State SECTION \ction 2, VOL. VI 'NEW JERSEY' NO. 2, November, 1918 Consecutive No. 13 eorganization of the New Jersey Teachers' Pension and Retirement Systems Report of the Pension and Retirement Fund Commission of the State of New Jersey a^s •v* e : % Contents PAGE Part I. Present Systems and Their Reorganization — A critical and constructive study 5 Part II. Contents of Proposed Legislation — An act providing for the establishment of a Teachers' Pension and Retirement Fund of the State of New Jersey 13 Part III. Actuarial Estimate of Liabilities of Existing Systems and of Proposed Plan 17 BUREAU OF STATESRESEARCH CLINTON BUILDING, NEWARK "10 .Vii/=U ^yi+PP" Al:* ; ! .••!""!• '::..: A •.•* NEW JERSEY' Joint Resolution No. 3, Laws of 1918 142d Session of the Legislature of the State of New Jersey Approved February 23, 1918 Joint Resolution for the Appointment of a Commission to Investigate the Subject of Municipal, County and State Pensions, and the Teachers' Retirement Fund and the Teachers' Thirty-five Year Half Pay Pension Fund. Be it Resolved by the Senate and General Assembly of the State of New Jersey: 1. That a commission of five members be appointed, two by the President of the Senate and three by the Speaker of the House, to be known as "The Pension and Retirement Fund Commission," to make a survey of the subject of pensions and retirement funds for the employees of the various municipal, county and State governments and the school teachers and school employees of the State, and to report its findings to the present or a future session of the Legislature, together with such recommendations as it may deem best regarding pensions and retirement funds. 2. Said commission shall have power to examine witnesses, to call for any books, records, memoranda or other material, and for such purposes is hereby given authority to issue subpoenas for the presence of any person or persons or the production of such books, records, memoranda or other material. 3. The Commission shall sit during the session of the present Legislature, and after adjournment thereof at such time and place as the majority may decide and shall serve without pay, but shall have authority to engage such assistants as may be deemed wise for the prosecution of their investigation, and to defray the expenses shall use such moneys or any portion thereof as may be appropriated in any supplemental or annual appropriation bill. 4. This joint resolution shall take effect immediately. The Commission Chairman Assemblyman Arthur N. Pierson, Union Senator Wieeiam E. Florance, Middlesex Assembeyman Raeph N. Keelam, Camden Senator Wieeiam B. Mackay, Bergen Secretary Assembeyman Edward P. Stout, Hudson "\. NEW2% of the payroll (about $230,000) it would have to increase the appro- priation to about five times that rate, i. e., to over a million dollars. That this would impose a consider- able burden upon the State is evident. It would seem hardly fair that the State should bear it, especially con- sidering that only a portion of the teachers would enjoy its benefit and that according to all sound standards the beneficiaries should participate in the cost of their pension. Cost and unsoundness of double benefits. It has been shown that the majority of the teachers now retiring receive double benefits ranging between 70% and 110% and even more of their salaries and averaging 103 %. 1 The maintenance of the present double sys- tem and double benefits for present teachers would cost more than $42,000,000 ($23,129,000 for the 35- year Half Pay Pension, and $19,961,000 for the Re- tirement Fund Annuity), towards which the teachers would contribute at the present rate only about 'The analysis of the retired teachers' roll shows that 363 retired teachers receive double benefits, 225 receive the annuity only and 54 receive the pension only. The facts about those receiving double benefits are as follows : 189 teachers are enjoying benefits of 110% of salary and more. 86 teachers are enjoying benefits of 100% to 110% of salary. 78 teachers are enjoying benefits of 75% to 100% of salary. 10 teachers are enjoying benefits of 70% to 75% of salary. 363 teachers are enjoying benefits averaging 103% of salary ($1,083 as against average salaries of $1,054). $4,500,000 (including the present capital of the Fund of $500,000). The annual cost would approximately equal 16% of the payroll, of which the teachers would contribute on the present basis only about 2%. For the present it would amount to more than $2,000,000 annually, of which the teachers would now contribute only about $260,000. It is evident that the State could not supply the tremendous difference between the contributions of the teachers and the cost of the double benefits. Further- more, it would be against the economic interests of the majority of the teachers if it should, because the $42,000,000 would supply only two kinds of benefits — the double superannuation benefit (pension and an- nuity) after 35 years of service, and the strictly dis- ability benefit (the annuity) between 20 and 35 years. Nothing will go to the dependents of the teachers who die. Nothing to those who resign or are dismissed be- fore retirement and who have contributed for a num- ber of years. Nothing to those who become disabled before 20 years of service: approximately one-fourth of the present teachers will receive double benefits, one- eighth will retire on one or the other benefit only, and two-thirds will receive no benefit whatsoever — most of them not even protection for disability as they would withdraw from the service before the time when under the present system disability protection begins. 2 The double benefits amounting to full salary or more and the inequitableness of the system would unfavor- ably affect the school system. Teachers who can by re- tiring receive the same or even greater allowance than the salary they are receiving would have no incentive to continue teaching. Efficient teachers would seek to retire before they become superannuated. Incapacitated teachers would postpone retirement until they could qualify for both benefits. Inefficient and not incapaci- tated teachers who have completed 20, 25 or 30 years of service would neither resign nor be dismissed be- cause this would entail for them a forfeiture of all their contributions. These tendencies are already apparent. Both for the teachers and for the State the situation would become unbearable. 'Summary of present situation. To summarize the present situation : 1. The Retirement Fund will be unable to fulfill its present promises and cannot be supported on a solvent basis by the contributions of its members. 2. The 35 years Service Pension is too burdensome for the State to maintain without contributions from teachers. 3. There is no principle justifying the double bene- fits amounting to full salary or more ; they are in- equitable and economically and administratively unsound. All these considerations have convinced the Commis- sion that the present two systems should no longer con- tinue to operate separately; that there is no justifica- tion for maintaining the double benefits ; and that some plan for the merger of the two systems and for a more equitable distribution of benefits must be devised. * Disability benefits under the Retirement Fund are paid only after 20 years of service. 'NEW JERSEY' New System Principles underlying new system. In framing the provisions of a new retirement system into which the two existing systems should merge the Commission was guided by the following three principles, upon which all sound retirement systems are founded : 1. The system should be established on a reserve basis, i. e., each year throughout the service of each member a contribution should be set aside which shall accumulate together with interest a reserve which shall be sufficient on an average to pay the retiring member the benefit promised to the end of his or her life. 2. The system should be supported by joint contribu- tions of the members and of the employer (in this case, the State) and jointly administered by them because there is a mutual interest between the employees and the employer in retirement provi- sions, the former seeking protection for them- selves and for their dependents against want in their old age, in case of disability or death and to some extent in case of resignation or dismissal, and the latter endeavoring to secure a higher ef- ficiency of service by eliminating deadwood from the service, and replacing them by younger and more efficient forces and attracting to the service a better type of employee and promoting the esprit de corps of the personnel ; and 3. Any member who withdraws from the service through resignation or dismissal before retire- ment and the estate of any member who dies be- fore retirement should receive all the contribu- tions he or she had paid, together with interest; each member's contributions should be credited to his or her account and should be carried until retirement in a similar way as deposits in a sav- ings bank. The Commission endeavored to make the provisions of the proposed system as liberal as possible within certain limitations of cost, and the system as equitable and elastic as a sound retirement system can be. The Commission also endeavored to make the tran- sition from the old system to the new system as gradual as conditions would permit and reduce as far as possi- ble the hardships which in anj process of transition might occur in individual cases. Prozisions of new system. The provisions of the proposed system are outlined in detail in the statement on pages 13 to 17. They may be briefly summarized as follows : A new fund called the New Jersey Teachers' Pension and Retirement Fund is to be created. The feature of the Teachers' Retirement Fund compelling all new ap- pointees to be members of that fund is to be repealed. Hereafter all new appointees shall be compelled to be- come members of the new fund. For present teachers membership in the new fund shall be optional. Those who are members of the Retirement Fund may if they wish transfer to the new rund. The new fund is to be administered by a board in which the teachers and the State shall be equally rep- resented. Retirement shall be optional at the age of 62 and compulsory at 70. The amount of allowance is approximately equal to l/70th of the average salary of the 5 years preceding retirement, for each year of ser- vice. 1 There is no maximum limit on the amount of the allowance. The latter may exceed half pay in case of service above 35 years. In no case shall the super- annuation allowance be less than $400. Credit is al- lowed for service rendered in the public schools in other States up to a maximum of 10 years. A disability allowance is provided after 10 or more years of service and is fixed at the same l/70th rate as the superannuation allowance, except that it cannot be less than 30% of salary or $300, whichever shall be larger, and on the other hand cannot exceed 9/10 of the amount of allowance to which the teacher would have been entitled had he stayed in the service until 62. In case of resignation or dismissal from the service before retirement the member shall receive all his con- tributions together with interest at 3%. In case of death before retirement, the estate of the member shall receive the contributions of the member together with interest at 3%. At the time of retirement any teacher may exercise his option as to the form in which he would like to take his benefits. He may convert the reserve into a smaller annual payment with the proviso that after his death the balance shall be paid in a lump sum or in the form of an annuity to any person which he may desig- nate. Any teacher who transfers from the Teachers' Re- tirement Fund to the new fund shall be credited in the latter with the amount which he contributed to the former fund and shall receive at retirement such an annuity as this amount will purchase. This annuity is additional to any other benefit received under the new act. The payment of the existing pensions granted under the 35-year Service Act shall be continued as hereto- fore. In case the annuities received from the Retire- ment Fund by any teacher now on the retired list who does not receive the pension, shall be reduced because of the inability of the Fund to pay full annuities, the State will supply the difference between the reduced annuity and the one which the teacher received here- tofore. Teachers' Contributions. The teachers will contrib- ute half of the cost of the benefits for all services rendered after the establishment of the new system. 1 The retirement allowance for future service consists of two elements : a "pension" provided by the state amounting to l/140th of the salary for each year of service, and an "an- nuity" provided by the teacher's own contributions which in the case of average advancement of salary will be equal to the "pension." Together the two benefits will make up the l/70th fraction of salary for each year of service. However, in case the teacher advanced during the later period of his career, at a more rapid rate than the average, his contributions made at the average rate of salary will not be sufficient to provide an annuity bearing the l/140th per year of service ratio to his larger salary. The total allowance will, therefore, be somewhat less than l/70th of salary multiplied by years of service. On the other hand, if the teacher advanced at a slower rate than the average his contributions will provide an annuity bearing a larger ratio to his salary. In this way the teachers who advance at a slower rate than the average will not be taxed to pay the annuities of the teachers who advance at a more rapid rate than the average. 8 'NEW JERSEY' The other half will be supplied by the State. They need not contribute on account of benefits for prior service. The State will contribute its own as well as the teachers' part for all the prior years. It will thus place the teacher in the same position as if the State and the teacher contributed on his or her account at a proper rate from the time the teacher entered the ser- vice and up to the present date. Contributions of the teachers are fixed according to age at the time they en- ter the new fund and vary for men between 3^2% and 6% of salary, and for women between 3^% and 7% of salary. A teacher who enters the system at an earlier age has a longer period within which to contribute his share of the cost of his prospective benefit than a teacher who enters the service at a later age. The latter must therefore pay a higher rate of contribution towards the same benefit than the former. Rates of Contribution Required of Teachers Under Pro- posed Plan. Retirement Age 62. Allowance 1/70 of the average salary of the five years immediately preceding retirement, multiplied by the number of years of service. AGE MEN WOMEN At Entrance Into (Percentage (Percentage the New Fund of Salary) of Salary) 20 3.60 3.91 21 3.60 3.93 22 3.60 3.95 23 3.61 3.98 24 3.62 4.01 25 3.62 4.05 26 3.64 4.09 27 3.66 4.13 28 3.69 4.18 29 3.72 4.25 30 3.76 4.32 31 3.78 4.39 32 3.84 4.46 33 3.89 4.53 34 3.93 4.60 35 3.97 4.68 36 4.01 4.75 37 4.07 4.84 38 4.13 4.94 39 4.19 5.04 40 4.26 5.13 41 4.33 5.22 42 4.40 5.32 43 4.47 5.42 44 4.54 5.53 45 4.61 5.63 46 4.68 5.73 47 4.76 5.83 48 4.84 5.93 49 4.92 6.04 50 5.01 6.16 51 5.10 6.27 52 5.19 6.38 53 5.28 6.49 54 5.37 6.60 55 5.46 6.71 56 5.56 6.83 57 5.67 6.94 58 5.78 7.05 59 5.89 7.17 60 6.00 7.29 retiring at the same age is only 11.84 years. It costs $10,760 to provide a retirement allowance of $1,000 to a woman teacher retiring at that age, and only $8,770, or about $2,000 less, to provide the same allowance to men teachers retiring at the same age. To meet its share of the higher cost of benefits of the women teach- ers, the State must contribute in their case at a higher rate than in case of the men. While the contributions required in case of entrants at higher ages may seem high (6% and 7%), it must be noted that they will be paid only for a few years, as all contributions cease at 62 years of age. Once the rate of contribution of a teacher has been fixed it re- mains at that rate throughout the entire period of his service, except that it may be slightly increased or reduced if at any subsequent actuarial valuation a higher or lower rate of mortality is obtained than the one originally adopted. Contributions of State as compared with those of teachers. In case of new entrants, i. e., teachers ap- pointed after the establishment of the new system, the State will contribute at such a rate as to match the benefit which the teachers' own contributions will provide. Rates of Contributions to Be Paid by the State Under the Proposed Plan of Reorganization, to Meet Half of the Cost of the Retirement Allowances to New Entrants and For Future Services of Present Teachers. NOTE: The rate is lower than that required of the teachers. This is due to the fact that the number of teachers who would leave the service before retirement, is discounted in the case of the State's contribution (i. e., the State does not contribute on their account). In addition to these contributions the State must con- ' tribute on account of the total cost of allowances for past services and all outstanding pensions as shown on page 9 of this report. AGE MEN WOMEN At Entrance Into (Percentage (Percentage the New Fund of Salary) of Salary) 20 1.97 2.15 21 1.99 2.23 22 2.01 2.32 23 2.03 2.41 24 2.05 2.51 25 2.08 2.62 26 2.11 2.75 27 2.14 2.88 28 2.18 3.02 29 2.22 3.15 30 2.26 3.27 31 2.30 3.36 32 2.34 3.44 33 2.39 3.52 34 2.44 3.60 35 2.49 3.67 36 2.52 3.71 37 2.54 3.73 38 2.56 3.75 39 2.58 3.76 40 2.63 3.77 41 2.70 3.78 42 2.79 3.79 43 2.88 3.81 44 2.98 3.83 45 3.08 3.85 Experience shows that women teachers must con- tribute at a higher rate than men, because they live longer after retirement than the latter. The average life time of women teachers retiring at age 62 is 15.27 years, whereas the average life time of men teachers In case of present teachers the State will contribute much more than the teachers. Whereas the greater part of the teachers' contributions averaging about 4 T / 2 % will eventually revert to them together with interest, as the majority will leave the service before 'NEW JERSEY' retirement, no part of the State's contributions, amounting to about 7% of salaries, will revert to it : Normal contribution on account of benefits for future services of present teachers, averaging 2^2% of salaries Deficiency contributions on account of benefits for prior services of present teachers, approximately. 3% of salaries Contributions on account of present pension roll V/2% oi salaries Total 7% of salary besides cost of administration, additional benefits, cost of minimum benefit provision, and guarantee in case of a deficiency. The difference in the proportion of cost borne by present teachers and by the State on their account may well be shown by the fact that whereas the present teachers will contribute on account of their superan- nuation and disability benefits approximately $6,300,- 000, the State will contribute on that account approxi- mately $21,600,000, i. e., more than 75% of the cost. All teachers' contributions above $6,300,000 will be merely savings accounts. They will be contributed and drawn out with interest by those teachers or by their dependents, who eventually resign, are dismissed or die before retirement. Thus every member of the force will to a greater or lesser extent become a bene- ficiary of the system. This feature vitally differs from the present tontine arrangement which has been dis- cussed on page 8. The contributions as between different benefits pro- vided are distributed as follows : Teachers' Contributions Superannuation Allowances $ 5,257,261 Disability Allowances 1,039,692 Total Teachers' Contributions $ 6,296,953 State's Contributions Superannuation Allowances : Now Outstanding $ 2,140,849 For Prior Service 8,167,627 For Future Service 5,257,261 Total for Superannuation $15,565,735 Disability Allowances 5,016,093 Disability Pension to guarantee present annuities of those who receive the an- nuity only 689,508 Additional Annuities in compensation of contribution to Retirement Fund 314,649 Total State's Contributions $21,585,987 The foregoing figures, including rates of state's contributions on page 8, have been computed on the basis of the original plan of the Commission. Since then many new features were incorporated in the bill (such as the computation of allowances on the basis of last 5 instead of 10 years, the increase of dis- ability allowances to the l/70th rate and the minimum benefit provisions) which will still further increase the difference between the cost to the state and the cost to the present teachers. The transition from an almost gratuitous to a con- tributory pension under the proposed system is a grad- ual one. Whereas a teacher who is now 62 years of age and had 35 or 40 years of service to his credit will receive his allowance of 35/70ths or 4O/70ths of salary entirely at the expense of the State, and only a small additional annuity at his own expense (i. e., for the few hundred dollais he has contributed to the old fund), the teachers retiring 5, 10 or 20 years hence will have contributed a noticeable share of the cost of their bene- fits. Finally those retiring 30, 40 or 50 years from now will have contributed one-half of the cost of their superannuation or disability benefits. Thus in the course of about fifty years the system will reach the truly "fifty-fifty" basis. Suggestions From Teachers Taking the view that the teachers' retirement ques- tion vitally affects the teachers as well as the schools and the public at" large, the Commission endeavored to give a wide publicity to its findings and proposals, t© carefully examine all criticisms which the latter might evoke and to incorporate in its proposals any sound suggestions that might have been advanced. Many teachers have urged that retirement on half pay should be allowed before 62 years of age. The Commission has, therefore, increased the disability benefit from l/75th of salary per each year of service to l/70th (although this feature is open to abuse). Thus a teacher who entered the service at 22 or 23 and has completed 35 years of service at 57 or 58 years of age and who is no longer capable to teach efficiently, can upon proper proof of such incapacity retire on 35/70ths of her salary, i. e., on half pay. It would be possible also to reduce the age for optional retirement to 60, but this would naturally increase both the teach- er's and the State's rates of contributions as compared with the rates required for retirement at 62. The rates for the lower age are now being calculated by the ac- tuary of the Commission and will be published in a special pamphlet, as soon as the calculations are com- pleted. The teachers and the State will then be in a better position to discuss this question. Another demand advanced by some teachers was that the retirement allowance should be computed on the average salary of last 5 years rather than on the aver- age of last 10 years, as originally intended by the Com- mission. Although the latter affords a more stable basis for the financing of the system, and is more equit- able than the 5 year basis, the Commission decided to change to the latter basis in order that the pension of some of the teachers about to retire should not be smaller than the one provided on that basis under the 35-year Half-pay Pension Law. The third important feature urged by some teach- ers and thereupon adopted by the Commission was that outside experience should be credited up to a maximum of 10 years. The cost of the additional benefit for that experience would be supplied entirely by the State, so far as present teachers are concerned. The new entrants desiring credit for their outside ex- perience not exceeding 10 years must cover half of the cost of the benefit on that account, the State supplying the other half. A teacher coming from Massachusetts, Connecticut, Pennsylvania or New York City will bring with him to the New Jersey fund the contribu- tions which the systems of the latter States or cities refunded to him when he withdrew from the service. Little or nothing would have to be contributed in addi- 10 'NEW JERSEY' tion. On the other hand a teacher coming from a State which has no retirement system or does not allow re- funds on withdrawal, or a teacher who did not become a member of the retirement system in the other State, will be charged a somewhat higher rate of contribution for outside experience if he wishes to get credit for it. Finally the fourth point brought to the attention of the Commission and favorably acted upon was that a minimum amount of allowance be established. The $400 minimum adopted for superannuation will assure all low-salaried teachers (those receiving less than $800 per year) an allowance of more than half pay. The disability minimum of $300 is $50 larger than the one now provided by the Retirement Fund. Summary The proposed plan is more liberal than the systems of Massachusetts and Connecticut, for it gives higher superannuation and disability benefits, gives credit for outside experience and imposes no maximum limit on the amount of the retirement allowance. It is more lib- eral than the system of New York City, for it computes the allowance on the average salary of last 5 instead of 10 years, proportionately increases the allowance be- yond half pay in case of service above 35 years, and gives a higher disability benefit. It is more liberal than the system of Pennsylvania, for it calculates the super- annuation allowance on the l/70th instead of the l/80th rate, gives credit for outside experience and greater disability benefits, and establishes a minimum amount of allowance. Compared with the present system of New Jersey it offers the following advantages : 1. Greater assurance that all the benefits promised shall be paid. 2. Return of contributions with interest at 3% in case of resignation or dismissal. 3. Death benefits before retirement in the form of refunds with 3% interest. 4. Disability protection after 10 years instead of 20. 5. Equitable increase of retirement allowance with longer service. 6. Convertibility of the individual reserves into such life or death benefits as the member may at the time of his re- tirement select. 7. Greater equitableness and elasticity of benefits. Table 1 — Amounts Which an Annual Contribution of $25, $35, $50, $75 or $100 Deposited at 4% Interest Will Produce at the End of a Certain Period of Years. No. of $50 8 281.65 624.30 1,041.25 1,548.45 2,165.60 2,916.40 3,829.90 4,941. 85 Table a— What an Annual Contribution of $25, $35, $50, $75 or $100 Compounded Annually at 3% Interest Will Amount to After a Certain Period of Years. No. of S50 8 273.40 590.40 957.85 1,383.80 1,877.65 2,450.15 3,113.89 3,883.16 Years 5 10 15 20 26 39 35 40 925 $ 140.82 312.15 520.62 774.22 1,082.80 1,458.20 1,914.95 2,470.67 $35 $ 197.17 437.01 728.87 1,083.91 1,515.92 2,041.48 2,680.93 3,458.94 $76 8 422.47 936.45 1,561.87 2,322.67 3,248.40 4,374.60 5,744.85 7,412.02 $100 9 563.30 1,248.60 2,082.50 3,096.90 4,331.20 6,832.80 7,659.80 9,882.70 Years 5 10 15 20 25 30 35 40 $25 | 136.70 295.20 478.92 691.90 938.82 1,225.07 1,556.90 1,941.57 $35 I 191.38 413.28 670.49 968.66 1,314.35 1,715.10 2,179.66 2,718.20 $75 9 410.10 885.60 1,436.77 2,076.70 2,816.47 3,675.22 4,670.70 6,824.72 $100 8 546.80 1,180.80 1,915.70 2,767.60 3,765.30 4,900.30 6,227.60 7,766.39 Table 3 — Comparison of the Superannuation and Disabil- ity Benefits of the Existing Systems and the Proposed Plan in Case of a Teacher Entering Service at 22 and Drawing an Average Salary of $1,050 for the 5 Years Preceding Retirement. Proposed Retire- ment Plan (l/70th Teach« JS-Year Age at which of salary for each year 01 service) i neat Fund Service Pea* Benefit is paid (60% of salary) (S0% ©faaku 22 A 9 2 G 23 V. -M . 24 +•> ft V) C V +2 25 o Cya v v 26 27 28 und of 3 with in bility bei 1* 29 30 Ref tion disa > ■*-> M 31 % ■4-> 32 '$315 33 34 315 315 IB 6 c 35 315 o 36 315 £ 37 315 1 38 315 1 39 315 £ 40 . 315 +■» 41 315 g 42 315 $630 O 43 315 ' 630 fc 44 330 630 45 345 630 46 ■Ij 360 630 47 375 630 48 390 630 49 405 630 50 420 630 51 435 630 52 450 630 53 465 630 54 480 630 55 495 >» -*-> 630 56 510 jB 630 57 58 525 540 3 630 630 r $525 525 59 540 630 525 60 540 630 525 61 • 540 630 d .2 525 62 " 600 630 "5 525 63 i 615 630 s< 525 64 ■a I 630 630 B 8. 525 65 645 630 525 66 660 630 r/) 525 67 1 675 630 525 68 3 690 630 525 69 705 630 525 70 I 720 I 630 L 525 'NEW JERSEY' 11 Table 4 — Approximate Amount of Retirement Allowance Which a New Entrant Would Receive on the Basis of l/70th of the Average Salary of the 5 Years Preceding Retirement for Each Year of Service ($14.28 Per Year) If His Salary Advanced During His Career at the Average Rate. Note. — The superannuation allowance is minimum MOO. The disability allowance is minimum $300. The latter allowance can in no case exceed 9/10ths of the allowance which the teacher would have received had he continued until 62. The two lines indicate, one, the points at which the allowance exceeds half-pay; the other, the points at which it is above the minimum. Age at Entrance Disability Allowance en Retirement at Aae Approximate Amount of Superannuation Allowance _ A P e ** _..... Entrance into the on Retirement at Age: Into the New Fund 55 56 57 58 59 60 61 62 63 64 66 68 67 New Fune" 22 $471 $486 | $500 $514 $514 $514 $514 $571 $585 $600 $614 $628 $643 22 23 457 471 486 | 500 501 501 501 557 571 585 600 614 628 23 24 443 457 471 486 488 488 488 543 5*7 571 585 600 614 24 2-5 428 443 457 471 476 476 476 528 543 557 671 585 600 25 26 414 418 443 457 463 463 463 514 528 543 557 571 585 26 27 400 414 428 443 450 450 460 | 500 514 528 543 557 571 27 28 386 400 414 428 437 437 437 486 | 500 514 528 543 657 28 29 371 386 400 414 424 424 424 471 486 | 500 514 528 543 29 30 357 371 386 400 411 411 411 457 471 486 | 500 514 628 30 31 343 357 371 386 398 39$ 398 443 457 471 486 | 500 514 31 32 328 343 357 371 386 386 386 428 443 457 471 486 | 500 32 33 | 314 328 343 357 371 372 373 |414 428 443 457 471 486 33 34 300 | 314 328 343 357 360 360 400 | 414 428 443 457 471 34 35 300 300 | 314 328 343 357 360 400 400 | 414 428 443 457 36 36 30i0 300 300 | 314 328 343 857 400 400 400 1414 428 44S 36 37 300 300 300 300 | 314 328 343 400 400 400 400 | 414 428 37 38 300 300 300 300 300 | 314 328 400 400 400 400 400 1414 38 39 300 300 300 300 300 300 | 314 400 400 400 400 400 400 39 40 300 300 300 300 300 300 300 400 400 400 400 400 400 40 41 300 300 300 300 300 300 300 400 400 400 400 400 400 41 42 300 300 300 300 300 300 300 400 400 400 400 400 400 42 43 300 300 300 300 300 300 300 400 400 400 400 400 400 43 44 300 300 300 300 300 300 300 400 400 400 400 400 400 44 45 300 300 300 300 300 300 300 400 400 400 400 400 400 45 46 300 300 300 300 300 300 300 400 400 400 400 400 400 46 47 300 300 300 300 300 300 300 400 400 400 400 400 400 47 48 300 300 300 300 300 300 300 400 400 400 400 400 400 48 49 300 300 300 300 300 300 300 400 400 400 400 400 400 49 50 300 300 300 300 300 300 300 400 400 400 400 400 400 60 Table 5 — Contribution; i and Amount of Retirement Allowances of ! Teachers Having Previous 1 Service to Their Credit and Retiring at 62 Years of Age. Age at Average Salary Entrance Number of Annual Contribution of 5 Years Retl rement Allowance Reserve into Years of (Percentage of Salary) Preceding Fraction (Actuarial Equivalent) the Fund Prior Service Men Women Retirement of Salary Ai mount Men Women 25 3 3.62 4.AK [ $1,400 40/70 $800 $7,029 $8,585 700 40/70 400 3,514 4,292 30 7 3.76 |«» \ 1.4( 39/70 780 6,853 8,370 700 minimum 400 3,514 4,292 40 15 4.26 5. 1 9 I 1.4C 37/70 740 6,492 7,941 700 minimum 400 3,514 4,292 50 30 5.01 6.1 K \ 1.4( 42/70 840 7,380 9,014 700 42/70 420 3,690 4,507 60 40 6.00 7. ,Q \ 1,4( 42/70 840 7,380 9,014 700 42/70 420 3,690 4,507 Table 6 — Amount of Reserve Necessary to Provide a Certain Retirement Allowance at a Certain Age, Amount of MEN Retirement Reserve Necessary at Retirement Age: Allowance 55 56 57 58 59 60 61 62 63 64 65 66 67 68 $400 14,133 J *4,050 $3,966 $3,879 $3,790 $3, 700 $3,608 $3,514 $3,420 $3,324 $3,226 $3,128 i 13,029 $2,930 500 5,166 5,062 4,957 4.848 4,738 4, 625 4,510 4,393 4,274 4,154 4,033 3,910 3,786 3,662 600 6,199 6,075 5,948 5,818 5,686 5,550 5,412 5,272 5,129 4,985 4,840 4,692 4,544 4394 700 7,232 7,087 6,940 6,788 6,633 6,475 6,314 6,150 5,984 5,816 5,646 5,474 5,301 5,127 800 8,266 8,100 7,931 7,758 7^81 7,400 7,216 7,029 6,839 6,647 6,453 6,256 6,058 5,859 900 9,299 9,112 8,923 8,727 8,528 8,325 8,118 7,907 7,694 7,478 7,259 7,038 6,816 6,592 1,000 10,332 10,125 9,914 9,697 9,476 9,250 9,020 8,786 8,549 8,309 8,066 7,820 7,573 7,324 Amount of WOMEN Retirement Reserve Necessary at Retirement Age: Allowance i 55 56 57 58 59 60 61 62 63 64 65 66 67 68 $400 $5,129 ! 15,015 $4,898 $4,780 $4,660 $4,539 $4,416 $4,292 $4,168 $4,042 $3,916 ! B3,789 $3,662 $3,535 500 6,412 6,269 6,123 5,975 5,825 5,674 5,520 5,366 5,210 5,053 4,895 4,736 4.578 4,419 600 7,694 7,522 7,348 7,170 6,990 6,808 6,624 6,439 6,251 6,063 5,873 5,683 5,493 5303 700 8,976 8,776 8,572 8,365 8,155 7,943 7,728 7,512 7,293 7,074 6,852 6,630 6,409 6,187 800 10,258 10,030 9,797 9,560 9^20 9,078 8,832 8,585 8,335 8,084 7,831 7,578 7,324 7,07» 900 11341 11,283 11,021 10,755 10,485 10,212 9,936 9,658 9,377 9,095 8,810 8,525 8.240 7,954 1,000 12,823 12,537 12,246 11,950 11,650 11, ,347 11,040 10,731 10,419 10,105 9,789 9,472 9,155 8,838 12 'NEW JERSEY' Table 7 — Proposed Retirement Plan. Valuation of the Assets and Liabilities of the State, If Every Teacher In the State Elected to Enter the System. NOTE — The liabilities are calculated on the basis of the plan originally proposed — allowances computed on the basis of 10 year average salary, disability allowances at l/75th rate of salary, no minimum amount of benefits. LIABILITIES Service pensions of present pension fund to be continued: Men $ 463,478 Women 1,677,371 $2,140,849 Disability pensions to be granted to annuitants of retirement fund who are not now drawing pensions, in order to guarantee continuation of present annu- ities: Men $ 133,101 Women 556,407 689,508 ASSETS Appropriations to be made by State. .$21,585,987 Total pensions to teachers now retired $ 2,830,357 Service allowances on account of future service to teachers now in service who remain to retire on service allowances: Men $2,337,454 Women.. 8,177,068$10,514,522 Less approximately one-half of allow- ance provided by contribu t i o n s of teachers: Men $1,168,727 Women.. 4,088,534 5,257,261 Net service allow- ances on account of future service provided by state: Men $1,168,727 Women.. 4,088,534 $5,257,261 Additional service al- lowances on ac- count of prior service of present teachers to be pro- vided by state: Men $2,020,661 Women.. 6,146,966 8,167,627 Total disability allow- ances payable to teachers now in service who become disabled: Men $ 447,352 Women.. 5,608,433 $6,055,785 Less part of disabil- ity allowances pro- vided by contribu- tions of teachers: Men $ 93,884 Women.. 945,808 1,039,692 Net disability allow- ance provided by state: Men $ 353,468 Women.. 4,662,625 5,016,093 Special annuity bene- fits allowable on service retirement on account of con- tributions to Teach- ers' Retire m e n t Fund: Men $ 43,809 Women.. 270,840 314,649 Total pensions to present teachers $18,755,63© Grand Total $21,585,987 $2.1,585,987 'NEW JERSEY' 13 PART II Contents of Proposed Legislation An act providing for the establishment of a Teachers' Pension and Retirement Fund of the State of New Jersey (Amendment of the Teachers' 35-Year Service Pension Law) Organisation of Fund. Establishment. Membership. Administration. Benefits. Superannuation. Disability. Death. Resignation or Dismissal. Optional Benefits. Additional annuity. Teachers now on retired list. Financing. Member's contributions. State's contributions. Guarantee of Solvency. Other provisions. Waiver of rights. ARTICLE I. Organization of the Fund. I. Establishment of Fund: On September 1, 1919, there shall be created in this state a fund called the Teachers' Pension and Retirement Fund of the State of New Jersey. II. Membership: A. All teachers appointed after September 1, 1919, shall automatically become members of said Fund. B. All present teachers who within a year after the establishment of the Fund shall elect to join it shall be members of the Fund. Those who are members of the Teachers' Retirement Fund must sign a waiver of all their rights under that Fund before they can be accepted into the Fund created by this act. The time for their joining it may be extended by the Retirement Board sub- ject to the approval of the State Commission into a period not exceeding five years. III. Administration : A. Organizatioi of Retirement Board: ( 1 ) The Fund shall be managed by a Retirement Board consisting of seven members : a. Commissioner of Education. b. State Treasurer. c. One member, not a teacher, appointed by the Governor for a period of three years, except that the one appointed immediately after the passage oi: this act shall have a two year term. d. Three members of the Fund elected by the members of the Fund in accordance with the rules which the State Pension Commission shall prescribe, for a term of three years, except that two of those elected in the year 1919 shall have a one, and two year terms respectively. e. The seventh member not a teacher nor an officer of the state elected by the six for a period of three years except that the one elected in 1919 shall have a one year term. (2) Until the organization of the Fund and the election of three members therefrom, the Commissioner of Education, the State Treas- urer and the member appointed by the Gov- ernor shall perform the duties of the Re- tirement Board. (3) A vacancy occurring in the Retirement Board shall be filled for the unexpired term by the appointment or election of a succes- sor in the same manner as that of his prede- cessor. (4) The members of the Board shall serve on it without compensation except that they shall be reimbursed for any necessary expendi- tures. (5) The Board shall engage such actuarial and other technical services as may be required and appoint such administrative employees as may be necessary for the transaction of its business. The compensation of all per- sons employed by the Board shall be fixed by the Board. (6) The Board shall have an office in such city as it may find most suitable for the transac- tion of its business. B. Chief Duties of Retirement Board: (1) To keep such data as shall be necessary for actuarial valuation of the fund. (2) To certify the rates of contributions which shall be deducted from the members' salaries and also those which shall be paid by the State. (3) To receive contributions and manage, invest, submit to periodical valuations and keep in a solvent condition the fund. (4) To grant retirement allowances in accord- ance with the provisions of this act. (5) To make such reports and take such steps regarding the financing and management of the funds as the State Commission shall prescribe. 14 NEW JERSEY C. Chief Duties of the School Authorities : The chief duties of the State Department of Public Instruction and of the branches of service in which the teachers are employed shall be: (1) To furnish the required records and infor- mation to the Retirement Board. (2) To make the deductions from members' sal- aries certified by the Retirement Board. ARTICLE II. Benefits. I. Superannuation Benefits: A. Condition of Allowances : ( 1 ) A superannuation allowance is granted upon the application of a member or at the request of the Board of Education employing the member, who has attained or passed the age of 62. (2) Retirement is compulsory at the age of seventy. B. Amount of Allowance: (1) The amount of allowance is approximately equal to one-seventieth of the average salary of the five years immediately preceding re- tirement multiplied by the number of years the employee has been a member of the Fund. For a member with more than thirty- five years service the allowance is more than one-half salary. (2) The allowance consists of a pension of l/140th of the average salary for each year the employee has been a member of the Fund and of an annuity such as his contribu- tions will purchase at the time of his retire- ment. Members who were in the service prior to their becoming a member of the said fund are to receive an additional allowance of one-seventieth of the average salary of the last five years for each year of such prior service except that a. In the case of the teachers who shall delay their joining the Fund beyond a year after its establishment, the time between the latter date and the date of their joining the fund shall not be counted for pension purposes. (3) The allowance shall in no case be less than $400. (4) In computing the amount of the allowance, credit shall be given for the years of service rendered in the public schools of other states up to a maximum of 10 years. II. Disability Benefit: A. Condition of Allowance: (1) An ordinary disability benefit is payable to any member who is physically or mentally incapacitated for duty after 10 or more years of service in New Jersey. The request for retirement on disability may come either from the member himself or from the Board of Education employing the member. B. Amount of Allowance III. IV. (1) The allowance equals approximately l/70th of the average salary of last 5 years for each year of service except that the years of service which are reduced or not counted for any superannuation pensions are similarly re- duced or not counted for disability pensions. (2) The benefits consist of an annuity such as the employee's contributions will purchase and of a pension which provides the balance. (3) The allowance is in no case less than 30% of the member's average salary, or $300, whichever amount shall be the largest. It can in no case exceed 9/10 of the allowance to which the member would have been en- titled had he remained in the service until 62 years of age. (4) In computing the amount of the allowance credit shall be given for the years of service rendered in the public schools of other states up to a maximum of 10 years. C. Safeguard Against Abuse: Members retired on account of disability may be required to undergo periodical medical exam- inations. Members whose disabilities are found to be removed are to have their allowances re- duced so that their earnings and pensions com- bined shall not exceed their previous earnings. Death Benefits: To the estate of any member who died before retirement there shall be refunded all his con- tributions together with interest at 3% com- pounded annually. Refund of Contributions in Case of Resig- nation or Dismissal: A. In case of resignation or dismissal from the service prior to retirement the member shall receive a refund of all his contributions together with interest compounded annually at 3%. B. The member who resigns or is dismissed may leave his contributions in the fund allowing them to draw interest and may withdraw them at a later date or in case of re-entrance in the serv- ice apply them to the credit of his or her future benefit. If a member takes a leave of absence and leaves his contributions in the fund, the state's contribution on his or her account shall be held in reserve for two years, so that in case the member is reinstated within that period, the member's and the state's contributions might con- tinue at the same rate. If the member who with- 'NEW JERSEY' IS drew from the service returns after a longer absence, he is admitted as a new entrant and must contribute at a new rate according to his age at the time he re-enters the fund. If he desires credit for the prior service in New Jer- sey he must make up the contributions (if he withdrew them) in a lump sum or by means of annual instalments to cover one-half of the cost of the benefits on that account, in which case the state will make up the other half. V. Optional Benefits: Members upon retirement may elect to receive the actuarial equivalent of their pensions and annuities in any one of the following forms : ( 1 ) Total amount payable in monthly instalments throughout life, all payments ending at death. (2) Reduced payments during life with a provi- sion that in case of death before such pay- ments have equalled the present value of pension and annuity at rate of retirement, the balance shall be paid to the heirs or assigns. (3) Reduced payments covering two lives with a provision that at the death of the member the same payments or one-half of such pay- ments shall be continued throughout the life of such other person as the member shall have designated. (4) Such other form of actuarial equivalent as may be certified by the actuary and approved by the retirement board. VI. Additional Annuity For Prior Contribu- tions : A. Any teacher who transfers from the Teach- ers' Retirement Fund to the fund which is hereby established shall be credited for annuity purposes in the latter fund with the amount which he contributed to the Retirement Fund and shall re- ceive on retirement such an annuity as this amount will purchase. B. This annuity shall be paid notwithstanding any other annuity or pensions which the teacher may receive under this act. VII. Provisions For Teachers Now on the Re- tired List: A. The payment of pensions granted under the 35 Year Service Pension Act prior to the enactment of this amendment shall be continued as heretofore. B. Any time any annuity received from the Teachers' Retirement Fund by any teacher who is on the retired list of said fund at the time of establishment of the Fund which is hereby created, and who has not been a beneficiary of the 35 Year Service Pension Act is reduced be- cause of insufficiency of funds, there shall be paid to such retired teacher from the fund which is hereby established an additional annuity which together with the reduced annuity shall provide him with the same total annuity he has been receiving heretofore. ARTICLE III. Financing. I. Contributions by Members: A. All new appointees will contribute from the date of their appointment and all other teach- ers who will join said fund shall contribute from the date of their becoming a member. The amount of the contribution is fixed as a percent- age of salary and shall depend upon the sex and the age of the member at the time of his entrance in the fund. B. The initial rate paid by the member is to continue unchanged until retirement unless al- tered at the time of actuarial revaluations. C. These rates are computed by use of mor- tality and service experience tables and interest tables. Each member must put into the fund every year enough so that when he reaches the age of superannuation, his contribution will be sufficient to purchase approximately one-half the allowance which is promised. The cost of that allowance is determined by the average salary upon which it is based and upon the length of time the annuity will be drawn as shown by the mortality table. In determining the annual per- centage that the member must contribute in order that the accumulated contributions be approx- imately equivalent to one-half the cost of the allowance, consideration is made of expected in- creases in the member's salary and of the fact that the state will guarantee that member's con- tributions shall bear interest compounded at four per cent. D. Members who have prior service at the time they become members of the Fund will purchase one-half the service allowance due to future service, and the state will provide the total allow- ance due to past service. E. New entrants desiring credit for service in the public schools of other states up to a maxi- mum of 10 years must contribute half of the cost of the benefit on that account. F. Members' contributions are placed in a dis- tinct and separate fund, called the Annuity Sav- ings Fund. Each member's contributions are placed to his own account and may be withdrawn if he leaves the service without purchasing a re- N tirement allowance. II. Contributions by State : A. The state will provide one-half of the cost of the service allowance to be granted on account of future service of the members, and half of the cost of the allowance for outside experience of 16 'NEW JERSEY' new entrants; all the allowances to be granted on account of prior service and outside experi- ence of present members ; the disability pension ; the additional annuity in compensation for prior contributions made by members who have trans- ferred from the Teachers' Retirement Fund to the Fund established by this act ; and all pensions granted prior to the establishment of the Fund which is hereby created. The state will also contribute the cost of the minimum benefit pro- vision, the administrative expenses of the system and cover any deficiency which the fund may develop. B. The state will make its contributions in the following way: (1) To provide for pensions to be granted on account of service rendered after the teach- ers become members of the Fund, the state will pay on a reserve basis a certain percent- age of the members' salaries. (2) To provide for allowances to be granted on account of service rendered by the teachers prior to their becoming members of said fund, the state will contribute on a reserve basis such a percentage of the salaries of said members as will according to the calculations of the actuary liquidate the deficiency on that account in approximately twenty-five years. (3) The state shall appropriate each year with- out providing a special reserve: a. The amount necessary to pay the pensions of that year granted prior to the estab- lishment of the Fund, which is hereby created. b. The amount necessary for the payment of administrative expenses of that year. c. The additional reserve necessary in cases where otherwise the superannuation or disability allowance would fall below the prescribed minimum of $400 or $300. III. Provisions For Continued Solvency of the Fund : A. Periodical actuarial valuations of the funds are required. The first valuation is to be taken a year after the establishment of the fund. B. Contributions of the state and of the mem- bers shall be actuarially determined and be equiv- alent to the cost of the benefits provided. C. Reserve funds shall be maintained by means of which accruing liabilities are provided for before they mature. D. Investment of Funds is limited to those legal for sinking funds. E. The State Pension Commission shall be responsible for their proper administration. ARTICLE IV. Other Provisions. I. Waiver of Rights Under Retirement Fund and Acceptance of This Act: Any person who is now a member of the Teachers' Retirement Fund, established by Chap- ter of the Laws of may on or before of waive all rights and privileges he now has as such and accept the provisions of this act with all its rights and privileges by sending and delivering to the board of trustees of both funds a notice in the following form: "To the Board of Trustees of the Fund of the State of New II. Jersey. You are herewith notified that I here- by waive all the rights and privileges as a mem- ber of the Teachers' Retirement Fund under any provisions of any retirement act heretofore passed by the Legislature, and that I hereby accept the provisions of an act entitled and that I do hereby agree to be bound thereby. Date A copy of said notice shall be filed with the Board of Education by whom the teacher is employed. Any acts or parts of acts inconsistent with this act are hereby repealed. NEW JERSEY' PART III. 17 Actuarial Estimates Cost of Existing Systems and of Proposed Plan Provisions of Existing Laws and Proposed Plan. Service factors considered in the Valuation. Rates of Separation. Service and Mortality tables. Annuity values. Procedure in the valuation. Age distribution. Valuation Balance Sheet. NOTE — At the time the question of the preparation of an actuarial estimate of the liabilities of the Teachers' Retirement Fund and of the 35 Year Service Pension was first discussed the Commission realized that the estimate could not be based upon the actual mortality and rate of withdrawal from the service which obtains among the New Jersey teachers. It would have required considerable funds and time, neither of which were avail- able, to collect data regarding the number of deaths, resignations and dismissals at different ages and after different lengths of service, which have occurred during the past years in the New Jersey school system and to make a detailed study of these factors. It was decided, therefore, to use the results of the exhaustive investigations made in some other states of the rate of mortality and withdrawal from the service prevailing among the teachers and to collect data regard- ing the ages, salaries, lengths of service of the teachers of New Jersey. Reliable estimates could be prepared on such a basis. The actuary prepared an estimate and presented a preliminary report based upon the complete results of the census taken by the Commission and then proceeded to calculate the cost of the changes in the existing sys- tems which the Commission proposed to introduce. The procedure followed in the preparation of the actuarial estimates is described below. It is believed that the fifigures given may be safely employed as a basis for the establishment of the plan of reorganization, should such a plan be accepted. PROVISIONS OF EXISTING RETIREMENT AND PEN- SION LAWS AND PROPOSED PLAN OF REORGANIZATION. The following summaries include only those provisions which were considered in the statements of cost herein- after presented. Provisions of the Teachers' Retirement Fund. In considering the Teachers' Retirement Fund, it seemed advisable to divide members into two classes, and consider separately the benefits and contributions to be made by each class. CLASS I. In this class are teachers who joined the system prior to 1906 and 1907, and did not accept the new provisions offered to them when the system was reorganized in 1906 and 1907. Benefits of the System. 1 A disability annuity of 50% of the average salary of the 5 years preceding retirement is payable to teachers disabled after 20 years of service in New Jersey. The minimum annuity is $250 per year, and the maximum is $600 per year. 1 The law also provides for the return of one-half of the teachers' contributions to teachers who resign after 5 years of service. Because of the small number who might claim this benefit, It was not considered In the valuation. Support of the System. Teachers must contribute annually 1%* of their salaries and of the annuities. A minimum of 20% of the first year's annuity must be contributed before retirement. CLASS II. In class II. are all teachers who are members of the retirement system in accordance with the provisions of the system after the reorganization of 1906 and 1907. Benefits of the System. A disability annuity of 60% of the average salary of the last 5 years preceding retirement is payable to teachers disabled after 20 years of service in New Jersey. The minimum is $250 per year, and the maximum annuity is $650 per year. Support of System. Teachers contribute according to the years of service at the time they became members, as follows: Teachers with 10 years service or less at entrance must contribute 1% of salary annually. Teachers with more than 10 years, but less than 15, must contribute 2%% of salary annually. Teachers with 15 years of service and over at the time of entrance must contribute 3% of salary annually. Teachers must contribute a minimum of the first year's annuity before retiring, but the maximum an- nual contribution is $50, and the maximum total contributions are $1,000. Provisions of the State 35-Year Service Pension Act. Benefits of the System. A service pension of one-half the average salary of the last 5 years of service is provided for (1) Teachers, teacher-clerks, principals, and persons employed in any supervisory capacity in the public schools, who complete 35 years of active service, the last 25 years of which were rendered in the state. (2) Teachers who attain age 70, the last 20 years of service having been rendered in the state. (3) Teachers who attain age 75, 32 years of service having been rendered in the state. (4) Teachers, teacher-clerks, principals, and persons employed in any supervisory capacity in the public schools who are disabled, having had 35 years of service in the state, and having attained 70 years of age. Support of System. This system is supported entirely by appropria- tions made by the state, as the benefits become pay- able. * There is also a very small group included In this class who contribute 2% of their salaries, according to amendments to law in 1902 and 1903. 18 •NEW JERSEY' Proposed Reorganization of State Pension. 1 Benefits of System. 1. A service benefit is payable to teachers attain- ing age 62 of 1/70 of the average salary of the last ten years, multiplied by the number of years the teacher has taught. Retirement is compulsory at age 70. 2. A disability benefit is payable after 10 or more years of service of 1/75 of the average salary of the last ten years multiplied by the number of years the teacher has taught. The minimum of 3 0% of the average salary of the last ten years except that no disability allowance is to exceed 8/9 of the allow- ance which would have been received by the teacher, had the teacher remained to obtain a superannua- tion benefit. 3. Return of teachers' contributions together with 3-% compound interest is made to teachers leav- ing the service without retirement benefits. 4. Additional disability pensions are provided in case the annuities paid by the Teachers' Retirement Fund are reduced. Support of System. By Teachers. Such percentage of salary as is sufficient to provide (1) one-half the cost of the super- annuation allowance which is dependent upon future service; (2) the return of contributions, with 3% compound interest, at separation prior to age 62. By State. Such contributions as are sufficient to provide (1) one-half the cost of the superannuation al- lowance which is dependent upon future service, together with the total cost of the superannua- tion benefit which is dependent upon past serv- ice; (2) that part of the cost of the disability allowance which is not provided by the dis- abled teachers' accumulated contributions toward the superannuation benefit. SERVICE FACTORS REQUIRED TO MAKE VALUATION. In order to make a valuation of the assets and liabil- ities of the retirement plans presented above, the prob- able rates at which New Jersey teachers will leave the active service in the future and their probable mortality when drawing retirement allowances were required. As the same rates of separation from active service and the same rates of pensioners' mortality do not apply to both men and women, the men and women teachers were considered in distinct groups and rates were derived for each group. The required rates were summarized as follows: (1) Rate of withdrawal from active service. (2) Rate of death in active service. (3) Rate of separation on account of disability. (4) Rate of salary change. (5) Rate of death of service annuitants. (6) Rate of death of disability annuitants. Collection of Data. The census card which was collected by the Pension and Retirement Fund Commission from each teacher and which was used by the actuary in preparing the rates of salary increase, and the age and service distribution of teachers necessary for the valuations is shown below: ADOPTED RATES OF SEPARATION. Active Service Rates. The following tables give the rates of separation from active service adopted for use in the valuations. 1 Note — Since this report has been submitted, several changes in the proposed retirement plan have been made: the 10-year basis in considering the amount of salary has been changed to 5 years, the disability rate increased to l/70th fraction, and the interest in case of refunds fixed at 3%. For a fuller statement regarding the benefits of the proposed plan see statements on pages 11 and 14. Table 1 — Rates of Separation from Active Men Teachers. Service. Rate of Rata of Age Withdrawal Death 18 .0808 .9024 19 .9220 .0025 2* .0248 .0026 21 .0157 .0928 22 .0263 .0029 23 .0265 .9030 24 .0263 .0022 25 .0258 .0033 26 .0250 .0035 27 .0240 .0036 28 .0228 .0037 29 .0215 .0039 30 .6203 .0040 31 .0189 .0041 32 .0174 .0041 33 .0160 .0942 34 .0147 .0043 35 .9135 .0044 31 .0122 .0044 37 .9109 .0045 38 .0097 .0045 39 .9985 .0046 40 .0074 .0046 41 .0063 .9047 42 .0054 .0047 43 .0045 .0048 44 .9938 .9049 45 .0932 .9050 46 .9027 .0052 47 .0022 .0053 48 .0018 .6055 49 .0015 .9057 50 .0011 .0060 51 .0008 .0062 52 .0005 .0065 53 .0003 .0069 54 .0090 .0073 55 .9078 56 .0083 57 .9089 58 .9096 59 .0104 69 .9112 61 .0120 62 .0130 63 .9139 64 .9149 65 .0159 66 .0170 67 .0183 68 .0195 C9 .0209 7# .0222 Rate of Disability .0005 Rateef 9erviee Retirement .0005 .0005 .0005 .0005 .0005 .0095 .0095 .0005 .0006 .0006 .9006 .0006 .0006 .0096 .0007 .0007 .0007 .0007 .0008 .0008 .0009 .0010 .9019 .0011 .0012 .0014 .0015 .0017 .0018 .0020 .0265 .0022 .9289 .0025 .0821 .0028 .0358 .0031 .0392 .0035 .0430 .0039 .9470 .0044 .0511 .0049 .0558 .0056 .0599 .0063 .0647 .0072 .0693 .0682 .0747 .0096 .0801 .0119 .0864 .0125 .0931 .0142 .1001 .0160 .1085 .0180 .1190 .0200 .1330 .0223 .1645 .0245 .2400 .0270 .9640 The data available for use as a basis in adopting the rates in Tables 1 and 2 was presented as the result of actuarial investigations of the service experience of teachers in various retirement systems, namely, the Teachers' Retirement Fund of the City of New York; 1 Boston Teachers' Retirement Fund;* Teachers' Super- annuation Fund of New Zealand; 3 Elementary School Teachers' Deferred Annuity Fund of England and Scot- land." In adopting rates for use, the fact that monetary values were to be made dependent upon them was kept in mind. Where several services indicated a marked similarity in any one rate, the rate adopted followed closely the one indicated by these services. Peculiarities in any experi- ence which were evidently characteristic of the one ser- vice alone were rejected. An effort was made to adopt such rates that, when used in combination, would form a safe and reasonable basis for estimating the cost of the proposed retirement plan. 1 Investigated 1912-1915 * " 1914 •Investigated 1912-1915 4 " 190&-1914-1916 'NEW JERSEY' 19 Table 2 — Rates of Separation from Active Service. Women Teachers. Rata of Rat* of Rata of Rata of Service AOS Withdrawal Death Olaablllty Retirement 18 .0026 .0011 .0005 19 .0063 .0012 .0005 26 .0123 .0013 .0005 21 .0214 .0014 .0005 22 .0318 .0016 .0005 23 .0563 .0018 .0005 24 .0720 .0020 .0005 26 .0760 .0023 .0006 26 .0770 .0025 .0006 27 .0752 .0028 .0006 28 .0717 .0030 .0007 29 .0668 .0032 .0008 39 .0615 .0033 .0008 31 .0548 .0034 .0008 32 .0471 .0035 .0009 33 .0393 .0036 .0010 34 .0319 .0036 .0010 86 .0262 .0036 .0011 36 .0216 .0037 .0012 37 .0177 .0039 .0013 38 .0159 .0040 .0016 39 .0133 .0042 .0029 49 .0111 .0044 .0045 41 .0090 .0046 .0064 42 .0073 .0048 .0088 43 .0055 .0050 .0103 44 .0043 .0053 .0110 4* .0034 .0056 .0113 46 .0028 .0059 .0114 .0649 47 .0023 .0062 .0114 .0669 48 .0019 .0066 .0114 .0693 49 .0018 .0070 .0114 .0719 69 .0016 .0076 .0114 .0747 61 .0015 .0080 .0114 .0779 52 .0014 .0086 .0114 .0812 53 .0013 .0091 .0114 .0850 54 .0013 .0097 .0114 .0893 56 .0011 .0104 .0114 .0943 66 .0010 .0112 .0114 .0998 67 .0009 .0120 .0114 .1068 58 .0009 .0129 .0114 .1129 59 .0008 .0139 .0114 .1210 69 .0006 .0150 .0114 .1308 61 .0005 .0162 .0114 .1420 62 .0004 .0176 .0114 .1670 63 .0003 .0189 .0114 .1770 64 .0001 .0204 .0116 .2090 65 .0001 .0222 .0124 .2290 66 .0000 .0240 .0147 .2700 67 .0262 .0177 .3281 68 .0289 .0215 .4321 69 .0324 .0263 .6563 70 .0367 .0329 .9633 Rates for Men Teachers. The rate of withdrawal from active service adopted for use in valuing benefits to men teachers in New Jersey Is a rate somewhat similar to that obtaining among New York City men teachers. It lies between the rate applying to men teachers in New Zealand, which is a comparatively high rate, and that applying to English and Scottish teachers, which is a comparatively low rate. The death rate assumed to reflect the mortality of men teachers is a higher rate of death than that based on the experience of New York City teachers with the exception of the rate from age 30 to age 38. It is a lower rate than that de- rived from the experience of English Elementary Teach- ers by King in 1906, but is somewhat higher to about age 48 than the rate derived for that service by Hardy in 1914. The rate of disability for men teachers of New Jersey is higher than the rate for New York City teachers but lower than that based on the experience of English and Scottish teachers. The rate of service retirement is one based upon the experience of New York City teachers. This rate was employed In valuing all retirement benefits payable after 35 years of service, with the exception that an assumption was made that only nine-tenths of the re- tirements assumed to occur according to the rate would actuaHy be granted in the case of retirements through disability after 35 years of service under the Teachers' Retirement Fund. The rate of death after eligibility for retirement is also based upon that experience. It is pub- lished in Part II. of the Report of the Commission on Pensions of New York. Rates for Women. The rates adopted for the valuation of benefits to women teachers follow closely those employed recently by David P. Fackler, actuary, in the preparation of an estimate of the liabilities of the Teachers' Retirement Fund of New Jersey. The rate of withdrawal employed by him is 26% higher than the one found to obtain among women teachers in New York City. This rate to age 38, is a rate of withdrawal from all causes including disability. The rate of withdrawal adopted for women teachers is one based upon the rates used by Mr. Fackler, but covers only those causes of withdrawal which were assumed to have occurred through resignation and dismissal. The rate of disability is based upon the experience of New York City teachers to about age 46 where the as- sumption is made that, unlike the latter rate, it is not influenced by early service retirements, and continues to increase. The rate of death in active service and the rate of retirement upon eligibility are based upon the experience of New York City teachers. As in the case of valuing benefits to men teachers, the assumption was made that only nine-tenths of the retirements assumed to occur according to the rate would actually be granted in the case of retirements through disability after 35 years of service under the Teachers' Retirement Fund. Pensioners' Mortality Rates. The following table shows the rates of mortality which were assumed to reflect the death rates of pensioners among New Jersey teachers. These rates are those found to obtain among service pensioners in New York City. Table 3. — Service Pensioners' Mortality Rates. Ago 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 Men .0335 .0342 .0350 .0358 .0367 .0377 .0387 .0399 .0412 .0426 .0441 .0458 .0477 .0497 .0619 .0543 .0569 .0599 .0630 .0665 .0702 .0743 .0789 .0837 .0391 .0949 .1013 .1082 Women .0134 .0140 .0146 .0153 .0161 .0169 .0178 .0188 .0199 .0212 .0225 .0239 .0255 .0273 .0292 .0313 .0335 .0361 .0388 .0418 .0450 .0486 .0525 .0667 .0614 .0664 .0720 .0780 Ago 78 79 80 81 82 83 84 85 86 8.7 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 106 Men .1156 .1238 .1328 .1423 .1528 .1640 .1762 .1895 .2033 .2189 .2355 .2528 .2717 .2918 .3132 .3360 .3600 .3855 .4121 .4399 .4691 .4994 .5303 .6000 .8000 Vr •lYWJrl .0846 .0916 .0994 .1078 .1170 .1268 .1376 .1492 .1618 .1753 .1900 .2067 .2226 .2409 .2600 .2810 .3029 .3262 .3510 .3771 .4045 .4331 .4629 .4938 .5256 .6584 .5916 .6600 20 •NEW JERSEY' Table 4. — Disability Pensioners' Age 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Men .06096 .06086 .05718 .05122 .04470 .03911 .03521 .03294 .03187 .03150 .03145 .03151 .03162 .03176 .03191 .03208 .03226 .03246 .03267 .03292 .03317 .03346 .03377 .03412 .03449 .03491 .03536 .03586 .03640 .03700 .03764 .03838 .03915 .04001 .04095 .04198 .04312 .04435 .04571 .04720 .04881 Women .03695 .03617 .03526 .03425 .03318 .03203 .03087 .02973 .02864 .02763 .02674 .02598 .02536 .02488 .02457 .02438 .02429 .02430 .02440 .02456 .02475 .02502 .02528 .02559 .02595 .02632 .02674 .02719 .02770 .02825 .02885 .02950 .03024 .03102 .03189 .03285 .03388 .03503 .03628 .03764 .03914 Age 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 Mortality Men .05059 .05253 .05466 .05700 .05952 .06238 .06536 .06866 .07232 .07269 .08061 .08532 .09045 .09610 .10224 .10884 .11615 .12393 .13261 .14172 .15198 .16275 .17452 .18735 .20093 .21584 .23170 .24910 .26707 .28668 .30742 .32964 .35308 .37801 .40395 .43129 .45997 .48922 .52032 .55171 .58364 Rates. Women .04078 .04258 .04452 .04670 .04902 .05160 .05444 .05747 .06084 .06450 .06849 .07287 .07767 .08286 .08847 .09470 .10143 .10872 .11668 .12528 .13462 .14490 .15575 .16776 .18069 .19432 .20955 .22545 .24281 .26079 .28110 .30183 .32437 .34780 .37298 .39925 .42681 .45567 .48559 .51648 .54824 Table 5 — Continued. SERVICE AND MORTALITY TABLES. The following active service tables were constructed on the basis of rates given in Tables 1 and 2 respectively. The salary scales were based upon rates of salary increase found to obtain among teachers in New Jersey. Table 5. — Active Service Table. Men Teachers. Disability Salary Age Living Withdrawal Is Cases Deaths Scale 18 100,000 2,080 50 240 530 19 97,630 2,148 49. 244 615 20 95,189 2,361 48 247 694 21 92,533 2,378 46 259 772 22 89,850 2,363 45 261 849 23 87,181 2,310 43 262 920 24 84,566 2,224 42 271 990 25 82,029 2,114 41 273 1,060 26 79,601 1,994 39 275 1,130 27 77,293 1,861 41 278 1,200 28 75,113 1,712 43 281 1,270 29 73,077 1,572 44 284 1,330 30 71,177 1,442 45 285 1,390 31 69,405 1,307 46 285 1,450 32 67,767 1,170 47 281 1,510 33 66,269 1,057 48 280 1,560 34 64,884 952 49 277 1,605 35 63,606 859 50 274 1,650 36 62,423 758 51 271 1,695 37 61,343 672 52 270 1,735 38 60,349 582 53 270 1,775 39 59,444 508 54 279 1,812 40 58,612 435 58 269 1,845 41 57,850 366 59 269 1,875 42 57,156 309 62 269 1,905 43 56,516 254 68 271 1,935 44 55,923 213 71 274 1,965 45 55,358 177 83 277 1,990 46 54,821 148 93 285 2,015 47 54,295 119 48 53,790 97 49 53,290 80 50 52,789 58 51 52,282 42 52 51,769 26 53 51,247 15 54 50,699 55 50,131 56 49,519 57 48,865 58 48,156 59 47,390 60 46,556 61 45,653 62 44,666 63 43,594 64 42,443 65 41,208 66 39,893 67 38,497 68 37,023 69 35,475 70 33,865 Table 6. — Active Service Table 98 288 2,040 107 296 2,065 117 304 2,085 132 317 2,105 147 324 2,125 160 336 2,145 179 354 2,165 198 370 2,180 221 391 2,195 243 411 2,205 274 435 2,215 304 462 2,225 341 493 2,235 382 521 2,245 438 549 2,250 491 581 2,255 545 606 2,260 603 632 2,265 660 655 2,270 718 678 2,275 769 705 2,280 826 722 2,285 869 741 2,290 2,295 Women Teachers. Age 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 Living 100,000 99,580 98,783 97,390 95,121 91,896 86,502 80,049 73,733 67,827 62,495 57,783 53,692 50,170 47,210 44,779 42,813 41,250 39,975 38,916 38,025 37,207 36,448 35,719 35,005 34,273 33,560 32,869 32,202 31,555 30,927 30,312 29,700 29,091 28,483 27,876 27,268 26,657 26,047 25,432 24,814 24,189 23,558 22,922 22,278 21,625 20,963 20,290 19,586 18,828 18,002 17,095 16,091 Disability Withdrawals Cases 260 628 1,216 2,084 3,025 5,182 6,233 6,086 5,678 5,098 4,481 3,862 3,302 2,749 2,224 1,760 1,364 1,081 863 688 605 495 405 321 256 189 144 112 90 72 59 54 47 43 40 36 35 29 26 23 22 19 14 11 9 6 2 ... 2 50 50 49 49 48 47 47 46 44 44 44 44 43 40 42 45 45 45 48 51 61 108 164 229 308 353 369 371 367 360 352 346 339 332 325 318 311 304 297 290 283 276 269 262 254 247 243 252 28-8 333 387 450 Deaths 110 119 128 136 152 165 173 184 184 190 187 185 177 171 165 161 154 149 148 152 152 156 160 164 168 171 178 184 190 196 204 212 223 233 242 254 265 277 292 305 320 336 353 371 390 409 428 450 470 493 520 554 Salary Scale 513 528 543 566 592 622 659 699 740 780 815 845 870 890 910 930 950 970 990 1,000 1,010 1,020 1,030 1,040 1,050 1,055 1,060 1,065 1,070 1,080 1,085 1,890 1,095 1,100 1,110 1,115 1,120 l,13i 1,140 1,145 1,150 1,160 1,165 1,175 1,181 1,190 1,200 1,208 1,215 1,220 1,280 1,235 1,240 'NEW JERSEY' 21 RETIREMENT TARLES. The active service tables trace the history of teachers until they become eligible to retire. The retirement tables continue the history of teachers from that time until they leave the service. Table 7. — Retirement Table. Men Teachers. Table 9 — Continued. Age Living Dying Retirements 48 100,000 350 2,550 49 97,100 369 2,806 50 93,925 424 3,015 51 90,486 443 3,240 62 86,803 458 3,403 53 82,942 474 3,567 54 78,901 491 3,708 55 74,702 519 3,817 56 70,366 562 3,891 57 65,913 578 3,948 58 61,387 589 3,972 59 56,826 593 3,938 60 52,295 593 3,906 61 47,796 642 3,828 62 43,326 673 3,744 63 38,909 700 3,623 64 34,586 719 3,462 65 30,405 711 3,299 66 26,395 677 3,141 67 22,577 643 3,003 68 18,931 602 3,114 69 15,215 514 3,652 70 11,049 398 10,651 Table 8. — Retirement Table, Women Teachers. Age Living Dying Retirements 46 100,000 590 6,490 47 92,920 580 6,216 48 86,124 569 6,969 49 79,586 559 5,722 50 73,305 547 5,476 51 67,282 535 5,241 52 61,506 522 4,994 53 55,990 508 4,759 54 50,723 493 4,529 55 45,701 475 4,310 56 40,916 457 4,083 57 36,376 437 3,848 58 32,091 414 3,623 5 9 28,054 390 3,394 60 24,270 364 3,174 61 20,732 335 2,944 62 17,453 305 2,740 63 14,408 272 2,550 64 11,586 237 2,317 65 9,032 200 2,068 66 6,764 162 1,826 67 4,776 124 1,567 68 3,085 87 1,333 69 1,665 51 1,091 70 523 17 506 MORTALITY TARL.ES. The following table is based upon the rates of mortality adopted for pensioners. Table 9. — Mortality Table for Service Pensioners. ME :n WOMEN Age Living Dying Living Dying 50 66,715 2,237 75,857 1,014 51 64,478 2,206 74,843 1,044 52 62,272 2,177 73,799 1,076 53 60,095 2,150 72,723 1,112 54 57,945 2,125 71,611 1,150 55 55,820 2,102 70,461 1,191 56 53,718 2,080 69,270 1,235 57 51,638 2,060 68,035 1,282 58 49,578 2,042 56,753 1,331 59 47,536 2,024 65,422 1,384 60 45,512 2,009 64,038 1,440 61 43,503 1,993 62,598 1,498 62 41,510 1,979 61,100 1,560 63 39,531 1,964 59,540 1,624 64 37,567 1,949 57,916 1,690 65 35,618 1,935 56,226 1,758 66 33,683 1,918 54,468 1,827 67 31,765 1,902 52,641 1,898 68 29,863 1,881 50,743 1,968 69 27,982 1,860 48,775 2,037 70 26,122 1,835 46,738 2,104 71 24,287 1,805 44,634 2,169 72 22,482 1,773 42,465 2,228 73 20,709 1,734 40,237 2,283 74 18,975 1,691 37,954 2,329 75 17,284 1,640 35,625 2,367 76 15,644 1,584 33,258 2,393 77 14,060 1,521 30,865 2,406 78 12,539 1,450 28,459 2,405 79 11,089 1,373 26,054 2,387 80 9,716 1,290 23,667 2,352 81 8,426 1,199 21,315 2,298 82 7,227 1,104 19,017 2,224 83 6,123 1,004 16,793 2,130 84 5,119 902 14,663 2,018 85 4,217 799 12,645 1,887 86 3,418 695 10,758 1,741 87 2,723 596 9,017 1,581 88 2,127 501 7,436 1,413 89 1,626 411 6,023 1,239 90 1,215 330 4,784 1,065 91 885 258 3,719 896 92 627 196 2,823 734 93 430 145 2,089 587 94 286 103 1,502 455 95 183 71 1,047 342 96 112 46 705 247 97 66 29 458 173 98 37 17 285 115 99 20 10 170 74 100 10 5 96 45 101 5 3 61 25 102 2 2 26 14 103 12 7 104 5 3 105 2 2 Table 10. — Mortality Tables for Disability Pensioners. MEN WOMEN Age Living Dying Living Dying 20 216,110 13,173 150,277 5,553 21 202,937 12,351 144,724 5,235 22 190,586 10,898 139,489 4,919 23 179,688 9,203 134,570 4,609 24 170,485 7,621 129,961 4,312 25 162,864 6,370 125,649 4,024 26 156,494 5,510 121,625 3,755 27 150,984 4,974 117,870 3,504 28 146,010 4,654 114,366 3,275 29 141,356 4,453 111,091 3,069 30 136,903 4,305 108,022 2,888 31 132,598 4,178 105,134 2,731 32 128,420 4,061 102,403 2,597 33 124,359 3,950 99,806 2,483 34 120,409 3,842 97,323 2,391 35 116,567 3,739 94,932 2,314 36 112,828 3,640 92,618 2,250 37 109,188 3,544 90,368 2,196 38 105,644 3,451 88,172 2,151 39 102,193 3,364 86,021 2,113 40 98,829 3,27*8 83,908 2,077 41 95,551 3,197 81,831 2,047 42 92,354 3,119 79,784 2,017 43 89,235 3,045 77,767 1,990 44 86,190 2,973 75,777 1,966 45 83,217 2,905 73,811 1,943 46 80,312 2,840 71,863 1,922 47 77,472 2,778 69,946 1,902 48 74,694 2,719 68,044 1,885 49 71,975 2,663 66,159 1,869 50 69,312 2,609 64,290 1,855 51 66,703 2,560 62,435 1,842 52 64,143 2,511 60,593 1,832 53 61,632 2,466 58,761 1,823 54 59,166 2,423 56,938 1,816 55 56,743 2,382 55,122 1,811 22 'NEW JERSEY' Table 10 — Continued. Table 11 — Continued. MEN Age Living Dying 56 54,361 2,344 57 52,017 2,307 58 49,710 2,272 59 47,438 2,239 60 45,199 2,206 61 42,993 2,175 62 40,818 2,144 63 38,674 2,114 64 36,560 2,084 65 34,476 2,052 66 32,424 2,021 67 30,403 1,987 68 28,416 1,951 69 26,465 1,914 70 24,551 1,873 71 22,678 1,828 72 20,850 1,779 73 19,071 1,725 74 17,346 1,667 75 15,679 1,603 76 14,076 1,532 77 12,544 1,457 78 11,087 1,374 79 9,713 1,288 80 8,425 1,194 81 7,231 1,099 82 6,132 998 83 5,134 896 84 4,238 794 85 3,444 692 86 2,752 594 87 2,158 500 88 1,658 413 89 1,245 333 90 912 262 91 651 200 92 451 149 93 302 107 94 195 74 95 122 50 96 72 31 97 41 19 98 22 11 99 11 6 100 5 3 101 2 1 102 1 1 103 WOM Living 53,311 51,505 49,701 47,898 46,095 44,291 42,485 40,676 38,865 37,050 35,234 33,416 31,597 29,781 27,969 26,165 24,373 22,597 20,842 19,115 17,424 15,774 14,174 12,633 11,159 9,761 8,447 7,223 6,098 5,079 4,158 3,350 2,648 2,051 1,553 1,148 825 576 389 254 159 96 55 30 15 7 3 1 EN Dying 1,806 1,804 1,803 1,803 1,804 1,806 1,809 1,811 1,815 1,816 1,818 1,819 1,816 1,812 1,804 1,792 1,776 1,755 1,727 1,691 1,650 1,600 1,541 1,474 1,398 1,314 1,224 1,125 1,023 921 808 702 597 498 405 323 249 187 135 95 63 41 25 15 8 4 2 1 ANNUITY VALUES FOR PENSIONERS. The following tables give the annuity values construct- ed on the basis of the mortality tables. Table 11. — Annuity Values for Disability Pensioners. Age Men Women Age Men Women 20 12.124 14.071 58 9.285 10.144 21 12.373 14.155 59 9.074 9.907 22 12.649 14.234 60 8.859 9.666 23 12.901 14.306 61 8.639 9.421 24 13.093 14.367 62 8.416 9.172 25 13.210 14.417 63 8.189 8.920 26 13.256 14.453 64 7.959 8.665 27 13.250 14.473 65 7.726 8.407 28 13,212 14.477 66 7.491 8.148 29 13.156 14.465 67 7.254 7.886 30 13.090 14.436 68 7.015 7.624 31 13.019 14.391 69 6.776 7.361 32 12.943 14.332 70 6.535 7.097 33 12.864 14.260 71 6.295 6.834 34 M.780 14.175 72 6.056 6.572 35 12.692 14.081 73 5.817 6.311 36 12.600 13.977 74 5.679 6.053 37 12.503 13.865 75 5.344 5.796 38 12.402 13.746 76 5.111 5.543 39 12.296 13.620 77 4.881 5.293 40 12.186 13.488 78 4.655 5.048 41 12.070 13.351 79 4.433 4.806 42 11.950 13.208 80 4.216 4.570 43 11.824 13.059 81 4.002 4.339 44 11.693 12.904 82 3.796 4.114 45 11.556 12.744 83 3.593 3.895 46 11.415 12.578 84 3.397 3.683 47 11.267 12.406 85 3.208 3.477 48 11.114 12.229 86 3.024 3.279 49 10.956 12.045 87 2.847 3.087 50 10.792 11.856 88 2.677 2.904 51 10.622 11.661 89 2.516 2.727 52 10.447 11.461 90 2.361 2.559 53 10.267 11.254 91 2.213 2.397 54 10.081 11.043 92 2.070 2.244 55 9.890 10.825 93 1.938 2.098 56 9.693 10.603 94 1.810 1.961 57 9.492 10.376 95 1.691 1.827 Table 12. — Annuity Values for Service Pensioners. Age Men Women Age Men Women 50 11.285 14.179 73 6.076 7.271 51 11.105 13.919 74 5.828 6.966 52 10.920 13.653 75 5.584 6.664 53 10.730 13.382 76 5.341 6.366 54 10.533 13.105 77 5.102 6.074 55 10.332 12.823 78 4.867 5.787 56 10.125 12.537 79 4.635 5.506 57 9.914 12.246 80 4.409 5.232 58 9.697 11.950 81 4.187 4.964 59 9.476 11.650 82 3.971 4.704 60 9.250 11.347 83 3.761 4.451 61 9.020 11.040 84 3.556 4.206 62 8.786 10.731 85 3.359 3.969 63 8.549 10.419 86 3.168 3.740 64 8.309 10.105 87 2.983 3.521 65 8.066 9.789 88 2.805 3.309 66 7.820 9.472 89 2.637 3.107 67 7.573 9.155 90 2.474 2.914 68 7.324 8.838 91 2.318 2.729 69 7.074 8.621 92 2.170 2.554 70 6.824 8.206 93 2.030 2.837 71 6.574 7.892 94 1.895 2.230 72 6.324 7.580 95 1.765 2.081 PROCEDURE IN PREPARATION OF VALUATION. By use of the preceding tables, the present value of the various benefits equated to one dollar of salary were calculated for the various service groups of teachers. A 4% interest rate was assumed. These values were multiplied into present salaries of teachers and the re- sults combined to form the present value of all benefits payable to teachers. The valuation of contributions to be received from present members of the Teachers' Retirement Fund in- volved more complex calculations than did any of the benefit provisions. Members of the Retirement Fund are required to have contributed a certain percentage of the first year's annuity before they are eligible to retire. To value the increase in the income of the fund which would result from provisions of this type, the following general methods were employed. First a summation column was made on the salary scale and then several curves were drawn on cross section paper showing various percentages of it, such as 1%, 2%, 3%, etc. The figures formed by dropping ordinates from the ends of each of the curves to the base line were then cut out of the paper and used as templets. A certain per- centage of the salary scale, generally 60%, was then plot- ted on co-ordinate paper of the same graduation. The tem- plet showing the accumulations at 2% was placed on the graph showing 60% of the salary scale in such a way that the ordinate on the graph for the age at entrance of a contributor at its point of intersection with the base line coincided with the ordinate for the same age at its intersection with the curves of the templet. Then the templet was swung at this point as an axis until the base line of both curves were parallel and the other point of intersection of the two curves was noted. This latter point indicated the age at which 2% of any salary begin- ning at the entrance age and accumulated would amount to 60% of the salary, if the salary had increased ac- cording to the average rates of increase indicated by the salary scales. Using the age thus obtained, the value of an insurance payment of 60% of the salary payable in the 'NEW JERSEY' 23 event of disability during the term prior to this age When the maximum limits had to be taken into account during which the teacher would be eligible for annuity in in connection with the procedure previously described, the the event of disability was calculated. Then the value of work became somewhat complex and tedious, returning to teachers disabled during the same term the In the retirement system proposed by the Pension and total amount of their accumulated contributions without Retirement Fund Commission, the benefit and contribu- interest was calculated. The difference between the two tion Provisions are so adjusted as to be readily valued, amounts thus obtained gives the additional amount to be AGE DISTRIBUTIONS USED AS A BASIS FOR received by the fund on account of this limitation. VALUATION. The preceding discussion gives an account of the gen- The age distributions of the teachers that were con- eral procedure necessitated in the calculations by reason sidered in the valuation follow. Tables 13 and 14 show of the single feature of the contribution provisions. The the age distribution of all teachers in the state who are fact that annuities are limited in amount, that the total eligible to benefits under the 35-Year Service Pension contributions of teachers are limited and that annuities Act. In giving them credit for service, prior service to are based on 60% of an average instead of the final salary the extent of ten years was included in accordance with all served to make the calculations more complicated. the law governing the benefits of this system. Table 13 — The Number and Salaries of Teachers Classified by Age. Men Teachers Towns or Cities of 5,000 'Ota' Rural Districts Inhabitants and Upwards Age Group Number Salaries Number Salaries Number Salaries 18-22 67 $ 56,860 39 $ 31,340 28 $ 25,520 23-27 220 248,210 80 82,350 140 165,860 28-32 354 510,700 95 120,280 259 390,420 33-37 328 550,200 80 105,300 248 444 900 38-42 262 506,730 75 115,710 - 187 391 020 43-47 215 440,070 61 84,420 154 355,650 48-52 142 304,300 46 68,180 96 236 120 53-57 105 240,180 27 38,760 78 201,420 58-62 56 125,100 26 35,780 30 89,320 63 and over 47 103,770 15 19,890 32 83,880 Total 1,796 $3,086,120 544 $702,010 1,252 $2,384,110 Women Teachers 18-22 1,965 $1,182,520 822 $473,600 1,143 $ 708,920 23-27 4,401 3,166,980 1,438 964,780 2,963 2,202,200 28-32 2,767 2,481,930 660 514,050 2,107 1,967,880 33-37 1,773 1,797,490 344 272,490 1,429 1,525 000 38-42 1,422 1,501,260 241 199,430 1,181 1,301,830 43-47 945 1,036,380 175 139,620 770 896 760 48-52 654 727,240 106 83,640 548 643^600 53-57 395 452,850 66 53,600 329 399 250 58-62 181 209,100 35 26,090 146 183,010 63 and over 665 82„630 11 9,520 54 73,110 Total 14,568 $12,638,380 3,898 $2,736,820 10,670 $9,901,560 Grand Total 16,364 $15,724,500 4,442 $3,438,830 11,922 $12,285,670 Table 14 — The Number and Salaries of Teachers Classified by Years of Service. Men Teachers Towns or Cities of 5,000 Total Rural Districts Inhabitants and Upwards Service Group Number Salaries Number Salaries Number Salaries Less than 5 years 374 $412,240 133 $128,040 241 $284,200 5 years and less than 10.... 383 569,700 99 127,940 284 441,760 10 years and less than 15.... 374 659,410 95 130,060 279 529*.350 15 years and less than 20.... 260 538,730 72 104,880 188 433,850 20 years and less than 25.... 181 395,900 60 88,970 121 306,930 25 years and less than 30.... 89 208,880 29 42,410 60 166^470 30 years and more 135 301,260 56 79,710 79 221,550 Total 1,796 $3,086,120 544 $702,010 1,252 $2,384,110 Women Teachers Less than 5 years 4,885 $3,214,540 1,832 $1,138,650 3,053 $2,075,890 5 years and less than 10.... 3,531 2,928,160 977 721,280 2,554 2,206 880 10 years and less than 15.... 2,310 2,260,160 477 376,770 1,833 1,883,390 15 years and less than 20.... 1,517 1,602,150 263 212,320 1,254 1, 389*,830 20 years and less than 25.... 1,004 1,098,720 150 123,040 854 975*680 25 years and less than 30.... 633 709,720 88 72,920 545 636*800 30 years and more 688 824,930 111 91,840 577 733*,090 Total 14,568 $12,638,380 3,898 $2,736,820 10,670 $9,901,560 Grand Total 16,364 $15,724,500 4,442 $3,438,830 11,922 $12,285,670 In the valuation of the liabilities and contributions tion rates payable. The following tables give summaries of the Teachers' Retirement Fund, the teachers were of the groups considered. In these tables, only service considered according to the classes described on page 2. in New Jersey has been taken into account. Each class was further divided according to the contribu- 24 'NEW JERSEY' Table 15 — The Number and Salaries of Contributors to the Teachers' Retirement Fund Classified by Age. Total Age Group Number Salaries 18-22 1,990 $1,214,230 23-27 4,584 3,390,200 28-32 2,692 2,602,610 33-37 1,393 1,589,570 38-42 1,128 1,354,130 43-47 839 1,070,830 48-52 642 813,470 53-57 423 567,560 58-62 215 304,670 63 and over 100 168,660 Total 14,006 $13,075,930 Contributing 1% 125 $164,820 Contributing 2% 12,230 10,810,480 Contributing 2 %■%... . 947 1,127,280 Contributing 3% 704 973,350 Men Coi itributors Number Salaries 64 $ 54,410 215 244,360 331 479,880 244 404,320 160 309,990 137 280,690 101 199,620 71 155,950 46 108,400 41 92,470 1,410 $2,330,090 11 $ 28,090 1,142 1,754,080 98 185,820 159 362,100 Women Contributors Number Salaries 1,926 $1,159,820 4,369 3,145,840 2,361 2,122,730 1,149 1,185,250 968 1,044,140 702 790,140 541 613,850 352 411,610 169 196,270 59 76,190 12,596 $10,745,840 114 $ 136,730 11,088 9,056,400 849 941,460 545 611,250 In the valuation of the proposed plan, an estimate of the maximum liabilities of the state was sought. It was therefore assumed that all teachers in the state would take advantage of the benefits of the system, and that members of the Teachers' Retirement Fund would trans- fer to the system. The tabulations shown in tables 13 and 14 therefore give the age and service distributions employed in the valuation of the plan of reorganization. The valuation of benefits payable to present annuitants under the Teachers' Retirement Fund, and pensions to pensioners under the 35-Year Service Pension Act was based on the age distribution shown in tables 17-19. Table 16 — The Number and Salaries of Contributors to the Teachers' Retirement Fund Classified by Service. Service Group Number Less than 5 years 6,217 5 years and less than 10.... 3,703 10 years and less than 15.... 1,214 15 years and less than 20.... 881 20 years and more 1,991 Total 14,006 Total Salaries $4,663,890 3,536,280 1,355,550 1,057,500 2,462,710 $13,075,930 Men Contributors Number Salaries 590 $757,870 394 700,080 136 256,420 105 221,180 185 394,540 Women Number 5,627 3,309 1,078 776 1,806 Contributors Salaries $3,906,020 2,836,200 1,099,130 836,320 2,068,170 1,410 $2,330,090 12,596 $10,745,840 Table 17 — Age Distribution, Number and Retirement Allowances of Retired Teachers Who Receive Renefits From Both the 35- Year Service Pension Fund and the Teachers' Retirement Fund. Men Teachers \ Women Teac jhers Men Teachers Women Teachers Amount Amount Amount Amount Amount Amount Amount Amount Num- of of Num- of of I dum- of of Num of of Age ber Annuities Pensions ber Annuities Pensions Age ber Annuities Pensions ber Annuities Pensions 38 1 $ 650 $ 710 68 4 2,200 3,660 14 7,810 6,830 39 69 2 1,050 870 13 5,720 5,060 40 70 2 1,300 2,140 10 5,470 6,190 41 71 4 2,120 2,550 7 3,490 3,990 42 72 3 1,250 1,050 7 3,540 3,740 43 73 2 1,000 1,290 15 7,560 8,960 44 74 2 900 1,020 4 1,690 1,730 45 75 3 1,900 2,690 8 3,570 3,320 46 76 2 1,300 1,930 5 2,310 2,590 47 1 380 390 77 3 1,360 2,110 4 2,170 2,960 48 78 49 79 1 320 320 2 520 530 50 80 1 650 1,500 1 250 170 51 81 2 1,300 2,930 52 82 53 83 54 2 900 860 84 1 590 750 1 350 260 55 4 2,160 2,130 85 1 650 920 56 1 $ 650 $ 600 9 5,080 4,530 86 1 650 1,080 57 14 7,850 7,940 87 58 3 1,668 1,610 13 7,600 7,150 88 59 4 2,340 2,220 14 8,210 8,340 89 60 3 1,950 2,230 22 13,700 13,410 90 61 7 3,740 3,710 19 10,640 9,930 91 62 2 820 680 19 9,810 9,020 92 63 5 2,780 2,600 17 9,220 8,870 93 64 8 4,150 4,630 16 9,400 9,300 94 65 16 8,390 7,620 95 1 610 480 66 3 1,050 2,330 950 2,880 13 6,880 8,440 6,260 7,170 67 5 16 Total 75 $40,020 $48,920 288 $154,370 ! £150,440 'NEW JERSEY' 25 Table 18 — Age Distribution, Number and Annuities of Teachers Retired Under the Teachers' Retirement Fund Who Receive No Retirement Allowances From the State 35- Year Service Pension Fund. Men Teachers Women Teachers Amount of Amount of Age Number Annuities Number Annuities 42 1 $ 470 43 44 1 650 45 1 $ 280 1 300 46 1 640 6 3,030 47 1 650 5 2,070 48 3 1,100 49 1 310 5 2,320 50 1 570 6 2,620 51 1 320 2 1,300 52 6 2,680 53 7 3,190 54 1 450 6 2,770 55 1 560 6 2,170 56 1 320 5 2,530 57 3 1,200 6 2,290 58 2 810 8 3,670 59 2 930 7 2,880 60 4 1,500 12 4,270 61 12 4,100 62 2 1,300 6 2,360 63 1 650 6 2,440 64 3 1,900 3 860 65 2 840 4 1,580 66 2 1,000 4 1,620 67 2 900 5 1,370 68 2 500 8 2,840 69 1 650 7 2,420 70 1 250 6 2,640 71 2 890 72 2 1,090 6 1,820 73 1 250 3 1,150 74 1 320 75 1 250 1 270 76 2 590 77 1 650 3 820 78 3 750 2 500 79 3 1,290 80 1 250 81 82 1 250 83 84 1 300 85 1 500 Total 45 $19,770 180 $71,240 Table 19 — Age Distribution, Number and Pensions of Teachers Retired Under the 35-Year Service Pen- sion Fund Who Receive No Retirement Allowances From the Teachers' Retirement Fund. Men Teachers Women Teachers Amount of Amount of Age Number Pensions Number Pensions 53 1 $1,200 54 1 $ 460 1 300 55 56 1 320 57 1 1,320 4 2,090 58 1 550 4 1,300 59 1 900 1 710 60 1 250 4 1,840 61 62 1 650 2 750 63 1 1,150 1 740 64 1 650 1 300 65 1 240 4 2,450 66 1 3,040 67 1 1,500 2 710 68 1 310 69 3 2,340 1 830 70 3 2,410 71 2 1,320 1 290 72 i 73 74 75 2 1,350 76... 77 78 1 920 79 l 300 80 81 82 1 350 83 84 85 86 87 88 89 90 91 92 93 94 l 270 Total 19 $15,910 35 $18,200 VALUATION BALANCE SHEET The following valuation balance sheets show the liabil- ities involved in the operation of the retirement plans under consideration. Table 20 — Teachers' Retirement Fund. Valuation of the Assets and Liabilities as of June SO, 1918. LIABILITIES ASSETS Present value of annuities to teachers now on Funds in hand $ 485,000 the retired list: Future contributions to be received from Men teachers $ 460,624 present teachers: Women teachers 2,170,774 Men teachers: 1% contributors $ 2,461 Total Benefits to present annuitants $ 2,631,398 2% contributors 599,619 Present value of annuities to be paid present 2%% contributors 38,679 active teachers who hereafter become in- 3% contributors 87,285 capacitated: Women teachers: Men teachers $ 1,590,496 1% contributors 13,107 Women teachers 14,839,771 2% contributors 2,613,732 m . . , ti . . ._ . 2%% contributors 244,770 Total Annuities to be paid to prospective an- 3% contributors 154 764 nuitants among present active teachers 16,430,267 ' Total future contributions from present teachers 3,754,417 Total assets $ 4,239,417 Deficiency 14,822,248 Grand Total $19,061,665 Grand Total $19,061,665 26 'NEW JERSEY' Table 21 — Teachers' 35 Year Service Pension Act. Valuation of the Assets and Liabilities as of June 30, 1918. LIABILITIES The present value of pensions to present pen- sioners: Men teachers $ 463,478 Women teachers 1,677,371 Total benefits to present pensioners $ 2,140,849 The present value of pensions to be paid pres- ent teachers who will receive benefits: Men teachers in cities $ 3,249,884 Men teachers in rural districts 978,224 Women teachers in cities 13,927,058 Women teachers in rural dis- tricts 2,833,197 Total benefits' to present teachers 20,988,363 Grand Total $23,129,212 ASSETS Contributions to be made by state $23,129,212 $23,129,212 NOTE — Table 22 shown in Part I, page 12. RATES OF CONTRIBUTION REQUIRED OF EN- TRANTS UNDER THE EXISTING RETIREMENT AND PENSION SYSTEMS. The preceding tables take into account only the liabil- ities involved in the operation of the plans for present teachers. In addition, for each new entrant, a certain percentage of salary should be contributed to provide for the liabilities added to the fund by new entrants. The following tables give these rates of contribution. Table 23 shows the rates that should be contributed by new members entering the Teachers' Retirement Fund, if they are to provide their proportionate share of the funds to be used for the benefit of those who become disabled. Table 24 gives the rates which would be re- quired of the state, in behalf of teachers entering under the 35 Year Service Pension Act. Table 23 — Teachers' Retirement Fund. Rates of Contri- butions Which Would Be Sufficient If Paid By the Teacher From the Time the Teacher Enters the Service and Up to the Time of Retirement, to Meet the Cost of the Annuity. WOMEN (Percentage of Salary) 4.50 4.51 4.53 4.55 4.56 4.57 4.53 4.50 4.46 4.43 4.42 4.40 4.35 4.29 4.19 4.04 4.18 4.35 4.50 4.68 4.83 AGE MEN At Entrance Into (Percentage the Service of Salary) 20 2.12 21 2.10 22 2.07 23 2.06 24 2.04 25 2.02 26 2.01 27 1.99 28 1.99 29 1.98 30 1.99 31 2.03 32 2.06 33 2.10 34 2.13 35 2.18 36 2.26 37 2.34 38 2.43 39 2.53 40 2.66 Table 24 — Teachers' 35 Year Service Pension. Rates of Contributions Which Would Be Sufficient, If Paid By the State From the Time the Teacher Enters the Service and Up to the Time of Retirement, to Meet the Cost of the Pension. WOMEN (Percentage of Salary) 3.51 3.50 3.49 3.48 3.47 3.46 3.44 3.43 3.41 3.40 3.39 3.37 3.33 3.26 3.17 3.02 3.20 3.42 3.66 3.91 4.19 RATES OF CONTRIBUTION UNDER THE PROPOSED PLAN OF REORGANIZATION. The rates of contribution required of teachers under the proposed plan are shown in Part I, page 4. The table gives not only the rates applicable to new entrants into the school system but shows the rate which would be payable by teachers now in the system who elect to enter the proposed system. A present teacher entering the proposed retirement system will pay the rate shown as of her age at the time she comes into the new system (not the rate applicable to the age at which she originally began teaching). The state will make up for the teacher the benefits which are allowable on account of her previ- ous service. The rates payable by the State to meet half of the cost of retirement allowances for new entrants and for future services of present teachers are shown in Part I, page 4. In addition the state must make special contributions to meet the total cost of allowances for past services of present teachers. AGE MEN At Entrance Into (Percentage the Service of Salary) 20 3.78 21 3.70 22 3.63 23 3.56 24 3.49 25 3.42 26 3.35 27 3.28 28 3.21 29 3.15 30 3.10 31 3.09 32 3.08 33 3.07 34 3.06 35 3.05 36 3.19 37 3.36 38 3.55 39 3.77 40 4.01 'NEW JERSEY' 27 PENSION REPORTS AND BULLETINS PUBLISHED BY THE BUREAU OF STATE RESEARCH OF THE NEW JERSEY STATE CHAMBER OF COMMERCE Preliminary Report of the Pension and Retirement Fund Commission State Research. Consecutive number 9, 191 8. 20 p. Covers the retirement systems for teachers, police, firemen, and other local employees. Supplementary Report of the Pension and Retirement Fund Commission State Research. Consecutive number 8, 191 8. 16 p. Contains a digest of the bill for the retire- ment of employees of the State of New Jersey and an estimate of cost of the proposed system. Introducing Order into Chaos Legislative Index, Vol. 15, No. 8, March 25, 1918. A review of what has been accomplished by six months of investigation of pension and retirement funds and what must be done in the future. Teachers' Retirement Systems in New Jersey, Their Fallacies and Evolution State Research, Consecutive numbers 10 and 12. 1918. Report of the Bureau of State Research prepared by Paul Studensky, Supervisor of the Pension Staff. In 3 parts. 19 18. 88 p. Intro- duction and Part I, Evolution of the Systems. Parts II and III, Present Condition and Practical Remedies. 40 p. Contains besides the discussion of the retirement situation in New Jersey, a chapter on the fundamental principles of a sound retirement system. Introduction to the Report on the Teachers' Retirement Systems in New Jersey, Their Fallacies and Evolution A reprint. 16 p. pamphlet. Police, Firemen's and Other Local Employees' Pension Systems in New Jersey State Research. Consecutive number 11, 1918. 24 p. Report of the Bureau of State Research prepared under supervision of Mr. Paul Studensky. Chapter on methods of financing and condi- tion of the funds, by Mr. Alexander Gourvitch. Chapter on development of legislation and charac- ter of benefits provided, by Mr. R. K. Bissell. A Sound Municipal Pension Act and Central Supervision of All Pension Funds in New Jersey 'New Jersey,' Vol. VI, No. 1, October, 1918. 8 p. By Paul Studensky, Supervisor of the Pension Staff of the Bureau of State Research. An outline and discussion of the features of the bill pro- posed by the New Jersey Pension and Retirement Fund Commission. Reorganization of New Jersey Teachers' Pension and Retirement Systems State Research. Consecutive No. 13, 1919. Report of the Pension and Retirement Fund Commis- sion of the State of New Jersey. January, 1919, 24 pages. Part I. Present Systems and Their Reorganization — A critical and constructive study. Part II. Contents of Proposed Legislation — An act providing for the establishment of a new fund on an actuarial basis. Part III. Actuarial Estimates — Cost of existing systems and of proposed plan. v«vium Bros. Makers Syracuse, N. Y W. JAN 21 1908 583225 UNIVERSITY OF CALIFORNIA LIBRARY