II) is: "Every employe . . . . shall be entitled on "reaching the retirement age or having already passed "that age. . . . in addition to the annuity herein pro"vided for from contributions 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 the "total compensation during service prior to the taking "effect of this Act: Provided, however, that no annuity "shall be paid by the United States for services prior to "the passage of this act, which, together with the annuity "earned by the employee's own contributions shall amount "to more than six hundred dollars, . . . . The Perkins bill omits this proviso, which, it is estimated by the Gillette committee, will limit the government's contribution under this section to, say, $50,000,000, possibly to $30,000,000 or $25,000,000. The omission of the proviso, it has been calculated, will cost the government $130,581,273. The retiring employee has three options: (1) an annuity payable quarterly throughout life, (2) an annuity payable quarterly throughout life with a proviso that in case the annuitant dies before he has received the full amount of his savings plus the interest credited to them, his heirs shall have the balance; (3) in one sum. The service is divided into three groups and the President is to designate the branches of the service in each. Members of group one retire at sixty-five (sixty?) years of age, of group two at sixty-five, of group three at seventy. If the employee is separated from the service prior to reaching the age of retirement, "the employee may "withdraw his savings in one sum and in case he has "been in such service not less than six years, he may also "receive in addition thereto interest on his savings at the "rate of three and one-half per centum per annum com"pounded annually.." If his savings amount to at least $1,000 he is entitled to any of the three options computed on the basis of his age at the time of his separation from the service. If an employee dies while in the service, "his legal heirs" will be paid his savings "together with the interest credited thereon." The provisions for the investment and financial administration of the sums deducted from the salaries of the employees need to be subjected to much further study and consideration: The money may either be loaned to savings banks or invested directly by the government. In the former case, the bank must pay at least 31⁄2 per cent. interest, compounded annually, and as collateral security deposit certain classes of bonds. In the latter case the government itself must invest the money in the same class of securities. These are: 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 or town in the United States which has been in existence as a city or town for a period of twenty-five years, and which for a period of ten years previous to such deposit has not defaulted in the payemnt of any part of either principal or interest of any funded debt authorized to be contracted by it, and which has at such date more than twenty-five thousand 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; or any legally authorized bonds issued for municipal purposes by any city or town in the United States which has been in existence as a city or town for a period of twenty-five years, and which for a period of ten years previous to such deposit has not defaulted in the payment of any part of either principal or interest of any funded debt authorized to be contracted by it, and which has at such date more than two hundred thousand inhabitants, as established by the last national census, and whose net indebtedness does not exceed seven 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. In this clause the words 'net indebtedness' mean the indebtedness of any city or town, omitting debts created for supplying the inhabitants with water, and debts created in anticipation of taxes to be paid within one year, and deducting the amount of sinking funds available for the payment of the indebtedness included. The Secretary of the Treasury shall accept, for the purpose of this act, securities herein enumerated in such proportions as he may from time to time determine, and he may at any time require the deposit of additional s curities, or require any bank to change the character of the securities already on deposit. It shall be the duty of the Secretary of the Treasury to obtain information with refer ence to the value and character of the securities authorized to be accepted under the provisions of this section, and he shall from time to time furnish information to savings banks as to such bonds as would be accepted as security. When consistent with the best interests of the fund created by this Act, the Secretary of the Treasury shall distribute the deposits herein provided for, as far as practicable, equitably, between the different States and sections. For the purpose of aiding the Secretary of the Treasury in depositing and investing the funds created by this Act a board of investment is hereby created, composed of the Treasurer of the United States, the Comptroller of the Currency, the chief of the office created by the provisions of this Act, and two persons to be designated by the President from among the employees of the classified civil service. The members of the board of investment shall be sworn, and shall hold office until others are appointed and qualified in their stead. The bill also contains provisions (Sections 8 and 9) intended to provide a form of accident or sickness insurance for employees totally and permanently disabled from either of those causes. A special fund is created made up of the compulsory contributions of each entrant into the service of one-fifth of his pay for the first six months and of the entire increase in salary for the first three months in every case of promotion. From this fund an annual allowance is to be paid equal to one and one-half per cent. of the disabled employee's total compensation prior to his disability Provided, however, that the allowance in case of disability due to accident must, if the special fund be sufficient, be at least one-fifth of the employee's average annual compensation prior to the accident; and that in case of disability due to sickness no allowance whatever shall be granted unless the employee had been in the service at least twenty years prior to the disabling sickness. If the employee at the time of his disability has not already compulsory savings to his credit which compounded annually at 31⁄2 per cent. would be enough at his normal age of retirement (say, at 70) to buy an annuity equal to his annual disability allowance, the deficit is to be made up by compulsory savings from the disability. allowance itself, until he reaches the normal age of retirement. That is, the disability allowance is treated as a salary out of which the disabled employee must help to provide for its continuance after he reaches the age when, irrespective of accident or sickness, he would have been obliged to retire from the service. If, at the time of his disability, the employee has more than enough compulsory savings to his credit to continue his disability allowance after he reaches the normal age of retirement, "he may withdraw such excess in one cash "sum or in an annuity limited to the age of retirement." If the special fund already described be not sufficient to meet the disability allowances, they must be reduced pro rata. The Secretary of the Treasury has full discretion to reduce or terminate any disability allowance at any time. At the death of the disabled employee, his legal representatives have no claim to his disability allow ance. The inadequacy of the plan just outlined would seem apparent; and it may well be questioned whether insurance against accident and disease should be made a part of a bill designed to establish retirement annuities for employees who have become superannuated after years of service. Since the foregoing was written, President Taft has sent a message to the Congress in which he strongly condemns straight civil pension on three grounds: (1) It is bound to become an enormous, continuous and increasing tax on the public exchequer. (2) It is demoralizing to the service, since it makes difficult the dismissal of incompetent employees after they have partly earned their pensions. (3) It is disadvantageous to the main body of the employees themselves, since it is always taken into account in fixing salaries and only the few who survive and remain in the service until pensionable age receive the value of their deferred pay. To those who have read previous reports of this committee, these objections to straight pensions have been made familiar. The President expresses his approval of the contributory plan and commends the principles embodied in the Gillett bill, except in respect to its provisions for the payment out of the public treasury, in whole or in part, of retiring allowances to those already in the service when the act goes into effect. In his judgment, these should be paid out of the salaries appropriated for the positions vacated by retirement, and the difference between the annuities thus granted and the salaries should be used for the employment of efficient clerks at the lower grades. HORACE E. DEMING, Chairman. RICHARD H. DANA, HENRY W. HARDON. |