Government under the plan proper for a period of about 40 years, or until the majority of those now in the service had passed away.

If Part I alone is adopted, the plan can go into effect at once, without cost to the Government except that necessary to meet the expenses of administration. In that case, however, it would be a full generation before the public service would be benefited by a thorough elimination of the superannuated. Bearing in mind the fact that the estimated loss to the Government through superannuation in the civil service is about $1,200,000 a year, the Keep Commission, in submitting to President Roosevelt its report of February 18, 1908, on superannuation in the civil service, recommended as good business policy the adoption of Part II along with Part I of the plan, since any measure which will relieve the Government of the evil of superannuation at a cost of $1,200,000 or less is plainly a saving of public funds. It is apparent also that, even if the adoption of Part II should cost considerably more than $1,200,000 a year for a while, it would still be a wise expenditure of public funds, and a means of economy, for such appropriations would be practically negligible in 50 years, and cease completely by the time that all present employees are dead, whereas, under present conditions, the Government's loss from inefficiency of its aged employees is a steady, permanent, and growing annual loss.

What it will cost, or seem to cost, to put the plan in immediate operation by adoption of Part II depends upon the number of employees that Congress may decide to include in its benefits. It might seem desirable to limit the operation of the plan at the start to the District of Columbia since superannuation there is much greater than elsewhere in the service. Census Bulletin 94 (p. 49) shows that in the District of Columbia practically 1 Government employee in 14 is at least 65 years of age, while elsewhere the corresponding figures are but about 1 in 34. Over 15 per cent of the employees in the State, War, and Navy Building and in the Treasury proper, over 14 per cent in the War Department, and over 11 per cent in the Interior Department are more than 65 years of age. Restriction of the plan to the civil service of the District of Columbia—that is, to 23,254 employees as against 170,228 employees in the whole service—is to be commended also on the general principle that it is always desirable to proceed slowly and cautiously in the inauguration of any new measure. Other branches of the service could be included gradually, as seemed desirable, and as confidence in the wisdom of the plan increased.

Two calculations of the cost of paying annuities for back services have been made. The first calculation included 103,030 classified employees, while the second included 170,228 employees. The increase in the number of employees is due to the growth in the civil

service during the interval which elapsed between the two reckonings, and to the fact that a number of groups of employees were included in the second calculation that were omitted from the first. It was the intention to include in this second calculation all groups of employees that might possibly be embraced in any plan of retirement. The first calculation was made under the direction of the Keep Commission and was based on Census Bulletin 12, covering the classified employees as of June 30, 1903. The second calculation was based on the cards used in preparing Census Bulletin 94, covering the classified employees as of June 30, 1907.

According to the first calculation, the total maximum sum required for putting into effect the provisions of Part II of this plan was $66,985,778, or about $725,000 in the first year, increasing gradually and reaching a maximum of $1,746,561 about 30 years after the passage of the bill. After the thirty-third year the amount required each year drops off very rapidly until in about 50 years, when all the present employees are dead, the plan would be self-sustaining. According to the last calculation, which embraces 67,361 more employees, and is based on earlier ages of retirement and slightly more conservative mortality tables than the first estimate, the total maximum sum required to pay annuities for back services would be $130,581,273, or about $1,120,000 the first year, increasing gradually and reaching the maximum of $3,495,000 about 28 years after the passage of the bill, and then dropping off gradually to nothing by the time all of the present employees are dead. It should be understood, however, that these calculations are necessarily exaggerated, since they make no allowance for the savings in annuities for back services that will be made through resignations before the age of retirement, which may be fairly estimated to equal the mortality, and because they are based on present salaries instead of average salaries, and because they make no allowance for retention of employees in the service past the age of retirement. The actual cost, therefore, of annuities for back services will be much less than these figuresprobably not more than half as great, or about a million dollars a year for 50 years, which is equivalent to an increase in the Government pay roll of a little over one-half of 1 per cent. It should be remembered also that all things are only large or small by comparison, and that even a million dollars a year for 50 years is a small sum compared with a permanent expenditure of a million two hundred thousand dollars a year, which is the sum computed to be lost annually through the inefficiency of aged employees. The plan can, in other words, be put in immediate operation without increasing the annual expenditures of the Government by one dollar. One needs to be no profound mathematician to see that by paying the annuities for back services and thus establishing a self-supporting plan of

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retirement, which would do away with that annual loss, the Government would effect an immediate and permanent economy. There would be a small saving the first year, a larger saving the second year, and so on, until by the time all present employees are dead the cost to the Government of superannuation would have ceased.

HOW THIS COST MAY BE MET.1

If annuities are paid for services rendered prior to the adoption of the plan, the obligation for their payment would seem to rest with the Government, which has had the benefit of those services. The suggestion was made, however, at the hearings held in the spring of 1908 that the plan proper might be put in operation without cost to the Government by imitating the practices of the French Government in raising the money to defray the expenses incident to the retirement of civil employees. This is done by making deductions from the salaries of new entrants and deductions from promotions. This idea was embodied in the third bill (H. R. 21261) introduced in Congress in the spring of 1908 and in the first bill (H. R. 28286) favorably reported by the House committee. According to the provisions of these two bills, a fund for the payment of annuities on services rendered prior to the passage of the bill would be created from two sources, (1) by a deduction for six months—that is, during the probationary period of one-fifth of the monthly pay of persons newly entering the service, and (2) by deductions from promotions of 25 per cent of the net annual increase, to be withheld during the first three months after promotion. This proposal was held by many to be open to serious objection as fundamentally unjust, since it requires contributions which are never returned to the contributor and imposes a tax on efficiency. It is certainly contrary to the spirit of the plan itself, which is based on the principle that each employee shall provide for his own annuity and not become in any way a tax on fellow employees. Such a fund, however, might be justly used to defray the expense of a provision for disability as previously mentioned, since the contributions would not then be diverted from the use of the contributors, as all would share in the protection furnished by such a provision.

In the interval which elapsed between the favorable reporting of the last two House bills-between February 23, 1909, and April 4,

1 How the cost of putting the plan into operation is to be met is a matter of bookkeeping. President Taft's recommendation in his annual message of December 6, 1910, that the annuities for back services shall be paid out of the salaries appropriated for the positions vacated by retirement, and that the difference between the annuities thus granted and the salaries may be used for the employment of efficient clerks at the lower grades, is a practical solution of the difficulty and avoids a call for increase of appropriation. President Taft's recommendation is based on statistics collected in the Treasury Department, the Post Office Department, and the Department of Commerce and Labor. details, see pp. 182-185.

For

1910 the House Committee seems to have become convinced that it would be unjust to require the younger employees to provide for the retirement of the older ones, and the last bill favorably reported (H. R. 22013) accordingly agrees in principle with the bill here proposed and discussed (Senate bill 1944) in providing that annuities for back services be paid by the Government.

DIFFERENCE BETWEEN PERKINS AND GILLETT BILLS.

It thus appears that the two bills, S. 1944 and H. R. 22013, which last had the attention of the Committees on Civil Service in the Senate and the House, agree not only on a definite plan of retiring civil employees, but also on the method by which it is to be put in immediate operation. The only material differences between them are two matters of detail. The House bill limits the amount payable by the Government for past services to $600 a year, and the Senate bill allows the full annuity for such services that would now be to the credit of the individual had the proposed plan always been in operation. The House bill, on the other hand, makes more liberal provision than does the Senate bill for retirement of employees in case of disability.

STATISTICAL DATA CONTAINED IN THIS REPORT.

This briefly is an account of the retirement plan which has been considered by the Committees of Civil Service in the Senate and the House and favorably reported by the House Committee. The Secretary of Commerce and Labor was requested by these committees at the close of the first session of the Sixtieth Congress to authorize the Bureau of the Census to prepare new tables, based on the most recent census of the executive civil service, showing the cost of annuities for back services, together with other data bearing on the plan. In this report, accordingly, are discussed the principles underlying the proposed savings and annuity plan, the mathematical basis of the plan, including the tables of mortality and interest on which the annuities and the necessary deductions from salary are computed, the minor provisions relating to separation from the service by reason of retirement, resignation, dismissal, disability, or death, the cost of paying annuities for back services as shown by the calculations made in the Bureau of the Census, and the provisions in the bill for investment of the fund created by the savings of the employees.

The Government Actuary of New Zealand, who devised the plan adopted there three years ago, made calculations to determine the probable cost of his plan, which contemplates a perpetual subsidy from the Government, but he carried his figures only through the first year and gave only an estimate as to the probable ultimate amount annually necessary. In calculating the cost of establishing

the plan proposed in the Perkins bill (S. 1944), the computations have been carried through 78 years, to the time when every member of the present civil service will be dead and the plan self-supporting, so that the figures quoted are a more than safe maximum. Calculations covering a period of 78 years have also been made to show the cost of establishing the plan proposed in the Gillett bill (H. R. 22013). Finally, calculations have been made covering a period of 35 years to show the cost of a straight civil pension conferring the benefits of the Perkins bill and paid wholly from the Public Treasury. When not otherwise stated, all reference made in this report to bill " is understood to apply to the bill proposed and discussed in this report, S. 1944.

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