TABLE OF CONTENTS. Page. Costliness of straight-pension plan... Efficiency and economy in public service require retirement plan.. Need of retirement plan noted by Chief Executive and heads of departments.. Experience of England with straight-pension system...... Demoralizing effect of straight-pension system on Government service.... Straight-pension system would raise more questions than it would settle..... Pension plans suitable for private corporations not appropriate for Gov- Sound contributory plan solution of problem of superannuation in Government Table III, showing total and comparative cost to the Government of establishing plan for retiring employees under terms of Perkins and Difference in cost between straight-pension and contributory plan confer- Table IV, showing comparative cost to the Government during first 35 years of retiring employees on straight pensions and under the Table V showing comparative cost to the Government during first 35 years of retiring employees on straight pensions and under the Gil- lett bill...... Reluctance of Congress to provide for retirement of civil employees on account Expense of establishing proposed contributory plan justified Arguments of employees against contributory plan answered Deductions from salaries of employees now in service should be limited... Government should not penalize employees leaving service....... Government should pay liberal rate of interest on enforced savings.. Both annuity and cash settlements should be arranged to protect interests Commission's effort to ascertain annual loss to Government through inefficiency Table VI, showing the number of employees in the classified civil service in the District of Columbia 70 years of age and over, the amount of sala- ries paid, the amount and per cent of salaries earned, and the amount and per cent of salaries unearned, or the loss due to superannuation............................ Commission's effort to ascertain annual loss to Government, etc.-Continued. Reluctance of officers to report on individual employees makes figures of loss less than the fact.............. Basis of estimate of future losses from superannuation............ Table VII, showing the number of employees in the classified civil service in the District of Columbia, distributed according to age, the total salaries paid, the total salaries earned, the per cent of salary earned, and the per cent of salary not earned................... Per cent of salary earned at various ages.. Age at which loss justifies retirement.. Method of calculating future loss to Government from superannuation.... Diagram showing the per cent of salary earned, based on department reports, and the percentages found by graduation....... Table VIII, showing the annual loss that will be sustained by the Government during the next 36 years if no plan is adopted for retiring employees now in the classified civil service in the District of Colum- bia when 70 years of age......... Commission's effort to determine what expense the Government is justified in incurring to avoid loss from superannuation....... Plan presented by the commission.... Table IX, showing the total maximum cost of retiring at age 70 all employees now in the classified civil service in the District of Columbia on annuities equal to one-half pay (maximum $600), maximum deduction from salary Cost of establishing proposed plan..... Table X, showing the net cost to the Government of establishing the RETIREMENT ALLOWANCES. The PRESIDENT: APRIL 18, 1912. The Commission on Economy and Efficiency has the honor to submit the following report on "Retirement allowances." The report and recommendations apply to the employees in the permanent classified service in the executive departments and independent Government establishments in the District of Columbia. The plan submitted provides for three classes of employees: (a) Employees in that service who have reached the age of 70 years when the plan is put into operation. (b) Employees in that service who are less than 70 years of age when the plan is put into operation. (c) Persons who enter that service after the plan is put into operation. The essential features of the plan, which are set forth in detail in the draft of bill at the end of this report, and which require legislation to carry them into effect, are the following: 1. That an employee now in the service who is 70 years of age be retired, and be paid by the United States an annuity equal to onehalf of his average annual pay for the past five years, but no such annuity to exceed $600. 2. That an employee now under 70 years of age be retired when he reaches that age and be paid an annuity equal to one-half of his average annual pay for the entire period of service, but no such annuity to exceed $600; provided, that there shall be deducted from the pay of such employee until he reaches 70 years an amount which, with interest at 4 per cent, compounded annually, will purchase such annuity, but no monthly deduction shall exceed 8 per cent of the monthly pay. 3. That a person first employed after the retirement plan is put into operation shall provide for the entire cost of his retirement allowance (which shall be an annuity of one-half of his average annual pay during his entire service, but no annuity to exceed $600), by deductions from his current pay of such amounts as may be required, with interest at 4 per cent, compounded annually, to pay his annuity. 4. That any person separated from the service before the age of 60 shall receive the amount of deductions made from his pay, with 4 per cent interest, compounded annually; after the age of 60, and before reaching 70, he shall receive the amount with interest in 10 annual installments, unless the total amount is less than $600, in which case the amount shall be paid at once. In case of death at any time before reaching 70, the amount of deductions, with interest, shall be paid to his legal representatives. In case of death after 70, the balance remaining to his credit over and above the sums paid to him in annuities shall be paid to his legal representatives. 5. That the Secretary of the Treasury shall invest the deductions and accrued interest thereon in bonds of the United States, States, and municipalities; and the United States shall appropriate a sum sufficient to assure to employees interest at 4 per cent per annum, compounded annually, on all deductions from salaries. In the discussion of the subject in this report, the commission has presented its reasons for the conclusions it has reached concerning the best plan for relieving the Government of the large direct and indirect loss due to superannuation among its clerical force in the executive service in the District of Columbia. The total cost to the Government during the next 30 years, in payment of annuities to employees to be now retired and of a part of the annuities of those hereafter retired, will be but a small amount in excess of the loss from superannuation that will occur if no retirement plan is adopted. The cost for those retired on an annuity paid in part by the United States will soon thereafter be reduced to an inconsiderable sum, and be much less than would be the loss from superannuation. All employees retired after 30 years from the taking effect of the plan will provide all the money needed to pay their own annuities. Without doing an injustice to any faithful employee, but on the other hand conferring an immediate benefit on many by more rapid promotion, the plan will confer a definite and substantial benefit on the service as a whole and increase to a marked degree the efficiency of the personnel. SAVINGS AND ANNUITY PLAN PROPOSED FOR RETIREMENT OF CIVIL-SERVICE EMPLOYEES. EFFICIENCY AND ECONOMY IN PUBLIC SERVICE REQUIRE RETIREMENT PLAN. The Commission on Economy and Efficiency has made a thorough investigation of the personnel of the civil service in the District of Columbia and is convinced that the service can never be brought up to the highest possible standard of efficiency until a satisfactory plan for the retirement of the aged employees is adopted by the Government. Any comprehensive scheme for the improvement of the civil service must include a proper plan of retirement for civil servants. While it is true that the laws regulating the civil service do not insure a permanent tenure of office, but on the contrary specifically provide for the removal of the inefficient, the fact is well known that this provision of law is disregarded whenever inefficiency is the result of old age; nor does this commission believe that Congress will insist upon administrative officers removing inefficient old people from the service so long as no retiring allowance has been provided for them. The work of the Government offices must therefore continue to be retarded by the inefficiency of aged clerks until such time as a retirement law is put into operation. The commission feels, therefore, that it can not lay too great emphasis on the fact that, without a provision for retiring aged employees, it is idle to expect either thorough efficiency in the public service or the closest economy in the expenditure of salary appropriations. NEED OF RETIREMENT PLAN NOTED BY CHIEF EXECUTIVE AND HEADS OF DEPARTMENTS. For years past heads of departments and chiefs of bureaus have called attention in their annual reports to the need of a proper system of retiring the aged employees, and recently the matter has received the special attention of the Chief Executive. The subject of superannuation in the public service has received the attention of President Taft in three annual messages to Congress. In his message to Congress in 1909, under the caption of "Reduction in the cost of governmental administration," he recommended legislation for the retirement of superannuated civil servants, coupling with it a recommendation for an increase of salaries. He said: More than this, every reform directed toward improvement in the average efficiency of Government employees must depend on the ability of the executive to eliminate from the Government service those who are inefficient from any cause, and as the degree of efficiency in all the departments is much lessened by the retention of old employees who have outlived their energy and usefulness, it is indispensable to any proper system of economy that provision be made so that their separation from the service shall be easy and inevitable. It is impossible to make such provision unless there is adopted a plan of civil pensions. Most of the great industrial organizations and many of the well-conducted railways of this country are coming to the conclusion that a system of pensions for old employees and the substitution therefor of younger and more energetic servants promotes both economy and efficiency of administration. I am aware that there is a strong feeling in both Houses of Congress, and possibly in the country, against the establishment of civil pensions, and that this has, naturally, grown out of the heavy burden of military pensions, which it has always been the policy of our Government to assume; but I am strongly convinced that no other practical solution of the difficulties presented by the superannuation of civil servants can be found than that of a system of civil pensions. The business and expenditures of the Government have expanded enormously since the Spanish War, but as the revenues have increased in nearly the same proportion as the expenditures until recently the attention of the public and of those responsible for the Government has not been fastened upon the question of reducing the cost of administration. We can not, in view of the advancing prices of living, hope to save |