(,] alendar Mo. 526. 65th Congress, 2d Session. SENATE. i Report I No. 574. RETIREMENT OF CLASSIx^IED CIVIL SERVICE EMPLOYEES. >y 1 nisiiSiSlffi! September 23, 1918. — Ordered to be printed. AY. McKellar, from the ^Committee on Civil Service and Retrench- ment,- submitted the following . i.17 EEPORT. [To accompany S. 4637.] Your Committee on Civil Service and Retrenchment reports il Senate bill 4637 to the Senate, with the recommendation that the || bill be passed. ill epitome OF PROVISIONS BY SECTIONS. • Section 1 of the bill provides that all the classified civil-service inployees of the United States who have on July 1, 1919, reached ]ie age of 68 years shall be eligible for retirement on an annuity ith the proviso that mechanics, city and rural letter carriers and railway mail clerks shall be eligible for retirement when they reach the age of 65. Postmasters are not included in the bill. Section 2 of the bill first classifies the retired employees and then fixes the compensation of each. There are four classes, A, B, C, and D. Class A includes alj emjDloyees who have served for a total period of 30 years or more; class B, all those who have served more than 25 years and less than 30 years; class C, all those who have served more than 20 j^ears or less than 25 years, and class D, all those who have served more than 15 years or less than 20 years. Class A is given a retirement compensation of not exceeding $600 per annum; class B, not exceeding $540 per annum; class C, $480 per annum; and class D, $420 per annum. Section 3 has simply to do with the method of computing service, with the proviso that any person who receives a pension on account of disability incurred in the line of duty has his election to say which pension he will receive, but can not receive both. Section 4 has to do with the inclusion of the employees of the Library of Congress and the Botanic Garden, and giving the President authority upon the recommendation of Civil Service Commission to extend the provisions of the act to other classes of employees, and also to exclude intermittent employees. 2 EETIREMENT OF CLASSIFIED CIVIL SERVICE EMPLOYEES. Section 5 provides for the automatic separation from the service upon arriving at the age of retirement, except in certain cases men- tioned in this section, but providing absolutely that at the end of 10 years no employees shall be continued in the civil service of the United States for a period of more than 4 years beyond the age of retirement. Section 6 furnishes the regulations under which an employee shall apply to the Bureau of War Risk Insurance for his retirement and annuity. Section 7 simply provides that when a person applies for employ- ment or continues in the civil service after the passage of this act, he shall thereby agree that the deductions provided in the act may be made from his salary, notwithstanding any other statutes that may have been passed. Section 8 provides that 2^ per cent of each employee's salary shall be deducted and withheld from the basic salary, pay, or compensa- tion of each person to whom the act applies. The section further provides that these deductions shall be placed to the credit of a special fund to be known as the "Civil-service retirement fund" in the Treasury Department and that they shall be credited, together with interest thereon at 4 per cent compounded annually. This sec- tion also appropriates, out of any moneys in the Treasury not other- wise appropriated, a sum which, when added to the deductions pro- vided for in the bill, shall be sufficient to make payments provided by the act. The proviso of this section authorizes the Secretary of the Treasury to invest the fund in interest-bearing securities. The Secretary of the Treasur}^ is also empowered to invest any donations gifts, legacies, bequests, and the like for the benefits of the fund. Section 9 provides for the mailing of the checks to the annuitants, and that when any annuitant is under a legal disability then it may be paid to the duly appointed guardian. Section 10 simply provides the terms upon wnich credit for past service may be given in case of transfer or reinstatement. Section 11 provides that employees who transfer from classified service to the unclassified, or become absolutely separated from the service before reaching the age of retirement, shall have the amount of the deductions from salary returned to him or her, together with 4 per cent interest, compounded annually. Section 12 provides that the administrative duties required by the bill are imposed upon the Director of .the Bureau of War Risk In- surance. Section 13 merely provides a proper method of paying the annui- ties so that the Government may be fully protected. Section 14 requires the heads of buieaus and departments to report to the Bureau of War Risk -Insurance the name and grade of each employee who may have been at any time upon the nonpay status. The War Risk Insurance Bureau is required to keep a record of ap- pointments, transfers, changes in grade, separations from the service, and losses of pay and the like. Section 15 provides that the Secretary of the Treasmy shall keep all needful tables, records, and accounts required for carrying out the provisions of this act, including data showing the mortality experi- ence of the officers and employees and the rate of withdrawal from such service and the like and he shaU, make a detailed comparative report annually to Congress. ^» ©^ D,. ^X* 4i ^ETIREMEis i' OF CLASSIFIED CIVIL SERVICE EMPLOYEES. 3 "^ Section 16 provides that none of the moneys mentioned in this act shall be assignable in law or equit}^ and that they shall not be subject to execution, levy or attachment, garnishment, or other legal process. Section 17 appropriates the sum of $100,000 for the purpose of carrying out the provisions of the act. Section 18 repeals all laws in conflict with the act. ELABORATE HEARINGS HAD. Hearings on this legislation were begun in July, 1917, by your committee. A great number of witnesses were examined. Repre- sentatives of all the civil-service associations in thp various depart- ments were present and examined. The committee also examined members of the Civil Service Commission. Members of the Cabinet were invited to appear before the committee and the representatives of some of them did appear. Hon. James L. Wilmeth, representing the Secretary of the Treasury, appeared. Hon. Edwin F. Sweet, Assistant Secretary of Commerce, represented that department. Gen. Henry P. McCain, Adjutant General of the Army, represented the War Department, and Mr. Pickens Neagle, card clerk of the Navy Department, and all of these gentlemen testified to the very great desirability of retirement legislation. They believed that the Government would be fully repaid for the expenditure of its portion of the retired pay by reason of increased efficiency in service brought about by the retirement of superannuated employees who are phys- ically and mentally able to do but little work, and putting in their places young and vigorous emplo3^ees who could do so much more work. Your comr.iittee is of the firmx opinion that the efficiency of the Government service will be greatly increased by the passage of a just retirement law. HISTORY OF RETIREMENT LEGISLATION. Civil-service retirement legislation has been proposed many times during a period of many j^ears. As a rule the employees have for the most part contended that the Government should pay the entire cost of retired pay to superannuated employees. On the other hand, many have contended that the employees should themselves bear the entire expense. Among these were Mr. Richard Henry Dana, president of the Civil Service Reform League of the United States. Mr. Dana appeared before our committee and strongly urged that view. . Bills have been from time to time introduced presenting these different views and some bills have been introduced presenting a mixture of views. Before the present bill was introduced on June 3,1918, your committee had from time to time many conferences with the representatives of the employees and with Dr. Maddrill, repre- seriting the Government in the capacity of secretary of the Bureau of Efficiency. Early in these negotiations it developed that the employees were wiffing to have a bill passed providing that 2 per cent of their salaries should be deducted each month for the purpose of aiding the Government in paying the annuities to be provided — their claim being that it would not take more than 4 per cent of their salaries to pay all the annuities that they were willing to receive and that the Government should bear half. 4 EETIREMENT OF CLASSIFIED CIVIL SEEVICE EMPLOYEES. HISTORY OF THIS BILL. Thereupon your committee submitted an outline of a proposed measure along the lines of a bill introduced by Senator Wadsworth to Dr. Maddrill of the Bureau of Efficiency, and he was asked to furnish the figures as to the cost. At that time the proposed bill provided that mechanics, railway mail clerks, and city and rural carriers should be retired at 62 years of age and all other clerks should be retired at 65 years of age. The bill provided also retirement pay in four classes: A, at S600; B, at $540; C, at $480; and D, at $420, all maximum. After a careful and painstaking examination, for v/hich Dr. Maddrill deserves the highest credit, he reported that it would take 7 per cent of the salaries of the employees to pay these annuities. After this report of Dr. Maddrill, the representatives of the employees were brought together for a conference before your committee, and the chairman of the committee stated to them that in the light of these figures the bill then under consideration could not get the approval of the committee, but that Dr. Maddrill believed that if the age limits were increased to 65 years for mechanics, railway mail clerks, and city and rural carriers, and to 68 years for all others, and with certain other amendments that he suggested, the cost could be cut down to 5 per ce2it. Thereupon t]ie chairman of the committee stated to the represen- tatives of the employees that if they would agree to the changes in the bill suggested by Dr. Maddrill, and would also agree to pay one- half of the estimated cost of the system, that he believed that the committee would report the bill. A number of conferences were held and finally Dr. Madchill reported that the present bill, which was introduced on June 3, 1918, would cost the Government and the employees not more than about the sum of 5 per cent of the salaries of all the employees. Thereupon the employees agreed to pay the 2-h per cent of their salaries, the Government to bear the expense of the other estimated 2-^- per cent, and the chairman of the committee introduced the present bill on that basis. HISTORY OF RETIREMENT SYSTEMS GENERALLY. The proof disclosed thiat every civilized nation, except the United States and Turkey Cif Turkey can be called civilized) has established in some way a retirement system. The first retirement system, <,,rude though it was, was established by Great Britain in July, 1834, during the reign of King William IV, nearly 90 3^ears ago. Amend- ments have been made to the English act from time to time ever since. So far as we can ascertain, Massa(;husetts is the onlj State that lias provided for noncontiibutory annuities paid to superannu- ated employees. Se^^eral municipalities in that State also pay super- annuated employees and a number of municipalities in other States. A large number of corporations also have superannuated pay systems.- A few of them require contributions by employees, but the most of them pay the annuities themselves. Among them are Armour & Co., United States Steel Corporation, International Harvester Co., Chi- cago & Northwestern Railroad Co., Atchison, Topeka & Santa Fe Railroad Co., Canadian Pacific Railroad Co., Baltimore & Ohio Rail- road Co., Delaware, Lackawana & Western Railroad Co., Grand Trunk Railroad Co., Illinois Central Railroad Co., Michigan Central EETIREMENT OP CLASSIFIED CIVIL SERVICE EMPLOYEES. 5 Railroad Co.. Minneapolis, St. Paul &. Sault Ste. Marie Railroad Co.. New York-Central Railroad Co., Rock Island S< Pacific Railroad Co., and otliers. The ages in these companies are from 65 to 70 years. New York City : San Francisco, Cal. ; Takoma, Wash.; Cleveland, Ohio; Detroit, Mich, : Pittsburgh, Pa., and perhaps some other cities provide for pensions to superannuated employees. In the United States retirement allowances in the form of age retirement annuities are made to Federal judges, the employees of the Army, Navy, and Marine Corps, the Life-Saving and Lighthouse Service, and the Revenue Service. BOTH POLITICAL PARTIES COMMITTED T(5 IT. The Republican platform of 1912 contained a provision on this subject as follows: We favor legislation to make possible the equitable retirement of disabled and superannuated members of the civil service in order that a higher standard of efficiency may be maintained. The Diemocratic platform at St. Louis in 1916 contained a pro- vision on this subject as follows: An equitable retirement law providing for the retirement of superannuated and disabled employees of the civil service, to the end that a higher standard of efficiency may be maintained. HALF AND HALF SYSTEM. For a number of years the Secretarj^ of the Interior, the Post- master General, and the State and other departments have declared in favor of a retirement system in their several reports. The system provided in this bill is based on the half-and-half plan — the Government bearing one half of the expense and the employees the other half. The Government is safeguarded by the fact that its expert representatives have produced the figures relative to the cost. It is further safeguarded by the provisions requiring all employees to agree to it who work for the Government in the classified service. It is not burdensome on the employees and it is not burdensome on the Government. It makes the employees more saving and virtually provides that they shall lay by annuities for themselves. At the same time, the Government encourages them in this good work. On the other hand, the Government gets, as we believe, the full value of its contribution by reason of a greater increase in efficiency in the civil service. There are now probably about 7,457 superanuated employees (4,104 then had sufficient service to retire.) For the most part they are drawing the highest rates of pay, having been in the service so long. They are doing for the most part the least efficient service because of their age. In the event this bill passes their places will be taken by young employees at lower rates of pay, another sav- ing to the Government, and in some cases they do no work at all. There is now no way of the Government's discharging its superannu- ated employees by law, and it is believed that by this retirement sys- tem that the Government will save in increased efficiency in service every dollar that it pays as its share of the annuities. DETAILS OF COST OF SYSTEM. Your committee desires to call attention to the cost of the system as estimated by Dr. Maddrill and contained in the hearings. RETIREMENT OF CLASSIEIED CIVIL SERVICE EMPLOYEES. f^ CT^ "<1 CI ■r.\> S S3 >J P ^. < A, rt tf f- <; "«. ^ m TO « ^ I— 1 =3 « CO ■^^ O ■.2 o ^ 1 ■^ > ® 1-^ ^< cc ;3§ K v^ K-tirt S ^ <; s >-< o H O »H ^ », < T] H 1 a [ ■ W m S M E^ S . +-^ rn CC O ^'^ 3 --H C^Ol■r^OOCOCOOO OS^ lO CO CO O C > -fi lO CO CD OC 2 s c^-. Eg ~ M 1 I (3 " A ° b L ._ .„ _ i-a u ".•H^ , o g O " J3.C c o> a-^^ '^S 3,°^ ®g P '-' ■fl^gw OTlJ iJ ^'2 a3.i So i , +^ S'g O"^ i C3 3 C3 SO 1 ci p.S^ Pf« ax] ftS^ T o 'TT'o ^o !ir''o "rf "^ "^ p,-^ Spq oo Sfi S • ffl £ ' ' '^,S';3 opa CO s s ^■3 ^^, 3 s:-^-g2 fe° §s §i " OO-^XJi-iiOOOCOcO ■^COCJOOOQlOi— (O O ^-^ --H (N CO -^ CD I>- -^ OS CO t^ OS OO CS OCi C0 I>- CO uo - 1--( OS r- F-( CD CO CO CO CO T« -:+< (M 1-H •ri< l-^ -^ • O Tt< C^ ■^Tf-Cq'— "(NCOcDtH 00 irt. cs T-i cs w M 00 iLO»OiO>O-7'Tt^C0C<) l>OS-:t*CS|^COOOlO COO'^C^OCCOOOCN t-ItHOOOsOOi-h :oDoo OtMCO'^COt^O'^ <)<^0 "^ -^ CO C<) C4 f^DCO-^rHi— lt~-OSOS (m' t> O i-I CO -^ CC T-j OOSOOOOCOI>-"*'-( (N lO oo' Os' M "^ O CO T-1 ^ C^ (M oscoosco-^^oio C) CO -^ lO CD OS I— I CO o 2.73 2.91 3.26 3.82 4.72 5.35 5.71 fi 77 o t I? 0.23 .41 .76 1.32 2.22 2.85 3.21 4 27 0.856 1.329 2.028 2.805 3.643 4.050 4.247 11.62 9.72 7.69 5.97 4.48 3.84 3.55 ft 3 o S r-1 9.146 7.920 6. 507 5.215 4.024 3.492 3.244 c J . I z o a > ■ ^ c o ooooooop ^ H oi '^ as -^ C3 CO p^ O lO O "O O lO o ^ CN (M CO CO -^ ^ »0 EETIEEMEFT OP CLASSIFIED CIVIL SERVICE EMPLOYEES. 7 DOES NOT IMPOSE ADDITIONAL BURDEN DURING THE WAR. A question has been raised about the advisabihty of putting an additional financial bui'den on the Government during the war. Your committee respectfully reports that while virtually there will be placed upon the Government an additional burden equal to a flat raise of 2^ per cent on all civil service employees' salaries, still that in so far as putting an additional burden on the Government during the war is concerned, the bill, if passed, will aid the Govern- ment financially, in that the deductions from salaries will be largely in excess of the annuities paid out. For instance, tne estimated receipts from employees during the year 1920 will be $9,000,000. The annuities paid out will not be much over $2,000,000 and there will be an excess the first year of $6,900,000 and for a number of years the receipts will exceed the amounts paid out. This is shown by a statement made by Dr. Mad- drill, marked 'Exhibit C" to his testimony in the hearing, which is here copied. [McKellar-Keating bill (S. 4637, H. R. 123.52).] Fiscal year ending July 1. Receipts in the form of deduction. Disbursements upon with- drawals prior to pension age. Pensions and guaranteed returns to pensioners. Excess. 1920 . . S9, 000, 000 9,400,000 9.-500,000 9,600.000 9, 700, 000 9, 770, 000 S400,000 865, 000 1,340,000 1,840,000 2, 360, 000 '2, 910, 000 $1,7,32,000 1,972,000 2,1.54,000 2,400,000 2,589,000 2, 778, 000 S8, 900, 000 1921 6, .55", 000 1922 . . 6, 000, 000 1923 .5, .3.50, 000 1024 4, 750, 000 1925 1,100,000 COST OF GUARANTIES AND ANNUITIES BY YEARS. The cost of pensions and guarantees is shown in the following tables submitted by Dr. Maddrill as Exhibit D. Exhibit D. — Cost of pensions and guarantees. [McKellar-Keating bill (S. 4637, H. R. 12352).] Retiring July 1, 1919 (assuming bill will become efiective then). Retiring annually thereafter. Ficsal year ending July 1- 1,344 mechanics, carriers, and railway postal, clerks, 3,232 others. 4,576 ci\al em- ployees. Mechanics, carriers, etc. others. Civil em- ployees. Combined cost by years. Num- ber. Cost. Num- ber. Cost. Num- ber. Cost. 1920 $549, 200 510, 000 471, 100 432, 600 394, 700 375, 600 321, 500 286.800 253; 800 222,500 $1,183,300 1,081,000 980. 700 883, 300 790, 000 700,000 614, 500 534,500 460,000 391, 400 $1,732,500 1,501,000 1, 451, 800 1,315,900 1,184,700 1,075,600 936, 000 821, 300 713,800 613, 900 $1,732,000 1921 1922..... 1923 1924 1925 1926 1927 1928 1929 331 340 349 358, 367 376 386 396 406 $137. 100 226, 900 388,900 503, 100 608,700 710, 200 807,600 901, 000 990, 100 581 605 630 657 £84 712 742 773 805 $243, 800 475,300 695, 400 901, 200 1,093,500 1, 273, 400 1,448,500 1,618,800 1,784,500 912 945 979 1,015 1,051 1,088 1,128 1,169 1,211 $380,966 702, 200 1,084,300 1,4C4,300 1,702,200 1,983,600 2,2.56,100 2,519,800 2,774,600 1,972,000 2, 154, 000 2,400,000 2,589,000 2,778,000 2. 920. 000 3.077,000 3', 234. 000 3,388,000 8 EETIEEMEJSTT OF CLASSIFIED CIVIL SERVICE EMPLOYEES. ||:;ji From these figures it is plainly evident that for at least a period of pH 10 years there will be no additional burden upon the Government, i!;;! Of course, howevei, the amount that the Government pays will be lili OTadually increased until the time arrives when it will be paying its |jp::! full share of the annuities. mi. MADivRII.L's PROPOSED AMENDMENT. After the draft of the bill had been agreed upon and the bill intro- duced, Dr. Maddrill, who has given this subject the greatest study and whose opinions are most valuable, asked for permission to reap- pear before the committee and submit an amendment. This was done and he submitted several amendments with a great many figures which are found in the hearings. The principal change suggested by Dr. Maddrill is in that section of the bill fixing the amounts of retirement pay. Dr. Maddrill states that those fixed under the present bill are not actuarily perfect, but that those fixed in his amendment iire. While Dr. Maddrill doubtless may be correct in this matter, still the payments provided for in his amendment would be understood with difficulty by the employees and, in the judgment of your committee, the figures adopted in the present bill bein^ simple, plain and unequivocal, and easily understood, are preferable. Your committee therefore has seen fit to reject Dr. Maddrill's amendment. Kepresentatives of the various em.ployees' associations were called before the committee when Dr. Maddrill testified and were told about the inequalities, or seeming inequalities, of the rates established in the present bill. They were unanimously of the opinion that notwithstanding these inequalities they preferred the bill as it is. Several members of the committee, while voting to report the bill, reserved the right to offer amendments, and to vote against the bill if these amendments were not adopted. Youi' committee respectfully reports the bill without amendment, with a recommendation that the Senate pass the same. o LIBRftRY OF CONGRESS 012 228 166 8 O L/BRARvop H.j^llinger Corp. pH8.5