J K 3/60 r&te /6>/ / DOCUMENTS DEPT. UC-NRLF t of BUREAU OF STATFS't CS CHARLES F. GETTEMY, O.ic^ A SPECIAL REPORT ON THE CIST OF RETIREMENT SYSTEMS FOR STATE AND COUNTY EMPLOYEES IN MASSACHUSETTS JANUARY. 19 SI BOSTON WRIGHT & POTTFR PRINTING COMPANY STATE PRINTERS 1911 GIFT OF ^/\& u^- "VVc^^o . \^> i\ r vj \j\^ ^^jr t\ JUMEN DEPT. HOUSE No. 1400 Cfte Commontoealtf) of REPORT OF AX INVESTIGATION BY THE DI- RECTOR OF THE BUREAU OF STATISTICS AS TO THE COST TO THE COMMONWEALTH AND THE COUNTIES OF THE ESTABLISHMENT OF RETIREMENT SYSTEMS FOR EMPLOYEES. To the Honorable Senate and House of Representatives : I have the honor to submit herewith a report of the inves- tigation made pursuant to the provisions of the following Resolve of the last Legislature : [CHAPTER 160, RESOLVES OF 1910.] RESOLVE TO PROVIDE FOR AN INVESTIGATION RELATIVE TO RETIREMENT SYSTEMS FOR STATE AND COUNTY EM- PLOYEES. Resolved, That the director of the bureau of statistics is hereby authorized and directed to make an investigation as to the cost to the counties of the commonwealth by the estab- lishment of retirement systems for employees as provided for in the senate bill numbered three hundred and seventy-five of the present year, also as to the cost to the commonwealth by the establishment of a retirement fund for its employees as provided for in the senate bill numbered three hundred and seventy-six of the present year. He is authorized to employ experts in determining the cost, and shall report his findings to the next general court not later than the first Wednesday in January. Any expenses incurred under this resolve shall be paid from the appropriation for the bureau of statistics. [Approved June 15, 1910.} 344191 2 KKTIHKMENT SYSTEM. [Jan. i. In >urorchfloe ,Vjth the> authority of the resolve, Prof. F. Spencer Baldwin, \\lio was^the secretary of the late Commis- sion on Old-Age Pensions, Annuities, and Insurance, was engaged as an expert to take immediate charge of the inquiry; and the findings of this report are the result of his computa- tions. The bills upon which the investigation was primarily based, namely, Senate Bills Nos. 375 and 376, provided for the estab- lishment of retirement systems for county employees and for state employees, respectively, on a basis of substantially equal division of expense between the beneficiaries and the public treas- ury. By the terms of the bills the employees are to be assessed regularly on their wages and salaries at the rate of not less than one, nor more than five, per cent, to provide a fund out of which annuities shall be paid to those retired from the service (excep- tion being made, however, in the case of employees receiving more than $30 per week, who are not to be assessed on the excess above that amount but simply on the flat basis of $30 per week). The annuity received by each employee retired under the provisions of the act is such amount as his con- tributions during his period of service, accumulated with inter- est at three per cent compounded semi-annually, will provide for him according to actuarial computation. The employee is given his choice of two kinds of annuity: First, a life annuity payable monthly; second, a life annuity payable monthly, with the provision that in the event of the death of the annuitant before receiving payments equal to the sum of his deposits accumulated, with regular interest, at the date of his retirement, the difference shall be paid to his legal representatives. In addition to the annuity, the employee is to receive in each case a pension of equivalent amount paid from the public treasury. In no case is the total allowance, includ- ing annuity and pension, to be less than $200 per year. The text of the resolve required this investigation to be based upon the provisions of Senate Bills 375 and 376, but amendments were offered to these bills after they had been reported which altered their provisions by relieving the Com- monwealth and the counties of the necessity of maintaining pension funds; and as such amendments, if adopted, would materially affect the burden of expense to be borne by the 1911.] HOUSE No. 1400. 3 public treasury, calculations of cost have been made in this report based upon the provisions both of the original and the amended bills. Three sets of calculations have been made for each set of bills showing :- (1) Estimated expense during the first year of operation of retiring all employees 65 years of age and over who would during the first year receive a pension only, based on prior service, no annuity fund having yet accumulated. (2) Estimated expense for the sixth year of operation of retir- ing all employees between 60 and 64 years of age during the first five years of operation, allowances being made for mortality. (3) Estimated expense for a year of full operation of retiring all present employees 65 years of age and over. This calculation differs from (1) in that all retired employees would, if the system were in full operation, draw annui- ties provided by their contributions during their service periods and also pensions of equivalent amount; that is, this computation is based on the assumption that the system had been put into operation at the time the oldest present employee entered the service, and that all the beneficiaries had been contributing to the annuity fund from the date of their first employ- ment. While the basis of this latter method of esti- mating the expense of applying the system to the present staff of employees is purely hypothetical, it probably gives a better idea of the cost than would an estimate of the expense of operation at some future date which would be merely a problematical forecast. As hereafter explained, it is impossible to calculate accurately in advance the cost of such plans as are contemplated by the proposed legislation, since, among other reasons, it cannot be determined how many employees would elect to participate in a voluntary system, nor how the details of the different propositions involved would affect, in the aggregate, the sev- eral classes of employees who had elected to participate. It is obvious, therefore, that the calculations of cost had to be based on certain more or less arbitrary assumptions which, together with an explanation of the method followed in mak- 4 RETIREMENT SYSTEM. [Jan. ing the calculations, are fully set forth subsequently in the body of this report. It should also be understood that the word "cost" in this connection is used in the sense of direct pecuniary outlay and does not pretend to represent the net cost of the operation of the system. With these considerations and qualifications in mind, the following summary statement of the results of the inquiry may be made, the figures, as given, including an estimate of the cost of administration : I. ESTIMATED COST TO THE COMMONWEALTH. 1. For the first year of operation : - SemfiSl 376 SenatefiS 441 (a) on a 1 per cent basis, . . $88,026.98 $48,067.54 (6) on a 5 per cent basis, . . 261,076.19 61,279.00 2. For the sixth year of operation : (a) on a 1 per cent basis, .. . 110,503.32 66,879.79 (6) on a 5 per cent basis, . . 298,062.31 79,944.64 3. For a year of full operation : (a) on a 1 per cent basis, . . 81,655.36 46,675.84 (6) on a 5 per cent basis, . . 236,208.89 61,311.30 II. ESTIMATED TOTAL COST TO ALL THE COUNTIES. 1. For the first year of operation : - SenSemi 375 Sena^Biii 440 (a) on a 1 per cent basis, . . $40,078.49 $28,547. 12 (6) on a 5 per cent basis, . . 88,853.39 43,196.55 2. For the sixth year of operation : (a) on a 1 per cent basis, . . 48,91 1 . 56 38,725 . 41 (6) on a 5 per cent basis, . . 99,574.76 52,614.00 3. For a year of full operation : (a) on a 1 per cent basis, . . 31,061 . 51 24,812 . 40 (b) on a 5 per cent basis, . . 60,573.54 41,328.00 In general, the figures for a year of full operation based upon the assumption explained on the preceding page are some- what lower than those for the first year of operation under present conditions. This is due to the fact that the amounts required for minimum payments increase the cost in the first year. In- the case of the assumed year of full operation, the number of instances of minimum payment is considerably smaller than would be found under the actual conditions dur- ing the first year. The cost for the several counties, individually, of course varies widely, Nantucket standing at one extreme and Suffolk at the other. In the case of four counties Barn- 1911.] HOUSE No. 1400. 5 stable, Franklin, Nantucket, and Plymouth there are no expenditures under the amended bill for the first year or for the year of full operation, since there are no persons in the employ of these counties 65 years of age and over, eligible for retirement. In the case of two of these counties Barn- stable and Nantucket there are no expenditures under the amended bill for the sixth year of operation. The maximum figure for Suffolk County, which has the highest amounts in the county table, is only 130,822.14 for the sixth year of opera- tion under the unamended bill on a five per cent basis. NUMBER OF ELIGIBI.ES. The first step necessary to the inquiry was to take a census of the employees of the Commonwealth and of each of the 14 counties, and incidentally to determine what persons should be regarded for the purpose in view as "employees," a problem which of itself presented numerous difficulties involving some arbitrary decisions. (See page 13 for statement in regard to excluded employees.) Some of the results disclosed by the methods adopted were as follows : I. Number of eligible state employees, age 70 or over, ... 39 age 65 to 69, ... 68 age 60 to 64, ... 131 under 60, . . . 6,283 Total number of state employees eligible, 6,521 Aggregate amount of salaries assessable, .... $4,096,949 . 13 II. Number of eligible county employees, age 70 or over, ... 42 " " " age 65 to 69, ... 39 age 60 to 64, ... 73 under 60, . . . . 1,001 (( 1C U l( U (I Total number of county employees eligible, 1,155 Aggregate amount of salaries assessable, . . . . $933,374.75 The above data, for the State, classified by departments, boards, commissions, etc., and for the several counties sepa- rately are given in the tables on pages 19-23. The means 6 RETIREMENT SYSTEM. [Jan. taken to procure this information, which was a necessary pre- liminary to making the calculations of cost, may be briefly described. It had first to be ascertained what was the number of persons on the pay-rolls who would be eligible for pensions under the proposed system, their ages, wages or salaries, and periods of service. An enumeration of the pensionable em- ployees of the Commonwealth and the counties was accord- ingly made by the Bureau of Statistics for the purpose of gather- ing this information. Blanks were sent out to the various departments, boards, and commissions calling for returns show- ing for each employee (a) the age at last birthday prior to July 1, 1910; (b) the date of entry into the service of the Com- monwealth or county; (c) the salary or wages; and (d) whether a veteran or not. The list of employees of the Commonwealth was made up from the manual for the General Court, the Auditor's report, and other sources of information. In mak- ing up the list of county employees for the purpose of this census, the manual for the General Court and reports of the County Treasurers were used, the lists thus obtained being completed by correspondence with the County Treasurers and other officials. The cost of this inquiry, which was borne by the Bureau out of its regular appropriations, has been as follows : For expert, field, and clerical services, . . . . $919.00 For travel, 59.80 For printing, postage, etc., 39.87 Total, $1,018.67 Tabulations of the principal data resulting from the inquiry, together with such explanatory text as has seemed desirable, are given in the following pages, while the text of the bills on which the investigation was based is reproduced in an appen- dix for convenience of reference in connection with the report. Respectfully submitted, CHARLES F. GETTEMY, Director, Bureau of Statistics. STATE HOUSE, BOSTON, January 4, 1911. 1911.] HOUSE No. 1400. RESULTS OE THE INQUIRY IN DETAIL. 1. The Proposed Legislation. Drafts of bills providing for the establishment of retirement systems of employees of the Commonwealth and of the counties were submitted to the last Legislature in the report of the Commission on Old-Age Pensions, Annuities, and Insurance (House No. 1400, January, 1910). The bills were referred to the Committee on Legal Affairs and were reported favorably, with slight amendments. They were then referred to the Sen- ate Committee on Ways and Means which reported instead the resolve providing for this investigation. The bills, as drawn by the Commission and reported by the Committee on Legal Affairs, provided that a fund to pay the pensions should be accumulated by the Commonwealth or the counties, as the case might be. They were required to con- tribute each month an amount sufficient to maintain reserves equal to the net value of the pensions corresponding to the annuities provided by the contributions of the employees. That is, the Commonwealth and the counties were to make regular contributions to a pension fund equivalent to the con- tributions of the employees to an annuity fund. Later, an amendment was drawn by the advice of the State Insurance Commissioner, designed to simplify the bookkeep- ing of the retirement system. This amendment relieved the Commonwealth and the counties of the necessity of making current contributions for the purpose of maintaining a pension fund. The amended provision merely requires the Common- wealth and the counties to pay the pensions when the latter become due. This amendment was incorporated by Senator Harvey, Chairman of the Committee on Legal Affairs, into the drafts of new 'bills, Senate No. 440 and Senate No. 441, which he offered as a substitute for the resolve ordering this in- 8 RETIREMENT SYSTEM. [Jan. vestigation as reported by the Senate Committee on Ways and Means; the substitute was, however, rejected and the resolve adopted. A similar amendment was introduced in the bill authorizing cities and towns to establish retirement systems as enacted by the General Court last year. As this amendment might be adopted by the Legislature if bills providing for state and county retirement systems should eventually be passed, calculations have been made in this report to show the cost of the proposed systems under the amended plan, as well as under the original bills. The age of voluntary retirement is fixed at sixty years; that is, employees who have reached that age may retire or may be retired by the board entrusted with the administration of the act. The age of compulsory retirement is fixed at seventy years; that is, employees who have reached that age must retire or be retired. An additional requirement of fifteen years' continuous service is laid down for employees retiring or retired at the age of sixty. Furthermore, employees who have served thirty-five years continuously may retire or be retired at any age. Participation in the retirement system is optional for present employees. It is obligatory for future employees, those enter- ing the service after the establishment of the retirement sys- tem, with these exceptions: (a) officers elected by popular vote; and (b) employees eligible for a pension from the Com- monwealth or the county, as the case may be, for any reason other than membership in the association. Both of these are debarred from participation. In addition to pensions for subsequent service, pensions for prior service are provided; that is, employees in the service of the State or county when the retirement plan is estab- lished are to receive, in addition to the pension which they may secure through their contributions to the annuity fund, an extra allowance equal to the amount of the annuity that they might have earned for themselves had the scheme been in operation when they entered the service and had they made contributions to the fund from that time in proportion to their current wages or salaries. It should be noted, further, that employees who had reached the age of sixty years when the 1911.] HOUSE No. 1400. 9 retirement system was established, and employees who had reached the age of fifty-five years at that date and also became members of the association, may be retired with pensions for prior service without having completed the otherwise required service period of fifteen years. Provision is made for refunding the contributions of employees who withdraw from the service without becoming entitled to a pension. In case a member of the association leaves employ- ment for any cause other than death before becoming entitled to a pension, there shall be refunded to him all the money that has been paid in by him, with regular interest. In case a member of the association dies before becoming entitled to a pension, there shall be paid to his legal representatives all the money that has been paid in by him, with such interest as shall have been earned on the deposits. The administration of the system is entrusted to a Board of Retirement, consisting of the State or County Treasurer, ex- officio, another member chosen by the Retirement Association composed of the participating employees, and a third member selected by the first two, or appointed by the Governor or the Chairman of the Board of County Commissioners in case of their failure to agree. The Insurance Department of the Com- monwealth is given certain powers of supervision with refer- ence to the actuarial and administrative features of the system. The retirement system for state employees is to be established on the first day of January or on the first day of July follow- ing the expiration of three months after the date on which the act takes effect. A retirement system for counties is not to be established until the act has been accepted by the County Commissioners and by the voters of the county. The refer- endum clause in the bill for counties provides that upon the initiative of the County Commissioners the question of accept- ance shall be submitted to the voters, and, if a majority of the voters voting on the question at such election shall vote in the affirmative, the act shall take effect. 2. The Basis of Calculation. It is obvious that the cost of such a plan cannot be calculated accurately in advance. Any estimate can be only approximate . 10 RETIREMENT SYSTEM. [Jan. There are several elements of uncertainty that necessarily enter into the calculation. For example :- 1. It is impossible to tell exactly how many of the pres- ent employees would elect to participate in the plan, as par- ticipation is voluntary. 2. The percentage of assessment on wages and salaries is not fixed definitely, but may range from one to five per cent, according to the decision of the Board of Retirement; also employees may be classified with different percentages of contribution for the various classes. 3. The number of employees in the age group 60 to 70 years, that is, between the age of voluntary and that of com- pulsory retirement, who would retire or would be retired, can- not be determined. 4. The number of employees having 35 years of service to their credit who would take advantage of the privilege of retiring or who would be retired "for the good of the service" cannot be known in advance. 5. Retiring employees may choose between two kinds of annuity: A regular life annuity and a special form of life annuity, under which, in the event of the death of the annui- tant before receiving an amount equal to the sum of his accumulated contributions, the difference shall be paid to his legal representatives. The amount of the second form of annuity is somewhat smaller than that of the first. It is not possible to tell how many annuitants would elect the second form. The proportion of such annuitants in the total number would make a difference in the cost under the amended plan in which the Commonwealth or the county simply pays the pensions when due, as the amounts of the pension would be smaller in the case of this class of annuitants. It would make no difference under the unamended bills, which require the Commonwealth or the county to pay regular contribu- tions equivalent to the contributions of the employees. Under the conditions, any calculation of cost must be based on certain more or less arbitrary assumptions. For the pur- pose of making a preliminary calculation, the following assump- tions may be taken :- (1) It may be assumed that all present employees will par- ticipate in the plan. While participation for this class is vol- 1911.] HOUSE No. 1400. 11 untary, the advantages held out are so considerable that it seems reasonable to assume that all persons now in the ser- vice would become members of the Retirement Association. (2) The calculations may be based on the assumption that either the minimum rate of one per cent or the maximum rate of five per cent assessment on wages and salaries would be chosen. It has seemed unnecessary, for the purpose of preliminary estimate, to calculate the cost for the intermediate rates of two, three, and four per cent. (3) It may be assumed that all employees of the age of 65 or over would retire or would be retired when the system went into operation. This assumption is not altogether arbi- trary, but seems a reasonable forecast of the probable scope of the retirement system during the first year of operation. (4) The number of employees who would be eligible for retirement under the thirty-five years of service clause is so extremely small as to be a negligible factor. (5) The percentage of annuitants who would choose the second form of annuity, yielding the smaller amount, would undoubtedly be small and may be left out of account. This factor, moreover, does not enter at all into the calculations under the unamended bills. On the basis of these assumptions, three calculations have been made: (1) Cost for the first year of operation; (2) cost after five years of operation, that is, for the sixth year; (3) cost for an assumed year of full operation. The last calcu- lation shows what the system would cost if in full effect with the present staff of employees; it is based on the assumption that the system had been in existence from the time the oldest employee entered the service, and that all eligible em- ployees had been contributing to the annuity fund from the date of their first employment. This method of estimating the expense by applying the system to the present staff of employees gives a better idea of its ultimate cost annually when in full operation, than would a problematical forecast of the expense of operation at some future date, say after twenty or thirty years. The contributions to be made by the Commonwealth are defined in Senate Bill No. 376 as follows :'- 1 The provisions as to contributions by the counties in Senate Bills No. 375 and 440 are the same as those for the Commonwealth. 12 RETIREMENT SYSTEM. [Jan. "B. Contributions of the Commonwealth, (a) Each month the commonwealth shall contribute such amount as may be necessary to maintain the contribution and pension reserves as of the last day of the preceding month, on the pensions to be paid " (b) Each year, in January, the commonwealth shall con- tribute an amount equal to the excess of the surplus arising from annuity deposits over the surplus arising from pension contributions If for any year the surplus aris- ing from pension contributions shall be found to be in excess of the surplus arising from annuity deposits, such excess shall forthwith be paid over to the commonwealth " (c) Each month the commonwealth shall contribute such amount as the board of retirement may determine to be neces- sary to pay current pensions for prior service " (d) Each month the commonwealth shall contribute such amount as the board of retirement may determine to be neces- sary to ensure the minimum payments provided for . . ." In the amended bill, Senate Bill No. 441, the provisions as to contributions by the Commonwealth are as follows: " B. Contributions of the Commonwealth, (a) Each month the commonwealth shall contribute such amount as the board of retirement may determine to be necessary to pay current pensions " (b) Each year, in January, the commonwealth shall con- tribute an amount equal to the surplus arising from annuity deposits; in case there should be a deficiency arising from such annuity deposits, instead of a surplus, then the common- wealth shall make good such deficiency. " (c) Each month the commonwealth shall contribute such amount as the board of retirement may determine to be neces- sary to pay current pensions for prior service " (d) Each month the commonwealth shall contribute such amount as the board of retirement may determine to be neces- sary to ensure the minimum payments provided for . . ." There is no way of estimating the amount that the Common- wealth or the county might be called upon to contribute under the original bills in order to equalize the surplus arising from annuity deposits and the surplus arising from pension contribu- 1 The provisions as to contributions by the counties in Senate Bills No. 375 and 440 are the same as those for the Commonwealth. 1911.] HOUSE No. 1400. 13 tions or the amount that might be paid over to the Common- wealth or the county on this account. Similarly, the amount that the Commonwealth or the county might be called upon to contribute under the amended plan, in order to make up a surplus or a deficit arising from annuity deposits, cannot be determined in advance. There would be no payments what- ever on these accounts for the first year, as there would be no previous annuity deposits to give rise either to a surplus or to a deficit. For the sixth year, moreover, the amounts would be small in any event. This element in the cost may accord- ingly be left out of account as practically negligible for the present calculations. 3. Excluded Employees. Employees not eligible for pensions in the bills were excluded from the tabulation. The bills expressly exclude two classes: First, officers elected by popular vote; second, employees entitled -to a pension from the Commonwealth or the county, respectively, for any reason other than membership in the Retirement Association. The persons excluded under these provisions are, in the case of the State : 1 . Elected officials, including the Governor, the Lieu- tenant-Governor, members of the Council, members of the General Court, the Treasurer, the Auditor, the Secretary of State, the Attorney-General, and the District Attorneys. 2. Employees pensionable under existing legislation, including judges of the Supreme, the Superior, and the Land Courts; judges and registrars of probate; veterans of the Civil War; members of the Metropolitan Park Police force; all employees of the State Farm, Bridge water; certain officers of the State Prison at Charlestown, of the Massachusetts Reformatory at Concord, of the Reformatory Prison for Women at Sherborn, and of the Prison Camp and Hospital at Rutland. 1 1 The Prison Officers' Retirement Act, Chap. 601, Acts 1908, is construed by the Prison Commissioners to include all employees and officers of the State Farm and certain officers of the other state correctional institutions. There is no provision in the Act defining the term ''officer." There are, however, other statutory provisions making such definition in the case of all the state correctional institutions except the State Farm. Officers so prescribed and held to be eligible to retirement under the Prison Officers' Retirement Act have been ex- cluded in the enumeration, as not eligible under the proposed general retirement system. All officers and employees of the State Farm have been excluded in accordance with the ruling of the Prison Commissioners holding them to be eligible for retirement under that act. 14 RETIREMENT SYSTEM. [Jan. The persons excluded in the case of the counties are : 1. All elected officials, including the county commis- sioners and associate commissioners, county treasurers, clerks of court, registrars of deeds, and sheriffs. 2. All employees pensionable under existing legislation, including veterans of the Civil War and all officers and employ- ees of county jails and houses of correction. 1 3. Strictly temporary or casual employees, when desig- nated as such in the returns. 4. Certain county officials not expressly excluded from par- ticipation in the proposed retirement system, but presumably ineligible under a logical interpretation of the bills, have also been excluded. Deputy sheriffs were excluded for these rea- sons: They are appointed by an elected official and thus are indirectly dependent on election for their tenure of office; furthermore, they do not give full time or render continuous service; finally, their remuneration is variable and uncertain, dependent on the amount of service that they render, as paid by fees. Special justices, masters in chancery, and assistant medical examiners were also excluded, as their services are occasional and their remuneration is uncertain, depending upon the amount of service they render, as paid by fee. Trial justices and medical examiners, however, were included, although their cases are doubtful. They serve only part time and receive small pay, except in a few cases. The decision of questions as to exclusion or inclusion of certain employees gave rise to considerable difficulty. Under the bills, all present employees are eligible for participation in the retirement system except elected and pensionable employees, as already mentioned. This provision is very broad. It would seem to include short-time and part-time employees, for ex- ample: Medical examiners and members of boards who receive small amounts for occasional service in the form of fees. It is a question whether employees of this class, who draw their remuneration chiefly from other sources than public employ- ment, ought to be admitted to participation in a retirement system for state and county employees. The bills also pre- scribe a requirement of fifteen years' "continuous service" as 1 The Prison Commissioners construe the Prison Officers' Retirement Act, Chap. 601, Acts of 1908, to include all officers and employees of county jails and houses of correction. 1911.] HOUSE No. 1400. 15 a condition of qualifying for retirement at sixty years of age. This is defined in Senate No. 376 as follows: - " (e) The words 'continuous service' mean uninterrupted employment, with this exception: a lay-off on account of illness or reduction of force; and a leave of absence, suspen- sion or dismissal followed by reinstatement within one year, shall not be considered as breaking the continuity of service.'' It seems doubtful whether the service rendered by the classes of employees in question would come under this definition. The bills contain no other definition of what shall constitute employment for purposes of the retirement system. In the absence of such definition, it seemed advisable to construe the terms of the bills broadly and to include many persons who probably would be debarred under any plan actually put into operation. Therefore, only employees designated as casual or temporary have been excluded in the present enu- meration, in addition to the classes expressly declared ineligible in the bills. 4. The Method of Calculation. The calculation of the cost for the first year of operation shows the expense of retiring all eligible employees sixty-five years of age and over, according to the assumptions previously indicated. The calculation for the sixth year shows also the expense of retiring the group 60 to 64 years, inclusive, who, under the assumption, would be pensioned during the first five years of operation. In this calculation allowance is made for reduction of the pension roll by mortality. The mortality at age 65, according to the American tables, is roundly 40 per 1,000, or 4 per cent per annum. Deduction has accord- ingly, been made for mortality during the first five years at the rate of five times 4 per cent, or 20 per cent. The calcula- tion for a year of full operation shows the expense of providing for all present employees 65 years of age and over assuming the scheme to have been in operation at the time the oldest present employee entered the service. The expense here differs from that for the first year of operation in this respect: All retired employees would, if the scheme had been continuously in operation from the time they entered the service, draw an- 16 RETIREMENT SYSTEM. [Jan. nuities provided by their contributions during their entire service period and also pensions of equivalent amount. On the other hand, if the scheme were now in its first year of operation, the employees immediately retired would draw only the pensions for prior service, no annuity fund having accumu- lated. Therefore, the minimum payments by the Common- wealth or the county required to make up in each case the difference between the total amount of pension and annuity and the minimum sum of $200 would be less if the plan had been in full operation since they entered the service than if it were in the first year of operation, because the annuity and the pension would be counted toward the minimum in the former case, while only the pension for prior service would be so reck- oned in the latter case. The procedure in calculating the amounts of pension and annuity was briefly as follows: The amount of the annual sal- ary or wages of each retiring employee was taken and the annual contributions were reckoned at 1 per cent and 5 per cent of this amount respectively. The amount of present sal- ary or wages was taken for this purpose. Presumably the amount earned in earlier years was in most cases smaller. Thus, a calculation based on present earnings must be some- what excessive, but to get the previous earnings of all employees of the Commonwealth and the counties and make calculations accordingly was impracticable. The amount that the annual contribution would provide accumulated with interest com- pounded semi-annually at 3 per cent was then calculated. The annuity which this sum would purchase according to the American mortality tables at 3 per cent was next reckoned. This amount was taken as representing the amount of pension payable by the Commonwealth or the county. The additional payments in order to insure in each case the minimum of $200 were also calculated. 5. Estimates of Cost. The estimates that have been made show only the probable gross expense of the retirement system, as it may be termed; that is, the direct pecuniary outlay that would be entailed by the establishment of the system. In order to determine the net expense of the system, it would be necessary to take account 1911.] HOUSE No. 1400. 17 of savings that might be effected through the retirement of inefficient veterans. Such saving might be effected in three ways: First, through elimination of the direct waste of money paid to aged employees who had outlived their usefulness; second, through stoppage of the indirect loss entailed by the slow pace forced upon the rest of the workers by the presence of inefficient veterans; third, through the possible gain that might result from the substitution of younger men for the super- annuated employees and the increased efficiency that might be promoted by the retirement system. Manifestly, the effect of the system in these various directions cannot be measured in advance. To what extent the economies indicated would actually be realized in practice must remain a matter of specu- lation until the experiment has been made. It is impossible, therefore, to present an estimate of the net cost of the pro- posed retirement system. The expense of operation for the State is estimated as follows: One actuary, $3,000 Clerks and stenographers, 15,000 Office rent and furnishings, 3,000 Printing, stationery, etc., 3,000 Contingent, 2,000 Total, $26,000 The expense of operation for the counties would, in most cases, be very low, as the number of employees eligible for participa- tion is extremely small. The expense has been fixed at $500 for Barnstable, Dukes, and Nantucket, each having less than 10 participating employees; at $1,000 for Berkshire, Bristol, Franklin, Hampden, Hampshire, Norfolk, and Plymouth, each with less than 100 participating employees; at $1,500 for Essex, Middlesex, and Worcester, each with 100 to 200 par- ticipating employees; and at $2,000 for Suffolk, with 369 participating employees. It has been assumed that the ex- pense of administration for the State would increase ten per cent during the first five years. No allowance has been made for increase in the case of the counties, as the amounts set down for the first year would presumably cover any additional expense reasonably to be expected during the next five-year period. 18 RETIREMENT SYSTEM. [Jan. 6. Amounts of Pensions. The following examples are given to indicate the amounts of retirement allowances that would be received by pensioners under the proposed system: 1. A person entering employment at age 25, serving 35 years, at an average salary of $600, and retiring at age 60, would be entitled, on the basis of a one per cent rate of con- tribution, to an annuity of $32.38. As this amount doubled by the pension would be less than the minimum, $200, fixed in the act, such a person would receive that minimum. On the basis of a five per cent rate, he would be entitled to an annuity of $161.90, which, doubled by the pension, would make a total annual allowance of $323.80. 2. For a salary of $900, under similar conditions as regards age and service, the allowances would be as follows : 1% Basis 5% Basis Annuity, $48.57 $242.85 Pension, 48.57 242.85 Total, $97.14 $485.70 3. For a salary of $1,200: 1% Basis 5% Annuity, $64.76 $323.80 Pension, 64.76 323.80 Total, $129.52 $647.60 4. For a salary of $1,500:- 1% Basis 5% Basis Annuity, $80.95 $404.75 Pension, 80.95 404.75 Total, . $161.90 $809.50 It should be noticed that the minimum contribution rate of one per cent would not in any case yield a sufficient amount of annuity and pension to cover the minimum payment. 1911.] HOUSE No. 1400. 19 7. Statistical Presentations. The results of this enumeration, so far as they are pertinent to the present inquiry, are presented in the tables that follow. The total number of employees of the Commonwealth eligible for participation in the proposed retirement system is shown in Table I to be 6,521. The number 70 years of age and over is 39, and the number 65 to 69 years of age is 68. Thus the total number who would be retired the first year under the assump- tion that has been made would be 107. The additional num- ber 60 to 64 years of age who would be retired during the first five years of operation according to the previous assumption is 131. The number under 60 years of age is 6,283. TABLE I. State Employees Eligible for Participation in Proposed Retirement System. DEPARTMENTS. Total Num- ber Amount of Salaries Assessable under Retirement System l Num- ber 70 Years and Over Num- ber 65-69 Years Num- ber 60-64 Years Num- ber under 60 Years Adjutant-General's Department, . 11 $14,100.00 1 1 - 9 Armory Commission, . 2 2,100.00 - - - 2 Assistant District Attorneys and Office Force. 15 20,436.00 _ _ _ 15 Attorney-General's Department, . 11 13,040.00 - - - 11 Ballot Law Commission, 3 1,500.00 - - - 3 Bank Commissioner's Depart- 15 18,664.00 _ _ _ 15 ment. Board of Bar Examiners, 4 3,400.00 - - - 4 Board of Boiler Rules, . 4 1,000.00 - 1 - 3 Board of Registration in Dentistry, 5 1,700.00 - - - 5 Board of Registration in Em- 3 300.00 _ _ _ 3 balming. Board of Registration in Medicine, 8 4,140.00 1 1 2 4 Board of Registration in Phar- 6 4,100.00 _ _ _ 6 macy. Board of Registration in Veter- inary Medicine. 1 400.00 - - - 1 Boston State Hospital: Men's Department, 83 36,751.40 - - 1 82 Women's Department, . 134 56,441.30 - - 2 132 Bridge water State Hospital, 71 33,250.00 - - 2 69 Bureau of Statistics, 57 53,508.00 - - 1 56 1 The figure given in this column is the total sum paid in wages and salaries to employees eligible for participation in the proposed retirement system minus all amounts in excess of $30 a week, which, under the terms of the bills, are not assessable for contributions to the retirement fund. 20 RETIREMENT SYSTEM. [Jan. TABLE I. State Employees Eligible for Participation in Proposed Retirement System Continued. DEPARTMENTS. Total Num- ber Amount of Salaries Assessable under Retirement System * Num- ber 70 Years and Over Num- ber 65-69 Years Num- ber 60-64 Years Num- ber under 60 Years Bureau of War Records, 10 $8,880.00 - 4 1 5 Cattle Bureau of the State Board 6 7,000.00 _ _ j 5 of Agriculture. Civil Service Commission, . 20 18,900.00 - - - 20 Clerk of the House of Representa- 5 5,475.00 _ _ _ 5 tives. Clerk of the Senate, . 3 4,120.00 - - - 3 Commission on Probation, . 2 2,460.00 - - - 2 Commission of Public Records, . 1 1,560.00 - - - 1 Commissioners on Fisheries and 46 39,760.00 1 1 1 43 Game. Controller of County Accounts, . 4 5,820.00 - 1 - 3 Danvers State Hospital, 275 118,638.80 1 - 6 268 Department of Weights and Meas- 8 9,240.00 _ _ 1 7 ures. District Police 66 88,740.00 - - 3 63 Executive Department, 5 6,520.00 - - - 5 Firemen's Fund - - - - - - Foxborough State Hospital, 87 35,850.00 - 1 2 84 Free Public Library Commission, 1 1,560.00 - - - 1 Gardner State Colony, 107 41,868.00 - 1 1 105 Gas and Electric Light Commis- 12 15.108.00 _ 1 1 10 sioners. General Insurance Guaranty 7 7,380.00 _ _ _ 7 Fund. Harbor and Land Commission, . 43 46,524.00 - 1 1 41 Industrial School for Boys, . 26 15,678.00 - - - 26 Industrial School for Girls, . 71 31,182.00 - - 2 69 Land Court, . 6 7,620.00 6 Lyman School for Boys, 74 44,826.40 1 1 5 67 Massachusetts Agricultural Col- lege. 70 82,990.00 2 - 1 67 Massachusetts Commission for the Blind. 7 6,712.00 - - - 7 Massachusetts Highway Commis- 129 133,464.00 _ _ _ 129 sion. Massachusetts Hospital School, . 64 24,814.88 - - 1 63 Massachusetts Insurance Depart- 48 45,800.00 _ _ 5 43 ment. Massachusetts Nautical Training 37 24,210.00 _ _ _ 37 School. Massachusetts Normal Art School, 22 28,040.00 1 2 1 18 Massachusetts Reformatory, 62 60,248.00 1 1 3 57 The figure given in this column is the total sum paid in wages and salaries to employees eligible for participation in the proposed retirement system minus all amounts in excess of $30 a week, which, under the terms of the bills, are not assessable for contributions to the retirement fund. 1911.1 HOUSE No. 1400. 21 TABLE I. State Employees Eligible for Participation in Proposed Retirement System Continued. DEPARTMENTS. Total Num- ber Amount of Salaries Assessable under Retirement System 1 Num- ber 70 Years and Over Num- ber 65-69 Years Num- ber 60-64 Years Num- ber under 60 Years Massachusetts School for the 211 $85,942.56 _ _ 1 210 Feeble-minded. Medfield State Asylum, 255 107,392.00 - 1 2 252 Metropolitan Park Commission, . 634 424,511.00 7 14 18 595 Metropolitan Water and Sewerage 505 432,144.00 6 3 15 481 Board. Monson State Hospital, 139 59,819.56 - 1 4 134 Northampton State Hospital, 165 68,044.00 - 1 2 162 North Tewksbury School, . 1 300.00 - - - 1 Ordnance Department, - - - - - - Pilot Commissioners, . - - - - - - Prison Camp and Hospital, . 24 16,800.00 - - - 24 Prison Commissioners, . 11 12,640.00 - - 3 8 Probate Courts, .... 103 89,937.64 1 1 3 98 Province Laws, .... 5 5,660.00 1 - 1 3 Quartermaster's Department, 10 8,730.00 - - - 10 Quartermaster's Armory Division, 32 28,060.00 - - - 32 Railroad Commission, . 20 28,044.00 - 2 4 14 Reformatory Prison for Women, 24 17,632.00 - - 1 23 Secretary of the Commonwealth, 30 25,739.99 1 - - 29 Sergeant-at-Arms' Department, . 63 56,720.00 - 2 3 58 State Aid and Pension Depart- 6 6,760.00 _ _ _ 6 ment. State Auditor's Department, 11 14,000.00 - 1 - 10 State Board of Agriculture, . 10 10,983.00 - - 1 9 State Board of Charity, 80 80,960.00 1 3 2 74 State Board of Conciliation and 6 7,680.00 ! _ _ 5 Arbitration. State Board of Education, . 15 21,000.00 - 3 - 12 State Board of Health, 91 93,323.00 - - - 91 State Board of Insanity, 25 26,780.00 - 1 1 23 State Farm - - - - - - State Forester, .... 38 37,124.00 - - - 38 State Infirmary, Tewksbury, 309 123,252.20 2 4 5 298 State Library of Massachusetts, . 12 11,256.00 1 1 - 10 State Normal School, Bridgewater, 40 34,341.00 1 - 1 38 1 The figure given in this column is the total sum paid in wages and salaries to employees eligible for participation in the proposed retirement system minus all amounts in excess of $30 a week, which, under the terms of the bills, are not assessable for contributions to the retirement fund. 22 RETIREMENT SYSTEM. [Jan. TABLE I. State Employees Eligible for Participation in Proposed Retirement System Concluded. DEPARTMENTS. Total Num- ber Amount of Salaries Assessable under Retirement System l Num- ber 70 Years and Over Num- ber 65-69 Years Num- ber 60-64 Years Num- ber under 60 Years State Normal School, Fitchburg, 30 $32,120.00 - 1 1 28 State Normal School, Framing- 35 29,138.00 - 1 - 34 State Normal School, Hyannis, . 31 30,803.60 - - - 31 State Normal School, Lowell, 14 16,080.00 - - 1 13 Bartlett Training School, 20 4,370.00 - _ 1 19 Lowell. State Normal School, No. Adams, 39 22,141.00 - - - 39 State Normal School, Salem, 35 27,916.00 - - 1 34 State Normal School, Westfield, 26 21,200.00 - 1 - 25 State Normal School, Worces- 15 17,120.00 _ 1 _ 14 ter. State Prison 28 30,212.00 2 2 - 24 State Sanatorium, Lakeville, 68 28,834.56 - - 2 66 State Sanatorium, No. Reading, 61 26,204.00 - - 2 59 State Sanatorium, Rutland, 181 60,151.20 - 1 - 180 State Sanatorium, Westfield, 55 24,672.80 - - 1 54 State Treasurer's Department, . 15 17,960.00 - 1 1 13 Surgeon-General's Department, . 2 2,580.00 - - - 2 Surveyor General of Lumber, 18 25,200.00 1 1 1 15 Taunton State Hospital, 227 91,072.40 2 - - 225 Tax Commissioner's Department, 54 52,000.00 - 2 1 51 Trustees of Massachusetts Hos- 2 2,510.00 _ _ _ 2 pitals for Consumptives. Wachusett Mountain State Reser- 4 3,004.00 4 vation Commission. Westborough State Hospital, 306 120,738.44 - - 1 305 Worcester State Asylum, 288 111,673.44 - 1 - 287 Worcester State Hospital, . 297 111,901.96 3 1 7 286 Wrentham State School, 38 15,950.00 - - - 38 6521 $4,096,949.13 39 68 131 6,283 1 The figure given in this column is the total sum paid in wages and salaries to employees eligible for participation in the proposed retirement system minus all amounts in excess of $30 a week, which, under the terms of the bills, are not assessable for contributions to the retirement fund. 1911.1 HOUSE No. 1400. 23 The number of county employees eligible for participation, as shown in Table II, varies widely, from 3 in Nantucket to 369 in Suffolk. Four counties Barnstable, Franklin, Nan- tucket, and Plymouth have no employees 65 years of age and over eligible for retirement under the assumption that has been made. Two of these counties Barnstable and Nan- tucket have no employees in the age group 60 to 64 years eligible for retirement during the first five years under the pre- vious assumption. The total number of county employees eli- gible for participation is 1,155. The total number who would be retired immediately is 81, including 42 in the age group 70 years and over and 39 in the age group 65 to 69 years. The number in the age group 60 to 64 years who would be re- tired during the first five years, as it has been assumed, is 73. The number under 60 years of age is 1,001. TABLE II. County Employees Eligible for Participation in Proposed Retirement System. COUNTIES. Total Num- ber Amount of Salaries Assessable under Retirement System 1 Num- ber 70 Years and Over Num- ber 65-69 Years Num- ber 60-64 Years Num- ber under 60 Years Barnstable 9 $4,756.00 - i - 9 Berkshire, 31 20,802.75 1 - 4 26 Bristol 69 56,215.00 5 3 3 58 Dukes 7 764.00 1 2 2 2 Essex, 149 103,357.00 5 1 7 136 Franklin 14 8,948.00 - - 1 13 Hampden 52 41,656.00 2 3 7 40 Hampshire 21 12,792.00 2 4 3 12 Middlesex 198 171,619.00 10 3 16 169 N&nt u ckfct 3 437.00 3 Norfolk 89 62,346.00 3 3 3 80 Plymouth 35 26,844.00 - - 2 33 Suffolk 369 341,931.00 9 13 20 327 Worcester, 109 80,907.00 4 7 5 93 TOTALS, 1,155 $933,374.75 42 39 73 1,001 1 The figure given in this column is the total sum paid in wages and salaries to employees eligible for participation in the proposed retirement system minus all amounts in excess of $30 a week, which, under the terms of the bills, are not assessable for contributions to the retirement fund. 24 RETIREMENT SYSTEM. [Jan. II i O I II o 10 o co O eo .-J ' ^< u h- OO 10 10 us "1 c? 5 <-< co o CO CO .-H B J? NUMBE OF RECIPI1 8 IS O ' CO i-l SI NUMBE II $310, 12, $298, 3 8 g s s III g ^ e 3 3" Q , fl CJ .- S - s K b . -Ml G C S >> .s a S 33 - 8 a o - ' a lji a o i! s s s -2 P T3 GO fl 111 as S B a sS-Sil a 7 s a ; . ~ jifijii ^ | j s 1 I 26 RETIREMENT SYSTEM. [Jan. 3s ?. 5 g ER IENT pa fc gs i i 8 S 3 3 8 * 3 8 S5 8 58 8 I I 4f S S 1 1 I I 1911.1 HOUSE No. 1400. 27 CL, 5 Cft I K5 t i a CD i ^ o 6S w o i o a a x O I MOUNT 1 S I - - - 1 1 i 1 J s 5 1 5 o .c, (4 p 0001 1 1 a s NUMBE RECIPI w g.2 0001 1 1 fe C O W Q i 0000 000 o 65 H a g H O 1 1 0000 000 a ^ pi a ll O w s *n'm 0001 1 1 H ga a w & O NUM OF REC: II 0001 1 1 INDED 5% Basis 0000 1 W a s M O i w .2 p H B O 0000 1 o S 65 ^ a 3 O 1 i fi 0001 1 1 1 a Z o 11 j 0001 1 1 h C o i a g * . rr> -* (3 a 2 .1 1 3 B X a "C tJ ^ S C 2 W S 3 | 3 s ' ft J o S - S 1 o M -0 M ^ < 5 " O - 2 -2 - "S 3 ^ 1 S 3 g "S | .2 .9 S g P 9 fl fl C3 D< t^ 6 1911.] HOUSE No. 1400. 29 1 I P3 Sa e >o o 8 oo S 8 * a si a OS W CO O I i-l 1-1 r o o g - a S -S 30 RETIREMENT SYSTEM. [Jan, Qs 1 ^ 2 .? s : pq < =s ^s ?sj V* 1 JX2 a H PQ S 11 8 1 "H S g 8 % & Z S 8 S S i 8 S 8 i-( i-H ss * g .1 .2 a -a i S 1911.] HOUSE No. 1400. 31 g I o S gg o 8 I I 32 RETIREMENT SYSTEM. [Jan. p i S i o K a H S 2 fc Is fa o 8 a - 00 JO 5 8 3 Q v^ 58 "i 2 eo ft B wj o H I NT EXI O 1 S 8 s " ^ O S -" i o> o> o 0> OS p* ^ a * O 1 EK IENTS f| , ,0 , 1 1 rn P9 P- ^ S o P w ^ ^^ *^ 1 10 1 1 1 1 5 8* Q Q .2 7) PQ IO U5 U5 O oo oo ^H o 3, S3 55 10 10 s CO ft W5 i r H d ** S H O 3 E H 1 r- t^ co o 2 S ^ o CO o s o i ^ J p* ^ d M ij w O CO si fi 1 O CO CO 1 . . a il o ffl *s 3 1 O CO CO 1 1 ' i 1 1 1 : : : : i ^ $ aT fl " 53 | 1 1 L 1 1 h OH jg ^ g 2 Q k o 3 -g a | ~ - M * & 3 I | 1 i * * a H i ' 4 3 i s "8 g a .2 .2 a g Q g i I 1 1 1 S s o (5 tS 2 3 S 34 RETIREMENT SYSTEM. [Jan. 1 d i i i 1* -1 NtJMB RECIP 5 8 O -_' _: S S 8 8 S 8 O co ro I O CO CO -2 tl s 'a S - 1911. 1 HOUSE No. 1400. 35 .? I 02 tO | ^ ^> !3Q X x o s Q O M 1 S 8 i o 8 CO 8 2 O CO CO S o S 8 00 s s! S " ol US -* 0-1 sO ^. to ws 1 5 X M H 2 | 'i 0000 1 O O jjj a r 1 8 S CQ ~ M ?i 0001 1 ' w Is *l g.a O O O 1 , , S o .2 ^ S 8 kO 1C O f * O a 5& co S o S c? S 5 a E f n~ n~ o w e^ e^ EH H 1 H 1 5 co r^ O - C<1 O o o o 5 O 3 j g S 8. 2 ^ H 1 a 9 M O H i fa ^ , 1 1 1 n S II O M J.. -H ~H TH | ! 1 5 w_ a 1 0000 1 a KO fc I 1 a s o p 1 0000 1 h o 5 O M a o ^H CQ fe5 1 JMBER 3CIPIENT 11 0001 -0 1 ^ il 0001 1 1 00 i P .1 ... Q C >I ! i .1 I w 1 1 - 1 1 fOQ ^ on to o 5 .11 j J 11 | _; 1 a i 1 i II 00 .2 .2 S Q 5 j I I -a I *s o f^ f^ S w S 1911. HOUSE No. 1400. 39 OQ XI si s (M (M 8 Sg S 8 8 >o eo 2 | a *> SI 1911J HOUSE No. 1400. 41 11 Z K fci O 10 1 pq P. S o p H O O5 OO 2 S g 8 O * 1 O 5O O 1 .1 B 1 ' .2 ! ! 1 1 1 P-i S , 9 fl J S H I s s d .2 "8 - ll 42 RETIREMENT SYSTEM. [Jan. ^ S i 5 ^ i ?3> a as $1 S .3 ? 5 1 O &3 O S 8 2 S 3 g eo o oo ii | i O CO -t< o eo 10 i ft I! 11*^ S I S i J 8 a g- * 5 M 1 I 1911.] HOUSE No. 1400. i . s s I fc i p a fc < . -0 1911.] HOUSE No. 1400. 45 "i .2 OQ S S M g Q j 1 ' H PQ ^ Q B g * " 9 ^ oo o g H a O i M i s i 1 ^000^ . g o o PQ * 1 i c J3 J ^ c O 2 oo Os H g wi 1 1 i i ? 1 1 w y o s Jz; &N2 1 1 i i h O 1 O 1 On 5% Basis *' i 1 ^ "S i g .2 S 00 S 00 00 1 O * c 3 1 i 1 6% * E-< ^ a 3 M Q JH OQ ^g f B H +r. " 'S 1 1 1 1 Is 15 <30 OQ NUMBER RECIPIE] 3* S-3 1 1 1 I ^'! g& Si 7"^* .2 cc s s s *^ ^^ a j 000^ i >5 ^2 S5 o w s i *4*i O w 5S H i H .2 *^ s 55 ^ i Is O i * i 3 ^ M 9 1 o H 1 1 1 i i o Ss O^ 1 fi NUMB RBCIP w S-S 1 1 i i & h O o^ 8 eg 1 g g 1 3 1 8 1 |" 1 j 1 x i 1 1 B 1 * ' 1 o ^ S j- .9 S > | f II II R 3 EH S O i 1 * - 1 j 1 1 1 1 ,1 1 I 8 46 RETIREMENT SYSTEM. [Jan. 1 ^ o i ?55 O H I* .&a ^^ ^ I 1 o &5 03 S H I 8 o 0000 1 H PQ O vO NOLL 1 1 5 1 i .2 1 E 1 0000 1 O o o S w g a m O o CQ fc?ao J 5' 0001 1 1 H H S < || | 0001 1 1 O < .9 O Q 1 1? g X O tf w 03 h *&3 2 o3 0000 000 p O i S a w ^ 85.8 0001 1 1 - OJ ^ 10 's i r/3 a S < C/J a 3 & H ^ H 0001 1 1 I 0000 1 o Vs^ 5 R O* O g (^ w 03 OP OPE AMOUNT S 0000 1 pq a O g g.s 0001 ( i ta * H S 11 tD W ga S H 0001 1 ' o .1 ... S 1 g 1 ' 1 ? a fa i - is 1 o ffl ^ o '3 M o i i 00 ^ S? "3 i ' 1 M M (i ** 18 a o I J * 1 1 i * I a 'S a S ^ o (S fS ii w o 1911.1 HOUSE No. 1400. 47 ^^ ^QQ So 1 (M O O t* 8 CD 1C OS t^ w 1 O O CO 48 RETIREMENT SYSTEM. [Jan. i O o 1 c 1 6S.8 S3 o S S 0001 2 S S S CO OJ 1 CO OJ OS g S 8 S 8 S 8 S S g S S 1 n e s (5 >> -o 2 ^ g o 3 S 1911.1 HOUSE No. 1400 3 o a O 49 n 1 S 8 3, s as sC & I 1 i .2 .2 n a a >> TJ 2 li 50 RETIREMENT SYSTEM. [Jan. 0000 0000 si 000 000 d O ^2~ 3 S S * I CD fH CO W3 00 N O CO s 0000 O 0001 . 1 1911.] HOUSE No. 1400. 51 o &s t s 5 M 9 IS g ^ Qi p-o IS <*> a I I nq % 8 S 8 1 . 1 1 1 H IB & BS gs 11 1 -H | 1 ' o H 1 ^j o 8 S III Q ^ O> O CD i 1 1 a CO - - M g M 3 I H p 1 9 S 9 8 * ^ o t^, ^ r^ 10 ^ CO OO ^ SH" ** CH 03 g.g 1 o jo w i i i 3 K 1 -X i W H fe CO ii g.2 1 o us o i , , 8 < 1 2 S g 8 S o PQ ^ d d O -^ C3 O i g g h 9 i s s H J 8 S 3 8 a o p od ( ? o o o od \ 5 s K " 3 1 j s fi 1 00 1 i i P o a. ^ IB g.2 1 ^J 1 , , h O ii i p I .8 b s K J 1 a ^ 8 ' "3 0M i 1 1 ,- 1 I - * '3 s fe O p < S 1 1 1 | "5 ? ^ | 3 -a 2 5 ^ ^ -g 4 5 ^ a a s g 3 * 1 O c .2 .9 a a P (2 13836 f 6 w s S TJ l! S 5 ^ number i his credii 54 RETIREMENT SYSTEM. [Jan. 1911. UMBER ECIPIE1 ss ss ^ & o 0> -^ I 11 I I i I a II il .2 .t3 ij 11 s M .SS APPENDIX SENATE BILLS, SESSION OF 1910, ON WHICH THE IN VESTIGATION AS TO COST WAS BASED. I The system as proposed for The Commonwealth. SENATE, No. 376. 2% Qlomttumumtltlr of AN ACT TO ESTABLISH A RETIREMENT SYSTEM FOR THE EMPLOYEES OF THE COMMONWEALTH. Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows: 1 SECTION 1. In this act, unless the context otherwise 2 requires : 3 (a) The words "retirement system " mean the arrange- 4 ments provided in this act for the payment of pensions. 5 (6) The word "annuities" means the payments for Me 6 derived from money contributed by the employees. 7 (c) The word "pensions" means the payments for life 8 derived from money contributed by the general court. 9 (d) The words "regular interest" mean interest at three 10 per cent per annum compounded semi-annually on the 11 last days of December and June, and reckoned for full 12 three and six months' periods only. 13 0) The words "continuous service" mean uninter- 14 rupted employment, with this exception: a lay-off on 15 account of illness or reduction of force; and a leave of 16 absence, suspension or dismissal followed by reinstate- 17 ment within one year shall not be considered as breaking 18 the continuity of service. ESTABLISHMENT OF RETIREMENT SYSTEM. 1 SECTION 2. The retirement system shall be estab- 2 lished on the first day of January or the first day of July 3 following the expiration of three months after the date 4 on which this act takes effect. 58 RETIREMENT SYSTEM. [Jan. THE RETIREMENT ASSOCIATION. 1 SECTION 3. A retirement association shall be organized 2 among the employees of the commonwealth as follows : 3 (1) All employees of the commonwealth, on the date 4 when the retirement system is established, may become 5 members of the association. On the expiration of sixty 6 days from said date every such employee shall be con- 7 sidered to have elected to become, and shall thereby be- 8 come, a member, unless he shall have within that period, 9 sent notice in writing to the state insurance commissioner 10 that he does not wish to join the association. 11 (2) All employees who enter the service of the common- 12 wealth after the date when the retirement system is estab- 13 lished, except persons who have already passed the age of 14 fifty-five years, shall upon completing thirty days of ser- 15 vice become thereby members of the association. Persons 16 over fifty-five years of age who enter the service of the 17 commonwealth after the establishment of the retirement 18 system shall not be allowed to become members of the 19 association, and no such employee shall remain in the ser- 20 vice of the commonwealth after reaching the age of seventy 21 years. 22 (3) No officer elected by popular vote may become a 23 member of the association, nor any employee who is or 24 will be entitled to a pension from the commonwealth for 25 any reason other than membership in the association. 26 (4) Any member who reaches the age of sixty years and 27 who has been in the continuous service of the common- 28 wealth for a period of fifteen years immediately preceding 29 may retire or may be retired by the board of retirement, 30 and any member who reaches the age of seventy years 31 must so retire. 32 (5) Any member who has completed a period of thirty- 33 five years of continuous service may retire, or may be 34 retired at any age by the board of retirement if such action 35 be deemed advisable for the good of the service. 1911.] HOUSE No. 1400. 59 THE BOARD OF RETIREMENT. 1 SECTION 4. (1) The management of the retirement 2 system is hereby vested in the board of retirement, con- 3 sist ! ng of three members, one of whom shall be the state 4 treasurer; the second member shall be a member of the 5 association elected by the latter within thirty days after 6 the date on which the retirement system is established, 7 in a manner to be determined by the state insurance com- 8 missioner; the third member shall be chosen by the other 9 two members. In case of the failure of the latter to choose 10 the third member within thirty days after the election of 11 the second member, the governor shall appoint such third 12 member. The first person so chosen or appointed as third 13 member shall serve for two years; otherwise and thereafter 14 the term of office of the two elected members shall be three 15 years. On a vacancy occurring in the board for any cause 16 or on the expiration of the term of office of any member, 17 a successor of the person whose place has become vacant 18 or whose term has expired shall be chosen in the same 19 manner as his predecessor. 20 (2) The members of the board of retirement shall serve 21 without compensation; but they shall be reimbursed out 22 of the retirement fund for any expense or loss of salary 23 or wages which they may have incurred through service on 24 the board. 25 (3) The state treasurer shall have charge and control 26 of the funds of the system, subject to the approval of the 27 board of retirement, and shall invest and reinvest the 28 same, and may from time to time sell any securities held 29 by him and invest and reinvest the proceeds therefrom, 30 and any and all unappropriated income of said funds: 31 provided, however, that all funds received by him not re- 32 quired for current disbursements shall be invested in accord- 33 ance with the provisions of the laws of this commonwealth 34 relating to the investment of the funds of savings banks. 35 He shall in the investment of the funds give preference to 36 the securities of the commonwealth. He may, whenever 37 he sells such securities, deliver the securities so sold upon 60 RETIREMENT SYSTEM. [Jan. 38 receiving the proceeds thereof, and may execute any and 39 all documents necessary to transfer the title thereto. 40 (4) The board of retirement shall have power to make 41 by-laws and regulations not inconsistent with the provi- 42 sions of this act, and to employ such clerical or other assist- 43 ance as may be necessary for the fulfilment of its purposes. 44 (5) The board shall determine the percentage of wages 45 that employees shall contribute to the pension fund, sub- 46 ject to the minimum and maximum percentages, and shall, 47 furthermore, have the power to classify employees for the 48 purposes of the retirement system and to establish differ- 49 ent rates of contribution f or ' different classes within the 50 prescribed limits. 51 (6) The state treasurer shall, in January of each year, 52 unless for cause the insurance commissioner shall have 53 granted an extension of time, file in the office of the insur- 54 ance commissioner a sworn statement, which shall exhibit 55 the financial condition of the retirement system on the 56 thirty-first day of the preceding December, and its finan- 57 cial transactions for the year ending with said day. Such 58 statement shall be in a form approved by the insurance 59 commissioner, and shall show, among other things, the 60 liability of the retirement system on account of the fol- 61 lowing items: A. Deposit Reserves. 62 The total of the deposits of the members actually re- 63 ceived by the treasurer or due from the commonwealth 64 under section five, (2) A, and held subject to withdrawal 65 by such members. B. Interest Reserve. 66 Regular interest on such deposits. C. Annuity Reserve. 67 The net value of the annuities entered upon under section 68 six, (2) B, on the basis of the mortality tables and inter- 69 est rates provided for in this act. ^X 1911.] HOUSE No. 1400. 61 D. Contribution Reserve. 70 The net value of the pensions not yet entered upon 71 under section six, (2) C (a), on the basis of the mortality 72 and withdrawal tables and interest rates provided for in 73 this act. E. Pension Reserve. 74 The net value of the pensions entered upon under section 75 six, (2) C (a), on the basis of the mortality tables and inter- 76 est rates provided for in this act. F. Expense and Contingent Fund. 77 (a) The unexpended portion of the amounts received 78 under section five, (1). 79 (b) The contingent fund. G. Gifts and Bequests. 80 The amounts received as gifts or bequests and held 81 under the terms of such gifts or bequests. H. Other Liabilities. 82 (a) The amounts contributed by the commonwealth 83 under section five, (2) B (c), and not distributed. 84 (6) All other liabilities. /. Surplus. 85 (a) Annuity Surplus. The undistributed surplus aris- 86 ing from annuity deposits, as defined in section five, (2) 87 B (b). 88 (b) Pension Surplus. The undistributed surplus aris- 89 ing from pension contributions, as defined in section five, 90 (2) B (b). 91 (c) Other Surplus. All unassigned funds. CREATION OF THE RETIREMENT FUND. 1 SECTION 5. The funds of the retirement system shall 2 be raised as follows:- 62 RETIREMENT SYSTEM. [Jan. (1) Expense and Contingent Fund. 3 The general court shall appropriate annually such an 4 amount as may be necessary to defray the entire expense 5 of administration, according to estimates prepared by the 6 treasurer. (2) Annuity and Pension Fund. 7 A. Deposits by Members. Each member shall deposit 8 in this fund from his wages or salary, as often as the same 9 are payable, not less than one per cent and not more than 10 five per cent of the amount of his wages or salary as deter- 11 mined by the Board of Retirement under the provisions 12 of section four (5): provided, however, that employees who 13 receive more than thirty dollars weekly in wages or salary 14 shall not be assessed for contribution to this fund on the 15 excess above that amount. 16 B. Contributions of the Commonwealth. (a) Each 17 month the commonwealth shall contribute such amount as 18 may be necessary to maintain the contribution and pension 19 reserves as of the last day of the preceding month, on the 20 pensions to be paid under section six, (2) C (a). 21 (6) Each year, in January, the commonwealth shall 22 contribute an amount equal to the excess of the surplus 23 arising from annuity deposits over the surplus arising from 24 pension contributions. The said surplus arising from annu- 25 ity deposits shall be the sum of that portion of the interest 26 reserve released by the withdrawal of members under 27 section six, (2) A (a), and the interest earned during the 28 year ending December thirty-first next preceding on the 29 deposit reserve and on the interest reserve, less the amount 30 necessary to maintain, during said year, the said interest 31 reserve. The said surplus arising from the pension con- 32 tributions shall be the sum of the gain arising during said 33 year from a mortality or withdrawal experience among the 34 members making annuity deposits in excess of that expected, 35 and the interest earned on the contribution reserve in excess 36 of the amount required to maintain, during said year, the 37 said contribution reserve. If for any year the surplus 38 arising from pension contributions shall be found to be 1911.] HOUSE No. 1400. 63 39 in excess of the surplus arising from annuity deposits, 40 such excess shall forthwith be paid over to the common- 41 wealth. 42 For the purposes of this paragraph the board of retire- 43 ment shall adopt, subject to the approval of the insurance 44 commissioner, an equitable method of determining the 45 excess interest and gain from mortality and withdrawal 46 mentioned therein. 47 (c) Each month the commonwealth shall contribute such 48 amount as the board of retirement may determine to be 49 necessary to pay current pensions for prior service under 50 section six (2) C (b): provided, that any amount so con- 51 tributed for any month and not needed for pensions for 52 that month shall be credited to the contribution of the 53 commonwealth for the succeeding month. 54 (d) Each month the commonwealth shall contribute 55 such amount as the board of retirement may determine 56 to be necessary to ensure the minimum payments pro- 57 vided for in section six, E. (3) Provision for Payments. 58 A. All amounts payable by members of the association 59 under paragraph (2) A of this section shall be deducted 60 by the commonwealth from the amounts payable to them 61 as wages or salary, as often as the same are payable, and 62 shall be immediately credited to the retirement fund by 63 the state treasurer. 64 B. All accrued obligations on the part of the common- 65 wealth under paragraphs (1) and (2) of this section shall 66 be preferred claims against the commonwealth in like 67 manner as claims for unpaid wages are or may be preferred. DISTRIBUTION OF FUNDS. 1 SECTION 6. The state treasurer shall administer the funds 2 of the pension system in accordance with the following 3 plan: (1) Expenses and Contingent Funds. 4 The funds provided for under section five, (1), shall be 5 used, so far as may be necessary, for the payment of the 64 RETIREMENT SYSTEM. [Jan. 6 expenses of administration. The portions not so used, if 7 any, shall be carried to the contingent fund, any portion 8 of which may be transferred to any other fund by vote 9 of the board of retirement. In case the amount appro- 10 priated for the expense fund in any year should prove 11 insufficient, the commonwealth shall appropriate in the 12 following year such additional sum as may be required to 13 cover the deficit. (1) Expense and Contingent Funds. 14 A. Refunds. (a) Should a member of the associa- 15 tion cease to be an employee of the commonwealth for any 16 cause other than death before becoming entitled to a pen- 17 sion, there shall be refunded to him all the money that 18 has been paid in by him under section five, (2) A, with 19 regular interest. 20 (6) Should a member of the association die before be- 21 coming entitled to a pension, there shall be paid to his 22 legal representatives all the money that has been paid in 23 by him under section five, (2) A, with such interest as 24 shall have been earned on such deposits. 25 B. Annuities from Employees' Deposits. Any member 26 who reaches the age of sixty years and has been in the 27 continuous service of the commonwealth for fifteen years 28 immediately preceding, and then or thereafter retires or 29 is retired, any member who retires or is retired at the age 30 of seventy years, and any member who is retired for the 31 good of the service under the provisions of section three, 32 (5), shall receive an annuity to which the sum of his de- 33 posits under section five, (2), with regular interest, shall 34 entitle him, according to the tables adopted by the board 35 of retirement, in one of the following forms: 36 (a) A life annuity, payable monthly. 37 (6) A life annuity, payable monthly, with the provision 38 that in the event of the death of the annuitant before 39 receiving payments equal to the sum at the date of his 40 retirement of his deposits under section five, (2) A, with 41 regular interest, the difference shall be paid to his legal 42 representatives. 1911.] HOUSE No. 1400. 65 43 C. Pensions derived from Contributions by the Common- 44 wealth. (a) Pensions based upon subsequent service. 45 Any member entitled to an annuity under paragraph (2) 46 B of this section shall receive in addition thereto a pension 47 for life payable monthly equivalent to that annuity, to 48 be paid out of the fund contributed by the commonwealth 49 under the provisions of section five, (2) B (a). 50 (b) Pensions based upon prior service. Any member 51 of the association who reaches the age of sixty years, hav- 52 ing been in the continuous service of the commonwealth 53 for fifteen years or more immediately preceding and then 54 or thereafter retires or is retired, shall receive in addition 55 to the annuity a pension provided for by paragraphs (2) 56 B and C (a) of this section, and an extra pension for life 57 as large as the amount of the annuity to which he might 58 have acquired a claim if the retirement system had been 59 in operation at the time he entered the service of the com- 60 monwealth, and if accordingly he had paid regular contribu- 61 tions from that date to the date of the establishment of 62 the retirement association at the same rate as that first 63 adopted by the board of retirement, and if such deduc- 64 tions had been accumulated with regular interest. 65 Employees who had already reached the age of sixty 66 years at the time the retirement system was established, 67 and employees who had already reached the age of fifty- 68 five years at that date, and also became members of the 69 association, may be retired under the provisions of the 70 preceding paragraph without having completed the other- 71 wise required service period of fifteen years. For the pur- 72 pose of computing any pension payable for prior service, 73 the board of retirement may estimate on the basis deter- 74 mined by them the wages received at any period for which 75 they may deem it impracticable to consult the original 76 records. 77 D. Application of Surplus. The board of retirement 78 shall have power to determine the application of any sur- 79 plus, as defined under section four (6) /, subject to the 80 approval of the insurance commissioner. 81 E. Minimum Payments.. In no case shall the total 66 RETIREMENT SYSTEM. [Jan. 82 monthly payment to a member be at a rate less than two 83 hundred dollars per year. 84 F. Association Membership and Pension Certificate. 85 Membership in the association shall be evidenced by a 86 certificate to be issued to each member by the board of 87 retirement, and the right to an annuity or a pension shall 88 be evidenced by a policy to be issued to each member who 89 retires or is retired by the board of retirement. TAXATION, ATTACHMENTS AND ASSIGNMENTS. 1 SECTION 7. The funds of the retirement system, so far 2 as they are invested in personal property, shall be exempt 3 from taxation. 4 That portion of the wages of a member deducted or to 5 be deducted under this act, the right of a member to an 6 annuity or pension, and all his rights in the funds of the 7 retirement system shall be exempt from taxation, and 8 from the operation of any law relating to bankruptcy or 9 insolvency, and shall not be attached or taken upon execu- 10 tion or other process of any court. No assignment of any 11 right in or to said funds shall be valid. SUPERVISION BY INSURANCE COMMISSIONER. 1 SECTION 8. The insurance commissioner shall prescribe 2 for the retirement system of the commonwealth one or 3 more mortality tables and one or more tables represent- 4 ing as nearly as may be the rates of withdrawal of em- 5 ployees from the service of the commonwealth for reasons 6 other than death, and shall determine what rates of inter- 7 est shall be established in connection with such tables, and 8 may later modify such tables or prescribe other tables to 9 represent more accurately the expense of the retirement 10 system, or may change said rates of interest and may 11 determine the application of the changes so made. He 12 shall also prescribe and supervise methods of bookkeeping 13 of the retirement association formed under the provisions 14 of this act. 15 The insurance commissioner shall at least once in each 1911.] HOUSE No. 1400. 67 16 year, either personally or by deputy or assistant, thor- 17 oughly inspect and examine the affairs of the retirement 18 association to ascertain its financial condition, its ability 19 to fulfil its obligations, whether all parties in interest have 20 complied with the provisions of law applicable to the retire- 21 ment association, and whether the transactions of the 22 board of retirement have been in accordance with the 23 rights and equities of those in interest. The retirement 24 system shall be credited, in the account of its financial 25 condition, with the amounts due from the commonwealth, 26 under the provisions of section five, (2) B (a), its invest- 27 ments with fixed maturities at amortized values, and its 28 other investments at a reasonable valuation. 29 For the purposes aforesaid, the insurance commissioner 30 or other persons making examination shall have access to 31 all the securities, books and papers of the retirement sys- 32 tern, and may summon and administer oaths and examine 33 as witnesses the members of the board of retirement con- 34 trol or any other person relative to the financial affairs, 35 transactions and conditions of the retirement system. The 36 insurance commissioner shall preserve in a permanent form 37 a full record of the proceedings at such examination, and 38 the results thereof. Upon the completion of such exam- 39 ination, verification and valuation, the insurance com- 40 missioner shall make a report in writing of his findings to 41 the board of retirement, and shall send a copy thereof 42 to the governor and the executive council of the common- 43 wealth. 1 SECTION 9. If, in the judgment of the insurance com- 2 missioner, the commonwealth or the board of retirement 3 have violated or neglected to comply with any of the pro- 4 visions of this act, or of the rules and regulations estab- 5 lished by the board of retirement hereunder, he shall give 6 notice thereof to the commonwealth and to the board of 7 retirement, and thereafter if such violation or neglect con- 8 tinues shall forthwith present the facts to the attorney- 9 general for his action. 18 RETIREMENT SYSTEM. [Jan. 1 SECTION 10. The superior court shall have jurisdiction 2 in equity upon petition of the insurance commissioner or 3 any interested party to compel the observance and restrain 4 the violation of this act, and of the rules and regulations 5 established by the board of retirement hereunder. 1 SECTION 11. This act shall take effect upon its passage. 1911.] HOUSE No. 1400. 69 SENATE, No. 441. Wtie (Enmmonumtltlj of iJJa0Hat!japtta . AN ACT TO ESTABLISH A RETIREMENT SYSTEM FOR THE EMPLOYEES OF THE COMMONWEALTH. Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows: 1 SECTION 1. In this act, unless the context otherwise 2 requires : 3 (a) The words "retirement system" mean the arrange- 4 ments provided in this act for the payment of pensions. 5 (6) The word "annuities" means the payments for life 6 derived from money contributed by the employees. 7 (c) The word "pensions" means the payments for life 8 derived from money contributed by the commonwealth. 9 (d) The words "regular interest" mean interest at three 10 per cent per annum compounded semi-annually on the 11 last days of December and June, and reckoned for full 12 three and six months' periods only. 13 (e) The words "continuous service" mean uninter- 14 rupted employment, with this exception: a lay-off on 15 account of illness or reduction of force; and a leave of 16 absence, suspension or dismissal followed by reinstatement 17 within one year and as to appointees of the sergeant-at- 18 arms the interval between sessions of the general court 19 shall not be considered as breaking the continuity of ser- 20 vice. ESTABLISHMENT OF RETIREMENT SYSTEM. 1 SECTION 2. The retirement system shall be established 2 on the first day of January or the first day of July fol- 3 lowing the expiration of three months after the date on 4 which this act takes effect. 70 RETIREMENT SYSTEM. [Jan. THE RETIREMENT ASSOCIATION. 1 SECTION 3. A retirement association shall be organ- 2 ized among the employees of the commonwealth as fol- 3 lows: 4 (1) All employees of the commonwealth, on the date 5 when the retirement system is established, may become 6 members of the association. On the expiration of sixty 7 days from said date every such employee shall be con- 8 sidered to have elected to become, and shall thereby be- 9 come, a member, unless he shall have, within that period, 10 sent notice in writing to the state insurance commissioner 11 that he does not wish to join the association. 12 (2) All employees who enter the service of the com- 13 monwealth after the date when the retirement system is 14 established, except persons who have already passed the 15 age of fifty-five years, shall upon completing thirty days 16 of service become thereby members of the association. 17 Persons over fifty-five years of age who enter the service 18 of the commonwealth after the establishment of the retire- 19 ment system shall not be allowed to become members of 20 the association, and no such employee shall remain in the 21 service of the commonwealth after reaching the age of 22 seventy years. 23 . (3) No officer elected by popular vote may become a 24 member of the association, nor any employee who is or 25 will be entitled to a pension from the commonwealth for 26 any reason other than membership in the association. 27 (4) Any member who reaches the age of sixty years and 28 who has been in the continuous service of the common- 29 wealth or of any institution taken over by the common- 30 wealth for a period 'of fifteen years immediately preceding 31 may retire or may be retired by the board of retirement, 32 and any member who reaches the age of seventy years 33 must so retire. 34 (5) Any member who has completed a period of thirty- 35 five years of continuous service may retire, or may be 36 retired at any age by the board of retirement if such action 37 be deemed advisable for the good of the service. 1911.1 HOUSE No. 1400. 71 THE BOARD OF RETIREMENT. 1 SECTION 4. (1) The management of the retirement 2 system is hereby vested in the board of retirement, con- 3 sisting of three members, one of whom shall be the state 4 treasurer; the second member shall be a member of the 5 association elected by the latter within thirty days after 6 the date on which the retirement system is established, 7 in a manner to be determined by the state insurance com- 8 missioner; the third member shall be chosen by the other 9 two members. In case of the failure of the latter to choose 10 the third member within thirty days after the election of 11 the second member, the governor shall appoint such third 12 member. The first person so chosen or appointed as third 13 member shall serve for two years; otherwise and there- 14 after the term of office of the two elected members shall 15 be three years. On a vacancy occurring in the board for 16 any cause or on the expiration of the term of office of any 17 member, a successor of the person whose place has become 18 vacant or whose term has expired shall be chosen in the 19 same manner as his predecessor. 20 (2) The members of the board of retirement shall serve 21 without compensation; but they shall be reimbursed out 22 of the contingent fund for any expense or loss of salary 23 or wages which they may have incurred through service 24 on the board. 25 (3) The state treasurer shall have charge and control 26 of the funds of the system, subject to the approval of the 27 board of retirement, and shall invest and reinvest the 28 same, and may from time to time sell any securities held 29 by him and invest and reinvest the proceeds therefrom, 30 and any and all unappropriated income of said funds: 31 provided, however, that all funds received by him not re- 32 quired for current disbursements shall be invested in accord- 33 ance with the provisions of the laws of this commonwealth 34 relating to the investment of the funds of savings banks. 35 He shall in the investment of the funds give preference 36 to the securities of the commonwealth. He may, when- 37 ever he sells such securities, deliver the securities so sold 72 RETIREMENT SYSTEM. [Jan. 38 upon receiving the proceeds thereof, and may execute any 39 and all documents necessary to transfer the title thereto. 40 (4) The board of retirement shall have power to make 41 by-laws and regulations not inconsistent with the provi- 42 sions of this act, and to employ such clerical or other assist- 43 ance as may be necessary for the fulfilment of its purposes. 44 (5) The board shall determine the percentage of wages 45 that employees shall contribute to the pension fund, sub- 46 ject to the minimum and maximum percentages, and shall, 47 furthermore, have the power to classify employees for the 48 purposes of the retirement system and to establish differ- 49 ent rates of contribution for different classes within the 50 prescribed limits. 51 (6) The state treasurer shall, in January of each year, 52 unless for cause the insurance commissioner shall have 53 granted an extension of time, file in the office of the insur- 54 ance commissioner a sworn statement, which shall exhibit 55 the financial condition of the retirement system on the 56 thirty-first day of the preceding December, and its financial 57 transactions for the year ending with said day. Such 58 statement shall be in a form approved by the insurance 59 commissioner, and shall show, among other things, the 60 liability of the retirement system on account of the fol- 61 lowing items: A. Deposit Reserves. 62 The total of the deposits of the members actually re- 63 ceived by the treasurer or due from the commonwealth 64 under section five, (2) A, and held subject to withdrawal 65 by such members. B. Interest Reserve. 66 Regular interest on such deposits. C. Annuity Reserve. 67 The net value of the annuities entered upon under sec- 68 tion six, (2) B, on the basis of the mortality tables and 69 interest rates provided for in this act. 1911.] HOUSE No. 1400. 73 D. Expense and Contingent Fund. 70 (a) The unexpended portion of the amounts received 71 under section five, (1). 72 (6) The contingent fund. E. Gifts and Bequests. 73 The amounts received as gifts or bequests and held 74 under the terms of such gifts or bequests. F. Other Liabilities. 75 All other liabilities. G. Surplus. 76 (a) Annuity Surplus. The undistributed surplus aris- 77 ing from annuity deposits, as defined in section five, (2) 78 B (b). 79 (b) Other Surplus. All unassigned funds. CREATION OF THE RETIREMENT FUND. 1 SECTION 5. The funds of the retirement system shall 2 be raised as follows : (1) Expense and Contingent Fund. 3 The general court shall appropriate annually such an 4 amount as may be necessary to defray the entire expense 5 of administration, according to estimates prepared by the 6 treasurer. (2) Annuity and Pension Fund. 7 A. Deposits by Members. Each member shall deposit 8 in this fund from his wages or salary, as often as the same 9 are payable, not less than one per cent and not more than 10 five per cent of the amount of his wages or salary as deter- 11 mined by the board of retirement under the provisions of 12 section four (5): provided, however, that employees who 13 receive more than thirty dollars weekly in wages or sal- 14 ary shall not be assessed for contribution to this fund on 15 the excess above that amount. 74 RETIREMENT SYSTEM. [Jan. 16 B. Contributions of the Commonwealth. (a) Each month 17 the commonwealth shall contribute such amount as the 18 board of retirement may determine to be necessary to pay 19 current pensions for subsequent service, under section 20 six (2) C (a). 21 (b) Each year, in January, the commonwealth shall 22 contribute an amount equal to the surplus arising from 23 annuity deposits; in case there should be a deficiency 24 arising from such annuity deposits, instead of a surplus, 25 then the commonwealth shall make good such deficiency. 26 (c) Each month the commonwealth shall contribute such 27 amount as the board of retirement may determine to be 28 necessary to pay current pensions for prior service under 29 section six (2) C (b). 30 (d) Each month the commonwealth shall contribute 31 such amount as the board of retirement may determine 32 to be necessary to ensure the minimum payments pro- 33 vided for in section six, E. (3) Provision for Payments. 34 All amounts payable by members of the association 35 under paragraph (2) A of this section shall be deducted 36 by the commonwealth from the amounts payable to them 37 as wages or salary, as often as the same are payable, and 38 shall be immediately credited to the retirement fund by 39 the state treasurer. DISTRIBUTION OF FUNDS. 1 SECTION 6. The state treasurer shall administer the 2 funds of the pension system in accordance with the fol- 3 lowing plan : (1) Expenses and Contingent Funds. 4 The funds provided for under section five, (1), shall 5 be used, so far as may be necessary, for the payment of 6 the expenses of administration. The portions not so used, 7 if any, shall be carried to the contingent fund, any por- 8 tion of which may be transferred to any other fund by 9 vote of the board of retirement. In case the amount 1911.] HOUSE No. 1400. 75 10 appropriated for the expense fund in any year should 11 prove insufficient, the commonwealth shall appropriate in 12 the following year such additional sum as may be required 13 to cover the deficit. (2) Annuity and Pension Funds. 14 A. Refunds. (a) Should a member of the associa- 15 tion cease to be an employee of the commonwealth for any 16 cause other than death before becoming entitled to a pen- 17 sion, there shall be refunded to him all the money that 18 has been paid in by him under section five, (2) A, with 19 regular interest. 20 (b) Should a member of the association die before be- 21 coming entitled to a pension, there shall be paid to his 22 legal representatives all the money that has been paid in 23 by him under section five, (2) A, with such interest as 24 shall have been earned on such deposits. 25 B. Annuities from Employees' Deposits. Any member 26 who reaches the age of sixty years and has been in the 27 continuous service of the commonwealth for fifteen years 28 immediately preceding, and then or thereafter retires or 29 is retired, any member who retires or is retired at the age 30 of seventy years, and any member who is retired for the 31 good of the service under the provisions of section three, 32 (5), shall receive an annuity to which the sum of his de- 33 posits under section five, (2), with regular interest, shall 34 entitle him, according to the tables adopted by the board 35 of retirement, in one of the following forms : 36 (a) A life annuity, payable monthly. 37 (6) A life annuity, payable monthly, with the provision 38 that in the event of the death of the annuitant before 39 receiving payments equal to the sum at the date of his 40 retirement of his deposits under section five, (2) A, with 41 regular interest, the difference shall be paid to his legal 42 representatives. 43 C. Pensions derived from Contributions by the Common- 44 wealth. (a) Pensions based upon subsequent service. 45 Any member entitled to an annuity under paragraph (2) 46 B of this section shall receive in addition thereto a pension 76 RETIREMENT SYSTEM. [Jan. 47 for life payable monthly equivalent to that annuity, to 48 be paid out of the fund contributed by the commonwealth 49 under the provisions of section five, (2) B (a). 50 (b) Pensions based upon prior service. Any member of 51 the association who reaches the age of sixty years, having 52 been in the continuous service of the commonwealth for 53 fifteen years or more immediately preceding and then or 54 thereafter retires or is retired, shall receive in addition 55 to the annuity and pension provided for by paragraphs 56 (2) B and C (a) of this section, an extra pension for life 57 as large as the amount of the annuity to which he might 58 have acquired a claim if the retirement system had been 59 in operation at the time he entered the service of the com- 60 monwealth, and if accordingly he had paid regular con- 61 tributions from that date to the date of the establishment 62 of the retirement association at the same rate as that first 63 adopted by the board of retirement, and if such deductions 64 had been accumulated with regular interest. 65 Employees who had already reached the age of sixty 66 years at the time the retirement system was established, 67 and employees who had already reached the age of fifty- 68 five years at that date, and also became members of the 69 association, may be retired under the provisions of the 70 preceding paragraph without having completed the other- 71 wise required service period of fifteen years. For the 72 purpose of computing any pension payable for prior ser- 73 vice, the board of retirement may estimate on the basis 74 determined by them the wages received at any period for 75 which they may deem it impracticable to consult the origi- 76 nal records. 77 D. Application of Surplus. The board of retirement 78 shall have power to determine the application of any sur- 79 plus, as defined under section four (6) G, subject to the 80 approval of the insurance commissioner. 81 E. Minimum Payments. In no case shall the total 82 monthly payment to a member be at a rate less than two 83 hundred dollars per year. 84 F. Association Membership and Pension Certificate. 85 Membership in the association shall be evidenced by a 1911.] HOUSE No. 1400. 77 86 certificate to be issued to each member by the board of 87 retirement, and the right to an annuity or a pension shall 88 be evidenced by a policy to be issued to each member who 89 retires or is retired by the board of retirement. TAXATION, ATTACHMENTS AND ASSIGNMENTS. 1 SECTION 7. The funds of the retirement system, so far 2 as they are invested in personal property, shall be exempt 3 from taxation. 4 That portion of the wages of a member deducted or to 5 be deducted under this act, the right of a member to an 6 annuity or pension, and all his rights in the funds of the 7 retirement system shall be exempt from taxation, and 8 from the operation of any law relating to bankruptcy or 9 insolvency, and shall not be attached or taken upon execu- 10 tion or other process of any court. No assignment of any 11 right in or to said funds shall be valid. SUPERVISION BY INSURANCE COMMISSIONER. 1 SECTION 8. The insurance commissioner shall prescribe 2 for the retirement system of the commonwealth one or 3 more mortality tables, and shall determine what rates of 4 interest shall be established in connection with such tables, 5 and may later modify such tables or prescribe other tables 6 to represent more accurately the expense of the retire- 7 ment system, or may change said rates of interest and 8 may determine the application of the changes so made. 9 He shall also prescribe and supervise methods of book- 10 keeping of the retirement association formed under the 11 provisions of this act. 12 The insurance commissioner shall at least once in each 13 year, either personally or by deputy or assistant, thoroughly 14 inspect and examine the affairs of the retirement associa- 15 tion to ascertain its financial condition, its ability to fulfil 16 its obligations, whether all parties in interest have complied 17 with the provisions of law applicable to the retirement 18 association, and whether the transactions of the board of 19 retirement have been in accordance with the rights and 78 RETIREMENT SYSTEM. [Jan. 20 equities of those in interest. The retirement system shall 21 be credited, in the account of its financial condition, with 22 the amounts due from the commonwealth, under the pro- 23 visions of section five, (2) B (a), its investments having 24 fixed maturities upon which the interest is not in default 25 at amortized values, and its other investments at a rea- 26 sonable valuation. 27 For the purposes aforesaid, the insurance commissioner 28 or other persons making examination shall have access to 29 all the securities, books and papers of the retirement sys- 30 tern, and may summon and administer oaths and examine 31 as witnesses the members of the board of retirement con- 32 trol or any other person relative to the financial affairs, 33 transactions and conditions of the retirement system. The 34 insurance commissioner shall preserve in a permanent form 35 a full record of the proceedings at such examination, and 36 the results thereof. Upon the completion of such exam- 37 ination, verification and valuation, the insurance com- 38 missioner shall make a report in writing of his findings 39 to the board of retirement, and shall send a copy thereof 40 to the governor and the executive council of the common- 41 wealth. 1 SECTION 9. If, in the judgment of the insurance com- 2 missioner, the commonwealth or the board of retirement 3 have violated or neglected to comply with any of the pro- 4 visions of this act, or of the rules and regulations estab- 5 lished by the board of retirement hereunder, he shall give 6 notice thereof to the commonwealth and to the board of 7 retirement, and thereafter if such violation or neglect con- 8 tinues shall forthwith present the facts to the attorney- 9 general for his action. 1 SECTION 10. The superior court shall have jurisdiction 2 in equity upon petition of the insurance commissioner or 3 any interested party to compel the observance and restrain 4 the violation of this act, and of the rules and regulations 5 established by the board of retirement hereunder. 1 SECTION 11. This act shall take effect upon its passage. 1911.] HOUSE No. 1400. 79 II The system as proposed for the Counties. SENATE, No. 375. Oil}* GJommnnwralili of fHaBsadjuartta . AN ACT TO AUTHORIZE THE COUNTIES OF THE COMMON- WEALTH TO ESTABLISH RETIREMENT SYSTEMS FOR THEIR EMPLOYEES. Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows: 1 SECTION 1. In this act, unless the context otherwise 2 requires : 3 (a) The words "retirement system" mean the arrange- 4 ments provided in this act for the payment of annuities 5 and pensions. 6 (6) The word "annuities" means the payments for life 7 derived from money contributed by the employees. 8 (c) The word "pensions" means the payments for life 9 derived from money contributed by the county. 10 (d) The words "regular interest" mean interest at three 11 per cent per annum compounded semi-annually on the last 12 days of December and June, and reckoned for full three 13 and six months' periods only. 14 (e) The words "continuous service" mean uninter- 15 rupted employment, with this exception: a lay-off on 16 account of illness or reduction of force; and a leave of 17 absence, suspension or dismissal followed by reinstate- 18 ment within one year, shall not be considered as breaking 19 the continuity of service. ESTABLISHMENT OF RETIREMENT SYSTEM. 1 SECTION 2. Any county in this commonwealth may 2 establish a retirement system for its employees by accept- 3 ing the provisions of this act in the manner hereinafter 80 RETIREMENT SYSTEM. [Jan. 4 prescribed, as follows: Upon the initiative of the county 5 commissioners, the question of acceptance shall be sub- 6 mitted to the voters of the county at the next election. 7 The vote in each case shall be in answer to the question, 8 to be placed upon the ballot: "Shall an act passed by the 9 general court in the year , entitled ' An Act authorizing 10 the counties of this commonwealth to establish retirement 11 systems for their employees,' be accepted? " If a majority 12 of the voters voting thereon at such election shall vote 13 in the affirmative, this act shall take effect in such county, 14 as hereinafter provided. A copy of the vote, sworn to 15 by the county commissioners or the officers corresponding 16 thereto, shall, within thirty days after the date of the vote, 17 be filed in the office of the insurance commissioner of this 18 commonwealth. The latter shall forthwith issue a certi- 19 ficate that the retirement system is declared established 20 in such county, to become operative on the first day of 21 January or the first day of July following the expiration 22 of three months after the date of such certificate. THE RETIREMENT ASSOCIATION. 1 SECTION 3. Whenever a county shall have voted to 2 establish a retirement system under the provisions of 3 section two, a retirement association shall be organized 4 as follows : 5 (1) All employees of the county, on the date when the 6 retirement system is declared established by the issue of 7 the certificate, as provided in section two, may become 8 members of the association. On the expiration of sixty 9 days from said date every such employee shall be considered 10 to have elected to become, and shall thereby become, a 11 member, unless he shall have, within that period, sent 12 notice in writing to the local election commissioners or the 13 officers corresponding thereto that he does not wish to 14 join the association. 15 (2) All employees who enter the service of the county 16 after the date when the retirement system is declared 17 established by the issue of the certificate, as provided in 18 section two, except persons who have already passed the 1911.] HOUSE No. 1400. 81 19 age of fifty-five years, shall upon completing thirty days 20 of service become thereby members of the association. Per- 21 sons over fifty-five years of age who enter the service of 22 the county after the establishment of the retirement sys- 23 tern shall not be allowed to become members of the asso- 24 ciation, and no such employee shall remain 'in the service 25 of the county after reaching the age of seventy years. 26 (3) No officer elected by popular vote may become a 27 member of the association, nor any employee who is or 28 will be entitled to a pension from the county for any rea- 29 son other than membership in the association. 30 (4) Any member who reaches the age of sixty years and 31 who has been in the continuous service of the county for 32 a period of fifteen years immediately preceding may retire 33 or may be retired by the board of retirement, and any mem- 34 ber who reaches the age of seventy years must so retire. 35 (5) Any member who has completed a period of thirty- 36 five years of continuous service may retire, or may be 37 retired at any age by the board of retirement if such action 38 be deemed advisable for the good of the service. THE BOARD OF RETIREMENT. 1 SECTION 4. (1) The management of the retirement sys- 2 tern is hereby vested in the board of retirement, consist- 3 ing of three members, one of whom shall be the county 4 treasurer; the second member shall be a member of the 5 association elected by the latter within thirty days after 6 the date when the retirement system is declared established 7 by the issue of the certificate, as provided under section 8 two, in a manner to be determined by the county commis- 9 sioners; the third member shall be chosen by the other 10 two members. In case of the failure of the latter to choose 11 the third member within thirty days after the election 12 of the second member, the chairman of the county com- 13 missioners shall appoint such third member. The first 14 person so chosen or appointed as third member shall serve 15 for two years; otherwise and thereafter the term of office 16 of the two elected members shall be three years. On a 17 vacancy occurring in the board for any cause or on the 82 RETIREMENT SYSTEM. [Jan. 18 expiration of the term of office of any member, a successor 19 of the person whose place has become vacant or whose 20 term has expired shall be chosen in the same manner as 21 was his predecessor. 22 (2) The members of the board of retirement shall serve 23 without compensation; but they shall be reimbursed out 24 of the retirement fund for any expense or loss of salary 25 or wages which they may have incurred through service 26 on the board. 27 (3) The county treasurer shall have charge and control 28 of the funds of the system, subject to the approval of the 29 board of retirement, and shall invest and reinvest the 30 same, and may from time to time sell any securities held 31 by him and invest and reinvest the proceeds therefrom, 32 and any and all unappropriated income of said funds: pro- 33 mded, however, that all funds received by him not required 34 for current disbursements shall be invested in accordance 35 with the provisions of the laws of this commonwealth 36 relating to the investment of the. funds of savings banks. 37 He shall in the investment of the funds give preference to 38 the securities of the county. He may, whenever he sells 39 such securities, deliver the securities so sold upon receiving 40 the proceeds thereof, and may execute any and all docu- 41 ments necessary to transfer the title thereto. 42 (4) The board of retirement shall have power to make 43 by-laws and regulations not inconsistent with the provisions 44 of this act, and to employ such clerical or other assistance 45 as may be necessary for the fulfilment of its purposes. 46 (5) The board shall determine the percentage of wages 47 that employees shall contribute to the pension fund, sub- 48 ject to the minimum and maximum percentages, and shall, 49 furthermore, have the power to classify employees for the 50 purposes of the retirement system and to establish different 51 rates of contribution for different classes within the pre- 52 scribed limits. 53 (6) The county treasurer shall, in January of each year, 54 unless for cause the insurance commissioner shall have 55 granted an extension of time, file in the office of the insur- 56 ance commissioner a sworn statement, which shall exhibit 1911.] HOUSE No. 1400. 83 57 the financial condition of the retirement system on the 58 thirty-first day of the preceding December, and its finan- 59 cial transactions for the year ending with said day. Such 60 statement shall be in a form approved by the insurance 61 commissioner, and shall show, among other things, the 62 liability of the retirement system on account of the following 63 items:- A. Deposit Reserve. 64 The total of the deposits of the members actually re- 65 ceived by the treasurer or due from the county under 66 section five, (2) A, and held subject to withdrawal by 67 such members. B. Interest Reserve. 68 Regular interest on such deposits. C. Annuity Reserve. 69 The net value of the annuities entered upon under sec- 70 tion six, (2) B, on the basis of the mortality tables and 71 interest rates provided for in this act. D. Contribution Reserve. 72 The net value of the pensions not yet entered upon under 73 section six, (2) C (a), on the basis of the mortality and 74 withdrawal tables and interest rates provided for in this 75 act. E. Pension Reserve. 76 The net value of the pensions entered upon under sec- 77 tion six, (2) C (a), on the basis of the mortality tables and 78 interest rates provided for in this act. F. Expense and Contingent Fund. 79 (a) The unexpended portion of the amounts received 80 under section five, (1). 81 (b) The contingent fund. G. Gifts and Bequests. 82 The amounts received as gifts or bequests and held 83 under the terms of such gifts or bequests. 84 RETIREMENT SYSTEM. [Jan. H. Other Liabilities. 84 (a) The amounts contributed by the commonwealth 85 under section five, (2) B (c), and not distributed. 86 (6) All other liabilities. /. Surplus. 87 (a) Annuity Surplus. The undistributed surplus aris- 88 ing from annuity deposits, as defined in section five, (2) 89 B (6). 90 (6) Pension Surplus. The undistributed surplus aris- 91 ing from pension contributions, as defined in section five, 92 (2) B (b). 93 (c) Other Surplus. All unassigned funds. CREATION OF THE RETIREMENT FUND. 1 SECTION 5. The funds of the retirement system shall 2 be raised as follows : (1) Expense and Contingent Fund. 3 The county shall appropriate annually such an amount 4 as may be necessary to defray the entire expense of admin- 5 istration, according to estimates prepared by the treasurer. (2) Annuity and Pension Fund. 6 A. Deposits by Members. Each member shall deposit 7 in this fund from his wages or salary, as often as the same 8 are payable, not less than one per cent and not more than 9 five per cent of the amount of his wages or salary as deter- 10 mined by the board of retirement under the provisions of 11 section four (5): provided, however, that employees who 12 receive more than thirty dollars weekly in wages or salary 13 shall not be assessed for contribution to this fund on the 14 excess above that amount. 15 B. Contributions by the County. (a) Each month the 16 county shall contribute such amount as may be necessary 17 to maintain the contribution and pension reserves as of 18 the last day of the preceding month, on the pensions to 19 be paid under section six, (2) C (a). 1911.] HOUSE No. 1400. 85 20 (6) Each year, in January, the county shall contribute 21 an amount equal to the excess of the surplus arising from 22 annuity deposits over the surplus arising from pension con- 23 tributions. The said surplus arising from annuity deposits 24 shall be the sum of that portion of the interest reserve 25 released by the withdrawal of members under section six, 26 (2) A (a), and the interest earned during the year ending 27 December thirty-first next preceding on the deposit reserve 28 and on the interest reserve, less the amount necessary to 29 maintain, during said year, the said interest reserve. The 30 said surplus arising from the pension contributions shall 31 be the sum of the gain arising during said year from a 32 mortality or withdrawal experience among the members 33 making annuity deposits in excess of that expected, and 34 the interest earned on the contribution reserve in excess 35 of the amount required to maintain, during said year, the 36 said contribution reserve. If for any year the surplus 37 arising from pension contributions shall be found to be 38 in excess of the surplus arising from annuity deposits, such 39 excess shall forthwith be paid over to the county. 40 For the purposes of this paragraph the board of retire- 41 ment shall adopt, subject to the approval of the insurance 42 commissioner, an equitable method of determining the 43 excess interest and gain from mortality and withdrawal 44 mentioned therein. 45 (c) Each month the county shall contribute such amount 46 as the board of retirement may determine to be necessary 47 to pay current pensions for prior service under section 48 six, (2) C (b): provided, that any amount so contributed 49 for any month and not needed for pensions for that month 50 shall be credited to the contribution of the county for the 51 succeeding month. 52 (d) Each month the county shall contribute such amount 53 as the board of retirement may determine to be necessary 54 to ensure the minimum payments provided for in section 55 six, E. (3) Provision for Payments. 56 A. All amounts payable by members of the association 57 under paragraph (2) A of this section shall be deducted 86 RETIREMENT SYSTEM. [Jan. 58 by the county from the amounts payable to them as wages 59 or salary, as often as the same are payable, and shall be 60 immediately credited to the pension fund by the county 61 treasurer. 62 B. All accrued obligations on the part of the county 63 under paragraphs (1) and (2) of this section shall be pre- 64 ferred claims against the county in like manner as claims 65 for unpaid wages are or may be preferred. DISTRIBUTION OF FUNDS. 1 SECTION 6. The county treasurer shall administer the 2 funds of the retirement system in accordance with the fol- 3 lowing plan : (1) Expense and Contingent Funds. 4 The funds provided for under section five, (1), shall be 5 used, so far as may be necessary, for the payment of the 6 expenses of administration. The portions not so used, if 7 any, shall be carried to the contingent fund, any portion 8 of which may be transferred to any other fund by vote of 9 the board of retirement. In case the amount appropriated 10 for the expense fund in any year should prove insufficient, 11 the county shall appropriate in the following year such 12 additional sum as may -be required to cover the deficit. (2) Annuity and Pension Funds. 13 A. Refunds. (a) Should a member of the association 14 cease to be an employee of the county for any cause other 15 than death before becoming entitled to a pension, there 16 shall be refunded to him all the money that has been paid 17 in by him under section five, (2) A, with regular interest. 18 (b) Should a member of the association die before becom- 19 ing entitled to a pension, there shall be paid to his legal 20 representatives all the money that has been paid in by 21 him under section five, A, with such interest as shall have 22 been earned on such deposits. 23 B. Annuities from Employees' Deposits. Any member 24 who reaches the age of sixty years and has been in the con- 25 tinuous service of the county for fifteen years immediately 1911.] HOUSE No. 1400. 87 26 preceding, and then or thereafter retires or is retired, any 27 member who retires or is retired at the age of seventy years, 28 and any member who is retired for the good of the service 29 under the provisions of section three, (5), shall receive an 30 annuity to which the sum of his deposits under section 31 five, (2), with regular interest, shall entitle him, according 32 to the tables adopted by the board of retirement, in one 33 of the following forms : 34 (a) A life annuity, payable monthly. 35 (6) A life annuity, payable monthly, with the provision 36 that in the event of the death of the annuitant before re- 37 ceiving payments equal to the sum at the date of his retire- 38 ment of his deposits under section five, (2) A, with regular 39 interest, the difference shall be paid to his legal representa- 40 tives. 41 C. Pensions derived from Contributions by the County. 42 (a) Pensions based upon, subsequent service. Any member 43 entitled to an annuity under paragraph (2) B of this section 44 shall receive in addition thereto a pension for life payable 45 monthly equivalent to that annuity, to be paid out of the 46 fund contributed by the county under the provisions of 47 section five, (2) B (a). 48 (6) Pensions based upon prior service. Any member of 49 the association who reaches the age of sixty years, having 50 been in the continuous service of the county for fifteen years 51 or more immediately preceding, and then or thereafter 52 retires or is retired, shall receive in addition to the annu- 53 ity a pension provided for by paragraphs (2) B and C (a) 54 of this section, and an extra pension for life as large as the 55 amount of the annuity to which he might have acquired 56 a claim if the retirement system had been in operation at 57 the time he entered the service of the county, and if ac- 58 cordingly he had paid regular contributions from that 59 date to the date of the establishment of the retirement 60 association at the same rate as that first adopted by the 61 board of retirement, and if such deductions had been accu- 62 mulated with regular interest. 63 Employees who had already reached the age of sixty 64 years at the time the retirement system was established, 88 RETIREMENT SYSTEM. [Jan. 65 and employees who had already reached the age of fifty- 66 five years at that date and also became members of the 67 association, may be retired under the provisions of the 68 preceding paragraph without having completed the other- 69 wise required service period of fifteen years. For the pur- 70 pose of computing any pension payable for prior service, 71 the board of retirement may estimate on the basis deter- 72 mined by them the wages received at any period for which 73 they may deem it impracticable to consult the original 74 records. 75 D. Application of Surplus. The board of retirement 76 shall have power to determine the application of any sur- 77 plus, as defined under section four, (6) /, subject to the 78 approval of the insurance commission. 79 E. Minimum Payments. In no case shall the total 80 monthly payment to a member be at a rate less than two 81 hundred dollars per year. 82 F. Association Membership and Pension Certificate. - 83 Membership in the association shall be evidenced by a 84 certificate to be issued to each member by the board of 85 retirement, and the right to an annuity or a pension shall 86 be evidenced by a policy to be issued to each member who 87 retires or is retired by the board of retirement. TAXATION, ATTACHMENTS AND ASSIGNMENTS. 1 SECTION 7. The funds of the retirement system, so far 2 as they are invested in personal property, shall be exempt 3 from taxation. 4 That portion of the wages of a member deducted or to 5 be deducted under this act, the right of a member to an 6 annuity or pension, and all his rights in the fund of the 7 retirement system shall be exempt from taxation, and from 8 the operation of any law relating to bankruptcy or insol- 9 vency, and shall not be attached or taken upon execution 10 or other process of any court. No assignment of any right 11 in or to said funds shall be valid. 1911.] HOUSE No. 1400. 89 SUPERVISION BY INSURANCE COMMISSIONER. 1 SECTION 8. The insurance commissioner shall prescribe 2 for each county that adopts a retirement system under the 3 provisions of this act one or more mortality tables and 4 one or more tables representing as nearly as may be the 5 rates of withdrawal of employees from the service of the 6 county for reasons other than death, and shall determine 7 what rates of interest shall be established in connection 8 with such tables, and may later modify such tables or pre- 9 scribe other tables to represent more accurately the expense 10 of the pension system, or may change said rates of interest 1 1 and may determine the application of the changes so made. 12 He shall also prescribe and supervise methods of bookkeep- 13 ing of each retirement association formed under the pro- 14 visions of this act. 15 The insurance commissioner shall at least once in each 16 year, either personally or by deputy or assistant, thor- 17 oughly inspect and examine the affairs of the retirement 18 association to ascertain its financial condition, its ability 19 to fulfill its obligations, whether all parties in interest 20 have complied with the provisions of law applicable to the 21 association, and whether the transactions of the board of 22 retirement have been in accordance with the rights and 23 equities of those in interest. The retirement system shall 24 be credited, in the account of its financial condition, with 25 the amounts due from the county, under the provisions 26 of section five, (2) B (a), its investments with fixed maturi- 27 ties at amortized values, and its other investments at a 28 reasonable valuation. 29 For the purposes aforesaid, the insurance commissioner 30 or other persons making examination shall have access to 31 all the securities, books and papers of the retirement sys- 32 tern, and may summon and administer oaths and examine 33 as witnesses the members of the board of retirement or any 34 other person relative to the financial affairs, transactions 35 and conditions of the retirement system. The insurance 36 commissioner shall preserve in a permanent form a full 37 record of the proceedings at such examination, and the 90 RETIREMENT SYSTEM. [Jan. 38 results thereof. Upon the completion of such examina- 39 tion, verification and valuation, the insurance commis- 40 sioner shall make a report in writing of his findings to the 41 board of retirement, and shall send a copy thereof to the 42 county commissioners. 1 SECTION 9. If, in the judgment of the insurance com- 2 missioner, the county or the board of retirement have vio- 3 lated or neglected to comply with any of the provisions 4 of this act, or of the rules and regulations established by 5 the board of retirement hereunder, he shall give notice 6 thereof to the county and to the board of retirement, and 7 thereafter if such violation or neglect continues shall forth- 8 with present the facts to the attorney-general for his action. 1 SECTION 10. The superior court shall have jurisdiction 2 in equity upon petition of the insurance commissioner or 3 any interested party to compel the, observance and restrain 4 the violation of this act, and of the rules and regulations 5 established by the board of retirement. 1 SECTION 11. This act shall take effect upon its pas- 2 sage. 1911.] HOUSE Xo. 1400. 91 SENATE, No. 440. (Cummmmiraltb AN ACT TO AUTHORIZE THE COUNTIES OF THE COMMON- WEALTH TO ESTABLISH RETIREMENT SYSTEMS FOR THEIR EMPLOYEES. Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows: 1 SECTION 1. In this act, unless the context otherwise 2 requires: 3 (a) The words "retirement system" mean the arrange- 4 ments provided in this act for the payment of annuities 5 and pensions. 6 (6) The word "annuities" means the payments for life 7 derived from money contributed by the employees. 8 (c) The word "pensions" means the payments for life 9 derived from money contributed by the county. 10 (d) The words "regular interest" mean interest at three 11 per cent per annum compounded semi-annually on the last 12 days of December and June, and reckoned for full three 13 and six months periods only. 14 (e) The words "continuous service" mean uninter- 15 rupted employment, with this exception: a lay-off on 16 account of illness or reduction of force; and a leave of 17 absence, suspension or dismissal followed by reinstate- 18 ment within one year, shall not be considered as break- 19 ing the continuity of service. ESTABLISHMENT OF RETIREMENT SYSTEM. 1 SECTION 2. Any county in this commonwealth may 2 establish a retirement system for its employees by accept- 3 ing the provisions of this act in the manner hereinafter 4 prescribed, as follows: Upon the initiative of the county 92 RETIREMENT SYSTEM. [Jan. 5 commissioners, the question of acceptance shall be sub- 6 mitted to the voters of the county at the next election. 7 The vote in each case shall be in answer to the question, 8 to be placed upon the ballot: "Shall an act passed by the 9 general court in the year 1910, entitled 'An Act authoriz- 10 ing the counties of this commonwealth to establish retire- 11 ment systems for their employees/ be accepted?" If a 12 majority of the voters voting thereon at such election 13 shall vote in the affirmative, this act shall take effect in 14 such county, as hereinafter provided. 15 A copy of the vote, sworn to by the county commis- 16 sioners or the officers corresponding thereto, shall, within 17 thirty days after the date of the vote, be filed in the office 18 of the insurance commissioner of this commonwealth. 19 The latter shall forthwith issue a certificate that the retire- 20 ment system is declared established in such county, to 21 become operative on the first day of January or the first 22 day of July following the expiration of three months after 23 the date of such certificate. THE RETIREMENT ASSOCIATION. 1 SECTION 3. Whenever a county shall have voted to 2 establish a retirement system under the provisions of sec- 3 tion two, a retirement association shall be organized as 4 follows: 5 (1) All employees of the county, on the date when the 6 retirement system is declared established by the issue of 7 the certificate, as provided in section two, may become 8 members of the association. On the expiration of sixty 9 days from said date every such employee shall be con- 10 sidered to have elected to become, and shall thereby be- ll come, a member, unless he shall have, within that period, 12 sent notice in writing to the local election commissioners 13 or the officers corresponding thereto that he does not wish 14 to join the association. 15 (2) All employees who enter the service of the county 16 after the date when the retirement system is declared 17 established by the issue of the certificate, as provided in 18 section two, except persons who have already passed the 1911.] HOUSE No. 1400. 93 19 age of fifty-five years, shall upon completing thirty days 20 of service become thereby members of the association. 21 Persons over fifty-five years of age who enter the service 22 of the county after the establishment of the retirement 23 system shall not be allowed to become members of the 24 association, and no such employee shall remain in the ser- 25 vice of the county after reaching the age of seventy years. 26 (3) No officer elected by popular vote may become a 27 member of the association, nor any employee who is or 28 will be entitled to a pension from the county for any rea- 29 son other than membership in the association. 30 (4) Any member who reaches the age of sixty years and 31 who has been in the continuous service of the county for 32 a period of fifteen years immediately preceding may retire 33 or may be retired by the board of retirement, and any mem- 34 ber who reaches the age of seventy years must so retire. 35 (5) Any member who has completed a period of thirty- 36 five years of continuous service may retire, or may be re- 37 tired at any age by the board of retirement if such action 38 be deemed advisable for the good of the service. THE BOARD OF RETIREMENT. 1 SECTION 4. (1) The management of the retirement sys- 2 tern is hereby vested in the board of retirement, consist- 3 ing of three members, one of whom shall be the county 4 treasurer; the second member shall be a member of the 5 association elected by the latter within thirty days after 6 the date when the retirement system is declared estab- 7 lished by the issue of the certificate, as provided under 8 section two, in a manner to be determined by the county 9 commissioners; the third member shall be chosen by the 10 other two members. In case of the failure of the latter 11 to choose the third member within thirty days after the 12 election of the second member, the chairman of the county 13 commissioners shall appoint such third member. The first 14 person so chosen or appointed as third member shall serve 15 for two years; otherwise and thereafter the term of office 16 of the two elected members shall be three years. On a 17 vacancy occurring in the board for any cause or on the ex- 94 RETIREMENT SYSTEM. [Jan. 18 piration of the term of office of any member, a successor 19 of the person whose place has become vacant or whose 20 term has expired shall be chosen in the same manner as 21 was his predecessor. 22 (2) The members of the board of retirement shall serve 23 without compensation; but they shall be reimbursed out 24 of the contingent fund for any expense or loss of salary or 25 wages which they may have incurred through service on 26 the board. 27 (3) The county treasurer shall have charge and control 28 of the funds of the system, subject to the approval of the 29 board of retirement, and shall invest and reinvest the 30 same, and may from time to time sell any securities held 31 by him and invest and reinvest the proceeds therefrom, 32 and any and all unappropriated income of said funds: pro- 33 vided, however, that all funds received by him not required 34 for current disbursements shall be invested in accordance 35 with the provisions of the laws of this commonwealth relat- 36 ing to the investment of the funds of savings banks. He 37 shall in the investment of the funds give preference to the 38 securities of the county. He may, whenever he sells such 39 securities, deliver the securities so sold upon receiving the 40 proceeds thereof, and may execute any and all documents 41 necessary to transfer the title thereto. 42 (4) The board of retirement shall have power to make 43 by-laws and regulations, not inconsistent with the provi- 44 sions of this act, and to employ such clerical or other assist- 45 ance as may be necessary for the fulfilment of its purposes. 46 (5) The board shall determine the percentage of wages 47 that employees shall contribute to the pension fund, sub- 48 ject to the minimum and maximum percentages, and shall, 49 furthermore, have the power to classify employees for the 50 purposes of the retirement system and to establish differ- 51 ent rates of contribution for different classes within the 52 prescribed limits. 53 (6) The county treasurer shall, in January of each year, 54 unless for cause the insurance commissioner shall have 55 granted an extension of time, file in the office of the insur- 56 ance commissioner a sworn statement, which shall exhibit 1911.] HOUSE No. 1400. 95 57 the financial condition of the retirement system on the thirty- 58 first day of the preceding December, and its financial trans- 59 actions for the year ending with said day. Such statement 60 shaJl be in a form approved by the insurance commissioner, 61 and shall show, among other things, the liability of the 62 retirement system on account of the following items : A. Deposit Reserve. 63 The total of the deposits of the members actually re- 64 ceived by the treasurer or due from the county under sec- 65 tion five, (2) A, and held subject to withdrawal by such 66 members. B. Interest Reserve. 67 Regular interest on such deposits. C. Annuity Reserve. 68 The net value of the annuities entered upon under sec- 69 tion six, (2) B, on the basis of the mortality tables and 70 interest rates provided for in this act. D. Expense and Contingent Fund. 71 (a) The unexpended portion of the amounts received 72 under section five, (1). 73 (b) The contingent fund. E. Gifts and Bequests. 74 The amounts received as gifts or bequests and held 75 under the terms of such gifts or bequests. F. Other Liabilities. 76 All other liabilities. G. Surplus. 77 (a) Annuity Surplus. The undistributed surplus aris- 78 ing from annuity deposits, as defined in section fiv3, (2) 79 B (b). 80 (6) Other Surplus. All unassigned funds. 96 RETIREMENT SYSTEM. [Jan. CREATION OF THE RETIREMENT FUND. 1 SECTION 5. The funds of the retirement system shall 2 be raised as follows :- (1) Expense and Contingent Fund. 3 The county shall appropriate annually such an amount 4 as may be necessary to defray the entire expense of admin- 5 istration, according to estimates prepared by the treasurer. (2) Annuity and Pension Fund. 6 A. Deposits by Members. Each member shall deposit 7 in this fund from his wages or salary, as often as the same 8 are payable, not less than one per cent and not more than 9 five per cent of the amount of his wages or salary as deter- 10 mined by the board of retirement under the provisions of 11 section four (5): provided, however, that employees who 12 receive more than thirty dollars weekly in wages or sal- 13 ary shall not be assessed for contribution to this fund on 14 the excess above that amount. 15 B. Contributions by the County. (a) Each month the 16 county shall contribute such amount as the board of re- 17 tirement may determine to be necessary to pay current 18 pensions for subsequent service, under section six (2) C (a). 19 (6) Each year in January the county shall contribute 20 an amount equal to the surplus arising from annuity de- 21 posits; in case there should be a deficiency arising from 22 such annuity deposits, instead of a surplus, then the county 23 shall make good such deficiency. 24 (c) Each month the county shall contribute such amount 25 as the board of retirement may determine to be necessary 26 to pay current pensions for prior service under section 27 six, (2) C (6). 28 (d) Each month the county shall contribute such amount 29 as the board of retirement may determine to be necessary 30 to ensure the minimum payments provided for in section 31 six, E. (3) Provision for Payments. 32 All amounts payable by members of the association 33 under paragraph (2) A of this section shall be deducted 1911,] HOUSE No. 1400. 97 34 by the county from the amount payable to them as wages 35 or salary, as often as the same are payable, and shall be 36 immediately credited to the pension fund by the county 37 treasurer. DISTRIBUTION OF FUNDS. 1 SECTION 6. The county treasurer shall administer the 2 funds of the retirement system in accordance with the 3 following plan : (1) Expense and Contingent Funds. 4 The funds provided for under section five, (1), shall be 5 used, so far as may be necessary, for the payment of the 6 expenses of administration. The portions not so used, if 7 any, shall be carried to the contingent fund, any portion 8 of which may be transferred to any other fund by vote of 9 the board of retirement. In case the amount appropriated 10 for the expense fund in any year should prove insufficient, 11 the county shall appropriate in the following year such 12 additional sum as may be required to cover the deficit. (2) Annuity and Pension Funds. 13 A. Refunds. (a) Should a member of the association 14 cease to be an employee of the county for any cause other 15 than death before becoming entitled to a pension, there 16 shall be refunded to him all the money that has been paid 17 in by him under section five, (2) A, with regular interest. 18 (b) Should a member of the association die before becom- 19 ing entitled to a pension, there shall be paid to his legal 20 representatives all the money that has been paid in by him 21 under section five, A, with such interest as shall have 22 been earned on such deposits. 23 B. Annuities from Employees' Deposits. Any member 24 who reaches the age of sixty years and has been in the 25 continuous service of the county for fifteen years immedi- 26 ately preceding, and then or thereafter retires or is retired, 27 any member who retires or is retired at the age of seventy 28 years, and any member who is retired for the good of the 29 service under the provisions of section three, (5), shall 30 receive an annuity to which the sum of his deposits under 31 section five, (2), with regular interest, shall entitle him, 98 RETIREMENT SYSTEM. [Jan. 32 according to the tables adopted by the board of retire- 33 ment, in one of the following forms:- 34 (a) A life annuity, payable monthly. 35 (b) A life annuity, payable monthly, with the provision 36 that in the event of the death of the annuitant before 37 receiving payments equal to the sum at the date of his 38 retirement of his deposits under section five, (2) A, with 39 regular interest, tHe difference shall be paid to his legal 40 representatives. 41 C. Pensions derived from Contributions by the County. - 42 (a) Pensions based upon subsequent service. Any mem- 43 ber entitled to an annuity under paragraph (2) B of this 44 section shall receive in addition thereto a pension for life 45 payable monthly equivalent to that annuity, to be paid 46 out of the fund contributed by the county under the pro- 47 visions of section five, (2) B (a). 48 (b) Pensions based upon prior service. Any member of 49 the association who reaches the age of sixty years, having 50 been in the continuous service of the county for fifteen 51 years or more immediately preceding, and then or there- 52 after retires or is retired, shall receive in addition to the 53 annuity and pension provided for by paragraphs (2) B 54 and C (a) of this section, an extra pension for life as large 55 as the amount of the annuity to which he might have 56 acquired a claim if the retirement system had been in opera- 57 tion at the time he entered the service of the county, and 58 if accordingly he had paid regular contributions from that 59 date to the date of the establishment of the retirement 60 association at the same rate as that first adopted by the 61 board of retirement, and if such deductions had been accu- 62 mulated with regular interest. 63 Employees who had already reached the age of sixty 64 years at the time the retirement system was established, 65 and employees who had already reached the age of fifty- 66 five years at that date and also became members of the 67 association, may be retired under the provisions of the 68 preceding paragraph without having completed the other- 69 wise required service period of fifteen years. For the pur- 70 pose of computing any pension payable for prior service, 1911.] HOUSE No. 1400. 99 71 the board of retirement may estimate on the basis deter- 72 mined by them the wages received at any period for which 73 they may deem it impracticable to consult the original 74 records. 75 D. Application of Surplus. The board of retirement 76 shall have power to determine the application of any sur- 77 plus, as defined under section four, (6) /, subject to the 78 approval of the insurance commission. 79 E. Minimum Payments. In no case shall the total 80 monthly payment to a member be at a rate less than two 81 hundred dollars per year. 82 F. Association Membership and Pension Certificate. 83 Membership in the association shall be evidenced by a 84 certificate to be issued to each member by the board of 85 retirement, and the right to an annuity or a pension shall 86 be evidenced by a policy to be issued to each member who 87 retires or is retired by the board of retirement. TAXATION, ATTACHMENTS AND ASSIGNMENTS. 1 SECTION 7. The funds of the retirement system, so far 2 as they are invested in personal property, shall be exempt 3 from taxation. 4 That portion of the wages of a member deducted or to 5 be deducted under this act, the right of a member to an 6 annuity or pension, and all his rights in the fund of the 7 retirement system shall be exempt from taxation, and from 8 the operation of any law relating to bankruptcy or insol- 9 vency, and shall not be attached or taken upon execution 10 or other process of any court. No assignment of any right 11 in or to said funds shall be valid. SUPERVISION BY INSURANCE COMMISSIONER. 1 SECTION 8. The insurance commissioner shall prescribe 2 for each county that adopts a retirement system under 3 the provisions of this act one or more mortality tables, 4 and shall determine what rates of interest shall be estab- 5 lished in connection with such tables, and may later modify 6 such tables or prescribe other tables to represent more 100 RETIREMENT SYSTEM. [Jan. 7 accurately the expense of the pension system, or may change 8 said rates of interest and may determine the application 9 of the changes so made. He shall also prescribe and super- 10 vise methods of bookkeeping of each retirement associa- 11 tion formed under the provisions of this act. 12 The insurance commissioner shall at least once in each 13 year, either personally or by deputy or assistant, thor- 14 oughly inspect and examine the affairs of the retirement 15 association to ascertain its financial condition, its ability 16 to fulfill its obligations, whether all parties in interest have 17 complied with the provisions of law applicable to the asso- 18 ciation, and whether the transactions of the board of re- 19 tirement have been in accordance with the rights and 20 equities of those in interest. The retirement system shall 21 be credited, in the account of its financial condition, with 22 the amounts due from the county, under the provisions of 23 section five, (2) B (a), its investments with fixed maturi- 24 ties upon which the interest is not in default at amortized 25 values, and its other investments at a reasonable valuation. 26 For the purposes aforesaid, the insurance commissioner 27 or other persons making examination shall have access to 28 all the securities, books and papers of the retirement sys- 29 tern, and may summon and administer oaths and examine 30 as witnesses the members of the board of retirement or any 31 other person relative to the financial affairs, transactions 32 and conditions of the retirement system. The insurance 33 commissioner shall preserve in a permanent form a full 34 record of the proceedings at such examination, and the 35 results thereof. Upon the completion of such examina- 36 tion, verification and valuation, the insurance commis- 37 sioner shall make a report in writing of his findings to the 38 board of retirement, and shall send a copy thereof to the 39 county commissioners. 1 SECTION 9. If, in the judgment of the insurance com- 2 missioner, the county or the board of retirement have vio- 3 lated or neglected to comply with any of the provisions of 4 this act, or of the rules and regulations established by the 5 board of retirement hereunder, he shall give notice thereof 1911.] HOUSE No. 1400. 101 6 to the county and to the board of retirement, and there- 7 after if such violation or neglect continues shall forthwith 8 present the facts to the attorney-general for his action. 1 SECTION 10. The superior court shall have jurisdiction 2 in equity upon petition of the insurance commissioner or 3 any interested party to compel the observance and restrain 4 the violation of this act, and of the rules and regulations 5 established by the board of retirement. 1 SECTION 11. This act shall take effect upon its pas- 2 sage. YC 36117