Perth Amboy evening news., 1918-12-14
Analysis Shows Retirement And
Pension Funds In Bad Shape

years, but the fact was not generally
realized. Fac year the capital in
creased at a slower rate. In 1910
fifty-nine per CEN of the members
contributions were paid out whereas
forty-one per cent were set aside and
added to the capital. Three years
later the proportion between contri-
buttons paid out and those set aside
was eighty-five per cent to fifteen per
cent. Last year it was ten per cent
and this yea the FER cent 20 moth
ing. To cover the deficiency the fund
had to draw on the interest and re-
ceipts from outside sources which
should have been regularly added to
the capital.
Denials of Insolvency.
The insolvent condition of the fund
is still not realized by the leaders of
the fund. 1t is denied on the ground
thai amy concern is solvent so long
as it can meet its obligations as they
come due" In reference to this the
report of the Bureau of State Re-
search says:
THE solvency of a pension fund
or retirement fund is not determined
solely by the fact that it has funds to
pay all claims presented, or even that
the income exceeds the disbursements.
for a fund may be in an unsound
@lition, although not yet in n n
nancial difficulties. The true condition
of q mi is shown by a valuation.
And with special reference to the
fund, states that its appears to be act
ually insoivent.'"
Financial Prospects
Not less serious Is thu financial
condition of the ~thirty-five year serv-
ice pension. The annual require
ments of that system have risen to
about a quarter OF a million dollars.
O rather considerable item in the
budget of the state. The attention OF
the legislature was attracted by n
item of expenditure. Upon the direc-
ton of the Pension and Retirement
Fund Commission an actuarial esti-
mate of the liabilities involved in h
pension was made last year by
George B. Buck, the consulting actu-
airy of the Bureau of State Research
The amount of liabilities shown by
h estimate was staggering: $2.156,-
b96 on account of h 486 pensioners
now on the retired list; $22. 200,337'
on account of those teachers now In
the service who would qualify for the
pension in the future: a total of $24.-
367,9S3 on account of these two items
of liability. Each year with the en-
trance of new teachers into the serv-
ice the moun OF liabilities is bound
to increase.
To give some tides of the true cost
d IN ptItSiOi Il III lttC
a sound financial policy, It were
placed on a reserve basis. the actuary
took the case of q new entrant and
estimated hat in his case 1t would
cost 4 per cent. of his annual salary.
In the case of teachers now In the
service, the cost YOU be far above
that rate, as these teachers are older
than the new entrants and nave past
services to their credf during which
no contributions at all were made.
The present contributions which
the state makes of n quarter of q mil.
hon dollars represents only about IN
per cent. OF the payroll. i.e., only a
particle of the true cost of the pen,
sion. To be adequate on a sound
financial basis, the contribution must
be increased several times. II the
system continues to operate on the
same basis, merely meeting the an
nual pension requirements n pro-
yiding no contribution to create an
adequate reserve, then h state
would Ia to pay In the future much
more than what would have been re-
iquired had 1t contributed from the
outset at an adequate rate. The re-
port OF the Pension and Retirement
Fund Commission of last year said:
IF the system continues to operate
without providing an adequate re-
serve, then the annual requirements
for pensions. which now mou to.
but a few thousand dollars and form
slightly nor than IL per cent. of
the payroll, will in a not distant ffu-l
ture amount to more than a million
dollars. The annual requirements
would exceed 10 per cent. of the pay
roll"
The teachers payroll already
amounts to about $14.00o. 900. 1t
may double and even triple in the
course of the next thirty or forty
years. Even before the annual re-
qnirements would reach 10 per cent.
of the payroll they may amour to
two or three million dollars. Sooner
{. later the state must stop this tre-I
nlendous N ever increasing drain
on the state finances. The financial
prospects of the system are exceed
ingly serioas.
LcNna Au~ofnn