Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-01-16
PAY-AS-YOU-GO CONTRIBUTIONS
URGED IN ACTUARIES' REPORT
Regular Appropriations Are Advocated,
With Greater Means Of Justice
In Retirement.

grOuBS OF eEHploStS, WIN poSSthic uIS
advantage to other employees.
Under existing law, and under the
proposed amendment here discussed.
the board OF actuaries explains. AR
employe with 30 years of service
would receive the "a me allowance ~
one with so years of service. although
the 5O.year employee has rendered
many more years of service and con
tributed more than twice as much "a
the fund"
1t Is the opinion Of the board OF
actuaries that before advocating or
adopting new legisla ton 10 liberalize
further the benefits for those who are
now most favored both the Govern
ment and the employees should give
consideration to the removal of such
inequalities as this in the existing law
and should attempt to arrange the
plan so that il will operate with great.
err fairness to those who under the
original law and who under the
amended law are given benefits which
are neither proportionate to the
amount OF their contributions nor to
the years OF service which they have
rendered.
Liabilities Are $78I,37I,737.
The report shows that the total
liabilities of the fund have a present
value OF 1881 .37l ,737. Of this amount
$49, 07l $40 will be paid to present an
nuitants who have been retired on
account of age and &S,S61 .0S6 20 pres
ent annuitants who have been retired
on account Of disa bility. The re-
mainder or $723, 33S, 331 represents the
amount which will be paid in benefits
to present employees. The employees
future contributions, or $326,2s7 .565,
plus the amount of funds in hand,
t54 ,62s zoos, will cover approximately
~ per cent of the total cost Of bene-
fits.
The report states that II the Gov
eminent were to make a contribution
of .4S per cent of the pay roll annually
this contribution. together with that of
$50 per cent by the employees, would
equal sss per cent, which is the nor.
NAL contribution. This contribution
would be suff1cient to cover the con
tinuing cost, but 1t is not sufficient
to cover the liability on account of
service rendered by employees prior to
the establishment of the fund In 1920,
when no contributions were made, nor
does 1t cover credit for service since
that date, during which time the Gov
eminent has made no contribution
whatever and the contributions of en-.
ployes have been used TO pay all the
benefits.
Method Is Explained.
The liability on account OF this past
service. according to the actuaries'
report, may be obtained by deducting
from the total liability OF the Gov
eminent the value of the future con-
tribution which would be paya BILE by
the Government at the normal rate OF
.4S per cent. An actuarial calcula.
ton shows that a contribution from
the Government equal to AS per cent
OF the pay roll Of present employees
has q present value OF $45,133,512 II
this amount Is deducted from the
items of $400,445, 1857. shown as the
value of the Governments prospective
appropria $35s, 311 ,655 Ia left as
the amount which must be placed in
the fund to Offset the lack of contri.
button in the past
IL the contributions for the accrued
liability are made according to this
plan another table in the actuaries'
report shows that a contribution
equivalent to $50 per cent of the pay
roll would he SUFFICIENT to support the
plan. The employees contribute $50
per cent, which may be considered as
An offset against the normal contribu-
ton rate.
The actuaries calculate that il the
Government were to begin immediate
ly to contribute to the fund at the rate
of 2.4O per cent Of the pay roll it
would pay the normal contribution
and interest on the amount of the ac-
crued liability the first year. The sec
ond year the payment OF 2.40 per cent
would pay the normal contribution,
and IL the pay roll had increased in
amount it would pay slightly more
than the interest on. the accrued
liability and would begin to liquidate
the principal amount.
Actual Liquidation Possible.
AS the employees are paying an
contribution of as per cent
OF their salaries. the actuaries point
out that the Government might very
properly contribute the round sum
equivalent to rs per cent of salaries
instead of "A per cent and in this
manner IL would actually begin the
liquidation of the accrued liability
even IL the pay roll did not increa Sc
II the pay roll does not increase the
actuaries report that contributions at
this percentage may be expected to
liquidate the accrued liabilities in So
years; II the pay roll increases by !
per cent each year the percentage
will liquidate the accrued liability in
approximately 40 years; IL it in
creases by 2 per cent each year, 80
years will he required for the liquida :
ton of the accrued liability, while II
the pay roll increased by per cent
each year the period required to
liquidate the accrued liability would
be only q years.
After stressing what they consider
several important points In respect to
the retirement act as 1t existed before
the recent amendment, the board OF
actuaries in its report to Congress
comments on the retirement act as
amended July 3, 1925.
Old Plan Held Unfair.
The main points stressed in regard
to the old law were: First, the board
believed that the plan was unfair to
employees because 1t exacted uniform
contributions from employees on the
basis of their full salaries and then
provided benefits based on limited sal
aries irrespective of the employees
age. so that certain employees paid a
small part of the cost of their allow.
ances while others with greater serv'
ice and apparently greater claim to
consideration from the Government
were forced to pay practically the en-
tire cost of benefits.
Second, the retiring allowances
were on the average too small to offer
a satisfactory means of retiring EN-
ployes.
Third. No system of records to pro
tect the Government and the EN-
ployes was provided for under the act
Fourth. The system was not deemed
properly financed by appropriation
TO cover the currently accruing liabil
ity so that the Government was pilina
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