How about samplers ? Mr. Mann. I think they are in the classified service. The Chairman. Then, Mr. Neagle, you are not quite sure what your average is based upon. Mr. Neagle. I am not sure as to what employees are excluded.. We have only the figures given to us of those who are included in the classified service. I do not know the direction in which the line runs separating the classified from the unclassified.- Mr. Mann. The navy-yard employees are not in the classified service unless it has been done very recently. Mr. Edwards. The mail carriers are included, are they not, both city and rural? Mr. Neagle. Yes, sir. In view of these comparisons I think it not at all unreasonable to say that the amount estimated by the Department committee to be paid by the Government in the sixty-seven years is, to be conserva- tive, too large by fully one-third. If, then, we diminish the estimate by one-third we have only $44,700,000 left as the probable real cost to the Government. The difference between this prospective expense RETIREMENT FUND SUPERANNUATED EMPLOYEES. 95 and the actual cost by the present method of about $90,000,000 is 145,300,000, which is the tremendous saving to the Government by the time the proposed plan would become self-sustaining. It would seem that no one could raise a valid or tenable objection to a business arrangement that would save the Government so large a sum of money in the time stated. As to the opportune time for legislation. Itis a fact that up to 1889 retirement of employees on pension was not in practice as a regular custom or in accordance with a definite system by any important corporation in the United States. In that year it was adopted by one large railroad company, the Pennsylvania. Then a number of years passed before any other company took it up — I think some ten years or so. After that scarcely a year passed with- out witnessing the adoption of some system of retirement and pension by one or several corporations in the country, until now the number that has resorted to it is probably near a hundred. Ten years ago no considerable number of men in the country seemed to think of retirement on annuities of any kind as a feasible or expedient remedy for superannuation in the Federal civil service, and the. sug- gestion of providing for it by any kind of legislation, except under the system still in vogue of carrying every incapacitated old clerk on the pay roll at a good salary, invariably raised a protest or met a chilling discountenance from President, Cabinet, Congress, public, and press, the most marked perhaps from the Congress itself. In these" few years a great change has taken place, and the change has been most rapid and greatest within the last four or five years. It has resulted simply from the educating of the people upon the subject, making them familiar with the harmless terrors of this bugaboo, in which our association has played perhaps the leading part. To-day retirement is advocated by the President, by the Cabinet, by many Members of Congress, and by a large part of the press, and there seems to be but httle, if any, protest from the public, such as there is coming from the- negligible uninformed that we have not yet had an opportunity to enlighten properly. And one of the strongest features of the great revulsion of sentiment is the fact that many of the advocates of the proposition go to the exteme of urging that the Gov- ernment bear the whole expense, as is done by many of the foreign civilized nations. For my own part I am radically and irrevocably opposed to what is commonly described as a civil pension list, meaning retirement upon an annuity paid by the Government, but I am not so blinded by my own convictions upon the subject that I can not see the trend of the tide. The signs are to my mind unmistakable, and I am con- vinced that if the agitation of this question in the future is contin- ued as in the past, five years will not -pass before the dominant idea will be retirement wholly at the Government's expense. But if the fair and reasonable proposition that is now largely in favor is adopted and made into binding law, the clamor will be stilled, the contention will be eliminated, the dissatisfied will be robbed of all cause for grievance, and the evil will be remedied for all time. In connection with a matter of this kind there is, of course, room for great variation in details, and it is probably true that many minor item^ might be fixed one way or another without effecting any advantao-e or disadvantage so far as the proposition as a whole is 96 RETIREMENT FUND SUPERANNUATED EMPLOYEES. concerned, but so far as our association can perceive, the provisions embodied in a composite of the two bills mentioned would accom- plish the desired purpose in a way to which there could be no rational objection. I would state also that our association perceives no objection to the plan suggested yesterday to the committee of taking for a spe- cial fund a certain part of each clerk's salary — that for the first month — on original appointment and a percentage of his increased salary on promotion, such fund to be used for the payment of annui- ties for services rendered prior to the passage of a retirement law. Mr. Hardy. The proposition was to take the whole of the first month's salary and distribute that over three, four, or six months? Mr. Neagle. Yes, sir. Mr. Mann. Is your association engaged in any waj^ in the prepara- tion of this bill? Mr. Neagle. No, sir; excepting that the bill first prepared by the Committee on Department Methods was unknown to us in any way until it was made pubhc, and then after a conference between the Committee on Department Methods and the National Civil Service Reform League, certain amendments were introduced, and the Com- mittee on Department Methods consulted our association with refer- ence to those things. Mr. Mann. Has your league carefully examined the provisions of the bill — ^gone over it very carefully ? Mr. Neagle. Yes, sir; some of them more carefully than I have. I have been so busy at the office that I have not felt I could spare the time to devote to the labor that I should. Mr. Mann. Is the bill fixed upon the basis of a fixed expectancy of hfe at the ages of 60 or 65 ? Mr. Neagle. I think that was used. There was some question before the committee as to whether it would be well to use the expect ancy of life or the mortality table, and I think they took the expect ancy of life. Mr. Hardy. What is the difference between the two ? Mr. Neagle. That is an insurance matter that I have not gone into, and I do not know. Mr. Mann. Have you made calculation to see how much would be deducted from the salary of a letter carrier who entered the the Government service at the age of 35 ? Mr. Neagle. No, sir. Mr. Mann. Or any other age? Mr. Neagle. No, sir; I am unable to make that kind of a calcu- lation and make it accurately, so I have not undertaken it. Mr. Mann. There is nothing difficult about it, I think. Have you made the calculation as to what a clerk in a post-office would have deducted from his salary? Mr. Neagle. No, sir; I have not, and I have not made a calcula- tion as to a deduction even from my own salary. Mr. Mann. Has your league made any calculation of the amount of deduction that would be made from anybody's salary in the Government service? Mr. Neagle. We employed some of the mosf^prominent actuaries in the country some years ago, and they made a very exhaustive examination of the matter of deductions. EETIBEMEKT FUND SUPERANNUATED EMPLOYEES. 97 Mr. Mann. Under this bill ? Mr. Neagle. That was under the proposition to make uniform deductions from the salaries of all people, which, of course, is not the same as this. Mr. Mann. Under the calculations of those actuaries you prac- tically gave up that bill, did you not ? Mr. IS EAGLE. We gave it up only because the committee on depart- ment methods produced a bill. It was sent to Congress by the President, and we did not want to interfere or put ourselves in the attitude of being in conflict with the President's views. Mr. Mann. "You have had bills before Congress for a number of years. When were these calculations made by the actuaries? Mr. Neagle. Very soon after this Bulletin No. 12 came out. I think it was some four years ago. Mr. Mann. And you have had a bill introduced upon that? Mr. Neagle. At the last session of Congress the first time. Mr. Mann. What bill was that? Mr. Neagle. I do not remember the number of it. Mr. Mann. Have you ever submitted those computations by the actuaries to this committee ? Mr. Neagle. That was done last year, yes, sir; in the hearings before the committee last year. Mr. Mann. That may have been, but I do not recall it. There were no hearings last year, were there? Mr. Neagle. Yes; or the year before. Mr. Mann. I think there were hearings for several years before this committee, and after the hearings nothing was heard from the bill; nothing more was done about it; it was not pressed after it was ascertained by the clerks as to the amount that would be deducted from their salary. There was an almost universal protest against the passage of the bill. I received myself a great many letters pro- testing against the passage of the bill, and not one in favor of it after it became known what the effect of that bill would be; and I think your association would not advocate it. Mr. Neagle. But not on that account. Mr. Mann. They stopped coining up here. Mr. Neagle. It became known then that the information that is now embodied in the report of the Committee on Department Methods was under preparation, and that the President was calling- Mr. Mann. But that was before the Committee on Department Methods was appointed. Mr. Neagle. But the President had called for information before the committee was appointed. Mr. Mann. But the nearing that was had here was before the Presi- dent took any action on the subject. Mr. Faunoe. We have only taken interest in one bill, that intro- duced at the last session. Mr. Mann. Then there was another association which you have taken the place of, because we had hearings several years ago, and I talked with a number of officers of the association. I do not know whether they have changed the name or not, but^ Mr. Stark. We were called before the committee, but we had no bill prepared at that time. Since that time the committee prepared 38257-08 7 98 RETIREMENT FUND SUPERANNUATED EMPLOYEES. the bill, and the figures in that bill have been verified by seven or eight of the most eminent actuaries in the country. That was included in my report of yesterday. Mr. Mann. Can that be furnished to the stenographer and printed in the report? Mr. Stare. It is in the report I made yesterday. Mr. Mann. Do they show what deduction would be made from the pay of a letter carrier who entered the service at the age of 35 ? Mr. Starr. It was 5 per cent for everybody. Mr. Mann. That is of no value, then, as to this bill. You have no figures made, then, as to what the deduction would be under this bill ? Mr. Starr. No, sir. Mr. Mann. Does anybody know what deductions would be made under this bill ? Mr. Starr. It was estimated at 3.57 per cent by the Keep Com- mission. Mr. Mann. The Keep Commission estimated in a report that if a man entered the Government service at 20 and remained until 70 that the deduction for the fifty years shall be between 3 and 4 per cent; but that is a different proposition from a man who leaves the service at the age of 60. The Chairman. I think Mr. Brown has tables for every year, but I do not know whether they have been printed or not. Mr. Hardy. I understood Mr. Brown had a series of figures begin- ning at 60, 65, and 70, and covering men in the service twenty, thirty, thirty-five years, and so on. Mr. Mann. Have you seen Mr. Brown's figures? Mr. Starr. No, sir. Mr. Mann. Has your association seen them? Mr. Starr. I do not know whether it has or not. Mr. Mann. Supposing this would require a deduction of 10 per cent from the salary of some ofiicial, do you think that deduction would be made with satisfaction to him unless his salary were considerably increased ? Mr. Neagle. It would depend upon the conditions. Mr. Mann. Of his temper. Do you know of any Government clerks in Washington now who are receiving so much salary over and above their living expenses that they desire or are willing to have a deduction made flrom their salary ? Mr. Neagle. I know some that are willing to have deductions made, even at great cost to themselves. Mr. Mann. Do you think the average clerk in Washington, so far as living expenses are concerned, can afford a deduction of between 5 and 10 per cent from his salary ? Mr. Neagle. No, sir; between 5 and 10 per cent would be too great. Mr. Mann. Then if it is very clear that there will be a deduction of over 5 per cent in a man retiring at the a^e of 60 under this bill, do you think the people in Washington are paid so much over and above their living expenses that they could easily afford to have that deduc- tion made from their salaries ? . Mr. Neagle. No, sir; not at all. Mr. Mann. So that if this bill should become a law on that basis, it would be essential to increase the salaries at least to that extent ? [ Mr. Neagle. No, sir; I do not think so. RETIKEMENT FUND SUPERANNUATED EMPLOYEES. 99 Mr. Mann. To what extent would it be necessary to increase the salaries ? Mr. Neagle. I think it would be scarcely necessary to make any special increase on account of this bill.- If the salaries were fairly proportionate to the circumstances under which people live now, they could, by pinching and economizing, stand the reduction. Mr. Mann. You do not a^ee with the views expressed in the numer- ous letters that we see in the Washington newspapers itemizing the expenses of the Government clerks, where it is shown that they are not able to now live upon their salaries, and are obliged to run into debt. Do you think they could easily save an additional amount of money and turn that over to the Government for this purpose? Mr. Neagle. I have not seen those statements. Mr. Mann. I see them very often. Mr. Neagle. I never saw one in my life. Mr. Hardy. How many of these Government employees carry life insurance under different policies 1 Mr. Neagle. I think a great many of them do in the beneficiary associations. Mr. Hardy. What proportion, what pef cent, of their salaries is required to pay the premiums on those policies? Mr. Neagle. It is very small. If I may mention it, I think the Royal Arcanum is probably one of the best and one of the most popu- lar companies, and upon 11,000 insurance I think the assessment is something like $15 a year. Mr. Mann. I think you had better look that up, because I believe you are wrong. Mr. Neagle. Is it larger than that? Mr. Mann. Has it not been doubled in the last few years ? It is not a fixed assessment. Mr. Neagle. It has been increased for some of the ages, but I do not think the increase has gone throughout all ages. I am not a member of that organization, and really know nothing of it, but have read statements regarding it in the papers, to which I have paid some slight attention. Mr. Hardy. Is it a fraternal organization? Mr. Neagle. Yes. Mr. Mann. I am not a member of the Royal Arcanum, but I do not think there is one organization in the country of any standing which has not recently had to increase the premiums, because they were all started upon some such basis as you propose here, one wholly inade- quate. Mr. Hardy. It seems to me that most of the insurance companies are based upon the idea of accumulating a certain surplus, making a certain profit, which runs up into the millions and even into the bil- lions of dollars. As I understand it, this Government plan is based upon the idea of no profit — to absolutely divide all the earnings of the money of the clerks, and therefore it must be cheaper than any other organization. ADDITIONAL STATEMENT OF MR. J. W. STARR. Mr. Starr. There is one matter that I would Hke to call attention to, and that is a question that was asked yesterday and here again to-day in relation to the people sending letters here opposed to this 100 RETIREMENT FUND SUPERANNUATED EMPLOYEES. institution. The Executive order of January 31, 1902, attempts to prevent employees from endeavoring to influence legislation. The Chairman. What is the pertinence of that, Mr. Starr? Mr. Starr. It accounts for the fact that you have not received letters from individuals excepting those opposed to it, and the num- ber received would be very few. Mr. Mann. If you think that Government employees in the service generally pay any attention to that order of the President's you are woefully mistaken. Mr. Starr. I think they do. Mr. Mann. I think I have 5,000 letters a year from Government employees in relation to things that they want. Mr. Starr. It may be that you get them, but here is the positive order of the President, and in order that we might proceed with the work of our retirement association we had to be exempted from it, and we were exempted in the formation of the bill which was pre- pared; and when prepared Mr. Fowler, of the House of Represen- tatives, went with me to the President and we delivered it to him. It was introduced in the Fifty-ninth Congress in both House and Senate. Subsequent to that time we asked the President to relieve us further from that, and here is the order of the President, through Mr. Cooley, in relation to it [reads] : United States Civil Service Commission, Washington, D. C. , October 25, 1906. Mr. Jacob W. Stake, P. 0. Box 37, Washington, D. C. My Deah Sir: Referring to the conversation I had with the committee of the retirement association ■ yesterday morning, in accordance with their request, I sub- mitted the questions you asked to the President at my interview with him yesterday afternoon. He informed me that he was willing that your organization should collect such funds as might be necessary to defray the expenses of employing actuaries to present your bill to Congress and such other incidental expenses as might be legitimate. He also raises no objection to your urging the bill upon the attention of Congress under such restrictions as the Civil Service Commission prescribes. I therefore have the honor to state that, in my judgment, this work should be tmder- taken by your executive committee, and that the members of the retirement associa- tion should be informed that the executive committee will take entire charge of the campaign. No member of the association not on the executive committee should attempt in any way to influence a Member of Congress, and the members of the execu- tive committee should confine themselves to appearing before the committees having the proposed legislation under consideration or to explaining to the members of the, committees the reasons why the bill is urged. The executive committee is also at liberty to answer all questions that may be addressed to it by any Member of Con- gress. This authorization is in the nature of an exception to a general policy that has been- laid down, and I therefore urge most strongly that your organization should be very careful to comply strictly with the suggestions contained in this letter. Very respectfully, Alpord W. Cooley, Commissioner. The Chairman. What is your object in introducing that? Mr. Starr. It is to show how strongly we hq,ve been held down in not pressing this matter to you in the shape The Chairman. But you have the opportimity now to present it. Mr. Douglas. As I understand it, he simply refers to the letter. The Chairman. Please give us the facts bearing upon the bUl, as our time is short. RBTIBEMENT FUND SUPERANNUATED EMPLOYEES. 101 Mr. Stare. I have here a letter from Mr. North, the Director of the Census, in relation to those $100 and |200 clerks which were asked about yesterday — I have this from the Civil Service Commis- sion in relation to it (reads) : The classified service embraces all employees who on the one hand are not mere laborers and on the other hand subject to confirmation by the Senate. The civil-service rules except frord examination persons receiving not more than 1300 a year where the duties require only a portion of their time. This class embraces chiefly clerks at substations of post-offices, post light keepers, crop, rainfall, and river observers, display men of the Weather Bureau, housekeepers in the Indian Service, and clerks and others at small offices and in isolated localities. Mr. Mann. Then there are no classified people under $100? Mr. Stark. No, sir. Mr. Mann. Or under $300 ? Mr. Stare. Nor under $300. Mr. Mann. Then that was an erroneous statement yesterday? Mr. Starr. That was the official statement of the Director of the Census as to the Government employees. We accept it without question; it is official data, and consequently we are not apt to question the Director of the Census upon the matter. Mr. Mann. Oh, no one complains about that. ' Mr. Starr. That is all I have. ADDITIONAL STATEMENT OF MR. NEILSON FALLS. Mr. Falls. A statement was made yesterday in regard to the present salaries paid, and I would hke to read to the committee a statement made by Mr. Samuel Ramsey, the chief clerk of the Sur- geon-General's Office in 1889 (reads) : The basis of the present scale of salaries was established by the act of April 22, 1854, at a time when rates of compensation generally were much lower than they are now. Salaries were fixed at $1,200, $1,400, $1,600, and $1,800, but in the thirty-five inter- vening years there have been great changes within the Department and without. The official day was then, in point of fact and usage, six hours, and is now seven; clerical work has become more complex and difficult from the multiplicity^ of laws regulations, and records to be coordinated and reconciled; and under the civil service the qualifications and tests for admission are vastly raised. It is not generally understood that the basis of salaries to-day is that of 1854, fifty-odd years ago. Mr. Mann. When you say that is the basis of salaries, what you mean is that that is the division into classes, third, fourth, and fifth, and so forth? Mr. Falls. That was what men were paid fifty years ago. Mr. Mann. Oh, no; that is the way those classes were divided into salaries, that is all. That has nothing to do with the fact as to whether a man gets such and such a salary or not. Mr Falls. Not at all. The question of wages was then deter- mined to be $1,200, $1,400, $1,600, and $1,800. Mr. Mann. They instituted certain classes on that basis, and what you have read refers to those classes in the appropriation acts, that is all. Mr. Falls. It simply amounts to a statement that at that time the purchasing value of a dollar was much greater than it is to-day. Mr. Mann. But it would depend upon what class an employee was put into. 102 EETIREMENT FUND SUPERANNUATED EMPLOYEES. Mr. Falls. But the purchasing power of the dollar to-day is much less than it was then, and that is the point that I wanted to make. Mr. Mann. The Keep Commission has made recommendations which would involve thirty-seven different classes. Mr. Falls. But we care nothing about the classification, we only care about the purchasing value or the dollar received. Mr. Mann. You think you are getting too much pay now? Mr. Falls. No; but I am perfectly willing to take less, sir, if the Government thinks I do not earn it. But what I want is that the gentlemen who give us this money and who prepare this bill must remember that the purchasing power of a dollar which they ^ive us to-day, whether it is 11,200 or $1,400 or $1,600 or $1,800, is very much less than was the purchasing power of the dollar away back when the salaries were fixed in 1854. Mr. Mann. I do not think the purchasing power of the dollar has changed so very much. STATEMENT OF MR. M. F. O'DONOGHTJE, OF WASHINGTON, D. C. Mr. O'DoNOGHUE. Mr. President and gentlemen of the committee, I do not know that I can add anything in the way of statistics to what has been stated here, but there is something that came under my observation in my career througl^ life to which I want to call your attention, and from which a lesson might be learned. As I understand it, this committee is trying to find a means of overcoming the obstacles that now stand in the way of the removal of superannuated clerks. Some years ago I was in Canada and was in the employ of the Canadian government, in the city of Ottawa. After serving there for some time I resigned, and came down here and entered the service of the United States Government under a competitive examination. Now, the Canadian government is small ahd relatively poor as compared with that of tMs country, and yet at the same time they have a perfect state of government up there, and during my residence in Canada I never heard of any dissatis- faction in the departments up there. There is none of the worrying up there which we notice here, and none of the deterioration of the service, and nothing like the amount of anxiety that the clerks here experience as to what shall happen to them as they shall become older, lest they should be forced to retire from the service here which incapacitates' them for anything else. I sent to the Canadian government for a copy of their bill The Chairman. It was submitted here yesterday. Mr. 0'DoNOGHUE._ I think from that and from the kindred bills from the other civilized governments of the world elsewhere a vast amount of valuable information can be obtained. Now, when I came here I could not see why it was that this Gov- ernment, essentially democratic in its origin, could not provide for its servants as other civilized nations do. I remember that before I left Ireland I taught school there, and since I left there the teachers have been pensioned by the Government. Then I taught school in San Francisco, and since I left there the teachers have been pen- sioned, so that pensions seem to be following me [laughter], and I am beginning to wonder if they will not overtake me at some time other. I have been tempted on general principles to resign from BETIREMENT FUND SUPERANNUATED EMPLOYEES. 103 the service of the Government, with an idea that it would be for the general welfare, and to take care of myself on the outside; and perhaps if I am driven to it, I will do that. Now, gentlemen, I have been in the Departments here and I know a great many of the elderly clerks. I was at one time in a certain Department, and I would not go through with my experience there again for a great deal. At that time I was appointed by Mr. Cleveland as chief of a division, taken out of the classified service and put into the unclassified. There were 60 clerks in the division at that time,_ and there was provision made for only 57 clerks. The period pending these reductions to make the number of clerks conform to the number provided for was something fierce. Another thing that has struck me is that the clerks in the Depart- ments of Washington are more closely allied to the flesh and blood of Congress and even of the Presidents than can be found anywhere else in the world. I can point out to you from California, the State where I came from, the sister and brother of a Congressman; I know the sister-in-law of a Senator, and I know the mother-in-law of a gen- eral, and I know the wife of a brigadier-general, and I know a brigamer- general himself, all in the Government service; so that when you strike at the Government clerk you are striking indirectly at the flesh and blood of Congress and of the Army and Navy and of the heads of the Executive Departments. The clerks, I say, are of the flesh and blood of Congress, and to a large extent they are the very best ele- ment in the United States. I have been all through it, and I have seen it, so that from a humanitarian standpoint and the standpoint of business as well, I should say you could not do anything better for the public service and for the country than to formulate and enact a wise and generous retirement system for the civil servants of the Government. Mr. Edwards. Don't you think Congress should also provide a pension for retired Presidents of the United States ? Mr. O'DoNOGHUE. That is another story. They do not devote all their time to the service. It is only temporary. STATEMENT OF MRS. J. M. MONROE, VICE-PRESIDENT OF THE UNITED STATES CIVIL-SERVICE RETIREMENT ASSOCIATION. Mrs. Monroe. Mr. Chairman and gentlemen, in regard to the young people in the Government service, the idea is that the young people are opposed to any retirement bill. That is a mistake. You have not yet heard from them, because it is against the President's order that their wishes should be made known or communicated by them. I am the mother of two young men in the Government service. Those two young men are in favor of the retirement bill, and they say that unless a bill of that character is passed in the near future, and in case they get an opportunity, they will go out of the Government serv- ice and enter corporation service, because they will there be better provided for and will get a higher salary. Those two young men are in scientific branches of the service, where it is hard to get competent people. One of them is in the Geological Survey and another is an expert draftsman in the Navy Department. I am acquainted with a great many young men in the service, and I hardly know of one that is not in favor of a retirement bill. Of course 104 KETIEEMENT FUND SUPERANNUATED EMPLOYEES. they do not want to give up as much as 5 per cent of their salary, as I understand is provided by this bill ; but anything under that they are willing to be assessed for. Our own bill of course was based on the theory that there would be no help whatever from the Government, and we simply yielded and gave way to the Keep Commission's report. Air. Edwards. What salaries do your sons get? Mrs. Monroe. One gets $2,000 a year and the other $1,200. Mr. Edwards. And they would not be willing to stand an assess- ment of 5 per cent or more ? Mrs. Monroe. Five per cent and under — anything up to 5 per cent. I know two young men who will be married next fall, and they said to me: "Mrs. Monroe, if the Government provides some retire- ment scheme for us we will stay in the Government service, but if not, we will go out." Mr. Edwards. I want to ask Mr. Naegle a question. Mr. Naegle, have you conferred with employees in different branches of the Gov- ernment service as to whether or not they favor this plan and whether or not they will stand for a compulsorj- assessment of their salary of 5 per cent or more? Mr. Naegle. I have had correspondence with employees in the different parts of the Government service, and the answers I have got are to the effect that they are in favor of it. Mr. Edwards. What have you heard from the rural carriers on that? Mr. Naegle. Nothing at all. Mr. Edwards. It is a fact that their salaries are comparatively low, is it not, and that their expenses are proportionately heavy? . Mr. Naegle. I do not know as to that. I do not know what" their expenses are. Mr. Edwards. I will give you some information on that hne. It is a fact that their expenses are heavy. I recently took pleasure in helping to increase the salaries of city letter carriers of the first class, and I hope to be able to help the rural carriers get an increase also. The Chairman. Now, Major Brackett, 12 o'clock has come and we are pressed for time. It is our intention to adjourn and conclude the hearing soon. STATEMENT OF MR. FRED BRACKETT, OF WASHINGTON, D. 0. Mr. Brackett. I would hke to have the committee understand that there has been no consultation between myself and the other gentlemen here who are representing the Retirement Association, neither have I ever had anything to do with the formation of the bill which is called the Brown bill. I had prepared some time ago a shght criticism of that bill, and as I know you want to get as near to the facts as possible, I will read this with your permission. It does not quite agree with the statements that have already been made here. Mr. Edwards. You are opposed to the bill, as I understand it ? Mr. Brackett. No, sir. I want the best bill we can get. I have examined the bill for the retirement of civil-service employees, and report thereon prepared by the subcommittee on personnel of the Committee on Department Methods, and beg leave to transmit the following criticism thereof: RETIREMENT FUND SUPERANNUATED EMPLOYEES. 105 Section 1. This section provides for the purchase of an annuity pay- able from the date a clerk arrives at age of retirement, "equal to 1^ per cent of his annual salary, pay, or compensation for every full year of service, or major fraction thereof, between the date of the passage of this act a,nd the arrival of the employee at age of retirement." It is obvious that this provision can not be literally carried out ex- cept in the case of an employee whose salary, pay, or compensation will not be changed "between the date of the passage of this act and the arrival of the employee at the age of retirement." Mr. GiLLETT. Why not, Major? Mr. Bkackett. As he is promoted and his salary changed, he would desire a higher annuity. Under the terms of the act The Chairman. I do not see why not. Mr. Beaokbtt. The section" might properly be amended to read ' ' an annuity for such amount as the officer or employee may elect to Epchase at any time." This would allow the beneficiary to increase is annuity at any time his salary might be increased. A 4 per cent interest basis for an annuity is too high. It is alto- gether improbable that more than 3 per cent interest could be earned. On this basis a larger deduction would have to be made every month than the amount stated by the Keep Commission. Section 2. Provides for keeping an account with every employee. This would be a stupendous task. Persons of different ages receiving the same salary, and persons of the same age receiving different sala- ries, will have deducted from their semimonthly pay different amounts, all of which would have to be certified to the disbursing clerk, with the probable result of vexatious delay in payments and the posting of individual accounts. At least 125,000 accounts would have to be kept. Section 6. Provides for groups 1, 2,. and 3, to be composed of employees aged, respectively, at retirement, 60, 65, and 70 years of Section 7. Provides for annuities based upon the following per- centages of salaries for each year of service: Group 1, 1 per cent; group 2, 1.25~per cent; and group 3, 1.5 per cent. I do not consider this an equitable provision, for there does not appear to be any good reason for making a difference of, say, $120 per annum in the pay of these three groups, when each of the employees may have served a like number of years, say forty, in which case a beneficiary in group 1 would receive (on a $1,200 salary) $480; in group. 2, $600; and in group 3, $720. Then, too, an employee in group 3 would only need to serve twenty-six and two-thirds years to be entitled to the same retired pay as an employee in group 1 who had served forty years and as an employee of group 2 who had served thirty-two years. Note also that the group 2 employee would have eight years' advantage over the employee in group 1. The question as to whether it is advisable to provide for a retired pay exceeding 50 per cent of the average salary for those now in the service is one worthy of serious consideration, especially as it is pro- posed that the Government shall contribute a portion of the annuity in such cases. 106 BETIEEMENT FUND SUPERANNUATED EMPLOYEES. July 1, 1908, the youngest clerks listed in Census Bulletin No. 12 will be rated as follows : Less than 19 years old 12 Who are 19 years old 20 Who are 20 years old 49 Who are 21 years old 112 Who are 22 years old 386 Who are 23 yeai-s old 946 Who are 24 years old Ij 532 I am dealing with the young clerks only. July 1, 1974, or, in sixty-six years, these clerks would be of follow- ing ages; Say, 84 years old 12 Aged 85 years 20 Aged 86 years - 49 Aged 87 years 112 Aged 88 years 386 Aged 89 years 946 Aged 90 years li 532 It is not likely, however, that any of these clerks will be Uving in 1974, but any of the clerks who are 25 years old in 1908 will probably live until 1953, retire at age 70, and draw retired pay for, say, nine years thereafter, or until 1962. The probability of Ufe at the age of 70 is 8.48 years. I think there is a very slight probability that any of the present force will draw pay after 1962. Understand that a clerk must be in service m. 1908 (under the proposed bill) in order to receive a Government annuity in addition to the one he pays for by personal contribution. Therefore, in esti- mating the cost to the Government, we have to base our calculations on the years' service rendered by each clerk prior to 1908. The aggregate of such service is (for clerks in classified list) 1,376,846 years. Allowing IJ per cent of average salary for each year's service we have a total of 17,211 per cent of average salary due to all clerks (under the bill) on July 1, 1908. The average salary paid clerks being $1,072, there would be due on said date, as the Government's share of the annuity, $18,450,192 per annum, proArided all of the 124,737 clerks in service (as per Census Bulletin No. 12) live to be 70 and retire under the provisions of the Keep Commission bill. It is reasonable to expect a large reduction in the number given (124,737) by reason of resignations, removals, and deaths. The average retired salary (of the whole number) would be 147.91 to be paid by Govern- ment from the date of each clerk's retirement. As the year for retirement would not be identical for all clerks, the total liabihty of the Government would not have to be met in a single year, but in the whole period between July 1, 1908, and the day when the last clerk entitled to the benefit expires, say, in 1974, allowing a 50 per cent reduction in the estimated number of clerks who may live until entitled to retire with pay, and we have $9,225,096 per annum due to such clerks on July 1, 1908, and payable on their annuity when- ever they retire. As the average expectation of life at age 70 is 8.48 years, we must multiply $9,225,096 by that sum, producing $78,228,814, provided they all retire at age 70 (more will be due 2 they retire at age 60 or 65 as they will live longer), that would prob- RETIREMENT PUND^ SUPERANNUATED EMPLOYEES. 107 ably have to be paid between 1908 and 1974. A report made on the Keep Commission bill estimates the total amount to be paid as a Government annuity at $66,985,778, or $11,243,036 less than my estimate. This difference possibly arises from allowing a greater reduction than I have in the number reaching the retirement period, the probable reduction made by- the Keep Commission being 64.5 per cent, not an unreasonable figure. Now, I will say in regard to the number of clerks in the Govern- ment service that the difficulty comes in estimating any definite number. As to that, I will read now from a document filed in the Senate (Appendix G) : In estimating the approximate cost of any retirement scheme there should be a definite basis as to number of clerks in tlie classified service to proceed upon. Census Bulletin No. 12, issued July 11, 1904. gives the following varying numbers: Page 9: A total of Page 16: Tables.. Page 24: Table 19. Page 90; Table 65. Page 92 " 3 96 Total 3 94 98 Grand total Page 21 Page 21 Total Number. 168,093 150,383 n 134, 066 149, 333 22,273 102, 464 124,737 3,318 21,278 149, 333 21,138 101,728 122, 866 Remarks. -25,646, or 124,737, etc. 4-613 special agents, etc. Classified and unclaasifled. Classified in District of Columbia. Classified elsewhere. Classified in United States. Unclassified in District of Columbia. Unclassified elsewbere. In United States. Classified in District of Columbia. Classified elsewbere. Classified in United States. a Excluding those paid by the piece and those reported without salary, or for whom salaries were not reported. , ^Jid so it goes. mtc. Brackptt. It was asked here what is the total amount of salaries paid to clerks and employees in the entire classified service. From information I procured from the various Departments and offices the amount paid in 1905 appears to have been $133,913,363.84, but the Director of the Census only reports $114,025,947 for the said year, making a difference of $19,887,866.84. That was probably made up from the Government Printmg Office, special agents, and employees of the Bureau of Engraving and Printing, and the rural-delivery service. The Chairman. Now, Major, yesterday we were told, I think, that you had some figures on the deduction of a certain amount from salaries and those who were promoted. Could you give us those figures, or give them to the stenographer, so that he could insert them? Mr. Braokett. Yes. Deducting one-twelfth of the salary from a clerk making an original entry into the service, and also deducting 25 per cent from any promotion. The Chairman. You mean when a man is promoted, taking 25 per cent of the increase? Mr. Brackett. Yes. If he was promoted from $1,200 to $1,400, take $50 from that promotion and deduct it in three months from his salary The total of those two classes of deductions, based upon the Census Bulletin No. 12, would be $1,412,329. 108 EBTIEEMENT FUND SUPERANNUATED EMPLOYEES. The Chairman. In a year? Mr. Beackett. Yes, in a year. The Chairman. It seems incredible that it would be as large as that. . Mr. Beackett. You would not believe, either, that a number equal to the entire classified service goes out every sixteen years. In other words, the outgoing number is about 6 per cent a year. You will find that all in that document. The Chaieman. We are much obhged to you. Mr. Beackett. I would hke to leave a copy of a proposed bill with the committee. The Chaieman. We will be glad to have you do it. Give it to the stenographer, and he will put it in the record. Mr. Beackett. I beheve the Government of the United States should pay every cent that would be paid as retired pay. It is now paying the retired ofiicers of the Army and Navy, the Revenue-Cutter Service, and the retired employees of the Life-Saving Service. In other words, you are giving retired pay to people who sometimes in war take fife, and to others who save life, but you are not giving anything to the men who are caring for the dollars of the Government. Mr. Cocks. The Life-Saving Service has no retired pay, as I under- stand. Mr. Beackett. A bill has passed the Senate that carries that. Mr. Cocks. Yes; we hope it will pass. Mr. Beackett. I beheve the perpetuity of the Republic depends as much on the men behind the dollars as upon the men behind the guns. I will leave a copy of that bill (Appendix H), which in effect asks the Government to contribute $3,660,000 a year and the clerks the balance. In other words, the Government would contribute 72 per cent of the needed sum, and the clerk 28 per cent. Mr. Cocks. Don't you think the retirement fund or pension would be equivalent to increasing salaries — that is, making the service that much more desirable? Mr. Beackett. I say that very thing. Under thi^ scheme, fte new bill which I present, the cost of retiring superannuated clerks or employees would be equitably distributed between the Govern- ment and all the employees in the classified service from time to time. The 3 per cent appropriation annually would be in effect an increase in the salaries of employees, as it would provide them retired pay without cost to themselves, but in return for the contribution of the Government those entering the service for the first time would receive less pay than the permanent employee (those who have com- pleted the probationary or trial period of six months), and it would be at a time when the reduction m pay would not be a hardship con- sidering the ultimate benefits to be derived. The same would be true of the reduction or suspension of increased pay in case of promotion. The ratio of contributions to the retire- ment fund would be, say, 72 by the Government and 28 per cent by the employees. The cost per annum ($3,660,000) to the Government would be less than the cost of a battle ship, while the cost to the employee in the three months' delay of increase in salary is of small consequence when contrasted with the benefit to be derived from the gain made in time of promotion by retiring the superannuated emoloyees from time to time. EETIREMENT PXJND SUPEBANNUAXED EMPLOYEES. 109 The Chairman. We are much obliged to you, Major. Mr. Beackbtt. There is a statement here, Mr. Gillett, that was printed two years ago, that will be of value to the committee. It shows what has been done by all the governments of the world. (Appendix G.) The Chairman. Give it to the stenographer. We will be glad to have everything of that character. There is a great deal that has been published that we will have to study up. Committee on Reform in the Civil Service, Monday, April IS, 1908. STATEMENT OF MR. HERBERT D. BROWN, OF CHICAGO, ILL.— Continued. The Chairman. The question was raised here whether annuity Kayments would be confined to the funds accumulated by deductions •om salaries and interest earned, or would they be confined to the Treasury of the United States. Is there any possibility that the funds provided here would not be sufficient to pay the annuities promised ? ' Mr. Brown. Not if the rates charged for the annuities were similar to those charged by the insurance companies, because the insurance companies' 'rates are unquestionably ample for all obligations that are incurred under them. Mr. Mann. Now, let us see whether you are correct about that or not. You provide that when a man reaches, say, the age of 70 years, he can purchase an annuity from the Government, or he can with- draw the funds to his credit in cash. Would it not be inevitable, under such circumstances, that the man who is in very poor health, but who, according to the mortality tables would have the same exipectancy of life that the healthy man would have, but who would under those circumstances have a much less expectancy of life, inevitably withdraw his cash funds, and that the man who has a very good actual expectancy of life will leave his money in for the purchase of the annuity? Mr. Brown. I am glad you mentioned that because that so-called selection against the company is identical with the selection that is made against an insurance company, and that is taken into account in the rate that is charged. Mr. Mann. But you have no such thing in an insurance company as you propose here? Mr. Brown. Yes; identically the same thing. Mr. Mann. I would like to have you give us some evidence of that. Mr. Brown. Yes; I will prove that. The Chairman. You mean that an insurance company can wait until the time comes Mr. Brown. I mean to say this, that the insurance companies hold out to the public an offer all the time to issue annuities to any- one — to all comers, at the rates which we propose here; and it is not proposed to give to the clerks any rate that would give them an advantage as against the Government that the insurance companies do not give to the public. The selection against the company and 110 RETIREMENT FUND SUPERANNUATED EMPLOYEES. against the Government would be identical. All those who are in poor health would unquestionably^ take their money, while all those m good health might take annuities, but that is a selection against the company that is always taken into account in the making of annuity rates. Now, if the rates named were not sufficient at any time, the Secretary of the Treasury, under this bill, would have the authority to change the basis of those rates and charge a higher rate. Mr. Mann. That could not apply to the individual who had reached the point where he was entitled to take the annuity. Under your scheme it could not very well apply for many years to come, and mean- while, all this time, the Government pays the deficiency. ^Mr. Brown. If there was any question about the rates charged by the insurance companies not being adequate, there is no reason why the rates should not have been raised in the first instance. If it should prove afterwards that there would be a surplus under the bill, that surplus may be distributed by the Treasury Department from time to time through the annuities. Mr. Mann. But the question which was asked is whether the Treasury shall bear the deficit, if there be one. Mr. Brown. There would be none. Mr. Mann. I think that is a pure guess on your part. Mr. Brown. No; there is no guess about that. A number of the insurance companies in the United States are offering these rates to the public, willing to take all comers, good, bad, and indifferent, and their experience for years past has been that they have not lost money. Mr. Mann. Anyone who has had experience with insurance com- panies knows that they take advantage of every possible thing they can, and that they get the advantage of a great many people who insure with them. Mr. Brown. There is no possibility of taking advantage of a person where he comes and puts down a certain amount of money with which to buy a life annuity. The Chairman. Do the insurance companies allow a person who takes out a policy to wait until he comes to an age of 70 j^ears, say, and then decide whether he wUl take the cash, or the annuity? Mr. Brown. Every policy that is issued by the Travelers' Insur- ance Company, at any rate, names an annuity that will be granted at the end of a given period of years, and the company takes a chance on the man being a good risk or a poor one. The Chairman. Does he have the option at that time? Mr. Brown. Yes. Mr. Mann. What Mr. Brown means, I think, is that the insurance companies offer at any age to sell annuities based upon a certain expectancy of life, and that it is natural to assume that people who had in fact little expectancy of life would not pay for an annuity, and that the people who in fact had, in their individual cases, a long expect- ancy of life, or good health, would be more apt to buy annuities. That is the point, is it not? Mr. Brown. In making aimuity rates the companies never over- look the point of selection against the company by reason of differ- ence in physical condition of the persons who might buy the annuities. The poor risk seldom buys an annuity, while the man who thinks he EETIREMENT FUND SUPEBANNUATED EMPLOYEES. Ill is in first-class health, and will get in a long series of payments, pays his money for the annuity. The Chairman. I suppose of course if the committee thought that was dangerous it could strike out the provision allowing a man to take cash. Mr. Brown. The annuity feature is not one that would be generally taken advantage of. The number of annuities issued by the Govern- ment would be small compared with the number of cash payments that would, be made That I think is proved by the small number of annuities issued by the life insurance companies as compared with the cash surrender values that are taken on policies at maturity. . Mr. Mann. Can you tell us how many annuities have been issued from year to year in the last few years by the life insurance compa- nies at the age of 70 ? Mr. Brown. No; I have not those figures here, but I can get them for you. The Chairman. What is the real purpose of the deduction of 10 per cent, from salaries of employees who remain in the service after reaching the retirement age? Mr. Brown. The purpose of the deduction of 10 per cent from the salaries of persons remaining in the service after reaching the age of retirement is this: If an employee enters the service late in life it naturally follows that the amount to his credit on reaching the retire- ment age would be small, and among that class the tendency to remain in the service would be greater than with those who had entered the service at an earlier period, and for that reason the 10 per cent clause was introduced for the purpose of increasing the amount to the credit of the individual as rapidly as possible, so that at as early a point as possible he would have an amount to his credit which would buy an annuity that would induce him to retire if he was remaining in the service through influence of his superior, when he should in fact retire. The Chairman. The question has been asked here. What would be done under the provision in this bill permitting an employee to retire after twenty years of service and take an annuity? Suppose an employee entered the service at the age of 25 in an occupation that would give him retirement at the age of 70, but on reaching the age of 60 or 65 the employee retired and elected to take an annuity. How much annuity would he receive, and would the election to retire and take an annuity at either of the earlier ages place any additional bur- den on the Government? Mr. Brown. No; it would not when the annuity was being paid for by the employee. If an employee entered the service at 25 m a line of employment that would retire him at 70, and on reaching the age of 65 he decided to retire and convert the money to his credit into an annuity, it would work out like this: If his salary had been $100 per month, he would have to his credit on reaching the age of 65, $4,718. That would be the amount of his accumulation with interest. At the age of 65 the annuity rate would be 1888, and therefore the annuity that the Government would grant on his retire- ment at the age of 65 would be the amount that 888 is contained ia $4,718, or $531. Now, if he had remained five years longer, to the age of 70, and contributed five years more, and interest earnings had been added for five years longer, he would have received $810 annuity. If he retired at 60, the accumulations with the interest amount to 112 RETIREMENT FUND SUPERANNUATED EMPLOYEES. $3,657, and at that age the annuity rate would be $1 ,066. So that the annuity the Government would grant would be $343. The earlier he retires the smaller would be his annuity. Mr. Hardy. In all cases it is intended to amount to an annuity that he could purchase at that age with the cash laid up to his credit. Mr. Brown. It is never more than the money will buy. There is no obligation on the part of the Government to pay an annuity that is not earned, and that he has not the money on hand to pay for; and the annuity rate could be changed at any time if it were foimd to be inadequate. Mr. Mann. Of course that is all on the theory that this is a pure business transaction, and not for the interests of the Government in getting rid of superannuation. The moment you get into that you get to the theory of giving an adequate amount for his support or to help support him. Mr. Brown. This bill is intended to be in the interest of the Gov- ernment primarily. The Chairman. Objection has been made to the plan on the ground that it is undesirable to retire any one on more than 50 per cent of pay. Mr. Brown. There is not much foundation in that objection, because it would only be employees who had served more than thirty- three years who would retire on more than 50 per cent of pay. Since this plan is to put a premium on long service, and beginmng at early ages, it seems to me it is in the interest of the service to pay a larger annuity for longer periods than thirty-three years. The Chairman. Objection has been made to this plan on the ground that it would be an interminable task and very expensive to keep an individual account for each employee. What have you to say on that objection? Mr. Brown. When I was in Chicago a few days ago I made inquiry of several savings banks as to the number of individual accounts a bookkeeper can take care of, and I found that a very mediocre clerk can enter four, five, or six hundred items a day, take care of his nec- essary statement work and keep his accounts balanced, so that if we were to estimate that an ordinary Government employee could make 400 entries per day, and should work twenty-five days per month, it would follow that he could take care of 10,000 accounts; and if there were 150,000 employees from whose salaries deductions were being made, it would require 15 bookeepers to handle that part of the plan, and as you see the force required would not be very great. Mr. Mann. Then why should not the cost of it be taken out of the fund instead of out of the Treasury Department? Mr. Brown. It would seem only fair that the Government should contribute something for the benefit it will receive from being able to dispose of superannuated material. Mr. Mann. It is your position that it would cost very httle. I think people who are famihar with the governmental service believe it will cost an exceedingly large amount. Mr. Brown. On what ground do they think that? Mr. Mann. Anybody who has had experience with the Govern- ment service knows that. Mr. Brown. I am making an estimate of the number of accounts that a clerk would take care of on the low basis of 400 entries per day. RETIREMENT FUND— SUPERANNUATED EMPLOYEES. 113 Mr. Mann. But upon a basis entirely dissimilar to the facts, how- ever. Mr. Brown. I do not know about that; I thought it was very simi- lar. In the matter of entering these items it would be easier than making entries in the savings banks, because the names on the pay rolls in the Departments almost always appear in the same order, and instead of having to hunt up different pages, as is common in entering items in savings banks, the employee could run right straight along, making one entry after another, because his record would be in the same order each month. The Chairman. In this connection, I wrote to a minister of Canada, where they have this system in operation, asking him if he could tell ' me what the expense was there, but he replied that it was infinitesi- mal, and that the number of accounts they have is very small. (Ap- pendix L.) Mr. Hardy. I should think that a great deal could be done in con- nection with the bookkeeping and the accounting by use of printed forms. Mr. Brown. But pay rolls as they are now printed have a column for deductions, and one of the disbursing ofiicers here in Washington told me some days ago that these deductions from pay would mean practically no extra work, or very little, provided they were made in even figures, which of course could be very easily done. Mr. Mann. How could that be done? Mr. Brown. These deductions from salaries should be made to even 10 cents, for instance. Mr. Mann. How could you do that under the bill? Mr. Brown. That could be easily done by providing in the bill that the deductions from salaries should be to the nearest 10 cents or 5 cents. It would not materially affect the results. Mr. Mann. That is not in the bill? Mr. Brown. No; but this bill will probably be amended. The Chairman. The question came up at one of the hearings whether this plan was not similar to fraternal life insurance and the resources equally inadequate. Is there any similarity between them? Mr. Brown. None whatever. The weakness in fraternal life insur- ance in the past has been due to the fact that their rates were based upon njortality of the members at the beginning of the organization. Naturally as the members grew older the rates increased, and the new members brought into the organization could never be in sufficient numbers to keep down the rates, so that ultimately the rate would increase, and when they reached a certain point the members, not know- ing where the increase was going to end, would naturally begin to look for insurance in standard reserve companies. Those who were good risks would step out, and the poor risks would be forced to remain, and that would result in an additional increase in rates, and finally the organization would fail because the rates would become so high that no one would pay them. There is no similarity between the plan under consideration and fraternal life insurance. Mr. Mann. Will you give us the figures upon which you base your tables on expectancy of life? What is the expectancy of life at the age of 50, 55, and so on up in five-year periods ? 38257—08 8 114 RETIREMENT FUND SUPEEANNITATED EMPLOYEES. Mr. Beown. The expectancy of life at 50 is 20.91 years; 55, 17.40 years; 60, 14.10 years; 65, 11.1 years; 70, 8.48 years; 75, 6.27 years; 80, 4.39 years; 85, 2.77 years; 90, 1.42 years. I would like to say in that connection that this is the American table of mortality, and is the basis for computing life insurance rates used by the American companies. Now, annuity rates are quite the reverse of that, and a table contemplating greater longevity should be used and would be used. The table suggested by Mr. Flynn was the British Offices Life Annuity table, as that table repre- sented practically the combined experience of the English compa- nies from 1863 to 1893, about thirty years; and the expectation of life under that table is considerably longer than under the American table. The rates named by Mr. Flynn were based on that table with 3.5 per cent interest, but with no loading for expenses. Mr. Mann. What is it under your table? Mr. Brown. I haven't that table here, and I have not been able to get it for you yet. Mr. Mann. What table have you used in making your estimates? Mr. Brown. I am glad you mentioned that. The American table of mortality was used in figuring the mortality of present employees — in other words, in making up the table of probaljle cost to the Gov- ernment for annuities for past service, but the rates which Mr. Flynn recommended were based upon the English table I have mentioned. Mr.- Mann. Who is Mr. Flynn? Mr. Brown. He is the assistant actuary of the Travelers' Insurance Company, and one of the most prominent young actuaries in the country. The reason that I have used the rates named by the Travelers' Insurance Company in talking about these annuities was because they are the figures that were incorporated in a report pre- sented by the subcommittee of the Keep Commission, and i thought it was better to confine myself to one set of tables in order to avoid -any confusion, but in actual practice a somewhat different table would be adopted. Mr. Mann. You have submitted to members of the committee various tables showing the per cent required to be deducted from salaries at which you provide annuities at different ages. Upon what table of expectancy of life were those computations made ? Mr. Brown. Those computations were based upon tRe rates charged by the Travelers' Insurance Company and other standard insurance companies for annuities at the ages named, and the rate of interest contemplated in those rates is Si per cent. The exact mor- tality table that is used I am unable to tell j-ou, because all of the rates named there are the result of various changes by the insurance company from time to time, and I don't know just exactly what mor- tality they are based upon. Mr. Mann. In making these figures you do not know what the expectation of life is at these various ages ? Mr. Brown. I did not base those figures on any expectation of life, I used the table that I knew was current with a number of leading insurance companies, such as The Travelers, the Mutual Benefit, the Pacific Mutual, the Phoenix Mutual, the Prudential, and the Union Central. Other companies, such as the National Life of Vermont, the Penn Mutual, and the Provident Life and Trust charge lower rates. Mr. Mann. But they are based upon expectation of life? EETIEEMENT FUND SUPERANNUATED EMPLOYEES. 115 Mr. Brown. Yes. Mr. Mann. And 3^ou do not know what table it is? Mr. Brown. What table the insurance company used I do not know; I could not easily determine it; it is a mixture of several tables or mortality. Mr. Mann. Your basis is wholly some table that some insurance company now has? Mr. Brown. Yes; and that is a very safe basis to follow. Mr. Mann. Well, no one can tell about that. How long since the insurance companies have been using the tables? Mr. Brown. Thoserateshavebeeninexistenceforagreatmanyyears. Mr. Mann. They have not been changed for a great many years? Mr. Brown. No; not those rates. Mr. Mann. And these are based upon 3^ per cent? Mr. Brown. Yes. Mr. Mann. Compound interest? Mr. Brown. Compound interest. Mr. Mann. How much does |1 amount to in ten years at 4 per cent, conipounded, for different years ? Mr. Brown. I shall be glad to furnish the necessary interest tables for the record so that anyone will be able to compute the annuity for any age and length of service. (Appendix N.) Mr. Mann. Yes; incorporate all of that. Mr. Brown. That, with the figures in the table that I handed you the other day, will enable anyone to figure any annuity. APPENDIX A. BILL PROPOSED BY HBEBERT D. BROWN AND INTRODUCED BY HON. FREDERICK H. GIL- LETT, H. R. 18982, SIXTIETH CONGRESS. [A BILL For the retirement of employees in the classified, civil service of the Government.] Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That beginning with the first day of July next following the passage of this Act there shall be deducted and withheld from the monthly salary, pay, or compensation of every officer or employee of the United States to whom this Act applies an amount that will be sufficient, with interest thereon at four per centum per annum, compounded annually, to purchase from the United States, under the provisions of this Act, an annuity for every such employee on arrival at the ^e of retirement as hereinafter provided equal to one and one-half per centum of his annual salary, pay, or compensation for every full year of service or major fraction thereof between the date of the passage of this Act and the arrival of the employee at the age of retirement. The deductions hereby provided for shall be based on such annuity table as the Secretary of the Treasury may direct, and interest at the rate of four per centum per annum, compounded annually, and shall be varied to correspond to any change in the salary of the employee. Sec. 2. That the amounts so deducted and withheld from the salary, pay, or com- pensation of each employee shall be deposited in the Treasury of the United States and shall be credited, together with interest at four per centum per annum, com- pounded annually, to an individual account of the employee from whose salary, pay, or compensation the deduction is made. The moneys so deducted and the income derived therefrom may be invested from time to time by the Secretary of the Treasury by the purchase of bonds of the United States, bonds or other interest- bearing obligations of any State of the United States, or any legally authorized bonds issued for municipal purposes by any city in the United States which has been in existence as a city for a period of twenty-five years, and which for a period of ten years previous to such purchase by the Secretary of the Treasury has not defaulted in the payment of any part of either principal or interest of any funded debt author- ized to be contracted by it, and which has at such date more than one hundred thou- sand inhabitants as established by the last national census, and whose net indebtedness does not exceed five per centum of the valuation of the taxable property therein, to be ascertained by the last preceding valuation of property for the assessment of taxes; 116 RETIREMENT FUND SUPERANNUATED EMPLOYEES. or the first-mortgage bonds of any railroad company, not including street-railway bonds, which, in compliance with existing law, reports regularly to the Interstate Commerce Commission a statement of its condition and earnings, and which has paid dividends of not less than four per centum per annum regularly and contiuuously on its entire capital stock for a period of not less than ten years previous to the purchase of the bonds by the Secretary of the Treasury. The moneys so deducted from salaries and the income derived therefrom shall be held and invested by the Secretary, of the Treasury until paid out as hereinafter provided. Any deficiency in the fund hereby created to carry out the provisions of this act shall be paid out of any money in the Treasury not otherwise appropriated. Sec. 3. That upon retiring at the age of retirement the employee may withdraw his savings, with the increment of interest as herein provided, under one of the fol- lowing options, and receive in addition thereto such sum, if any, as may be appor- tioned by the Secretary of the Treasury out of interest accumulations in excess of the four per centum guaranteed by the provisions of this act, and such apportion- ment by the Secretary of the Treasury shall be conclusive: Option I. In one sum. Option II. In an annuity payable quarterly throughout life. Option III. In an annuity payable quarterly throughout life, with the provision that in case of the death of the annuitant before he has received in annuities the amount of his savings, plus the interest credited thereon, the balance shall be paid to his estate. In determining at his death the amount due to his estate no account shall be taken of the annuities paid to him by the United States, as hereinafter provided . Option IV. In an annuity certain for a limited term of years, payable quarterly. If after retirement the employee does not avail himself of one of the foregoing options, but leaves the amount due him on deposit, interest at the rate of two per centum per annum on the original sum so left on deposit on retirement shall be cred- ited thereto for a period not exceeding twenty years, and if not then withdrawn the money so left on deposit and the interest credited thereon shall be covered into the Treasury as a miscellaneous receipt. Sec. 4. That upon absolute separation from the civil service prior to the retirement age, and only upon such separation, the employee may withdraw his savings, with the increment of interest credited thereon, in one sum, or, in case his savings amount to at least one thousand dollars, and he has been in the service not less than twenty years, he may withdraw the same under any one of the foregoing options computed on the basis of his attained age. In case of the death of an employee while in the service the amount of his savings, together with the interest credited thereon, shall be paid to his estate. Sec. 5. That in case of reinstatement in the classified civil service of any person who at the time of his separation therefrom received a refund under section four of this act, his period of service for the purpose of retirement and of making the monthly deduction from his salary shall be computed from the date of such reinstatement, unless he shall within ninety days after reinstatement pay to the Secretary of the Treasury the amount refunded to him, in which case the same shall be replaced to the credit of his account, and the former period of service shall also be counted. Sec. 6. That the retirement age herein referred to shall be sixty years for group one, sixty-fi-^e years for group two, and seventy years for group three. And the President of the United States shall designate the branches of the service to be included in each group. Sec. 7. That every employee to whom this act applies shall be entitled, on reach- ing the retirement age, or having already passed that age, to retire from the service under the provisions hereinbefore contained, and also, in addition to the annuity herein provided for by his own contributions from his salary, to receive from the United States, during the remainder of his life, an annuity equal to one per centum for group one, one and one-fourth per centum for gi-oup two, and one and one-half per centum for group three of his average salary, pay, or compensation, during the last ten years of service, for every year that he shall have been in the service prior to the pas- sage of this act; and the Secretary of the Tresaury is hereby authorized and directed to pay such annuity quarterly, from any money in the Treasury not otherwise appro- priated, upon proper certification of the retirement of such employee by the appoint- ing officer under whom he last served. Annuities from the United States for the period of service prior to the passage of this act shall be payable only on condition that the employee remains in the service until he reaches the age of retirement. On the death of the employee the payment of annuities provided for by this section shall cease and determine. Annuities payable by the United States under this section on salaries in excess of two thousand five hundred dollars per annum shall be based upon an annual salary of two thousand five hundred dollars. Sec 8. That the period of service upon which the annuity to be paid by the United States is based shall be computed from original employment, whether as a classified EETIREMENT FUND SUPERANNUATED EMPLOYEES. 117 or unclassified employee, and shall include periods of service at diiSerent times and service in one or more departments, branches, or independent offices of the Govern- ment, the Signal Corps prior to July first, eighteen hundred and ninety-one, and the general service in or under the War Department prior to May sixth, eighteen hun- dred and ninety -six. Sec. 9. That the Secretary of the Treasury shall prepare and keep all needful tables, records, and accounts required for carrying out the provisions of this act. The rec- ords to be kept shall include data showing the mortality experience of the employees in the various branches of the service and in different localities through the country and the rate of withdrawal from the classified service, and any other information that may be of value and may serve as a guide for future valuations and adjustments of the plan for the retirement of employees. Sec. 10. That within thirty days before the arrival of an employee at the age of retirement, the head of the Department or independent office shall certify to the Secretary of the Treasury regarding the efficiency of such employee, with a statement whether the public interest requires his continuance in the service or his retirement, and such certificate and statement shall be conclusive. If he certifies that by rea- son of the efficiency of an employee who has reached the retirement age, and is will- ing to remain in the service, nis continuance therein would be advantageous to the public servipe, such employee may be retained for a term not exceeding two years; and at the end of two years he may by similar certification be continued for an additional term of two years, and so on. Upon the failure of the head of the Department or independent office to make the above-described certificate it shall be the duty of the Secretary of the Treasury to place such employee upon the retired list in accordance with the provisions of this act. Sec. 11. That if an employee is retained in the service after reaching the retire- ment age, a deduction of ten per centum of his monthly salary, pay, or compensation shall thereafter be made while he remains in the service, and the same shall be treated as other deductions under this act. Sec 12. That the provisions of this act shall apply only to the classified civil service, which is hereby defined to include all officers and employees in the executive civil service of the United States, except persons appointed by the President and con- firmed by the Senate, and mere unskilled laborers. No person serving in a position excepted from examination or registration as defined in the civil-service rules shall be included within the provision of this act unless he has served in a competitive position for at least one year. Whenever any person becomes separated from the classified service by reason of appointment in the unclassified service, such separation shall not operate to take him out of the provisions of this act. The President shall have power, in his discretion, to exclude from the operations of this Act any groujjs of employees whose tenure of. office is necessarily intermittent or of uncertain duration. Sec. 13. That none of the moneys mentioned in this act shall be assignable either in law or equity or be subject to execution or levy by attachment, garnishment, or other legal process. Sec. 14. That for the clerical and other service and all other expenses necessary in carrying out the provisions of this act, during the fiscal year nineteen hundred and nine, including salaries and rent in the city of Washington, there is hereby appropriated the sum of fifty thousand dollars; and also the amounts necessary for the annuities to be paid by the United States, under section seven of this act, from year to year, are hereby appropriated, out of any money in the Treasury not otherwise appropriated, to be available until expended. Sec. 15. That the Secretary of the Treasury is hereby authorized to perform or cause to be performed any and all acts, and to make such rules and regulations as may be necessary and proper, for the purpose of carrying the provisions of this act into full force and effect. APPENDIX B. BILL RECOMMENDED BY THE SUBCOMMITTEE ON PERSONNEL, OF THE KEEP COM- MISSION, AND INTRODUCED BY HON. J. A. GOULDEN, H. R. 17969, SIXTIETH CONGRESS. A BILL For the retirement of employees in the classiaed civil service ol the Government. Be it enacted by the Senate and House of Representatives of the United States of Am' rica in Congress assembled, That, beginning with the fltrst day of July next following the passage of this act, there shall be deducted and withheld from the monthly salary, pay or compensation of every officer or employee of the United States to whom this act applies an amount that would be sufficient, with interest thereon at four per cen- tum per annum, compounded annually, to purchase from the United States, under the provisions of this act, an annuity for every such employee, on arrival at the age of retirement as hereinafter provided, equal to one and one-half per centum of his annual 118 RETIREMENT FUND SUPERANNUATED EMPLOYEES. salary, pay, or compensation for every full year of service, or major fraction thereof, between the date of the passage of this act and the arrival of the employee at the age of retirement. The necessary deduction hereby provided for shall be based on such annuity table as the Secretary of the Treasury may direct, and interest at the rate of foTir per centum per annum, compounded annually. Such deductions shall be varied to correspond with any change in the salary of the employee. Sec. 2. That the amounts so deducted and withheld from the salary, pay, or com- pensation of each employee shall be deposited in the Treasury of the IJnited States and shall be invested^ from time to time by the Secretary of the Treasury in State, municipal, railroad, or other bonds approved by him. The interest on said bonds shall be paid into the Treasury of the United States and shall be reinvested in the same manner as above described. The earnings shall be annually credited to the individual accounts of the employees from whose salary, pay, or compensation the deductions have been made, and the moneys deducted, together with the interest added thereto, shall be held and invested by the Government while the employee remains in the service, and after retirement as required for an annuity payment if he selects such option as hereinafter provided. Sec. 3. That upon retiring at the age of retirement the employee shall withdraw his savings, with the increment of interest as herein provided, under one of the follow- ing options: Option I. In one sum. Option II. In an annuity payable quarterly throughout life. The annuity herein provided for shall be based on such mortality tables as the Secretary of the Treasury may direct, and interest at the rate of four per centum during the first two years of the operation of this act. After the act shall have been in operation two years the interest assumed shall be the average rate the retirement fund shall have been earning dming the two years prior to the first of January pre- ceding the date of retirement. Upon the death of an annuitant his estate shall be paid the proportional part of the current quarterly payment. Sec. 4. That upon absolute separation from the civil service prior to the retirement age, and only upon such separation, there shall be paid to the employee or his estate the amount of his savings, with the increment of interest credited thereon, in one sum: Provided, That any employee who shall voluntarily withdraw from the service before the age of forty-five years shall forfeit the accrued interest on his savings, and only the amounts deducted from his salary shall be returned to him. In case of death after reaching the retirement age and before deciding upon an option the sav- ings, with the increment of interest credited thereon, shall be paid to the estate of the employee. Sec. 5. The retirement age herein referred to shall be sixty years for Group One, which shall consist of employees whose duties require great physical activity; sixty- five years for Group Two, which shall consist of employees whose duties require a moderate amount of physical activity; and seventy years for Group Three, which shall consist of employees whose duties are mainly intellectual. And the President of the United States shall designate the branches of the service to be included in each group. Sec 6. Every employee to whom this act applies shall be entitled on reaching the retirement age, or, having already passed that age, to retire from the service under the provisions hereinbefore contained, and also in addition to the annuity herein pro- vided for by his own contribution from his salary to receive, from the United States, during the remainder of his life, an annuity equal to one and one-half per centum of his total compensation during service prior to the taking effect of this act, and the Secretary of the Treasury is hereby authorized and directed to pay such annuity quarterly upon certification of the retnement of such employee by the proper appoint- ing officer under whom he la;st served: Provided, That after having served the IFnited States twenty years an employee may be retired by the proper appointing officer by reason of disability not due to vicious habits, or by reason of exigencies of service but without fault or delinquency on his part, or on his own application after forty years' service, and upon such retirement shall be entitled to the benefits of this act. Sec 7. The provisions of this act shall apply only to the classified civil service, which is hereby defined to include all officers and employees in the executive civil service of the United States, except persons appointed by the President and confirmed by the Senate, and mere unskilled laborers. No person serving in a position excepted from examination or registration ae defined in the civil-service rules shall be included within the provisions of this act unless he has served in a competitive position for at least one year. Whenever any person becomes separated from the classified service by reason of appointment in the unclassified service, such separation shall not operate to take him out of the provisions of this act. The President shall have power, in his discretion, to exclude from the operations of this act any groups of employees whose tenure of office is necessarily intermittent or of uncertain duration. EETIREMENT FUND SXJPEEANNXJATED EMPLOYEES. 119 Sec. 8 The period of service upon which the annuity to be paid by the United states IS based shall be computed from original employment, whether as a classified or unclassihed employee, and shall include periods of service at different times and service m one or more departments, branches, or independent offices of the Govern- ment, the bi^nal Corps prior to July first, eighteen hundred and ninety-one, and the (jeneral [service in or under the War Department prior to May sixth, eighteen hundred and ninety-six. j > » ^^°- 9- The Secretary of the Treasury shall prepare and keep all needful tables, records, and accounts required for carrying out the provisions of this act. The records to be kept shall include data showing the mortality of the employees in the various branches of the service and in different localities throughout the country, and the ratb ot withdrawal from the classified service, and any other information that may be of value and may serve as a guide for future valuations and adjustments of the plan for the retirement of employees. Sec. 10. Within thirty days before the arrival of an employee at the age of retire- ment the proper appointing officer shall certify to the Secretary of the Treasury regarding the efficiency of such employee, with a statement, whether the public interest requires his continuance in the service or his retirement, and such certificate and statement shall be conclusive. If he certifies that by reason of the efficiency of any employee who has reached the retirement age, and is willing to remain in the service, his continuance therein would be advantageous to the public service, such employee may be retained for a term not exceeding two years; and at the end of the two years he may by similar certification be continued for an additional term of two years, and so on. Upon the failure of the proper appointing officer to make the above-described certificate, it shall be the duty of the Secretary of the Treasury to place such employee upon the retired list in accordance with the provisions of this act, Sec. 11. None of the moneys mentioned in this act shall be assignable either in law or equity or be subject to execution or levy by attachment, garnishment, or other legal process. Sec. 12. For the clerical and other service and all other expenses necessary in car- rying out the provisions of this act, during the fiscal year nineteen hundred and nine, including salaries and rent in the city of Washington, there is hereby appro- priated the sum of fifty thousand dollars; and also the amounts necessaiy for the annuities to be paid -by the United States, under section six of this act, from year to year are hereby appropriated, out of any moneys in the Treasury not otherwise appropriated, to be available until expended. Sec. 13. The Secretary of the Treasuiy is hereby authorized to perform or cause to be performed any and all acts, and to make such rules and regulations as may be necessary and proper, for the purpose of canying the provisions of this act into full f6rce and effect. APPENDIX C. TABLES PREPARED BY HERBERT D. BROWN", SHOWING SALARY DEDUCTIONS UNDER GILLETT OR GOULDEN BILLS. Table I. — Showing per cent required to be deducted monthly from, any salary to provide an annuity for a male at age of 70 equal to 1\ per cent of annual salary for each year of service. Illustration: $1,W0 {salary)Xli (per cent)=$18X50 {years of service) —$900 {amount of annuity). [(a) Age of retirement, (b) Age of entrance to service, (c) Years of service, (d) Amount of annuity to be provided for on retirement at age shown in column (a) . (e) Cost of SlOO annuity, for a male, at age shown in column (a), first payment in one year after retirement. Interest at 3i per cent per annum, compounded annually, (f) Cost of annuity shown in column (d) . (g) Amount to which a deposit of $1 per month, first payment immediate, will accumulate at 4 per cent per annum, compound mterest, at end ot years shown in colunm (c) . (h) Amount of monthly deduction reqmred from monthly salary of JlOO (per cent of other salaries) , during years shown in column (c) , to accu- mulate sum shown in column (f). Interest at 4 per cent per annum, compounded annually.] (a). (b). (c). (d): (e). (f). (g). (h). 70 20 50 J900. 00 $742.00 $6,678.00 $1,871.48 n$3.568 70 25 45 810. 00 742.00 6, 010. 20 1, 483. 64 4.051 70 30 40 720. 00 742.00 5,342.40 1,164.87 1586 70 35 35 630. 00 742.00 4,674.60 902.87 5.177 70 40 30 540.00 742.00 4,006.80 687. 52 5.828 70 45 25 450. 00 742.00 3, 339. 00 510. 52 6.540 70 60 20 360. 00 742.00 2,671.20 365.04 7.317 55 15 270. 00 742.00 2.003.40 245.46 8.162 70 60 10 180.00 742.00 1,335.60 147. 18 9.075 n Or per cent. 120 EBTIREMENT FUND SUPERANNUATED EMPLOYEES. Table II. — Shouing pn cent required to be deducted monthly from any salary to provide [ an annuity fa- a male at age of 65 equal to 1\ -per cent of annual salary for each year of service. Illustration: $1,200 {satary)Xl\ (per cent)=fl8X50 (years of service) —■^810 (amount of annuity). ((a) Age of retirement, (b) Age of entrance to sennce. (c) Years of service, (d) Amount of annuity to he provided for on retirement at age shown in column (a) . (e) Cost of $100 annuity, for a male, at age shown in column (a), first payment in one year after retirement. Interest at 3J per pent per annum, compounded annually, (f) Cost of annuity shown in column (d) . (g) Amount to which a deposit of SI per month, first payment immediate, will accumulate at 4 per cent per annum, compound interest, at end of years shown in column (c). (h) Amount of monthly deduction required from monthly salary of SlOO (per cent of other salaries) , during years shown in column (c) , to accu- mulate sum shown in column (f). Interest at 4 per cent per annum, compounded annually.] (a). (b). 45 RF, 20 6.T 25 40 (i.T 30 35 (i.i «5 30 (i.i 40 25 M 45 20 B.'i 50 15 (« 55 10 OS 60 5 (d). (e). S810.00 720. 00 ! 630. 00 540. 00 450. 00 360.00 , 270.00 180. 00 90.00 (!)■ $7, 192. 80 6, 393. 60 5, 594. 40 4,795.20 3,996.00 3, 196. 80 2, 397. 60 1,598.40 799. 20 (g). (h). SI, 483. 64 I 1,164.87 ' ■902. 87 687.52 510. 52 365. 04 245.46 147. 18 66. 40 a S4. 848 5.488 6.196 U.974 7.827 8.757 9.768 10. 860 12. 036 a Or per cent. Table III. — Shouing per cent required to be deducted monthly from any salary to provide an annuity for a male at age of 60 equal to li per cent of annual salary for each year of service. JUustrafiou: $1,200 (salary)X H (per cent)=$18 X 40 (years of service)=$7W (amount of annuity). [ (a) A^e of retirement, (b) Age of entrance to service, (c) Years of service, (d) Amount of annuity to be provided for on retirement at age shown in column (a) . (e) Cost of SlOO annuity, for a male, at age shown in column (a) , first payment in one year after retirement. Interest at 3J per cent per anniun, compounded annually, (f) Cost of aimuity shown in column (d). (g) Amount to which a deposit of SI per month, first pajTnent immediate, will accumulate at 4 per cent per annum, compound interest, at end of years sho\^Ti in column (c) . (h) Amount of monthly deduction required from monthly salary of SlOO (per cent of other salaries), during years shown in column (c), to accu- mulate sum shown in column (f). Interest at 4 per cent per annum, compounded annually.] (a). (b). (c). ! (d). S720.00 (e). (t). (g). j (h). 60 20 40 1 SI. 066. 00 S7, 675. 20 81,164.87 1 a ?6. 589 CO 25 35 030.00 1,066.00 6,715.80 902.87 1 7.438 6 30 30 540.00 1.066.00 5,756.40 687.52 8.373 60 35 25 ; 4.50.00 1.066.00 4,797.00 510.52 9.396 60 40 20 360.00 1.066.00 3,837.60 365.04 10. 513 60 1 45 15 i 270.00 1.066.00 2,878.20 245.46 1 11.726 60 50 10 ! 180.00 1,066.00 1,918.80 147.18 13. 037 60 65 "l 90.00 1,066.00 959. 40 66.40 14. 449 a Or per cent. Table IV. — Shouing amount of annuity that may be provided for a male at age of 70 by a monthly deduction of 5 per rent from a salary of $100 per month, deductions begin- ning at various age^ from 20 to 60. Deductions accumulated at 4 per cent per annum, compound interest. I (a) Age of retirement, (b) Age of entrance to service, (c) Years of service, (d) Amount of annuity to be provided tor on retirement at age shown in column (a) . (e) Cost of SlOO annuity, for a male, at age shown in column (a) , first payment in one year after retirement. Interest at 3i per cent per annum, compounded annually, (f) Cost of annuity shown in column (d). (g) Amount to which a deposit of SI per month, first payment immediate, will accumulate at 4 per cent per annum, compound mterest, at end of years shown in column (c) . (h) Amount of monthly deduction required from monthly salary of SlOO (per cent of other salaries) , during years shown in column (c) , to accumu- late sum shown in column (f ) . Interest at 4 per cent per annum, compounded annually.] (a) (b) (c) 50 (d) (e) ! (I) 1 Cg) (h) 70 20 SI, 261. 10 S742.00 \ S9,3o7.40 i SI, 871. 48 nSS.OO 70 25 45 999. 76 742.00 7,418.20 1 1,483.64 5.00 70 30 40 784. 95 742.00 5,824.35 1,164.87 5.00 70 35 35 608.40 742.00 ' 4,514.35 ! 902.87 5.00 70 40 30 463.29 742.00 j 3,437.60 1 . 687. 52 5.00 70 45 25 344.02 742.00 j 2,552.60 510. 52 5.00 70 .iO 20 245. 98 742.00 ' 1,825.20 365. 04 5.00 70 .-,.} 15 165. 40 742.00 1,227.30 245.46 5.00 70 60 10 99.18 742.00 735.90 147. 18 5.00 a Or per cent RETIREMENT FUND SUPERANNUATED EMPLOYEES. 121 TAShY^ J .—Showing per cent required to be deducted from a monthly salary of $100 to provide an annuity of $900 per annum for a male at aqe of 70, deductions beginning at various ages from 20 to 60 . » J ^ '■^ol,^St,r°t^K^'™™'J*-j,''^' ■'^^'^ °' entrance to service, (o) Years of service, (d) Amount of a moiFat o„ P™^'™"? lor on retirement at age shown in column (a), (e) Cost of SlOO annuity, lor ?o?t rfoV o^n^? shown m column (a), first payment in one year after retirement. Interest at 3i per whiPh„ riS?n=^''iT''°™'^^'^.^"'l™''y- W Cost of annuity shown in column (d). (g) Amount to or>7nS>,,„H ?^t ; »1 per month, first payment immediate, will accumulate at 4 per cent per annum, ?r^'^^,rtS* 1 ■ ^^ !??„2'7''^''^ stiova in column (c) . (h) Amount of monthly deduction required rI?r^=?SS l„f l-^ ,°' ^lOO (per cent of other salaries) , during years shown in column (c) , to accumu- late sum shown m column (f! . Interest at 4 per cent per anndm, compounded annually.] (a). (b). (c). (•1). (e).. (f). (g). (h). 70 20 50 3900. 00 $742. 00 SO, 678 00 SI, 871. 48 a J3. 568 25 45 900 00 742.00 6,678 00 1, 483 64 4.501 30 40 900. 00 742 00 6,678 00 1, 164 87 5.733 35 35 900. 00 742.00 6,678 00 902, 87 7.396 40 30 900 00 742. 00 0,678 00 687. 52 9.713 70 45 25 900 00 742.00 6, 678 00 510 52 13, 081 70 60 20 900. 00 742 00 6,078 00 305. 04 18. 294 70 55 16 900. 00 742.00 6,078 00 245. 46 27.206 70 60 10 900 00 742.00 6, 078 00 147. 18 45 370 a Or percent. APPENDIX D. STAFF PENSION FUNDS WITH SPECIAL REFERENCE TO A RETIREMENT PLAN FOR UNITED STATES CIVIL-SERVICE EMPLOYEES. [By Benedict D. Flynn, from transactions of the Actuarial Society of .America, October, 1907.] _ American actuaries liave given but little attention to the subject of old-age pen- sion plans, chiefly for the reason that the idea of providing for the aged poor of the state, and for the old and faithful employee, has not yet seriously taken hold of the American people. It is true that many of the great railway systems of the United States and Canada, and a few of the large banks and commercial houses, have estab- lished funds for the relief of their old employees, but when one considers the large number of institutions throughout the country in which this idea could be put into effect, the number of such funds existing is seen to be comparatively small. There are signs, however, that the subject is beginning to occupy public attention. The appointment recently by the governor of IMassachusetts of a commission to investi- gate and consider the various plans of old-age pensions, with a view to establishing an old-age insurance system in the Commonwealth, and the interest which has been taken in a retirement scheme recently proposed for the United States civil-service employees, indicate that the time is not far distant when the question of national old-age pensions will be fully discussed, and the justice and advantages of staff pen- sions will be more clearly understood. The part which the actuary must take as this idea of old-age provision develops is shown by a study of the history of old-age pensions in foreign countries to be both important and difficult. Actuarial advice will undoubtedly be sought in attempts to obtain a satisfactory solution to the problem of national old-age pensions, but it is in the valuation and readjusting of existing staff pension funds and in the estab- lishing of new retirement plans that the services of the actuaries of this country will be more often required. It is advisable, therefore, that more attention be given to this branch of the subject in preparation for the responsibilities which may later fall upon the members of this society. Recognizing the necessity for this, the society at its last meeting added to its requirements for admission as a fellow a knowledge of the methods of construction and of valuation of pension funds. The subject is impor- tant and most interesting and it is with the purpose of bringing it before the society for consideration and discussion that this paper is submitted. Bvit few articles have been written on the technical side of the subject of staff pen- sion funds from an actuarial standpoint, for the reason, probably, that one can become an authority upon the subject only after years of thought and practical experience, and also that the few papers written have covered the subject ably and thoroughly. Mr. Henry W. IManly, in his masterly work "On the valuation of staff pension funds" (J. I. A., vol. 36, p. 209; vol. 37, p. 193), first placed the study of staff pension funds upon a sound and scientific basis. Prior to the appearance of this paper, although some of the methods described by him had been used by other actuaries, nothing had 122 HETIEEMENT FUND SUPERANNUATED EMPLOYEES. appeared in print, and most of the problems met in the valuation of these funds had been solved by methods of approximation. In a previous paper read before the second international congress of actuaries (Trans, of Sec. Int. Cong., p. 860) this gentleman had given solutions for many of the simpler problems which arise in con- nection with these funds, but in this later work he takes up those of a more intricate and practical nature and gives solutions which are mathematically exact. Nothing else of particular value appeared upon the subject, with the exception of an article by Mr. David Garment, "Practical notes on the vahiation of pension funds" (Trans, of Fac. of Act., vol. 1, p. 305), until Mr. George King contributed a paper on "Staff pension funds" (J. I. A., vol. 29, p. 129), which has often been referred to as a text- book upon the subject. Although covering much the same ground as Mr. Manly, Mr. King treats the subject from a more practical standpoint and introduces some minor changes and improvements in the methods. These papers, with remarks ■ and discussions upon them, if carefully read by the student, should give a good idea of the technical construction and of the methods of valuation of these funds. A brief outline ot the methods employed by these actuaries in the treatment of this problem may be of interest. The best way to gain an idea of the general construction of a staff pension tund is to take up, as does Mr. King, the valuation of an existing fund. As the statistics of one fund can not be safely used for another, the first step is to collect data from which to obtain rates of withdrawal, mortality and superannuation of mem- bers on the active list. From these statistics a service table is then made, which diffora from a mortality table only in that there are three columns of decrements — withdrawels, deaths, and pensioned — instead of one. The average salary of the members at each age is also obtained and adjusted to represent the probable future average salaries of the fund at each age, if it has not yet reached a stationary state, and the result used as a model scale of salary or column from which the rate of increase of salary can be obtained. The valuation of the future contributions and the various benefits of the fund is made by means of factors, which, in turn, are obtained by the use of various sets of commuta- tion columns. The factor which represents the value of the contribution of 1 per cent of future salaries, for instance, by an employee at age x, present salary SI 00 and increas- ing according to scale, takes the form in somewhat similar notation of =-?. The com- mutation symbol in the numerator of this expression is based upon the Zj; column of the service table, which is subject to the three decrements before mentioned, and also upon the salary scale which is introduced at each age. As salaries are assumed to be payable uniformly throughout the year of age, and withdrawals, deaths, and retire- ments to be distributed in a similar manner, the numerator of this expression and of those which follow is a continuous function. The denominators in every case are based upon the deaths, but in factors for the valuation ol benefits depending upon future contributions, this function is modified slightly for ease in calculation. In making the valuation of an existing fund, as the past contributions are known, the method followed is to consider separately the value of benefits based upon past and upon future contributions. Taking up the valuation ot the simpler benefits, such as the return upon withdrawal of total contributions without interest, we have in respect to past contributions the total of such payments multi- plied by a factor of the form -^. The numerator of this expression is based upon the withdrawals just as the regular M^ is based upon the column of deaths. Similarlv, the factor to be used to obtain the value at age x of the return upon withdrawal of "l per cent of future salaries, present salary .SlOO and increasing according to scale, is similar to ^. The numerator of this expression is formed by using the column of withdrawals ■Yx and also considering the salary scale. The factor for return upon death before pen- sioned is calculated upon the same principle for past and future contributiohs as those upon withdrawal, the difference being simply that the deaths are used instead of the number of withdrawals. The special forms of return upon death, such as total con- tributions with compound interest at valuation rate, with interest other than at valua- tion rate, and at simple interest, are obtained by employing special commutation col- umns to obtain the valuation factors. Taking up next the valuation of the pensions, a table of contipuous annuities appli- cable to the fund under observation must be prepared. ' The annuity values obtained from the experience of the fund can be used for the early ages, but in the later ages it 18 safer to employ some other table. Considering the simplest form of pension benefit, that based upon average salary from commencement of membership, upon retirement EETIREMENT FUND SUPERANNUATED EMPLOYEES. 123 at any time, we have in respect to past contributions a factor of the form ^, and for those of the future ^. The numerators of each of these expressions are based upon the column of retirements, and in the case of the factor for use in future contributions tJie salary scale is also introduced . This last factor gives the value of a pension of 1 per cent ot average salary for each year of membership in respect of a salary of $100, increas- ing according to scale. In practice, any variations in this benefit are met, such as pensions based upon terminal salaries -or upon varying percentages not directly based upon the number of years of service, and these are solved by obtaining factors based upon new commutation columns. It can be seen, therefore, that although many of the problems arising from the rules of funds met in practice are very complicated, their solution IS much simplified by this extended use of commutation columns. Although the American actuary will be called upon to value existing funds, it will be chiefly in the inauguration of new pension systems that his services will be required. It 18 therefore important to investigate the principal methods of construction of staff pension funds m order to determine which plan is best adapted to certain conditions and requirements. From the above general outline, a fair idea of the elaborate structure of most of the funds m existence m European countries and the United States can be obtained. In the papers previously mentioned and throughout the remarks upon them reference is often made to the practical difficulties encountered in establishing a fund along these lines and the danger of weakness resulting from the unreliable nature of the materials upon which this framework is based. I quote from the remarks of Mr. G. J. Lidstone (J. I. A., vol. 36, p. 279) upon the latter phase of the subject: "It must be remembered that, however much time and care might be taken in erecting an elegant and refined edifice, it could never have any more stability than the materials upon which it was founded. In the present case the materials were not only uncertain, but were often actually shifting, and not the same from time to time. Considering first of all the rate of withdrawal, which was assumed in the formula to be known and stationary, obviously the rate might vary within wide limits at different periods, owing to the trade conditions and a number of other circumstances, and therefore the experience of the fund mi^ht not be a safeguard in the future. An even greater difficulty arose when dealing with a new fund. One had then to utilize the experience of withdrawals before the fund was formed, but it was one of the prin- cipal objects of those funds — certainly one of their effects — to steady the service and prevent withdrawals to a certain extent, for a man belonging to such a fund thouglit twice before shifting his employment and thus sacrificing years of pension service. It might therefore be that the rate of withdrawal deduced from the experience amongst the officials before the fund commenced would be quite unreliable for the valuation of the fund when it was once in existence." What Mr. Lidstone has said in regard to the great difficulty of obtaining a true meas- ure of the rate of withdrawals applies, to a large extent, to the rates of mortality and retirement involved. And the salary scale, which is probably of greater importance in determining_ the amount of contribution than any other element, is most difficult to determine with reasonable accuracy. The presence of high-salaried officials in the older ages of the staff and the probability of change in the methods of advancement, call for the greatest care and judgment in the adjustment of the salary scale. Even when the work is completed in the most skillful manner, there is a grave question as to whether the result gives a fair estimate of the rate of increase in salaries to be experi- enced in the future. The fact that these assumptions with regard to the rates of withdrawal, retirement, and salary increase can not be made with accuracy, however, would not of itself be of great moment, provided the errors of judgment did not place the fund in an unsafe condition, if it were not for the fact that in such a fund individuals or certain classes are not treated equitably. This point is set forth ably in remarks by Mr. William Sutton before a select committee of the House of Commons in 1891, as follows: "It may be said that, with a few exceptions, superannuation funds as generally constituted are radically wrong in principle when looked at from the actuarial point of view. Instead of resting content with the introduction of as few assumptions as possible, they are made to involve not only assumptions as to the rates of mortality to be experienced among the members and as to the rate of interest to be earned by the accumulated funds — these may be fairly said to be indispensable — but they are also made to depend upon such capricious elements as the rates of secession of members (that is, of members leaving active service otherwise than by death or retirement) and the rates of salary the members will receive, and on which the nature and amount of their contributions to the fund will depend , as well as the amount of the pension they 124 RETIREMENT FUND SUPERANNUATED EMPLOYEES. will receive. It thus follows that in bringing into the question rates of secession and rates of salary, matters which can not be prognosticated with any certainty for any length of time, classes of members get lumped together whose real circumstances and conditions in respect of these matters are as different aa possible." The percentage contribution of a member to a fund formed on these lines can be looked upon as a rate in determining which the savings from various sources, such as deaths or withdrawals, have been anticipated and which has been based upon the salary which the member will receive in future. If, therefore, the experience on certain classes differs greatly from the assumptiolis made, especially in regard to such uncertain and important elements as rates of withdrawals and salary increase, the result must be inequitable treatment of the members. It might be possible, in theory, to improve this situation by dividing the whole membership into homogeneous groups and to modify the rates for each. The task of obtaining standards of measure- ment for the various groups which would be reasonably safe indices of future results would be, however, too great for practical solution. Mr. Manly in his article upon staff pension funds states that he endeavors to per- suade the employer to guarantee a certain rate of pension based upon years of service and average salary which is to be understood to be a reward for faithful service — that is, that the institution create and support its own pension fund. In cases such as this, where the employer contributes the whole of the cost of the pension scheme, the use of such a fund as outlined above is permissible, for the reason that the right of the em- ployer to give to some larger pensions than to others can not be denied. Where part of the cost is contributed by the employer and the rest by the employees, however, although the latter can not complain if they receive ample return for their own contri- butions, it will probably save much annoyance and discontent if some other method be adopted. In case the pension system is based entirely upon the contributions of the members, some other plan would seem to be necessary. Mr. King states (J. I. A., vol. 37, "p. 44) that wherever possible he has recommended a system of deferred annuities combined with whatever other benefits are desired, the annuity to be purchased by a percentage deduction from the salary. In case of in- crease of salary the pension payable is obtained by entering the table of annuity values at the age attained, the same percentage of the increase in salary being used. This method is undoubtedly an improvement upon the other plan, in that it removes the troublesome element of rate of increase in future salaries, but the assumption with regard to the rate of withdrawal remains. . Before going further with the question of the proper plan to use in the organization of a pension system, the demands of the employees as shown in the rules of these plans should be considered. It is probably because of human nature that practically all pension schemes which depend in any degree upon compulsory contributions from members contain in their rules the privilege of return of the whole or part of the contri- butions with or without interest in case of withdrawal or death before age of retu-ement is reached. Mr. Manly states this point clearly in his remarks (J. I. A., vol. 37, p. 43): "In nearly all the schemes the men try to get all their money back somehow, as well a^j a pension; and he had before him now a case where they wanted their money back with compound interest and to have a good pension as well." In view of the fact, therefore, that the rules of pension schemes require the return of the whole or the greater part of the contributions of the members, and oftentimes with interest, the question which naturally arises is what necessity there may be for intro- ducing the elements of mortality and withdrawal and of the erection of this elaborate statistical structure. Why not eliniinate these assumptions entirely in so far as active members are concerned and simply accumulate the contributions at compound inter- est? This savings-bank idea, although referred to at various times throughout the dis- cussion of staff pension funds, has never been given the consideration that would seem to be its due. In cases where the. rules of the plan call for return of contributions with tabular interest upon withdrawal, early retirement, or death, the deposit required upon this plin would be exactly coiTCct. Where the rules allow simply return of contributions without interest or at a rate of interest lower than the tabular for any of the above modes of retirement the rates upon this plan will be larger than if profits were antici- pated and a surplus account formed, its size being measured by the degree of liberality shown to the retiring members. Some idea of the difference in rates of a plan in which the contributions are simply accumulated at compound interest and of one in which the sa\ings are anticipated can be gained from the following table. The figures for columns 1 and 2 are taken from the tables illustrating problems 7a and 9a of Mr H. W. Manly's paper "On the valuation of staff pension funds" (J. I. A., vol. 36 pp 224 and EETIEEMENT FUND SUPERANNUATED EMPLOYEES. 125 .^"®^^8is of these figures is Mr. Manly's "Hypothetical pension fund experience table No. 4," which takes into consideration rates of death, withdrawal, and early retirement. The rate of interest Used is 4 per cent. Annual premiums to provide an annuity of 65— x at the age of 65 with the condition that the whole of premiums paid be returned upon death, withdrawal, or retirement before reacmnq age 65. Agej. Column 1 — Without interest. .971 1.278 1.632 2.054 2. 563 3.181 3.927 4.818 5.849 6.942 Column 2— With interest at tabular rate (4 per cent) in case of death or re- tirement and without in- terest upon withdrawal. Column 3 — With interest at tabular rate (4 per cent) (savings- banlj: planj; 15 ; 1.750 2.331 2.905 3.474 4.036 4.603 5.180 5.777 6.428 7.120 2.531 2 873 20 25 30 3 672 35 40 4 639 45.. 50 5 789 65 60 7 134 The rates in column 2, which will probably apply more nearly to the rules of the compulsory staff pension fund of to-day, can be seen to be but slightly smaller than the compound-interest deposit in column 3 at an average age of entry of about 30. The slightly larger premium of the compound -interest, plan insures solvency, and it should not be a difficult task to devise an equitable method of apportioning at certain intervals the profits which will accrue, basing the computations upon the experience of the members by classes. The results under such a plan should be more satisfactory than by a method which in its rates anticipates the gains of the fund by making use of a single set of assumptions more or less inaccurate. It is in the ease with which a plan based upon the savings-bank idea can be started and operated, however, that its chief advantage lies. An account can be kept for each member, and the proper return upon death or withdrawal or the amount of pen- sion upon retirement can be determined with accuracy. Another advantage which this plan possesses is in the case of change in the rules of the plan. Mr. Manly states that in his experience rules were changed about every five years, and oftentimes without the knowledge and advice of the actuary who made the original calculations. Funds which start with simple benefits very often assume obligations of a more costly nature without a corresponding increase being made in the contributions required. In cases where such changes have been made and actuarial advice either ignored or not sought at all the funds have become insolvent with consequent loss to members. The result of increasing the benefits to the members under the savings-bank plan would simply be to cut down the gains to the fund and to reduce the surplus to be divided among the members — a simple adjustment compared with the situation in a fund built upon assumptions. It can be said, therefore, if the rules of a plan require the return of contributions with interest, as will most plans of to-day which make payments by members compulsory, that the use of the savings-bank plan as outlined above has many advantages and that, even in cases where the benefits to members are more restricted, it will prove a safe and desirable method for starting and carrying the scheme until a reliable experience can be obtained. The value and adaptability of this method can best be shown in detail by consider- ing a plan which has been proposed recently; for the retirement of the employees of the classified branch of the United States civil service. This scheme was devised by Mr. Herbert D. JBrown, formerly a special examiner for the Bureau of Corpora- tions of the Department of Commerce and Labor, to fit the conditions peculiar to the United States Government service, and the writer was later consulted especially in regard to the actuarial problems involved. The classified civil service of the United States is made up of about 150,000 em- ployees in many different lines of work, situated in various parts of the country, and subject to widely varying conditions. Railway postal clerks, for instance, although required to pass a rigid physical examination upon entrance, are subjected to special 126 BETIREMEKT FUND SUPERANNUATED EMPLOYEES. hazards and conditions incident to their -work, which place them in a class by them- selves. Various other branches, such as city letter carriers, because of the require- ments of the work, experience rates of mortality and withdrawal differing greatly from the average for the whole service. Again, about 8 per cent of the whole number of employees are females — a most disturbing element in a fund and one which is most difficult to deal with. It can be seen, therefore, that the establishment of a fund in which the contributions and benefits of these widely differing classes are figured upon the same basis with regard to rates of mortality, withdrawal, and increase of salary would be manifestly unwise and unjust. It should be stated that, because of public sentiment against civil pension lists, it was necessary that the scheme be supported almost entii-ely by the contributions of members. The foundation of the proposed retirement plan is a compulsory savings account for each Government employee, to provide for himself in old age or in event of physical incapacity prior to date of retirement. A certain percentage of the monthly wage of each person in the classified branch of the civil service, sufficient to provide a fund upon retirement of 1^ per cent of his annual salary for every full year of service, shall be withheld and deposited in the United States Treasury at 4 per cent compound in- terest per annum, in the name of and to the credit of the employee. Upon absolute separation from the service before reaching the age of retirement, and only in such event, the employee shall have the privilege of withdrawing his accumulated savings in one sum, or, if the amount of the fund to his credit be at least SI, 000 he shall have the option of using his savings to provide an annuity at his attained age. In case of the death of an employee while in the service the amount to his credit shall be paid to his estate. Upon attaining the age of retirement the employee may withdraw his savings in one of the following methods: Option I. In one sum. Option II. An annuity payable quarterly throughout life. Option III. An annuity payable quarterly throughout life, with the provision that in case of the death of the annuitant before he has received in annuities the amount of his savings, the balance shall be paid to his estate plus interest credited thereon. Option IV. An income payable certain for a limited term of years. The proper age for compulsory retirement in the civU. service differs according to the particular division which is under observation. There are provided, therefore, three groups into which various branches of the service are to be divided by the President of the United States, the age for Group I being 60 years, for Group II 65 years, and for Group III 70 years. As it is often to the advantage of the service to retain an old employee because of his expert knowledge, it is provided in the rules that in such a case the employee may be retained, if he be willing, after the age of retirement, for two years and for suc- cessive periods of two years each, as long as, in the opinion of the head of the de- partment, he continues efficient in the work upon which he is engaged. In order that the object of the scheme may not be defeated in the case of old em- ployees who will not be able in the years remaining before retirement to save enough to provide a proper pension, it is necessary for the Government to supplement the sav- ings of these old eniployees, in order that they may be retired upon a comfortable com- petence. To attain this end, the plan contains the provision that an appropriation be made annually from funds in the United States Treasury, which will allow to pen- sioners in Group I, for each year of service prior to the date of introduction of the sys- tem of savings, 1 per cent of the average salary received during the ten years preceding that date, 1^ per cent for Group II, and IJ per cent for Group III. Some provision similar to the above is needed in the formation of every staff retirement plan where a constant percentage deduction is made from the salaries at all ages, in order that the younger members may not be unduly taxed to provide the pensions of the older men who will soon retire. _ Stating the plan briefly, therefore, the employee is required to provide for himself m old age by systematic saving during his years of service, and the Federal Govern- ment, as an aid to the scheme, guarantees an attractive rate of interest, agrees to stand behind the plan and to meet the expense of operating it, and offers to help its present old employees who will not be able in the years remaining before retirement to provide pensions for themselves through their own efforts. A brief reference to the actuarial work involved in establishing this plan may be of interest. As the selection exercised by the employee in choosing Option II will be nearly, if not quite, as great as that against an insurance company by a person purchas- ing an annuity, the British offices life annuity tables— males and females— with how- ever, no loading for expense, have been used in computiag the charges for this option, in (Jption III, partly because of the advanced age of the employee at retirement and the consequent weight of the insurance element involved, and also for the reason that RETIREMENT FUND SUPERANNUATED EMPLOYEES. 127 the selection exercised by the employee would not be as severe as in Option II, the antish othces lite table (Om) was selected as the basis of this charge. Compound in- terest at 4 per cent, which is to be guaranteed by the Federal Government as an aid to tJie plan, was used m computing the figures for Options II, III, and IV. Census Bulletm No. 12, The executive civil service of the United States, giving statistics as of July 1, 1903, was used as a basis for determining the amount of annual appropriation by the Federal Government to provide annuities for old employees. As these data were not considered sufficiently recent, the Census Bureau has compiled new statistics as of July 1, 1907, which will be used this winter in revising the figures already obtained. The chief requirement in determining the annual appropriations was that the amounts be the maximum required to provide these annuities. For this reason, although the right of an employee to an annutiy from the Government is to be relinquished upon withdrawal or death, the withdrawals were disregarded and deaths alone considered m obtaining these figures. The method pursued is best shown by taldng a particular age attained, as age 45 in Group I, the age of retirement being 60 years. The total of the annuity payments based upon 1 per cent for each year of service of the average salary for the past ten years was obtained for each age, and then discounted by the probability of dying before reaching the age of retirement. As the ages given in the census bul- letin were for last birthday, and, consequently, the average age understated six months, and, as the annuity at retirement is to be payable quarterly, the factor j^ was considered to be a safe approximation. To obtain the amount of annuity pay- ments for employees now aged 45 during the second year and after retirement, the above result was multiplied by the factor ~-^ and so on each year to the end of the ' oOf mortality table. When these calculations had' been completed for aU ages and groups, the results were arranged and the total appropriations necessary to provide annuity payments in 1908, 1909 j and later years were obtained. The mortality table selected as the basis of these computations was the American experience table of mortality. This decision was reached after consideration of the effect of the conditions involved in this part of the proposed plan upon the amounts of appropriations and all other information obtainable which would throw light upon the character of the class under observation from the standpoint of probable longevity. As stated before, withdrawals, other than by death which take place before the retire- ment age is atta,ined, will tend to decrease the amount of annuity payments each year. These amounts will also be diminished because of the fact that there are many em- ployees at the older aegs, such as old soldiers, who have been in the service but a short time and who are receiving small salaries — virtually pensions — for unimportant work, who will be allowed to retain their positions rather than be retired upon an annutiy which would be but a small percentage of their annual salary. For these reasons, and because of the standard of the mortality table adopted, the appropriations determined would seem to be a safe outside estimate of the amount necessary to provide the annuity payments. To establish and maintain this savings system, although it might require consider- able clerical work, should not prove a difficult task. From a table giving the amount of $1 per month at 4 per cent compound interest for certain terms of years, the amount ' of accumulated savings at retirement could be easily determined for any age at en- trance. At each increase in salary the table could be entered for the amount of monthly increase for the term of years remaining before attaining the age at retirement, and the value thus obtained added to the amount of accumulation which was being provided for under the old salary. A card could be written for each employee ui)on which could be kept his account, and, in addition, other data which could be used in obtaining the ' mortality experience, rate of withdrawal, and other valuable information in regard to the members of the classified civil service. Because of the large number under obser- vation the experience could be safely subdivided to show the mortality^ of employees in the District of Columbia, as distinguished from the other main division of the service, elsewhere; also the experience in certain branches of the service, such as L postal railway clerks and city letter carriers, which are affected by conditions peculiar to these classes of employees. The experience thus obtained would not only prove of considerable statistical value, but would serve as a guide in future valuations or adjustments of the plan. 128 RETIREMENT FUND SUPERANNUATED EMPLOYEES. APPENDIX E. Statement submitted by Jacob W. Stan; showing separations from competitive positions by branches of the service and by fiscal years from 1898 to 1905, inclusive. 1898. 1899. 1900. Branch of service. '6 > 1 a "S o o P.'O P.S " o i > o « 2,274 507 211 208 399 70 24 i m G> rt 1,897 907 124 125 92 160 254 •6 ea (3 257 214 75 13 30 63 15 ■=•5 Ip 37, 600 35,650 5,024 1,876 2,816 8,388 1,890 i > o i i 13 'So g§S ail g53« O 1,746 535 283 579 92 68 75 1,635 805 149 336 117 168 327 184 37.500 1,494 480 80 73 195 62 34 1,919 1,131 64 55 107 213 282 225 225 63 12 34 67 8 37,500 199131,000 37,000 63 34 20 48 3 4,933 3,168 2,816 7,999 1,890 5,115 Internal-Rev en ue Service 1,876 2,816 8,696 1,890 Total 3,378 3,527 551 89,306 3,6933,559' 667 93,144 2,408 3,771 634 94,893 1901. Branch of service. Departmental service Post-Office service Customs Service Internal-Revenue Service Government Printing service Railway mail service Indian Service Total 941 458 140 61 161 56 29 1,846 1,904, 26S 1,3111 272 110 63 66 24 95 39 271 52 298. 81 44, son 40,000 5,142 1,863 3,500 8,975 1,925 4,045 7241106,2051,296 1,! 1,265 86 62 113 236 312 3,972 ag 5 p 2 » 255' 2.33 71, 281 28' 67. 10 46,975 40,114 5,21l] 2,015 3,760 9,000, 1,925 ■3 as 31107,9901,571 1,761 140 77 lOS, 3311 348 263 322 82 41 38 54,107 59,016, 4,596 2,067 3,750 10,355 1,798 4,999; 842135,463 Branch ol service. Departmental service Post-office service Customs service Internal-Revenue Service Government printing semce. Railway mail service Indian service Total 1, 669i 1905. Total. ? © *H i ■*^ 03— ' B.2 S 2,717 334 58, ( H,' 468 2,0171 280 71,098 428 83 124 67 4,935 191 47 68 36 2,043 26 46i 140 33 3,862 49 671 626 103 11,301 81 16 421 9 1,863 28 « I 5 I ffi> """^ ftSu S.2 " o 3,479 383 2,23ll 294 167 51 144 402 64,62210,256 81,696 3,810 6,398 1,131 2,057 1,101 4,043 1,106 82] 12,171, 501 " 1,920' 247 17,683 11,428 964 830 916 2,397 2,731 2,169 30,107 2,03917,277 564 2,659 213 2,144 270 2,292 670 3,468 691 3,017 1,113 862164,093 2,300 6,963 921 171,807 18, 151 36, 9495,894 60,994 I I I ' I i : APPENDIX F. EXECUTIVE ORDER OP JANUARY 31, 1902, PROHIBITING ATTEMPTS OF GOVERNMTBNT EMPLOYEES TO INFLUENCE LEGISLATION. "All officers and employees of the United States of every description, serving in or under any of the Executive Departments or independent Government establishments, , and whether so serving in or out of Washington, are hereby forbidden, either directly or indirectly, individually or through associations, to solicit an increase of pay or to influence or attempt to influence in their own interest any other legislation whatever, RETIREMENT FUND SUPERANNUATED EMPLOYEES. 129 either before Congress or its cominittees, or in any way save througli the heads of the Departments or independent Government establishments in or under which they serve, on penalty of dismissal from the Government service. ' ' In response to a letter from the United States Civil-Service Retirement Association, requestmg permission for the formulation of a bill for the retirement of superannuated employees, the President, under date of February 21, 1902, replied, in part: "Permis- sion is restricted to acts pertinent and necessary to the single object proposed, namely, to obtam information, upon which legislation for the retirement of superannuated em- ployees may be based." APPENDIX G. ANALYSIS, BY MR. FRED BRACKETT, OP THE UNITED STATES TREASURY DEPARTMENT, OP THE ASSESSMENT SCHEME POR THE RETIREMENT OP CLERKS, BASED UPON A 3 PEE CENT ANNUAL ASSESSMENT ON SALARIES, A 25 PER CENT ASSESSMENT ON ALL INCREASE OP SALARY, AND AN ASSESSMENT OP ONE-TWELPTH OP SALARY ON ALL ORIGINAL APPOINTMENTS. e ^ _ In estimating the approximate cost of any retirement scheme there shbuld be a defi- nite basis as to number of clerks inthe classified service to proceed upon. Census Bulletin No. 12, issued July 11, 1904, gives the following varying numbers: Number. Remarks. Page 9: A total of Page 16: Table 5.. Page 24; Table 19. Page 90: Table 65. Page 92 Page 96 Total Pa^e94 Page 98 Grand total Page 21 Page 21 Total 168,093 150, 383 1134,066 149,333 22,273 102, 464 134,737 3,318 21,278 149, 333 21,138 101,728 122,866 -25,646, or 124,737. etc. +613 special agents, etc. Classined and unclassified. ClassiSed in District of Colombia. Classified elsewhere. Classified in United States. Unclassified in District of Columbia. Unclassified elsewhere. In United States. Classified in District of Columbia. Classified elsewhere. Classified in United States. • Excluding those paid by the piece and those reported without salary, or for whom salaries were not reported. Page 252, Report of Civil Service Commission for 1904, gives a grand total of 154,093 "competitive positions." A recent report made by the Director of the Census to the retirement association (see p. 107) gives a total of 128,098 employees, with salaries aggregating $114,025,497. Reports received from various departments and ofiices (see p. — ) show that 1133,913,363.84 is paid this year for salaries to classified employees. There is therefore an apparent difierence in the two reports as to salaries of $19,887,866.84. As the report of the Director of the Census did not include 613 special agents of the Census Bureau receiving small pay (not more than an average of $200 per annum), nor 1,587 piece- workers (see p. 20, Bull. 12, supra), this would account for quite a large sum of the difference, but taking — The maximum amount paid to Census special agents „^1??' ™ And allowing 1,587 pieceworkers an average of $1,500 each 2, 380, 500 We have a total of It'w'tr? Which is less the difference noted by ► 17, d«4, 767 19, 887, 867 The final difference noted may be the pay of rural free-delivery employees, but there is no report to that effect. ^- . ^ ^i, a- 4.- It seemed to me impossible to harmonize m any satisfactory way these conflicting statements I therefore made several computations, as follows: A Based upon 22,273 clerks in the District of Columbia, serving twenty years and retiring at age 70, not deducting deaths before 70, but estimating them. 38257—08 9 130 EBTIKEMENT FUND SUPEKANNUATED EMPLOYEES. , B. Based upon 22,273 clerks in the District of Columbia, and deducting deaths before 70. 0. Giving product of assessments, annual retired pay at |600 and |500, on basis of 6,705 times the number of clerks in Table B. D. Showing available fund, payments, balances, and increments from insurance, based upon foregoing tables. E. Based upon 149,333 clerks and employees in United States, retiring at age 70 without regard to term of service, giving survivors and years of salary (265,907) which, multiplied by |500, gives the cost for thirty years, but does not give the yearly bal- ances and interest. F. Giving the probable actual cost of retiring all Herks now in service when they shall have reached age 70, without regard to term of service, giving yearly pay- ments, balances, and compound interest on balances at 3 per cent per annum, cover- ing the period from 1906 to 1935 — thirty years. It may properly be asked why so many tables are presented, and in reply I have to say that they are the product of an evolution process, for which varying conditions are responsible. Then, too, it is desirable to try various methods in order to prove that the deductions are correct when comparison of the various tables are made. The first table covers only that portion of the clerks in the classified service who are employed in the District of Columbia, and the tables following up to and including Table D are predicated on the first two. The proportion of the clerks in the District of Columbia (22,273) to the entire force in the United States (149,333), given in Table 65 of Census Bulletin No. 12, is 6.705, and" in various tables the estimates are increased that much. An examination of Table E, however, will show that the product of such a multiple is too great for certain ages (see columns 8 and 10), for the proportion of aged clerks is greater in the District of Columbia than elsewhere. The result, however, gives more than the greatest possible maximum of clerks ever likely to be retired of those now on the rolls. The total of years service of clerks on Table E to be paid for under the first tables is 310,984, but under the amended list, column 8, it is only 265,907, which covers the actual conditions as the ages are divided to-day. The average of deaths per year in the entire service, as given by reports of Civil Service Commission for 1903 and 1904, is 859, or 0.00575 per cent per annum. In thirty years, therefore, we should lose in entire service 25,770 by death, provided the conditions remain as they are to-day, but as clerks grow older the average loss by death will increase. In fixing the average of retired pay at $500 I am certain I have reached the maxi- mum. The average salary of 149,333 clerks, whose salaries aggregate $122,000,000 would be $817 per annum. The average salary in statement of Director of the Census (Appendix H) is $890.14, while I have estimated the average salary at $1,000 and aver- age retired pay at $500, thus giving a large increase, probably equal to one-tenth more than the maximum amount required. If the total amount paid is greater than $122,- 000,000 per annum, the product of a 3 per cent assessment would be greater than I have estimated it, while the average salary under any circumstances is not likely to exceed $1,000. In estimating the income to the retirement fund I have taken $122,000,000 as amount of annual expenditure for salaries, on which I have reckoned a 3 per cent assess- ment, producing $3,660,000. There is an average of 8,082 deaths, resignations, and removals per year, and I have allowed an equal number of new appointments at $720 each, from which we receive $60 each, or one-twelfth of the whole amount. This produces $484,920 per annum, but as probably 5 per cent of the original appointments would be of $900 grade, we must add $6,060, or 404 by 15, which would give us $490,981 from appointments. From promo- tions we should receive an average of $120, less 5 per cent for appointments to vacated grades, which might not involve promotions. Each promotion ought to average $114, as follows: $720to $840 $120 840 to 900 60 900 to 1,000 100 1,000 to 1,200 200 480 25 per cent (assessment) on $480 is $120. $120 less 5 per cent=($6) $114. $114 by 8,082=1921,348. $490,981+$921,348=$1,412,329. $l,412,329+$3,660,000=$5,072,329, the amount of annual proceeds from three sources. EETIREMENT FUND SUPERANNUATED EMPLOYEES. 131 The average "expectancy" of life for persons aged 70 is 8.48 years; that means that two persons of that age will probably live in the aggregate 16.96 years. One may live but two years, while the other will complete sixteen years (after reaching age 70). The terms lived by each may vary but the sum of the terms will be 16.96 years. This IS the rate fixed by life insurance companies. I have allowed in the beginning (in order to facilitate computations) a term of nine years after age 70 and have subse- quently deducted the difference between 8.48 and nine years, or 0.0577 per cent. Resignations from the service average 5 606 persons per annum, therefore, if any of the 168,180 persons that will resign from the service within the next thirty years are of such age as will bring them to age 70 by the year 1935, they must be deducted from the number (36,827) listed for retirement up to and including that year. If but 1,000 of the 168,180 named are included among those whom we have treated as retired, and living in retirement for nine years, we will be able to reduce our retire- ment pay 14,500,000, less 0.0577 per cent, or $4,240,350 below the amount estimated on Table E. It is proper to suggest, in conclusion, that if those who can give but little time to the investigation of this subject do not care to traverse all the tables given they will find in Table F the essential facts governing the cost of retirement scheme outlined in the Brownlow bill. The estimates cover a period of thirtjr years — ^from 1906 to 1935, inclusive. I am satisfied that the plan will be self-sustaining for forty years as well, and for all time under the same conditions, as the maximum number of clerks would be on retired list about the year 1947. Table A. Ag^70 year— Clerks retir- ing. Total re- tired. Dying alter retire- ment. Clerks surviv- ing. Annual cost, at $600 each. Probable losses. Age in 1906. Per cent of loss be- fore 70. Num- ber lost. Years of pay. Total years. 1 o 3 i 5 6 7 8 9 10 H 70 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1936 472 110 127 159 154 201 261 266 320 299 328 294 268 262 295 262 326 300 361 364 391 370 400 467 442 656 624 606 622 473 472 682 709 868 1,022 1,223 1,484 1,740 2,060 2,369 2,216 2,399 2,540 2,643 2,784 2,835 2,900 2,944 2,986 3,040 3,103 3,179 3,311 3,616 3,663 3,966 4,164 4,369 4,630 4,649 ""Hi' 110 127 159 154 201 261 266 320 299 328 294 268 262 296 252 326 300 361 354 391 472 582 709 868 1,022 1,223 1,484 1,740 2,060 1,887 2,105 2,272 2,381 2,489 2,583 2,574 2,644 2,624 2,686 2,712 2,809 2,911 3,049 3,221 3,411 3,640 3,864 4,008 4,176 4,268 $283,200 349,200 425,400 520,800 613,200 733,800 890,400 1,044,000 1,236,000 1,132,200 1,263,000 1,363,200 1,428,600 1,493,400 1,549,800 1,544,400 1,586,400 1,574,400 1,611,600 1,627,200 1,685,400 1,746,600 1,829,400 1,932,600 2,046,600 2,184,000 2,318,400 2,404,800 2,606,600 2,664,800 69 0.06 .11 .16 .19 .22 .25 .27 .30 .32 .34 .36 .37 .38 .39 .40 .41 .42 .43 .44 .45 .46 .46 .47 .48 .48 .49 .49 .60 .60 7 14 24 29 44 65 69 96 96 112 103 99 100 116 101 134 136 165 166 176 170 184 219 202 266 257 247 261 236 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 8 7 6 6 4 3 2 1 63 68 126 67 216 66 . . 261 65 396 64 586 63 621 62 864 61 864 60 1,008 59 927 68 891 57 900 56 1,035 55 909 54 1,206 53 1,224 52 1,396 51 60 1,404 1,584 49 1 530 48 1,472 47 1,533 46 1,212 45 1,330 44. 1,028 43 741 42 622 41 236 Total 10,048 78,254 5,790 72,464 43,478,400 3,873 26,083 Total annual cost at 1600 each ^i^l'slo'^ Less 26, 083 years, at $600 16,649,800 Cost of 6,176 clerks, at $600 (from 1906 to 1935) S'??^?2S Cost of 6!l75 clerks, at $500 (in District 01 Columbia) 23,190,500 »2iiQn linn V 6705 fin United States) ■-■- 165,492,303 If allowed 8 483 years, instead of 9 years life as average after retirement, would reduce amount 0.0677 per cent, or 8,971,906 Probable actual cost (from 1906 to 1936) 146,520,397 132 EETIBEMENT FUND SUPERANNUATED EMPLOYEES. Table B. Year. Clerks on roll, retired. Annual cost at $600 rate. Aged 70, i£ sur- viving. Probable loss. Actually retiring. Probable deaths. Surviv- ing. Cost at $600. 1 2 S 4 5 6 7 8 9 1906 472 575 695 844 993 1,179 1,419 1,671 1,964 1,791 1,993 2,169 2,282 2,389 2,468 2,473 2,510 . 2,488 2,531 2,556 2,633 2,741 2,865 3,002 3,209 3,374 3,607 3,761 3,915 4,022 $283,200 345,000 417,000 506,400 595,800 707,400 851,400 1,002,600 1,178,400 1,074,600 1,195,800 1,301,400 1,369,200 1,433,400 1,480,800 1,483,800 1,506,000 1,492,800 1,518,600 1,533,600 1,579,800 1,644,600 1,719,000 1,801,200 1,925,400 2,024,400 2,164,200 2,256,600 2,349,000 2,413,200 472 110 127 159 154 201 261 256 320 299 328 294 268 262 295 252 326 300 361 354 391 370 400 467 442 555 524 505 522 473 472 103 113 136 125 157 196 187 224 203 216 191 169 162 180 151 192 164 206 198 215 200 216 248 240 289 267 258 261 237 472 675 688 823 948 1,105 1,301 1,488 1,712 1,443 1,566 1,634 1,668 1,705 1,728 1,683 1,688 1,628 1,631 1,613 1,637 1,668 1,722 1,790 1,879 1,976 2,079 2,131 2,194 2,216 $283,200 345,000, 412,800. 493,800' 568, 800^ 663,000 780,i6()0 892,800 '■■ 1907 7 14 24 29 44 65 69 96 96 112 103 99 100 115 101 134 136 155 156 176 170 184 219 202 266 257 247 261 236 1908. . 1909 1910 1911 . 1912 1913 1914. . 1,027,200 865, 800, i 933,600 1915. . . 472 103 113 135 125 157 196 187 224 203 216 191 169 162 180 151 192 164 206 198 215 1916 1917. 980,400 l,0OO;80Of: 1,023,000 1,036,800 1,009,800 1,012,800 976,800 978,600 967,800 982,200 1,000,800 1,033,200 1,074,000 1,127,400 1,185,600 1,247,400 1,278,600 1,316,'fflO 1,329,600 1918 1919 1920. 1921 1922 1923 1924 1925 1927 1929 1930 1931 1932 1933 1935 Total 68,591 41,154,600 10,048 3,873 6,175 3,959 46,381 27,828,600 Annual cost at $600 rate $41,154,600 Add 3,873 X $600 equals 2,323,800 Total (equals Table A) 43,478,400 46.381 years, at $600, equals $27,828,600. RETIREMENT FUND SUPERANNUATED EMPLOYEES. 133 Table C. Year. 1906.. 1907.. 1908.. 1909.. 1910.. 1911.. 1912.. 1913.. 1914.. 1915.. 1916.. 1917.. 1918.. 1919.. 1920.. 1921.. 1922.. 1923. 1924.. 1926.. 1926.. 1927.. 1928.. 1931.. 1932., 1933. 1934. 1935. Total. Product ol 3 per cent tax on $122,000,000. S3, 3, 3 3; 3, 3, 3, 3 3; 3, 3, 3, 3; 3, I: 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 660,000 060,000 109,800,000 Tax on pro- motions and appoint- ments. .,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412; ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, ,412, 329 42,369,870 Total of tax or assess- ments. Annual pay ol retired clerks,at $600, $5,072,329 5,072,329 5,072.329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 6,072,329 5,072,329 5,072,329 5,072,329 162,169,870 $1,898,866 2,313,226 2,767,824 3,310,929 3,813,804 4,446,415 5,233,923 5,986,224 6,887,376 6,805,189 6,259,788 6,573,682 6,710,364 6,869,215 6,951,744 6,770,709 6,790,824 6,549,444 6,661,513 6,489,099 6,686,651 6,308 064 6,927,606 7,201,170 7,559,217 7,949,448 8,363,817 8,573,013 8,826,462 9,317,268 186,590,763 Number of clerks, esti- mated. 3,164.76 3,855.37 4,613.04 5,518.21 6,356.34 7,409.02 8,723.20 9,977.04 11,478.96 9,676.31 10,432.98 10,956.97 11, 183. 94 11,432.02 11,586.24 11,284.51 11,318.04 10,915.74 10,935.86 10,815.17 10,976.08 10,513.44 11,546.01 12,001.95 12, 698. 70 13,249.08 13,939.70 14,288.36 14,710.77 16,528.78 Annual pay at $500, re- tired. $1,582,380 1,927,687 2,306,620 2,769,107 3,178,170 3,704,512 4,361,602 4,988,623 5,739,480 4,837,657 5,216,490 5,477,985 5,691,970 5,716,012 5,793,120 5,642,257 6,669,020 6,457,870 6,467,928 6,407,683 5,488,042 5,266,720 5,773,00s 6,000,975 6,299,348 6,624,640 6,969,848 7, 144, 177 7,356,386 7,764,390 165,492,303 Total annual pay, at $600, retired $165, 492, 303 9-8.48=0.52-5-9=0.0577 per centX155, 492-303 8, 971,906 Total estimated cost 146,520,397 upon the theory that the clerks in the District of Columbia aged 41 to 70 (both inclu- sive) should be increased 6.705 times to obtain clerks in United States who would retire in year named, but the proportion is too large. 134 RETIREMENT FUND SUPEEANNXJATED EMPLOYEES. Table D. Year. Available lund. Annual pay- ment. Annual bal- ance Interest earned at 3 per cent compound interest. 1 2 3 4 5 1906 $5,072,329 8,562,278 11,706,920 14,472,729 16,785,951 18,680,110 20,047,927 20,758,654 20,842,460 20,176,309 20,409,981 20,265,820 19,860,164 19, 340, 623 18,696,840 17,976,049 17,406,121 16,819,430 16,433,889 16,038,290 16,703,036 16,287,323 16,102,932 14,402,256 13,473,610 12,246,691 10,694,380 8,796,861 6,725,013 5,072,329 3,322,433 $1,682,380 1,927,687 2,306,520 2,759,107 3,178,170 3, 704, 512 4,361,602 4,988,523 5,739,480 4,837,657 5,216,490 5,477,985 5,591,970 5,716,012 6,793,120 6,642,257 5,659,020 5,457,870 5,467,928 5,407,583 5,488,042 5,266,720 5,773,006 6,000,976 6,299,348 6,624,540 6,969,848 7,144,177 7,366,385 7,764,390 $3,489,949 6,634,591 9,400,400 11,713,622 13,607,781 14,975,598 15,686,326 15,770,131 15,102,980 15,337,652 15,193,491 14,787,835 14,268,194 13,624,611 12,903,720 12,333,792 11,747,101 11,361,560 10,966,961 10,630,707 10,214,994 10,030,603 9,329,927 8,401,281 7,174,262 5,622,051 3,724,532 1,652,684 $104,700 1907 202,191 1908 288,066 1909 360,063 1910 419,042 1911 461,851 1912 484,436 1913 487,633 467,719 1914 1915 474,172 1916 470, 015 1917 457,740 441,772 1918 1919 422,003 1920 399, 780 1921 382,043 1922 363,874 1923 351,776 1924 339,533 1925 329,116 316,323 1927 310,420 289,213 1929 260,706 223,041 1931 172,351 113,921 1933 39,208 1935 461,178,538 155,492,303 305,686,235 9,432,708 Total annual payment. Less 0.0577 per cent Money required. Money available $165,492,303 8,971,906 146,520,397 152,169,870 5,649,473 9,432,708 5,649,473 Surplus in 1935 15,082,181 Less than $600 omitted and over $500 treated as $1,000 in computing interest. There will be additional interest on $5,649,473. Total interest earned. Excess KETIEEMBNT PUND SUPBEANNUATED EMPLOYEES. Table E. 135 Age in 1906. Age 70 year— Number on rolls in year 1906. Per cent of losa before reaching 70. Number lost. Number retiring. Dying in nine years. Surviv- ors each year. Cost per annum. Surviv- ors per Table^C. 1 2 S 4 5 6 3 8 9 10 70 1906 1907 1908 1909 1910 1911 1912 1913 2,249 606 621 757 903 1,129 1,280 1,278 1,524 1,634 1,629 1,634 1,483 1,633 1,603 1,711 1,880 1,721 2,090 2,216 2,379 2,467 2,641 3,040 3,178 3,598 3,688 3,446 3,741 3,703 2,249 476 663 643 731 881 960 933 1,067 1,111 1,075 997 934 1,012 978 1,027 1,109 998 1,191 1,241 1,309 1,332 1,426 1,611 1,663 1,871 1,881 1,857 1.S70 "2," 249' 476 663 643 731 881 960 933 1,067 1,111 1,075 997 934 1,012 978 1,027 1,109 998 1,197 1,241 1,309 2,249 2,725 3,278 3,921 4,652 6,533 6,493 7,426 8,493 7,365 7,964 8,398 8,689 8,970 9,067 9,134 9,310 9,241 9,321 9,487 9,799 10,197 10,611 11,244 11,870 12,632 13,516 14,181 14, 810 16,362 $1, 124, 600 1,362,500 1,639,000 1,960,600 2,326,000 2,766,500 3,246,600 3,713,000 4,246,600 3,677,600 3,977,000 4,199,000 4,344,600 4,486,000 4,633,500 4,667,000 4,665,000 4,620,600 4,660,600 4,743,600 4,899,500 6,098,600 6,305,600 5,622,000 6,936,000 6,316,000 6,757,500 7,090,600 7,406,000 7,676,000 3,166 3,856 4,613 5,618 6,366 7,409 8,723 9,977 11,479 9,676 10,433 10,956 11,184 11,432 69 6.06 .11 .16 .19 .22 .26 .27 .30 .32 .34 .35 .37 .38 .39 .40 .41 .42 .43 .44 .45 .46 .46 .47 .48 .48 .49 .49 .60 .60 30 68 114 172 248 320 345 457 523 654 537 549 621 626 684 771 723 899 975 1,070 1,135 1,215 1,429 1,525 1,727 1,807 1,589 1,871 68 67 66 65 64 63 62 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 61 . 60 59 58 57 66 55 ll',286 54 53 52 10 936 51 60 10,976 10,513 11, 646 12 002 49 48 .. 47 46 12,599 45 13 249 44 13,940 14,288 14, 711 42 41 1,862 1.861 15,629 Total. . 61,262 24,436 36,827 21,745 266,907 132,963,600 310,984 Total number on roUs in 1906. Number lost Number retiring . 61,262 24,435 36,827 310,984X1500 3166,492,000 266,907X 500 $132,953,600 Difference overestimated in Table C $22,538,600 136 RETIREMENT FUND SUPERANNUATED EMPLOYEES. Table F. Year. Numlier clerks. Actual an- nual cost. Available fund. Annual bal- ance. Annual inter- est at 3 per cent, 1 2 3 4 5 6 1906 2,249 2,725 3,278 3,921 4,652 5,633 6,493 7,426 8,493 7,355 7,954 8,398 8,689 8,970 9,067 9,134 9,310 9,241 9,321 9,487 9,799 10,197 10,611 11,244 11,870 12,632 13,516 14,181 14,810 16,352 lOO, being 483 years 81,124,600 1,362,500 1,639,000 1,960,500 2,326,000 2,766,600 3,246,500 3,713,000 4,246,500 3,677,500 3,977,000 4,199,000 4,344,600 4,485,000 4,433,500 4,567,000 4,755,000 4,620,500 4,660,500 4,743,500 4,899,500 5,098,600 5,305,500 5,622,000 5,935,000 6,316,000 ■ 6,757,500 7,090,500 7,405,000 7,676,000 15,072,329 9,020,158 12,729,987 16,163,316 19,276,145 22,021,474 24,327,303 26,153,132 27,512,461 28,338,290 29,733,119 30,828,448 31,701,777 32,429,606 33,016,935 33,556,764 34,061,093 34,478,422 34,930,251 36,342,080 36,670,909 35,843,738 35,817,567 35,584,396 35,034,725 34,172,054 32,928,383 31,243,212 29,225,041 26,892,370 $3,947,829 7,667,658 11,090,987 14,202,816 16,949,145 19,264,974 21,080,803 22,440,132 23,265,961 24,660,790 25,756,119 26,629,448 27,357,277 27,944,606 28,483,435 28,988,764 29,406,093 29,857,922 30,269,751 30,598,580 30,771,409 30,745,238 30,512,067 29,962,396 29,099,725 27,856,054 26,170,883 24,152,712 21,820,041 19,216,370 $108,440 1907 . . 232,993 1908 339>720 '1909 436,282 1910 521,558 1911 593,297 1912 650,229 1913 692,711 1914 ■718,761 1915... 761,387 1916 795,525 1917 822,736 1918 845,392 1919 863,712 1920 880,401 1921 896,082 1922 909,062 1923 923,010 1924 935,792 1925 946,044 1926 951,511 960,896 1927 1928 943,887 1929 927,177 900,815 1930 1931 862,704 811,011 1932 1933 748,920 677,068 596)792 1934 1935... Saving of 0.0577 per cent of $132,953,£ gidifleienee between 9 years and 8. 132,953,500 7,671,408 853,103,485 720,149,986 a 22, 243, 914 125,282,092 a Interest reckoned on even thousands of bala,nces. $853,103, 486-$720,149,985=$132,963,500. Fund collected in thirty years $152,169,870 Interest 22,243,914 ^otal 174,413,784 Amount to pay in thirty years : 125, 282, 092 Excess 49,131,692 G. Amounts paid for salaries of employees in the classified service in the United States. Civil Service Commission $221, 250. 00 Government Printing Office 4, 294^ 707. 80 Smithsonian Institution ' 208^ 403. 07 Department of Agriculture 3^ 868' 406. 58 Department of the Interior 5^ 102| 624. 00 Department of Justice ' 154' 760. 00 Department of Navy ..\[.[\\.. 2, 795^ 023! 04 Department of State. I49 920. 00 Department of Commerce and Labor 5, 717' 570. 35 Department of War ..'.'..'..'. ll' 385^ 379! 00 Department of Treasury 17_ 560, 395. 00 Department of Post-Office 82, 289, 925. 00 Interstate Commerce Commission 165 000. 00 Total 133 913 353. §4 Director of Census reports 114 025' 497. 00 Difference 19^ 887, 866. 84 RETIREMENT FUND SUPERANNUATED EMPLOYEES. 137 H. DePARTHIENT 01" COMMEKOB AND LABOR, Bureau of the Census, Washington, December 20, 1905. Dear Sir: In deference to the request of the United States Civil Service Retire- ment Association, I have had the statistics for the 50,047 civil-service employees shown in Census Bulletin No. 12 as receiving less than $720 per annum segregated so as to eliminate 5,958 of them which received less than $100 per year and tabulated the remainder according to the amount of salary that each received. The totals for all classes of employees included in this group, whether employed in the District of Columbia or elsewhere, are summarized in the following statement: Receiving $100 but less than $200 per annum 1, 964 Receiving $200 but less than $300 per annum 1, 686 Receiving $300 but less than $400 per annum 2, 372 Receiving $400 but less than $500 per annum 3, 101 Receiving $500 but less than $600 per annum 2, 916 Receiving $600 but less than $700 per annum 28, 936 Receiving $700 but less than $720 per annum 3, 114 Total 44, 089 The Bureau of the Census has refrained from calculating the total amount palid annually to the civil-service employees, because it was believed the information in the possession of the Office was not sufficiently accurate to justify such a computa- tion, but, in compliance with your request, the computation has been ina,de, and the results are furnished in the following statement : In the District of Columbia. ' Elsewhere. Number ol employees. Estimated average salary. Total amount paid. Number of employees. Estimated average salary. Total amount paid. 5,643 2,033 491 1,742 2,131 5,104 2,471 1,194 1,020 767 638 $533 720 840 900 1,000 1,200 1,400 1,600 1,800 2,000 2,500 83,007,719 1,463,760 412, 440 1,567,800 2, 131; 000 6,124,800 3, 459, 400 1,910,400 1,836,000 1,634; 000 1,345,000 38,446 11,017 8,438 8,849 20,780 8,199 6,186 1,150 1,025 984 .890- 8533 720 840 900 1,000 1,200 1,400 1,600 1,800 2,000 2,500 820,491,718 7,932,240 7,087,920 7,964,100 20,780,000 9,838,800 7,260,400 1,840,000 1,845,000 1,968,000 2,225,000 23,134 1,071.68 24,792,319 104,964 850.13 89,233,178 Total number of employees 128,098 Total amount paid - $114, 025, 497. 00 Estimated average salary 8890. 14 The total amount paid in salaries to the employees of the executive civU service was calculated by multiplyiag the number of employees in each group by the esti- mated average salary. In computing the total salaries separately for the employees in the District of Columbia it was found that by taking for the average salary the min im um rate of all - groups, except the group of employees receiving less than $720, a total amount was obtained approximately the same as that given in the Official Register for 1903, and the same rates were therefore used for employees elsewhere than in the District of Columbia. By the segregation in $100 groups of the employees receiving less than $720 it was found that the average salary less than $720 is about $533. This average salary was therefore used for the less than $720 group in calculating the total salaries. In making tfie calculation no account was taken of the employees receiving less than $100; those whose salaries were not reported or who received no compensation, pieceworkers, and 613 special agents paid on a per diem basis, who received com- pensation only for such time as they were actually employed. By this estimate it appears that the annual salaries of the employees in the District of Columbia approximated $24,792,319, and of the employees engaged elsewhere than in the District, $89,233,178, making a total of $114,025,497. Very respectfully, S. N. D. North, Director. Mr. Wallace W. Hitb, Patent Office, Washington, D. C. 138 RETIEEMENT FUND SUPERANNUATED EMPLOYEES. APPENDIX H. A BILL SUGGESTIED BY MAJ. FRED BEACKETT, FOE THE KETIHEMENT OP EMPLOYEES IN frHE CLASSIFIED OIVIL SERVICE OF THE GOVEKNMENT. A bill, suggested by Maj. Fred Brackett, for the retirement of employees in the classified civil service of the Government. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That there be and hereby is appropriated, out of any money in the Treasury not otherwise appropriated, a sum of money equal to three per centum of the total annual expenditure for pay and compensation of all employees in the classi- fied service on July first, eighteen hundred and , and every day thereafter; said sum or sums to constitute a permanent appropriation and the proper proportion thereof to be deposited with the Treasurer' of the United States to the credit of the retirement fund on the day following each semimonthly or other regular pay day as the case may be. Sec. 2. From and after July first, nineteen hundred and , the pay of all em- ployees in the, classified service who may receive original appointments and enter the service shall be reduced for the first three months of service in an amount equal to one-twelfth of the annual pay or compensation provided by law for permanent employees of like grade, and an amount equal to the total amoimt of said reductions is hereby appropriated out of any money in the Treasury not otherwise appropriated, shall constitute a permanent appropriation, and shall be deposited at the expiration of such three months in each case of reduction, with the Treasurer of the United States to the credit of the retirement fund. Sec. 3. From and after July first, nineteen hundred and , the increased pay, otherwise provided, of each employee in the classified service, who may be promoted, shall not take effect until the expiration of three months after the date of such pro- motion, and a sum equal to the total amount of pay so withheld from the pay or compensation otherwise due in each case of promotion is hereby appropriated out of any money in the Treasury not otherwise appropriated, shall constitute a permanent appropriation, and shall be deposited at the end of the period designated in each case with the Treasurer of the United States to the credit of the retirement fund. Sec. 4. Every employee in the classified service of the United States when seventy years of age, or when sixty-five years of age and having served twenty years or more, shall be retired, and shall receive from the United States during the remainder of his life an annual salary equal to ten-sixtieths of his average annual salary, pay, or compensation, during the entire period of service, whether as a classified or unclassified employee, in one or more branches or independent offices of the Government or Departments of the Government, and shall include periods of service at different times, and in addition thereto a sum equal to one-sixtieth of such average salary for every year that he shall have been in service as stated: Provided, That such retired annual salary shall not exceed fifty per centum of said average salary nor twelve hundred dollars per annum. Sec. 5. The Secretary of the Treasury shall make such rules and regulations, and is hereby authorized to perform or cause to be performed any and all acts, and employ such force, as may be necessary and proper for the purpose of can-ying this act into effect. Sec. 6. Any surplus accruing in the retirement fund may, in the discretion of the Secretary of the Treasury, be invested in approved secm-ities bearing interest at a rate not less than three per centum per annum, such interest and the principal when collected to be deposited with the Treasurer of the United States to the credit of the retirement fund. Sec. 7. If by reason of the efficiency of an employee who has reached the retire- ment age, and is willing to remain in the service, his continuance therein would be, in the opinion of the head of the Department or proper appointing ofiicer, advanta- geous to the public service, such employee may be retained for a term not exceeding two years; and at the end of the two years, he may, by similar certification, be continued for an additional term of two years, and so on, and in the absence of such certification the employee shall be placed upon the retired list. Sec. 8. For the purpose of paying for clerical and other work and expenses neces- sary m carrying out the provisions of this act during the fiscal year 19—, including salaries and rent in the city of Washington, there'is hereby appropriated the sum of fifty thousand dollars out of any money in the Treasury not otherwise appropriated, and for all payments to retired employees authorized by this act the necessai-y moneys are hereby appropriated, to be paid from the retirement fund. RETIREMENT FUND SUPERANNUATED EMPLOYEES. 139 APPENDIX I. COMPUTATION OF MAJ. FRED BRACKBTT, BASED ON 149,333 CLEBK8 AND EMPLOYEES, CLASSIFIED AND UNCLASSIFIED, SHOWING RESULT OF 3 PER CENT ASSESSMENT ON SALARIES. One-twelfth (Jj) deduction from annual salaries In all cases ol original appointments for first year; 25 per cent deduction for one year from increase of salary m all oases of promotion.] Annual cost. Available. Annual bal- ance. Interest. Assessments and collections. 1906. , 1907. 1908. 1909. 1910. 1911 . 1912. 1913. 1914. 1915. 1916. 1917., 1918. 1919. 1920. 1921. 1922. 1923. 1924. 1925. 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936, July 1. $1,124,600 1,362,600 1,639,000 1,960,500 2,326,000 2,766,600 3,246,600 3,713,000 4,246,600 3,677,600 3,977,000 4,199,000 4,344,500 4,485,000 4,433,600 4,567,000 4,756,000 4,620,600 4, 660, 500 4,743,500 4,899,500 5,098,500 5,306,600 5,622,000 5,936,000 6,316,000 6,767,600 7,090,600 7,405,000 7,676,000 $5,072,329 9,138,598 13,081,710 16,858,320 20,417,084 23,706,146 26,640,164 29,167,803 31,290,776 32,927,933 36,200,276 37,232,302 39,096,630 40,867,023 42,546,813 44,328,011 46, 026, 170 47,581,634 49,322,297 61,073,980 62,792,723 54,402,349 55,856,293 57,138,616 58,134,443 58,837,765 59,169,737 59,056,933 58,597,755 67,800,867 $3,947,829 7,776,098 11,442,710 14,897,820 18,091,084 20,939,646 23,393,664 25,464,803 27,044,276 29,250,433 31,223,275 33, 033, 302 34,752,130 36,382,023 38,112,313 39,761,011 41,271,170 42,961,134 44,661,797 46, 330, 480 47,893,223 49,303,849 50,549,793 61,516,616 62,199,443 62,621,756 62,412,237 61,966,433 61,192,756 60,124,867 (61,628,613) $118,440 233,283 343,281 446,935 542,733 628, 189 701,810 763,644 811, 328 , 877,513 936,698 990,999 1,042,664 1,091,461 1,143,369 1,192,830 1,238,136 1,288,834 1,339,854 1,389,914 1,436,797 1,479,115 1,516,494 1,545/498 1,565,983 1,675,653 1,672,367 1,668,993 1,636,783 (1,603,746) $5,072,329 5,072,329 5,072,329 5,072,329 6,072,329 6,072,329 6,072,329 6,072,329 5,072,329 6,072,329 5,072,329 5,072,329 5,072,329 6,072,329 6,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 5,072,329 6,072,329 5,072,329 6,072,329 6,072,329 6,072,329 6,072,329 5,072,329 APPENDIX J. [Compilation by Maj. Fred Brackett.] Total number of employees, classified and unclassified, as shown by reports of CivU Service Commission. Report. 1903 1904 (p. 338). 1905 (p. 263). 1906 (pp. 169-172). 1907 (p. 6). Classified , o 135, 453 129,612 6154,093 e 130, 562 c 171, 807 / 125, 675 d 184, 178 134,831 196,918 Excmted, noncompetitlTe, and unclassi- 140,082 TotaJ 264,965 284,655 293,382 319,009 337,000 ^Includes 15,941 rural free-delivery employees; without rural free-delivery employees aggregates 119.812. , , ,. !> Includes 24,566 rural free-delivery employees; without rural free-dehvery employees aggregates 129 527 cGIven in 1906 report, p. 170, as 174,350; includes 32,065 rural free-delivery employees; without rural free-delivery employees aggregates 139,752. , , , „ li Includes .35,738 rural free-delivery employees: without rural free-deUvery employees aggregates 148,440. « Given in 1906 report, p. 262, as 121,253. /Given in 1906 report, pp. 170-172, as 121,472. 140 RETIREMENT FUND SUPERANNUATED EMPLOYEES. Annual changes in entire service. IN CLASSIFIED SERVICE. Report. 1903 (p. 269). 1904 (p. 329). 1905 (p. 248). 1906 (p. 168). 1907 c (mem.). 1,572 5,017 846 1,662 6,196 872 2,505 9,756 1,079 3,603 13,934 1,084 3,344 15,289 Died 1,254 Total 7,435 8,730 13,340 18,621 19,887 IN EXCEPTED, NONCOMPETITIVE, AND UNCLASSIFIED POSITIONS. 1,046 1,684 92 1,770 2,249 169 i,9or 2,192 120 2,903 4,046 203 1 . : Resigned [ 8,454 Died Total 2,822 4,188 1 4,213 2,399 7,152 491 8,454 RtatiiH <»hfl.Tig^ftf1 , , . r Appointments in entire service. Report. 1903 (p. 268). 1904 (p. 328). 1905 (p. 247). 1906 (p. 168). 1907 <:(mem.). 28,035 2,143 3,088 66,592 2,973 2,254 59,179 3,693 1,877 56,601 8,048 2,292 69,525 Excepted and noncompetitive. .. 6,036 4,142 Total « 33,266 6 71,819 64,749 66,941 79,703 B Error i% footing oi report of 100. i> Error in footing of report of 1,000. Total separations and changes in entire service. . Report. 1903 (p. 269). 1904 (p. 329). 1905 (p. 248). 1906 (pp. 168-69). 1907 c (mem.) . Competitive 19,794 6 2,822 31,221 6 4, 189 31,697 3,468 3,145 36,326 5,298 2,345 45 382 Excepted and noncompetitive 5,373 3,141 Total 122,616 35,410 38,310 43,969 53,896 a Error in footing of report of 320. 6 Includes unclassified employees. ^Memoranda, not yet in annual report. The total appointments made in 1903 are given on page 268 of report as 33,266 (on page 23 as 39,646 and on page 279 as 40,270), while the total of separations is given on j)age 269 as 22,616, the difference of 10,650 probably being additions to the service authorized by law. The total appointments made in 1904 are given on page 328 of report as 71^^19, while the total sepa;rations are given on page 329 as 35,410, the difference of 36,409 being made up of — Navy Department, in navy-yards 16, 664 Other Departments and offices 19, 745 There were 19,690 employees added to the service in 1904' but I do not understand why 16,664 appointments in navy-yards are charged when as a matter of fact they were not made. The total appointments in 1905 are given on page 247 as 64,749, while the separa- tions from service are given as 38,310, the difference being 26,439. The increase in employees over 1904 is 8,727, thus leaving 17,712 to be accounted for. RETIBEMENT FUND SUPERANNUATED EMPLOYEES. 141 On pages 252-253 separations are given as 44,943, a difference of 6,633 from state- ™^io o^^^P^^?.!^^- -A-ppointmente are given on page 247 as 64,749and on pages 252-253 as 62,997, a difference of 1,772. Ten thousand nine hundred and fifty-six appointments in navy-yards are charged on page 247, and none on page 253. ■' ^^ •' •^ & The total appointments in 1906 are given on pages 168-169 as 66,941, and the total separations as 43,969, a difference of 22,972. The increase in employees over 1905 is shown on page 172 as 25,627, which more (2,655) than accounts for the said difference. _.-'-.^s„"'tal appointments m 1907 are given in a statement received from office of the Uvii bervice Commission as 79,703 and the separations as 53,896, a difference of 25,807. . -? l^n'^f^^ ^^ employees over 1906 is 17,991. I am unable to say what the difference of 7,816 (between 25,807 and 17,991) represents. APPOINTMENTS IN NAVY-YAHDS. In report for 1903 (see footnote, p. 279) it is stated that 14,080 appointments were made m navy-yards, and are included in the total of 40,270 appointments for the year. In report for 1904, page 328, it is stated that 16,664 appointments were made in navy-yards ;n 1904, and they are treated as part of the total of 71,819 appointments charged to the year. On page 338 no appointments are charged, and the number of workmen and mechanics in service June 30, 1903, and June 30, 1904, are said to be the, same, i. e., 15,885. luTeport for 1905, page 247, there are 10,956 appointments charged as part of the total of 64,749 appointments made during the year. On page 252 the total mechanics and workmen in service June 30, 1904, is given as 18,585 (300 less than 1904 report gives) and the same number on June 30, 1905, indicating no changes for the year 1905. In report for 1906, page 168, there are 10,495 appointments charged to navy-yards as a part of the total of 66,941 made during the year. On page 170 the total number x)f competitives in service is given as 18,585 with no change for the year. Unclassified noncompetitive and excepted employees in navy-yards are given as 2,538 from 1903 to 1906, both inclusive. 1903, page 268, no appointments; on page 279 there are 14,080 charged. 1904, page 328, 16,664 appointments; on page 338, no appointments. 1905, page 247, 10,956 appointments; on page 252, no appointments. 1906, page 168, 10,495 appointments; on page 170, no appointments. It will be observed that the total of appointments in the navy-yards (competitive class) charged, as made in 1904, 1905, and 1906, aggregates 38,115, adding the 14,080 named in 1903, and we have a grand total'of 52,195. What separations may have been made I do not know, but the largest number (competitive) reported as in service for any of the years named is 18,885. Various tables in reports of the Civil Service Com- mission show the following differences in — Appointments. Competitive. DifEer- enee. Noncom- petitive, etc. Differ- ence. 1903 (p. 268) 1903 (p. 277) 1904 (p. 328) 1904 (p. 339) 1905 (p. 247) 1905 (p. 253) 1906 (p. 168) 1906 (p. 170) 28,035 40,270 66,592 49,898 59,179 49, 411 56,601 46,158 12,235 5,231 16,694 "9," 768' 'i6,'643' 5,227 5,238 5,570 13,666 10,340 21,002 7,996 "i6,'662 Undoubtedly, these differences in the record of appointments are partly due to the improper entries connected with navy-yard employees, and the matter can only be explained by the Commission. Very respectfully, Fred Braokett. 142 EETIEEMENT FUND— SXJPEEAN'irUATED EMPLOYEES. APPENDIX K. [The Washington Post, March 19, 1906.] SYSTEMS OP RETIREMENT OF VARIOUS GOVERNMENTS AND CORPORATIONS. The subject of superannuation of employees in the civil service of the Government is now receiving a large amount of attention. Something of the extent of the various methods now followed by governments and corporations in caring for employees, who by many years of active, earnest work, and devotion to duty have earned the right to assistance when they are disabled by age or accident and no longer able to earn a living, may be interesting. All the great nations except the United States have provided for retirement of em- ployees under various conditions, with pay, as shown by subjoined tables. The officers of the Grand Trunk Railway of Canada say, in part, as to the effects of a retire- ment scheme put in operation by that company thirty-two years ago: "It has been stated that the existence of a pension acts as a detriment to efficient service, owing to the tendency on the part of an employee approaching the retirement age to become lax in the performance of duty in consequence of the knowledge that he will soon be able to leave the service and draw a pension. The experience of this com- pany has demonstrated that such reasoning is entirely fallacious. Every company and corporation having a retirement pension system in operation regards it as a good business investment, without considering the humanitarian prin- ciple involved. Many say that the plan results in creating among the employees a feeling of permanency in their employment, enlarges their interest in their employers' aiifairs, and induces them to remain in and devote their best efforts and attention to their employers' service. France has had a system in operation for over fifty years and has granted pensions far beyond anything of the kind ever proposed in this country; contributing large sums annually out of the public funds to sustain the system, which includes the consular and diplomatic service. The following table gives a synopsis of systems established and in operation: EETIEEMENT I'TJND SUPERANNUATED EMPLOYEES. 143 •snoTsnad 144 EETIREMENT FUND SUPERANNUATED EMPLOYEES. Among the corporations paying the entire cost of pensions are' the following: Canadian Pacific Railroad. Pennsylvania Railroad. Pennsylvania Railroad Lines west of Pittsburg. *New York Central and Hudson River Railroad. *Boston and Albany Railroad. Baltimore and Ohio Railroad. Illinois Central Railroad. Boston and Maine Railroad. Southern Pacific Railroad. Delaware, Lackawanna and Western Raih-oad. Philadelphia and Reading RaUroad. Midvale Steel Company. *Cumberland Valley Railroad. San Antonio and Aransas Pass Railroad. *Champlain Transportation Company. Metropolitan Street Railroad. Oregon Railroad and Navigation Company. Boston Elevated Railroad. Fourth Street National Bank, Philadelphia, Pa. *Southwark National Bank, Philadelphia, Pa. *First National Bank, Pittsburg, Pa. *Girard National Bank, Philadelphia, Pa. *Bank of New York National Banking Association. *Merchants' National Bank, Baltimore, Md. Old Dominion Steamship Company. In corporations preceded by mark "*"' retirements in each case are treated upon merits. As a general rule, retirements are coinpulsory at the age of seventy, while voluntary retirements are permitted from ages fifty-five to seventy. The Brownlow bill, lately introduced in Congress, provides for retirement of em- ployees in the classified service at various ages under certain conditions, with a pen- sion after retirement equal to 50 per cent of the average salary paid them while in active service. Said bill provides a method for creating a sufficient fund for the pay- ment of pensions by assessments on salaries, promotions, and original appointments. APPENDIX L. Finance Department, Ottawa, Canada, April 2, 1908. William H. Dbarden, Esq., Clerh of Committee on Reform in the Civil Service, House of Representatives, Washington, D. C. Dear Sir: I beg to acknowledge the receipt of your letter of the 27th ultimo, requesting certain information iu connection with the Canadian system of retirement. With regard to the expense of administration of the retirement fund, no definite account is kept of such expense. The matter is comparatively unimportant, and the business is conducted simply as part of the routine business of this and other departments. The number of separate accounts on the books of the fund on the 1st of AprO, 1907, was 2,768. I trust this information will suit your requirements. If there are any further points which you desire to have elucidated, I shall be happy to do my best to oblige you. Yours, truly, H. BOVILLE, Deputy Minister of Finance. APPENDIX M, Statistics of Employees, Executive Civil Service of the United States: 1907. [Outline ol contents of Census Bulletin 94.] The employees in the executive civil service are the subjects of a statistical inquiry which has ]ust been completed by the Bm-eau of the Census. The results of this mq^uiry are published in Census Bulletin 94, which was prepared by Lewis Meriam, acting chief of the division of revision and results. BETTREMENT FUND SUPERANNUATED EMPLOYEES. 145 ov?^^ f^^^ ^■' ^^^^' according to this bulletin, the total number of employees in the wa=9afi'^QAr^ j®'7\°?' exclusive of persons in the consular and diplomatic service, national ca it 1 "umber 29,103— practically one-tenth— were employed at the SCOPE OF BULLETIN. In the detailed statistical tables it was considered impracticable to include all these employees; m a tew cases because the retui-ns were too incomplete, but more often Decause certain classes are so peculiar in respect to the way they are appointed, or the basis on which they are paid, that their inclusion would have impaired the value of the statistics tor the remaining classes. The most important classes omitted for this latter reason include 62,663 postmasters, 18,376 mechanics and laborers in navy-yards and naval stations, 12,850 clerks m post-offices not having free delivery, and 1,031 occa- sional employees of the Weather Bureau. Data for 4,584 employees of the Isthmian tanal Commission employed on the Isthmus were too incomplete to be included. As the net result of all omissions, the total number of persons treated by the Bureau of the Census as employees in the executive civil service is 185,874. OVER 6,500 GOVERNMENT EMPLOYEES AT LEAST 65 YEARS OP AGE. One of the most interesting questions considered in the bulletin is that of the age of the employees. One-half of them are under 36.5 years of age. In the District the median age is slightly higher, being 38.8 years, while elsewhere it is but 36.2. The advanced age periods are, however, more interesting than the medians. The figures show that the Government employs in the civil service 4,364 persons from 65 to 69 years of age; 1,557 from 70 to 74 years; 465 from 75 to 79 years; and 137 at least 80 years of age. These figures give a total of 6,523 employees in the executive civil service who are 65 years of age or over. Of this number, 1,852 are employed in the District of Columbia and 4,671 elsewhere. Although less numerous in the District than elsewhere, employees of advanced age form a much larger proportion of the force in the District than they do of the force elsewhere. In the District practically 1 Government employee in 14 is at least 65 years of age, while elsewhere the corre- sponding figures are but about 1 in 34. In an effort to determine whether these figures represent any special tendency for Government employees to remain in service after persons in other walks of life would have retired, the Census bulletin compares the ages of the Government employees with the ages of all breadwinners at the census of 1900, and reaches the conclusion that the tendency to remain in the Government service after reaching advanced age is not unusual, except, perhaps, among the male employees in the District of Columbia. CIVIL-SERVICE RULES NOW PREVAIL. Of the employees considered in this bulletin 164,051, or about 9 out of 10, are in the classified service, and most of the employees, about two-thirds of the total number, secured their present positions through open competitive examination. This is, in fact, practically the only way in which a person seeking Government employment can now enter the classified service. The two exceptions to the fundamental rule requiring a competitive examination are both unimportant, as only 2,573, or 1.4 per cent of the total number of employees, were reported as securing their present status by "noncompetitive examination" or by "preference." Persons who secured posi- tions in the classified service through "classification and extension" — that is, surviv- ors from a former system of appointment — form less than a fifth of the total number of employees. Thus the figures indicate that the geater part of the Government em- ployees hold office by virtue of the new system instituted by the civil-service act of 1883. TWO-THIRDS DO CLERICAL WORK. In respect to the character of their work; the bulletin divides the employees into six main classes, as follows: Clerical, 122,636; subclerical and manual labor, 37,a97; pro- fessional, technical, and scientific, 9,745; executive, 2,157; and miscellaneous, 5,643. Practically two-thirds of the Government employees are thus engaged in clerical work. The next largest class is formed by those whose work is subclerical and manual. These two classes together include 86 per cent of all the employees. None of the remaining classes is large, the percentage they constitute of the total varying from 1.2 for the executive, the smallest class, to 5.2 for the professional, technical, and scientific. The median ages of the employees in these occupation classes are as follows: Cleri- cal 35.5; professional, technical, and scientific, 36.8; subclerical and manual labor, 37.7- mechanical, 39.4; miscellaneous, 43.7; and executive, 49.1. The youngest class 38257—08 10 146 EETIKEMENT FUND SUPEEANNTJATED EMPLOYEES. is thus the clerical, the oldest the executive; and the difference between the median ages of the two is no less than thhteen and six-tenth years. HALF HAVE SERVED LESS THAN FIVE YEARS. The figures for length of service show that almost one-half (48.2 per cent) of the em- ployees have worked for the Government less than five years. In each successive five- year period of service the number of employees grows smaller. There are 1,052 em- ployees, or 6 out of every 1,000, ivho have been in Government employ more than forty years. A constant decrease of numbers as the period of service increases is the inevi- table result of resignations, removals, and deaths. At the same time the growth of Government work also tends to increase the proportions in the shorter periods, since the creation of new positions, necessary as the work of the Government expands, gen- erally results, directly or indirectly, in the appointment of persons who have never before been in the service. MANY OF ADVANCED AGE WHEN APPOINTED. Length of service is of com-se intimately connected with age. No young man can have served a long period. An old man, however, may have served a short period, and it is this fact which makes particularly interesting the table in the census bulletin, which classifies the employees by age and length of service. This table shows that at least 1,129 employees must have been appointed after reaching the age of 60 and that the actual number appointed after reaching that age is probably considerably larger. Although the proportion formed by persons of advanced age is greater in the District than it is elsewhere, this does not appear to indicate a gi-eater tendency in the District toward the appointment of elderly people. APPROXIMATE AVERAGE COMPENSATION. In the District of Columbia the approximate average compensation for men is $1,178 and for women |837; elsewhere it is $935 for men and $766 for women. That the women are paid at a lower rate than the men does not indicate that women receive less than men for the same class of work, but reflects the fact that a far larger percent- age of women than of men are engaged in subclerical work or manual labor. The approximate average rates of compensation for different classes of employees are as follows: Executive, $1,983; professional, technical, and scientific. $1,375; mis- • cellaneous, $1,221; mechanical, $959; clerical, $953; and subclerical and manual labor, $711. In the clerical class, it is interesting to note, the approximate average compensation for women ($950) is practically the same as that for men ($953). COMPENSATION INCREASES WITH AGE. Among the employees engaged in each class of work a general tendency is apparent towai-d an increase in average compensation as age advances, though this increase is not always uninterrupted; and similarly there is almost uniformly a consistent increase in compensation as the length of service increases. The clerical class is a particularly good illustration of the latter tendency, since the average rate of compensation for that class, beginning at $757 for those who have been in the service less than one year, increases in each successive period without a single interruption until for those who have served forty years and over it is $1,450, an increase of $693. POST-OFFICE LEADS THE DEPARTMENTS. Of the employees considered in this bulletin more than one-half (106,811) are in the Post-Oifice Department. The great importance of this Department is of course due to the enormous number of persons required to handle the mail of the country The figures include 37,389 rural delivery carriers, 28,846 clerks in classified offices 24 696 lo".®^.,^^™'^'''^^ ^^'^ ^^'^^^ railway mail clerks. It should be recaUed, moreover that 62,663 postmasters and 12,850 clerks are not included in the figures. If these are added, it wiU be found that the total number engaged in handling the mail of the country is 180 336. In marked contrast to this army of employees is the administra- tive force m the Post-Ofiice Department at Washington, which consists of 1,988 per- sons. ' ^ WAR VETERANS IN SERVICE. In answer to the inquiry concerning war service, 15,207 employees, 8.2 per cent of the total number, reported that they were war veterans. Of these veterans 8 464 had served in the civil war and 6,743 in the war with Spain The total numberof employees at least 60 years of age is 13,363, and of this number 7 768, or 58.1 per cent are war veterans. Roughly speaking, therefore, among every 10 employees at least 60 years of age 6 are war veterans. S ^ J- RETIBBMENT FUND SUPEKANNXJATED EMPLOYEES. 147 In addition to the figures for the employees above considered the bulletin also shows separately certain statistics for the postmasters, classifying them by sex,- age, P®™d of service, and compensation. It also contains several diagrams illustrating the distribution of the employees by sex, age, marital condition, character of appoint- ment, and other details. APPENDIX N. TABLES REFERRED TO IN TESTIMONY, APRIL 13. Amount to which a deposit of 1 per cent of a monthly salary of flOO, first payment im- mediate, will acewmulate at 4 per cent per annum compound interest at the end of a given term of years. Term ot years. Amount of accu- mula- tion. Term of years. Amount of accu- mula- tion. Term of years. 25 26 27 28 29 30 31 32 33 34 35 36 Amount of accu- mula- tion. Term of years. Amount of accu- mula- tion. Term of j years. Amount of accu- mula- tion. 1 2 3 4 5 6 7 8 9 10 11 12 tl2.26 25.01 38.27 52.06 66.40 81.31 96.82 112. 95 129. 73 147. 18 165. 32 184. 19 13 14 15 16 17 18 19 20 21 22 23 24 $203.82 224.23 245. 46 267. 54 290.50 314.38 339.21 365. 04 391. 90 419.83 448.88 479. 10 $510. 52 543. 20 577. 18 612. 53 649. 29 687. 52 727. 28 768.63 811.63 866.36 902.87 951. 24 37 38 39 40 41 42 43 44 45 46 ^1,001.55 1,063.87 1,108.28 1,164.87 1,223.73 1,284.94 1,348.59 1,414.79 1,483.64 1,555.25 47 48 49 50 .51 52 53 I 54 55 56 SI, 629. 72 1,707.16 1,787.71 1,871.48 1,968.59 2,049.20 2, 143. 42 2,241.42 2,343.33 2,449.33 American table of mortality. Num- ber living. 100,000 99,251 98,505 97,762 97,022 96,285 95,550 94,818 94,089 93,362 92,637 91,914 91, 192 90, 471 89,751 89,032 88,314 87,596 86,878 86,160 85,441 84, 721 84,000 83,277 82, 551 81, 822 81,090 80,353 79,611 78,862 78, 106 77,341 76, 667 76, 782 74,986 74, 173 73,345 72, 497 71,627 70, 731 69,804 68,842 67, 841 Number deaths each year. 749 746 743 740 737 735 732 729 727 725 723 722 721 720 719 718 718 718 718 719 720 721 723 726 729 732 737 742 749 766 765 774 785 797 812 870 896 927 ■ 962 1,001 ' 1,044 Death- rate per 1,000 each year. 7.49 7.52 7.54 7.57 7.60 7.63 7.66 7.69 7.73 7.76 7.80 7.86 7.91 7.96 8.01 8.06 8.13 8.20 8.26 8.34 8.43 8.61 8.61 8.72 8.83 8.95 9.09 9.23 9.41 9.59 9.79 10.01 10.25 10. 623 10.83 11.16 11.56 12.00 12.51 13.11 13.78 14.54 15.39 Expec- tation of life. 48.72 48.08 47.45 46.80 46.16 45.60 44.85 44.19 43.53 42.87 42.20 41.63 40.85 40.17 39.49 38.81 38.12 37.43 36.73 36.03 35.33 34 63 33.92 33.21 32.50 31.78 31.07 30.36 29.62 28.90 28.18 27.45 26.72 26.00 26.27 2154 23.81 23.08 22.36 21.63 20.91 20.20 19.49 53 66, 797 64 66,706 66 64,563 56 63,364 57 62, 104 68 60,779 59 59,385 60 67,917 61 66, 371 62 54,743 63 . . 53,030 64 51,230 65 49, 341 66 47,361 67 - . 45,291 68 43, 133 69 - . 40,890 70 38, 569 71 36,178 72 33,730 73 31,243 74 28,738 75 26,237 76 23,761 77 21,330 78 . ... 18,961 79 16, 670 80 14, 474 81 82 12,383 10,419 N^- deaths living. ^"^'^ = year. 8,603 6,966 5,485 4,193 3,079 2,146 1,402 847 462 216 79 21 3 1,091 1,143 1,199 1,260 1,325 1,394 1,468 1,546 1,628 1,713 1,800 1,889 1,980 2,070 2, 168 2,243 2,321 2,391 2,448 2,487 2,506 2,601 2,476 2,4.31 2,369 2,291 2,196 2.091 1,964 1,816 1,648 1,470 1,292 1,114 933 744 556 385 246 137 58 18 3 Death- rate per 1,000 each year. 16.33 17.40 18.67 19.88 21.33 22 94 24.72 26.69 28.88 31.29 33.94 36.87 40.13 43.71 47.65 62.00 * 56.76 61.99 67.66 73.73 80.18 87.03 94.37 102. 31 111. 06 120. 83 131. 73 144. 47 158. 60 174. 30 191. 66 211. 36 236. 65 265. 68 303. 02 346. 69 395. 86 454. 54 532. 47 634. 26 734. 18 867. 14 1,000.00 Expec- tation of life. 18.79 18.09 17.40 16.72 16.05 15.39 14.74 14,10 13.47 12.86 12.26 11.67 11.10 10.54 10.00 9.47 8.97 8.48 8.00 7.55 7.11 6.68 6.27 5.88 5.49 5.11 4.74 4.39 4.06 3.71 3.39 3.08 2.77 2.47 2.18 1.91 1.66 1.42 1.19 .98 .80 .64 ..60 148 EETIEEMENT FUND SUPERANNUATED EMPLOYEES. Amount of annitcd income certain, first payment immediate, which can he obtained by a deposit of $1,000. jAny number of annual instalments may be selected from 5 to 30. Interest at SJ per cent com- pounded annually.] Amount Total Number of annual of each annual amount payable income in aimual per Sl.OOO. ■ incomes. 5 $214 181 158 140 127 116 107 100 SI, 070 1,086 1,106 1,120 1,143 1,160 1,177 1,200 6 7 8 9 10 11 12 13 94 1,222 14 88 1,232 15. 84 1,260 16 80 1,280 17 76 1,292 Total amount payable in annual incomes. APPENDIX O. Report of Actuary B. D. Flynn on the actuarial aspect of the retirement plan, with accompanying letter. Haktford, Conn., January 17, 1907. Mr. H. D. Brown, Cincinnati, Ohio. My Dear Mr. Brown: Inclosed you will please find report upon the mathematical work in connection with the proposed civil-service superannuation scheme. You will notice that Table I can be used for any salary and for increases. If the plan goes into effect, however, similar tables can be drawn for various salaries and percentages, and increase of salaries. The amounts given in Table IV, you will notice, are somewhat smaller than those which I quoted to you in Washington. The reason for this is that we have used the table of 1 X -f-i, which is practically correct. The appropriations given for 1907 are, of course, with the understanding that employ- ees who are retii-ed this year who are over 70 years, also those who have attained the age 01 70 since the beginning of the year, shall receive back payments for 1907. The total appropriations ran down to small amounts in the last years. I have there- fore cut off all appropriations up to $100 in order not to have the tables appear ridic- ulous. Some of the arithmometers have not worked well, so that those that were in com- mission were worked practically all the time, mornings, noon times, and nights. The additional tables wanted have increased this last stage of the work three or fourtimes over our original estimate, so that the appropriation has been just aljout used up. I have not figured out the hours accurately yet, but I think there will be a small margin on the right side. With best wishes for your success, I am, Sincerely, yours," B. D. Flynn. Report to the Keep Commission upon Project for Superannuation Provision FOR United States Civil-Service Employees. The plan is best considered in two parts, which, stated briefly, are as follows: Part I, a systematic saving of a part of the salary of each employee to provide for him- self in old age or in event of physical incapacity prior to that time; and Part II, the payment of an annuity by the Federal Government to all persons in its classified civil service employ July 1, 1903, upon retirement at age of 70. A certain percentage of the monthly wage of each person in the classified branch of the civil service shall be withheld and deposited in the United States Treasury, at 4 per RETIREMENT FUND SUPERANNUATED EMPLOYEES. 149 cent compound interest per annum, in the name of and to the credit of the employee, tpon absolute retirement from the service, and only in such event, the employee shall t'-^ *f privilege of withdrawing his accumulated savings in one sum, or if the amount of the funds to his credit be at least $1,000 he shall have the option of using his savings to provide an annuity at his attained age.' In case of the death of an employee while in the service the amount to his credit shall be paid to his estate. Upon retirement at the age of 70 the employee may withdi-aw his savings in one sum or choose one of the following methods of applying his funds: Option 1. An annuity payable monthly throughout life. Option 2. An annuity payable throughout life with the provision that in case of the death of the annuitant before he has received in annuities the amount of his deposit the balance shall be returned to his estate. (In determining the amount of annuity payments received, that part contributed by the Federal Government under Part II of the plan shall not be considered.) Option 3. An income payable certain for a limited term of years. Table I (See Appendix N) shows the amount to which a deposit of 1 per cent of a monthly salary of $100, first payment immediate, will accumulate at 4 per cent per annum compound interest at the end of certain terms of years. For instance, a person entering the civil service at age of 30 and contributing 1 per cent of his monthly salary of $100 will have to his credit at age of 70 — forty years later — provided he remains in the service, $1,164.87. At each increase in pay the table should be entered for the amount of monthly increase for the term of years remaining before attaining the age of 70 years, and the value thus obtained added to the amount of accumulation which was being provided for under the old salary. If the amount of monthly salary be $66.67 instead of $100, the accumulation will be two-thirds of the amount given in Table I and, also, if the percentage deduction ai salary determined upon be 3 per cent the accumluation will be simply three times greater than given in Table I. The amount of deposit necessary to provide option 1 — an annuity payable monthly throughout life, first payment immediate upon attaining the age of 70 years — will be for an annuity of $100 payable in monthly instalments of $8.33 each $774.17 for males and $867.87 for females. The basis of these charges is the British office's life annuity tables with 3 J per cent interest. The selection exercised by the employee in choosing this option will be nearly, if not quite, as great as that against an insurance company by a person pirr- chasing an annuity. The table mentioned above, which is a select table based upon the experience of practically all the British companies for the period from 1863 to 1893, has therefore been used, with, however, no loading for expense. The amount of deposit necessary to provide option 2 — an annuity of $100, first pay- ment immediate upon attaining the age of 70 years, with provision granting return in case of death of balance of deposit not received in annuities — will be $1,025. Because of the advanced age of the employee at retirement and the consequent weight of the insurance feature involved in this option the British office's life table (0"), with interest at 3^ per cent, has been used in computing this charge. Table II (see Appendix N) shows the amount of annual income certain, first pay- ment immediate, which can be obtained by a deposit of $1,000. The values given in this table are based upon 3i per cent compound interest. PART n. The computations under Part II, which follow, are based upon the following statement of this part of the plan: The "Federal Government shall provide for each employee in its classified civil service July 1, 1903, an annuity payable monthly, beginning at age 70 and continuing throughout life, provided the person is still in the service when he attains that age. The light to an annuity shall be relinquished upon withdrawal from the service before attaining the age of 70 years, and in case of the death of the employee prior to at- taining the retirement age there shall be no payment by the Government to the estate of the deceased. , ■ , , The amount of the annuity shall be 1 per cent of the salary which the employee was receiving July 1. 1903, for each completed year of service prior to that date. The amount of annuity payable to each employee whose salary July 1, 1903, was more than $2 500 shall be based upon an annual salary of $2 500. Census Bulletin No. 12, "The Executive Civil Ser\'ice of the L nited States " giving statistics as of July 1, 1903, has been used as the basis of all of the computations in this part of the plan. One hundred and three thousand and thirty employees in the classi- fied civil service entitled to annuities were considered. 20 451 of whom were located in the District of Columbia and 82 579 elsewhere. 150 RETIKEMEXT FUND SUPEEANNUATED EMPLOYEES. Employees reported as "-sv-ithout salary" were not included, nor were those used whose years of service were unreported. As there were but 163 members of the latter group, the average salary of whom was small and the terms of service probably short, It was not thought advisable to attempt to distribute them. All persons listed as recei-\dng "less than $720" were considered as receiving |600 per annum; all ' .$720, but less than 1840," were treated as $720, and similarly; the minimum salary was used in each grouping. After a careful computation of "piece- workers " and persons with salaries not reported it was decided to treat these as receiv- ing, on an average, annual salary of $1,000. Table III shows the method by which the data was drawn off and the percentages of salaries determined for all classified employees in the Distiict of Columbia aged 45 years. A similar table was completed for classified employees "elsewhere" of the same age and the total amount of salaries to be used in determining the annuities for this age was obtained. These totals were then discounted to age 70 according to the probability of liviug based upon a mortality table and by employing the same proba- bility the total annuity payments for each year for the remaining years of life obtained. The mortality table selected as the basis of these computations was the American experience table of mortality. This decision was reached after consideration of the effect of the conditions involved m this part of the proposed plan upon the amounts of appropriation and of all information obtainable which would throw light upon the character of the class under observation from the standpoint of probable longevity. Table IV gives the amounts of appropriations each year in order to provide annuity payments in accordance with Part II of the plan. Withdrawals other than by death which take place before the retirement age is attained will tend to decrease the amount of annuity payments each year. These amounts will also be diminished because of the fact thstt there are many employees at the older ages who have been in the service but a short time and who are receiving small salaries who will prefer to retain their positions rather than accept an annuity which will be but a small per cent of their annual salary. For these reasons, and because of the standard of the mortality table adopted, the appropriations given in Table, IV can safely be considered as the maximum amounts required. Tables V to VII show the amounts of appropriations necessary to carry out Part II of the plan under different assumptions as to age and years of service. Table V gives the amounts necessary to provide annuity payments in accordance with Part II, with the exception that all employees who had not completed six years of service July 1, 1903, shall not be entitled to annuity payments. Table VI gives the amounts necessary to provide annuity payments in accordance with Part II, with the exception that the age of retirement is taken as 65 years. Table VII gives the amounts necessary to provide annuity payments in accordance with Part II, with the exception that the age of retirement shall be 65 years and all employees who had not completed six years of service July 1, 1903, ghall not be entitled to annuity payments. In concluding, I would recommend that, in case the above outlined superannuation plan is put into effect, the record which is kept for each employee contain information which can be used in obtaining the mortality experience, the rate of withdrawal, and, if possible, a law of increase of salaries of the members of the classified civil service. Because of the large number under observation the experience could probably be sa,fely subdivided to show the mortality of employees in the District of Columbia as distinguished from those in other parts of the country; also, the experience in certain branches of the service, such as postal railway clerks and city letter carriers, which are affected by conditions peculiar to these classes of employees. The experienee thus obtained would not only prove of great statistical value, but would serve as a guide in future valuations or ailjustments of the plan. Respectfully submitted. Benedict D. Flynn, Actuary. Hartford, Conn., January n, 1907. F. A. S. RETIREMENT FUND SUPERANNUATED EMPLOYEES. 151 — Showing the method by which the data were drawn off and the percentages of salaries determined, District of Columbia {age 45). ' Salary. Computed years orservioe. S600. $720. $840. $900. No. Amount. No. Amount. No. Amount. No. Amount. 0... 3 2 1 1 2 3 3 2 1 4 2 1 6 $1,800 1,200 600 600 1,200 1,800 1,800 1,200 600 2,400 1,200 600 3,600 3 2 2 4 1 2 1 $2,160 1,440 1,440 2,880 720 1,440 720 1 1 1 4 1 1 1 1 3 2 3 3 2 $900 900 3,600 900 900 900 900 2,700 1,800 2,700 2,700 1,800 2 1 1 2 1 $840 840 1,680 840 3 i 5 6 7 3 2 2 2,520 1,680 1,680 8 3 5 2 2,i66 3,600 1,440 9 10 11 12 1 720 1 840 13 14 3 1,800 4 2 2,880 1,440 15 1 840 2 1,800 16 2 2 1 1,200 1,200 600 17 i 1 1 720 720 720 18 1 1 20 1 1 600 BOO 900 i 720 22 i 840 1 1 1 24 1 2 1 2 1 1 600 1,200 600 1,200 600 600 1 720 900 900 26 . 28 30 32 1 900 1 600 " 1 50 30,000 37 26,640 15 12,600 31 27,900 152 RETIREMENT FUND SUPERANNUATED EMPLOYEES. Table III. — Showing the method by which the data were drawn off and the percentages of salaries determined, District of Columbia {age 45) — Continued. Salary.* Computed years of service. $1,000. $1,200. $1,400. $1,600. No. Amount. No. Amount. No. Amount No. Amount. 0.. 2 2 12 7 3 3 1 3 1 6 7 2 14 2 4 8 3 4 2 4 4 1 2 4 3 3 2 $2,400 2,400 14,400 8,400 3,600 3,600 1,200 3,600 1,200 6,000 8,400 2,400 16, 800 2,400 4,800 9,600 3,600 4,800 2,400 4,800 4,800 1,200 2,400 4,800 3,600 3,600 2,400 2 1 2 2 4 2 1 1 4 1 5 3 7 2 $2,800 1,400 2,800 2,800 5,600 2,800 1,400 1,400 5,600 1,400 7,000 4,200 9,800 2,800 1 1 1 $1,600 1,600 1,600 1 2 1 2 $1,000 2,000 7,000 3,000 3,000 3.... 7 3 3 4 3 2 4,800 3,200 6 6 7 1 2 4 3 4 2 2 4 1,000 2,000 4,000 3,000 4,000 2,000 2,000 4,000 i 2 1 1 1 1 1,600 8 3,200 1,600 1 600 9 10 11 1,600 1,600 12 13 14 15 3 2 2 6 1 . 4 •2 2 4 4,200 2,800 2,800 8,400 1,400 5,600 2,800 2,800 5,600 16 . . . 3 2 3,000 2,000 2 3,200 17 18.. . 2 1 3,200 19..: ;.;;;;:;;:::;;;::::: :;:;:::;: 20 4 4.000 21 1,000 1 4 1 1 2 1,600 6,400 1,600 22 23 1,000 1,000 1,000 1,000 24 25 2 2,800 3,200 26 27 1 1,600 28 1,000 1,000 1,000 1 1 1 2 1,200 1,200 1,200 2,400 1 1,400 29 30 31 1 32 1 33 j 34 1 Total 55 55,000 113 135,600 66 92,400 30 48,000 BETIKEMENT FUND SUPBEANNUATED EMPLOYEES. 153 Table III.. -Showing the method by which the data were drawn off and the percentages of salaries determined, District of Columbia (age 45) — Continued. Salary. Total num- ber em- ployees. Total amount salaries. Per cent. Computed years of service. S1.800. J2,000. S2,500. Percent- age of salary. No. Amount. No. Amount. No. Amount. 1 1 1 1,800 2 4,000 2,000 4,000 2 1 5,000 2,500 16 13 24 28 19 18 9 12 22 27 25 15 37 8 19 17 13 15 18 10 19 9 8 19 10 16 4 3 4 4 2 2 1 1 1 21,660 16,240 28,680 30,420 21,500 20,080 10,320 12,220 27,440 28,780 29,340 17,300 43,660 11,700 20,880 20,380 16,300 19,420 26,520 13,420 26,000 11,920 11,600 27,640 12,920 20,100 4,000 2,800 4,200 4,600 2,200 2,400 900" 600 2,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 162 672 913 860 1,004 619 856 2,195 2,590 2,934 1,903 6,239 1,621 2,923 3,057 2,608 3,301 4,774 2,550 6,200 2 3 i 4 1 1,800 1 2,500 5 6 1 1 2,500 2,500 7 1 1,800 8 9 . 1 1 1,800 1,800 2 1 2 4,000 2,000 4,000 1 ■ 1 2,600 2,500 10 11 11 1 i,866 12 2 1 1 4,000 2,000 2,000 1 1 2,600 2,600 13 14 3 5,400 15. 1 1 1 2,600 2,500 2,500 16 17. 3 4 s,466 7,200 IS 2 2 2 2 4,666 4,000 4,000 4,000 19 20 2 3,600 1 2,500 21 22. 2*652 23 6 10,800 i 1 1 2,666 2,000 2,000 24. 1 2,600 3 101 25 3 5,400 5,025 1 040 26.. 27 '756 28 1 176 29 1 1,800 l|334 660 30 31 32 288 33.... 198 34 1 2,000 680 Total 29 52,200 26 52,000 15 37,600 467 669,840 72, 171 154 EETIEEMEN"! FUND StJPEBANlirUATED EMPLOTBBS. Table IV. — Maximum amount of annual appropriation by the Federal Government necessary to provide a monthly annuity to each person in its classified civil-sertnce employ July 1, 190S, upon attaining the retirement age of 70 years, ike amount of annuity to he 1 per cent of the employee's salary July 1, 1903, for each year of service completed prior to that date. Year. Amount of appropria- tion. Year. Amount of appropria- tion. Year. Amount of appropria- tion. 1907 $483,407 541,227 605,459 683,493 771,464 839,160 913,807 977,616 1,017,701 1,047,179 1,052,755 1,043,316 1,033,828 1,023,091 1,021,234 1,008,106 1,036,463 1,031,244 1,033,812 1,037,059 1,047,788 1,059,446 1,078,201 1930 $1,109,321 1,133,249 1,142,023 1,149,590 1,166,402 1,167,365 1,163,008 1,164,374 1,157,983 1,145,695 1,123,149 1,090,282 1,046,469 995,220 937,466 876,001 807,893 735,456 660,389 586,216 515,157 446,084 381,847 1963 $322,713 1908 1931 1954 268,870 1909 .. 1932 1955 221,118 1910 1933 1966 179,587 1911. 1934 1957 144,031 1912 1935 1958 113,965 1913 1936. .. .. 1959 88,898 1914 1937 1960 68,300 51,623 38,333 1915 1938 1939.... 1961 1916 1962 1917 1940 1963 27,923 1918 1941 1964 19,918 1919 1942 1965 13,886 1920 1943 1966 1967 1968 9,436 1921 1944 6,236 1922 1946. 3,981 1923 1946 1969 2,465 1924 ■.. 1947. .. . 1970 1,466 1925 1948 1971 834 1926 1949. 1972 453 1927 1950 1973 . . . 231 1928 1951. 1974 109 1929 1952..-. Table V. — Mammum amount of annual appropriation by the Federal Government nec- essary to provide a m,onthly annuity to each person in its classified civil service employ July 1, 1903, upon attaining the retirement age of 70 years, the amount of annuity to be 1 per cent of the employee's salary July 1, 1903, for each year of service which he had completed prior to that date, provided the term of service was at least six years. Year. Amount ol appropria- tion. Year. Amount of appropria- tion. Year. Amount of appropria- tion. 1907 $473,417 529,422 591,529 667,332 752,403 817,337 888,989 949,328 986,452 1,013,903 1,017,987 1,006,431 995,560 984,291 981,176 967,674 961,197 956,986 960,257 963,907 975,211 1928 $985,718 1,003,870 1,032,453 1,054,020 1,060,824 1,064,840 1,069,325 1,066,524 1,068,272 1,063,392 1,049,748 1,030,399 999,380 959,366 905,820 846,492 778,331 706,132 631,810 554,930 479,001 1949 $408,487 344,270 285,610 1908 1929 1950 1909..: 1930 1951 1910 1931 1952 1911 1932 1953 191,048 163,824 121,308 94,089 71,669 53,509 39,073 27,871 19,366 13,061 8,520 5,366 3,244 1,877 1,036 543 1912 1933 1954 1913 1934 1966 1914 1938 1968 1916 1936 1957 1916 1937 1958 1917 1938 1959 1918 1939 1919 1940 1961 1920 1941 1921 1942 1963 1922 1943 1923 1944... . 1965 1924 1945 1926 1946... . 1967 1926 1947 1968 1927 1948 RETIREMENT FUND STJPERANNTJATBD EMPLOYEES. 155 1 ABLE VI. — Maximum amount of annual appropriation by the Federal Government' necessary to provide a monthly annuity to each person in its classified civil-service employ July 1, 1903, upon attaining the retirement age of 65 years, the amount of annuity to be t^T,^^ Of'e employee's salary July 1, 1903, for each year of service completed prior to Year. Amount of appropria- tion. Year. Amount of appropria- tion. Year. Amount of appropria- tion. 1907 $1,260,214 1,366,287 1,469,602 1,543,083 1,602,946 1,631,268 1,639,801 1,646,298 1,649,451 1,662,187 1,658,868 1,706,504 1,710,017 1,721,646 1,732,458 1,751,334 1,770,133 1,797,012 1,839,206 1,872,004 1,885,171 1,896,630 1,871,137 1930 $1,810,332 1,919,848 1,924,330 1,919,193 1,906,596 1,880,566 1,840,523 1,783,831 1,718,362 1,640,014 1,656,048 1,460,839 1,367,292 1,247,663 1, 137, 466 1,027,692 918,681 814,074 714,847 621,603 535,494 457,363 387,170 $324,659 269,608 221,324 179,663 144,046 113,965 88,898 68 300 1908 1931 1954 1909 1932 1955 1910 1933 1966 1911 1934 1912 1935 1968 1913 1936 1969 1914 1937. . 1960 1915 1938 1961 1916 1939 ; 1940 1962 38,333 27,923 19,918 1917 1963 1918 1941 1964 1919 1942 1965 1920 1943 1966 9,436 6,236 3,981 2,465 1921 1944. 1967 1922 1945 1968 1923 1946. 1969 1924 1947 1970 1925 1948 1971 '834 1926 1949 1972 1927 1950 1973 231 1928 1951 1974 ■ 1952 Table VII. — Maximum amount of annual appropriation by the Federal Government necessary to provide a monthly annuity to each person in its classified civil-service employ July 1, 1903, upon attaining the retirement age of 65 years, the amount of annuity to be 1 per cent of employee's salary July 1, 1903, for each year of service which he had com- pleted prior to that date, provided the term of service was at least six years. Year. 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917, 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 Amount of appropria- tion. $1,218,009 1,330,239 1, 428, 415 1, 497, 329 1,553,774 1, 579, 429 1,584,270 1, 688, 128 1,589,692 1,699,995 1,595,386 1,597,214 1,600,287 1, 611, 307 1, 621, 020 1, 639, 126 1,665,043 1,679,587 1,717,252 1,746,579 1,755,262 Year. 1928, 1929, 1930 1931, 1932, 1933, 1934 1935 1936, 1937, 1938, 1939, 1940, 1941, 1942 1943, 1944. 1945, 1946. 1947. 1948. Amount of appropria- $1,761,016 1, 767, 485 1, 764, 702 1, 767, 453 1,763,368 1, 747, 649 1, 724, 614 1,686,216 1, 635, 361 1,565,736 1, 485, 392 1,393,929 1,294,677 1, 188, 699 1, 076, 686 963,243 854, 314 750, 415 654, 053 566,328 484, 345 Year. 1949, 1950, 1951. 1952, 1953, 1954. 1965, 1956. 1967. 1958. 1969. 1960. 1961. 1962. 1963. 1964. 1966. 1966. 1967. 1968. 1969. Amount of appropria- j tion. $411,042 346,302 286,138 235,696 191, 112 153,824 121, 308 94,089 71,669 53,309 39,073 27,871 19,355 13, 051 8,520 5,366 3,244 1,877 1,036 543 272 o