The CHAIRMAN. Without objection, it will be inserted in the record at this point.

(The bill submitted by Mr. Russell is as follows:)

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 every employee in the classified civil service of the United States who shall have reached the age of sixty-five years or over shall be retired upon an annuity of $600 per annum.

SEC. 2. That beginning with the first day of July next following the passage of this act there shall be added to the salary of every employee under the classified civil service of the United States a sum, computed to the nearest tenth of a dollar, that will be sufficient, with interest thereon at four per centum per annum, under the provisions of this act, to purchase an annuity, payable quarterly throughout life, 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 salary, pay, or compensation for every full year of service or major fraction thereof.

SEC. 3. That the entire increase of salary authorized heretofore in section two shall be deducted and withheld from the salary, pay, or compensation of every officer or employee in the classified civil service of the United States to whom this act applies, and shall be set aside for the purpose of purchasing the annuity as herein before provided. In the event that an employee dies, resigns, or is discharged prior to the age of sixty-five years, all deductions from his salary shall, with interest at four per centum, inure to the benefit of the heirs or next of kin of said employee.

SEC. 4. That every employee in the classified civil service of the United States shall be eligible for retirement upon reaching the age of sixty-five years, and that such employees who may have become physically disabled or incapacitated by reason of their connection with the service shall be eligible for retirement at any time at the rate of annuity as is provided for those employees who are to be retired by virtue of having reached the age of sixty-five years.

SEC. 5. There shall be added to the retirement fund, as created by the previous sections of this act, all moneys unexpended as a result of "lapsed" salaries, all moneys unexpended as a result of the sale of waste material, all moneys unexpended as a result of the rental of privileges in public buildings, all moneys unexpended as a result of balances of appropriations, and all moneys unexpended resulting from the sale of articles that are unclaimed at the Dead-Letter Office.

SEC. 6. 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.

SEC. 7. The Secretary of the Treasury is hereby authorized to meet any deficiencies in the retirement fund out of moneys not otherwise appropriated.

Mr. RUSSELL. The cost of this bill would be approximately $6,000,000 or $7,000,000. It provides for the retirement of the old employees who have reached the age of retirement on the 1st of July following the passage of the bill, at a rate of $600 per annum. That might seem to be an excessive cost at first glance. There are 6,000 of these employees eligible for retirement now.

Mr. DIES. According to the last report made three years ago it was 6,500 men.

Mr. RUSSELL. I was using approximate figures. The exact number is 6,523.

The CHAIRMAN. What is the minimum of age for retirement?
Mr. RUSSELL. Sixty-five years.

Mr. DIES. I was going on the basis of 70 years; that occurred several years ago.

The CHAIRMAN. This bill provides for complete retirement at 65 years of age?

Mr. RUSSELL. For complete retirement at 65 years of age; that would cost in retirement annuities, $3,600,000.

Mr. DIES. I understand how you get at the figures for the city of Washington, because the Government has had the report covering that

prepared, but how do you get at the figures which would embrace the entire service?

Mr. RUSSELL. It is 6,500.

Mr. DIES. How did they get those figures?

Mr. RUSSELL. They were compiled by this economy commission. All you have to do is to take the census report and get the ages of the employees through the entire service.

Mr. DIES. And that is 6,500 at this time?

Mr. RUSSELL. Six thousand five hundred at this time, or perhaps a few more, due to the increase of the force, but less than 7,000. This was two years ago. This would cost $3,600,000. You are eliminating at the same time 6,500 salaries at the average of a little over $1,000 per annum. These older employees are getting higher salaries than the average, and this would eliminate something over $6,000,000 in salaries.

Mr. DIES. You mean you would save $6,000,000 in superannuation? Mr. RUSSELL. You spend $3,600,000 for annuities and against that you have a saving of something over $6,000,000 in salaries, using an average of $1,000 per employee.

The CHAIRMAN. If this bill should go into effect, how many would it retire now under the bill?

Mr. RUSSELL. Six thousand five hundred and twenty-three under the figures submitted, Mr. Chairman.

This would not save you the difference between $3,600,000 and $6,000,000, because you would have to put some men in their places, but the

Mr. DIES. You mean you would pay out $6,000,000 and get in $3,600,000?

Mr. RUSSELL. No; just the reverse of that.

Mr. DIES. I was just wondering how you could get this $6,000,000, in view of the fact that a report made up three years ago said there were only $220,000 lost by superannuation.

Mr. RUSSELL. According to the report, $1,200,000 was the estimated loss. That was an estimated figure and nobody, of course, can tell exactly.

Mr. DIES. We have a commission on efficiency and economy, and they report that the loss would be $220,000 for the service here in Washington only. That had a good deal to do with affecting the proposition to legislate at that time, I will tell you.

Mr. RUSSELL. The entire estimate, of course, was based solely upon the ideas of these gentlemen. There was no actual way of telling how much.

Mr. DIES. This commission sent out cards, and they had an accurate return made of every employee of the Government with regard to efficiency, starting in when they began in the service and wound up at, say, 80 years old. They say this, that at 70 years there was inefficiency of 14 and a fraction per cent to illustrate to you that the thing was actually made.

Mr. RUSSELL. Based upon the figures of the chiefs of divisions and their estimates of the amount of efficiency is about as accurate as could be made.

Let me straighten you out on this particular point. There are 6,523 employees who are receiving an average salary of something over $1,000 for the sake of convenience, say $1,000.

Mr. DIES. Six thousand five hundred?

Mr. RUSSELL. At an average salary of $1,000. That means they are being paid $6,500,000 to-day out of the Public TreasuryMr. DIES. Over 60 years of age?

Mr. RUSSELL. Over 65 years of age.

The CHAIRMAN. What is the value of the services they are rendering the Government?

Mr. RUSSELL. That is the point we were just discussing. The loss in efficiency was estimated at $1,200,000. If it costs $6,500,000 to keep these people on the pay roll, and they are losing $1,200,000, their average loss is about 20 per cent in efficiency, you will see. That, of course, is estimated. This bill proposes to retire these people at a cost of $3,600,000 a year, leaving a difference of $3,000,000 for which you can employ new blood to take their places.

The CHAIRMAN. If the average salary was $1,000 a year, what would you retire them on?

Mr. RUSSELL. If their average salary was $1,000 a year we would retire them on $600, and then use the balance of the $6,500,000 to employ new blood. It is estimated, you will find that the departments can almost take care of the superannuation proposition without the aid of an additional appropriation. For instance, retiring in some instances two superannuated men and putting one young man in their place. There is no doubt but that in a great many instances one young man can do the work of two or even three aged employees who are now in the service.

Mr. DIES. What is your estimate of the loss to the Government by superannuation?

Mr. RUSSELL. I would not estimate it. I had to accept the figures of these gentlemen. If $1,200,000 is correct as the loss by superannuation, when analyzed you will find that it will not cost anything, Mr. Chairman, to retire these employees now eligible for retirement and it will not involve an expenditure from the Public Treasury, so that the expenditure will be made for future needs-men eligible for retirement in 1, 2, 3, or 4 years hence, and so forth. It is proposed to have the Government make up in part the deficiency in this retirement or annuity fund.

Mr. DIES. Would you be in favor of a contributory plan that would not affect an increase in the salaries of employees?

Mr. RUSSELL. I do not think it would be just to the employees, particularly the underpaid employees or the low-salaried employees. I believe in the contributory plan, because, in my judgment, it is better for the Government and better for the employees. It stimulates the idea of thrift and industry.

Mr. DIES. Take, for instance, the Gillette bill. Would you be willing to see this Gillette bill written into law?

Mr. RUSSELL. No, sir; not as it is, because it would fall too hard. upon the underpaid people. This bill that we have submitted is the Gillette bill, with the increase of salary provided sufficient to meet the deductions proposed under this bill.

Mr. DIES. What would be the difference between the straight pension and the contributory pension plan where the Government does. all the contributing?

Mr. RUSSELL. It would be practically the same so far as the employees are concerned who are now eligible for retirement.

The distinction arises when you take up the question of those eligible for retirement in the future. Under the contributory plan, the cost is practically the same year after year. Having once made the increase in the salaries of all employees and having compelled them to put the entire increase into the retirement fund, the cost will be limited to the amount of the increase. The straight pension plan is cheaper in the beginning, but the cost of such a plan will increase from year to year, if we are to use the war pensions as proper criteria. In fact, the civil pension will continue to increase for all time. The war pensions, it is assumed, must begin to decrease at some time. Mr. DIES. That is a very violent supposition.

Mr. RUSSELL. I concur in that opinion, Mr. Dies. Certainly the civil roll will continue to grow from year to year. You gentlemen will be compelled of necessity to recognize the fact that increases of salaries must come to the employees and we maintain that the increase of salaries should carry with it a retirement provision.

Mr. DIES. If you require a man to contribute a part of his salary and he becomes inefficient or is guilty of insubordination, how are you going to get rid of him?

Mr. RUSSELL. Discharge him and give the man back his savings with compound interest.

Mr. DIES. In the event a man makes a good employee and is efficient and the Government wants to keep him, and that man wants to quit, will you pay him back, when he quits, what he has put in? Mr. RUSSELL. Yes, sir; with compound interest.

Mr. DIES. Suppose he wants to quit and the Government wants him to quit, and the Government pays him back, and, again, here is an efficient employee and the Government wants him to stay and he wants to quit, should the Government pay him back, too?

Mr. RUSSELL. It should pay him back the money that has been deducted from his salary, because it is a part of his compensation and belongs to him.

Mr. DIES. I will ask you a further question. Suppose a man serves the Government until he is 69 years of age, and dies. Would you have the Government appropriate the money he has paid in or give it to his family?

Mr. RUSSELL. I would have his family get the benefit of what he has paid in.

Mr. DIES. A man serves the Government until he is 65 years of age I am going on the basis of 70 years—and he is retired on an annuity. He dies at 67 years of age, and leaves a wife and helpless children. Would you have the Government appropriate what he has contributed, or would you make it an additional annuity to his family?

Mr. RUSSELL. Equity demands the latter course, still I do not see how that could be made any part of this bill, and yet I recognize that that has been the tendency in war pensions.

Mr. DIES. Do you not know that in every country that has tried civil service that has been the outcome-pensioning the widow and children?

Mr. RUSSELL. I know that special bills have been introduced from time to time to take care of dependent relatives, but it seems to me that that should not comprise a part of this bill, unless the widow

could be paid the balance of the annuity which his savings entitled him to.

Mr. DIES. Let us see. Here is a man who comes up in the service of the Government and who has forcibly taken from his salary every month a part of it, the Government holding it in reserve for him, and at 65 he retires and the Government pays him an annuity in the form of a pension. Do you not know that there is not a government on the face of the earth but what would pay his family the additional annuity?

Mr. RUSSELL. Pay the accrued savings to the widow or do you mean to give her the balance of the annuity?

Mr. DIES. I mean give the wife and children what the Government has taken out of his salary.

Mr. RUSSELL. The Government has not lost anything. The Government has held out a part of his salary and in that event would only pay to that widow what was taken from his salary.

Mr. SCOTT. Why do you say they have taken it from his salary, if his salary was so much and so much was deducted? Is not that, in effect, the Government paying his insurance premium?

Mr. RUSSELL. Our proposition is to give the employees an increase as salary and to withhold this increase. The employee would then be paying the premium.

Mr. DIES. By a process of compulsory insurance it is taken out of his salary.

Mr. SCOTT. It is not taken out of his salary. salary, and that salary is fixed in that law.

He never draws that

The

Mr. DIES. For services rendered or gratuity. Mr. RUSSELL. Take the Isthmian Canal Commission Service. Government there pays a man so much a month and feeds him at the Government hotel, taking his fare out of his salary, even though it is paid to him in hotel fare, it is salary nevertheless, and this would be salary, even though paid to him in the form of an annuity or accrued savings.

I think that I have said all that I care to say on this particular point, unless some gentleman of the committee desires to question me further about some particular branch of the subject. I would like to have two or three of our other people address the committee for a few minutes each.

Mr. JOHN P. DORNEY. In the estimated superannuated employees did that include those superannuated employees in the mechanical establishments of the Government-in other words, those who are direct burdens? In the absence of positive figures, I assume that all classified employees are included.

Mr. DIES. Do you know whether or not they are classified?
Mr. DORNEY. Some are and some are not.

Mr. RUSSELL. Are they in the civil service?

Mr. DORNEY. They have been since the introduction of the Austin bill brought into the service, and as a consequence those figures would include those people.

Mr. RUSSELL. I can not answer that question positively. I assume that it is true. Mr. Chairman, I will ask permission of the committee to introduce to you Mr. Goldschmidt, of New York, chairman of the executive committee of the Federal Civil Service Society of that State.