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[REPORT IN FULL]

Report of the Superannuation Committee of the National
Civil Service Reform League on the Plan of Old
Age Pensions formulated by the Sub-Com-
mittee of the Keep Committee on
Department Methods.

THE FACTS.

There has been a persistent agitation in recent years to secure the enactment of some form of civil pension or retirement annuity law to remedy the evil, asserted to be very great, of superannuation in the civil service of the United States. The Council of the Civil Service Reform League in 1906 made an investigation as to how far the civil service law was responsible for the existence or alleged increase of superannuation in the service, and the cost to the public treasury through the inefficiency of superannuated employees. In September, 1906, the Council published a report of its investigation. None of its statements of fact has been contradicted. Among these facts are the following:

The civil service law was passed in 1883, and for at least three-quarters of a century prior to its enactment superannuation among the civil employees of the government had been well known and frequently commented upon; (')

Only 5.1 per cent of the employees over 65 years of age now in the service entered it through competitive examination; (2)

(') League's Superannuation Report of 1906, pp. 2-3.

(3) Twenty-third Report U. S. Civil Service Commission,

PP. II-12.

The percentage of employees over 70 years of age in the civil service has remained about the same since 1893, the only period during which we have official statistics on the subject; ()

That percentage is only 1.2% of the executive civil service throughout the country; (*)

Under the civil service law and rules, inefficiency from superannuation is ample cause for removal, and such removals are in fact made, to the advantage of the service. In practice, however, responsible officials hesitate, and always have hesitated, to make such removals, when they result in leaving old employees without means of support. But the retention of employees in the executive civil service of the United States is no longer than in the service of such great railroads as the New York Central and the New York, New Haven and Hartford; (*)

At the time of the Council's investigation the separations from the service were taking place at a rate that, if applied to the whole service, would change its personnel every 121⁄2 years; at the rate now obtaining the personnel of the service would change every eight years; by far the greater number of these separations is due to the resignations of employees who have entered through competition and who find better positions in private employment; (*)

The government's civil employees over 70 years of age do three-fourths of the maximum quantity of work performed by a thoroughly efficient employee; (')

The government's loss from inefficiency of its employees now over 65 years of age, expressed in salary, does not exceed $1,200,000 a year, a fraction of 1% of its annual payroll. (1)

(*) 20th Report U. S. Civil Service Commission, p. 168.
(*) 21st Report U. S. Civil Service Commission, pp. 29-30.

(*) 21st Report U. S. Civil Service Commission, p. 29.

(*) 22nd Report U. S. Civil Service Commission, pp. 248 and 253 and 23 do., pp. 12 and 13 and 168.

(') 23rd Report U. S. Civil Service Commission, pp. 11-12.

Assuming the same relative efficiency in the service outside of Washington for persons of same age, the total loss would be $1,200,000. See League's Superannuation Report, 1906, p. 6.

In brief, the investigation of the Council proved that the charge that the civil service law either caused or aggravated the evil of superannuation was baseless; that the proportion of superannuated employees in the public service was very small and was likely to grow smaller, and that any loss sustained by the government through their inefficiency was a matter of very minor importance compared with the enormous cost to the public treasury under any plan that had been suggested of retiring them on pensions or annuities.

A NEW SUPERANNUATION PLAN IS PROPOSED.

Since this investigation by the Council of the Civil Service Reform League, the civil employees of the gov ernment who are advocates of old age pensions have been searching for a plan inexpensive to the government and free from the admittedly grave objections to which all their previous plans were open. Sometime ago the President appointed a committee of government officials to investigate and report on Department Methods. This committee, known as the "Keep Committee" from the name of its chairman, has in its turn appointed a Subcommittee on Personnel. This Sub-committee, consisting of seven members, all civil employees of the government, has recently reported a civil pension plan which it claims is based upon the sound principle that "The funds necessary for the payment of the annuities should be furnished by the employees themselves without expense to the government, other than 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 fund." The Sub-committee urges the retirement upon annuities of aged civil employees of the Government (1) to improve the service by avoiding "the progressive inefficiency of aged employees" (2) as an act of justice, since the salaries of the government civil servants are seldom sufficient "to enable them to lay aside anything for old age." It, therefore, recommends the enactment of a law compelling each employee to lend a portion of

his pay each month to the government which is to repay to him, on his separation from the service for any reason, the amount of these compulsory loans with interest at four per cent, compounded annually.

The plan in its essential features is as follows:

THE ESSENTIAL FEATURES

of the Superannuation Plan recommended by the Sub-Committee on Personnel of the Committee on Department Methods (The Keep Committee.)

First.

To every employee entering the civil service after this plan shall have been acted into law, and remaining in the service until he is seventy years old, the United States government shall pay an annuity for the remainder of his life. This annuity shall be ascertained by adding together one and one-half per cent of the salary that he has received each year while in the service. Thus, to adopt the Sub-committee's illustration, if the employee enters the service at the age of twenty and receives each year the same salary, the amount of his annuity will be precisely seventy-five per cent. of his salary; e. g., if this salary was $1,200, his annuity will be $900.

Second.

To provide the funds out of which to pay these annuities each civil employee shall be compelled to lend the government such portion of his monthly pay as would, if invested at four per cent. interest compounded annually, produce, when the employee is seventy years old, a sum that would purchase the annuity in question from any solvent insurance company that issues annuity policies. Taking the same illustration as before, an employee, who enters the service at the age of twenty and receives $100 from the government each month until he is seventy years old, would be compelled to make a monthly loan of $3.57 to the government. The sum invested

each month, until he becomes seventy years of age, at four per cent, compounded annually, would produce, at the end of fifty years, $6,678; and anyone seventy years old can buy an annuity of $900 for the rest of his life by paying $6,678 for it.

Third.

If the employee is separated from the service for any reason before attaining seventy years of age, the government shall repay to him or his estate in cash the amount of his forced monthly loans, with interest at four per cent. compounded annually.

If such sum amounts to at least $1,000 and he has been in the service twenty years or more, or the employee is seventy years old, he has the following options:

1. Repayment in cash of his monthly loans with interest at four per cent. compounded annually,

2. An annuity from the government for the rest of his life equal to 12% of each year's salary received,

3. Such an annuity from the government for the rest of his life as the accumulated sum of money would buy from an insurance company, if there be a proviso in the policy that, in case the annuitant dies before this sum with interest be exhausted by the annuities paid, the balance shall be paid to his estate,

4. Such annuity as it would buy for a fixed term with no further claim against the government in case the annuitant dies before the expiration of the term.

Fourth.

Each employee not yet seventy years of age already in the service when the plan of the Keep Sub-committee is enacted into law shall be compelled thereafter, precisely as if he were a new employee, to lend the government such portion of his monthly pay as will provide an annuity at seventy years of age equal to one and one-half per cent of each year's salary received after the enactment of the law.

To cover the period of his service before the enact

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