Charles A. (Charles Allen) Prosser.

The teacher and old age online

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should be collected from which an actuary can
compute the occupational risk and determine an
adequate premium rate to cover it. It is possi-
ble that in the case of permanent disability, the
state should supplement, after a definite term of
service, the insurance so raised. But such a fund
should be separate from the old-age pension

To collect such statistics would be a compara-


tively easy task. For example, it should be possi-
ble to go back, say forty years, in the records of a
normal school and follow the vital history of each
member of the graduating classes for five suc-
cessive years. Such an inquiry would include, in
addition to the vital statistics, such information
as the length of teaching period, reason for with-
drawal, date of reentrance, length of subsequent
service, if any, and the time lost for sickness
during teaching periods.

Some such set of figures should be collected for
graduating classes dating back, say from twenty
to fifteen years. It should be possible, from rec-
ords of city schools, to ascertain the same body
of facts for two five-year periods, following out
the Hfe history of each member of the teaching
staff between certain dates. A body of material
could thus be collected from which an actuary
could determine the occupational risk and pre-
mium rate.

To sum up, then, disability and old age being
entirely different risks, a complete plan of insur-
ance should comprehend at least two distinct
measures. It will be better to proceed on sound
principles, and since at this time the data for
drafting a law covering an equitable insurance
scheme against disability are not available, the


subject should be approached first from the
standpoint of old-age insurance, but with the ex-
pectation of completing the scheme as rapidly as
possible by the addition, in a separate measure,
of a disabiHty law.

Characteristics of a model old-age retirement law

It is becoming recognized more and more that
in such far-reaching and important legislation as
that proposed for retirement systems, the section
following the enacting clause should be devoted
to defining accurately important terms used in
the act. The proposed act, providing for a retire-
ment system for public-school teachers in Mass-
achusetts, contains thirteen definitions. Massa-
chusetts statutes overlap and in some particulars
are apparently inconsistent, so that this number
need not necessarily mean that every state would
need so many. In popular writing, the terms
"annuities," ''pensions," and "retirement allow-
ances" are indiscriminately used. These are ex-
amples of terms, the meaning of which should be
precisely indicated as used in the act. In some
states the laws are not clear as to exactly what is
a public school. A high school or an industrial
school may or may not be a public school within



the intent of existing law. A careful study of the
statutes and judicial decisions is essential in
framing a new statute so as to cover just what
is intended. Attention to this important matter
will doubtless prevent much future litigation.


'A date for the estabhshment of the retirement
system should be set far enough in the future to
allow sufficient time to organize the necessary
administrative machinery.


Regardless of any local pension plans that may
be in force at the time of the adoption of a state-
wide act, a date should be fixed, after which all
teachers entering the service in the state must
become members of the retirement system. It
should be provided that all local systems will in
time cease to operate.

All teachers in service at the time when the
act takes effect should be permitted to become
members of the state system regardless of any
expectancy they may have in a local system, but
provision should be made that at no time after
retirement shall a person be in receipt of both a
state and a local pension.


Careful provision should be made, however,
for reimbursement out of the state treasury to
towns and cities continuing to pay pensions un-
der local systems to teachers in service who do
not elect to become members of the state system.

A provision should be inserted that teachers
who neglect to join the retirement system on the
specified date may become members of the retire-
ment association thereafter by paying an amount
equal to the amount, with interest, they would
have paid had they become members in the be-


A retirement board should be established.
This should be an unpaid board, but should em-
ploy a paid expert secretary as its executive. Its
membership, duties, and the method of filling
vacancies should be carefully defined. It is sug-
gested that the official heads of the three state
departments of insurance, banking, and educa-
tion should represent the state on this retire-
ment board. Three members should be elected
by the prospective beneficiaries from their own
membership. These six should elect a seventh
member, who should be neither a teacher nor a
state ofiicial.

Broad powers should be vested in this board,


such as power to fix the annuity tables, power to
prescribe and enforce administrative orders upon
school officials and members of the retirement
association, and power to enforce any by-laws
adopted to carry out the intent of the law.

The method of raising funds should be very
carefully prescribed. The necessary funds are:
(a) expense fund; (b) pension fund; (c) annuity

The expense fund is the amount necessary to
pay the administrative expenses of the system;
it should be entirely supported by the state and
should be appropriated at each session of the
state legislature on estimates furnished by the
retirement board.

The pension fund is the amount of money nec-
essary to pay pensions under the act. It is the
state's contribution to the system, and should be
appropriated at each session of the legislature
rather than by building up an enormous sinking
fund in anticipation of future demands.

The annuity fund is the amount contributed

by the teachers with compound interest upon

the same. It is raised by assessments upon the

teachers' wages. It should be within the powers



of the retirement board to establish an assess-
ment rate within fixed percentages of the salary,
say four to seven per cent. There should be no
difficulty about leaving this flexible, since the
members of the association should have half the
representation upon the board and should be in
a position to respond readily to the wishes of the

There should, however, be a fixed minimum
assessment below which no teacher should pay;
and a fixed maximum above which no teacher
should be permitted to pay. This minimum
should be an amount sufficient to provide, ac-
cording to accepted annuity tables, whatever
annuity it is desired to pay at a fixed age. For
example: thirty-five dollars deposited annually
for thirty years will, at compound interest at
three per cent, pay an annuity of approximately
one hundred and fifty dollars at age sixty years.
It is possible, then, to place this system upon a
sound insurance basis. Thirty annual contribu-
tions of one hundred dollars will yield at regu-
lar interest (three per cent) an amount sufficient
to produce an annuity of approximately five
hundred dollars at age sixty.

As has been pointed out before, while a thirty-
five dollar annual assessment may look large to



many teachers, this cost may rapidly be shifted
over upon the community employing the teachers
and no permanent diminution of wages will follow.
In fact, it may be expected that wages will in
some school systems, at least, rapidly respond to
this necessary increased expense to the teacher.
Provision should be made that teachers may
pay assessments during the entire time of their
service, providing that they may not contribute
an amount in excess of the amount necessary to
produce an annuity of five hundred dollars at
the age of sixty.


The time and method of paying retirement
allowances should be carefully prescribed. For
example, if sixty years is taken as the age for
voluntary retirement, then seventy may well be
taken as the age for compulsory retirement. The
teacher should be definitely guaranteed that the
amount which he has contributed, with com-
pound interest thereon, will produce a definitely
fixed annuity. The state should pay an equal
amount in a pension. At this point it is desirable,
especially in the case of men who may have de-
pendent families, to give an option between re-
ceiving a definite annuity and a smaller annuity


with a certain guaranty of insurance. Such
phraseology as the following covers this : —

An annuity of less amount, payable in quar-
terly payments, as may be determined by the
retirement board, with the provision that if
the annuitant dies before receiving payments
equal to the sum of his assessments with regu-
lar interest, the difference between such pay-
ments and the amount of his contributions,
with regular interest, shall be paid to his legal

This option is given by insurance compa-
nies, and the annuity so fixed by one company
amounts to 78-108 of the total annuity due. The
difference is virtually the premium on a paid-up

One of the most difiScult sections to construct
is one putting a teacher in service on an equality
with teachers yet to enter the service, that is to
say, so that past service may receive from the
state compensation equal to that provided for
future service. We have here a situation involv-
ing teachers who have from one to thirty years to
serve; teachers who have served varying num-
bers of years in the state; some who can make
contributions sufficient to produce a respectable


annuity, others who cannot. So far as the pen-
sion goes (the state's contribution), all teachers
should be on exactly the same footing. The fol-
lowing phraseology shows how such a situation
may be met: —

Any teacher in service when this act takes ef-
fect who shall have become a member of the re-
tirement association, and who shall have served
fifteen years or more in the public schools of the
state, not less than five of which shall immedi-
ately precede retirement, shall be entitled to re-
ceive a retirement allowance as follows : —

(a) Such annuity as his contributions may

(b) A pension equal to the annuity.

(c) An additional annual pension to such an
amount that the sum of this additional
pension and the pension mentioned in (b)
shall equal the pension to which he would
have been entitled had he paid thirty as-
sessments on his average yearly wage for
the fifteen years preceding his retirement
at the rate in effect at the time of his re-

{d) A clause should be added guaranteeing
that if the total retirement allowance


under (a), (b), and (c), is not, say three
hundred dollars, the state shall provide a
further pension sufficient to make a total
retirement allowance of three hundred dol-

Under such a plan, every teacher retiring,
whether he retires immediately after the act takes
effect or serves for a series of years, is guaranteed
three hundred dollars. He pays assessments so
long as he may remain in service after the act
takes effect. His annuity is guaranteed, and his
pension is on the same basis as if his pension
were reckoned on future service.


Provision should be made for the return of all
assessments, with interest thereon, in case the
teacher withdraws for any cause prior to becoming
eligible to retirement. It is contended by many
people that if this withdrawal takes place after
ten years of service, the amount should be repaid
in the form of an annuity in order to safeguard
the invested savings of the teacher. In case
a teacher withdraws and dies before receiving
the amount of his contributions, the difference
should be paid to his legal heirs.




Provision should be made exempting the an-
nuity fund from taxation, attachment, or assign-
ment, and all funds that are invested in personal
property should be exempt from taxation.


The duties of local school oflScials in executing
the provisions of the act should be formulated
with great care. For example, it should be the
duty of the school officials —

1. To notify every applicant for a teaching
position of his duties and obligations under
the retirement act.

2. To certify to the retirement board the
names of all teachers in their employ to
whom the act applies.

3. To notify the retirement board of the em-
ployment of new teachers, removals, with-
drawals, changes in salary.

4. To furnish all information required by the
retirement board in the discharge of its

5. To deduct, as directed by the retirement
board, from the salary due each teacher, all



amounts due as contributions to the an-
nuity fund.
6. To keep careful records as required by the
retirement board.


The treasurer of each town or city should for-
ward to the state treasurer all amounts due as
deducted by employing school authorities. The
state treasurer should be the custodian of the
annuity fund, should invest it, and should be
obliged by law to furnish to the retirement board
an annual statement of the condition of the an-
nuity fund. The state treasurer should also, on
order of the retirement board, pay all pensions
and annuities.


In many states, the question of absorbing
local pension systems into a state system will be
a vexing one. A great amount of discrimination
must be exercised in order to preserve the rights
of all prospective beneficiaries of local pension
systems, on the one hand, and local taxpayers,
on the other. The method of taking over local
retirement systems by the New York state sys-
tem is an example of unfortunate legislation.



Suffice it to say that actuaries have declared the
New York state retirement system as absolutely
bankrupt, and the law in crying need of amend-
ment. Sections similar to the two following will
go a long way toward solving the difficulty : —

Whenever a town or city retires a teacher
after the adoption of this act, and pays such
teacher a pension in accordance with any pension
system previously authorized by law, and the
school officials of said town or city certify under
oath to the retirement board to the amount of said
pension, said town or city shall be reimbursed
therefor annually from the state treasury; pro-
vided that no such reimbursement shall be in ex-
cess of the amount, as determined by the retire-
ment board, to which said teacher would have
been entitled as a pension had he become a mem-
ber of the retirement association under the pro-
visions of this act.

On or before (here insert a date) of each ses-
sion of the legislature, the retirement board shall
present to the legislature a statement of the
amount expended previous to the preceding first
day of December by cities and towns in the pay-
ment of pensions under the provisions of the
preceding paragraph, for which such cities and


towns should receive reimbursement. On the
basis of such a statement, the General Court may
make an appropriation for the reimbursement
of such cities and towns up to the first day of

By means of such provisions the rights of all
parties are protected, and by a provision to the
effect that all new teachers must become mem-
bers of the state system and not the local system,
the principle of state pensions is guaranteed,
and it will only be a limited number of years
when all local pension systems will be wiped out
and a complete state system set up.


A date should be set after which local pension
schemes, if any exist in the state, shall become
inoperative for teachers entering the service.


Some court should be specifically authorized,
as having jurisdiction in the first instance, in case
of dispute between a beneficiary and the retire-
ment board.


It will be apparent to those who have read thus
far that the problem of teachers' pensions is by-
no means as simple as it was thought not long
since, and no campaign for legislation should be
undertaken without serious study of all the fac-
tors involved. It is of vastly greater importance
than simply relieving the schools of a few out-
worn teachers, and the time has arrived in the
development of such legislation when we should
approach the subject with certain well-ascer-
tained facts and principles in mind. Much of
this legislation heretofore has been hasty and
ill-considered, and some of it has been in effect
long enough to show that the anticipated bene-
fits do not accrue ; hence, in some states there is
already a demand for amendment and changes
of various sorts both in local and state plans.

The ideal method of legislation would be the
enactment of two separate measures — one ap-
plying to teachers in service on a certain date;

1 See also, " Teachers' Pension Legislation in Massachusetts,"
W. I. Hamilton, School Board Journal, August, 1913.


the other applying to teachers entering the serv-
ice after that date. So far as is known this
method has never been followed in this country,
but from now on it should receive careful con-
sideration. There is a clear line of demarcation
between the two groups of teachers mentioned,
and certain provisions can be made affecting new
teachers that would be neither equitable nor just
in the case of teachers already in service. Con-
tributory systems can be made compulsory
for teachers entering the service as one of the
terms of such service, but in the case of teachers
already in service participation should be vol-

As a further illustration it may be pointed out
that new teachers can be required to teach a
sufficient length of time to guarantee a reason-
able annuity yielded by their own contributions,
whereas in the case of teachers already in the serv-
ice, some of whom should be retired at once, the
state may expect to pay a larger proportionate
share of the retirement allowance than it would
for new teachers. In many of our states, equities
in existing pension systems have been built up by
teachers now in service which they do not wish
to give up ; whereas in the case of new teachers a
way should be found to require all new teachers


to enter the state system, and this means the ulti-
mate abandonment of all existing local systems.

It should be anticipated that no new system
will be inaugurated that will not be financially
sound and provide definitely ascertained annui-
ties. It has already become evident that certain
local systems do not meet these conditions, and
from every standpoint it would be far better for
teachers in those places to seek a method of par-
ticipation in a sound state system.

Opposition to this plan for two laws is almost
certain to develop. Teachers fear that a legisla-
ture will enact a law costing little or nothing for
its execution until after a long period of years has
elapsed, but might not be willing to enact an-
other law providing for them on an equal finan-
cial basis, calhng for immediate expenditure.
Favorably disposed members of the legislature,
fearing the opposition of forces arrayed against
all forms of state pensions, frequently will mani-
fest a desire to deal with the questions in one

There will be less difficulty in states in which
local pension systems are little developed, as in
these states all that is necessary is the education
of the public to the support of sound social in-
surance principles. There will be more and more


opposition as local pension systems may extend;
and when certain vested rights are built up
through a long term of years, the absorption of
local pension systems into a sound state system
becomes an extremely difficult and complicated
question. Indeed, it is not clear that it has yet
been successfully done in this country.

The New York state system is an unfortunate
example of an attempt to pass a satisfactory law
providing for all teachers in the state, at the same
time catering to certain prejudices, more or less
well considered, on the part of many teachers
already provided with pensions from local sources.
This experience clearly indicates the necessity for
a different method of procedure.

The writer does not undertake to lay out a
program that will fit all the states not now pro-
viding teachers' pensions. Such effort would be
useless, as local conditions make a vast deal of
difference in dealing with any question of legis-
lation. While no complete statement can be
made, certain facts can now be regarded as estab-
lished; and it is urged that when any legislation
is projected, it shall be with the idea of providing
a sound and equitable system for all teachers
entering the service on and after a fixed date
and the immediate or gradual abandonment of



all local systems. With this principle in mind any
necessary adjustments can be made for taking
care of teachers now in the service.

Only one method can be followed which will
bring about this result, namely, the securing of a
unanimous public sentiment; and the public in
this case includes at least the teachers pro-
vided with pensions under local schemes, other
teachers not provided with pensions, prospective
teachers, and all the citizens of the state inter-
ested in social welfare. Public sentiment must be
aroused to recognize that the pension provided
by the state tends to the ultimate good of all
the schools of the state, whereas local pension
systems may perpetuate certain already existing
inequalities in the public-school system. The
support of a method that will secure this unani-
mous public opinion indicates a degree of profes-
sional spirit greatly to be desired in the teachers
of the country.

If it is proved to be impossible to pass two
separate bills, old teachers and new teachers
should be dealt with in separate sections of the
one bill; and there should be a clear line of de-
marcation in the provisions affecting these teach-
ers, even at the expense of repetitions, and the
provisions affecting each group should be clear


and distinct so as to avoid confusion in the minds
of legislators, the public, and the teachers af-
fected. When such a bill has been drawn, with
the experience we now have there can be no ex-
cuse for not submitting the same to an actuary,
who will be able to state to a close approxima-
tion the amount allowed each teacher under its
terms, and pass upon the financial soundness of
the proposed scheme.

As pointed out in a previous paragraph, there
is bound to be a growing amount of difficulty
in merging local pension systems into the state
system, because in many states these local sys-
tems authorized by law have grown to consider-
able magnitude. It is always difficult to win to
new things those who already have fixed rights
in the old. It is the inevitable tendency on the
part of the holders thereof to let well enough
alone and to look with suspicion upon the new.
Furthermore, in many sections of the country, if
not in all, there is a formidable amount of local
pride, and a great faith in local autonomy, along
with considerable distrust for centralization.

It is difiicult, and perhaps impossible, to state
in terms of dollars and cents the exact amount of
annuities or future financial benefits under such
a plan as has been proposed herein, while many



existing plans provide for flat pensions. The
apparent security of local pensions has proved
unfounded under several existing plans, but wher-
ever it exists, one can count on opposition to the
plan herein proposed. It has been demonstrated
that it is impossible in some sections of the coun-
try to get teachers now in service willingly to
abandon their local plans and come into a state

Since local pension systems generally develop
first in large cities, an attempt to force all teach-
ers into a state system is likely to develop an
undesirable antagonism between the teachers of

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Online LibraryCharles A. (Charles Allen) ProsserThe teacher and old age → online text (page 5 of 8)