Converted insurance was provided on the net premium basis, the Government bearing the cost of administration and the extra losses resulting from the hazards of military and naval service. Converted insurance is participating, and benefits are made payable in one sum or other optional settlements elected by the insured. A recent amendment to this act removed all restrictions as to who may be designated as beneficiary under converted insurance. A large percentage of those in service never paid a premium on their insurance after discharge. At the present time (1929) approxi mately 650,000 veterans are insured under legal reserve policies in an aggregate amount of more than $3,000,000,0040. This con verted insurance is self-sustaining and dividends have been paid regularly to all policy holders. All the forms of relief, insurance and the care of veterans have been consolidated in the Veter ans' Bureau. For the fiscal year ending June 3o, 1927, the cost of this bureau was $405,348,447.70. Since April 6, 1917, the total cost of all such operations concerned with the World War has been $3,904,592,602.56. (G. E. I.) Civil Service.—On May 22, 1920, Congress adopted a civil service pension plan. Retirement is permissible, after 15 years of service, at ages from 62 to 7o, according to certain classifica tions of service. The amount of pension, depending upon length of service, ranges from 3o% to 6o% of the average basic salary of the employee during the last 1 o years of service. There is a minimum, in any case, of $180 a year, and a maximum of $1,020 a year. The plan is financed by a deduction of 31% from the salaries of all Government employees, the Government being responsible for all that may otherwise be needed, including the accrued liabilities. There has been some demand for more liberal provisions by associations of civil service employees. A more ade quate system exists in the Department of State for the permanent officers of the foreign service. The deduction from pay is 5% and the pensions are higher, a maximum pension of $5,400 being possi ble. The treasury will eventually have to pay the cost in excess of the contributions, and the accrued liabilities.
The earlier plans did not establish a balance between the revenue of the system and the pensions promised, covering the entire period of the plan's existence. Outside sources of income, which could bear no relation to the amount of the pensions and the longevity of pensioners, were important items of revenue, such as licences for carrying fire-arms, deductions for teachers' absences, etc. The New York City Police Pension Fund was the earliest one in force. In 1893 a contribution of 2% of salary was required. It bore no relation to the cost of the plan. It was, however, copied literally by cities over the entire country. Sometimes the contribu tions, such as an equal amount from each individual, were entirely unrelated to the pension. There was the common error of regard ing a balance in the treasury, almost inevitable in the early years of even the worst constructed system, as a real surplus and there fore an evidence of solvency. (M. SA.) Teachers' Pensions.—Beginning with Chicago in 1893 and a State organization in New Jersey in 1896, half of the States now have comprehensive systems of teachers' pensions and in the others there are many city or county provisions that are develop ing toward State-wide systems. Where the teacher is wholly an
officer of the Government, pensions are likely to be paid entirely by the State and to be closely related to rigid governmental con trol of training, certification, tenure and salary. Free pensions are considered, and properly, as partial compensation, but as such are generally valued too highly and this keeps salaries unduly low. Political pressure upon free pension systems has frequently re sulted in arbitrary changes in regulations that have frustrated many hopes. Even more frequently friendly legislation has in creased the privileges of free pension systems until their cost, which is rarely reckoned in advance, has become intolerable, prom ised privileges have been reduced, and entire pension systems have been modified or abandoned. Teachers' pensions, therefore, are now most generally provided in part by contributions from the teachers,—an arrangement that is ethically, socially and economi cally sound. As yet, however, the teacher's contribution rarely bears any precise relation to the benefits that are expected, it being still quite customary to decide that certain benefits are de sirable, to require teachers to make modest contributions, and then to hope that the employing State or city or institution will provide the remainder of the cost, whatever it may be. The disappoint ment of such extravagant hopes, however, is developing an increas ing agreement that the cost of pensions should be borne by equal contributions from the employing organization and the teacher, that pension provisions must be carefully related to the funds that are available, and that the carrying out of the plans shall he guaranteed by contracts between the system and each member. Less agreement exists that the contributions of the employer and the teacher should be made jointly, year by year, so as to accu mulate throughout the teacher's service. There is, however, no other way of making certain that the prospective pension will be adequate and that the funds necessary to provide the pension will be available at the time of retirement.
Experience and enquiry agree that retiring allowances of approx imately half of the active pay preceding retirement, together with pensions for widows of approximately half of the retiring al lowances, provide reasonable comfort at a cost that is not too great for the teacher and the employer. The principle of half pay, however, has been the occasion of many difficulties, on ac count of the necessity of estimating the pay over a period of many years, and adequately preparing for payment. The only safe appli cation of the principle of half-pay is to estimate its cost from as many instances of completed and prospective service as are available, to fix deposits and contributions on this basis; usually as a percentage of salary, and then to promise pensions that are not a proportion of any series of future salaries but annuities than can be definitely provided for by contracts based on the deposits and contributions that are made, on a guaranteed rate of interest, and upon specified tables of mortality. Tables can then be provided by means of which any teacher can ascertain the amount accumu lated by any deposit over any number of years, and the annuity that any accumulation will provide for a man or woman, begin ning at any age, according to various options.