Carnegie Foundation for the Advancement of Teachin.

A statement to the teachers in the associated colleges and universities online

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WAY -.67 1918





I C> J. i >J T—




During the twelve years of its existence, the officers and trustees of
the Carnegie Foundation have been engaged in a study of the whole
problem of the protection of teachers against the hazards incident to
the Ufe of the professional man living upon modest fixed salary. This
study resolved itself into three practical questions :

First, Is the free pension system as originally adopted by the Foun-
dation in the interest of the teacher and can it be made permanent?

Second, If the free pension is not a permanent solution, what are the
terms upon which an adequate and enduring system of protection for
college teachers should be based?

Third, In any substitution of a new plan for the old, what is a reason-
able and fair fulfilment of the expectations of the teachers in the asso-
ciated institutions?

The first two of these questions were, by a vote of the trustees of
the Carnegie Foundation in November, 1916, referred for report to a
commission upon which were trustees of the Foundation, college presi-
dents, university teachers, and others directly interested in the solution
of these questions. An expert actuary was at the service of the com-
mission and the pension experience of the world was available for its use.
This commission reached definite conclusions, which are printed in full
in the Twelfth Annual Report. In the place of the free pension, the
commission recommended certain fundamental principles which should
underlie any pension system. It pointed out that insurance during the
productive period of life must supplement an annuity in old age; that the
former was purely the concern of the individual, while the latter was a
joint obligation of the teacher and his employer, the college, and should
rest upon their joint contributions. As a conclusion of its labors the
commission presented a practical plan adapted to the needs of teachers,
in which the individual may obtain both his insurance and his annuity



under definite, contractual terms, at minimum cost and subject to the
scrutiny of the state departments of insurance.

The method of the fulfihnent of the expectsitions of the teachers in
the associated colleges and uni\ ersities was not referred to this commis-
sion. The determination of that (juestion is a responsibility which rests
upon the trustees of the Foundation. The commission very properly,
however, took occasion to express its opinion to the trustees in the fol-
lowing resolutions:

Voted : Referring to the resolution of the Board of Trustees of the Carnegie Founda-
tion, adopted in Novemlier, 1915, tliat "whatever plan is finally adopted will be
devised with scrupulous regard to the privileges and expectations which have been
created under existing ndes,'' this Commission expresses the opinion that the exten-
sion to all teachers at present in the associated institutions of the privilege of con-
tinuing in the present system would completely meet all their reasonable expecta-
tions. Tiie Commission assumes that the Trustees of the Carnegie Foundation will
in due time announce a date after which the privileges and expectations of the
present system will not be available to those newly entering upon the profession of

Voted: That the Trustees of the Carnegie Foundation be requested to give all possible
consideration to the needs of the older teac-hers in institutions which are not yet,
but may later be, associated with tiie Foundation.

Voted : The Commission docs not know the extent to which assistance can \ye obtained
outside the present funds of the Foundation, but it is acting on the expectation
of substantial jussistance in carrying a large but limited load, and with the further
understanding that adequate assistance cannot be obtained to carr\' the ever increas-
ing pension burden without calling upon institutions and individual teachers to bear
a share.

The report of this commission was considered by the tnistees of the
Carnegie Foundation at a special meeting held in May, 1917. At that
meeting the trustees took up and accepted the statement of funda-
mental principles of a pension system as framed by this commission.
The trustees also accepted the form of machinery recommended bv the
commission to carry out these ])rinciplos as it is embodied in the pro-
posed Teachers Insurance and ^Vnnuity Association, and voted to ask
of the trustees of the Carnegie Corporation one million dollars to estab-
lish this agency.


To fulfil the expectations of teachers in the associated institutions in
the manner suggested by the commission was beyond the power of the
trustees because the funds at their disposal were inadequate.

There were in active service in these institutions on November 17,
1915,' some 6600 teachers, including professors, associate and assistant
professors, and instructors. These teachers were distributed in age as

Affe Number of


20-24 34

25-29 559

30-34 1149

35-39 1235

40-44 1124

45-49 925

50-54 675

55-59 440

60-64 247

65-86 238


This number must of course decrease year by year since teachers en-
tering these institutions, after the date named, come under the new plan.

The conditions under which expectations have been created are the

Seventy-four colleges and universities have been admitted to the
pension benefits of the Foundation. The teachers of these institutions
have the privilege of retiring under the following rules :

1. An old age retiring allowance is granted at the minimum age of
sixty-five, after fifteen years of professorial service.

2. A disability allowance is granted after twenty-five years of service
in case of complete disability.

3. Widows of teachers qualified under provision 1 or 2, or widows of
teachers who die before retirement after twenty-five years of service,
receive one-half of the pensions accredited to their husbands.

4. The Carnegie Foundation retains the power to alter these rules in

' On this date the trustees passed resolutions looking toward the adoption of a contributory pension plan. These reso-
lutions accompanied the President's report on the new plan, which was sent to the trustees, officers, and teachers
of all of the associated institutions.


such manner as experience may indicate as desirable for the benefit of
the whole body of teachers.

An actuarial estimate of the load likely to accrue year by year from
the retirement of these teachers underthe present rules involves assump-
tions of great uncertainty. The actuaries have little information to guide
them in determining the rate of separation, the age at which men will
choose to retire, or the average salary thirty years hence. The records
of the Foundation show that there is a large drift from the associated
colleges to the hundreds of other colleges and universities in the United
States and Canada, and these records show also that a large proportion
of younger men go out of teaching. But how large these factors are is
unknown. Further, it is evident that the war will have a marked effect
on this situation. Already a large number of teachers under forty have
given up their positions. Some of these will return to their places, but
many will enter other callings, or be distributed among other colleges.

The only assimiptions that can be made are that men will withdraw
in somewhat the same proportion as during the past five years, and that
teachers will avail themselves of the privilege of retirement as soon as
it is open to them.

Under these jissumptions the computations of the actuaries show
that the load arising from the pensions of these teachers will steadily in-
crease, reaching its maximum about thirty years hence, then diminishing,
until about the forty-fifth year the annual cost will approach the present
income of the Foundation. CompuUitions on this bjisis indicate that tlie
total sum necessary to be paid out during the forty-five years to carry
out the present rules completely in the cases of these teachers will be
$69,000,000, in addition to the sums, now amounting to about .^700.000
annually, which the Foundation pays to teachers already retired and to
widows of such teachers.

During the same period the income of the Foundation available for
such pensions will be approximately $;{+. 000,000. To carry out the pres-
ent rules unchanged would require twice as much money as the trus-
tees have at their disposal. In the light of these figures the expectiitions
of the teachers, as formulated by the connnission, were obviously not
justified by the facts of the situation.


In making and announcing the present rules, the trustees of the
Carnegie Foundation took pains not to bind themselves by promises
which they might be unable to fulfil. In connection with their original
announcement, and as part of the same memorandum, they expUcitly
reserved the right to make such changes in the rules of retirement as
experience may indicate as desirable for the benefit of the whole body
of teachers. This right has been twice exercised: once in the year 1908,
by the extension of the privileges of the Foundation to instructors and
to widows, and again in 1910 by the elimination of the pension hitherto
granted on the basis of service alone. These facts were fully known to
the teachers in associated institutions. But so great was the desire of the
trustees to meet every expectation that had been created, whether fully
justified or not, and so serious was their reluctance to curtail privileges
which had been mistakenly regarded as promises, that after full delibera-
tion the trustees of the Foundation decided to ask the aid of the Carnegie
Corporation in carrying out the present rules upon the exact terms sug-
gested by the commission — even tho they knew that the demands made
upon the trustees of the Carnegie Corporation were so great as to make
it doubtful whether this request could be granted in its entirety. This
request, forwarded in the latter part of May, 1917, was conveyed in the
following resolutions :

Voted: That the Carnegie Corporation of New York be asked to cooperate with the
Carnegie Foundation for the Advancement of Teaching in carrying out the recom-
mendations of the Commission in the following matters:

1. By enabling the Foundation to fulfil the expectations of teachers in the associated
colleges and universities prior to the seventeenth of November, 1915. This will
involve a large but limited liability extending over a numberof years, the extent of
which will be clearly indicated by the actuarial reports which accompany this record.

2. By enabling the Foundation to afford some assistance during the transition period
of the next twenty years toward the retiring allowances of old teachers in institu-
tions which are not now, but may later be, associated with the Foundation. At the
present time the Foundation is devoting the income of more than $2,000,000 of its
endowment to the payment of pensions to teachers not in the associated institu-

8. By supplying the capital necessary to establish the Teachers Insurance and Annu-
ity Association. The sum necessary to establish the Teachers Insurance and Annuity
Association is $1,000,000.


In reply to these resolutions, the trustees of the Corporation an-
swered, in November last, that they had given earnest study to the
requests of the Foundation; they expressed their appreciation of the
diflicult questions with which the trustees of the Foundation have had
to deal, and indicated their desire to aid toward a wise and just solution
of its problems. In extending such aid, however, the trustees of the Cor-
poration stilted that they were ol)liged to tiike into account not alone
the expectations of the Foundation, but tiie needs of other causes as
well ; that as a sound principle for their guidance they must assume that
such obligations as the Corporation undertakes, whether on behalf of
the institutions bearing Mr. Carnegie's name or for other agencies, shall
be determinate. The present trustees of the Corporation did not feel jus-
tified in mortgaging any large part of its income for an indefinite num-
ber of years. In the light of these general principles, the trustees of the
Corporation stated that such aid as they could extend in enabling the
Foundation to fulfil the expectations of teachers must be expressed in
terms which are definite, both as to amount and as to duration. Bearing
in mind these limitations, the trustees of the Corporation have agreed
to supply, in answer to tlie request of the Foundation, thirteen millions
of dollars, of which one million is to provide capital and surplus for
the Teachers Insurance and Aiuuiity Association, one miUion is to be
devoted to the assistance of teachers and colleges not now associated
with the Foundation, while eleven milhons shall go to the creation of a
reserve under the following conditions:

l.The Foundation shall begin at once the accumulation of a i"e.sen'e fund for the
liquidation of jKMision obligations to lu-cruc from teachers in the associated institu-
tions. Into this reserve fund the Fomulation shall place its present suqiius amount-
ing to approximately one million dollars. To this reserve fund tlic Corporation sliall
contribute ?.'j,0()(),000 par value of honds, any deferred payments at the conven-
ience of the Cor|)oration to l)e made as of .lanuarv 1, 191S, with interest at four
percent. This reserve is to Ik- pl(U'eeneflta
of the exUtinc lyatero. we regard a gradual clunie In the minimum ace of retirement aj pcrlupa the leaat objec-
tionable."— l«l(l Report of the Committee on Penaloaa of the American Aaaorlallon of L'niveraity ProfcMor*.


number of teachers, (2) to raise the minimum age of retirement, or
(3) to cut down the value of the average pension.

The first method has been rejected as inequitable. It is recognized
that the financial value of the expectation of a teacher at age 30 is very
different from that of another teacher at age 60, but the equity of the
expectation, whatever its cash value, is the same. It would be entirely
feasible to make a solution of the problem thru either one or the other
forms of reduction. If the minimum age of retirement is at once raised
to 70 years, the problem would be solved. On the other hand, the same
result can be effected by cutting down all retiring allowances about one-

The objection to the adoption of either of these measures, to the ex-
clusion of the other, is so weighty that some compromise plan is inev-
itable. If the minimum age of retirement were arbitrarily raised to 70,
not only would such a radical change produce much hardship and dis-
appointment to teachers, but the plans of institutions which have
fixed an earlier date of retirement would be upset. While the date at
which a teacher ought to retire varies with the individual, to compel
all teachers to wait to 70 years of age for retirement would go far to
destroy the value of the retiring system both to the teachers and to
the colleges.

On the other hand, if a sweeping reduction of allowances were under-
taken, the burden would fall with most distressing effect upon those who
have the greatest claim to consideration — those who will retire in the
near future.

It has been found possible to devise a plan under which the teacher
may either have retirement at 65 or the full pension, or such adjustment
between the two as may best suit his individual needs.

The moment the matter is closely examined it becomes evident that
the question of minimum age at which retirement may be had cannot
be separated from that of the amount of the average pension. For ex-
ample, a retiring allowance of $1500 for man and wife available at age
65, one of $1980 available at age 67, and one of $2370 available at age
70 are actuarially equivalent. The two questions cannot be separately
handled : as soon as the amount of money available is definitely limited,
a teacher who retires at the age of 70 is equitably entitled to a larger


pension than he would have received had he retired at 65. He cannot
equitably claim the same pension at do that he could at 70. One other
consideration must be recognized. The man within measurable disUuice
of retirement has expectations of a very definite character. To a consid-
erable extent his future is planned upon a stated retiring allowance. He
is too old to avail of the advantages of the Teachers Insurance and An-
nuity Association to provide an annuity to supplement his pension. Men
further away from retirement have not framed their life plans upon a
definite retiring allowance years lience. and in addition tliey can by verj'
moderate payment secure annuities supplementing their pensions. Thus
a man of 45 by payment of §04 a year could provide a $1000 annuity
available between the ages 05 and 68, or a man of 30 by pa^niient of §34
a year could obtiiin a one thousand dollar annuity contract available
between 05 :md 70.*

A teacher in an associated institution will, of course, be able to make
such provision for insurance or annuity as he sees fit thru the Insurance
Association, witiiout prejudice to his expectation of a retiring allowance
from the Foundation.

Careful actuarial analysis of tlie problem indicates that the resources
available will suffice to support a system of retiring allowances for the
teachers who were in associated institutions on November 17, 1915,
upon the following rules:

I. The minimum age at whicli allowances will be granted (except on
the basis of disability) sliall remain at 0.3.

II. The maximum allowance available to a tcaclier shall contimie
to be computed upon the present formula. Allowance eipials one-half
active pay plus §400.

III. The maximum allowance shallbe available upon the present basis
to all teachers reaching the age of 65 on or before June 30, l'.)23.

IV. The maximum allowance shall be available after .Tunc 30, r.)'23,
on the following terms:

Ik'twit'ii .Iiilv 1, l!)y:5, and June 80, 1925, niaximum allowance at 66
Ik'twecn .lulv 1, 19ii5, and .Tuml- 30, 192(5, maximum allowanc-e at 67
Bi'twitMi Julv 1, 1926, an


Online LibraryCarnegie Foundation for the Advancement of TeachinA statement to the teachers in the associated colleges and universities → online text (page 1 of 2)