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coming disabled at age 70 will explain the selection of the retirement percentages given in the fourth assumption.

7. I have been informed that the meaning assigned to “disabled ” was intended by the author of the bill.

8. The sixth (f) assumption was considered advisable because the average salary for the “ preceding five years," as obtained from the bulletin, would have been less than the actual average. The average for the current five-year period would have been in excess of the actual, hence the mean between these averages appeared to represent what would be obtained from the facts.

9. The seventh (9) assumption is to produce larger estimates of disability payments as an offset against any payments to those who might enter the service and become disabled between the present date and the future date for which the estimate is made. Where 10, 15, or more years intervene the overstatement is considerable and will exceed the actual payments to entrants during the period and who become disabled. Nevertheless, it is preferable to over rather than under estimate future payments.

10. The treatment of the statistics involved determination of

(a) The number of employees subject to immediate retirement and the amount of service pensions payable the first year.

(6) The amount of additional service pensions to those continuing from the first year payable in the fifth and any subsequent year.

(c) The amount of disability payments in the fifth (and any subsequent) year on account of previous disablement.

11. That you may be fully advised in regard to the procedure I submit the formulas for the computations:

Immediate pensions.-Payable the first year are the number of pensionable employees multiplied by the per cent of the average salary, determined as heretofore explained. Pensions payable the fifth (or nth) year are the number of present employees multiplied by the probability of surviving to receive the

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pension ('7*) multiplied by the average salary determined for the nth year

(0 represents the immediate pension age).

Future pensions.-Payable in the nth year to present active employees were obtained from the formula :

Average salary at age +n multiplied by number of employees at age z by

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x

19a where x is the present age; Itt is the retirement age, and where n is greater than t; and 1 is the number of living according to the selected mortality table; li the number living according to the table of disabled lives; laa the number of surviving active employees and lii the number of surviving disabled employees—the sum of the two last (194 +13) being equal to the assumed number living (1x) according to the selected mortality table.

Future disability payments.Due in the nth year to present active employees who become disabled requires the following formula : Number of employees multiplied by average salary by

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where x+n is not greater than the age of retirement.

Where it is greater, then the probability that an active employee at age & will be on the retired list n years hence on account of total and permanent disability is

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lice ilga 12. I selected the National Fraternal Congress table of mortality because it would eliminate a less number on account of death than other standard tables, and thus would tend to prevent an underestimate of future pension payments.

13. I employed probabilities of disability amongst active employees derived by me directly from personal investigation of the disability experience of a number of large American fraternal societies.

14. I employed probabilities of death amongst disabled persons which were derived from the statistical cards secured by me from four American societies.

15. The combined tables were especially prepared for the computations necessary for this report.

16. At this point it may be well to warn against the error of assuming that the disability payments will continue from date of disability to the age of retirement, excepting through discontinuance on account of deaths, as expected from any standard mortality table. The death rate amongst disabled persons is very, very much higher than assumed by the American experience or other ordinary mortality tables. The error would lead to a large overstatement of future disability payments.

STATISTICS.

17. Bulletin 94 gives the statistics concerning 185,874 employees in the civil service, and of these 6,463 might be considered as eligible for pensions under the provision of House bill 9242.

18. Such an estimate, in my opinion, would overstate largely the amount for which the Government would be called on to pay.

19. I have proceeded on the theory that you desire an estimate that will be reasonably near the facts as developed under the provisions of the bill should it become a law.

20. This procedure will not allow unreasonable assumptions in either direction.

21. It is not reasonable to assume that every employee who could retire on 40 or 45 per cent of an average salary will surrender his present pay and leave the service.

22. It is a violent assumption to estimate that all who can retire on 50 per cent of the average salary will quit while capable of efficient and satisfactory service.

23. Some of the efficient employees who could secure any rate of pension and be convinced that they could engage in other vocations at a compensation greater than the forfeited Government pay would leave the service.

24. Probably those who could not render efficient service, or whose necessities would be provided for by the pension to which they would be entitled, would accept the provisions of the bill.

25. After careful consideration I am convinced that no attempt should be made to directly estimate the probable service-pension payments under the 40 and 45 per cent provisions. Certainly it would be a gross exaggeration to assume that all who could claim such pensions would do so.

26. A study of all the facts and circumstances leads me to believe that ample provision will be made for the payments to those claiming pensions under the provisions for 45 and 40 per cent of average salary by assuming

First, that all will make claim under the 50 per cent provision and thus overstate the actual pensions by the amount allowed for those who will not retire; and

Second, that the estimated disability payments will exceed the actual at the pension ages (from 60 to 70 years of age).

27. Of course, there wil} be an underestimate of the aggregate amount of pension and disability payments proportionate to the understatement of the actual number of employees in the civil service.

28. Census Bulletin 94 (in the tables used in my computations) gives the total of 185,874 civil-service employees. A more recent document issued by the Civil Service Commission gives the amount as 222,278. Senate Document 745 credits the Official Register with the statement of 286,902. I am informed by you that the actual number is about 250,000, or probably 260,000.

29. Whatever be the true number, the relation will hold between that and the number assumed in the computation, and it will not be difficult to make the estimate for the larger number if the results are reliable when based upon the smaller number.

30. To assure greater reliability in the statistics, I excluded the ported” and those on “piecework,” aggregating 1,575, thus leaving subject to treatment 184,299 employees at the various rates of compensation and years and ages of service.

31. The statistics being recorded by age groups, it was impossible to accurately determine the number who might retire at age 62 after 25 or more years of employment. The best estimate was to assume that three-fifths of the number in the age group 60–64 were entitled to the 45 per cent pension.

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32. After excluding the 1,575, it was found that the number who might be entitled to service pensions under the 50, 45, and 40 per cent provisions was 5,983, and the possible payments in the first year $3,307,200 on estimates of 50, 45, 40, and 30 per cent of an average annual salary of $1,260, as follows:

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33. The total annual salaries of the 184,299 employees amount to $172,829,000, or an average of $938 a year.

34. It would be an error to base estimates upon this general average, for the reason that salaries are increased with duration of service. For instance:

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35. The large number of employees in the service less than 15 years causes an average salary amongst the 184,299 of $938. But the service pension is to be a percentage of the average salary during the five years preceding retirement. and hence much in excess of the general average.

36. The retirement provisions make 60 years the minimum age, and that provision, as well as the one for 20 years or more of service, enters into the determination of the average salary. It has required the expenditure of much labor to work out the requisite averages, since the age attained and the period of service entered into the determination of the average salary as a basis for disability payments. It is not my purpose to burden the record with statistics, but a few examples may prevent conclusions from estimates on general averages :

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37. Under the assumptions heretofore stated, the number of employees estimated for immediate payments was found to be 4,384, and the first year's pensions $2,440,820, is follows

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Present age, 60 to 64 years:

30 to 34 years.. 35 to 39 years.

40 years and more.. Present age, 65 to 69 years:

30 to 34 years. 35 to 39 years.

40 years and more. Present age, 70 to 74 years:

Under 5 years.. 5 to 9 years.. 10 to 14 years. 15 to 19 years.. 20 to 24 years. 25 to 29 years.. 30 to 34 years. 35 to 39 years.

40 years and more Present age, 75 to 79 years:

Under 5 years. 5 to 9 years. 10 to 14 years. 15 to 19 years. 20 to 24 years. 25 to 29 years.. 30 to 34 years.. 35 to 39 years.

40 years and more. Present age, 80 years and over:

Under 5 years. 5 to 9 years.. 10 to 14 years.. 15 to 19 years. 20 to 24 years.. 25 to 29 years. 30 to 34 years.. 35 to 39 years.. 40 years and more.

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Grand total.

4,384

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5572, 440, 820

PAYMENTS IN THE FIFTH YEAR.

38. At the end of the fifth year after the proposed plan goes into effect the service pensions and disability payments are estimated as follows: To the survivors of those 60 to 64 in first year.

$627, 230 To the survivors of those 65 to 69 in first year.

519, 980 To the survivors of those 70 to 74 in first year.

494, 440 To the survivors of those 75 to 79 in first year

112, 430 To the survivors of those 80 in first year--

207, 750

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To disability payments to disabled in group :

Under 5 years.
5 to 9 years---
10 to 14 years.
15 to 19 years.
20 to 24 years.
25 to 29 years.
30 to 34 years.
35 to 39 years.

62, 036 82, 189 46, 966 44, 771 34, 393 28, 735 9, 313 3, 234

311, 637

Total payments at end of the fifth year..

4, 435, 960 39. The amount of disability payments in the fifth year will probably be nearer $400,000 than $311,637, for the reason that the inefficient and partially disabled, who could not legally come within the provisions for service pensions, will be considered “ disabled ” and entitled to disability payments. Under such a construction the Government will receive advantage, because such employees are now retained on the rolls at average salaries much in excess of the disability payments on which they might be retired. The difference between such salaries and the disability pensions probably would cover the salaries for new and fewer employees sufficient to perform the work of those who retire. An additional $100,000 may be added to the estimated disability payments and the amount would remain within reason and be for the good of the service.

40. It may be of value to show the continued payments to those pensioned in the first year to indicate the progress toward extinction of pensions after they have been incurred : Payments in the first year.

$2, 440, 820 Payments in the fifth year.

1, 866, 000 Payments in the tenth year.

1, 259, 200 Payments in the fifteenth year.

707,850 Payments in the twentieth year..

296, 470 Payments in the twenty-fifth year.

77, 773 Payments in the thirtieth year.

8, 757 41. While pensioners are going on the list, they are also going off, and ultimately the service and disability annual payments will become constant, assuming a constant number of employees. It is probable that this Government will continue to grow and prosper and that the number of employees in the civil service will continue to increase and the aggregate pensions may continue to increase, but that fact does not change the relation of the Government to its seryants. If it be right and just and expedient to have a pension scheme for 200,000 it is expedient and just and right to continue the plan for 300,000, when the Government service requires that number of employees.

42. In coming to some conclusion in regard to the liability involved by inaugurating such a scheme as proposed in House bill 9242 it is permissible and necessary to assume an ultimate constant number of employees. The resources of the Government are also assumed to remain constant. If there be a continued increase in employees there will be a corresponding increase in the importance of governmental affairs.

43. To forecast the future expenditure for service and disability payments, it should therefore be assumed that the same number of employees enter and Teave the service each year.

44. Of the total exits it may be assumed (from experience of pension funds) that 57 per cent will be from withdrawals, 30 per cent from retirement, and 13 per cent from deaths.

45. While pensions tend to persistency in service, this applies more especially to those who have remained upward of 10 years in the work. A pension of 40, 45, or 50 per cent at the end of 20, 25, or 30 years, and at no age under 60 years, is too far removed and not sufficiently alluring to hold young and recent entrants who believe they can improve their condition by withdrawal.

46. The employees advanced in age and period of service will persist, but the experience in the operation of pension funds shows a heavy withdrawal rate in early years of service.

47. This fact is important in estimating the future number of pensioners.

48. Ultimately, when the number of employees becomes practically constant, and the entrants and exits are equal, it will be found that about 57 per cent

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