REPORT ON THE TEACHERS' RETIREMENT ¥U CITY OF NEW YORK COMMISSION ON PENSIONS City of New York liiiiiii !lW!!i REPORT ON THE TEACHERS' RETIREMENT FUND CITY OF NEW YORK This report was approved for publicatii purpose of conference and discussion, of the Commission on Pensions, on < at which there were present and voting in the af- firmative, Messrs. Bethell, Bru^re, Boiling, Chorosh, deRoode, Haag, Hahlo and Wolfe, and Mrs. Cothren. >lication, for the / ion, at a meeting / . January 5, 1916,_j COMMISSION ON PENSIONS City of New York 1915 THE TROW PRESS NEW YORK CONTENTS PART I— INTERPRETATIVE AND CONSTRUCTIVE REPORT CHAPTER I— INTRODUCTION PAGE Advance Consideration of Teachers' Fund Necessitated by Its Bankruptcy 9 Exhaustive Inquiry as Foundation for Conclusions Reached 9 Present Plan Defective 10 Tentatively Suggested Reorganization Plan 11 Comparative Statement of Provisions Now in Force and Those Tentatively Recom- mended 12 Financial Statement — Balance Sheet as of June 30, 1914 15 CHAPTER II— PRESENT PENSION PROVISIONS Pensions Should Promote Efficiency of Service 16 Retirement Without Regard to Incapacity Unjustifiable 16 Half -pay Pensions Regardless of Length of Service Inequitable 16 Pensions Based on Final Salary Inequitable 17 Uncontrolled Disability Retirements Result in Unwarranted Expense 17 Crediting of Outside Experience Without Payment of Contribution Arrears Unwar- ranted 19 Special Privileges of Hunter College Teachers Unwarranted 20 Uniform Provisions for Men and Women Teachers Questionable 20 Divided Responsibility Handicap to Effective Administration 20 CHAPTER III— COST OF PRESENT PLAN UNDER EXISTING METHOD Two Methods of Meeting Cost of Pensions 22 Teachers' Retirement Fund Operates on "Cash Disbursement" Basis 22 Pensions Will Amount to More Than 20 Per Cent, of Salaries 23 Actuarial Forecast of Future Police Pensions Indicates Rapid Increase in Pension Roll is Inevitable 25 Experience of City's Pension Funds Illustrates Growth of Pension Demands 26 Reorganization Necessary to Prevent Future Disappointment 27 Indirect City Contributions Hide Cost of Pensions 28 CHAPTER IV— RESERVE OR "THINK OF THE FUTURE" PLAN AND THE PRESENT FUND Advantages of Operating Fund on "Reserve" Basis 29 $54,700,000 Deficiency on June 30, 1914 29 Rapid Increase in Shortage Since That Date 31 iii ivr713244 CHAPTER V— OPERATION OF THE PRESENT FUND ILLUSTRATED PAGE Average Entrance and Retirement Ages 32 Comparison of Aggregate Pay and Pension of Average Teacher 32 Value of "Average" Teacher's Pension on Theory of "Deferred" Pay 34 Value of a $1 Pension and Average Lifetime of Pensioners 37 CHAPTER VI— A TENTATIVE REORGANIZATION PLAN Reasons for Submission of Tentative Reorganization Plan 39 Summary of Tentative Suggestions for Reorganization 40 Definition of Problems Which Must Be Faced 42 Present Pensioners 42 Teachers' Pensions Only Small Part of City's Total Pension Roll 42 City Legally Unable to Furnish Additional Aid to Present Pensioners 43 City Should Reduce Liability to Pensioners and Assume Payment 43 Burden of Liability Should be Equally Divided Among Taxpayers of Next Sixty Years 45 Teachers Now in Service 46 Discounted Value of Future Pensions to All Municipal Employees Now in Service Approximately $170,000,000 46 City Legally Unable to Guarantee Future Pensions 47 City's Interest to Give Financial Support to Fund 47 City Must Protect Its Interest by Insisting on Fotir Fundamental Conditions ... 47 Details of Suggested Pension Provisions 50 Details of Contributions by Teachers 52 Application of Provisions Illustrated by Eight Individual Cases 55 Superannuation Retirement and Contributions 55 Disability Retirement 57 Return of Contributions 59 City's Contributions on Account of Teachers Now in Service 59 New Entrants 60 City's Retirement Problem Not Limited to Teachers 60 Benefit Provisions Suggested for Present Teachers to Apply Also to New Entrants 61 New Entrants Required to Contribute at Lower Rates Than Present Teachers . . 61 City Should Contribute Currently on Account of New Entrants 61 Comparative Cost of Present and Proposed Benefits Shown by Total Contribu- tions Required of New Entrants 62 Service or Superannuation Pension 62 Disability Pension 63 Withdrawal Benefits 63 All Benefits Combined 64 CHAPTER VII— SUMMARY OF RECOMMENDATIONS FOR FINANCING FUND REQUIREMENTS Plan Proposes Definite Settlement of "Deficiency" Problem 65 Contributions of Teachers and City 66 Perpetual Solvency Guaranteed by Provisions for Future Adjustments 67 60- Year "Deficiency" Contribution Provides for Perfection in Financial Basis of Plan 67 Method Adopted by Liverpool Contemplated by Other Cities 68 Example of Compromise on "Semi-Reserve" Plan 69 iv PART II— DESCRIPTIVE REPORT CHAPTER VIII— THE EXISTING FUND AND THE MACHINERY FOR ITS ADMINISTRATION PAGE Benefits Paid by Fund 73 Reinstatement of Teachers 74 Income of the Fund 74 Administration of the Fund 74 Organization Provided for Administration 75 Procedure in Granting Service Pensions 76 Procedure in Granting Compulsory Superannuation Pensions 76 Procedure in Granting Disability Pensions 77 Pensions to Hunter College Staff 77 Procedure in Payment of Pensions 77 Accounting 78 Expense of Managing Fund 78 CHAPTER IX— THE ACTIVE SERVICE Employees to Whom Pension Provisions Apply 79 Requirements for Entrance Into the Service 80 Hours of Work and Vacation Periods 80 Medical Supervision of the Teaching Force 81 Sick Leave Allowances 81 Discontinuance from Active Service 82 CHAPTER X— ESTABLISHMENT AND DEVELOPMENT OF FUND New York Fund Operated Independently from 1894 to 1901 83 Brooklyn Fund Operated Independently from 1895 to 1901 86 Fund Consolidated in 1901 with Increased Benefits 86 Organization of Fund from 1905 to 1914 87 Changes in Benefit and Income Provisions — 1894 to 1914, Inclusive 90 Pensions Increase from $12,633.34 in 1895 to $1,183,397.08 in 1914 92 Main Causes for Rapid Increase in Pension Payments 92 City Contributed 80 Per Cent, of Income of Fund 94 Depletion of Fund Begins in 1910 96 Present Bankruptcy Hastened by Payment of $160,000 of Refunds in 1915 96 Teachers Allowed Leaves of Absence with Half -pay in Lieu of Retirement 96 Pensions Increased to 4.15 Per Cent, of Active Payroll 96 1,549 Retired Teachers Draw Average Pension of $784.53 at Close of 1914 96 Average Present Age of Men and Women Pensioners 97 Average Age at Retirement for "Service" of Men and Women Pensioners 98 Average Age at Retirement for "Disability" of Men and Women Pensioners 98 CHAPTER XI— UNSUCCESSFUL REORGANIZATION ATTEMPTS Recurrence of Past Errors Must be Avoided 100 Increased Benefits Demanded Despite Knowledge of Insolvency 100 Rejected Plans for Temporary Adjustment 104 V APPENDIX TO PARTS I AND II PAGE Table 1. Employees Subject to Retirement Law, May 31, 1915 109 Table 2. Men Teachers — Active Force as of June 30, 1914, Classified by Age and Length of Service 110 Table 3. Women Teachers — Active Force as of June 30, 1914, Classified by Age and Length of Service 110 Table 4. Salary Schedules, June, 1915 112 Table 5. Number of Teachers Who Withdrew from the Active Service for Various Causes During the Years 1909 to 1914 113 Table 6. Detailed Statement of Disbursements — 1894 to 1914 113 Table 7. Detailed Statement of Receipts— 1894 to 1914 114 Table 8. Absence Deductions, Refunds and Net Deductions — 1894 to 1914 115 Table 9. Receipts and Disbursements — 1894 to 1914 — Analyzed by Sources of Income and Object of Expenditure 116 Table 10. Statement of Surpluses, Deficits and Balances — 1894 to 1914 117 Table 11. Receipts and Disbursements During the Year 1915 118 Table 12. Comparative Growth of Active Force and Pensioners and of Salary and Pension Rolls— 1905 to 1914 120 Table 13. Pensioners on Pension Roll December 31, 1913, and December 31, 1914, Classified According to Amounts of Annual Pension 121 Table 14. Men Teachers — Total Number of Persons on the Pension Rolls on June 30, 1914, Classified by Present Age and Cause of Retirement 121 Table 15. Women Teachers — Total Number of Persons on the Pension Rolls on June 30, 1914, Classified by Present Age and Cause of Retirement 122 Table 16. Men Teachers — Number of Pensioners on the Rolls on June 30, 1914, Who Were Retired for Length of Service, Classified by Age at Date of Retire- ment and Length of Service Prior to Retirement 122 Table 17. Women Teachers — Ntmiber of Pensioners on the Rolls on June 30, 1914, Who Were Retired for Length of Service, Classified by Age at Date of Retirement and Length of Service Prior to Retirement 123 Table 18. Men Teachers — Number of Pensioners on the Rolls on June 30, 1914, Who Were Retired for Disability, Classified by Age at Date of Retirement and Length of Service 123 Table 19. Women Teachers — Number of Pensioners on the Rolls on June 30, 1914,Who Were Retired for DisabiUty, Classified by Age at Date of Retirement and Length of Service 124 Table |20. Comparative Statement of Retirements Made on Account of Disability After Less Than Thirty Years of Service and of Service Retirements Made After Thirty or More Years of Service During the Calendar Years 1905 to 1914 (Inclusive) 125 Table 21. Pensioners on Rolls September 1, 1915, Who Were Retired for Disability After Less Than Thirty Years of Service 126 Table 22. Retirements on the Ground of Disability After Less Than Thirty Years of Service and Cancellations on Account of Death and Voluntary Reassign- ment to Duty 126 Table 23. Comparative Statement of Pensioners and Total Pension Charge for the Years 1913 and 1914 127 Table 24. Aggregate and Detailed Annual Cost of Pensions to Persons Now on the Pension Rolls of the Teachers' Retirement Fund 128 Details of Actual and Estimated Service Records of Teachers Used in the Application of Proposed Provisions 129 VI PART III— BASIS OF ACTUARIAL CALCULATIONS CHAPTER XII— INVESTIGATION OF ASSETS AND LIABILITIES OF PRESENT FUND page Benefits and Contributions 137 Data Used as Basis for Valuations 138 Mechanical Tabulations 143 Table 25. Actual Experience — Active Service 143 Table 26. Actual Experience — Service Pensioners 144 Table 27. Actual Experience — Disability Pensioners 144 Table 28. Actual Experience — Salary Scale 145 Exposure and Check Tables 145 Table 29. Comparison of the Number of Separations of Men Teachers from the Service Which Were Recorded by the Pension Commission with the Number Which Wotild Have Occurred Had the Rates of Separation Been the Same as Those Prepared in the Former Investigation 145 Table 30. Comparison of the Number of Deaths Among Men Pensioners Recorded by the Pension Comjnission with the Deaths That Would Have Occurred Had the Rates of Mortality Been the Same as Those Shown in the Previous Investigation 146 Table 31. Comparison of the Nimiber of Separations of Women Teachers from the Service Which Were Recorded by the Pension Commission, With the Number Which Would Have Occurred Had the Rates of Separa- tion Been the Same as Those Prepared in the Former Investigation . . 147 Table 32. Comparison of the Number of Deaths Among Women Pensioners Re- corded by the Pension Commission With the Deaths That Would Have Occurred Had the Rates of Mortality Been the Same as Shown in the Previous Investigation 147 Graduation of Unadjusted Rates 151 Rates and Comparisons 151 Table 33. Comparative Rates of Withdrawal from Active Service 152 Table 34. Comparative Rates of Mortality in Active Service 153 Table 35. Comparative Rates of Disability in Active Service 154 Table 36. Rates of Service Retirement from Active Service 164 Table 37. Rates of Mortality Among Pensioners 155 Service and Mortality Tables 155 Table 38. Active Service Table and Salary Scale — Men 157 Table 39. Active Service Table and Salary Scale — ^Women 168 Table 40. Service Pensioners' MortaUty Table — Men 159 Table 41. Service Pensioners' Mortality Table — ^Women 159 Table 42. Disability Pensioners' Mortality Table — Men 160 Table 43. Disability Pensioners' Mortality Table — Women 161 Rate of Interest 161 Present Value of Various Benefits 162 Table 44. Amount of Money Which, if Placed at 4 Per Cent. Compound Interest at the Time the Employee Enters the Service, WiU Be Suffi- cient to Provide for His Pension Payments Under the Various Benefits for Which He May Become Eligible. Computed on the Basis of An Average Entrance Salary of $1,134 per Annum for Men and $762 per Aimum for Women 162 Table 45. Amount of Money Which, Placed at 4 Per Cent. Compound Inter- est at the Time the Employee Enters the Service, Will Be Sufficient to Provide for His Pension Payments Under the Various Benefits for Which He May Become Eligible. Computed on the Basis of an Entrance Salary of $1,000 per Annum for Both Men and Women . . . 163 vii PAGE Present Active Service and Pension Rolls 163 Table 46. Number and Salary of All Regular Teachers in the Active Service Classified by Age 164 Table 47. Number and Salary of All Hunter College Teachers in the Active Service Classified by Age 164 Table 48. Number and Salary of All Regular Teachers in the Active Service Classified by Length of Service 165 Table 49. Niunber and Salary of All Hunter College Teachers in the Active Service Classified by Length of Service 165 Table 60. Number and Pension of All Regular Teacher Pensioners Who Were Retired on Service Pensions Classified by Age 166 Table 51. Number and Pension of All Hunter College Pensioners Who Were Retired on Service Pensions Classified by Age 166 Table 52. Number and Pension of All Regular Teacher Pensioners Who Were Retired on DisabiUty Pensions Classified by Age 167 Table 53. Number and Pension of All Hunter College Pensioners Who Were Retired on Disability Pensions Classified by Age 167 Valuation Balance Sheets. 168 Table 54. Valuation of Assets and Liabilities of the School Teachers' Retirement Ftmd on Account of Men Teachers — Valued as of June 30, 1914 .... 168 Table 55. Valuation of Assets and Liabilities of the School Teachers' Retirement Fund on Account of Women Teachers — ^Valued as of June 30, 1914. . 160 Table 56. Valuation of the Total Assets and Liabilities of the School Teachers' Retirement Fund — ^Valued as of June 30, 1914 170 Percentage of Salaries Required to Pay Pensions to Future Entrants 170 Table 57. Rates of Contribution, Expressed as Percentages of Salaries, Necessary to Pay for the Various Pension Benefits Allowed by the Pension Provisions of the Teachers' Retirement Fund 171 CHAPTER XIII— VALUATION OF FUND UNDER PROPOSED PENSION PLAN Benefits and Contributions 172 Tables Used as Basis for Valuation of Proposed Fund 172 Table 58. Adopted Rates of Withdrawal and Disability Used in Valuation of Proposed Fund in Place of Corresponding Rates Developed from Experience Under Present Fund 173 Valuation Balance Sheet 174 Table 59. Valuation of the Total Assets and Liabilities of the School Teachers' Retirement Fund Under the Proposed Pension Law — Valued as of June 30, 1914 174 Percentage of Salaries Required to Pay Pensions to Future Entrants 174 Table 60. Contributions, Expressed as a Percentage of Salary Paid, Required of Entrants in Order That They May Pay Half the Cost of the Pension Benefits Allowed to Them 175 Contributions Required from Employees Now in Service 175 Table 61. Total Contributions, Expressed as a Percentage of Salary Paid, Reqxiired of Employees, in Order That They May Pay One -Half the Cost of the Pension Benefits Allowed to Them. Rates Given According to Present Age and Length of Service — Rates for Men 176 Table 62. Total Contributions, Expressed as a Percentage of Salary Paid, Re- quired of Employees, in Order That They May Pay One-Half the Cost of the Pension Benefits Allowed to Them. Rates Given Ac- cording to Present Age and Length of Service — ^Rates for Women. . 177 viii New York, December 8, 1915. To THE Commission on Pensions, City of New York. Sirs: Since in 1894 in New York, and since 1895 in Brooklyn, pension systems have been in operation for the retirement of superannuated teachers. In 1905 the existing teachers' retirement fund was organized. It is now in- solvent not only with respect to its future obligations, but with respect to obligations currently maturing. In the following report there is outlined a history of the teachers' pension system in New York City. Complete facts are given with regard to the development of the existing fund, its present condition, together with recommendations for establishing an equitable and financially sound per- manent retirement system. The imperative need for reorganizing the teachers' retirement fund of the city of New York is not only a question of vital concern to the present and future teachers in the service of the city, but is of the greatest impor- tance to the welfare of the schools. It was long ago demonstrated by experi- ence that an efficient teaching force could not be recruited or maintained if provision were not made for the suitable retirement of teachers when by reason of age or other disability they are no longer fitted for active teaching service. It has been a common fault of retirement or pension systems that they have failed to give heed to the cost of putting into permanent effect benevo- lent programs. It is easy to plan generous benefits, but less easy to make financial provision for them. With natural human optimism, the future cost of pension plans is generally discounted, with the result that a compara- tively brief experience in applying benefits brings about an inadequacy of income such as now confronts the New York Teachers' Retirement Fund. There are many, no doubt, who will argue that whatever the cost of retirement, a great city should make provision for the comfortable release from service of superannuated employees. But there are limitations to what even a municipal Corporation can do. The city of New York has not only to concern itself with its 20,000 teachers, but it has to meet obligations legally incurred for the retirement of lo^goo policemen and 5,000 firemen, and to assist in financing funds for the retirement of several other groups of employees. When all this is done there remains unprovided for the great bulk of city employees, whose pensions are paid out of the public treasury only when after thirty years of service they are physically or mentally unfitted to perform their duties. It would be easy to submit for the consideration of authorities and tax- payers generous pension plans which place the entire cost upon the city. It does not require much wisdom to appreciate the folly of such a course. Not only would the immediate cost be burdensome, but it would presently become so onerous that unquestionably benefits would be curtailed. If it be to the interest of the city that provision be made for the retire- ment of superannuated employees, it is of greater interest to the employees themselves who are the beneficiaries of the retirement plan. But merely from self-interest, and without regard to questions of propriety and justice, employees should welcome any means which will ensure the permanency of a plan established, and remove from the possibility of doubt their receipt of pensions when the time comes for them to claim them. With these considerations in view the plan suggested in this report for reorganizing the teachers' retirement fund places equally upon the teachers and the city, with one qualification in favor of the teachers, later discussed, tEe cost'of future benefits. The cost of these future pensions will be "considerable if they are to be as adequate as they should be from the stand- point of efficiency and humanity. There must also be provided the means of meeting future payments on pensions already granted, which for 191 5 will total about $1,200,000, decreas- ing each year thereafter. In order that the members of the existing teach- ing force may no longer be required to contribute a part of their salaries to meet the pensions of teachers already retired, it is proposed to accumu- late all future contributions by teachers for the payment of pensions to those who contribute. \ Accordingly, it is suggested that the city assume responsibility for liquidating the cost of pensions already granted and assist in meeting the charge upon the teachers of the cost of their share of future pensions when one-half the total cost will be too burdensome. The following report fully explains the basis of these recommenda- tions. It may be wise, however, to give a word of explanation at this point. The proposed plan is based upon a comprehensive, actuarial determina- ^ tion of the actual cost of providirig pensions for the teaching service. For teachers to be employed in the future, this cost will vary with age at the time of entrance into the service, and will require equal contributions from .both teachers and the city of from 2.52 per cent, to 4.53 per cent, of total sal- aries. Similarly, it will vary for the individual members of the existing teaching force in accordance with their respective ages and length of prior service at the time of the establishment of the new plan. Where teachers are approaching the period of superannuation, contributions necessarily will be high, in order that a sufficient fund may be set aside to meet the obliga- tions as they mature. When the one-half of the total cost which is to be assessed on the teachers exceeds 8 per cent, of the salary of the teacher in question, it is proposed that the city make up the difference. Cases where the rate will reach this high figure are, of course, relatively few, and will consist of those who, advanced in years, are reaching the age of retirement. Often it is claimed that to lay aside a fund for pension purposes on an actuarial basis is unnecessary, since the pension roll may be regarded merely as a retired list, and quite as much a charge upon the current ^ revenues of the city as are the salaries of active employees. This view, it/ is believed, is shortsighted, for many reasons, and conspicuously for the/ reason that when it becomes inconvenient financially and politically tc^ increase the retired list, superannuated teachers will not be retired, injustic^ will be done to employees no longer able to perform their duties effectively] and the schools will be injured by inefficient service. Because of the bank-\ rupt condition of the teachers' retirement fund, this demoralized condition exists at the present time in New York City. Many teachers who should be retired are either carried on half pay or are required to continue in active service. It is unjust to taxpayers that they should be asked in any one year to meet the obligations for service rendered in the past. It is as financially shortsighted to fail to set aside currently the cost of an obligation currently accruing and to mature at some future date, as it would be to fail to amor- tize long term bonds by annual installments in the sinking fund. No method other than annual payments on an actuarial basis can be advanced for cur- rently accruing funds to meet liabilities as they accumulate. Throughout Europe, where retirement systems are recognized as an essential part of employment plans, many funds have been established on an actuarial basis into which are paid currently the charges accruing against liabilities maturing in the future. To leave the provision for future retire- ments to the uncertain action of changing appropriating authorities will be to keep in a condition of confusion and uncertainty the plans of teachers who are growing old in the service, and keep active a very demoralizing influence on the efficiency of the service. In this report, therefore, following good practice elsewhere, and guided by the past mistakes of New York City in dealing with pension problems, a proposal is made to organize a retirement system which will be free, on the one hand, of uncertainties, and, on the other, will provide a means just to employees and taxpayers alike for its financing. It is by no means main- tained that the conclusions set forth in the report are final. They are pre- sented with a view to complete discussion and with the expectation that they will be changed in the light of fuller wisdom and possibly more mature thought which this discussion will produce. Whatever may be the judg- ment on the recommendations, the facts are plainly told so that there is provided a complete basis for considering the two major questions involved in the problem: First, what shall be the conditions of retirement? Second, how shall the cost of meeting these conditions be provided ? It is conceivable, of course, that the cost of the entire pension plan may be levied upon the teachers themselves. But to do so would mean either to cut down the benefits below a point where they would seem adequate to furnish a proper basis of retirement, or to impose an intolerable burden upon the teaching force. Similarly, it is conceivable that the entire cost might be laid upon the city. But if this were done, the burden on taxpayers would be so great that protest would be surely evoked, and either reduction or complete stoppage of benefits would follow. The middle course of equal division of cost is suggested with the adequate safeguard of the interest of the teachers that in case they withdraw from the service prior to retire- ment their contributions shall be returned to them with compound interest. The cost of the provision to return contributions is included in the deter- mination of the rates upon which the plan is based. During the preliminary discussions of the recommendations of this report criticism has been made by teachers of the provision which fixes the age of superannuation at 65 years. It is claimed that a teacher is unfit for service before reaching 65 and that a superannuation provision withholding retirement for service until that age would be of little value to the teachers and of injury to the schools. A provision similar to the one in the present law which permits retirement after 30 years of service is urged, but the argument seems generally to be in the direction of retirement at about 60 years. The difference of a few years would add materially to the cost. Can the greater cost be endured by the city and by the teachers ? Abroad, super- annuation for teachers is widely fixed at 65 years. In New York, men teachers have retired at an average age of 66 years, women teachers at 57. In the proix>sed plan a teacher who is disabled for any cause may retire any time after ten years of service, though at a lower rate than the service pension. It would not be necessary, therefore, because of the 65 super- annuation provision, for a teacher to remain in service after becoming phy- sically or nervously incapacitated. It might be possible to permit voluntary retirement at 60 with a lower pension, based on the actuarial value of the pension at that age. Our views on the subject are not iron clad. Many sound alternatives for each feature of the suggested plan may be advanced as advisable of adoption. They have not been presented in this report as the calculation of the variations in cost would have greatly delayed its publication and the subject matter would have become too complicated. It would seem desir- able, therefore, to await a crystallization of thought on the part of the teachers, the city and the public before the final and complete revision of the suggested scheme, including cost calculations, are undertaken. If the greater cost of the earlier retirement age seems to be offset by its advantage to the schools, the recommendations herein made can be modified accord- ingly. The commission will gladly confer with representative teachers' organizations regarding the cost of desired pensions. I wish to add a word regarding the frequently appearing misconcep- tions of the purpose of actuarial computations. To many the word "ac- tuarial'^ seems to imply a ruthless disregard of humanitarian rights. It is, of course, merely a precise calculation of what is to be the future cost of a proposed benefit. Not to determine this cost would be to launch the city and its employees on a speculative program of pensions without any as- surance that future benefits would be paid when the amount of annual outlay became burdensome. It is imperative, of course, that human con- siderations be taken into account in determining a pension plan, but it is the most short-sighted sentimentalism to disregard the fundamental facts of cost and income in reaching conclusions as to a pension policy. A proper pension plan involves a contractual relation between employer and em- ployees. A clear agreement as to this relation cannot be arrived at unless it is based upon facts. It is to ascertain the facts that actuarial computations are necessary. Only by such computation will it be possible to avoid the tragic disaster into which pension plans have been plunged, as now in New York, and other cities in the United States and abroad. The descriptive and constructive suggestions contained in the report have been worked out by the staff of the commission under the immediate direction of Mr. Robert von Reutlinger. The actuarial work was performed by the Commission's actuary, Mr. George R>.Buck, with the advice of a consulting volunteer board of actuaries. This board, which was nominated at the request of the Commission by the Actuarial Society of America, con- sists of the following gentlemen : Wm. A. Hutcheson, Actuary, Mutual Life Insurance Company — Chairman Robert Henderson, Actuary, Equitable Life Assurance Society Henry Moir, Actuary, Home Life Insurance Company To them I desire to acknowledge our great indebtedness not only with respect to this report, but for their continuous advice in all the work of the commission which has to do with eight other pension funds and the work- ing out of a pension plan for the entire municipal service. Respectfully submitted, HENRY BRUERE, Vice-Chairman and Secretary. Mr. George W. Perkins, Chairman. Frank H. Bethell Frank L. Dowling John A. Bolles August Ferrand , Raynal C. Boiling Joseph Haag John H. Boschen Louis H. Hahlo William H. Chorosh Francis D. Pollak Mrs. F. H. Cothren Arthur Williams Albert de Roode S. Herbert Wolfe PART I INTERPRETATIVE AND CONSTRUCTIVE REPORT CHAPTER I INTRODUCTION Advance Consideration of Teachers' Fund Necessitated by Its Bank- ruptcy The consideration of the teachers' retirement fund in advance of the general pension problem of the city is necessitated by its critical financial condition. The fund's resources are exhausted, temporary relief measures have failed of adoption, and it appears that a reorganization can be effected only if a permanent plan is submitted. The disadvantages of arriving at a final solution with regard to the teachers' fund at the present time are twofold. In the first place, a con- sistent retirement policy, giving equal consideration under like conditions to all city employees, can best be developed after facts relating to the entire municipal service have been presented and discussed according to their relative value and significance. Secondly, definite recommendations for support by the city are difficult before calculations of the cost of all existing and tentatively proposed new pension provisions have been completed. The constructive recommendations, included in this report, are, there- fore, tentative and subject to modification in the light of future discussion and presentation of facts regarding other branches of the service. They are submitted for purposes of discussion and are distinctly subject to change. Exhaustive Inquiry as Foundation for Conclusions Reached To arrive at definite conclusions regarding the effect of existing pro- visions of the teachers' retirement fund on the teaching service, it was necessary to subject the past operation of the fund to a close scrutiny. For this purpose a study was made of the development of legislative action, of administrative measures adopted for the interpretation of the law, of the application of provisions in individual cases and of the financial trans- actions of the fund. The results of this study which represent the fact basis of conclusions reached are presented in Part II of this report. In order to enable the commission to calculate the cost of existing benefit provisions and those to be proposed, a sound basis for actuarial computations was required. An experience of six years — June 30, 1908 to June 30, 1914 — was selected for this purpose. Essential data for each teacher who drew a salary or pension during this period was secured by means of 25,000 individual schedules filled mostly by teachers themselves or obtained by the staff of the commission from departmental records. This data formed the foundation of the actuarial work, the details of which, showing the methods employed in computations, form the subject matter of Part III of this report. Present Plan Defective The present inquiry into the operation of the teachers' retirement fund has brought out the fact that it does not fully accomplish its main purpose, namely, assisting in the maintenance of a high standard of efficiency in the teaching service. The principal defects in the operation of the present retirement fund leading to this conclusion are the following: 1. The operation of the 30 years' service provision of the plan permitting retirement without proof of incapacity early in life. 2. Retirement because of physical or mental disability after a short period of service based mainly upon the certificate of private physicians employed by the applicant. 3. The scale of benefits is high and does not provide more pen- sion for more service. 4. The interpretation of the retirement law, which allows a wide scope of administrative discretion, devolves upon a large number of officials and is, comparatively, an unimportant part of their duties. In addition to the plan's failure to promote adequately the efficiency of the service, it has been conducted without knowledge of its cost. As a result, the income provided by law to finance the fund's requirements has fallen below its annual demands. The appraisement of assets and liabilities of the fund as of June 30, 1914, under the assumption that it will continue to operate under the present benefit provisions, has brought out the following facts : 1. Present fund methods would require income increasing to 20 per cent. of payroll: The annual pension roll, which at present is 4.15 per cent, of the payroll, will in the course of the next 35 years increase to 20 per cent, of the payroll, provided the present salaries and quota of the teaching force are not increased. The fund's annual income, limited by law, is at present about 4 per cent, of the payroll, i per cent, of which is contributed by teachers, and shows a tendency to yield a lesser percentage in the future. The continuation of the plan would, therefore, necessitate legal provision for the gradual increase of the contributions of the teachers, or the city, or both, until the combined income would amount to 20 per cent, of the payroll. 2. Fund's liabilities, $69,809,760: The discounted value, at 4 per cent, compound interest, of future payments for pensions already granted and those to be granted to prospective beneficiaries of the present force is $69,809,760. 3. Fund's assets, $15,066,440: The fund has $882,715 on hand (June 30, 1914). The discounted value of future contributions of present teachers is $4,183,725 and 10 contributions of the city on their behalf is $10,000,000, making the total future assets of the fund $15,066,440. 4. Fund's shortage, $54,743,320: The net deficiency of the fund is $54,743,320, or nearly twice the total annual payroll of the Department of Education. If the fund, in addition to its future income as provided by law, had this amount on hand on June 30, 19 14, it would have been enabled, with future accumulations of 4 per cent, compound interest, to meet all pension claims of pensioners and teachers on the rolls on that date. 5. Deficiency rapidly increasing since June 30, 1914: The lack of compound interest accumulations since June 30, 1914, on the unprovided reserve of $54,743,320 and the inadequacy of the fund's income on account of teachers employed since that date rapidly increase the deficiency. Annual payments to the fund of about 6f per cent, of the salaries of such entrants (about 4 per cent, in case of men and about 7 per cent, in case of women) are required to cover the future cost of their pensions under present provisions. Tentatively Suggested Reorganization Plan As a first step toward a permanent reorganization of the fund, a ten- tative plan has been formulated and its cost calculated. The details of the suggested plan are discussed elsewhere in this report. In order to facih- tate a perspective of what is involved in the fund's reorganization, the main features of present provisions and of those tentatively suggested as a basis for discussion are presented in condensed form in the comparative state- ment on pages 12 to 14. In brief, the recommendations for the future financing of fund require- ments are as follows : 1. That the teachers' contributions be accumulated at interest of 4 per cent, and used only as the obligations for which they were paid mature. These contributions would amount during the first year to $1,529,700, or about 5^4 P^r cent, of the payroll and gradually decrease to a constant 3 per cent, of the payroll in the course of the next 47 years, at the end of which period all present teachers who are to pay the higher rates will have left the service. 2. Two alternatives are suggested for financing the city's part of the pension cost : (a) The thoroughly sound method of permanent "normal" city contributions of 3 per cent, of the annual payroll ($866,710 during the first year) for the accumulation at interest of the city's half of the pension charge accruing because of services of teachers after reorganization, and of 60 equal annual "deficiency" contributions of $1,233,220 for the amortization of the deficiency 11 developed in the past which is not covered by the increased scale of contributions recommended for teachers now in service. The total annual city contributions under this alternative would amount during the first year to $2,099,930, or about 7^ per cent, of the payroll, gradually decreasing as a percentage until at the end of the 60-year period they would amount to a constant 3 per cent, of the payroll. (b) The compromise method of meeting the city's part of the cost as tliat cost matures. The city's contributions under this method would amount during the first year to about $1,100,000, or approximately 4 per cent, of the total payroll. They would not be accumulated at interest, but be required to meet in full matur- ing pension claims of pensioners now on the rolls, and of that part of the maturing claims of pensioners to be retired in the future which was not provided for by the accumulation of their own contributions at 4 per cent, interest. The city's contribu- tions under the second alternative, therefore, would gradually increase from the initial contribution of 4 per cent, to a higher percentage of the payroll. A full discussion of this financial aspect of the proposed reorganization occurs on pages 65 to 70. COMPARATIVE STATEMENT OF PROVISIONS NOW IN FORCE I AND THOSE TENTATIVELY RECOMMENDED Provisions Under the Present Law Under Suggested Reorganization Scheme 1. Administration Recommendation for re- tirement. Board of Retirement, con- sisting of 7 members (Pres. of Bd. of Ed., 2 members of Bd. of Ed., the City Supt. and 3 members of the teaching force). Board of Retirement as at present, with sUghtly changed membership. Granting of pensions. Board of Education. City Pension Board. Medical examination for disability retirement. By applicant's physician. By physicians of City Pen- sion Board. Medical examination of disability pensioners. None made. Annually, by physicians of City Pension Board. Records, teachers in active service. At Dept. of Education, not adapted for use in actua- rial valuations. At City Pension Board, changed to show data re- quired for valuations. 12 Provisions Under the Present Law Under Suggested Reorganization Scheme Records, pensioners. At Dept. of Education, not adapted for use in actua- rial valuations. Duplicate set kept by secretary of Board of Retirement. At City Pension Board, changed to show data re- quired for valuations. Periodical actuarial valua- tions. None made. By actuary of City Pension Board. 2. Benefits . Superannuation retirement. No provision. At age 65, compulsory by law, unless by medical ex- amination of physician of City Pension Board abil- ity to continue is proven. Compulsory superannua- tion retirement. At age 65, after 30 years' teaching experience, no minimum service require- ment in local schools — discretionary with Board of Education. At age 70, mandatory by law. Service retirement, re- gardless of age and in- capacity. After 30 years' teaching ex- perience, minimum 15 years' local service. None. Disability retirement. After 20 years' teaching ex- perience, minimum 15 years' local service. After 10 years' * service. Basis of pension scale. Salary at date of retirement. Average salary of last 10 years. Scale of superannuation pensions. One-half salary at date of retirement. lJi% of average of last 10 years' salary for each year of service. Scale of disability pensions. One-sixtieth of final salary for each year of service, including years serv'^ed in schools outside of the City of New York. 1% of average of last 10 years' salary for each year of service. Minimum pension. $600 per annum after 30 years' service. 30% of average salary of last 10 years. Ui^omJLJ. *^ Maximum pension. $1,500 for teachers and prin- cipals, $2,000 for super- vising officials. No maximum. Return of teachers' con- tributions. At dismissal; without in- terest. At resignation, dismissal or death, with compound in- terest at 4%. -HI un lUt-yV * The preliminary plan provided for disability retirement after any period of service. Sub- sequently the minimum lo-year service limitation was added as a proper safeguard to the fund. To avoid delay in the publication of this report, no change in the original cost calculations has been made. Tlie necessary slight adjustments in rates will be made when the cost of the final plan is calculated in all its details. 13 Provisions Special concessions to Hunter College staff. 3. Contributions By teachers now in active service, for pensions ac- cruing because of past services and because of services to be rendered in the future. By teachers entering ser- vice after reorganization. By city, for pensions ac- cruing because of future services of teachers now in active service and teachers entering service after reorganization. By city, for present pen- sioners and for the dis- charge of deficiency aris- ing because of insuffii- cient contributions in the past on account of services of present teach- ers prior to reorganiza- tion. Under the Present Law No minimum service in local schools for service retirement; 10 instead of 15 years' minimum ser- vice in local schools for retirement on disability; no maximum limitation of amount of pension. 1% of salaries, not exceed- ing annually $30 for teachers and principals and $40 for supervising officials. Under Suggested Reorganization Scheme Same provisions as for all school teachers. Graduated scale according to present age and length of service, including ' ' out- side" experience, prior to reorganization; rising from a minimum of 2.63% and 2.87% of salaries of men and women, respectively, to a maximum of 8% of salaries. Unrefunded absence deduc- tions and 5% of excise tax, yielding insufficient income to permit contin- uation of present scheme. Graduated scale according to age at entrance into the ser- vice; rising from a mini- mum of 2.52% to a maxi- mum of 3.13% of salaries at age 40 in the case of men, and from a minimum of 2.76% to a maximum of 4.53% of salaries at age 40 in the case of women. Back contributions for teach- ers with "outside" ex- perience. Annual appropriation of about 3% of all salaries of present teachers as well as of new entrants. The amount of the appropria- tion during the first year is estimated at $866,710. Uniform annual deficiency appropriation of $1,233,- 220 for the next 60 years, at the end of which period the present deficiency of $27,899,430, as set forth in the balance sheet on page 15 will be wiped out. 14 FINANCIAL STATEMENT BALANCE SHEET AS OF JUNE 30, 1914 TT ^ fVi Under Liabilities and Assets unaertne Suggested as of June 30, 1914 La^" Reorganiza- ^ tion Scheme Liabilities Pensions to existing pensioners: Value of 1,521 pensions at $1,185,890 per annum $11,581,210 $11,581,210 Pensions and refund benefits to prospective beneficiaries of the present force: Value of prospective pensions 58,228.550 48,227,475 Value of refund benefits 4,105,235 Total $69,809,760 $63,913,920 Assets Funds in hand _. $882,715 $882,715 Value of 1% salary contributions of present force drawing salaries of $28,890,370 per annum 4,183,725 Value of salary contributions of present force according to suggested graduated scale .... 22,108,950 Value of annual "normal" appropriations by city of about 3% of salaries of present teachers for pensions accruing be- caue of future services .... 13,022,825 Value of uniform "deficiency" appropriations by city of $1,233,220 annually during the next 60 years for the dis- charge of the deficiency arising because of insufficient contributions in the past .... 27,899,430 Value of proportion of future city contributions of unexcused absence deductions and 5% excise taxes which can be credited to present teachers 10,000,000 .... Deficiency, unprovided for 54,743,320 .... Total $69,809,760 $63,913,920 15 CHAPTER II PRESENT PENSION PROVISIONS Pensions Should Promote EfSciency of Service A constantly growing number of municipal pension funds in this coun- try, especially those established twenty or more years ago, are meeting with financial difficulty. This has resulted in a tendency to focus attention on the balancing of income and outgo alone. The fact that the purpose of pension funds is not limited to the payment of pensions, but that such funds should be the means of increasing efficiency of servic e has frequently been lost sight of. Yet it is a defect common to most of the existing plans that their benefit provisions often produce a harmful effect on the service and do not result in an equitable treatment of individual beneficiaries. It is obvious, therefore, that pension schemes need first of all to be revised on the basis of principles of service efficiency and equity. The question of equalizing pensions and resources is a mathematical process which must necessarily follow after the main problems are satisfactorily settled. This applies with special force to the New York Teachers' Retirement Fund, Its continua- tion with its present inequitable and illogical features could hardly be jus- tified, even if it were financially sound and able to meet all demands, and required little or no support from the taxpayer. Retirement Without Regard to Incapacity Unjustifiable The main provision of the present pension plan is retirement after thirty years' teaching experience, regardless of age or incapacity. The present departmental regulations, in force since 1879, prescribe the age limits of 18 to 50 years for entrance into the service. Teachers, therefore, may become eligible for retirement at as early an, age as 48. Compulsory retirement, under departmental rules, takes place at age 70. It is obvious that the retirement of a teacher 48 years old in the majority of instances means a loss to the service of an experienced teacher, while the retention in the service of a teacher until the advanced age of 70 may be equally dis- advantageous. It would appear that in a department with a wide range between the minimum and maximum age limitations for entrance into the service the requirement of a stated uniform number of years of service before retire- ment is impractical as a means of humanely eliminating teachers who have passed the period of usefulness. Half-pay Pensions Regardless of Length of Service Inequitable Teachers retiring after thirty years of service are pensioned at half the salary received at the date of retirement. Additional service after the 16 lapse of thirty years results only in additional contributions without increase in pension returns. The longer a teacher remains in service after thirty years the more he contributes and the less he draws in aggregate pension receipts. An incentive is thereby created for a teacher to leave the service at the earliest opportunity. Assuming that a pension of one-half final salary is granted after thirty years of service to a teacher 48 years old and after fifty-two years of service to one who is 70 years old, the former has the advantage not only of receiving more pension payments, but also of having the likelihood of adding to his income through private employment. Pensions Based on Final Salary Inequitable The present determination of the amount of pension according to the salary received by a teacher at the date of retirement is unsatisfactory. A teacher may retire immediately following an increase in salary and obtain an allowance for the rest of her life on the basis of a salary rate received for only a short time. A general increase in salary rates automatically increases the liabili- ties of the fund without an adequate increase in its income. The effect of the introduction of the "equal pay" law in 1912 may serve as a good illustration of this fact. As shown in Table 20, page 125, in 191 1 only 89 pensions were granted, at an average amount of $719.69, while in 1912, 222 pensioners were placed on the roll, at an average pension of $887.07. The average pension granted in 1913 and 1914 rose to $889.02 and $948.38 respectively. While pensions in the past three years were granted on the basis of the 1912 salary increases, the teachers' contribu- tions were made prior to such increases from the lower salaries prevailing before the passage of the "equal pay" law. Uncontrolled Disability Retirements Result in Unwarranted Expense The existing provisions for retirement on the ground of disability present one of the most unsatisfactory features of the pension plan. A teacher who has had at least twenty years' teaching experience, fifteen of which must have been in the schools of New York City, and who is "men- tally or physically incapacitated for the performance of duty" may be retired on a pension of 1/60 of the final salary for each year of service. The following observations with regard to the existing practice are pertinent : 1. The law does not provide a satisfactory definition of what consti- tutes disability. 2. Proof of disability is furnished in the form of a certificate of the applicant's private physician. 3. Not only are extensive leaves of absence included in the number of years of active service in determining eligibility for retirement, but in calculating the amount of pension to be granted, 1/60 of the final salary is allowed for each year of absence during which no service was rendered. 17 When such absence was without pay, the teachers were not contributing to the fund during its duration. This practice is the result of a ruling of the Committee on By-laws of the Board of Education, which provides that: "All persons who are in the school system are entitled to retire for the aggregate number of years of service, including any time dur- ing which they are absent on leave." In a number of cases absence of from two years to six years and four months were credited as active service in determining the amount of pension to be granted, as may be seen from the following specific instances up to February i, 1910: Retirement Number of Pensioner Actual Service Continuous Ab- sence Preceding Retirement Service Credited for Retirement 1,342 18 yrs., 891 933 1,199 18 905 949 896 942 926 18 yrs., 3 mos. 2 TTS. , - mos. 20 yrs. 3 mos 27 ' 10 " 2 4 30 2 " 17 ' 8 " 2 6 20 2 " 18 ' 2 " 2 7 20 9 " 26 < J u 3 2 29 3 " 17 ' 8 " 3 3 20 11 " 26 ' 5 " 3 4 29 9 " 19 ' 6 " 4 4 23 10 " 18 ' 7 " 6 4 24 11 " 4. Pensions granted for disability after less than thirty years of service, although smaller in amount than pensions granted after thirty or more years of service, cost, comparatively, more because of the fewer con- tributions made to the fund and the greater number of payments drawn on account of the longevity of pensioners retiring early in life. 5. The Board of Education has not taken any steps to compel the return to duty of pensioners whose health has been restored. The law allows the reinstatement of pensioners to active service, but such reinstate- ment is voluntary on the part of the retired teacher. Six of the total number of 346 teachers retired since 1905 on the ground of disability after less than thirty years' service have been reassigned to duty, but on their own application. It is quite probable that a number of disability pensioners now on the roll have regained their health, but unless they voluntarily apply for reinstatement or the Board of Education adopts adequate rules for their physical re-examination, there is nothing to prevent their engaging in other occupations while continuing to draw pensions granted for specific reasons no longer existing. The expense of such pensions is entirely unwarranted. 18 6. That retirements for disability of an obviously temporary character, which are permitted under the present law, have been made, may be illustrated by the following recommendation of a district superintendent to the Board of Retirement : "Miss * is comparatively young, and I should hesitate to say that she has outlived her usefulness as a teacher; but at the present time I should say, emphatically, that she should be retired in accordance with her wish until such time as her usefulness has been fully restored." 7. The practice of early retirement on the ground of disability was introduced by a change in the retirement law in 1905. Since then, of the total 1,231 teachers placed on the pension roll, 346 teachers, or 28.11 per cent., retired after less than thirty years of service on the ground of dis- ability. The increase in the proportion of those availing themselves of early retirements, the average amount of pension granted, as well as the total annual charge added to the liabilities of the fund on account of annual retirements, are set forth in detail in Table 20, page 125. Tables 21 and 22, page 126, show in detail the length of service, present age and annual charge for the 297 disability pensions on the roll on September i, 19 15, as well as additions and cancellations of disability pensions from 1905 to September I, 1915. The detail statement on which this table is based is not appended to this report because of its bulk. It is on file in the office of the Commis- sion on Pensions, and may be used as a basis for the re-examination of the pensioners, if such action is determined upon in the near future. Crediting of Outside Experience Without Payment of Contribution Arrears Unwarranted Under the present law credit is given for teaching service outside of the schools of the city of New York. Teachers retiring after thirty years of service and those retiring on the ground of disability after twenty years of service are required to have served a minimum of only fifteen years in New York City schools. For compulsory retirement, at the dis- cretion of the Board of Education, after 65 years of age is reached, no minimum service in New York City is required. It does not seem fair to expect the taxpayers to pay pensions for services from which they have derived no benefit. No contributions to the fund are made by teachers for the period served outside of the city, which is not only inequitable to the contributing New York teachers, but has been one of the causes for the present unsatisfactory condition. As may be seen from the data presented in Tables 16 to 19, pages 122 to 124, 180 teachers, or 11.8 per cent., of the total number of 1,521 pen- * The retirement number of the teacher is 1,554. 19 sioners on the rolls on June 30, 19 14, had to be credited with service outside of the city of New York to become eligible for retirement. Special Privileges of Hunter College Teachers Unwarranted The retirement law grants special privileges to teachers and professors of Hunter College. Notwithstanding the higher salaries received by pro- fessors during active service and the consequent greater opportunity to provide for their old age, their benefits are increased to more than one-half of final salary by the grant of pensions of even multiples of $1,000. No minimum service in New York City is required for retirement after thirty years' teaching experience. In case of retirement for disability after twenty years' teaching experience, a minimum of local service of only ten years is required. These deviations from the general benefit provisions in favor of the teaching staff of Hunter College can hardly be justified. The evil and costly consequences of special pension privileges lie in the setting of con- stantly higher and more expensive precedents and create dissatisfaction among those not specially privileged. Uniform Provisions for Men and Women Teachers Questionable Present retirement provisions make no distinction between the benefits of men and women teachers who contribute the same percentage of salary. This is inequitable to the men teachers, whose pensions are less costly than those granted to women teachers. In the first place, the mortality among men pensioners is higher than among women pensioners, resulting in a comparatively smaller number of pension payments. Secondly, men teachers remain in active service longer than women teachers and there- fore contribute to the fund a larger proportion of the cost of their pensions. As shown in Tables 14 to 19, pages 121 to 124, 82 pensioners, or 5.4 per cent., of the total of 1,521 pensioners on the roll on June 30, 1914, were retired men teachers. Eleven, or 13 per cent., of the 82 pensioned men teachers were retired for disability at the average age of 54.82 years. In the case of women pensioners, 278, or 19 per cent., of their total num- ber of 1,439 were pensioned for disability, at the average age of 48.39 years. Of the 71 men teachers receiving service pensions, 45 retired after an average of 41.69 years in local service (Table 16, page 122), while of the 1,161 women teachers receiving service pensions, 1,058 retired after an average of only 37.40 years in local service (Table 17, page 123). The corresponding average retirement age was 68.09 years for men and 57.13 years for women. Divided Responsibility Handicap to Effective Administration The chief defect in the present method of administering the pension fund is the wide distribution of responsibility for retirements among a 20 large number of people, whose functions in connection with pension man- agement are only a small and comparatively insignificant part of their prin- cipal duties. This is especially unsatisfactory because the retirement law is not definite, a condition which makes all retirements depend on official discretion, and leaves the details of management to be regulated from time to time by departmental regulations. The lack of a clear definition in the law of what constitutes disability is a serious defect. No steps whatever have been taken to determine whether disability pensioners have regained their health and are able to resume service. In conclusion, it must be pointed out that the exercise of the semi- judicial function of interpreting pension provisions by department officers responsible for operative results is wrong in principle and has invariably failed to work well in practice. The temptation is ever present to utilize the benefits of the fund for current administrative purposes, and with the responsibility for fund management scattered among a large number of, officers and made a subordinate part of other duties, the most liberal inter- pretation of the retirement law and generous expenditure of pension moneys is rendered so easy as to become a matter of fact. 21 CHAPTER III COST OF PRESENT PLAN UNDER EXISTING METHOD The cost of benefit provisions, its distribution between taxpayer and employee, and the method adopted for meeting fund requirements are important questions which must be disposed of after the consideration of the retirement scheme from the viewpoint of its effect on the efficiency of the service. The main distinguishing feature of a "financially" sound pension scheme is a clear understanding with regard to the above three questions on the part of the taxpayer and employee. The absence of such understanding in the case of the teachers' retirement fund during the 21 years of its operation, as well as the numerous fallacies and misconcep- tions which have established themselves in the minds of the public and the employee in New York and other municipalities with regard to the finan- cial operation of pension funds, necessitate a somewhat detailed discussion of the questions of cost and methods of meeting that cost. Two Methods of Meeting Cost of Pensions There are two distinct methods which may be adopted for meeting the cost of pensions: 1. The "cash disbursement" plan. — Sufficient funds are provided currently, as payments to pensioners fall due. 2. The "reserve" plan. — Amounts necessary to be set aside during the active service of employees to provide for their pensions when they retire, are accumulated at interest and form a reserve fund, out of which pension payments may be made as they become due. The main distinction between the two plans is that in the first the interest factor is disregarded, making its apparent cost to the city or to those who must provide the funds about twice as much, eventually, as the cost under the reserve plan. Under both plans an actuarial valuation or appraisement of the fund requirements is necessary to enable officers to set aside the proper "reserve" for investment on the one hand, or to determine the future encumbrances on the city's taxables on the other, for the "cash disbursement" plan operates as an encumbrance on the future revenues of the city unless some other method is provided for the fund's revenue. Teachers' Retirement Fund Operates on "Cash Disbursement" Basis At the establishment of both the old New York and the Brooklyn Teachers' Retirement Funds in 1894 and 1895, respectively, as well as at the time of the merging of these funds into one in 1901, no estimates of cost were made, and no definite or adequate plan for financing fund require- ments was adopted. Without intent on the part of the founders and 22 subsequent builders of the fund, it operated in the beginning on a sort of semi-reserve plan, the excess of income over disbursements developing a reserve (see Table lo, page 117) during the earlier years, which, how- ever, was never sufficient to make the fund solvent on the theory of a strictly "reserve" plan. When the fund, since 1910, was forced to draw on its reserve capital to satisfy current pension payments, it began to change its method of operation, until at the present time it operates on the "cash disbursement" plan pure and simple, as there are no accumulated reserves and the entire annual income is immediately paid out to satisfy current pension demands. Pensions Will Amount to More Than 20 Per Cent of Salaries The cost of benefit provisions is generally calculated on the assumption that the fund operates on the "reserve" basis, and the compound interest is one of the most important factors in such calculations. In the actuarial appraisement of the fund's assets and liabilities, the Commission on Pen- sions has followed this general practice. In order, therefore, to give an approximate idea of the future operation of the fund with the interest factor eHminated from consideration, the following cost approximations are made: Let us take, as an example, a woman teacher who enters the service at the age of 20 and retires, after a service of 37 years, at the age of 57, on one-half of her salary at the date of retirement.* Let us further assume that she was an elementary school teacher, starting with a salary of $720 per annum for the first three years, receiving during the next twelve years annual increases under the Salary Schedule B-i, now in force (see Table 4, opposite page 112), and drawing during the final twenty-two years of her service prior to retirement a uniform salary of $1,500 per annum. According to the mortality experience determined for women teachers during the present valuation of the teachers' retirement fund (see page 38), the average expectation of life of a teacher retiring at 57 years of age is about 18 years. Assuming that in the case used for illustration, the teacher retiring on a pension of $750 (half of her salary of $1,500 at date of retirement) lives 18 years after retirement, she will draw $13,500 in pensions (18 X $75o), or about 28 per cent, of her total compensation of $48,480 during her active service of 37 years. When a pension plan is operated on the "cash disbursement" plan, the pension demands are small in the beginning. They constantly increase, however, for more pensioners are put on the roll than are dropped on account of death. If it were assumed that the quota of the teaching force, the salary rates and the pension conditions were to remain unchanged, the annual demands of the fund would gradually become normal and eventually form a certain uniform percentage of the salary roll. * Entrance and retirement age, as well as service, are averages for the 1,058 women pen- sioners on the rolls on June 30, 1914, who were pensioned after a service of 30 or more years in New York City schools (see Table 17, page 123). 23 If every member of the teaching force entered the service and retired under indicated conditions, then the annual pension payments, which at present are only 4.15 per cent, of the annual salary roll (See Table 12, page 120) would increase in the course of the next 30 to 35 years, when the financial load on the fund will be approximately normal, to about 28 per cent, of the active payroll. There are, however, a number of factors which would tend to increase the proportionate cost of pensions under present provisions, as illustrated in the foregoing average retirement case. The more important of these factors are: 1. "Early Pensions" — Pensions granted after short periods of service for disability not necessarily impairing the pensioner's chances for long life, although smaller in amount than regular service pen- sions, cost comparatively more (see illustration on page 32). As shown in Table 20, page 125, 28.11 per cent, of all retirements made since 1905 were on the ground of disability after a service of less than 30 years. 2, "Outside Teaching Experience" — Retired teachers allowed credit for service rendered in schools other than those of the City of New York will draw, comparatively, a larger amount in pensions as compared to their total salaries received from the City of New York than pensioners who served their entire term in local schools Of the total of 1,521 retired teachers on the rolls on June 30, 1914, 180 pensioners, or 11.8 per cent., were given credit for "outside" teaching experience in order to make possible their retirement after 20 or 30 years' service under present pension provisions (see Tables 16 to 19, pages 122 to 124). While the above indicated provisions would increase the proportion of pension to compensation for active service to more than the previously estimated 28 per cent., there are certain factors in the operation of the scheme which tend to reduce the pension cost. The more important of these factors are as follows: 1. Resignations — A considerable number of teachers resign with- out receiving any return from the fund (see Table 5, page 113). The majority of these resignations, however, occur after short periods of service, resulting in only a small gain to the fund from individual forfeitures. 2. Deaths — A number of teachers die while in active service. The number of deaths, however, as shown in Table 5, is comparatively small. 3. Retirements of Men Teachers — Men teachers, as a rule, unless they receive credit for outside experience, remain longer in the service, receive more in aggregate salaries, and retire later in life, drawing less in pensions in proportion to active pay, than women teachers. The 24 proportion of men teachers in the service, however, is only about 12.7 per cent, of the total teaching force (as of May 31, 1915 — see Table I, page 109). The retired list on June 30, 1914, contained only 82 men teachers, or 5.4 per cent., of the total of 1,521 pensioners on the roll (see Tables 14 and 15, pages 121 and 122). Considering these factors for the increase and decrease of the' cost of pensions as approximated for the purpose of illustration in the assumed average retirement case, it becomes evident, even without actuarial calcula- tions, that the pension roll will gradually increase until it will amount to about 20 per cent, or more of the salary roll. An actuarial estimate of thisi increase shows that the annual demands for pensions will approach a normal load slightly in excess of 20 per cent, of the payroll, if the present pension provisions be continued. Actuarial Forecast of Future Police Pensions Indicates Rapid Increase in Pension Roll is Inevitable The most effective way of showing future increases in pension pay- ments is to calculate the amounts which will be required annually to pay current pensions and to compare such amounts with the salary roll. Such calculations require a great outlay of time, are not essential in determining the cost of present and proposed benefit provisions, and their usefulness is limited to the demonstration of disadvantages of operating a plan on the "cash disbursement" basis. In addition, such calculations, illustrating the operation of a mathematical principle of equal application to all pension funds, have been made in a recently published report by the Bureau of Municipal Research on the New York Police Pension Fund. For these reasons the Commission on Pensions has not computed the amounts which will be required, year by year, to pay teachers' pensions. The late H. W. Manly, an authority on pensions of world-wide repu- tation, commented upon the New York Police Pension Report as follows : "British actuaries have had to fight for years the common view that so long as the funds are increasing all is well with the fund, and there is no necessity to consult an actuary, and it is only when the patient gets sick and weakly that there is any need to call in the doctor, in the shape of an actuary, to set everything right again. It was only by showing the future progress of these funds that the actuary at last gained the victory, and I feel that Tables 30 and 31 ought to make a deep impression on the city authorities." The police fund's pension payments in 1912 amounted to 14.46 per cent, of the payroll. The tables referred to by Mr. Manly made an actuarial forecast of future increases, which, in summarized form, are given on page 26. 25 Year After Valuation Annual Pension Payments Annual Salary Payments Percentage of Salaries in Pensions 1 2 3 4 5 10 20 30 40 50 60 70 80 85 $2,265,204 2,381,685 2,502,610 2,624,788 2,748,086 3,327,707 4,196,560 4,767,819 4,967,753 4,980,994 4,971,870 4,971,343 4,970,912 4,970,866 $14,981,250 15,151,921 15,019,718 15,285,904 15,310,319 15;529,996 15,423,237 15,024,460 14,884,963 14,866,417 14,865,410 14,865,410 14,865,410 14,865,410 15.12* 15.72* 16.66 17.17 17.95 21.43 27.21 31.73 33.37 33.51 33.45 33.44 33.44 33.44 Experience of City's Pension Funds Illustrates Growth of Pension Demands To place further emphasis on the certainty of the rapid growth of pension demands, the past experience of five large city pension funds, including the teachers', is offered for consideration. A great number of factors, which vary in each fund, govern the ultimate limitations of future increases in pension and salary payments, such as scales of benefits, admin- istration of pension provisions, mortality rates, increases in quota, salaries of the active force, etc. The combined operation of such factors, however, based upon incontrovertible natural laws, causes during a great number of years the more rapid increase in pensions than in salaries. This is forcibly brought home by the increases in the percentage relation of pen- sions to salaries during the years 1905 to 1914 in the five large pension funds of the city indicated below : Proportion of Pensions to Payroll During the Year Estab- Years Indicated Pension Fund lished 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 Police Pension Fund 1857 1871 11.35 11.81 11.31 11.32 12.11 11.33 12.09 11.29 12.17 11.59 12.35 12.09 13.04 13.05 14.46 14.38 15.73 13.85 16.16 Fire Department Relief Fund 14.08 Teachers' Retire- ment Fund 1894 3.65 3.87 3.82 3.92 4.02 4.09 3.82 4.10 4.15 Health Department Pension Fund . . . 1894 1.60 1.50 2.33 2.31 2.62 2.69 2.82 3.25 3.86 5.92 Street Cleaning Department Re- lief and Pension Fund 1911 .38 2.44 3,49 * Compare these estimated with the actual percentages of 15.73 per cent, and 16.16 per cent, for the years 191 3 and 1914 as given in the table below. 26 In ten years, be it observed, the police pension fund grew from 11.35 per cent, of the annual payroll to 16.16 per cent.; the fire fund from a pro- portion of 1 1. 81 to 14.08 per cent. Since 1906 teachers' pensions have advanced from 3.65 to 4.15 per cent, the rate of advance being temporarily checked in 1912 by salary increases. The expansion of the teachers' fund is inevitable if the present plan is pursued. In computing the future pro- portion of pensions to salary roll, the withdrawals of teachers from service without pensions is, of course, taken into consideration. Reorganization Necessary to Prevent Future Disappointment It is often maintained that a municipal pension fund cannot become bankrupt, no matter what its statutory revenues are ; that the moral obliga- tion of the public to city employees is so strong that in case of insufficiency of funds its resources will be increased. Let us assume that teachers will avail themselves of the distressing features of the present situation to appeal to the legislature and succeed in forcing on the city the requirement of making good any future defi- ciencies which may occur in the fund. It has been done in the case of the police pension fund in 1892 and the fire department relief fund in 1912, and the repetition of such a procedure in the case of the teachers' retire- ment fund would not be unprecedented. It may be safely predicted, however, that such a measure to extend the fund's resources to the capacity of the city's taxing power would not last long. The general public does not now realize the amount of money it has been and is paying for teachers' pensions. This is effectively hidden by the automatic reversion of indirect city contributions (unrefunded absence deductions and excise moneys) to the uses of the fund. The ques- tion of cost begins to impress itself on the public mind only when it appears clearly as a budgetary item. If the city were to make good future deficiencies in the teachers' retirement fund, it would be called upon to do so immediately after the passage of the law, as the present revenues are insufficient to cover current demands. As has been estimated in the preceding pages, the pension pay- ments will increase in the future to about 20 per cent, of the payroll. Assuming that the annual salary expenditure remains stationary, the pen- sion demands will eventually amount to about $6,000,000 (20 per cent, of the payroll of $30,000,000 as of May 31, 1915 — see Table i, page 109). The teachers' contributions, remaining stationary at i per cent, of salaries, would furnish only $300,000; the excise taxes and unrefunded absence deductions would under favorable conditions make available twice as much, or $600,000, while the balance of $5,100,000 would become a direct charge on the taxpayer. It is logical to suppose that the growth of the annual deficiencies in the fund to an amount in excess of $5,000,000 a year would not pass entirely unnoticed. Long before such a stage is reached, a popular demand for the 27 reorganization of the fund would be brought about and a reduction of its expenditures enforced. It is, therefore, to the distinct advantage of both the taxpayer and the teacher to unite as soon as possible on a sound reor- ganization plan, in order to avoid unnecessary expenditure as well as future disappointment to present and prospective beneficiaries of the fund. This should not be difficult to accomplish, if only the teachers would acquaint themselves with the situation and realize that it is more to their advantage to have reasonable and secure provision against old age and incapacity than over-liberal benefits which they may never be able to enjoy. Indirect City Contributions Hide Cost of Pensions In connection with the criticism of the present method of providing funds to meet the cost of pensions, it is desired to call special attention to its worst feature — the use of miscellaneous city revenues as sources of income. In the first place, it is unfair to the taxpayer, since it throws a cloak of mystery over the real cost of pensions. The money becoming available each year from these indirect sources automatically reverts to the fund and is used up without the public realizing the true proportions of the expenditure. Secondly, there is no parallel between the growth of mis- cellaneous revenues applicable to the fund and pension payments, since increases in revenues seldom, if ever, grow at the rate of pension liabilities. It is, therefore, in the interest of both the taxpayer and the present and prospective beneficiaries of the fund that it should not derive its income from miscellaneous revenues, a method which creates the erroneous im- pression of shifting the pension burden from both the taxpayers and the beneficiaries. The city's part of the pension fund cost should be met sys- tematically and openly by budgetary appropriations. 28 CHAPTER IV RESERVE OR " THINK OF THE FUTURE " PLAN AND THE PRESENT FUND Advantages of Operating Fund on "Reserve" Basis Scientifically managed and actuarially sound pension funds are gen- erally operated on a "reserve" basis. This necessitates, as has been stated previously, the setting aside during the active service of employees of definite amounts properly calculated and usually expressed as a percentage of the current annual payroll. The amounts so set aside are accumulated at interest and form a "reserve" fund, out of which pension disbursements may be made as they become due. Under such an arrangement, the advantage of the compound interest factor is secured, which reduces the apparent cost of pensions to more than one-half of the apparent cost under the "cash disbursement" plan. All other conditions being equal, the same amounts are actually paid out in benefits under both plans. The pension cost, however, is measured under the "reserve" plan by the percentage of the payroll needed to be set aside currently to secure future pensions, while such cost under the "cash dis- bursement" plan is measured by the percentage which the current pension payments form of the annual payroll. The first is a constant factor, and in the case of the teachers' retirement fund operating under existing pror visions has been determined to be about 4 per cent, for men and about 7 per cent, for women teachers. The second is a changing and constantly increasing factor and, as has been previously explained, will eventually amount to more than 20 per cent, of the payroll. The main advantage of operating a pension fund on the "reserve" basis is in the clear understanding of the pension cost, which is secured by the definite and constant relationship which each year's contribution to the pension fund bears to the same year's expenditure for active services. Having been accepted as reasonable by all concerned, the possibility of arbitrary discontinuance of the scheme and consequent disappointment of prospective beneficiaries is avoided. Furthermore, each generation of tax- payers and teachers pays, currently, its own obligations. A proportionate part of the future pension requirement is set aside each year, and if calcu- lated properly the pension scheme under such conditions is solvent at all times. $54,700,000 Deficiency on June 30, 1914 In the actuarial appraisement of the teachers' retirement fund, the details of which are^resented in Part III of this report, the actual experience of the fund during the six-year period — July i, 1908, to June 30, 1914 — has been 29 used as a basis for estimating its future operation. The rate of interest used in computations was 4 per cent. The results of the appraisement, showing the condition of the fund as it was on June 30, 1914, are presented in detail in the valuation balance sheets on page 170, a summary of which is as follows: Liabilities Value of 1,521 pensions already granted $11,581,210 Value of prospective pensions to teachers now in service 58,228,550 Total $69,809,760 Assets Funds in hand $882,715 Value of future 1% salary contributions of teachers now in service 4,183,725 Value of future city contributions of unexcused absence deductions and 5% of excise taxes which can be credited to teachers now in service 10,000,000 Deficiency, unprovided for 54,743,320 Total $69,809,760 Following the usual practice, the above valuation balance sheet considers only the teachers in active service and on pension on June 30, 1914, leaving "new entrants," i. e., teachers who enter the service subsequently, out of consideration. The liabilities of the fund show the discounted, or "present," value of future pension payments. In explanation, the total liability of the fund shown in the balance sheet in the sum of $69,809,760 represents the capital amount which, if invested on June 30, 1914, will be just sufficient, together with future interest accumulations at 4 per cent., compounded annually, to make future pension payments to teachers already retired and to those of the teachers in the active service on that date who will subsequently retire. The assets of the fund show, in addition to the money actually on hand at date of valuation, the discounted, or "present" value of the moneys which will be paid into the fund in the future by teachers who were in the service on the date of the valuation, and by the city in respect of these teachers. The cash on hand June 30, 1914, amounted only to $882,715, which is insufficient to pay even one year's pension charge. The value of the future i per cent, salary contributions of the teachers adds $4,183,725, and that part of the 5 per cent, excise tax and unrefunded salary deductions for absence which may be credited to teachers who were in the service at the date of valuation further increases the assets by an uncertain amount, which, due to lack of basis for an accurate forecast, is roughly approximated at $10,000,000. The total of these assets — $15,066,440 — is inadequate to equal the total liabilities of $69,809,760 by $54,743,320. The amount of this deficiency rep- resents the capital, or reserve, which should have been on hand in the fund in addition to the $882,715 on June 30, 1914, to make the fund solvent. It would have enabled the fund, together with future accumulations of 4 per cent, compound interest, to supplement its inadequate future income. 30 Rapid Increase in Shortage Since that Date The large amount of shortage — $54,743,320 — which is a direct result of the fund's insufficient income during the 21 years of its past operation, does not give, however, an adequate idea of the seriousness of the situation. It merely represents the deficiency as it existed on June 30, 1914. The fund's reorganization is made more difficult as time passes, since under the present method of operation it merely serves as a means of developing a constantly increasing deficit. The rapid increase in the deficiency, due to the absence of the reserve of $54,743,320, may be easily appreciated when it is considered that simple interest alone at 4 per cent, of the above amount would have yielded to the fund $2,189,733 for the year ending June 30, 1915. The lack of interest accumulations therefore increased the deficiency during one year to $56,933,053- The "new entrants" into the fund, i. e., teachers employed after June 30, 1914, involve the fund into still further financial difficulties. Neither their future pensions nor the fund's future income on their behalf has been taken into account in the valuation of assets and liabilities. The deficiency of the fund, therefore, increases with the employment of each additional teacher, when it is considered that the fund's actual income is at present about 3 per cent, of salaries and shows a tendency for future decrease, whereas the income required to guarantee future pensions of new entrants should amount on the average to about 4 per cent, of salaries in the case of men and about 7 per cent, in the case of women teachers. The percentages of salaries required to be paid into the fund on account of new entrants, according to age at entrance into the service, have been calculated and presented in detail on page 171. The payments required at the ages indicated below are as follows : Men Teachers Women Teachers Age at Entrance Disability Service Disability Service into Pension Pension Total Pension Pension Total Service after after all after after all 20 Years' 30 Years' Pensions 20 Years' 30 Years' Pensions Service Service Service Service 20 .40 3.05 3.45 1.41 5.08 6.49 25 .43 3.50 3.93 1.13 6.12 7.25 30 .45 3.96 4.41 .64 6.54 7.18 35 .43 4.20 4.63 .35 6.16 6.51 40 .31 3.89 4.20 .16 5.16 5.32 31 CHAPTER V OPERATION OF THE PRESENT FUND ILLUSTRATED The results of the actuarial investigation have been shown by the valua- tion balance sheet and the rates of salary contributions that would be re- quired. To facilitate a clear understanding of these results the operation of the fund under the present provisions as applied to the average teacher is illustrated in the following pages. Average Entrance and Retirement Ages The following table gives the average age at which men and women teachers have entered the service in New York City schools and the average age at which pensioners were retired under the "disability" and "30 years' service" provisions during the six-year period ending June 30, 1914: Entrance Age Disability- Retirement Age Service Retirement Age Men teachers 26 8 54.3 47.0 66 1 Women teachers 23.5 57 4 Comparison of Aggregate Pay and Pension of Average Teacher The chart on page 33 shows a comparison of the aggregate pay and pension received by the average teacher. The teachers are considered as entering the service on average entrance salaries, such as were paid in 1914, namely, $1,134 per annum in the case of men and $762 per annum in the case of women. The salaries are estimated to increase in accordance with the scale of salary changes as computed by the Commission on Pen- sions and presented on pages 157 and 158. The pension is based on the final salary which would be allowable at the time of retirement and is considered to continue for the "average lifetime" of the pensioner. No allowance has been made on account of teachers leaving the service without pensions. The aggregate salaries and aggregate pensions as well as their percent- age relation in the four "average" cases are as follows : Aggregate Pension "Average" Pensioner Aggregate Per Cent. Salary Amount of Aggregate Salary Man— Disability Pensioner $57,269 $18,405 32 . 14 Man— Service Pensioner 87,503 13,930 15 .92 Woman— Disability Pensioner 31,923 13,840 43 .35 Woman— Service Pensioner 50,140 16,686 33 .28 32 ANNUAL SALARY AND PENSION PAYMENTS RECEIVED BY THE "AVERAGE PENSIONED TEACHER 3000^ 2500 zooo 0( I50O. < J lOOO . •> BOO YCA^S 1 Years i 2000^ y (f ISOO, < J lOOO. < "O- 500. Ykars 1 zooo. > ^ 1500. < J lOOO. < ^ 600. o . Years 1 Male- Disability Pensioned lO 15 to SS So 35 3»0 ^ Male- Service Pensioner •45 49 Female- Disability Pensioned IIIIIIIIIIHIIIIIIII I I • 16 20 ZS 30 35 Aa 4* Temale- Service Pensioner nm m 25 30 ♦5 50 52 Salary lllllill - LGGEND- Pensions lillllll 33 Value of "Average" Teacher's Pension on Theory of "Deferred" Pay The preceding illustrations show the relation of aggregate salaries and pensions, and assume the operation of the fund on the "cash disbursement" principle, which disregards the interest factor. Should the pension be regarded in the nature of "deferred" pay, the teacher's claim not only to the proportion of salary so deferred but also to the accumulations of compound interest on the amounts theoretically withheld must be considered. Under this theory, the pension fund is assumed to operate on the "reserve" principle. A comparison of salaries, excluding the i per cent, contributions, with pensions, on the theory of a reserve or "deferred" pay principle, is presented in the following charts in the case of the "average" man and woman teacher, both as regards total and one year's service. It is really a compari- son of present rates of net compensation with what they would be if the present pension system were abolished and the teachers given the exact actuarial equivalent by means of increases in salaries. In the construction of these charts, due allowance has been made on account of teachers leaving the service without pension. 34 COST OF ENTIRE TEACHING SERVICE OF THE AVERAGE TEACHER COMPOSED OF SALARY ACTUALLY PAID AND SALARY "DEFERRED" FOR FUTURE PENSION MALE FEMALE Pension ^z.633 Totol Salary (less one percent dedvcction) ^ 59.501 Pension ^i.aas Total Salary (^less one per cent deduction) 24.036 35 COST OF ONE year's TEACHING SERVICE OF THE "aVERAGE" TEACHER COM- POSED OF SALARY ACTUALLY PAID AND SALARY "DEFERRED" FOR FUTURE PENSION MALE female: Pension ^ 9i Salary (less one percent deduciion.) $ 2,062 Pension ^lod Salary (le^s- one percent deduction) $ \,Z(oG 36 Value of a $1 Pension and Average Lifetime of Pensioners In the following tables are given the annuity values used as a basis for calculating the cost of pensions. These tables give the present value of a pension of $i, starting at any age desired. While the expectations of life of pensioners at various ages were not used in the calculations, they were afterward computed and are shown for the purpose of giving an idea of the probable average lifetime of teachers retiring at various ages. PRESENT VALUE AT DATE OF RETIREMENT OF A CONTINUOUS LIFE ANNUITY OF ONE DOLLAR PAYABLE TO TEACHERS RETIRING AT THE AGES SHOWN Age at Disability Pensioners Service Pensioners Retirement Men Women Men Women 40 12.07 13.49 41 11.92 13.35 42 11.78 13.21 43 11.64 13.06 44 11.51 12.90 45 11.39 12.74 46 11.27 12.58 47 11.16 12.41 48 11.04 12.23 49 10.91 12.05 50 10.79 11.86 11.00 14.07 51 10.65 11.67 10.86 13.84 52 10.51 11.47 10.72 13.59 53 10.37 11.26 10.57 13.35 54 10.21 11.05 10.41 13.09 55 10.04 10.84 10.23 12.83 56 9.86 10.62 10.05 12.56 57 9.67 10.39 9.86 12.28 58 9.46 10.16 9.66 11.99 59 9.23 9.93 9.45 11.70 60 8.99 9.69 9.23 11.39 61 8.74 9.45 9.01 11.08 62 8.47 9.20 8.77 10.76 63 8.20 8.95 8.54 10.43 64 7.94 8.70 8.29 10.10 65 7.69 8.45 8.04 9.76 66 7.45 8.19 7.79 9.42 67 7.22 7.93 7.54 9.08 68 6.99 7.67 7.28 8.73 69 6.76 7.40 7.02 8.39 70 6.53 7.14 6.76 8.04 37 EXPECTATION OF LIFE OR AVERAGE LIFETIME OF TEACHERS RETIRING AT THE AGES SHOWN Age at Retirement Disability Pensioners Men Women Service Pensioners Men Women 40 19.51 41 19.12 42 18.75 43 18.39 44 18.05 45 17.72 46 17.40 47 17.09 48 16.77 49 16.44 50 16.12 51 15.78 52 15.44 53 15.09 54 14.72 55 14.35 56 13.96 57 13.56 58 13.14 59 12.70 60 12.25 61 11.79 62 11.33 63 10.86 64 10.41 65 9.99 66 9.60 67 9.22 68 8.84 69 8.47 70 8.11 22.81 22.37 21.93 21.49 21.04 20.59 20.14 19.68 19.21 18.75 18.28 16.58 23.01 17.81 16.24 22.36 17.34 15.89 21.71 16.86 15.52 21.07 16.39 15.15 20.42 15.91 14.76 19.78 15.44 14.37 19.13 14.97 13.96 18.49 14.49 13.55 17.84 14.02 13.13 17.20 13.55 12.70 16.55 13.08 12.28 15.91 12.62 11.84 15.27 12.16 11.41 14.64 11.70 10.98 14.01 11.25 10.55 13.38 10.80 10.12 12.77 10.36 9.70 12.16 9.92 9.28 11.57 9.49 8.86 10.99 9.06 8.45 10.43 38 CHAPTER VI A TENTATIVE REORGANIZATION PLAN Reasons for Submission of Tentative Reorganization Plan The reorganization of the fund on a sound administrative and financial foundation is of immediate importance. Such reorganization, however, is surrounded with great difficulties, especially from the financial viewpoint. The ^xisting_nine_rnunicipal pension^funds cover by their provisions )racti £ally the entire m unicipal service. Their obligations for future pension payments to pensioners already on the roll and to those of the present employees who will subsequently retire, are now being calculated by the Commission on Pensions and will presently be published. In anticipation of the completed results, the discounted, or "present," value at 4 per cent, com- pound interest of these future pension payments may be estimated at about $220,000,000. As security that pensions will be paid, the nine funds have about $3,000,- 000 actually on hand. To this must be added the discounted value of future city contributions of uncertain amounts as provided under existing charter provisions, and the discounted value of future contributions of employees, amounting to about $9,000,000. The amount of the difference between that part of the above assets which consists of the cash in hand and contributions of employees, and the total obligations — $208,000,000 — represents the discounted value of additional amounts which the various funds will require in the future to enable them to meet the pension claims of present pensioners and employees now in service. The greater part of this sum represents the discounted value of future mandatory city contributions in the form of miscellaneous revenues and direct deficiency appropriations, i. e., a liability on the part of the city and an asset to the funds. The lesser part of the $208,000,000 is the com- bined unprovided for deficiency, or the discounted value of amounts which will be required to supplement inadequate future income. While the state legislature has not as yet made the city shoulder this deficiency, which in the case of teachers amounts to $54,700,000, the experi- ence of the past does not give any assurance that it will not do so in the future. For this reason, and unless present laws are revised, the possible extent of the city's mandatory and discretionary participation in the future pension burden with respect to present pensioners and employees alone is indicated by its discounted value of $208,000,000. This condition indicates only in part (additional burdens in respect of employees to enter the service in the future not being considered in the above estimates) the magnitude of the financial problem which the Commission on Pensions is engaged in solving. The recommendations for a definite plan of 39 reorganization of the teachers' retirement fund submitted in this report are, therefore, subject to possible modifications in the light of future discussion of questions of public policy regarding the entire pension problem of the city. The necessity for this reservation is further emphasized by the lack of uniform and satisfactorily tested standards in this country and abroad for the retirement of various classes of municipal employees. Municipal pension schemes in this country, on account of the wide dis- similarity of pension provisions and general condition of approaching or actual bankruptcy, furnish in most cases merely precedents of measures which it is desirable to avoid in establishing a sound pension policy. This is mainly due to the comparatively short time the pension funds have been in operation and to the lack of public interest in efficient and equitable munici- pal management in the past. In foreign countries, where pension schemes have been in operation for more than a century, definite and sound pension principles have gradually begun to be developed and put into operation. This development is not so much due to a more intelligent public interest in municipal government as to the dire necessity for retrenchment after pension schemes estabhshed without a definite idea of cost began to be exorbitant in their demands on the public treasury. Yet, despite a marked activity, especially during the last decade, in the reorganization of a number of foreign municipal pension funds, there is still a regrettable absence of uniformly accepted standards for the treat- ment of all phases of the pension problem. A pension scheme, ideal in all its details, does not exist, and it remains, therefore, for those concerned — the administration which, as a representative of the taxpayer, is interested in maximum civil service efficiency, and the employee who is entitled to equitable treatment — to work out and determine through intelligent cooperation a constructive pension policy which would cure existing defects, secure beneficial results, afford equitable treatment and, last but not least, through the adoption of sound financial methods, lay a permanent foundation for a measure so essential to the satisfactory conduct of public business and to the general welfare of public employees. Summary of Tentative Suggestions for Reorganization As a substantial aid to constructive thinking, and as a practical means of bringing forward differences of opinion regarding the general policy under- lying pension systems, a definite plan for the reorganization of the teachers' retirement fund has been formulated on the basis of such of the existing precedents of pension management as have proved satisfactory in operation elsewhere and appear to oflfer a satisfactory remedy for existing local condi- tions. The constructive suggestions set forth in detail in the succeeding pages may be summarized as follows : I. The present law should be repealed and a new law passed which will deal more exhaustively with all details of provisions than the present 40 / law, and will eliminate as much as possible the exercise of administrative discretion. 2. The administration and interpretation of the law should be entrusted to a board independent of the Board of Education and com- posed of members administratively and technically qualified for the effi- ' cient performance of their duties. In such board the Department of Education should be represented. 3. The liability to present pensioners should be reduced / (a) By a revision of the entire list. (b) By the revocation of pensions to disability pensioners no longer disabled. (c) By the return to duty of existing disability pensioners who are cured of their disabilities and of service pensioners who are not superannuated or otherwise disabled. (d) By a readjustment of pension benefits in accordance with / the scale suggested for the retirement of future bene- ficiaries. 4. The fund's liability for future pensions to teachers now in the service should be reduced. A change of existing provisions by the intro- ^/ duction of a minimum age limit for retirement and other details dis- cussed in this report will materially reduce the fund's present liability. 5- The future contributions of teachers now in the service should be increased to cover : (a) One-half of the cost of benefits accruing for services sub- / sequent to the reorganization of the scheme, and (b) One-half of the cost of benefits accruing for services prior to the reorganization of the scheme, except when the total ' annual contribution of individual teachers would exceed 8 per cent, of salary. The scale of contributions will vary according to present age and number of years of past service, and should, as a matter of expediency, be limited to a maximum of 8 per cent, of salaries in case of individual teachers. The con- tributions of teachers should be made returnable with compound interest at 4 per cent, upon separation from service prior to retirement. 6. Teachers entering the service after reorganization should be made eligible to retirement under the same pension provisions as are proposed for teachers now in the service. Their contributions should / cover one-half of the cost of their benefits. Since there are no arrears to be made good, the contributions of new entrants into the system will be much smaller than those of teachers who are nearing the period of retirement. 7. The city should contribute annually a percentage of salaries of 41 teachers sufficient to cover one-half of the cost of benefits accruing be- cause of services subsequent to the reorganisation of the scheme. Such contributions should not be available to employees leaving the service prior to retirement. 8. The city should contribute a uniform amount annually for the ^ next 60 years to liquidate : (a) The fund's liability remaining for pensions on the roll at the time of reorganization of the scheme after the list of pensioners has been revised as recommended. (b) The fund's liability remaining for future pensions on account of services of present teachers prior to reorgani- zation after change in benefit provisions has been made and the future contributions of teachers have been in- creased to cover back services. / 9. The assets and liabilities should be appraised periodically, and necessary adjustments made in all three contributions. Definition of Problems Which Must Be Faced Past experience of the city with its pension funds forces forward two separate phases of the pension problem for consideration : First: That pension provisions are not sound unless they accomplish a definite purpose, namely, assisting in obtaining a high standard of efficiency and providing a certain means of retirement on a just and humanitarian basis for employees no longer able to meet the demands of service- Second: That pension provisions, before their adoption, must be calcu- lated as to cost, and such cost preferably met on the reserve, or "provide for the future," basis. Keeping these main considerations in mind, three groups of persons affected must be separately considered : Present pensioners, or 1,549 former teachers who have already entered upon their pensions, have severed their connection with their profession, and who, because of advanced age, are, in a good many instances, helpless. Active service, or some 21,000 teachers now in the service who have entered upon their duties in the expectation of a rather liberal pension, and who have served various periods of years, each year of such service carrying with it a certain proportion of the pension prospect entertained at the time of employment. New entrants, or teachers to be employed in the future, and with whom the city is at liberty to make whatever pension arrangements it may consider as most beneficial to the service. Present Pensioners Teachers' Pensions Only Small Part of City's Total Pension Roll The problem of making provision for the continued payment of pen- sions to already retired teachers cannot consistently be considered without 42 taking into account the total liability of all pension funds for future pay- ments to already retired city employees. On December 31, 1914, there were 8,232 pensioners on the city's pension roll, drawing an average annual pension of $624.29, or a total of $5,139,166.- 49.* The 1,549 pensioned teachers with an annual pension charge of $1,215,231.11 form, therefore, only about 19 per cent, of the total number of pensioners and about 24 per cent, of the total annual pension charge. The present value of future payments to these 8,232 pensioners may conservatively be estimated, in anticipation of the completion of actuarial calculations, at about $50,000,000. The present value of the 1,521 teachers' pensions on the roll on June 30, 1914, has been ascertained to amount to $11,581,210. The liquidation of this liability, against which practically no reserves have been accumulated, presents a difficult and immediate problem since neither the present employees nor those to be employed in the future can be expected to pay the pensions of those already retired. Whatever arrangements the city may make to provide the necessary amounts, its ability for financial support of pensions to all municipal employees now in service and to those who will enter it in the future will be seriously impaired. City Legally Unable to Furnish Additional Aid to Present Pensioners The city's contributions to the teachers' retirement fund are restricted by law to receipts from definite sources, such as 5 per cent, of excise taxes and unref unded absence deductions. There is now, therefore, no way within the law whereby the city may be obligated to contribute, or can of its own volition add, more to the fund than the amounts accruing from the sources defined by law. City Should Reduce Liability to Pensioners and Assume Pa3nnent It must be kept in mind that a large proportion of the pensioners have reached an advanced age and are, therefore, unable to adjust themselves to a substantial cut or entire loss of income. The fact that they have entered upon their pensions relying on the integrity of the fund, should also be given serious consideration. On the other hand, a number of pensions have been granted after less than thirty years' service for disability of a temporary character. No system has been established by the Board of Education to guarantee the return to duty of those whose disability had ceased, and it is conceivable that a num- ber of these pensioners should be restored to active service. It would seem, therefore, advisable to review the entire list of pension- ers, subdivide it into groups, according to nature of retirement and present age, and apply the following procedure with respect to each group : I. Pensioners who have retired for disability after less than thirty years and are at present less than 65 years old: On September i, 1915, * See Table 23, page 127. 43 there were 273 pensioners of this class on the roll, drawing an average annuity of $645.05, or a total of $176,097.70 per annum (see Table 21, page 126). These pensioners should be required to undergo a physical examination. Refusal to be examined should result in revoca- tion of pension. Pensioners who are found to have regained their health should be reinstated to active service. Pensioners whose health is not improved should continue to draw their pensions, but should be required to be physically examined every year. 2. Pensioners zvho have retired after thirty years' service and are at present less than 65 years old: In view of the city's enormous obligations for present pensions, and because of the additional liability under various existing provisions for past services to present employees, it is necessary to reduce pensions wherever it is possible to do so on an equitable basis. It is assumed that the purpose of the retirement system is to take care of employees who are no longer able to continue in the service and not to provide opportunity for experienced teachers to leave the service on pension at the first chance. Taking the suggestion from the present law, the average teacher is presumably superannuated at age 65, since the Board of Education has authority, at its discretion, to retire a teacher compulsorily who has reached that age. The Board of Education, how- ever, evidently considers that teachers as a general rule can efficiently perform their duties until they reach the age of 70, and adopted, on December 27, 191 1, a by-law providing for compulsory retirement of teachers attaining that age. Service pensioners under 65, of whom there were 612 on the rolls on June 30, 1914, should be assumed to be able to continue teaching and their pensions revoked, unless by physical exami- nation their inability to teach is proven. 3. Pensioners less than 65 years old who are unable to teach and pensioners 65 or more years old: In this group will be all those who are either superannuated or, because of ill health, incapacitated. The con- tinuation of their pensions would, therefore, be necessary. It must, however, be pointed out that the scale of pensions is so high as to be, in this respect, possibly unique among all teachers' pension funds in the United States as well as abroad.* Pensions after 30 years of service range from a minimum of $600 to a maximum of $5,000. 181 pension- ers or 1 1.7 per cent, of the total number of 1,549, receive $1,000 to $1,500 per annum. 45 pensioners draw $1,500 and less than $1,750 per annum, 6 between $2,000 and $2,500 per annum, i draws $3,000 and another $5,000 per annum, f * But two large cities in the United States (besides New York City) pay teachers' pensions exceeding $600. The cities are Philadelphia, which pays as high as $1,000, not exceeding one-half of final salary (minimum $400), and Buffalo, which pays as high as $800, not exceeding half of final salary. Besides giving materially smaller benefits, both require contributions up to 2 per cent, of salary. t See Table 13, page 121. The pensioner drawing $5,000 died October 14, 1915. Attention is also called to the general increase in the average amount of annuity granted during recent years, as shown in Table 20, page 125. 44 In view of the extraordinarily high pension scale, and the urgent neces- sity for economy, a reduction should be made on some equitable basis.* It is suggested that the pensions be graduated in accordance with the scale pro- posed for future retirements, i. e., they should amount to 1.25 per cent. (1/80) of the average salary during the last 10 years for each year of service, with a minimum of 30 per cent, of such salary. The application of such a scale, as illustrated on pages 56 to 59, in the case of eight teachers now in service, will reduce principally the pensions of teachers who have retired at an early opportunity, and especially the recently granted pensions which have been based on salaries increased by the passage of the "equal pay" law. On the other hand, the pensions of teachers who have retired after exceptionally long terms of service, exceeding 40 years, would be slightly increased. Burden of Liability Should Be Equally Divided Among Taxpayers of Next 60 Years As a result of the suggested revision of the present pension list and con- sequent revocations and reductions in pensions, the total liability of $11,581,- 210 will, in all probability, be reduced. If the city were simply to assume the fund's obligations for the payment of pensions as they become due from year to year, the taxpayers of the next 15 years would have to carry more than 75 per cent, of the entire burden. The amounts payable each year have been calculated, and are presented in Table 24, page 128. A summary of the table, showing the amounts required to be paid, beginning with the year 1914, in five-year periods, is presented below: Per Aggregate Cent. Amount of Total Five years, ending 1918. 1923. 1928. 1933. 1938. 1943. 1948. 1953. 1958. 1963. 1968. 1973. $5,315,511 32.3 4,117,335 25.0 2,974,974 18.1 1,962,878 11.9 1,154,043 7.0 586,715 3.6 249,145 1.6 85,116 .6 22,654 .1 4,550 .0 637 .0 48 .0 $16,473,606 100. ' The scaling down of annuities of existing municipal pensioners has a number of precedents. The Virginia teachers have had their pensions pro rated, the San Francisco teachers receive only 50 per cent, of the amounts of the pensions granted. The Philadelphia and Boston public school teachers' pensions can be pro rated, except that in Boston no pension to a teacher who has served 30 years shall be less than $312 a year. Provisions in industrial schemes for the scaling down of pensions to bring them within the resources provided are quite general. 45 Since the fund's liability to present pensioners, if it were a legal obliga- tion on the part of the city, would resemble a debt accumulated by several generations in the past, it would hardly be equitable to charge the taxpayers of the next few years alone with paying it. It is, therefore, suggested that the fund's liability to present pensioners be added to the unprovided for lia- bility to present teachers as explained on page 60 and the total discharged by a uniform annual payment extending over a period of 60 years. The latter period is suggested on the assumption that within 60 years all present pensioners will have died, and the majority of the present teachers will have retired and died.* Teachers Now in Service Discounted Value of Future Pensions to All Municipal Employees Now in Service Approximately $170,000,000 Teachers are not the only employees to whom retirement provisions apply under present pension laws. The number of employees in depart- ments having special pension funds and of the balance of the municipal service covered by the general provisions of the "Grady Law" was on December 31, 1914, with exceptions noted, as follows: Department of Education 21,317t Police Department 10,708 Street Cleaning Department 5,474 Fire Department 5,004 Health Department 1,256 College of the City of N. Y 223 Supreme Court, 1st Dept 295 Supreme Court, 2nd Dept 177 Total employees covered by special pro- visions 44,454 Balance of municipal service covered by the "Grady Law" 32,8561: Total employees in municipal service covered by pension provisions 77,310 These 77,000 employees expect to be retired on pensions if they stay in the service the required length of time, and in the case of the Police, Fire, Health and Street Cleaning Departments the dependents of deceased * Municipalities in Great Britain have recently shown a marked activity in the reorganiza- tion of their pension funds on a scientifically sound financial basis. This requires a change from the "cash disbursement" to the "reserve" plan of financing fund requirements. The problem of "accrued" liabilities, which is the main difficulty in making the change, is overcome by their dis- tribution in equal annual installments over a period of 50 to 60 years. With the debts of the past settled in this manner, the pension funds are enabled to make a fresh start on a deficit-proof basis. Liverpool adopted such a procedure in 1913, and Edinburgh, Birmingham, London and Manchester are following suit. t As of May 31, 1915. J As of June 30, 1914, excluding temporary employees, and appointive and elective officers. 46 employees are entitled to pensions as well. The provisions vary in each department and are especially costly in the Fire, Police and Health Depart- ments. The present value of future pensions, under existing provisions, to teach- ers now in the service has been computed in the sum of about $58,000,000. A rough estimate, in anticipation of the results of the actuarial valuation, soon to be completed, would place the present value of future pensions to the remaining 56,000 municipal employees at about $112,000,000, making the total capital value of pensions to all municipal employees now in service approximately $170,000,000, in addition to the $50,000,000 required to guar- antee payments to the 8,232 city pensioners. The vast extent of these pension promises the larger part of which, according to present laws, the taxpayer is expected to make good, must be constantly kept in mind when the ability of the city to lend its financial support for the continuation of the present pension provisions to active teachers as well as all other municipal employees is considered. City Legally Unable to Guarantee Future Pensions As in the case of teacher pensioners already on the rolls, the city is powerless to add anything to the present contributions to the fund in order to guarantee the payment of pensions and thereby allow the retirement of superannuated teachers now in service. The present law has been drawn up in such a way as to give first claim to those already retired. It continues, however, the contributions of active teachers without, in any way, guarantee- ing their retirement. City's Interest to Give Financial Support to Fund The disadvantages that arise from the lack of a proper retirement sys- tem in the civil service are too widely known to require any detailed argu- ment for the need of providing pensions for superannuated employees. The need of such provision being indisputable, the question of financial support by the city is the next point for consideration. That such support is not only advisable but unavoidable with regard to those now in the service is obvious from the fact that a number of active employees are within a short period of superannuation and could not possibly in a few years contribute enough to retire on an adequate annuity of their own. For this reason, even in such schemes where the entire cost or a considerable part of it is borne by employees entering the service after its establishment, the retirement of those already in the service is facilitated by contributions of the employer on account of back services. City Must Protect Its Interests by Insisting on Four Fundamental Conditions In approaching the subject of provisions for the future retirement of teachers now in the service, the city should at the outset insist on certain 47 conditions being observed to prevent the pension system from becoming a failure. The city's experience in this respect is sufficiently long and costly to know what is to be avoided, and from the experience of municipalities abroad which are gradually reorganizing their pension schemes on sound founda- tions, object lessons are afforded for securing desired results. In reorganizing the present teachers' pension scheme, the following provisions must be used as a necessary foundation : 1. The law should be so amended as to state clearly not only the main provisions, but all details and deviations from the general rule : (a) A service of 21,000 teachers of both sexes presents a complicated number of conditions which must be dealt with in the law as exhaustively as possible and not left to the discretion of the administration. (b) A special clause should be included in the law providing for a valuation of assets and liabilities at stated intervals, and preventing future amendments zvithout actuarial estimate of the financial effect of such amendments. 2. The , administration and interpretation of the pension law should be entrusted to a body of officials: (a) Who are not responsible to the Board of Education. It is wrong in principle and has not worked well in practice to im- pose semi-judicial functions on those who are interested in the results of their decisions. (b) Who have the necessary technical and administrative qualifications or assistance for the efficient performance of their duties. (c) Who may be held responsible for all details which enter into the scientific management of all pension funds, such as the accumulation of vital statistics, proper accounting, preparation of annual reports, keeping of pension records, etc. (d) Who should have their own physicians for the examina- tion of applicants for disability pensions and for the periodical examination of pensioners retired on the ground of incapacity. Since the above qualifications have equal application to pension funds of other departments, it would be obviously desirable, from the point of view of economy in management, and for a uniform and im- partial interpretation of the present law for the entire municipal serv- ice, to establish centralized administration for all city pension funds. The board which would be entrusted with the administration and in- terpretation of the teachers' pension law should, therefore, form a nucleus for the future centralized board. 3. The pension provisions for teachers now in the service should be so amended as to insure the best interests of the service by effective elimination of the superannuated and incapacitated and by furnishing 48 inducement to the efficient to continue in service. Above all, the bene- fits should be adequate without being excessive. Inadequate benefits do not present a solution of the pension problem, and their considera- tion does not accomplish practical results. The provisions should also be equitable as between individual teachers, since no benefit to the service can accrue on the basis of inequitable treatment. Amendments on the basis of benefit to service will reduce the discounted value of $58,228,550 for future pensions to teachers now in service. If suggested changes in this report be adopted, the fund's liability will be reduced to $48,227,475. The introduction of the pro- vision for the return of teachers' contributions will add only $4,105,235 to the above amount, making a total of $52,332,710, or a net reduction of $5,895,840. 4. The contributions of the city and teachers should be sufficient to guarantee future pension payments. Whether the city or the teacher should contribute the entire cost of pensions, or whether such cost should be borne by both, and in what proportion, is one of the most difficult phases the pension problem has to offer. To summarize the opinion of authorities on the subject, the straight, or free pension plans, entirely financed by the employer and the compulsory savings plans entirely financed by the employee have the following serious disadvantages : The straight pension plans are too costly. Though it would appear at first glance that forfeiture of pension rights in cases of withdrawal help to reduce the relative cost of pensioning those who remain long enough to be retired, the evident injustice of such tontine features ultimately leads to the adoption of arbitrary and discretionary provisions for dependents, and other features, the cost of which more than offsets the economies gained from for- feitures. On the other hand, forfeitures interfere with the free discharge of incompetents. They are not a sufficient deterrent on the efficient employee from seeking employment where the compensation for active service is not confused with the question of "additional" and highly uncertain compensa- tion in the form of forfeitable pensions. The compulsory savings scheme necessitates too high a tax on the salaries of employees to provide for adequate benefits and return of contribu- tions in the event of withdrawal. The amounts of accumulated contributions, which are considerable after a few years of service and may be withdrawn at any time, are a constant inducement for employees to leave the service, which only a few will be able to withstand. The experience of European pension plans which are now being reor- ganized on the basis of sound and practical methods, points toward the advisability and expediency of the share-and-share-alike method of carrying the cost of pensions with the employees' contributions returnable and the employer's contributions forfeitable in case of withdrawal from service with- out pension. 49 It is suggested, therefore, that if the city be financially able to do so the annual pro rata of the pension cost for future services of present teachers should be borne equally by the city and the teachers. The deficiency arising from lack of contributions for past services of present teachers should be borne in part by the teachers themselves by raising their contributions on account of future services to a reasonable maximum and in accordance with the number of years of service during w^hich no adequate contributions were exacted. The balance of the deficiency should be discharged by the city as outlined on page 60. Details of Suggested Pension Provisions The following provisions for the retirement of teachers now in service are suggested : 1. SuperanniMtion retirement should be made at age of superannu- ation: The purpose of superannuation provisions is to take care of teachers who are no longer able to continue in the service because of advanced age. The present method of retiring a,fter a period of 30 years of service is an indirect means of dealing with the superannuation problem, which, on account of the low minimum age of entrance into the service, enables retirement at age 48, and in many instances results in the loss to the schools of experienced teachers. The better and more reliable basis for the determination of superannuation is the age of an employee, and has been adopted in the majority of countries as the main condition for retirement on application. Age 65 is almost universally recognized as the age at which the average teacher may be supposed to have passed the period of reasonable usefulneess on account of advanced age, and is recommended as a basTs for the retirement of New York teachers. 2. Superannuation retirement should be made compulsory by lazu: Teachers should be required by law to retire at age 65, with the follow- ing qualifications : Those who are able to continue beyond this age should be allowed to remain in the service upon satisfactory physical examina- tion and the approval of the pension board until 70 years of age is reached, when retirement should be made mandatory. Those who are superannuated before reaching age 65 may be retired under the dis- ability provisions. 3. Amount of pension should vary with length of service and aver- age compensation: The amount of pension should be based on the average compensation received during the last 10 years. 1.25 per cent. (1/80) of such compensation for each year of service should determine the amount to be granted. The lo-year average basis would do away with the possibility of unwarranted promotion of a prospective bene- ficiary just before retirement in order substantially to increase the pension. Increasing pensions in proportion to length of service would 50 bring the pension into a more logical and equitable relationship to the value of the employee's services than the present method. It would serve as an inducement for the employees to remain in the service as long as they are able, even beyond the retirement age. Finally, from the actuarial viewpoint, it presents a satisfactory and reliable basis for calculation. 4. Minimum pension should be fixed at 30 per cent, of average salary: The question of adequacy of pension makes the determination of a minimum pension necessary. Inadequate pensions, i. e., amounts which are insufficient to maintain a pensioner without additional income from outside sources, are ineffective as a means of elimination of the superannuated and incapacitated from the service, and therefore do not solve the pension problem. In the great majority of instances teachers will, at the rate of 1.25 per cent, of salary for each year of service, be retired on adequate annuities. For retirements after very short periods of service, in cases where teachers enter the service at an advanced age, or are disabled soon after entering the department, a minimum pension of 30 per cent, of average salary is suggested (See illustrations on page 58). 5. Teachers should pay arrears of contributions for "outside" experience: The present method of crediting teaching experience out- side of the City of New York in determining eligibility to retirement and amount of pension is unsound, since such teachers are not required to pay into the fund the contributions for the period of outside service. As stated on page 24, of the total of 1,521 retired teachers on the rolls on June 30, 1914, 180 pensioners, or 11.8 per cent., were given credit for "outside" teaching experience in order to make their retirement after 20 or 30 years' service possible under present pension provisions. It is suggested that teachers who had "outside" experience be required to contribute the corresponding arrears. This will be accomplished by including in their prior service the period of "outside" experience and charging them the corresponding rates on the same basis as proposed for other teachers (see pages 176 and 177). 6. Special privileges to Hunter College staff should be eliminated: The deviations from the general benefit provisions in favor of the teach- ing staff of the Hunter College can hardly be justified. The evil and costly consequences of special pension privileges lie in the setting of constantly higher and more expensive precedents and in creating dis- satisfaction among those not specially privileged. It is, therefore, sug- gested that the retirement of the Hunter College staff be based on the same rules as applicable to the rest of the New York school system. 7. Excessive absences should not be credited for pensions: The rules of the Board of Education provide that all absences of teachers from duty should be included in the aggregate period of service entitling an applicant to retire. Under this ruling, a number of teachers have been given credit for excessive absences, ranging up to 6 years and 4 51 months. It is suggested that excessive absences without pay should not be credited in fixing the amount of pension. 8. Disability pensions should be granted after a minimum service of lo years: The elimination from the service of incapacitated teachers is of as much importance to the efficiency of the service as the elimina- tion of the superannuated. Sickness and disease occurring before the teacher has taught 20 years results possibly in more hardship than after a longer term of service. The cost of such pensions has probably been the principal reason against granting them. It may be expected, how- ever, that with a stricter physical examination before retirement and periodical examination after retirement the cost of disability pensions will not be excessive. It is therefore suggested that the present re- quirement of a minimum period of 20 years of service for eligibility to disability pensions be reduced to 10 years. 9. Amount of disability pension at a lesser percentage of average salary than superannuation pension: The experience of most pension funds points to the high cost of disability provisions. One of the main reasons for such cost lies in the tendency of employees to retire before superannuation on the ground of slight incapacity, especially when the disability pension is granted on a basis similar to that of the superannua- tion pension. It is suggested that a lesser percentage of salary be allowed for each year of service than the percentage allowed for the superannuation pension. Disability pensions should be calculated at the rate of i per cent, of the average compensation of the last 10 years for each year of service. It is believed that such arrangement will insure bona fide disability retirements and offset their greater cost. 10. Applicants for disability pensions should be examined by physicians of pension board: It is suggested that no pensions on the ground of disability should be granted unless such disability is certified by physicians of the pension board. Such physicians should not be under the jurisdiction of the Board of Education, nor should they be allowed to practice privately among teachers. 11. Disability pensioners should be periodically examined after retirement: Teachers retired on the ground of disability should be required to undergo annually an examination by the physicians of the pension board. If a pensioner is found to have regained health, the pension should be discontinued and return to active duty should be required. Details of Contributions by Teachers The cost of the provisions suggested in the preceding pages has been calculated and the contributions required on the part of the teachers now in service determined as follows: I. Teachers should contribute half of sum required for pensions accruing for future services: The share-and-share-alike principle appeals to logic as an equitable method for distributing the cost of a 52 scheme from which both parties are to benefit. It is on this basis that teachers now in service should contribute their pro rata share of pen- sions accruing because of future services. 2. Teachers should help discharge deficiency because of hack services: The contributions on the part of teachers now in service have been insufficient to cover any considerable part of the pensions accruing on account of past services. If the share-and-share-alike principle is adopted, it would be equitable for the city to expect the teachers to make up half of the resulting deficiency while the city makes provision for the payment of the other half. It must be pointed out, however, that a number of teachers are very near the retirement age and the deductions required to make up for insufficient contribu- tions would prove excessive. It is, therefore, advisable to increase the percentage deductions required for meeting half of the cost of pen- sions accruing for future services by additional percentage deductions for meeting half of the cost of pensions accruing for past services, setting, however, a limit of 8 per cent, of salary as a matter of ex- pediency, 3. Separate rates of contributions should apply to men and women teachers: The experience of the pension fund in the past has demon- strated the fact that the pensions of men teachers cost less than those of women teachers, mainly because their mortality rates are higher as compared with those observed among women teachers. In the interest of equity, therefore, the rates of contributions of men teachers should be lower than those to be applied to women teachers. 4. Contributions based on present age and years of service prior to reorganization: The salary deductions required to be made on the basis explained in the three preceding paragraphs have been calculated according to age at time of reorganization, i. e., "present" age and years of completed service. The rates for men and women teachers are presented in detail on pages 176 and 177. The deductions, expressed in percentages of salary, required for teachers who have reached the ages and completed the number of years of service indicated below are as follows : MEN TEACHERS Years of Service Prior to Reorganization Age at Reorganization 2 Yrs. 7 Yrs. 12 Yrs. 17 Yrs. 22 Yrs. 27 Yrs. 37 Yrs. 20 2.63 25 2.68 30 2.82 35 3.05 40 3.36 45 4.06 50 5 93 55 • 56 and above 3.00 3.19 3.50 3.92 4.53 5.93 8.00 3.56 3.96 4.51 5.30 6.61 8.00 8.00 4.42 5.10 6.09 7.76 8.00 8.00 5.71 6.90 8.00 8.00 8.00 7.73 8.00 8.00 8.00 .00 53 WOMEN TEACHERS Years of Service Prior to Reorganization Age at Reorganization 2 Yrs, 7 Yrs. 12 Yrs. 17 Yrs. 22 Yrs. 27 Yrs. 37 Yrs. 20 2.87 25 3.17 3.49 30 3.55 3.91 4.32 35 4.07 4.54 5.02 5.52 40 4.78 5.40 6.04 6.69 45 5.63 6.17 7.06 7.97 50 7.47 7.47 8.00 8.00 54 and above 8.00 8.00 8.00 In order to illustrate the application of the above rates to teachers already in the service, let us take, for instance, a woman teacher who has reached age 40 at the time the suggested plan goes into effect. If she has had 12 years' service, she will be required to contribute 6.04 per cent, of her salary as long as she remains in the service, and her contributions will be sufficient to provide one-half of the contemplated benefits. Another woman teacher who has had also 12 years of service, but who is 54 years old at the time of reorganization, would have to contribute 8 per cent, of salary for the remaining years of her service. The contribution required on her part to pay one-half of the benefits allowed by the suggested scheme would have necessitated the deduc- tion of 10.6 per cent, of her salary, as shown on page 177, On account of the hardship entailed in requiring excessively high contributions, these are limited to 8 per cent, of salary. The remaining 2.6 per cent, of salary in this case, therefore, would be contributed by the city. An approximate idea of the number of teachers who would be required to pay different contribution rates may be formed from the following statement, prepared according to the distribution of the teach- ing force by age and prior service, on June 30, 1914: Percentage of Salary Required as Contribution Men Teachers Number Per Cent of Total Women Teachers Number Per Cent of Total Total Teach- ing Force Number Per Cent of Total Less than 3% 3% and less than 4% 4% " " " 5% 5% ' 6% 6% " " " 7% 7% " " " 8% 8% Total 474 997 509 160 106 59 303 18.2 38.2 19.5 6.1 4.1 2.3 11.6 3,233 4,262 3,464 2,457 588 1,410 2,566 18.0 23.7 19.3 13.7 3.3 7.8 14.2 3,707 5,259 3,973 2,617 694 1,469 2,869 18.0 25.6 19.3 12.7 3.4 7.1 13.9 2,608 100.0 17,980 100.0 20,588 100.0 54 The distribution of the teaching force at the date of reorganiza- tion will be practically the same as that existing on June 30, 1914. As shown above, the majority of teachers, or 62.9 per cent, of their total number, would be required to contribute less than 5 per cent, of salary. Contributions of 5 per cent, and less than 8 per cent, of salary would be made by 23.2 per cent, of the force. Only 13.9 per cent, of the total number of teachers, a group consisting of those who would soon become eligible for retirement, would contribute at the maximum rate of 8 per cent, of salary. These high contributions would therefore be required for only a comparatively short time. 5. Contributions of teachers should be returned in case of zvith- drawal: It is suggested that the contributions of teachers should be refunded, with accumulations of compound interest at 4 per cent., in case of death, resignation or dismissal. These refunds are in the nature of additional benefit provisions, and naturally require larger contributions than would be necessary if teachers leaving the service before becoming eligible to pension were to forfeit the amounts they had paid into the fund. The refund provision has been taken into con- sideration in calculating the rates of contributions just presented, be- cause the failure to make refunds generally leads to dissatisfaction among employees and interferes with the discharge of inefficient em- ployees before they are eligible to pension. It is also assumed that the return of contributions with compound interest will be considered as an attractive savings arrangement by the younger teachers, who constitute the majority of the teaching force, and who would otherwise probably consider it a great hardship to make increased contributions for a remote benefit which they do not expect to claim. Application of Provisions Illustrated by Eight Individual Cases To illustrate the application of the suggested provisions governing benefits and contributions in individual cases, eight teachers now in the service have been selected. Six of these teachers, of various ages, lengths of prior service and grades of compensation, are credited only with expe- rience in local schools, while the remaining two teachers have entered the local school system with credit for outside teaching experience of 7 and 13 years, respectively. The past record of these teachers has been supple- mented by an estimate of future promotions under the present salary schedules. The combined "actual" past and "estimated" future experience is presented on pages 129 to 133, under the identification letter "A" to "H.^' Superannuation Retirement, and Contributions On the basis of the individual records of the eight teachers, the details of their eventual retirement at age 65 and the required contributions have been compiled in the following statement: 55 ^S S c c c h OOCOOOOOO CO-*(N'*T-tO'00 O t^^Tj^OCldotN' (N(M(NiO00(M00»O a, «^ ,_(,_i (M a ."x ^-^ O O ^bwl.^ CO CO OS o S^ G a > Ph O (^ O OG0»-HO'*OOO t^OJi-Ht^OiO-^O w . o fSj -ta a^. Ui g2b lOOOOOiOiOO o TtllCCOiOiO-^lO o 55 % ^ COOOt^O»OGCO Ph -4-3 coooeo>o;_ W < t-rT-Ti-Ti— 1 i-Tt-h" u ^ < td H -J-3 oooooooo H oooqqooo K o <6> (Zi ^ o iOO(MiOOOiOO i-H_Tj<_Qq^(Oicio^co^io^ 3 co~(N'~.-rc< PS oooooooo oddddd o'lo < hj lOOlMiOOOiOO CO < , H OOOOOOOO oooqqoqq g O C^ GO o o o o ^ u 0_^t^ t^ (N^lO^lO^lO^rH^ M i-T i-ri-ri-r(M''cc" €^ H 'o s§ t) > •^^ o O-^rJHeOOt^OO CC^^'^'^'^CC*^ ^ g< fe CO §2 o O S G ss J 0) tuO-S (M^fOrHOOi-'t^i-H 1— 1 1-H CO I— 1 fCl Q 00(NTt was 21,317, of which 2,713, or 12.7 per cent., were men and 18,604, or 87.3 per cent., were women, and the total annual salary charge as of that date was $30,284,217.* This number does not include substitute teachers who make no con- tributions. The non-teaching staff of the Department of Education, which includes the administrative officials, the clerical force, the janitorial service, the construction division, etc., is covered by the provisions of the "Grady Law" (sections 165, 166 and 167 of the Greater New York Charter), which apply to all municipal employees not eligible for pensions from special departmental funds. The number of employees on the non-teaching staff was approximately 1,660 on June 30, 1914. The distribution of the teaching and supervising staff, according to age and length of service, is shown in Tables 2 and 3, on pages no and in, for men and women respectively. The data collected in the census of municipal employees on June 30, 1914, was used as the basis for compiling these tables. The following is a summary of age distribution : Present Age Men Women Total Number Per Cent. of Total Number Per Cent. of Total Number Per Cent. of Total 17 30 40 65 70 years and less than 30 years " " "40 " "65 " " " "70 " " " "75 " 707 995 878 28 3.4 4.9 4.3 .1 7,431 5,800 4,694 51 4 36.1 28.2 22.8 .2 8,138 6,795 5,572 79 • 4 39.5 33.1 27.1 .3 Totals 2,608 12.7 17,980 87.3 20,588 100.0 *The present salary rates, in effect since January i, 1912, as well as those obtaining prior to the enactment of the "equal pay" law, are presented in Table 4, opposite page 112. Y9 The following summary shows the distribution by years of service: Men Women Total Length of Service Number Per Cent. of Total Number Per Cent. of Total Number Per Cent. of Total Less than 10 years 10 years and less than 20 years 20 " " " "30 " 30 years and over 1,357 1,007 194 50 6.6 4.9 1.0 .2 9,524 5,460 2,067 929 46.3 26.5 10.0 4.5 10,881 6,467 2,261 979 52.9 31.4 11.0 4.7 Totals 2,608 12.7 17,980 87.3 20,588 100.0 Requirements for Entrance Into the Service The teaching staff is recruited through examinations held by the Board of Examiners which consists of the city superintendent of schools and four other persons appointed by the Board of Education upon the nomina- tion of the city superintendent. Eligible lists remain in force for three years, except those for principals, which remain in force until exhausted. The age limits for entrance into the service, in force since 1879, vary according to the license issued, but the usual age requirement for teachers is from 18 to 40, and for principals from 25 to 50. There are various exceptions to these rules, but such exceptions apply principally to promo- tions of those in the service. Before appointment a physical examination is made of all applicants, by either a man or woman physician of the Board of Education. The few rejections that are made are mainly for defective sight or hearing. Approximately 600 applicants for teachers' licenses were examined during the year 1914, and, in addition, a physical examination was made of about 900 applicants for the training school for teachers. Physical examination is required only upon entrance into service, none being made when teachers are promoted to higher grades. Hours of Work and Vacation Periods The number of hours which a teacher devotes to her duties depends to a considerable extent upon herself. The class-room period is rarely more than five hours a day, but frequently the teacher spends considerable time after school hours in rating papers and preparing for the next day's class work. There are from 171 to 176 non-working days throughout the year, including Saturdays and Sundays and the vacation periods. This leaves from 189 to 194 school days. Some of the teachers supplement their salaries by teaching in evening schools, vacation schools, etc. 80 Leaves of absence without pay are granted for a period not to exceed one year for the purpose of study or restoration of health, and for two years for child bearing. Medical Supervision of the Teaching Force The Department of Education has no staff of physicians to supervise the health of the teaching force or to investigate causes of absence on account of illness. The duties of the two physicians employed by the department are restricted to the physical examination of applicants for licenses. Occasionally, they are requested to verify the statements of pri- vate physicians in connection with applications for the retirement of teach- ers because of disability. No statistics are available at present,* therefore, showing the total sick rate or prevalent diseases among teachers. Sick Leave Allowances Under a recent rule, very much stricter than the rule hitherto in force, teachers absent on account of illness are allowed full pay, at the discretion of the proper departmental officials, for varying periods, according to length of service, as follows : Years of Service Maximvim Number of Days Excused with Pay First 3 years 4th to 6th year 7th " 10th " 20 days 30 " 40 " 11th " 15th " 50 " 15th year and thereafter 60 " The present rules governing sick leave with pay were established on July 14, 191 5. Deductions of 1/25 of a month's salary are made auto- matically for every day's absence and paid into the retirement fund. In order to receive full pay for absences on account of illness, the teacher submits an application with a physician's certificate, which must be sworn to if required by the Local School Board or by the Board of Superinten- dents. If the application is approved, a refund of the amount deducted is made out of the retirement fund. Prior to September, 1908, the maximum annual sick leave allowed with full pay was 55 days. The regulations in force from September, 1908, to July 14, 1915, were more liberal. Under these regulations, 1/30 of a month's salary was deducted for each day's unexcused absence. Full pay * A thorough study of this subject is now being made under the auspices of the Bureau of Reference and Research of the Board of Education, and the School Problems Committee of the Brookljm Teachers' Association. 81 was granted for only i^ days of the first 4 days excused, but additional leaves of absence with full pay, not exceeding 91 days, were granted. A teacher, therefore, could absent herself from duty 95 of the 189 to 194 school days and receive pay for all but 2^ days. It was possible for a teacher who was absent from duty the entire year to draw about 71 per cent, of her salary, full pay for 92^ of 95 days' excused absence and 171 to 176 non- school days. It has been shown, conclusively, in a report submitted by Associate Superintendent Shallow to the city superintendent that the sick rate of teachers depends to a considerable extent on the comparative liberality of the department by-laws relating to absences excused with pay.* In this report a comparison was made of absences of teachers during the year 1903 under stringent absent regulations and the year 1912 under the most liberal regulations known in this country. It was shown that in 1903 about 2.8 per cent, of the teachers were absent during the year and in 1912 5 per cent, were absent. It is obvious, therefore, that present statistics of illness among the active force, even if available in convenient form, cannot be used as a reliable basis for conclusions as to the prevalence of disabling sickness among teachers. Discontinuance from Active Service Table 5, page 113, compiled from the data collected in the census of municipal employees on June 30, 1914, shows the number of the teaching force discontinued from active service for various causes. The total with- drawals for the six-year period ending June 30, 1914, were as follows: Cause of Withdrawal Number Per Cent of Total Dismissal 13 3,341 418 805 4,577 .3 Resignation 73.0 Death 9.1 Retirement 17.6 Total withdrawals 100.0 * See pages 371 to 389, report of the city superintendent of schools for the year ending July 31, 1914- 82 CHAPTER X ESTABLISHMENT AND DEVELOPMENT OF FUND New York Fund Operated Independently from 1894 to 1901 The laws of 1894 (chapter 296) created a retirement fund for the teachers of the city of New York, providing an income from the follow- ing sources: 1. Absence deductions from the salaries of teachers, to be so regu- lated as to provide a sufficient income for the payment of pensions 2. Donations, legacies, gifts, etc. 3. Interest on the fund Pensions of one-half of the final salary, not exceeding $1,000, could be granted by a two-thirds vote of the Board of Education to teachers mentally or physically disabled for the performance of duty, upon the recommendation of the city superintendent. The service requirement was : (i) after 30 years for women teachers, and (2) after 35 years for men teachers. The Board of Education was given complete charge of the fund and the establishment of by-laws for its management. It was empowered to reduce pensions to a uniform rate. The comptroller of the city of New York was made treasurer of the fund. Under these provisions the New York fund was operated independ- ently of the Brookl)m fund until the close of 190 1. In 1894 the income from unrefunded absence deductions amounted to $25,060.33. During the following year, 35 teachers were placed on the pension roll with an average service of 39.09 years. Their average age at appointment was 19.71 years, many having entered the service between 13 and 17 years. The retirements of the Manhattan and Bronx teachers during the seven years of the fund's independent operation were as follows: Year Men Women Total 1895 3 6 1 6 7 2 2 27 32 44 56 18 100 25 43 318 35 1896 50 1897 57 1898 24 1899 107 1900 27 1901 45 Total 345 83 Of the 345 retired teachers, 35 died during the seven-year period, leaving on December 31, 1901, a total of 310 pensioners on the pension roll. The Greater New York consolidation in 1897 did not affect the opera- tion of the fund. Sections 1083 and 11 19 of the first Greater New York charter continued the separate existence of the New York and Brooklyn funds, adding, however, provisions regulating the transfer of teachers from one fund to the other. To section 1083 of the charter (laws of 1897, chap- ter 378), relating to the New York fund, was added the following pro- vision : "None of the provisions of this section shall apply, however, to any teacher in any school in the Borough of Brooklyn who is entitled to any benefit under the fund mentioned in section 11 19 (Brooklyn Teachers' Fund) of this act until after his removal from said borough. When a teacher is transferred to the Borough of Brooklyn, a sum equal to one percentum of the amount paid to such teacher during said teacher's service in the city of New York, as constituted prior to the passage of this act, since the date on which the Public School Teachers' Retirement Fund of Brooklyn was created, shall be paid into the said Brooklyn Retirement Fund and inure to the teacher's benefit in that fund under the rules governing the same." In 1898 (laws of 1898, chapter 91) a new source of income was applied to the fund. Five per cent, of the excise moneys belonging to the city of New York was to be apportioned by the Board of Education among the several boroughs, according to the number of teachers actually employed and the amount of salaries paid to them in each of the boroughs. In 1901 (laws of 1901, chapter 186) a provision was added providing for a minimum pension of $600, as follows : "In no case shall such annuity for any teacher already retired or hereafter to be retired, be less than $600." This automatically raised many pensions granted prior to that time to over 50 per cent, of the salary received at retirement. The additional annual charge on account of this provision amounted to $13,035 in 1901. The same law made the female staflf of Hunter College eligible to retirement from the New York fund under more favorable conditions than the public school teachers. It gave the Board of Education power "by two-thirds vote of all its members, and after recommendation to that effect shall have been made by the Board of Trustees of the Normal College, stating that the teacher is mentally or physically incapacitated for the performance of duty, to retire the female super- intendent and any female tutors of the Normal College and the female superintendent and any female critic teacher of the Training Depart- ment of the Normal College who have taught in said Normal College or Training Department or in the public schools during a period ag- gregating thirty years." 84 Retirement on application without proof of incapacity and regardless of age was also permitted by the following provision: "The said Board of Education, upon the recommendation of the Trustees of the Normal College, may also, in its discretion, retire any such teacher or teachers upon her or their own application after the like period of service," The first retirement of a Hunter College teacher under these pro- visions was made on April 26, 1901, when a pension of $455, or half the teacher's salary of $910, was granted. The provision for a minimum pen- sion of $600 did not apply to the Normal College retirements at that time. Brookl3m Fund Operated Independently from 1895 to 1901 As early as 1879 and 1881 the Brooklyn teachers made efforts to establish a retirement fund. The bills introduced in the legislature of those years were, however, defeated. The campaign for pensions continued and succeeded in 1895. The laws of 1895, chapter 656, established the Brooklyn Teachers' Retirement Fund, which was to derive its income from the following sources : 1. One per cent, of future salaries of existing teachers who shall elect to come under the act and one per cent, of the salaries of all teachers appointed after January i, 1896 2. Donations, legacies, gifts, etc. 3. Interest on the fund Pensions of one-half of the final salary, not exceeding $1,200, were to be granted at the discretion of the Board of Education of the city of Brooklyn to women teachers not less than 55 years old and to men teachers not less than 60 years old, after a teaching experience of thirty years, of which twenty years must have been in Brooklyn schools. No retirement was to be made unless the teacher had paid into the fund 20 per cent, of the last annual salary before retirement. The Board of Education of the city of Brooklyn was given complete charge of the administration and custody of the fund and empowered to establish rules and regulations for that purpose. It was also given the power to reduce pensions in case of insufficiency of funds. The pension fund operated under these provisions until 1901 without change. The operation of the fund during the six-year period of its separate existence is shown by the following statement of receipts and disbursements, taken from the 1909 report of the secretary of the Board of Retirement: 86 Receipts Pensions Paid Year 1 Per Cent. Salary Contributions Back Con- tributions of Pensioners Interest Total Balance Dec. 31st 1896... } $35,251.99 21,483.17 29,330.52 35,763.09 10,980. 38 (*) $6,032.00 2,375.17 1,149.34 7,316.36 8,761.70 418.14 $330.80 728.20 1,111.76 1,317.83 1,138.43 43.34 $41,614.79 24,586.54 31,591.62 44,397.28 20,880.51 461.48 $ 1,927.06 11,902.91 19,315.49 21,610.00 41,329.63 53,835.97 1897. . . 1898. . . 1899. . . 1900. . . 1901... 1902. . . $27,784.82 33,055.87 43,037.49 46,105.14 13,149.68 13,611. 16(t) Total . . $132,809.15 $26,052.71 $4,670.36 $163,532.22 $149,921.06 The consolidation of Greater New York in 1897 left the Brooklyn fund undisturbed. Section 11 19 of the charter (laws of 1897, chapter 378), after restating the provisions of the Brooklyn law, provided in addition : "When a teacher is transferred to another borough having a teachers' retirement fund, his or her contribution may be paid into the said fund and inure to the teacher's benefit in that fund under the rules governing the same." In 1898 (laws of 1898, chapter 91) the fund became entitled to a share of the 5 per cent, of excise moneys of the city of New York in proportion to the number of the Brooklyn teachers and their salaries. The income from this source remained in the New York fund and was credited on its books to the Brooklyn fund, as follows : 1898 $97,045.27 1899 94,676.37 1900 95,437.30 1901 75,213.31 Total $362,372.25 Funds Consolidated in 1901 with Increased Benefits The laws of 1901, chapter 466, provided for the consolidation of the New York and Brooklyn funds. The benefits of both funds were repealed and retirement provided under more liberal conditions. Under the new law, a disability pension after thirty years of service (twenty in New York •The law discontinuing contributions of teachers became effective on April 22, 1901. t This amount was turned over to the comptroller of the city of New York on January 22, 1902, upon the merging of the Brooklyn fund with the New York City fund. City) was allowed at one-half of the salary received at the date of retire- ment, with a minimum of $600 and a maximum limit of $1,000 for teachers, $1,500 for principals and $2,000 for supervising officials. A pension of like amount was permitted at 65 years of age, after thirty years' service (twenty in New York City). The granting of a disability pension required the recommendation of the city superintendent and a two-thirds vote of the Board of Education. There was no such requirement for the "age 65" pension. The provisions in the old New York and Brooklyn laws relating to the reduction of pensions were omitted. The 5 per cent, of the city's excise money remained as one of the sources of income of the fund. The income from unrefunded absence deductions, heretofore accruing only to the old New York fund, was ap- plied also to the Brooklyn teachers. The one per cent, salary contributions of the latter which the law had required in the past were discontinued. The provisions of the law of 1901 (chapter 186), passed a month before, relating to the female staff of Hunter College, were continued. In 1902 (laws of 1902, chapter 530) the scope of the fund was ex- tended to include schools and classes maintained in institutions controlled by the Departments of Public Charities and Correction. The city superin- tendent of schools was also added to those eligible to pension benefits. In 1903 (laws of 1903, chapter 177) the limitation on Hunter College benefits to women was removed. A requirement was added that ten of the thirty years of service of the Hunter College teachers shall be in the Hunter College or training department of the city of New York. The law changed the "one-half" salary provision to read "not less than one- half," and further provided in the case of a president or professor "such an additional sum per annum as will increase such one-half of the salary previously paid, if not an even multiple of $1,000, to an even multiple of $1,000." It also provided for a minimum pension of $600 for the Hunter College teachers. In 1905 (laws of 1905, chapter 107) the present section 1092-a of the charter, relating to the exemption of pension moneys from execution, was inserted in the law. Reorganization of Fund from 1905 to 1914 Substantial changes in the retirement law were introduced in 1905 (laws of 1905, chapter 661) and became effective on June ist of that year. The income of the fund was increased by the requirement of one per cent, salary contributions of all entitled to pension benefits, limited to a maximum of $30 per annum for teachers and principals, and $40 per annum for supervising officials. It will be remembered that the Brooklyn teachers had been required, until 1901, to make such a contribution. The new law omitted the requirement that absence deductions "shall be fully adequate to meet the demands upon the Public School Teachers' 87 Retirement Fund." To guarantee the safety of pensions of retired teachers, it limited the number of annual retirements so that the entire amount of annuities to he paid in any one year should not exceed the estimated income of the fund in that year. A Board of Retirement was created and its powers defined. The benefits were substantially liberalized. The requirement of thirty years of service (twenty in the city of New York) for retirement because of dis- ability was reduced to twenty years (fifteen in the city of New York). For retirement at age 65 after thirty years of service, in the discretion, of the Board of Education, the law omitted the requirement that twenty of the thirty years must have been served in New York City. An entirely new provision was added for retirement upon application of a teacher after thirty years of service (fifteen in New York City) irrespective of age or physical condition. The new law provided that all retirements after thirty years were to be at half salary, except those of the Hunter College stafif. The teachers' maximum pension was raised from $1,000 to $1,500, as at present. The application of the $600 minimum was limited to retirement after a service of not less than thirty years. For shorter periods pensions of one-sixtieth of the final salary for each year of service were to be granted. In the definition of beneficiaries of the fund, the teaching and super- vising staff was to include "the city superintendent of schools, the associate city superintendents, the district superintendents, the members of the board of examiners, the directors and assistant directors of special branches, the supervisor and assistant supervisor of lectures, all principals, vice-prin- cipals, assistants to principals, heads of departments and all regular and special teachers of the public day schools of the city of New York." The provisions for the retirement of the members of the Hunter Col- lege staff, including special privileges afforded the president and professors, were left unchanged. The first Board of Retirement was organized on July 10, 1905, some of its members holding their membership up to the present time. The first retirements upon the recommendation of the new board took place on February i, 1906. The laws of 1907, chapter 167, reduced the period of service of Hunter College applicants for disability retirements from thirty years (ten in New York City) to twenty years (ten in New York City), and added a pro- vision for retirement after thirty years' service upon the recommendation of the Trustees of Hunter College, in the discretion of the Board of Edu- cation, omitting the requirement exacted in the case of public school teachers that fifteen of the thirty years shall have been in the city service. In 1909 (laws of 1909, chapter 505) section 1092-b of the present charter was added, allowing an expenditure of not exceeding $1,500 per annum for the administrative expenses of the fund. On January 18, 191 1, the by-laws of the Board of Education were 88 amended to provide for the compulsory retirement, without the recom- mendation of the Board of Retirement, of teachers reaching 70 years of age. The city superintendent submitted the first list of 21 teachers who would reach 70 years of age on or before February i, 19 12, and the Board of Education voted to retire the entire 21 as of that date. The laws of 1914, chapter 476, added to those eligible to participate in the retirement fund, the director and assistant director of the Division of Reference and Research in the Department of Education. The main changes in the benefit and income provisions of the fund are presented in the chart on the following pages. 89 Changes in Benefit and Income Benefit and Income Provisions Benefits "Service" pension, without proof of incapacity: 30 years' service (15 in N. Y. City schools) 30 years' service (no minimum service in N. Y. City schools).. 30 years' service (10 years in N. Y. City schools) Compulsory "superannuation" pen- sion in discretion of Board of Education: Age 70, after 30 years' service (no minimum service in N. Y. City schools) Age 65, after 30 years' service (no minimum service in N. Y. City schools) Age 65, after 30 years' service (20 in N. Y. City schools) "Service" and "superannuation" pension: Women, 55 years old and 30 years' service (20 years Bklyn. schools) Men, 60 years old and 30 years' service (20 years Brooklyn schools) "Disability" pension: Women, after 30 years' service in N. Y. City schools Men, after 35 years' service in N. Y. City schools 30 years' service (20 years in N. Y. City schools) 20 years' service (15 years in N. Y. City schools) 30 years' service (no minimum service in N. Y. City schools) . 30 years' service (10 years in N. Y. City schools) 20 years' service (10 years in N. Y. City schools) Income Employees. City, indirect contributions. Others. 1894 Chapter 296 N. Y., H salary max., 11,000. N. Y., H salary; max., f 1,000. N. Y., no con tribution N. Y., Absence deductions.. N.Y., Donations, &c. N. Y., interest. 1895 Chapter 656 Bklyn., J^ salary, max. f 1,200 Bklyn., J^ salary; max., 11,200. .. Bklyn., 1% sal. 1898 Chapter 91 N. C, ii salary; max. $1,000 N. Y., Excise taxes Bklyn., Excise taxes Bklyn., dona- tions, &c Bklyn., interest. 1901 Chapter 186 N. Y., ^ salary; min., 1600; max., 11,000... N. Y., H salary; min., $600; max., 11,000. ., N. C, H salarv max., 11,000... •Abbreviations: N. Y. — New York Teachers' Fund (1894 to 1901); Bklyn. — Brooklyn Teachers' Fund (1895 to 1901); N. C. — Normal College. t Minimum, $600; president and professors receive pension of even multiple of $1,000. 90 Provisions — 1894 to 19 14, inclusive * 1901 Chapter 466 1903 Chapter 177 1905 Chapter 661 1907 Chapter 167 Jan. 18, 1911 By-Laws of Board of Education Present Provisions Discontinued N. C, not less than yi salaryt- J^salary.t N. C, not less than ^ salaryt- Discontinued Discontinued. 14 salaryt H salary .J H salaryj. i^ saljiryj Discontinued Discontinued. Discontinued Discontinued. Discontinued.. . . Discontinued. Discontinued Discontinued. Discontinued Discontinued. H salary} Discontinued 1/60 of salary for each yr. of serv. . 1/60 of salary for each yr. of serv. Discontinued N. C, not less Discontinued. Discontinued. N. C, 1/60 of salary for each year of service. N. C, 1/60 of sal- ary for each year of service. No contribution. No contribution! 1% of sal.; max., $30 for teach. & princ. : $40 suprv. officials 1 1% of sal.; max., $30 for teach, and 1 princ; $40 for superv. officials. N. C, 1% of sal. Absence deductions N. C, 1% sal Absence deduc- 1 j cise taxes J I 5% of excise taxes. Donations, &c. . . Donations, &c. Interest Interest. t Minimum $6oo; maximum, $1,500 for teachers and principals, $2,000 for supervising officials. § Minimum, $600; maximum, $1,000 for teachers; $1,500 for principals; $2,000 for supervising officials. 91 Pensions Increase from $12,633.34 in 1895 to $1,183,397.08 in 1914 The effect of liberalizing benefit provisions and their extension to new classes of beneficiaries can best be illustrated by the following statement of pension payments made annually to retired teachers :* y. Pension y Pension ^^^ Payments ^^^^ Payments 1895 $12,633 .34 1905 $526,502.36 1896 42,595.07 1906 616,984.54 1897 71,539.49 1907 689,390.64 1898 102,157.04 1908 724,129.78 1899 124,296.18 1909 777,800.85 1900 214,563.57 1910 833,863.59 1901 263,805.28 1911 880,389.83 1902 343,017.13 1912 983,554.99 1903 420,026.99 1913 1,108,874.30 1904 477,418.74 1914 1,183,397.08 Total pensions $10,396,940.79 Administrative expenses 4,600 . 29 Total disbursements $10,401,541 .08 Main Causes for Rapid Increase in Pension Pajmients One of the most important causes for the rapid increase of pension demands in the past as well as of payments to be made in the future must be attributed to the growth in the number of teachers in active service. The strength of the teaching and supervising force subject to the retirement laws increased at the end of the school years 1899 to 1914 (July 31st) as follows: y Number of y Number of ^^^^ Employees ^^^^ Employees 1899 10,008 1907 15,728 1900 10,555 1908 16,655 1901 11,338 1909 17,244 1902 12,161 1910 17,907 1903 12,792 1911 18,369 1904 13,428 1912 19,073 1905 13,888 1913 19,681 1906 14,660 1914 t20,588 In addition to the rapid growth of the active force, a number of other conditions have caused sudden increases in the annual pension demands. The * For details consult Table 6, page 113. t As of June 30, 1914. 92 first of these increases, when the fund had time to settle to normal conditions after the first few years of operation, occurred in 1900, the pension payments for that year amounting to $214,563.57 as against $124,296.18 in 1899. This was due to an increase in salary schedules in 1899. In the next year the salary schedules were to be reduced, and as a result 108 teachers retired on December 31, 1899, to avoid substantial reduction in retirement allowances. The increases in 1902 and 1903 are directly traceable to the effect of more liberal retirement provisions introduced on the consolidation of the New York and Brooklyn funds in 1901. The removal of the age limitations and the reduction of the minimum years of service enabled a greater number to apply for retirement. The increase in the maximum pensions from $1,000 in the old New York fund and $1,200 in the Brooklyn fund to $2,000 granted from the consolidated fund raised the average amount of newly added annui- ties. Finally, the application of the minimum limit of $600 to pensions granted in the past raised the annual charge for already existing pensions by $16,590. Of this amount $13,035 represented the retroactive increase in 1901 of pensions granted from the old New York fund and $3,555, the added charge in 1902 on account of past retirements from the Brooklyn fund. The next substantial increases in the annual pension expenditures occurred in 1906 and 1907, the pension roll rising from $526,502.36 in 1905 to $616,984.54 in 1906 and to $689,390.64 in 1907 — an increase of $162,888.28 during the two years. It will be remembered that in 1905 the fund was reor- ganized along lines more liberal even than those prevailing before that date. The right to retirement after thirty years on application without proof of mcapacity, and the reduction of the service requirement to twenty years in case of retirement for disability which was certified to by the applicant's home physician, were the main causes, inducing a large number of teachers to avail themselves of the retirement privileges. On January i, 1912, the "equal pay'^ law came into effect substantially raising existing salary rates. Teachers who had contemplated retirement in the immediate past, but were waiting for the new law to be passed, were now ready to be placed on the pension roll at half the salary received but a few months before retiring from the service. The increases of $103,165.16 and $125,319.31 in the pension payments of 1912 and 1913 over the preceding years illustrate the extent to which the "equal pay" law increased the liabili- ties of the fund. In the following year the helpless financial condition of the fund was so apparent that the retirements were somewhat restricted. As a result, only 42 teachers were retired on February i, 1914, and 50 teachers on September I, 1914. The added pensions caused the pension payments in 1914 to rise to $1,183,397.08, exceeding the 1913 pensions only by about $74,522.78. In order to facilitate the study of the rapid increase of the pension charge in the past, the fluctuations in the number of annual retirements, the average pension granted each year and the total pension charge assumed on account of yearly added pensions are given in the following statements : 98 35 $594.84 $20,819.50 63 600.70 37,844.00 77 580.74 44,717.00 29 695.88 20,180.50 134 716.81 96,052.00 42 768.33 32,270.00 78 738.27 57,585.00 121 843.72 102,090.00 97 816.29 79,180.00 112 787.77 88,230.00 38 818.42 31,100.00 197 746.74 147,107.99 86 787.85 67,754.81 98 739.35 72,456.21 127 787.58 100,023.09 109 732.89 79,884.67 89 719.69 64,052.39 222 887.07 196,928.29 173 889.02 153,800.78 92 948.38 87,250.60 Number Re- Average Total Annual Year tired During Annuity Charge of the Year Granted Annuities Granted 1895 1896 1897 1898 1899 1900 1901 ; 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 City Contributed 80 Per Cent, of Income of Fund A detailed statement of the receipts of the fund since the date of its establishment in 1894, a statement showing absence deductions, refunds and net deductions, an analyzed statement of receipts and disbursements, and a statement of surpluses, deficits and balances are presented in Tables 7, 8, 9 and 10, pages 114 to 117, respectively. The separate transactions of the old New York and Brooklyn funds up to 1901 have been combined, and the statements therefore represent the financial pension operations on account of both teachers' funds since 1894. A summary of the receipts during the twenty-one year period of the fund's existence follows : Per Cent Items of Receipts Amount ^£ Total' Employees' Contributions $2,222,624.98 19.65 1% salary contributions of Brooklyn teachers from 1896 to 1901, inclusive 158,861 .76 1% salary contributions of all teachers from June 1, 1905, to December 31, 1914 2,063,763.22 Indirect City Contributions 8,510,280.94 75.26 Unrefunded absence deductions since 1894 3,743,903 . 16 Fines since 1910 1,818.58 Excise licenses since 1899 4,764,559.20 Donations and Bequests 1,144.88 .01 Interest 574,095.85 5.08 Total Receipts $11,308,146.65 100.00 From the above, it will be seen that about eighty per cent, of all receipts of the fund were contributed by the city, including the amount of interest 94 which accrued from a permanent fund of $800,000 set aside in 1905, and which represented mainly the accumulations of city contributions. Depletion of Fund Begins in 1910 As will be seen from the facts presented in Table 10, page 117, the fund was accumulating a surplus until 1909, at the close of which year the balance in the fund amounted to $1,353,305.70, including the $800,000 permanent fund set aside by legislative act in 1905. Beginning with the year 1910, however, the surplus capital began to be depleted, the annual receipts falling short of the annual disbursements in amounts as follows : Year ^Xft ^^^^ at End Balance in md at E: of Year 1910 $48,142.95 $1,305,162.75 1911 77,337.53 1,227,825.22 1912 134,773.71 1,093,051.51 1913 79,380.46 1,013,671 .05 1914 107,065.48 906,605.57 During the last two years, 1913 and 1914, the continuation of the fund's existence was made possible only by extraordinary measures which merely postponed its complete breakdown. In 19 13 the advance to the fund of $200,000 of excise moneys which would have been received under prevailing practice in January, 1914, enabled it to pay pensions, although the surplus fund was further reduced by $79,380.46. In 1914, in addition to the advance of excise moneys, the embargo on refunds imposed by the by-laws of the Board of Education since September 24, 1913 (see Table 8, page 115), and the curtailment of 1914 retirements (only 92 pensioners were added to the roll), helped the fund barely to meet its most pressing obligations to teachers already retired. Present Bankruptcy Hastened by Payment of $160,000 of Refunds in 1915 Table 11, pages 118 and 119, shows the actual receipts and disburse- ments of the fund during the first seven months of 191 5 and its estimated transactions during the balance of the year. This statement has been compiled from the books of the Finance Depart- ment, the balances of which do not agree with those shown on the books of the auditor's office of the Department of Education. This is due to the fact that a number of items originate in the Board of Education, while others are first entered on the books of the Finance Department, resulting in differences in the accounts because of vouchers or information in transit. The balance of $29,841.09 shown in Table 11, as of January i, 1915, is 95 exclusive of the $800,000 permanent reserve capital which is not available for the payment of pensions and which cannot be released except by legis- lative action. The balance also omits the December, 1914, contributions of employees and gross absence deductions, as well as some minor items which were not actually turned over to the fund until 191 5, although they were credited on the books of the Department of Education for the months when the items accrued. As shown by the statement referred to (Table 11), a total of $160,- 658.73 was paid out in refunds of absence deductions during the first seven months of 1915. This extra drain on the fund, which could have been postponed until relief from the legislature was obtained in 1916, hastened the exhaustion of the fund. Teachers Allowed Leaves of Absence with Half -pay in Lieu of Retire- ment No pensions were granted in 191 5. Instead, teachers applying for retirement were allowed leave of absence for one year on half pay. The number of teachers placed in this manner on the "unofficial" retirement list during the first half of the year was 42, the average annual "half pay" was $938.43, and the total annual charge paid from the general fund of the Department of Education was $39,414.24. Pensions Increased to 4.15 Per Cent, of Active Pa3rroll The growth of the pension fund during the ten year period 1905 to 19 14 as compared with the growth of the active force is indicated by Table 12, page 120. It must be kept in mind that payroll payments are for cur- rent services, while pension payments are for services rendered in the past. Although there is no direct or immediate relation between the two, the comparison serves as a basis for a proper appreciation of the growth of pension demands. In 1906 for every $100 expended for the services of active teachers $3.65 was paid for pensions accruing for services rendered in the past. This rela- tive amount gradually increased until in 1914 for every $100 paid in salaries $4.15 was required for the payment of pensions. The increase is explained by the fact that more pensions are added to the roll each year than terminate on account of death. It is the more noteworthy because the active payroll has been increasing at a rapid rate during the same period — a factor which tends to lower the percentage proportion of pension payments. 1,549 Retired Teachers Draw Average Pension of $784.53 at Close of 1914 On December 31, 1914, there were 1,549 retired teachers on the pension roll. The distribution of benefits among these pensioners is shown in detail in Table 13, page 121. The total annual charge was $1,215,231.11. Pensions ranging between $402.39 and $5,000 per annurn were paid in groups as fol- lows: 96 Annual Pension Number ^^^ ^^^ $402.39 and less than $600 150 9.6 600 " " " 1,000 1,165 75.2 1,000 " " " 1,750 226 14.6 1,750 " " " 2,500 6 0.4 3,000 1 0.1 5,000 1 0.1 Total 1,549 100.0 The first group consists entirely of teachers retired for disability after less than thirty years of service, at the rate of i/6o of the final salary for each year of service. The minimum limitation of $6oo per annum does not apply to this group. The majority of pensioners in the second group are elementary school teachers. Those retired under the old salary schedules prior to 19 12 are mostly drawing a pension of $660 per annum. The majority of those pen- sioned after the introduction of the "equal pay" law are in receipt of pensions of $750, $800, $910 and $960 per annum. The third group consists of teachers who reached the higher grades before retirement and principals whose pensions are limited by law to $1,500 per annum. Supervising officials limited to a maximum pension of $2,000 per annum are in the fourth group, while a former professor of Hunter College is drawing $3,000 and the ex-president of Hunter College $5,000 per annum.* Average Present Age of Men and Women Pensioners Tables 14 and 15, pages 121 and 122, contain a classification of all re- tired teachers on the rolls on June 30, 1914, by sex, cause of retirement and present age. The average present age of men pensionrs is 69.50 years and of women pensioners 62.05 years. A summary of these tables is presented below : Average Class of Pensioners Number Present Age Total Pensioners 1,521 62.46 Men pensioners Women pensioners "Service' ' pensioners Men pensioners Women pensioners "Disability' ' pensioners Men pensioners 11 57 .00 Women pensioners 278 51 .83 * Died Oct. 14, 1915. 97 82 1,439 69.50 62.05 1,232 * 64.90 71 1,161 71.44 64.50 289 52.03 Average Age at Retirement for "Service" of Men and Women Pen- sioners Tables i6 and 17, pages 122 and 123, show a classification of teachers who retired because of length of service, by sex, service prior to retirement, age at appointment and age at retirement. The information presented is summarized as follows : Average Age Average Average Class of Pensioners NiHnber at Years of Age at Re- Appointment Service tirement Men pensioners 71 33.10 33.80 66.90 Women pensioners 1,161 21 .21 36 .04 57 .25 An inspection of the above figures shows that men teachers continue in service until a much later period in life than women teachers. Their pensions, therefore, are less costly, provided they are of the same amounts, since the period of their retirement is on the average much shorter than that of the women teachers. Another interesting point is brought out by the tables referred to. The tabulations include, under years of service, only the time served in New York schools, and the age at appointment refers only to entrance into New York schools. Teachers whose service is shown as less than thirty years had teaching experience outside of New York City which was credited for retire- ment by the fund. The following facts supplement, therefore, the summary above presented: Men Women Pensioners Pensioners Number of pensioners with less than 30 years' service in New York City schools 26 103 Ntmiber of pensioners with 30 or more years of service in New York City schools 45 1,058 Per cent, of pensioners with less than 30 years' service in New York City schools 57.8% 9.7% Average entrance age of those with 30 or more years of service in New York City schools 26.40 years 19.73 years Average service of those with 30 or more years of service in New York City schools 41 .69 years 37.40 years Average retirement age of those with 30 or more years of service in New York City schools 68 .09 years 57 . 13 years Average Age at Retirement for "Disability" of Men and Women Pen- sioners The details of the retirement of teachers for disability are presented in Tables 18 and 19, pages 123 and 124. The information presented is sum- marized as follows: 98 Average Average Average Class of Pensioners Number Age at Years of Age at Re- Appointment Service tirement Men pensioners 11 36.27 18.55 54.82 Women pensioners 278 24.36 24.03 48.39 The comparatively small number of disability pensioners on the roll (19 per cent, of the total number of 1,521 pensioners) is explained by the fact that only since February i, 1906, did the provision permitting retire- ment for disability after twenty years' service (fifteen in the city of New York) come into effect, while the provision for retirement after thirty years' service was a feature of the pension plan since its establishment. Attention is also called to the fact that those pensioners who are shown in the two tabulations (Tables 18 and 19, pages 123 and 124) as having served less than twenty years must have had outside experience to have qualified for disability retirement. 99 CHAPTER XI UNSUCCESSFUL REORGANIZATION ATTEMPTS Recurrence of Past Errors Must be Avoided Efforts have been made in the past six years by teachers as well as by the government to amend the present retirement law. Disregarding for the present the question of the soundness of proposed amendments, the most sig- nificant feature of the past and present agitation is the inability of individual teachers and groups of teachers to unite on any definite policy. To save the fund and to place it on an equitable and financially sound basis, the sincere and earnest cooperation of all concerned is required. Grave errors in the development of teachers' pension funds in this country and consequent failures* have so far made no impression on the teachers of the city of New York. Now that their own fund is in a pre- carious condition, it is hoped that an effort will be made by the teachers to unite in an intelligent constructive movement. With no desire to locate responsibility and merely for the purpose of pointing out the mistakes which must be avoided to obtain good results, this chapter is devoted to a brief account of the unsuccessful reorganization attempts of the past. Increased Benefits Demanded Despite Knowledge of Insolvency During the years 1908 and 1909, repeated efforts were made by the teachers to increase retirement benefits, which culminated in the introduc- tion of a bill in the legislature by Assemblyman Brennan. The bill passed, but was vetoed by Mayor Gaynor. If the bill had become effective, the present bankruptcy of the fund would have occurred a year or so sooner. Mayor Gaynor gave the following reason for his veto : "There is so much diversity of opinion among the teachers them- selves, who are to be the beneficiaries of this bill, that I think it better to withhold my acceptance of it and give the teachers time to get together and agree upon a bill acceptable to all." The bill in question provided the following increased benefits : 1. An increase of the minimum pension from $600 to $750. 2. The minimum annuity for principals was set at $1,500 (women principals were then receiving $2,500, and the proposed law was to pro- vide for retirement at more than one-half final salary). • Virginia, Maryland, Cincinnati, San Francisco, Boston, Providence, Newport, etc. 100 3- The maximum limits for pensions to teachers and principals of $1,500 and to supervising officials of $2,000 were to be removed by pro- viding that all persons retired after 30 years were to receive one-half of final salary. This would have permitted the retirement of the city super- intendent at $5,000 and a number of other supervising officials on annui- ties of $3,250 and $2,500 per annum. As an offset to the increased benefits, the bill provided that all teach- ers, principals and supervisors should contribute i per cent, of their salaries, removing the maximum contribution of $30 per annum for teachers and principals and $40 per annum for supervisors. The proposed increased contributions by no means offset the contem- plated benefit increases. As a matter of fact, no calculations were made to determine how far the increased income from the i per cent, contributions of principals and supervisors would go towards defraying the added expense. A committee of the Board of Retirement prepared a tentative estimate of the effect of the proposed amendment on the financial operation of the fund, and found that it would result in substantial deficits. This warning, however, was not heeded, the bill being forced through the legislature and only dissension among the teachers themselves bringing about its final failure. The first deficit of the fund, which occurred in 1910 and became gener- ally known early in 191 1, gave renewed impetus to the ever-growing activities of the teachers for pension reorganization. A general representative commit- tee of about 80 teachers was formed, which undertook by means of question- naires to determine the attitude of teachers toward a number of constructive suggestions. Suggestions to increase the one per cent, contributions were emphatic- ally voted down. The unrefunded absence deductions, i. e., pay for services not rendered and absences not excused, were held to be contributions of the teachers and not of the city. The suggestion, that these "teachers' " contri- butions as well as their i per cent, salary deductions should be "matched" by the city, received an overwhelming affirmative answer. The resulting bill provided for the following increased benefits : 1. Vested rights of teachers to retire after 30 years' service (15 in New York City) if 55 years old. 2. Minimum pensions to be granted after 30 years of service, $750 for teachers, $1,000 for heads of departments, $1,500 for principals. 3. Removal of maximum pension limit. The remaining benefit provisions of the existing law were allowed to stand almost unchanged. The contributions of the teachers were to be increased as follows : I per cent, of salary — those in the service less than 20 years and receiving less than $3,500 per annum. 101 2 per cent, of salary — those in the service more than 20 years and receiving less than $3,500 per annum, and those receiving more than $3,500 and less than $5,000 per annum. 3 per cent, of salary — those receiving salary of more than $5,000 per annum. While the above percentages look impressive, they would have accord- ing to a rough calculation effected a probable increase in income of approxi- mately only one-half per cent., as the i per cent, salary contributions were to apply, as before, to the bulk of the service, and only a small number of teach- ers were to make 2 per cent, and 3 per cent, contributions. The unrefunded absence deductions were to remain a source of income while the payment of excise moneys into the fund was to be discontinued. The city was, however, to appropriate annually an amount equal to the amount of the percentage contributions of teachers and the unrefunded ab- sence deductions, the latter item being considered a contribution by the teachers. The total income of the fund under the proposed provisions would have amounted, roughly, to about 5 per cent, of the payroll, of which only i^ per cent, would have been contributed by the teachers. The changes in benefits were by no means offset by the slightly increased income, and if the bill had become a law, the fund would have become more seriously involved than at present. The introduction of the pension provisions of the "Gaynor" Charter Bill containing provisions for the amalgamation of all city pension funds pre- vented the consideration of the teachers' bill. The teachers directed all their energies to block the enactment of the pension sections of the "Gaynor" bill. Not only did this bill provide for a centralized administration, but it pro- posed that all employees contribute 2 per cent, of their salaries, the city assuming responsibility for meeting deficiencies. As the teachers' pensions will eventually cost 20 per cent, of the payroll, the bill providing for teachers' contributions of only 2 per cent., the city assuming the ever- increasing difference, was a decided bargain for the teachers from the financial standpoint. The actual cost of pensions, however, was never realized, and, in addition, the power of the proposed pension board to reduce and terminate pensions appeared to the teachers such an encroach- ment on their existing rights that effective opposition was deemed essential. In the meantime the fund's condition grew worse. The second annual deficit in 191 1 further reduced the balance of the fund and left only a small margin over the reserve capital of $800,000 which, according to law, cannot be applied to the payment of pensions. In 1912, general appre- hension arose, and though agitation for increased benefits, especially half- pay pensions for all, continued as usual on the part of small groups of teach- ers, the majority of the force favored an actuarial investigation of the fund. The Brooklyn Class Teachers' Organization secured in February, 1912, an opinion from an actuary that the fund was in a depleted condition. Finally, 102 in June, 1912, Wm. A. Hutcheson, Actuary of the Mutual Life Insurance Company was retained by the Board of Retirement to investigate the fund. In the meantime, the fund's disbursements in 1912 again exceeded its receipts and the balance was still further reduced. In May, 1913, the Conih missioners of Accounts submitted a report on a survey made of all New York City pension funds, disclosing urgent need for reorganization. In June of the same year Mayor Gaynor appointed a commission to study the operation of existing pension funds and to work out constructive recommendations. In September, 1913, the Board of Education discontinued temporarily the refund of absence deductions to enable it to pay current pensions. On October i, 1913, the actuary, Wm. A. Hutcheson, submitted his report to the Board of Education, in which the fund's insolvency was ex- haustively demonstrated and a number of constructive suggestions for its rehabilitation submitted. A special committee of the Board of Retirement was instructed to draw up a bill for the amendment of the retirement law. Although the resulting constructive plan was meant only as a temporary measure of relief, it almost entirely disregarded the advice of the actuary. Its enactment would simply have postponed the present crisis for a number of years when reorganization would be more difficult because of increased deficiencies. The benefits suggested in the bill were as follows : 1. Retirement without proof of incapacity after 30 years' service (20 in the city of New York) — women if 55 years old and men if 60 years old — on a pension of i^ per cent, of final salary for each year of service. Minimum pension, $600; maximum, ^ final salary, not to exceed $3,000 per annum. 2. Disability retirement after 20 years' service (minimum, 20 years in the city of New York) upon proof of incapacity certified to by departmental physician — on pension calculated in same manner as above. The income was to be increased as follows : Contributions by teachers 2 per cent, of salary — those in the service less than 10 years and receiving less than $3,000 per annum 3 per cent, of salary — those in the service more than 10 years and less than 20 years, and those receiving more than $3,000 and less than $5,000 per annum 4 per cent, of salary — those in the service more than 20 years and receiving more than $5,000 per annum Contributions by the city Absence deductions of teachers as before 7 per cent, of excise moneys, instead of 5 per cent, as contributed in the past 103 This plan, which included additional unimportant changes, was unoffi- cially submitted to the actuary, Mr. Hutcheson, who characterized the pro- posed changes as unsound, and stated that if adopted the fund would in a few years be unable to meet its obligations. Preparations were made, however, to introduce the bill in the legis- lature. The Board of Estimate adopted on January i6, 1914, a resolution requesting the legislature and the city departments not to consider any proposed pension legislation until the Mayor's Commission on Pensions had reported its findings and recommendations. In compliance with this resolu- tion, no further efforts were made to place the proposed amendment on the statute books. Rejected Plans for Temporary Adjustment After a preliminary survey of the existing pension situation and a num- ber of hearings given to city employees to express their views on the pension problem, the Mayor's Pension Commission realized the necessity of obtaining a reliable basis of fact before it could intelligently propose constructive sug- gestions. Accordingly, on March 18, 1914, a staff was organized for the collection and analysis of data, and the preparation of actuarial cost computations. A census of the entire municipal service as of June 30, 1914, and of those who left the service during the six-year period July i, 1908, to June 30, 1914, was undertaken. This fact basis made it possible to calculate the necessary rates, such as mortality in active service, mortality of pensioners, withdrawals from the service without pension, retirement on pension, etc. As the cost calculations could not be completed, however, in time to furnish a basis for the immediate permanent reconstruction of the teachers' retirement fund, which was in a critical condition, the staff of the pension commission was instructed by its secretary to study the operation of the teachers' fund with a view to suggesting alternatives for temporary relief. In May, 19 14, at a conference of members of the Board of Education, the Board of Retirement, the Pension Commission and the Comptroller, cal- culations were submitted showing that the fund could continue its operation until late in 1916 under the condition that: 1. Future retirements should be limited to: (a) 50 teachers on September i, 1914, at an average annuity of $888; (b) 75 teachers on February i, 191 5, at an average annuity of $888; (c) 75 teachers on September i, 191 5, at an average annuity of $888; 2. No refunds of absence deductions be made during the balance of 1914 and the entire year 1915; 3. Teachers contribute 2 per cent, of salaries beginning February I, 1915- 104 The further postponement of the payment of refunds of absence deduc- tions (they were held up by a ruling of the Board of Education since Septem- ber 25, 1913) was considered by the school officials as a hardship to teachers, and an understanding was reached with the Comptroller by which a special committee was to review applications for refunds of absence deductions. This committee reported in November, 1914, as follows : Total deductions for absence from September 25, 1913, to June 30, 1914 $504,422.74 Refunds of deductions recommended. ....... 152,586.32 On September i, 19 14, 50 new retirements were made, but the sugges- tion for the increase of contributions to 2 per cent, was not acted upon. Early in 19 15 the fund was rapidly approaching the final stage of col- lapse and the situation was discussed in a series of conferences between a special committee of the Board of Education, the Board of Retirement, the president of the Board of Education, the Comptroller and the Cham- berlain, Following these conferences, cost estimates of several alleviative alternatives were made by the staff of the pension commission. Finally, it was agreed to by the Comptroller that the Board of Estimate request the legislature to require the city to pay annually a flat sum equal to the average contributions made indirectly by the city through excise taxes and deduc- tions from teachers' salaries for absence from 1909 to 19 13 inclusive, and that the percentage contributions from teachers be increased sufficiently to provide for the obligations of the fund. With this understanding, the staff of the pension commission calculated the prospective requirements of the fund to and including 1917. The calcu- lations showed that if the city were to contribute to the fund $558,000 per annum, and the teachers 3 per cent, from their salaries and if the payment of already authorized absence refunds and those to be authorised in the future were to be postponed until the increased income of the fund would produce sufficient balances to warrant such payments, then the fund could continue its operations until the year 19 17. On the basis of this report, which was published in the City Record in the issue of March 17, 1915, a bill was drawn for introduction at the close of the 191 5 session of the legislature. In the meantime, several groups of teachers, evidently dissatisfied with the efforts of administrative officials to save the fund from collapse, inde- pendently prepared a number of pension bills, all unsupported by adequate cost calculations, for introduction at the same session of the Legislature. The Board of Estimate bill failed of passage, as did all the pension bills in- troduced by teachers' organizations. Even the bill for the release of $300,000 of the permanent $800,000 reserve fund produced dissension among the teachers and failed to become a law. The failure to pass the relief measure advocated by the Board of Esti- mate made it very doubtful whether the fund would be able to pay pensions already granted during the balance of the year 191 5. Only by careful man- 105 agement of the fund could the Board of Education be enabled to pay pensions during the balance of the year. In the months of February, March and April the Comptroller advanced to the fund $225,000, its estimated share of the excise moneys, which, under ordinary circumstances, would have been paid in January, 1916, after the total excise tax for 1915 had been collected. To avoid an actual deficit payments of pensions are now being deferred until amounts are accumulated to meet each monthly disbursement. In May, 191 5, the secretary of the Pension Commission, at a conference held with the Comptroller and members of the Board of Education, submit- ted a report containing tentative constructive recommendations for the permanent reorganization of the fund in 1916. It had been prepared merely as a first step to definitize the problem to be solved and to ofifer possible solu- tions. In this report, special attention was called to the fact that deficiencies were anticipated in the fund during the last three months of the current year and that if no further payments of refunds for absence deductions were made until 1916, the pensions would have to be reduced 16 per cent, from July, 1915, or 32 per cent, from October, 1915. The fund is now living f rorrt hand to mouth ; no further retirements are possible ; teachers are paying one per cent, of their salaries to meet arrear- ages in the fund and with no assurance that when their time comes to retire provision will be made for them. Reorganization and refinancing of the fund is imperative. It must be undertaken in full view of the facts and with com- plete appreciation that a great retirement system cannot be maintained with- out straightforward, adequate financing. 106 APPENDIX TO PARTS I AND II Table 1 — employees subject to retirement law, may 31, 1915 * Class of Employees Superintendents Board of Examiners Supervisors and Directors, Asst. Su- pervisors and Directors, Inspect- ors and Asst. Inspectors, Special Teachers President of Hunter College Principals of Training Schools Principals of High Schools Principals of Vocational (Trade) Schools Principal of Parental School Principals of Elementary Schools Principal in Charities Dept Assts. to Principals, Elementary Schools Teachers in Hunter College Teachers in Training Schools Teachers in High Schools Teachers in Vocational (Trade) Schools Teachers (Grade) iq Elementary Schools Kindergarten Teachers, Elementary Schools Teachers, Dept. of Charities Teachers, Dept. of Correction Totals Men Women Total 33 4 2 35 4 189 1 2 23 420 "i 609 1 3 23 2 1 229 1 244 1 3 1 473 1 12 12 23 1,028 453 163 89 1,156 465 175 112 2,184 20 12 32 1,127 15,137 16,264 '7 920 5 920 5 7 2,713 18,604 21,317 Total Annual Salary Charges $192,250 24,000 931,255 10,000 15,000 110,500 12,250 3,000 1,527,960 3,500 1,115,250 446,372 279,030 4,766,145 59,675 19,807,750 967,140 7,440 5,700 $30,284,217 Average Annual Salary Charges $5,492.86 6,000.00 1,529.15 10,000.00 5,000.00 4,804.35 4,083.33 3,000.00 3,230.36 3,500.00 2,398.39 2,550.70 2,491.34 2,182.30 1,864.84 1,217.89 1,051.24 1,448.00 814.29 $1,420.66 Compiled from the records of the Auditor of the Board of Education. 109 TABLE 2— MEN TEACHERS— ACTIVE FORCE AS OF JUNE 30. 1914, CLASSIFIED BY AGE AND LENGTH OF SERVICE * Present Age Total Length of Service Less 5 and 10 and 15 and 20 and 25 and 30 than 5 less less less less less and years than 10 than 15 than 20 than 25 than 30 over 20 yrs. and less than 25 yrs. 165 161 4 25 ' ' 30 " 542 229 290 23 30 ' ' 35 " 529 80 203 239 7 35 ' ' 40 " 466 73 136 129 125 3 40 ' ' 45 " 360 33 91 108 97 30 i 45 ' ' 50 " 232 8 41 60 75 25 22 1 50 ' ' 55 " 141 6 28 50 26 24 7 55 ' ' 60 " 77 2 13 17 15 16 14 fiO * ' 65 " 68 7 21 11 13 16 65 ' ' 70 " 28 1 7 2 6 12 1 :ot il Nu mber 2,608 584 773 608 399 112 82 50 Compiled by mechanical tabulation of census cards taken on June 30, 1914. 110 TABLE 3— WOMEN TEACHERS— ACTIVE FORCE AS OF JUNE 30, 1914, CLASSIFIED BY AGE AND LENGTH OF SERVICE * Total Length of Service Present Age Less 5 and 10 and 15 and 20 and 25 and 30 than 5 less less le^s less less and years than 10 than 15 than 20 than 25 than 30 over 17 yrs. and less than 20 yrs. 16 16 20 " * ' 25 " 3,305 3,217 88 25 " ' ' 30 " 4,110 1,408 2,519 183 30 " ' ' 35 " 3,145 247 1,022 1,696 179 i 35 " ' ' 40 " 2,655 178 385 671 1,261 160 40 " ' ' 45 " 1,999 96 249 345 453 738 lie 2 45 " ' ' 50 " 1,299 17 66 215 185 217 495 104 50 " ' ' 55 " 790 4 9 81 104 74 138 380 55 " ' ' 60 " 414 1 1 19 37 58 34 264 60 " ' ' 65 " 192 12 11 11 15 143 65 " ' ' 70 " 51 1 4 4 4 5 33 70 " ' ' 75 " 4 1 3 To tal Numh er 17,980 5,185 4,339 3,226 2,234 1,264 803 929 * Compiled by mechanical tabulation of census cards taken on June 30, 1914. Ill t ••• 1« -wj Q^ !i i 1 M a s i m .\ II • rr.Tfba^ Table 5 — number of teachers who withdrew from the active service FOR various causes DURING THE YEARS I909 TO I914 * Year Deaths Retire- ments Resigna- tions Dis- missals Total With- Strength drawals of Forcef 1909 1910 1911 1912 1913 1914 Totals. 71 94 480 68 125 577 71 113 492 76 134 602 54 188 607 78 151 583 418 805 3,341 2 647 17,244 3 773 17,907 1 677 18,369 812 19,073 4 853 19,681 3 815 20,588* 13 4,577 Table 6 — ^detailed statement of disbursements J — 1894 to 1914 Year Pension Payments. Administrative Expense Total Dis- bursements 1894 1895 $12,633.34 1896 42,595.07 1897 71,539.49 1898 102,157.04 1899 124,296 . 18 1900 214,563 . 57 1901 263,805.28 1902 343,017 . 13 1903 420,026.99 1904 477,418.74 1905 526,502.36 1906 616,984 .54 1907 689,390.64 1908 724,129.78 1909 777,800.85 1910 833,863.59 1911 880,389 . 83 1912 983,554 . 99 1913 1,108,874 . 30 1914 1,183,397 . 08 Totals $10,396,940.79 $12,633.34 42,595.07 71,539.49 102,157.04 124,296.18 214,563.57 263,805.28 343,017.13 420,026.99 477,418.74 526,502.36 616,984.54 689,390.64 724,129.78 $141.00 619.90 777,941.85 834,483.49 682.15 417.20 1,929.0011 881,071.98 983,972.19 1,110,803.30 811.04 1,184,208.12 $4,600.29 $10,401,541.08 * Compiled by mechanical tabulation of census cards taken on Jtine 30, 1914. The data is given for the years indicated ending June 30th. tAs stated in the annual report of the Teachers' Retirement Fund for 1913, figures for July 31st of the years indicated. The strength of the force in 1914 is given as of June 30th, accord- ing to the results of the census of the municipal service. J As shown for the years 1894 to 1913 in the annual reports of the Teachers' Retirement Fund, and for the year 1914 on the books of the Auditor, Board of Education. i Net amount to annuitants. I Partly chargeable to 1912. 113 Table 7 — ^detailed statement of receipts * — 1894 to 1914 Year Employees' Contribu- tions Absence Deductions (Net) Fines Excise Licenses Interest Donations Total Receipts 1894 $25,060.33 62,897.08 50,504.04 63,382.58 59,213.83 77,779.14 87,327.01 185,799.64 146,703.70 160,535.67 193,062.99 186,727.32 211,976.05 274,743.13 227,534.25 261.646.23 254,618.49 255,464.17 254,384.02 240,123.92 464,419.57 '$548!6i V,269;97 $25,060.33 62.897.08 50 504 04 1895 1896 1897 $41,283.99 23,858.34 30,479.86 43,079.45 19,741.98 418.14 $2,961.81 728.20 4,225.28 10,772.76 13,698.70 16,579.30 41,306.77 40,975.63 35,708.15 39.766.84 43.155.13 48.536.62 52,025.16 50,328.61 41,308.67 49,234.85 36,902.17 45.881.20 "$i5;66 "soo^oo "sss^oi "44i;87 107.628 38 1898 83,800 37 1899 1900 1901 1902 1903 $269,094.83 266,859.37 265,853.17 262,066.04 265,917.78 281,964.66 281,973.60 285,275.54 287,853.89 294,694.22 386,054.58 272,772.03 291,803.16 286,579.67 t484,212.31 281,584.35 381,579.11 408,038.59 485,108.49 425,767.18 468,060.22 516,003.28 597,048.00 706.072.85 784.354.89 760.176.05 898.208.84 786.340.54 803,734.45 849,198.48 1.031.422.84 1,077,142.64 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 92,638.93 169,054.42 178,214.73 189,410.96 198,482.87 207,630.93 215,158.45 257,729.97 270,184.44 285,257.52 Totals. . . $2,222,624.98 $3,743,903.16 $1,818.58 $4,764,559.20 $574,095.85 $1,144.88 811,308,146.65 * As shown for the years 1894 to 1913 in the annual report of the Teachers' Retirement Fund, and for the year 19 14 on the books of the Auditor, Board of Education. t Includes $200,000 of the fund's share of excise taxes for the year 1913 which, if custom of previous years were to be followed- would have been turned over to the fund in 1914. 114 Table 8 — absence deductions, refunds and net deductions * — 1894 TO I914 Year Gross Absence Deductions Refunds of Absence Deductions Amount Per Cent Refunded Net Absence Deductions 1894 $28,158.81 1895 66,688.84 1896 60,846.13 1897 70,844.30 1898 86,627.45 1899 110,554.25 1900 149,779.11 1901 298,607.08 1902 267,177.37 1903 280,029.59 1904 297,013.68 1905 324,483.90 1906 357,752.52 1907 405,106.75 1908 379,493.44 1909 440,610.37 1910 528,053.68 1911 555,992.42 1912 575,850.37 1913 594,927.94 1914 481,646.44 Totals $6,360,244.44 $3,098.48 3,791.76 10,342.09 7,461.72 27,413.62 32,775.11 62,452.10 112,807.44 120,473.67 119,493.92 103,950.69 137,756.58 145,776.47 130,363.62 151,959.19 178,964.14 273,435.19 300,528.25 321,466.35 354,804.02 11.0 5.7 17.0 10.5 31.6 29.6 43.0 37.8 45.0 43.0 35.0 42.5 40.7 32.2 40.0 40.6 51.8 54.1 55.8 59.6 17,226.87 3.6 2,616,341.28 41.1 $25,060.33 62,897.08 50,504.04 63,382.58 59,213.83 77,779.14 87,327.01 185,799.64 146,703.70 160,535.67 193,062.99 186,727.32 211,976.05 274,743.13 227,534.25 261,646.23 254,618.49 255,464.17 254,384.02 240,123.92 464,419.57 $3,743,903.16 * Compiled from annual reports of the Teachers' Retirement Fund (for 1894 to 1913) and from statement prepared by the Auditor of the Board of Education (for 1914). 115 s *8oo§ S§8fe§ s Oi-IINCO lit 1 i» 00 00 00 00 00 OOOJOSffiOS OS OS O OS OS fj> i-l rH .H tH r-t rtrtrtrtrt ^ o . ^ t» 00 00 tow (N 00 00 OS "5 •HNNMOS CO 00 5> P>"«-s N (N m; d OJ C0>OiO00 00 lOrtCOXlN OS 00 00 00 OS tO>-ltO00tO totomuii^ OOOOrtO OS s OS OS 3 J3 ^ ■s;fe2s; 00 1» 00 coos ^^^■$^ ■COSOOOSO (N s -S i-iiON^ro 00-*OS^C0 3s a> 1 ■ntrsat^ «Oe«5"5t^® s ^ >M i5 0>CDO-H(N ^OOOOSIN ■*oo«-t^o s o NiOOOOO Tj ii gc •PSiOOSt^ tocoioi>o 00(N-*OOS pcoos-^-* o >t Tf ^ .2 S 03«>O.-H(N .-lOoOOSIN -* •*-> S6 ^(2 • tOiOU5.-l INiOOOOO T*H in OS CO -H 00 00 CO lO 00 CO 0^ •o .C f^ ,^ o o ** •a 1 a t i3"S ^c5 88888 88888 88888 88888 8 8 l3 t-i O o l-H f-H »-t *-t 1-t 1-C-H.-l,-lrt c 3 b< ■M V «OOC0C0 ;2§52?3 OOOlCOSiCl (NOOOOOO 00 in • o Pi , +> OUS-'ifOCO tHOS'^-hos ©©■^ooo to 00 ;3 . . .rtO OOtOOOt^ CO "5'* CON to»-ot^ o in U-t c ^ 00 c^ (Nt^t^COt^ tOrlOOr-ltO .-HtOtOOO^ 00 V, D 1— 1 2 .-100 1ON00O5 5O "5 00 to lO to l>.OtOiOCO moOOOrt._t^t-HIO dicoscood O CO COIN OS Ndrt'os'to" 00 in *♦•» o u M t<» •* eo CO ■^ • fee : : : :8 : : :§ : :g : : : o V Ui o U o u U (/} ») • a o F bJ >% H .2 to . : :8 :8 ! : :© • t^ . . . X • • • SB 3 c c CO u o_ >> Rl ^ U3 M • -US -g : : :gg : • • -co • ■* ; i 1 1* . . . -* •«1< o ««• ja (U QM ^ ■•■^ N P^ a o V osoOrtO^ tpOININO .-irji»mco .-li-lO00(N to to M rt fee 00 to IN IN *^ <; C ^d 8882§g OtOCOO—c (N00O.-I00 Nt^OOCOO OS in w -« H < 03 00 OS OS OS ost^r^wto t-. to to to t- to t^ 0\ •s .2 •1- •M- 15 ' S?§S§S t»00.-l-*iO lONOSINt^ i-HCOCOCOCO IN 31 V 03 CO 00 1^'* t0 03U50r1( WrlCOtOIN OS *" J3 M •^ o iS;S§32 t»Oi-Ht^00 0»0>0 03(N OOSt^COtO ocotococo d •4- t^00"5«COIN oOi-itDr^-* Ot^(NiO(N o 00 1-i lONOCOOl CO T»( 1-1 CO to "SOOt^MN t^t^t^iM-* to o 3 T3 (NtOiOtOUS t^ to OS to (N SoSSt^ ■* V CO CO ■* Tjl •<»< Tjt Tji ■<)( in »o ^. 2 3 u 00 CD u cd • • .lOI^ osifscpo • • .-1 •<*l CI r^ mot^icos O'.jtt^co.-i 00 in s iBa •COtJI most- OS -* >> ^6 •00 00 r^OTji mcoiN-* (NtOtOOtO to OS m en • • -COIN •»He»(MN ININNCOiN IN l-l . .d JB • s • • -Oi-^ tOlOOOTll • •CO .H • OS-*t^OS 00 OS -^It OS-* m '1 s^s oo-^-^o NOOOOS-* oocomiNoo 1^ •* n) V in NOO •<1HOt»Tlt ■ tOON-* •0-i0t--0 m IN CO W « r. wo ' ' M'N CO-«"^ OS to t» 00 oso»-<>ot~ 00 5 >« < o •» .-Hrtrt ^INNNIN IN IN a l-l *» * 13 •H- ■f+ >H ■«fliO®t^00 gssss sssss ©O-HC>»C0 -* ■B l-l eg o K X 00 00 00 OS OS OS OS c- OS OS OS OS s w OSOS O ^ pq 116 Table io — statement of surpluses, deficits and balances * — 1894 to 1914 Year Receipts Disbursements Surplus DeBcit Balance Dec. 31st 1894 $25,060.33 62,897.08 50,504.04 107,628.38 83,800.37 381,579.11 408,038.59 485,108.49 425,767.18 468,060.22 516,003.28 597,048.00 706,072.85 784,354.89 760,176.05 898,208.84 786,340.54 803,734.45 849,198.48 1,031,422. 84t 1,077,142.64 $25,060.33 50,263.74 7,908.97 36,088.89 257,282 193 193,475.02 221,303.21 82,750.05 48,033.23 38,584.54 70,545.64 89,088.31 94,964.25 36,046.27 120,266.99 $25,060.33 75,324.07 83,233.04 1895 $12,633.34 42,595.07 71,539.49 102,157.04 124,296.18 214,563.57 263,805.28 343,017.13 420,026.99 477,418.74 526,502.36 616,984.54 689,390.64 724,129.78 777,941.85 834,483.49 881,071.98 983,972.19 1,110,803.30 1,184,208.12 1896 1897 119,321.93 1898 1899 $18,356.67 100,965.26 358,248.19 551,723.21 1900 1901 773,026.42 855,776.47 1902 1903 903,809.70 942,394.24 1904 1905 1,012,939.88 1,102,028.19 1906 1907 1,196,992.44 1,233,038.71 1,353,305.70 1,305,162.75 1,227,825.22 1,093,051.51 1,013,671.05 906,605.57 1908 1909 1910 1911 1912 1913 1914 48,142.95 77,337.53 134,773.71 79,380.46 107,065. 48t Total. $11,308,146.65 $10,401,541.08 $1,371,662.37 $665,056.80 * Compiled from annual reports of Teachers' Retirement Fund (1894 to 1913) and from statement of Auditor of Board of Education for 1914. t Includes $200,000 advanced for excise taxes in this year. t The deficit would have been much larger if the payment of refunds of absence deductions had not been postponed. 117 Table ii — receipts and disbursements Available Balance at Beginning of Period Receipts Month Employees' Contributions Gross Absence Deductions Excise Licenses Interest Dona- tions Unclaimed Annuities Total Receipts Receipts and Balances 1915 January February March April May June July 129,841.09 5,315.82 47,190.10 9,164.54 81,130.56 154,780.62 59.799.12 58,010.20 -39,819.80 — 96,180.62 -154,716.37 -180.751.99 $1,402.53 24,097.52 24,577.07 25,044.91 48,484.93 24,815.71 49,827.33 24,666.87 24,211.91 24,243.81 24.864.57 $45.66 27.427.11 60,815.73 51,809.69 112,398.15 56,895.04 47.067.35 17.652; si 14,582.34 39,994.84 39,014.16 $76,169.07 100,000.00 25,000.00 100,000.00 $195.98 170.22 63.90 145.53 6,710.42 10,967.80 264.57 $i2;66 $7,920 !7i 6.343! 05 EST ACTUAL REC $77,813.24 159,615.56 110,468.70 177,000.13 173,936.55 92,678.55 97,159.25 IMATED REC EIPTS AND $107,654.33 164,931.38 157,658.80 186,164.67 255,067.11 247,459.17 156,958.37 August September. . . October November. . . December EIPTS AND 58,010.20 41,719.18 38,794.25 71,044.38 74.555.51 1,899.38 6,805'. 73 10,676.78 -57,386.37 -83,671.99 - 106,196.48 Total . . . $295,637.16 $467,702.38 $301,169.07 $36,000.93 $12.00 $14,263.76 $1,114,785.30 Deficit, December 31, 1915 Deduct accrued receipts: 1% salary contributions. December. 1915 $24,673.12 Absence deductions. December, 1915 51,805.68 Total accrued receipts Deficit (after deducting accrued receipts) -$203,026.48 $76,478.80 -$126,547.68 * Compiled from the books of the Finance Department for the months January to July; the figures for the remaining months estimated on the basis of probable future cash receipts under the assumption that no payments of refunds will be made during the balance of the year. 118 DURING THE YEAR I915 Disbursements Available Pensions Admini- strative Expense Refuntis of Absence Deductions Refunds of Salary Deductions Refunds of Unclaimed Annuities Total Disbursements Balance at End of Period EISBURSEM $101,220.92 100,937.31 100,701 . 16 100,611.16 98,844.70 98,521.81 98,055.29 DISBURSEM 97,805.00 ENTS $25.00 25.00 25.00 25.00 25.00 25.00 25.00 ENTS 25.00 525.00 25.00 25.00 25.00 $967.59 16,715.04 47,727.06 4,397.95 1,327.67 88,851.80 671.62 "$i!43 41.04 ■29;i2 151.44 $125.00 62.50 'eoloo 110.00 196.26 $102,338.51 117,741.28 148,494.26 105.034.11 100.286.49 187.660.05 98.948.17 97.830.00 98,080.00 97,330.00 97,080.00 96,830.00 $5,315.82 47,190.10 9,164.54 81,130.56 154,780.62 59,799.12 58,010.20 -39,819.80 — 96 180 62 97.555.00 97,305 . 00 -154,716.37 -180,751.99 -203,026.48 97,055.00 96,805.00 $1,185,417.35 $800.00 $160,658.73 $223.03 $553.76 $1,347,652.87 Totals Deficit (after deducting accrued receipts) — $126.547 . 68 Add accrued liabilities: Estimated balance of refunds of absence deductions (September 25, 1913 to December 31. 1915) 187,348 .68 Corrected deficit $313,896.36 Permanent fimd 800,000.00 Total balance in fund $486,103.64 119 Table 12 — comparative growth of active force and pensioners- and of salary and pension rolls 1905 to i914 Total Pensioners Pensions Paid Strength Payroll of Year of Active Force * Per Cent Force f Per Cent Number * of Active Force Amount of Active Payroll 1905 13,888 698 5.03 II $526,502.36 1906 14,660 805 5.49 $16,905,442.00 616,984.54 3.65 1907 15,728 909 5.78 17,821,473.00 689,390.64 3.87 1908 16,655 950 5.70 18,941,096.00 724,129.78 3.82 1909 17,244 1,008 5.85 19,848,287.00 777,800.85 3.92 1910 17,907 1,089 6.08 20,763,093.00 833,863.59 4.02 1911 18,369 1,173 6.39 21,515,845.00 880,389.83 4.09 1912 19,073 1,259 6.60 25,772,997.00 983,554.99 3.82 t 1913 19,681 1,515 § 7.70 27,018,444.00 1,108,874.30 4.10 1914 20,588 ** 1,549 § 7.59 28,525,752.00 1,183,397.08 4.15 Per cent • increase 1914 over > 48.24 121.92 68.74 H 124.77 1905 * As stated in the annual report of the Teachers' Retirement Fund for 1913, figures for July 31st of the years indicated. ** Number of participating employees June 30, 19 14, as shown by census of municipal service. t Estimated on the basis of the i per cent, deductions from salaries during the calendar years indicated. t The decrease is explained by the extraordinary increase in the payroll for 1912, due to a general raise in salary scales. S As of December 31st. II Deductions from salaries were made only for part of this year. I Increase of 1914 over 1906. 120 Table 13 — pensioners on pension roll December 31, 1913, and December 31, I914, CLASSIFIED according TO AMOUNTS OF ANNUAL PENSION Annual Amount Pensioners on Roll Dec. 31, 1913 Per Cent. Of Total Pensioners on Roll Dec. 31, 1914 Per Cent, of Total $400 and less than $450 20 1.3 21 1.3 450 " " ' 500.... 27 1.8 27 1.7 500 " " • 550.... 56 3.7 59 3.8 550 " " ' 600.... 44 2.9 43 2.8 600 " " ' 700.... 626 41.3 618 39.9 700 " " • 800.... 308 20.3 322 20.8 800 " " • 900.... 79 5.2 80 6.1 900 " " * 1,000.... 134 8.8 145 9.4 1,000 " " ' 1,250.... 89 5.9 98 6.3 1,250 " " ' 1,500.... 79 5.2 83 5.4 1,500 " " • 1,750.... 44 2.9 45 2.9 1,750 " " ' 2,000.... . . . 2,000 " " ' 2,500.... 7 6.5 6 6.4 2,500 '• " ' 3,000.... . . . 3,000 " " ' 3,500.... 1 o.i 1 6.i 3,500 " " ' 4,000.... 4,000 " " ' 4,500.... . . . 4,500 " " ' 5,000.... . . . 5,000 " " ' 6,000.... i o.i 1 O.i Total 1,515 779.85 100. 1,549 784.53 100. Average Pension Annual Charge. . $1,181,471.67 $1,215,231.11 Table 14 — men teachers — total number of persons on the pension rolls on june 3o, i914 classified by present AGE AND CAUSE OF RETIREMENT* Number Total Dis- Present Age Total of Service Pensioners ability Pensioners 45 years and less than 50 years 3 3 50 " ' " 55 3 2 55 " ' " 60 II 6 2 60 " ' '• 65 < < piS < o o I? fa 55 < l-J « H fa rn a trt H W hJ O P4 H < g H fa 3 > CQ fa < u; to Q fa O fa O ^ » H < ,.—^ !? & fa fa > o en u fa P u fa ^J < o u 1^ "A !?; o pj a o Tf < ^ o\ ^ fa o Xfl fa H fa 8s 1^ fa h-l u Q pe; < S U o; to H fa 15 o fa H fa i!5 fa Ul i-t s s u fa H <: fa H l> w l-H > fa fa > fa l-H H ^ fa o <5 fa Q S ;z; O < u 1 fa u o i-i c< > fa M fa J UJ PQ < H H sz: D O o o O H 5 w u ^ ^ w ■< D b Z O Q fa H ■«: OS O z o z u H O •< Bi fa > < o H O CJ I. c " > O iJ SS O (U tn pii •«! W W „ rp^ O S iz: w S ca W tft o ^ W A^ o OCMOOi-iOcOWXNOSiC O(N-*03C0O0500OO c ooo OOOOOOP^OO OOOOOOOO OiOO 00 CO-* eC(N■*■* (N »H lO »0 00 O TjH CO ^H lO 00C.t^t>.t>.t^t^ooooos OC0N-«4iTHcDt>.00Ot^ Oi-H;Dt^i>eccoo-«i<-* o«o-«*->*tjhoo6ct>ooo t^iOiOiC«C»O»OcDl>00 T-l00W5O5(NO5»OeCt^O5 C<>(NOOOSTfHt~OCOiON oooooot^-oor-ooooso 00t^«O00t^O5O5(NeO(N COOiOOa>(NOOO(Nt^O> 1—1 I-t 1— I C^ T— I c<5coc^(Niceo(NeoTt< s rH'.i-ICO(NO5 5OCO»OC0 o " «5cot>.ooa>o»-iesicoT}< QOOOO'-Hi— ii-Hi— i>-i 125 Table 21 — pensioners on rolls September i, 1915, who were retired for disability after less than 30 years of service Total Annual charge Num- ber Retired After an Active Service of Present Age, Sept. 1, 1915 20 and less than 22 Years 22 and less than 24 Years 24 and less than 26 Years 26 and less than 28 Years 28 and less than 30 Years 35 and less than 40 yrs $1,120.50 20,029.00 47,293.63 63,489.53 30,449.18 13,715.86 15,017.21 2 33 77 94 46 21 24 2 28 31 10 2 2 4 '3 17 17 6 5 4 "2 17 21 12 3 6 '9 21 12 3 4 40 " " " 45 " 45 " " " 60 " 50 " " " 55 " 65 " " " 60 " 60 " " " 65 " 65 " over '3 25 14 8 6 Total $191,114.91 297 79 52 61 49 56 Table 22 — retirements on the ground of disability after less than 30 years of service and cancellations on account of death and voluntary reassignment to duty Year Retired for Disability Died Reassigned to Active Duty Number on Roll December 31 Married 1905 1 64 27 23 26 27 31 56 52 39 1 2 2 4 5 6 4 6 6 4 3 '2 '2 2 62 87 106 127 146 173 221 265 300 297t 1906 7 1907 3 1908 1 1909 1910 4 1911 1 1912 5 1913 6 1914 5 To|Sept. 1, 1915 Total 346 43 6 32* * One married teacher has died since retirement. t As of September i, 191 5. 126 Table 23 — comparative statement of pensioners and total pension charge for the years i9i3 and i914 Pension Fund December 31, 1913 December 31, 1914 Increase Decrease Police Department: Number of pensioners. . . Average pension Total annual charge. . . Fire Department: Number of pensioners. . . Average pension Total annual charge. . . Dept of Street Cleaning : Number of pensioners. . . Average pension Total annual charge. . . Dept. of Education: Number of pensioners. . . Average pension Total annual charge. . . Dept. of Health: Number of pensioners. . . Average pension Total annual charge. . . College of the City of N. Y, Number of pensioners. . . Average pension Total annual charge. . . Supreme Court, 1st Dept, Number of pensioners. . . Average pension Total annual charge. . . Supreme Coturt, 2nd Dept. Number of pensioners. . . Average pension Total annual charge. . . "Grady Law" pensioners: Number of pensioners. . Average pension Total annual charge. . 4,201 $583.28 $2,450,365.51 1,636 $633.53 1,036,456.40 356 $395.38 $140,753.50 1,515 $779.85 1,181,471.67 76 $793.81 $60,330.00 4 $1,081.25 $4,325.00 $1,143.75 $9,150.00 63 $839.64 $52,897.48 4,234 $581.37 $2,461,528.55 1,686 $632.23 1,065,939.73 484 $351.69 $170,216.50 1,549 $784.53 1,215,231.11 97 $827.91 $80,307.50 $1,081.25 $4,325.00 11 $1,136.36 $12,500.00 $900.00 $900.00 166 $772.40 $128,218.10 33 $11,163.04 50 $29,483.33 128 $29,463.00 34 $4.68 $33,759.44 21 $34.10 $19,977.50 $3,350.00 $900.00 $900.00 103 $75,320.62 $1.91 1.30 43.69 7.39 67.24 Total, all funds Number of pensioners. . . Average pension Total annual charge 7,859 $628.04 $4,935,749.56 8,232 $624.29 $5,139,166.49 373 $203,416.93 $3.75 127 Table 24 — aggregate and detailed annual cost of pensions to persons now on the pension roll of the teachers' retirement fund Disability Pensions Service Pensions Year after ♦Date Men Women Men Women Total Valua- tion Hunter Hunter Hunter Hunter Regular Teachers College Teachers Regular Teachers College Teachers Regular Teachers CoUege Teachers Regular Teachers CoUege Teachers 1914 $10,978 $163,947 $7,485 $87,911 $7,211 $877,430 $4,734 $1,159,696 1 1915 10,469 158,558 7,162 79,815 5.827 845,052 4,460 1,111,343 2 1916 9.965 153.209 6,844 72,241 4,585 811,979 4,215 1,063,038 3 1917 9,484 147.996 6,526 65,142 3,494 778,258 3,975 1.014,875 4 1918 9,006 142.602 6.214 58,485 2,559 743,947 3,746 966,559 5 1919 8,539 137.341 5.887 52,241 1,793 709,127 3,531 918.459 6 1920 8,078 132,112 5,598 46,408 1,191 673,888 3,327 870,602 7 1921 7,622 126.913 5,300 40,993 742 638,336 3,152 823,058 8 1922 7,182 121.747 5.004 36.004 427 602,595 2,949 775,908 9 1923 6.741 116,615 4,716 31.440 223 566,801 2,772 729,308 10 1924 6,310 111,517 4.435 27.298 104 531,098 2,618 683,380 11 1925 5.891 106,456 4,160 23.573 41 495,640 2,433 638.194 12 1926 5.489 101,437 3,895 20.248 15 460,600 2,270 593,954 13 1927 5.098 96.463 3,638 17,302 4 426,133 2,109 550,747 14 1928 4,705 91.540 3,386 14,712 392,405 1.951 508.699 15 1929 4,335 86,672 3.145 12,450 359,574 1,795 467,971 16 1930 3,980 81,864 2,912 10,489 327,790 1.640 428.675 17 1931 3,634 77,125 2,686 8,801 297,201 1,490 390.937 18 1932 3,309 72.457 2,467 7,352 267,930 1,345 354,860 19 1933 2,989 67,872 2.159 6.109 240,102 1,204 320,435 20 1934 2,690 63,375 2,058 5.045 213.813 1,069 288,050 21 1935 2.409 58,976 1,867 4,135 189,124 940 257,451 22 1936 2.149 54,683 1,687 3,367 166.136 819 228,841 23 1937 1.895 50,507 1,516 2,701 144.859 706 202.184 24 1938 1.665 46,447 1,356 2,145 125,301 603 177.517 25 1939 1.450 42,522 1,206 1,678 107.509 507 154.872 26 1940 1.252 38,737 1,068 1,295 91.422 423 134,197 27 1941 1.073 35,104 940 984 77,018 345 115,464 28 1942 911 31,631 822 735 64,248 279 98,626 29 1943 763 28,327 719 541 52.988 218 83,556 30 1944 634 25.200 619 391 43,254 172 70,270 31 1945 518 22,262 533 277 34.867 131 58,588 32 1946 420 19,517 455 194 27.743 96 48,425 33 1947 334 16,972 387 132 21.771 71 39,667 34 1948 263 14,633 328 87 16.835 49 32.195 35 1949 204 12,501 275 55 12,807 34 25,876 36 1950 154 10,575 228 33 9,579 22 20,591 37 1951 115 8,855 188 19 7.036 15 16,228 38 1952 83 7,333 155 10 5,066 9 12,656 39 1953 57 6,002 128 5 3,568 5 9,765 40 1954 38 4.851 103 2 2,455 3 7,452 41 1955 23 3.871 83 1 1,649 1 5,628 42 1956 13 3,047 66 1,078 4,204 43 1957 7 2,364 51 683 3,105 44 1958 3 1.806 39 417 2,265 45 1959 1 1,357 29 243 1.630 46 1960 1.002 21 137 1.160 47 1961 726 16 78 820 48 1962 516 12 29 557 49 1963 359 8 16 383 50 1964 244 6 9 259 51 1965 162 4 1 167 52 1966 104 2 106 53 1967 65 1 66 54 1968 39 39 55 1969 23 23 56 1970 13 13 57 1971 7 7 58 1972 4 4 59 1973 1 1 Total 1152.928 $2,909,163 $110,595 $742,846 $28,216 $12,467,625 $62,233 $16,473,606 Date year beginning July i. 128 Man Teacher A Age at entrance, 26. Present age, 28. Total salary for service prior to retirement at age 65 $105,970 Actual salary for service prior to reorganization 1,900 Teacher entered service under grade D-i, Assistant, High SchcMDls. Year Salary 1914 $900 1915 1,000 Estimated Future Salary Promotion under grade D-i to the year 1924, then change to grade D-2 ; promotion thereafter until maximum has been reached. Year Salary Year Salary Year Salary Year Salary 1916 $1,100 1926 $3,150 1936 $3,150 1946 $3,150 1917 1,300 1927 3,150 1937 3,150 1947 3,150 1918 1,450 1928 3,150 1938 3,150 1948 3,150 1919 1,600 1929 3,150 1939 3,150 1949 3,150 1920 1,750 1930 3,150 1940 3,150 1950 3,150 1921 1,900 1931 3,150 1941 3,150 1951 3,160 1922 2,050 1932 3,150 1942 3,150 1952 3,150 1923 2,200 1933 3,150 1943 3,150 1924 2,730 1934 3,150 1944 3,150 1925 2,940 1935 3,150 1945 3,150 Woman Teacher B Age at entrance, 21. Present age, 22. Total salary for service prior to retirement at age 65 $91,990 Actual salary for service prior to reorganization 720 Teacher entered service under grade B-i, Elementary Schools, i-A to 6-B. I'^^*^^^'^^!l*i^^ Year Salary 1915 $720 Estimated Future Salary Promotion under grade B-i, 6-A to 6-B, to year 1919; then change to grade B-2, 7-A to 7-B, promotion under this latter grade to 1924; then change to B-3, Assistant to Principal, Elementary Schools ; promotion there- after until maximum has been reached. 129 Year Salary Year Salary Year Salary Year Salary 1916 $720 1927 $2,400 1938 $2,400 1949 $2,400 1917 720 1928 2,400 1939 2,400 1950 2,400 1918 780 1929 2,400 1940 2,400 1951 2,400 1919 940 1930 2,400 1941 2,400 1952 2,400 1920 1,020 1931 2,400 1942 2,400 1953 2,400 1921 1,100 1932 2,400 1943 2,400 1954 2,400 1922 1,180 1933 2,400 1944 2,400 1955 2,400 1923 1,260 1934 2,400 1945 2,400 1956 2,400 1924 2,100 1935 2,400 1946 2,400 1957 2,400 1925 2,250 1936 2,400 1947 2,400 1958 2,400 1926 2,400 1937 2,400 1948 2,400 Woman Teacher C Age at entrance, 21. Present age, 24. Total salary for service prior to retirement at age 65 $69,560 A dual salary for service prior to reorganization 2,940 Teacher entered service under grade B-i, Elementary Schools, i-A to 6-B. Year Salary 1912 $720 1913 720 1914 720 1915 780 Estimated Future Salary Promotions under grade B-i, Elementary Schools, i-A to 6-B, to year 192 1 ; then change to B-2, Elementary Schools, 7- A to 8-B; promotion there- after until maximum has been reached. Year Salary Year Salary Year Salary Year Salary 1916 $840 1926 $1,740 1936 $1,820 1946 $1,820 1917 900 1927 1,820 1937 1,820 1947 1,820 1918 960 1928 1,820 1938 1,820 1948 1,820 1919 1,020 1929 1,820 1939 1,820 1949 1,820 1920 1,080 1930 1,820 1940 1,820 1950 1,820 1921 1,140 1931 1,820 1941 1,820 1951 1,820 1922 1,420 1932 1,820 1942 1,820 1952 1,820 1923 1,500 1933 1,820 1943 1,820 1953 1,820 1924 1,580 1934 1,820 1944 1,820 1954 1,820 1925 1,660 1935 1,820 1945 1,820 1955 1,820 Woman Teacher D Age at entrance, 22. Present age, 33. Total salary for service prior to retirement at age 65 $85,240 Actual salary for service prior to reorganization 9,480 130 Teacher entered service under grade III, Elementary Schools, Kinder- garten, promotion under this grade until 1912; then change to B-i. Year Salary Year Salary 1905 $600 1911 $840 1906 640 1912 1,020 1907 680 1913 1,080 1908 720 1914 1,140 1909 760 1915 1,200 1910 800 Estimated Future Salary Promotion under grade B-i, Elementary Schools, until 1919; then change to B-2, Elementary Schools, 7-A to 8-B; promotion under latter grade until 192 1 ; then change to grade D-i, Assistant, High School; pro- motion following until maximum of grade has been reached. Year Salary Year Salary Year Salary Year Salary 1916 $1,260 1924 $2,200 1932 $2,650 1940 $2,650 1917 1,320 1925 2,350 1933 2,650 1941 2,650 1918 1,380 1926 2,500 1934 2,650 1942 2,650 1919 1,660 1927 2,650 1935 2,650 1943 2,650 1920 1,740 1928 2,650 1936 2,650 1944 2,650 1921 1,750 1929 2,650 1937 2,650 1945 2,650 1922 1,900 1930 2,650 1938 2,650 1946 2,650 1923 2,050 1931 2,650 1939 2,650 1947 2,650 Woman Teacher £ Age at entrance, 19. Present age, 37. Total salary for service prior to retirement at age 65 $59,820 Actual salary for service prior to reorganization 17,820 Teacher entered service in Elementary Schools ; changed to grade III, Elementary Schools, in 1900; promotions in that grade until 1912; then changed to B-i, Elementary Schools. Year Salary Year Salary 1898 $504 1907 $960 1899 576 1908 1,000 1900 680 1909 1,040 1901 720 1910 1,080 1902 760 1911 1,120 1903 800 1912 1,440 1904 840 1913 1,500 1905 880 1914 1,500 1906 920 1915 1,500 131 Estimated Future Salary No promotion after 1913. Year Salary 1916 $1,500 1917 1,500 1918 1,500 1919 1,500 1920 1,500 1921 1,500 1922 1,500 1923 1,500 1924 1,500 1925 1,500 Year Salary 1926 $1,500 1927 1,500 1928 1,500 1929 1,500 1930 1,500 1931 1,500 1932 1,500 1933 1,500 1934 1,500 1935 1,500 Year Salary 1936 $1,500 1937 1,500 1938 1,500 1939 1,500 1940 1,500 1941 1,500 1942 1,500 1943 1,500 Woman Teacher F Age at entrance, 18. Present age, 49. Total salary for service prior to retirement at age 65 $54,015 Actual salary for service prior to reorganization 30,015 Teacher entered service in Elementary Schools; change to grade III, Elementary Schools, year 1900; change to grade B-i, Elementary Schools, i-A to 6-B, year 1912. Year Salary Year Salary Year Salary 1885 $573 1895 $573 1905 $1,240 1886 573 1896 573 1906 1,240 1887 573 1897 573 1907 1,240 1888 573 1898 750 1908 1,240 1889 573 1899 936 1909 1,240 1890 573 1900 1,240 1910 1,240 1891 573 1901 1,240 1911 1,240 1892 573 1902 1,240 1912 1,500 1893 573 1903 1,240 1913 1,500 1894 573 1904 1,240 1914 1915 1,500 1,500 Estimated Future Salary No promotion after year 191 2. Year Salary Year Salary Year Salary 1916 $1,500 1921 $1,600 1926 $1,500 1917 1,500 1922 1,500 1927 1,500 1918 1,500 1923 1,500 1928 1,500 1919 1,500 1924 1,500 1929 1,600 1920 1,500 1925 1,500 1930 1931 1,500 1,500 Woman Teacher G Age at entrance in New York City, 33. Present age, 43. Total salary for service in New York prior to retirement at age 65 $73,850 Actual salary for service in New York prior to reorganization 18,200 132 Teacher entered service under grade 16-A, Elementary Schools, Draw- ing, having had 7 years' outside teaching experience ; promotion until 1909 ; then change to grade IX-C, Assistant, High Schools; promotion until 1912; then change to grade D-i, Assistant, High Schools; promotion under latter grade up to time of reorganization. Year Salary Year Salary 1905 $1,000 1911 fl,580 1906 1,100 1912 2,050 1907 1,200 1913 2,200 1908 1,300 1914 2,350 1909 1,420 1915 2,500 1910 1,500 Estimated Future Salary Maximum of grade D-i reached in 1916; salary then remains stationary. Year Salary Year Salary Year Salary Year Salary 1916 $2,650 1921 $2,650 1926 $2,650 1931 $2,650 1917 2,650 1922 2,650 1927 2,650 1932 2,650 1918 2,650 1923 2,650 1928 2,650 1933 2,650 1919 2,650 1924 2,650 1929 2,650 1934 2,650 1920 2,650 1925 2,650 1930 2,650 1935 2,650 1936 2,650 Man Teacher H Age at entrance in New York City, 38. Present age, 56. Total salary for service prior to retirement at age 65 $84,100 Actual salary in city service prior to reorganization 52,600 Teacher had 13 years' outside experience; entered the service as ist Assistant, High School; promoted to IX-F, Assistant, High School, 1900; promoted to D-2, ist Assistant, High School, 1912. Year Salary Year Salary Year Salary Year Salary 1898 $2,500 1903 $2,900 1908 $3,000 1913 $3,150 1899 2,500 1904 3,000 1909 3,000 1914 3,150 1900 2,600 1905 3,000 1910 3,000 1915 3,150 1901 2,700 1906 3,000 1911 3,000 1902 2,800 1907 3,000 1912 3,150 Estimated Future Salary Promoted to C-2, Principal High School, 1916 (less than 25 classes). Year Salary Year Salary Year Salary 1916 $3,500 1919 $3,500 1922 $3,500 1917 3,500 1920 3,500 1923 3,500 1918 3,500 1921 3,500 1924 3,500 133 PART III BASIS OF ACTUARIAL CALCULATIONS CHAPTER XII INVESTIGATION OF ASSETS AND LIABILITIES OF PRESENT FUND Benefits and Contributions In the valuation of a pension fund, facts relating to the conditions of retirement, the amount of benefits and other details are developed from the experience or actual working of the fund in the past. To base a valuation upon the statutory provisions alone is not safe, because in the majority of existing pension funds the way in which discretionary powers are exercised by the administration constitutes an important factor requiring special consideration. The following brief summary shows only the main provisions of the law considere'd in connection with the valuation. Benefits : Service. — Pension of one-half final salary to any member retiring after 30 years' service, provided 15 years of it was in the schools of New York City. If the member does not have the requisite 15 years' service in the schools of New York City it is sufficient if he be 65 years of age or over. Maximum annuity. — $1,500 per annum for teachers or principals. $2,000 per annum for supervising officials. Minimum annuity. — ^$600 per annum, except in case of president or professor in Hunter College when annuity is increased to multiple of $1,000. Disability. — Pension of one-sixtieth of final salary for each year of service to any member disabled, mentally or physically, after 20 years' service, provided 15 of these years have been served in the schools of New York City. Maximum annuity. — One-half final salary. Contributions : City. — Net absence of deductions from salary roll; 5 per cent, of excise moneys, etc. Employees. — One percentum of salary. Maximum contributions — $30 per annum for teachers and principals ; $40 per annum for super- vising officials. To obtain an estimate of the cost of pensions it is necessary to measure separately the various independent forces upon the combined action of which the cost of the pension system depends. Because of differences in the mortality and service experiences of the men and women employed in the 137 teaching staff of the Department of Education it was necessary that a division as to sex be carried into the measurement of these elements. The factors for which specific measurement was required were as follows: ( 1 ) The probable mortality of members while in the active force. (2) The probable withdrawal experience or rate of leaving the active force by resignation or dismissal. (3) The probable rate of retirement on disability pension. (4) The probable rate of superannuation retirement from the active force. (5) The probable mortality of members on the disability pension roll. (6) The probable mortality of members on the superannuation pen- sion roll. (7) The probable rate of salary increase of members of the active force. Data Used as Basis for Valuations Collection of Schedules The basis for the valuation tables was the mortality and service experi- ence of the force during the period from June 30, 1908, to June 30, 19 14. To secure the data regarding this experience the record of every employee who had been in the active service or on pension at any time during the six year period under observation was required. This information was obtained from the employees directly and from the records in the Department of Education. All information regarding the persons in active service was secured by means of the regular census schedule prepared by the Commission and sent out to all the departments in connection with the pension census, made as of June 30, 1914. Although the official date of the census was June 30th and all the information was given as of that date, the schedules were not pre- pared in the Department of Education until September, when the teachers returned to the schools after the summer vacation. Schedules were sent to the principals of the various schools, who distributed them to the teachers. They were made out in triplicate under the supervision of the officials. Two copies were forwarded to the Commission on Pensions and the third was retained by the teacher. A copy of the schedule used for collecting the data regarding each employee in active service is shown on the following page: 138 inquiries r to any r person wer such o secure le neves- o c OS'*--; fi •« C « • 2 tf <« E ® * ® < se great care In answerin If In doubt as to proper t the Immediate superior o e head of the department purpose of these questio r the Commission on Pen H U > H g H H ase exercl schedule n, consul ted by th es. The benefit o V en o '^ -> S) ^'^ a^ 3^ Bass's C/5 o CO U o o CO O a V II •" a .a i$ on OD V 8.0 4« x: iSri pa ha « 5 ■ «l I O" .^i « J-t I j* w a iiil •5 si I.S.S2. "* C 'Si S **■ ;» ! .« Jfe ! <«■ ':'■ *%s ?! "' 1 "^^ ji 1 « i , ■• ^ H"*^ 'we-^wwtwf-'*^--'-- • W I ^ t- , « everv « is»«w»^«»^fieWW'^«'^*ft^!«*r; CV> CN^ S S O O Schedules of other colors, calling for slightly different information were prepared for all employees who had left the active service without pension during the six year period, for all pensioners on the rolls on June 30, 1914, and for those whose pensions had terminated, in the preceding six years. These schedules were prepared by employees of the Commission on Pensions from the records in the Department of Education. Although data for the period from June 30, 1908, to June 30, 1914, were to be used as a basis for the table showing the mortality and service experi- ence of the force, records were taken from December 31, 1907, up to the time of the actual date of collection. By thus having the period for which the teachers and other field workers supplied data overlap, at either end, the period for which data were absolutely essential, the necessity for absolute precision as to dates on the part of the field workers was eliminated. Data regarding facts not relating to the basic period were easily rejected in the office by mechanical methods and a precision as to time limits secured that would scarcely have been feasible had dependence been placed solely upon the many teachers and the field workers who naturally could not be con- versant with all the requirements of the census. Checking Schedules as to Number and Completeness The Department of Education furnished the Commission with state- ments showing the number of employees on the payroll in the various schools and divisions of the department June 30, 1914, and cojoperated in every way to make the work successful. The schedules received by the Com- mission were checked to this number to make sure that no schedules for active employees were omitted. After the cards for the active service were checked as to number the out of service cards were added and later, by means of tabulating machines, the cards were assorted so as to show the active service as of December 31, 1907, and June 30, 1914. The tables prepared from these assortments were again checked against the records of the department. This check was for the purpose of insuring that no cards for persons out of service had been omitted. The same methods were employed in checking cards for pensioners. In the active service schedule shown on page 139, a small coupon will be noted, which contains the name of the employee and certain other facts. Similar coupons were attached to the schedules for all out-of-service employees and pensioners. After the schedules for all departments in the city government were received, these coupons were detached and arranged alphabetically. By this method all duplicate schedules were located and removed and the cases of employees who had passed from one department of the service to another during the six year period of the experience were dis- covered and the records adjusted, so that reports for such persons would tabulate consistently with those for persons employed in but one service. After the schedules had been checked for number and the coupons 140 assorted, they were reviewed for apparent inconsistencies and for omissions of data. Where inconsistencies or omissions were found, the reports were corrected from the various departmental records. Preparation of Punch Cards for Mechanical Tabulation For purposes of the tabulation the data on the schedules were trans- ferred to punch cards by means of a system of code numbers. The follow- ing is a copy of the card used : Ul "^ \-- =t U.V. C. PEKIS!0\' CO r>^^AlSSr5NI'/ dENenM AuuuAt Data or Pur Diem ^o| ,- cv CO frf lO CD| t>>. CO' 00 o» 31JaiO O T— , CM CO 't ID CD • r-* en) O O ^_ CM CM CO CO in- m CD : CD ; CXI 00 ^ix . o r- CM CO '^ lO CD ; N- CO a» ^ o r- CM CO ^ lO CD r^ 00 '^"X- o «- CM CO , ^ If) GO O 00 > ^-£X o - CM CO ^ in CD h- 00 0> 9snsp o t- CM CO '* in CD r^. 00 O) 1^-5 o «— CM CO ^ in CD r^ 00 m i^=X o *- CM CO ^ in CD r««. CO <3» .•0 o r- CM CO ^i- in CD h- 00 m -^x o T- CM CO ^ in CD r^ 00 m »snc3 X o T— CM CO . _5g o »- CM CO -^ in CD r>. 00 O)) 1 X a — CM CO ^ in CD i^ 00 o> £ ♦^ o <- CM CO ^ in CD 1^ 00 <«) a o »- CM CO rr in CO r^ CO O)) .ilJO^'^ o — CM CO ^ in CD r>-. 00 5' o - CM CO ^ in CD f^ 00 on o r- ca CO "* in CD r^ 00 o o r— CM CM CO CO -* in in CO CD CO CO pnxij o ^ CM CO "«t in CO rv. 00 a> cn X ^ o .- CM CO '^ in <0 r* 00 flC Xfio r- CM CO ^ lO <0 r^ CO o> 9Z031 142 Although the date of the wife's birth and the number of children were not required in the valuation of the teachers' retirement fund, they were col- lected because the Commission also had to deal with funds which provide pensions for dependents, and it seemed best to collect uniform data for all employees. After the data were transferred to the punch cards the cards were veri- fied by reading back to the original schedule the information punched into them. In the latter part of the investigation this verification was performed by means of a mechanical checker, devised by the Commission on Pensions and built by the Hollerith Tabulating Machine Company. Mechanical Tabulations After the cards were punched and verified they were tabulated by means of the Hollerith system. Tabulations were made showing in detail, by age, length of service, etc., the number of employees in the active service and on the pension rolls, together with their salaries or pensions. Summaries of these tabulations are shown on pages 164-167. A tabulation showing the experience of the active force during the last six years was necessary to measure the forces on which the costs of pensions depend. The following table heads show the form of these tabula^ tions and the total of the detail on the sheets ; the tables are not presented in entirety on account of lack of space. Table 25 — actual experience — active service Age 2 1 1 1 tn Q •Is xn 18 1 19 20 etc J De tail for Each A ge Total on Table for Men 1,975 895 243 56 11 54 1 2,505 Total on Table for Women 13,981 7,320 3,111 362 208 532 1 17,087 Total 15,956 8,215 3,354 418 219 586 2 19,592 US Table 26 — actual experience * — service pensioners Age Survivors Entrants With- drawals Deaths Existing 46 ] 47 1 48 : etc I Detail for Each Age Total on Table for Men 34 133 70 97 Total on Table for Women 773 545 180 1,138 Total 807 678 250 1,235 Table 2y — actual experience * — disability pensioners Age Survivors Entrants With- drawals Deaths Existing 35 1 36 37 etc J Detail for Each Age Total on Table for Men 1 10 1 10 Total on Table for Women 79 282 40 321 Total 80 292 .... 41 331 As shown by the schedule (on page 139) the experience of but five years was used as regards salary. This period was adopted merely as a matter of expediency. The five year period was deemed a sufficient basis for the prep- aration of salary scales. To have based the salary experience on the six year period used for the mortality and withdrawal rates would have necessitated the use of an extra punch card because of the amount of information to be recorded, and would accordingly have doubled the amount of work required. The added degree of accuracy and precision thereby achieved could not have compensated for the added expense and labor involved. It is doubtful if the rates based on six years' experience would have been substantially different from the rates based on five. In the tabulation for salary scales the cards for the members of the active force were kept separate from those for the members on pension in order that any selection of persons for retirement which might result from differences in salaries, could be studied. Each card was tabulated as five separate reports for an employee, according to the age of such employee at the time the salary was received. The following shows the summary of the experience used as a basis for salary scales. •This Table Includes Experience of Fund for Period Prior to 1908. 144 Table 28 — actual experience — salary scale Class Number of Annual Salaries Considered Amount Men Women 11,513 77,042 $24,123,620 93,072,678 Total 88,555 $117,196,298 Exposure and Check Tables The actual experience tables, discussed on page 143 in connection with the tabulation of data, were used as a basis for the exposure tables, which show the number of persons in the active force at each age who were expose'd to the contingency of leaving the service during the period of the experi- ence, together with the number of dismissals, deaths, retirements, etc. On these tables the unadjusted rates of separation from the service were pre- pared. These rates were then graduated, as explained later in the report, and the results were checked back to the original data to insure that the graduated or adjusted rates had not departed from the original data. After the exposure tables were prepared and before the unadjusted rates were computed, the rates prepared by Mr. William A. Hutcheson in the recent actuarial report on the School Teachers' Pension Fund were checked into the experience, and the expected mortality, withdrawal and retire- ment experience as found by these rates was compared with the actual experience as tabulated by the Commission on Pensions. As the result of such checking it was considered unnecessary to make up an entirely new set of rates. The following table for men teachers shows a comparison of the actual tabulation of withdrawals as made by the Commission on Pensions with the withdrawals which would have occurred had the experience been the same as that shown in Mr. Hutcheson's report. Table 29 — comparison of the number of separations of men teach- ers FROM THE SERVICE WHICH WERE RECORDED BY THE PENSION COM- MISSION WITH THE NUMBER WHICH WOULD HAVE OCCURRED HAD THE RATES OF SEPARATION BEEN THE SAME AS THOSE PREPARED IN THE FORMER INVESTIGATION Resignations Disability Service Age AND Dismissals Deaths Retirements Retirements Groups Actual Expected Actual Expected Actual Expected Actual Expected 20-29 157 133.2 16 11.6 30-39 63 69.0 11 26.2 40-49 19 14.7 6 8.0 3 1.5 .8 50-59 2 1.9 11 7.5 5 2.7 10 15.6 60-69 2 10 7.9 3 2.7 20 23.9 70 and over 2 2.9 24 15.6 Total. . . 243 218.8 56 64.1 11 6.9 54 55.9 145 Since the total number of actual separations from the service without pension was 299 (243+56) as against 282.9 (218.8+64.1) expected, by the use of Mr. Hutcheson's rates, the percentage ratio of actual to expected was 105.7 per cent. There were 65 (11+54) cases of the total separations from service with pensions against 62.8 (6.9+55.9) cases expected, or a ratio of actual to expected of 103.5 per cent. There is a tendency toward compensa- tion in the rates, since Mr. Hutcheson's rates provide that a few more men remain in active service to become eligible for retirement, but, on becoming eligible, that they retire at a somewhat slower rate than was found to be a fact by the Commission on Pensions. Because of this compensation and since the difference is very slight in any event, it seemed inadvisable to cor- rect the active service table for men. As regards the mortality among men pensioners, the following table shows the comparison of the actual with the expected deaths, according to Mr. Hutcheson's tables. Table 30 — comparison of the number of deaths among men pen- sioners RECORDED BY THE PENSION COMMISSION WITH THE DEATHS THAT WOULD HAVE OCCURRED HAD THE RATES OF MORTALITY BEEN THE SAME AS THOSE SHOWN IN THE PREVIOUS INVESTIGATION Age Groups Disability Pensioners Service Pensioners Actual Expected Actual Expected 50-59 1 .8 .5 3 17 34 16 1.4 60-69 17.7 70-79 44 5 80-89 16.8 Total 1 1.3 70 80 4 Because of the difference between the actual and expected in the case of service pensioners' mortality a new rate was graduated. This new rate, however, was not based on actual experience as recorded by the Commission but is a rate lying between the one found by Mr. Hutcheson and the one indi- cated by the actual experience reports of the Commission. Both the rate worked by Mr. Hutcheson and that worked by the Commission from actual experience are based on comparatively small numbers. Rather than to accept either one as correct and to reject entirely the other, it seemed safer to take a middle ground, which is doubtless more nearly the true ground, and does not involve so wide a possibility of error. No change was thought advisable in the rates showing mortality of dis- ability pensioners. The rates applicable to the active service of women required slightly more modification than those for men. The following table shows the com- parison of the actual experience with that expected by the application of the rates in the former report: 146 Table 31 — comparison of the number of separations of women teach- ers FROM THE SERVICE WHICH WERE RECORDED BY THE PENSION COM- MISSION WITH THE NUMBER WHICH WOULD HAVE OCCURRED HAD THE RATES OF SEPARATION BEEN THE SAME AS THOSE PREPARED IN THE FORMER INVESTIGATION Resignations Deaths Disability Service Age AND Dismissals Retirements Retirements Groups Actual Expected Actual Expected Actual Expected Actual Expected Under 20. 2 2.7 1 .9 20-29 2201 2146.4 101 98.9 30-39 821 878.9 94 111.6 10 4.0 40-49 79 69.1 86 82.0 146 133.8 34 37.2 50-59 8 6.2 61 58.0 35 40.0 325 281.0 60-69 0.2 18 22.0 17 4.6 146 136.7 TOandmore 1 2.1 27 15.4 Total... 3111 3103.5 362 375.5 208 182.4 532 470.3 The disparity between the actual rate of retirement and the rate ex- pected according to the former report was very noticeable ; consequently an investigation of the reason for such a deviation was made. The results showed that many teachers who would ordinarily have retired in the period covered by the experience used as a basis for the previous report, did not retire in that period because of the increase in salaries anticipated as a result of the "equal pay act" and the consequent increase in pensions expected. In the year following the passage of the "equal pay act" the number of retire- ments was much greater than in the previous year, which indicated that the rates of retirement for the period used by Mr. Hutcheson were too low to represent usual rates and that it was necessary to take into account the two succeeding years in order to arrive at a proper rate of retirement. Because of these facts, new rates of disability retirements and regular retirements were prepared in accordance with the experience recorded by the Pension Commission. Considering the rates of mortality for women pensioners, the following table shows the comparison of the actual deaths with those expected : Table 32 — comparison of the number of deaths among women pen- sioners RECORDED BY THE PENSION COMMISSION WITH THE DEATHS THAT WOULD HAVE OCCURRED HAD THE RATES OF MORTALITY BEEN THE SAME AS SHOWN IN THE PREVIOUS INVESTIGATION Age Groups Disability Pensioners Service Pensioners Actual Expected Actual Expected 30-39 19 15 4 2 .3 26.0 22.8 6.4 1.9 1 31 75 60 12 40-49 .8 50-59 35.5 60-69 80.2 70-79 62.4 80-89 9.9 Total 40 57.4 179 188.8 147 The mortality among service pensioners was considered as being the same as that deduced by Mr, Hutcheson, but in the case of disability pen- sioners it was thought advisable to reduce the mortality forecast in order to bring it more nearly in conformity with the experience found by the Pension Commission. It might be well to add that, when the former report was prepared, the rate of mortality was found to be so low that the figures were very properly doubted by the actuary. Since these results were obtained from a first investigation, Mr. Hutcheson modified the rates to bring them more nearly in harmony with those shown in a standard mortality table. The present investigation demonstrates the fact that the previous experience was probably correct and that it is probably better to use the experience as found from the service than to use the standard mortality tables. The experience in respect to changes in salary among members of the active force was not shown in the previous actuarial report and, in fact, was not prepared at that time because the actuaries were informed that the schedules of the salaries prepared by the Department of Education gave the changes. These schedules were therefore used as a basis for estimating the future amounts and prospective pensions of employees and no resort was made to the experience in regard to salaries. The Commission on Pensions did not rely on these tables of the Department of Education but prepared the experience as to salaries directly from the data which it obtained. The reports on the census schedules showing the salaries of active employees and others showing the salaries of pensioners previous to retirement were used as a basis. The resulting scales of salary increases, thus based on actual experience, demonstrate that the salaries in the service increase much more rapidly than is indicated by any of the more important single schedules of the Department of Education, because of the various changes in the schedules and the transferring of employees from a class covered by one schedule to a class covered by another having a higher rate. The experi- ence of the force in this regard ran so regularly that an adjustment was hardly required and it is consequently thought that the basis for estimating the future salaries is very reliable. Attention is called to the fact that this change in the method of estimat- ing the future salaries greatly increased the estimated liabilities, since the expected pensions are necessarily much larger than those shown by the use of the salary schedules of the Department of Education. The following dia- grams show the comparison of the actual and adjusted salary rates as used by the Commission. The diagrams are miniatures of the actual sheets used ; consequently much of the ruling has been omitted to facilitate reproduction. 148 mit mm J 1 J """"^"^ :-5::::::::::::::::::::::::±::|:: J i J — % i[ -- H^ iliBil , — ¥^fc^:r: U::::::::::::::::::::::::::::::::::: — 1 -T-T-.- '^ =• ti'i Lli...- .,.. , -f 1 — ^ '■ --f ±-^ — — = — -._u_^iHfi -fU|L I'll ill M i lX 1 ^ ^* !, 1 ! 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' - V ,- ^- J — ^ 3--=^ ,^': _ \ t- .- I -t u- - iv- ■ -- 4r 4V [ f , 1 1 :: :t 1 1 1 1. T ~1 \ I I i . I -- i - -t 1 [ II 1 ^ 1 ::: jt -fe- ll - E^ 1 ^ X pll - A l: L % 5? ^ 2 ^ T V vj S « \ ^ 1 S ? "^ i \ . . 8 § fe £ ^ 1 . .. >o St^ \ 1 . . .. i z 5 1 S, . ,, ■¥ O Si ILJ ^ % : " ^5 t < N o 5 cj^ y . 1 > £ •« "^ N : :: "S = ^ 9 < =1 < 5 ^^ • ' 1 ! i • • • i . J i -A v indi- cates the number of regular pensioners living at age x, while I ^*) represents, similarly, the number of disability pensioners living at age x. The column marked "salary scale" is given in connection with the active service table and, as previously explained, the ratio between the figures opposite one age and that opposite a later age is the rate at which salaries increase in the period between these ages. The salary scale must not be used as representing the actual future salaries on which the amount of a teacher's pension will be based. It is given in the active service table because the values in that table are generally used in combination with it. The following are the tables for both men and women : 156 Salary Scale Sx U5»0»00»OQOOOOOO»00»0>000»COOOOOOO»OiO»0«00 lOooowTfSixJOOiQ—ifNC^eoeceoeceofNiM^orooot^co-^coNO^ Total Decre- ment coeooia5Tj4ot^ O ^0 C^-*^<© 00 05^0 '-H_'-<^i--i^'-^_i» <» C0'-Hcoo5r^asaiTt*o»ccooecTtOOQOOOO»Ci0005.-H(M(NOOOO(N'*t^(MrH(NOlI^COOOO«5t^<-HCCi-H I^00O(NtOO(N«Ot^00»0O>Oa5'-i— iOOO(M>Ot^OOO(NiOOiO(N>-H (M(Ne«3eoeO'*Tt*'*-<}o<©«OTi 00 O (M O 05 l^ fO CO ■* I— 1 I— 1 I— ( 3 -^ ^OSCOOS'*^05C^T+(50Tt<,-it^(Oi000505»00000>'-HOt^"3»OOOOCO'^ 00«0(N(M05O'*«0-*05O<-l(MTti0rt4t^»OCD05C^ lOTjrco'c^T'-rcrocrco'ioirot-rod'cd'ec'o'b-r'^'i-H^oO'o'c^roroTjrcsri-r u3»oioir3ir3iO'*'*-*-*Ti-00050i-i0'-! »f5»0»00»0»OiO«0>OCOOcOOi©«0«OOiOCOl>-t--I>>l>l^t^I>t^l>»l>0000 Salary Scale Sx OOr»Oi-iiOiO»CiOOI>000000«0»000»000»00»00000»C«30 CeC050I>t^00050'-i(MCOTtilC50t>-000500'— l(NCOC«3T}-iOCOCOC-cocoio>o>ort*Ti<'^io?ot» i-rc^"(N"(N"c. ?o N i-< <© Deaths ece«t^»-l0005 00Wr-lOC0Orl*Ot^C0CO'-t(N-*ioot^oi0^ect^(NOicoeoi-<05i©-*oiooo5t^'©io«ccoooO'-<»o With- drawals OC5rHiO(NOO(MOOeOC-*.-Heooo»0'-ioO'*.-(050eci-Hoo«o i-H-.l<0(NiOOO>OT}< (N^0^00__0_->*_C<>_0_05 OOt^COlOlO-^rJ^CCCOCOIMe^C^KNi-tt-l Or^COOO(N(MiOiOC0 OOOOMC«500lr^OO>Cl-^t^»Oi0^00005(NC50COt^^'*rHTj<0 05 0(NeOOOOO o i>(N 05 CO 00 o c^^''^05,"*,^^o,'-ic^co_o^t> -^^tj* ■*_^oq_'-H_ic 05_Tr_oo -*__05_-*^oq_(N 0050503050505000000t>.b-l^t>t>-COCOCOCOCOCOCOCOCOCOiOiO'0"3iOiOiOkO O < 00050^(NW^tCCOt^00050.-i(NCOTjOOa>0^(Me<5rt*»00 ^i-H(N._^t> t>^t>^r>^i>_i>_i>_oo 00 00 00 c» 00 oq^oq_oo go os os oj 05_0i o o o o o^ Total Decre- ment O5.T-ieClTHlO00t^-^t^TtlO5-*lMl>00e0rHTjlCr-l-<*<-f(^^14■IH~rH"1H"l-^',-^,-^I-^1-^l-^T-^ Service Retire- ments ' X i-ICOOaiOO>OI>lOCOOO*'*TfOrHtD00ait^'-l-*c0t-00C0t-l C^-*^U5_0 <0 cq_«q_"5_«0 -^^^-^^CO (N^i-J^^O OS OO 1> O -* ^t^(NI>C005?DC0»-IO05t^<©l^00CD'co(Nt^a>(N(NrHooioa>-*iccO'*(N05i-Hi£>u:)i>eO'H CDcOt^<£>COO>0^'*eC(N005t^CO'*(NOOOiO->*(N'-i (N (N (N (N (N (N (N CI (N(N (N (N T-l T-H rH tH rt ri With- drawals OlOOOOCCOSiC^OOOlO-^WrH ■*COCC(N(Ni-^i-iT-i,-i OiOOOC^lOrJHr-lOOt-OiCaiOOCflOCOiCfNi-Hl^lNlOOOSlOr-l ici>i>cD»OTj0005 0i-HC<1CO'^>OCDl^0005 0'-H(MCO-*iOCOt^OO Salary Scale Sx 00(Ni-ifOOfO-HrHOcOC0 000 COt^OOOiT-HfOCOO»dOCOC<100CCOi":iOCOOl0 05(N5D03i-HCOiCt^05i-H(NeCi-* tOcDCDCDl>I>.l>.0000OiO5 0_0_i-H_rH^C^l>^I>^ Total Decre- ment 00>OI©rHl^C<)t^lCOi-H05i-HC0lOrJ^O(M00Oi-lO00lOOC0C0»ClX>rHlOC0r-05(NlOg5b-i-HTj<-*i-lTt^5»_00 »C (N_0^05 COt^l>I>00O0001>l>O5 1-1,00 CO .-H~i-H"c^'"T^'"lO~lO'lO~TtrTjH~eo'co"c4'CO0500O5lOOl^'*OOOOCOt^t^'-H 001^05 r-(TtHOOeOOOOt>»OkO'^ (N IC O t-^^TtH^IN^i-H^r-J^OO Tf^ro '^ O^IO i-H_CD CO O 00 r^U5Tti-(OCO'-H->*0505 0005 00(Nt^COI>l01>OOI>t^Ort'-(£> 0'*00>OOI>Ot-(05e005i-l0_•«i^^^-__ »0 t^-^^iO O 00 1> 00 o_(^ cToTocTt^rio'oj'od'c's'oo CO oc^rJ^"o"^-^T)^c^"c^o^^-^l©~l/^^l:^•^"co"c<^'-^o"o oToo t^ coio 00>050505050000l>I>i©«OCO»0>0»Oir5'*-*Tt00050rHC3CO;^i250b-OOg50 »-l»-i(NC^lN