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Mortality tables—Continued.

Tables used in preparing this plan-Continued.

Reasons for using American Experience Table of Mortality in first step

of determining cost of annuities for back services

98

Table VII.—Showing probability of living from various ages to age of

70, according to different tables of mortality

99

Reasons for using Combined or Actuaries' Table of Mortality in last

step of determining cost of annuities for back services..

99

Interest...

100

Simple interest and compound interest.

100

Cumulative power of compound interest..

100

Table VIII.-Showing percentage of annuity contributed by employee

and percentage gained through increment of interest ..

101

Table IX.-Showing amount returned to the employee in cash after

various periods of service for each dollar deposited....

101

Chårt showing the amount of a deposit of $1 per annum at various rates

of interest

102

Table X.-Showing the amount of a deposit of $1 per annum at vari-

ous rates of interest..

103

Rate of interest....

103

Rate of 34 per cent proposed...

104

Objection to low-interest rate.

104

Advantage of low-interest rate.

105

Table XI.—Showing the value of an annuity of $1 at various ages,

based on the British Offices' Select Annuitants' experience, with dif-

ferent rates of interest, annuity payable quarterly

106

Annuities.

106

Annuity, 11 per cent of aggregate salary..

106

Annuity of 1 or 2 per cent of aggregate salary possible but not advisable.. 107

Table XII.-Showing differences in practicability of several bases of

computation for annuities, 1, 1), and 2 per cent of annual salary

for each year of service.

108

Two forms of annuities granted...

108

Table XIII.—Showing amount of annuity granted for a given sum of

money under option I and option II of the bill.....

109

Advisability of cash settlement as well as annuity settlement.

109

Annuity rates used in proposed plan....

112

Table XIV.—Showing how the value of an annuity is determined... 112

Present value of an annuity of $1, for a male, beginning at age 70.. 113

Illustration.....

113

Present value of an annuity of $1, for a female, beginning at age 70... 114

Table XV.-Showing the present value of a life annuity of $1, for

males and females, payable quarterly, beginning at various ages,

first payment in three months after purchase

115

These rates conservative, as shown by comparison with Canadian Govern-

ment rates

115

Table XVI.-Showing immediate annuity rates of Canadian Govern-

ment, annuities payable quarterly, first installment three months

after purchase.

116

Influence of longevity on annuity rates.

116

Table XVII.—Showing the deaths in the registration area per 1,000 of

population in 1890 and 1900, and the decreases and increases in the

rates ..

118

A life annuity is the converse of a life policy.

119
Page.

Deductions from salaries.....

How to determine the amount of deductions from salaries.....

Table XVIII.—Showing the amount to which a deposit of $1 a month

(first payment immediate) will accumulate at 3} per cent per annum

compound interest at the end of a given term of years

Table XIX.-Showing amount required to be deducted from a

monthly salary of $100 (per cent of other salaries) to provide an

annuity at age 70 equal to 1} per cent of annual salary for each year

of service....

Percentage of salary deducted varies with retirement age...

Table XX.-Showing per cent required to be deducted from a

monthly salary of $100 (per cent of other salaries) to provide an

annuity at age 65 equal to 13 per cent of annual salary for each year

of service...

Table XXI.-Showing per cent required to be deducted from a

monthly salary of $100 (per cent of other salaries) to provide an an-

nuity at age 60 equal to 14 per cent of annual salary for each year of

service

Percentage of salary deducted varies with entrance age, but not with salary.

Table XXII.—Showing amount of cash accumulation at end of various

years of service payable to employee on resignation or to his legal

heirs in case of death; and life annuity that may be granted on

resignation in lieu of cash...

Amount of deduction from salary varies only with change in salary...

Table XXIII.—Showing how deductions from salaries may be adjusted

to correspond to promotions.....

Average rate of deduction from salary only 5 per cent.

Advantage to the service of increasing deduction with increase of entrance

age.....

to provide an annuity of $1 (first payment immediate) to age of retire-

ment upon occurrence of total and permanent disability...

Estimated cost of disability provision in so-called Keep bill.

143

143

Cost of putting plan into operation under Perkins bill....

155

Experience of New Zealand.....

156

Cost dependent on number of employees included..

157

Two calculations of maximum cost of putting plan into operation for entire

classified service....

159

The first calculation.

159

Table XXVII.—Showing maximum cost of annuities for back services

for 103,030 employees, based on census of employees as of June 30,

1903....

159

The second calculation..

159

Table XXVIII.—Showing maximum cost of annuities for back serv-

ices for 170,228 employees, based on census of employees as of June

30, 1907, under Perkins bill.....

160

Method followed in preparing tables of cost.

161

Tables XXIX and XXX.-Showing the method by which the data

were drawn off and the percentages of salaries determined..... 162-165

Comparison of two calculations shows agreement....

166

Greater number of employees included in last calculation..

166

Classes excluded from first calculation..

168

Classes excluded from second calculation.

168

Earlier retirement ages in last calculation.

169

Test of accuracy of two calculations..

169

Probable cost much less than maximum.

170

Because calculation makes no allowance for resignations .

171

Because calculation is based on present salaries instead of average

salaries....

172

Because calculation makes no allowance for retention in service past

age of retirement..

172

Calculation includes payment on back services to all present mem-

bers of service.....

173

Cost of putting plan into operation under Gillett bill.

173

Comparison of cost of Perkins and Gillett bills.

174

Table XXXI.-Showing comparative cost to the Government of establish-

ing plan for retiring employees under terms of Perkins and Gillett bills. 174-176

Cost of putting plan into operation under Gillett bill—Continued.

Page.

Chart showing comparative cost to the Government of establishing the

savings and annuity plan embodied in the Perkins and Gillett bills.... 177

Table XXXII.-Showing by classes the per cent of employees whose annui.

ties would be reduced by the $600 limit provided by the Gillett bill....

Calculation of maximum cost of putting Perkins bill into effect for classified

service in District of Columbia...

178

Table XXXIII.—Showing estimate of maximum cost the first year of

annuities

178

How the cost of putting the plan into operation may be met..

179

Plan can be put into operation without additional appropriation by the

Government....

180

Cost of administering the plan.

185

CHAPTER V.-PROVISIONS FOR INVESTMENT OF RETIREMENT.FUND.

Two provisions for investment of fund...

189

Not feasible at present to deposit fund in savings banks..

189

Differences between eastern and western savings banks.

190

Investment of fund should be restricted to public securities.

191

Savings-bank investments.....

191

Table XXXIV.-Showing savings banks in the Commonwealth of Massa-

chusetts placed in the hands of receivers from 1834 to October 31, 1906,

which have not resumed business...

193

Public bonds safe investments..

194

Federal bonds.....

194

Various issues of Federal bonds.

194

Table XXXV.-Showing principal outstanding bonds of the United States 195

Federal bonds now issued to pay for public works..

196

Federal bonds safest of investments...,

196

Rate of interest on Federal bonds low....

196

Federal bonds attractive to life insurance companies during war...

197

State bonds.......

198

State bonds now safe holdings..

198

Rate of interest on State bonds not high.

199

Municipal bonds...

199

Large investments in municipal bonds.,

200

Table XXXVII.-Showing population living in cities at each decade..... 200

Table XXXVIII.-Showing purposes of municipal bond issues.....

201

Character of municipal bonds acceptable.

201

Bonds of small municipalities

201

“Net indebtedness" defined...

203

Essential points in considering safety of municipal bonds...

203

Rate of interest on municipal bonds...

204

Probable future course of rate of interest..

204

SAVINGS AND ANNUITY PLAN PROPOSED FOR RETIREMENT OF

SUPERANNUATED CIVIL-SERVICE EMPLOYEES.

INTRODUCTION

The civil-service law has now been in operation over a quarter of a century. Passed by a Republican Congress, it was sternly upheld by a Democratic President. The best men of both parties have been its disinterested supporters. Its beneficent effects have been felt throughout the public service and few will be found to dispute them.

NEED OF PLAN

FOR RETIRING SUPERANNUATED CIVIL EMPLOYEES.

There is one problem of the service, however, that the law has not solved, and that is the problem of superannuation. Without provision for retirement of the aged officeholder a law which in practical operation insures him a permanent tenure of office works an injustice to the Government, since it permits the retention in the service of many who have outlived their usefulness. It is true that the law does specifically provide for the removal of the incompetent on the proper record of the existence of incompetency, but such a provision has proved to be inadequate where incompetency is the result of old age. That part of the law is practically a dead letter, as is acknowl. edged in the following paragraph found in the Nineteenth Report of the Civil Service Commission:

It has been urged by opponents of the competitive system that that system, by securing comparative permanence of tenure, tends to promote superannuation in the public service. The commission calls attention to the fact that the civilservice law itself provides for no permanency of tenure. Under it any employee can be dismissed at any time. The successor of such employee, however, is no longer appointed through personal or political favor, and thus the civil-service act has taken away the motive for making arbitrary removals. To this extent the act has promoted permanency, and a very much smaller proportion of persons are removed from the competitive classified service than from other parts of the service. In order to secure justice in making such removals it was further provided by Executive order that the appointing officer must give his reasons, with proper notice and an opportunity for answer, to the person proposed to be removed, and that removals should only be made for such reasons as would promote the efficiency of the service. It is evident that under this rule, rigidly enforced, no person ought to be retained in the public service whose

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