College Retirement and Insurance Plans 9780231879958

Table of contents :
Foreword, by O. C. Carmichael
Contents
Part I. College Retirement Plans
Part II. Planning and Revising College Retirement Systems
Part III. College Plans for Survivor Benefits
Part IV: Descriptions of College Retirement Plans
Appendices

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COLLEGE RETIREMENT AND INSURANCE PLANS

COLLEGE RETIREMENT AND INSURANCE PLANS

BY WILLIAM C. GREENOUGH

COLUMBIA UNIVERSITY PRESS NEW YORK

.

MCMXLVIII

COPYRIGHT 1948 COLUMBIA UNIVERSITY PRESS, NEW YORK Published in Great Britain and India by Geoffrey Cumberlege, Oxford University Press, London and Bombay Manufactured in the United States of America

To My Wife

FOREWORD T H I S BOOK will fill a real need. Any college or university president who has not established retirement and insurance plans for members of his staff will find here the arguments for doing so that should convince the most conservative board, and a guide for the formulation of such plans that will be enormously useful. Those who have plans already in operation will find many suggestions for their improvement. Thus every administrator of an institution of higher learning should not only read the volume, but should keep it near by for reference in answering the many questions which arise in dealing with the retirement and insurance problems of the staff. While a large proportion of the colleges and universities of the United States and Canada have plans for the retirement of the professors, relatively few make provision for the nonacademic staffs of the institutions. Methods of handling that problem are discussed and the reasons for including the latter group are clearly set forth. In view of the social security laws that compel business and industry to provide for their employees, it is becoming more and more obvious that institutions which are not covered by these laws must make some provision for all their workers. The section dealing with the adequacy of plans now in force is worthy of careful consideration by all institutions. Decline in interest rates and the increase in life expectancy noted in the last few years have resulted in materially lowering the income of annuity reserves. This means that the 10 percent of salary contributed by the individual and the institution, which prevails in most colleges and universities, will no longer suffice to meet the retirement needs of the individual. The alternatives possible in meeting this situation are presented in a clear and helpful light. Apart from the many specific suggestions useful to one who has to formulate or operate retirement and insurance plans, the background which Mr. Greenough gives of the movement to provide retirement income and survivor benefits warrants reading the volume, if only to get a general picture of what has taken place in the last half-century

viii

FOREWORD

to lighten the burdens of aged and infirm professors and their widows. The history of this development is of wide interest. The book should, therefore, appeal to the general reader as well as to those specifically concerned with the problems with which it deals. Part IV, "Descriptions of College Retirement Plans," has specific interest, not only for the faculty members, trustees, and officers of the many institutions with which it deals, but also for administrators and staff members of nonprofit organizations other than colleges and universities. Furthermore, it is of general interest to students of social security as a survey of the various approaches which have been made by institutions in this country and in Canada toward the solution of the problem of old age security for workers in higher education. I predict a widespread use for this study of a timely topic and one which has received increasing attention in the past few years. O . C . CARMICHAEL, President The Carnegie Foundation for the Advancement of Teaching

New York, New York September 1, 19Jtf

ACKNOWLEDGMENTS COOPERATION of college and university presidents and business officers made this study possible. They supplied the information and then checked the descriptions of benefit plans in effect at their institutions. In many cases they gave helpful comments upon the objectives and operation of their plans. Their assistance is sincerely appreciated. Officers of the Carnegie Corporation of New York, the Carnegie Foundation for the Advancement of Teaching, and my colleagues in Teachers Insurance and Annuity Association of America made valuable suggestions regarding material pertaining to these organizations. My greatest individual obligation is to Dr. Rainard B. Bobbins, long a recognized authority in the field of pensions and social security. He has allowed me to make full use of his many writings. I have drawn heavily upon his College Plans for Retirement Income, predecessor of this study, published by Columbia University Press in 1940. Dr. Robbins likewise read much of this manuscript and gave constructive advice. In fairness to him I should add that I did not always follow his suggestions. I, of course, assume full responsibility for imperfections. THE

WILLIAM

C.

GREENOUGH

CONTENTS Foreword, by O. C. Carmichael

vii

Part I: College Retirement Plans, 1 Introduction and Summary Data

5

College Pension Plan Development

7

The Carnegie Foundation for the Advancement of Teaching

8

Teachers Insurance and Annuity Association of America

12

Publicly Administered Plans

17

Plans for Religious Workers

18

Plans Using Contracts of Agency Life Insurance Companies

20

Self-funded Plans

22

Nonfunded Plans

22

Canadian Government Annuities

22

Social Security

23

Part II: Planning and Revising College Retirement Systems, 25 Objectives of a Retirement Plan

27

Analysis of Provisions

30

Financing and Funding

47

Adequacy of Benefits

51

Retirement Provisions for Nonacademic Employees

57

Summary

62

xii

CONTENTS

Part III: College Plans for Survivor Benefits, 65 Part IV: Descriptions of College Retirement Plans, 75 Appendices,

181

A. Teachers Insurance and Annuity Association Plans

183

1. Sample Form of Resolution for Establishing TIAA Plans

183

2. Tabular Schedule of Provisions in TIAA Plans

185

3. Summary of Provisions Used in TLAA Plans

233

B. Colleges Covered by Publicly Administered Plans

235

C. Colleges Covered by Plans for Religious Workers

242

D. Colleges with Plans Using Contracts of Agency Life Insurance Companies

244

E. Colleges with Self-funded Plans

245

F. Colleges with Nonfunded Plans

245

G. Colleges Using Canadian Government Annuities

246

H. Colleges with No Retirement Plan

246

I. No Information Obtainable

249

J. Colleges Having Group or Collective Life Insurance

252

Part COLLEGE

I

RETIREMENT

PLANS

INTRODUCTION

AND

SUMMARY

DATA

include many of the most distinguished men in America, men who like teaching and the opportunity for untrammeled thought and research. The importance of continuing to attract men of the highest caliber to college work cannot be overestimated. Although the monetary rewards for this service compare unfavorably with those of many other callings, a secure income is usually assured throughout productive years. To this, most colleges now add some measure of security for their staff members during retirement. Two thirds of the colleges, universities, and state teachers colleges in the United States, employing over 85 percent of the total faculty members, now have retirement plans. Over half of the Canadian institutions likewise have plans. Thus a considerable majority of college faculty members may now look forward to some measure of security in old age. By means of retirement plans, colleges are better able to keep their classrooms and laboratories staffed with capable, productive individuals. The objective of this study is to present and evaluate data provided by colleges concerning their retirement and survivor benefit plans. Various types of plans will be compared to determine which provisions seem desirable for educational institutions and their staff members. Part I traces the history of college retirement plans and outlines the types now in use. Part I I discusses pertinent material concerning planning and revising college retirement plans, and Part III deals with survivor benefit arrangements. Descriptions and listings of individual college plans are given in Part IV and in the appendices. Information in the Educational Directory 1 was used as the basis for classification of individual institutions; this study includes all four-year, degree-granting colleges and universities and accredited teachers colleges, twenty-nine institutions of four-year college grade listed as "professional and technological schools," and Negro colleges that fall into C/OLLEGE FACULTIES

1 Educational Directory, 1945-46 (U. S. Office of Education Government Printing Office, Washington to, D. C.), Part I I I .

4

INTRODUCTION

these groups. Studies of numbers of teachers vary considerably, but for the listing in Tables 1 and 2, the 1947 World Almanac seemed to be the best source from which figures for all institutions in the United States could be obtained. Although 40 percent of United States colleges and universities do not indicate having a retirement plan, these institutions employ only 15 percent of the teachers. Of the colleges that have plans, 56 percent use TIAA contracts, 21 percent are state or city supported institutions brought under broader retirement plans for public employees, 9 percent are included in church pension plans, 9 percent use agency company contracts, 4 percent have nonfunded plans, and one percent have selffunded plans. TABLE

1

R E T I R E M E N T P R O V I S I O N S , U N I T E D S T A T E S C O L L E G E S AND

Type of Plan Teachers Insurance and Annuity Association Plans Publicly Administered Plans Plans for Religious Workers Agency Life Insurance Company Plans Nonfunded Plans Self-funded Plans No Plan No Information Deduct Duplicates

UNIVERSITIES

Teachers (Approximate)

Institutions

Percentage

281 108 47

33.4 12.8 5.6

46,243 22,373 2,391

45.7 22.1 2.4

45 21 6 145 189

5.4 2.5 .7 17.2 22.4

8,025 3,059 3,983 6,470 8,547

7.9 3.0 4.0 6.4 8.5

842 19

100.0

101,097 2,899

100.0

823

Percentage

98,198

Table 1 summarizes retirement provisions among colleges and universities in the United States, exclusive of state teachers colleges, on December 31, 1946, and indicates the types of retirement provisions in effect, as well as the number of institutions that have no plans or from which no information was forthcoming. State teachers colleges comprise a separate class when studying college provisions for retirement income. Because these institutions are closely allied with the public school systems of the various states, almost all of them have been included in state teacher retirement plans designed for these systems. This has made it possible to classify, with reasonable assurance of accuracy, the few institutions that did not answer requests

INTRODUCTION

5

for information. In each state concerned, one or more state teachers colleges did respond, and frequently information was received from the state teacher retirement system or from some other source which indicated that all state teachers colleges in that state were covered. They have been so classified in Table 2. TABLE

2

R E T I R E M E N T PROVISIONS, STATE T E A C H E R S COLLEGES, U N I T E D

Type of

Institutions

Plan

Publicly Administered Plans Teachers Insurance and Annuity Association Plans

Percentage

145

97.3

4

Teachers pproximate)

100.0

148

Pcrcentagc

7,496

94.Î

465

5.8

7,961 97

100.0

1.7

149 1

Deduct Duplicates

(.1

STATES

7,864

Table 3 covers Canadian colleges and universities listed in the Encyclopaedia Britannica. The large number of duplications results from the use of Canadian Government annuities up to the maximum allowable annuity of $1,200 a year, with amounts above that provided by supplementary plans set up by the colleges. TABLE

3

RETIREMENT PROVISIONS, CANADIAN COLLEGES AND Type

of

Plan

Teachers Insurance and Annuity Association Plans Canadian Government Annuities Agency Life Insurance Company Plans Publicly Administered Plans Plans for Religious Workers N o Plan No Information Deduct Duplicates

Institutions

UNIVERSITIES Percentages

13 13 3 1 1 7 6

29.5 29.5 6.8 2.3 2.3 15.9 13.7

44 14

100.0

30

Table 4 summarizes retirement provisions at all institutions in the United States and Canada covered by this study, classified by type of retirement plan, if any, and by type of institution.

COLLEGE

PENSION

PLAN

DEVELOPMENT

7

Over 80 percent of the colleges, covering more than 90 percent of the teachers employed, responded to requests for information. Of the institutions that responded, about four out of five have retirement plans. It would be quite erroneous to assume that the same proportion holds for the 195 institutions that did not respond; in fact, it may be assumed that few of them have any organized plans providing for retirement income. Careful checks of secondary information and comparisons with listings in College Plans for Retirement Income, written by Dr. Rainard B. Robbins and published by Columbia University Press in 1940, confirm this conclusion. Direct comparison of the figures given by Dr. Robbins and those included here is impractical because of differences in scope of the two studies. It may be estimated, however, that about 185 colleges and universities in the United States and Canada have established retirement plans in the past seven years, excluding state teachers colleges which were not covered by the earlier study. COLLEGE

PENSION

PLAN

DEVELOPMENT

C O L L E G E PENSION PLANNING is, in the main, limited to the twentieth century. During the previous century most colleges were small, intimate groups of professors and students. When a professor reached the point where he could no longer continue in service, perhaps he would be given a pension out of the institution's current income in reward for his service and accomplishments. No particular need for planning ahead on a group basis was recognized in the colleges or, for that matter, in other walks of life. Problems of retirement were thought of as individual, to be handled on an individual basis. For instance, Samuel Johnson, the first president of King's College, later Columbia University, was retired in 1763 on a pension of fifty pounds per annum. During the next 129 years a number of individual faculty members were retired on varying stipends. In 1892 the trustees of Columbia University inserted in the statutes a general regulation providing that any professor at age 65 who had completed fifteen or more years of service might be retired on half salary at the option of the professor or the trustees. A few other colleges bestirred themselves about this problem toward the end of the century. In 1897 Yale University established a half-pay pension system providing for retirement income beginning at age 65 for persons who had served for twenty-five years in a rank higher than that of assistant professor. Provision was made for reducing the service requirement for those who entered as professors at unusually advanced

8

THE

CARNEGIE

FOUNDATION

ages. The Harvard plan followed closely, in 1899. There, officers of instruction or administration aged 60 and over with twenty years of service as assistant professor or in a higher rank could request retirement with an allowance of 1/60 of their last year's salary for each year of credited service, not to exceed % of salary. Harvard could require retirement at age 66. Cornell University's plan, established in 1903, contrasted with prior plans in that it was contributory. An anonymous gift of $150,000 started the retirement fund, to which interested full professors contributed. The University of California established a plan in 1903, which was slightly modified two years later to provide at age 65 a benefit of % of average salary for the last five years of service for persons who had held a specified rank for at least twenty years. McGill had an early informal arrangement for treating each application for an allowance separately. The plan of the University of Toronto, established in 1891, was largely a savings enterprise without contributions by the university. It is to be noted that in all these early plans participation was limited to specified ranks or classes of employees, and a professor could look forward to a pension only if he remained at a particular institution until retirement. The idea of pension arrangements allowing mobility of academic talent among various institutions did not take root until the introduction of the broadly conceived Carnegie Foundation scheme of retirement allowances. Soon after the establishment, in 1905, of the Carnegie Foundation for the Advancement of Teaching, the plans then in existence were discontinued, or were revised to make the college plan supplementary to the Carnegie allowances. Annual reports of the Carnegie Foundation from 1905 to 1933 are replete with historical material on college pensions and retirement plans.

THE

CARNEGIE

FOUNDATION

ADVANCEMENT

OF

FOR

THE

TEACHING

A N D R E W CABNEGIE became concerned about the cause of the teacher when he was made a trustee of Cornell University in 1890. He "was shocked to discover that college teachers were paid only about as much as office clerks." 2 He established the Carnegie Foundation in 1905. 1 Robert M. Lester. Forty Years of Carnegie Giving (New York: Charles Scribner's Sons. 1941), p. 45.

THE

CARNEGIE

FOUNDATION

9

The purposes he had in mind are expressed in his letter of gift to the trustees of his new foundation, dated April 16, 1905: I have reached the conclusion that the least rewarded of all the professions is that of the teacher in our higher educational institutions . . . I have, therefore, transferred to you and your successors, as Trustees, $10,000,000, 5% First Mortgage Bonds of the United States Steel Corporation, the revenue from which is to provide retiring pensions for the teachers of Universities, Colleges, and Technical Schools in our country, Canada and Newfoundland under such conditions as you may adopt from time to time . . . I hope this fund may do much for the cause of higher education and to remove a source of deep and constant anxiety to the poorest paid and yet one of the highest of all professions.

Mr. Carnegie later supplemented his grant with an additional $5,000,000 in order that professors in state universities might be embraced in the pension fund. In addition, the Carnegie Corporation of New York has made grants to the Carnegie Foundation totaling $12,425,716 toward pension obligations. During the early part of the century the grants to individuals made possible by these gifts provided the primary source of retirement income for college staff members. Measured by present standards, provisions for old age income designed over forty years ago were defective. But if we bear in mind the dearth of such provisions in Carnegie's day and the fact that little attention had as yet been given to the subject, we can understand the views of those who hailed the Carnegie Foundation plan as a valuable forward step. At that time a Harvard professor could look forward to a pension from Harvard only if he remained with that institution until retirement. The same was true at Columbia. While Carnegie had no thought that his benefaction should extend to the faculties of all colleges and universities, his plan permitted free interchange of professors among the institutions that it covered without loss of pension expectations. This was a distinct advance. 8 Entrance and graduation requirements were none too high in many institutions, and methods of financing left much to be desired. Many colleges were anxious to qualify for inclusion in the Carnegie Foundation pension group and were thus led to greater and earlier improvements than would otherwise have materialized. A number of the stronger institutions that did not qualify under the Carnegie gift were led to announce pension plans comparable in liberality with that of the Carnegie Foundation. ' Rainard B. Robbins, College Plans for Retirement University Press, 1940).

Income

(New York: Columbia

10

THE

CARNEGIE

FOUNDATION

Perhaps the greatest weaknesses of the Carnegie free pension plan were responsible for the most valuable work of the Carnegie Foundation in the field of planning for retirement income. Strange as it may seem, these weaknesses were that the pensions were without charge to the college or to the professor and that expectations of unknowable magnitude were aroused with only a limited, even though liberal, gift to support them. Among the first to recognize these characteristics as shortcomings was the late Henry S. Pritchett, the first president of the Carnegie Foundation. His experiences led him to the conviction that from the standpoint of both the college and the faculty free pensions are not the best agency for provision of retirement income. Only a few years after the Carnegie Foundation was established Mr. Pritchett declared his conviction that a contractual arrangement by which colleges and faculty members might contribute toward provision of retirement income would be superior to free pensions. Carnegie Foundation allowances were clearly noncontractual. Another disadvantage developed out of one of the strengths of the original plan. So long as additional colleges could be brought into the Carnegie group, the effect was to increase the mobility of academic talent and to exert a wholesome stimulus both on colleges in the plan and on those that hoped to be. After a time, it was recognized that the list of individuals having expectations of benefits from the foundation would have to be closed, and this was done in 1931. There have been no additions to the list of institutions "accepted," "associated," or "specified" by the foundation trustees for purposes of retirement and migration of teachers since 1930. These steps have reduced the flexibility and the range of improvement implicit in the foundation's original purposes and plans, but the much broader conception underlying the Teachers Insurance and Annuity Association, established through Carnegie Foundation and Carnegie Corporation initiative in 1918, has in large measure alleviated the situation, particularly for younger teachers. RULES FOR THE GRANTING OF RETIRING

ALLOWANCES

The original Carnegie grant could do no more than provide pensions for professors and their wives in a limited number of institutions. Rapid growth of faculties, coupled with rising salaries after World War I, resulted in limitations on the number of persons to benefit and on the generosity of the scale of benefits originally formulated. On May 1, 1931, the executive committee of the Carnegie Foundation established the "Closed List of Pensionables," based on lists of 1929. No names could be added to the list; reductions occur because of deaths and with-

THE

CARNEGIE

FOUNDATION

11

drawals from service at "specified" institutions. The foundation has made changes from time to time in its "Rules for the Granting of Retiring Allowances." Present rules.—Allowances will hereafter be arranged only for those whose names are on the Closed List of Pensionables of May 1,1931, and who remain in the service of specified institutions (formerly called associated institutions) until retirement. In order to receive a retiring allowance an individual must have attained the age of 65 and must have completed fifteen years of active service as a professor or twenty-five years as an instructor and professor. The normal allowance to begin at age 70 is $1,000 a year. A few persons still in service and born prior to 1867 receive more under earlier rules. If a retiring allowance begins at an earlier age it is correspondingly reduced—to $670 if it begins at age 65. For each such pensioner Carnegie Corporation purchases from TIAA a single life annuity of $500 a year, if begun at age 70, or of a correspondingly reduced amount if begun earlier. The annuitant may choose an actuarially equivalent survivorship annuity with income to continue to his wife if he predeceases her. Attainment of age 65 is waived for anyone who becomes disabled (as stated in the rules) after completing twenty-five years as a professor or thirty years as a professor and instructor. The disability allowance in such cases is the same as the retiring allowance at age 65. If a recipient or anyone eligible for an allowance dies leaving a widow who has been his wife for ten years, she is eligible during widowhood to a pension half as large as her husband's or that for which he was eligible. To be eligible for this benefit the widow of a recipient must also have been married to him at the time of his retirement. A special "disability annuity allowance" is available to a teacher in active service who entered the employment of an associated institution after November 17, 1915, and prior to January 1, 1933, who began participation with his employing institution in a contributory retirement plan using contracts of TIAA prior to January 1, 1933, and who became disabled after at least five years of such participation. The annuity is % of what would have been available under the contributory plan had service continued to age 65, and one condition of its receipt is that the TIAA retirement annuity contract be assigned to the Carnegie Foundation. From its establishment in 1905 to June 30, 1946, the Carnegie Foundation paid out $50,077,419 in free retiring allowances, disability allowances, and widows' pensions to 4,161 persons connected with specified colleges, universities, and technical schools. Allowances and pensions

12

TI AA

were being paid on June SO, 1946, to 1,950 persons, and 1,064 persons then remained on the foundation list as having expectations of retiring allowances. This brief discussion of the Carnegie Foundation for the Advancement of Teaching does not attempt to do justice to its contributions in the field of college pensions. Various publications are available to persons wishing to be fully informed regarding its work.1 Specified institutions.—Institutions specified by the Carnegie Foundation board of trustees for payment of benefits within the Closed List of Pensionables and for purposes of teacher migration without loss of pension expectations are indicated in Appendix lists by an asterisk. It is noteworthy that during the years subsequent to the closing of the Carnegie Foundation lists, almost all the specified institutions have established contributory, funded retirement plans for new staff members not included under the Carnegie arrangements.

TEACHERS

INSURANCE

ASSOCIATION

OF

AND

ANNUITY

AMERICA

W H E N IT B E C A M E APPARENT that the retiring allowances of the Carnegie Foundation for the Advancement of Teaching would necessarily have to be limited to a specified number of colleges and individuals, a broader concept was sought for future college retirement plans. Carnegie Foundation studies led to the conclusion that a system whereby the college and its staff members would join in contributing toward individual annuity policies wholly owned by staff members would be best suited to the purposes in mind. A separate life insurance company, Teachers Insurance and Annuity Association of America, was established to pool the provisions for retirement income and life insurance with contracts available to staff members in all colleges and universities and certain other nonprofit educational institutions. TIAA was thus an extension of the philanthropic ventures of Andrew Carnegie. It was organized on the initiative of the Carnegie Foundation and was endowed originally by the Carnegie Corporation of New York 4 The Carnegie Foundation for the Advancement of Teaching, Annual Reports, First (1906) through Twenty-eighth (1933); Bulletins, Nos. Nine, Twelve, Seventeen, Twentytwo, and Twenty-five; distributed without charge, if in print, on application to the Foundation, 522 Fifth Avenue, New York 18, N. Y. Lester, op. cit. Abraham Flexner, Henry S. Pritchett, a Biography (New York: Columbia University Press, 1843).

IS

T IAA

with $1,000,000, half of which was for capital stock and the other half for surplus. TIAA was incorporated as a legal reserve life insurance company in the state of New York in 1918. For a number of years the expenses of operation were paid by gifts from Carnegie sources. By 1938 the Carnegie Corporation had completed a further gift of $6,600,000 to the association, and the stock of the association was transferred to the Trustees of T.I.A.A. Stock, a membership organization created by special act of the New York Legislature. The primary duty of the Trustees of T.I.A.A. Stock is to elect trustees of the association, one of whom is nominated each year by policyholders. The charter of the association provides explicitly that its business shall be done without profit to stockholders. The charter states TIAA's purpose as follows: The purpose of the corporation is to aid and strengthen non-proprietary and non-profit-making colleges, universities and other institutions engaged primarily in education or research by providing annuities and life insurance suited to the needs of such institutions and of the teachers and other persons employed by them on terms as advantageous to the holders and beneficiaries of such contracts and policies as shall be practicable, and by counselling such institutions and their employees concerning pension plans or other measures of security, all without profit to the corporation or its stockholders. The corporation may receive gifts and bequests to aid it in performing such services.

The association operates without soliciting agents, the thought being that college officers and staff members can give consideration to various plans and decide what they want, thus avoiding a substantial proportion of the overhead expenses of a company that sells through agents. The organization of the association, with the backing of the Carnegie Foundation and the Carnegie Corporation, the publicity given to the subject in the annual reports of the Carnegie Foundation, and the widespread cooperation of college organizations and actuarial associations all helped to give an impetus to the development of college retirement plans and adoption of the contractual method of financing them. TABLE 5 CUMULATIVE GROWTH OF T I A A RETIREMENT PLANS

Year 1925 1935 194J 1946

Colleges and Universities 67

118 258 298

Others"

Total

32 77 137

99 195 395 458

160

" Nonprofit junior colleges, private secondary schools, scientific and research organizations.

14

T IA A

I t is interesting to note that of the first forty-one institutions that had established TIAA plans after its organization in 1918 and up to June 30, 1920, only two have discontinued their plans in the succeeding twenty-seven years. The 1946 annual report of the association shows that policyholders total 45,090. The cumulative total of benefits paid to policyholders and beneficiaries by December 31, 1946, was over $42,000,000, and benefits exceeded $6,000,000 in 1946. Total assets of TIAA at the end of 1946 were over $200,000,000, a figure that offers a startling contrast to the original gift of $10,000,000 to the Carnegie Foundation for pensions to college teachers. TIAA's assets are growing at the rate of over $17,000,000 a year. Although it is a specialized company restricting eligibility for its contracts to a limited field, its total assets place it in the upper 10 percent of American life insurance companies, ranked by size. RETIREMENT

PLANS USING TIAA CONTRACTS

The common characteristic of TIAA retirement plans is that they make use of an annuity contract specially designed to facilitate the operation of effective college retirement plans. Provisions of the contract grew out of intensive study of pension plans in America and abroad, the experience of the Carnegie Foundation for the Advancement of Teaching, and direct correspondence with more than five thousand teachers. These provisions were suggested and critically analyzed in 1916-18 by the American Association of University Professors, the Association of American Colleges, the National Association of State Universities, the Association of American Universities, the American Institute of Actuaries, and the Actuarial Society of America. Emphasis was upon developing a contract that would advance the cause of education as a whole. No method then in existence of funding pension plans seemed wholly satisfactory for the college plans anticipated. After a suitable contract was developed, a survey of life insurance companies disclosed no contract with the desired attributes, and it did not seem feasible for an agency company to issue the special contract desired without costs of agency organization and commissions. I t was only then that a separate company was organized to provide contracts through which (a) educational institutions could fund their retirement plans on a mutually advantageous basis, and (6) educational personnel could obtain life insurance and retirement annuities at low cost. The importance of an appropriate contract for use in college retirement plans cannot be overemphasized. When TIAA's flexible, fully vested, transferable, noncashable contract was introduced in 1918, it

TIA A

15

was unique in many of its provisions, and during almost thirty years of experience no essential changes in its general outline have seemed desirable. Use of the contract relieves the college of annuity risks, risks not compatible with college organization. The institution assumes the obligation of contributing, along with its staff member, during working years, toward making the staff member independent after retirement. When retirement age is reached, employment merely ceases, and the individual's income is shifted from compensation for college service to annuity payments from the life insurance company. As for the employee, he has a contract that does not even mention his employer. His rights are independent of his relationships with a particular employer. His contributions, as well as those made on his behalf by the college, are protected by his own contractual arrangement with a third party, organized to invest funds and do a life insurance and annuity business under strict supervision of insurance laws and regulations. Although the individual owns the contract and can take it with him if he leaves, the college is assured that its contributions cannot be liquidated or mortgaged; the individual can use his contract only for its original purpose— to provide a retirement income. Furthermore, flexibilities with respect to premium payments, selection of retirement date, selection of type of income settlement on retirement, and the like, allow the college and the individual wide latitude in adjusting the contracts to fit differing situations. The TIAA contract is an agreement entirely between the company and the individual, promising benefits in return for premiums paid. The college retirement plan, on the other hand, is an agreement between the college and its staff members. This is usually formalized through a resolution passed by the governing board in which the essentials of the college plan are stated. Thus the college and TIAA each have an agreement with the participant but no stated agreement with each other. Through the use of these two agreements, complicated state laws, trust agreements, or master contracts and certificates are made unnecessary, and income tax procedure is simplified. TIAA RETIREMENT

ANNUITY

CONTRACTS

Staff member owns contract.—All rights in the contract are vested in the staff member or his beneficiary. If he changes jobs, he takes the contract with him, including the rights established by all premiums paid up to that time. He may cease to pay premiums, may continue payments himself, or may join with his new employer in sharing payments. There is no provision in the contract for lump-sum payments to the

10

T IA A

staff member at any time, nor is there provision for borrowing on the security of the contract. In this manner the contributing college is assured that its staff members will not be able to mortgage or destroy the provision built up for their retirement. No forfeiture; no penalties.—Benefits promised in return for premiums already paid are not affected by suspension of premium payments. Whether premiums are continued or not, whether the policyholder remains in academic work or not, whether the employing institution continues to share in premiums or not—none of these alternatives has any effect on benefits purchased by premiums already paid. Premium payments.—Each premium on a TIAA retirement annuity purchases a definite, guaranteed annuity benefit. Within limits as to the maximum total annuity that may be purchased from TIAA, policyholders may increase regular premiums, either by themselves or through additional college contributions, and may pay additional single premiums of $100 or more. TIAA also accepts nine or ten installments instead of twelve monthly payments for premiums if the college prefers. On policies issued since June 30, 1941, the rate schedule in effect when the premium is paid determines the small expense charge to be made, the interest to be credited on the accumulation, and the assumptions as to longevity of annuitants. The annuity guaranteed for each premium is the result of these three factors. Premium payments on these later contracts may be discontinued and then taken up again without payment of intervening premiums. Death benefit.—If the policyholder dies before he begins to receive annuity payments, the full equity to his credit in the contract is payable to the named beneficiary or to the estate; if to the former, the policyholder may choose among several income payment methods or may leave this choice to be made by the beneficiary. Only for the estate as payee is a lump-sum payment provided. Choice of retirement date.—The policyholder may have annuity payments begin either earlier or later than the time chosen when the contract was issued, but normally not later than age 71. The association's practice is to allow deferment beyond age 71 if employment with the college continues beyond that age. When premium payments cease on the contract or at any later time before age 71, the policyholder may ask that annuity payments begin. Choice of income arrangement.—The policyholder may choose among various forms of income upon retirement—an annuity with all payments ceasing at his death; an annuity under which, if he predeceases a second annuitant, payments will continue in full or in part until the beneficiary's

PUBLICLY

ADMINISTERED

PLANS

17

death; or an annuity to continue until the full accumulation at the time of retirement has been paid out, and, if the policyholder is then living, continuing thereafter to the time of his death. Selection among these options may be made until the time that income payments begin. COLLEGE

RETIREMENT

RESOLUTION

The TIAA annuity contract incorporates fundamental provisions specially designed for college retirement plans. But the use of an appropriate contract does not necessarily assure that a college will have a good retirement plan. The college's decisions in setting up a plan are vital to its successful operation. These decisions have to do with who is to participate and when, the size and sharing of contributions by the college and the participant, the retirement age, and any benefits to be paid for service at the college prior to the inauguration of the retirement system. These provisions deserve careful attention, both when the plan is installed and at regular intervals thereafter. Provisions and tabular descriptions of TIAA plans are given in Appendix A. The college usually states the provisions of its plan in a formal retirement resolution, passed by the governing board. Colleges often distribute copies of their resolutions to old and new staff members so that all persons concerned will have full information as to the conditions for their participation in the plan and their retirement. A sample resolution has been developed from the experience of colleges in inaugurating retirement plans using TIAA contracts. This sample resolution is printed in Appendix A as a guide only; the resolutions establishing the plans vary widely in provisions, making use of the flexibilities of the contract to adjust to differing local situations.

PUBLICLY

ADMINISTERED

PLANS

AMONG COLLEGE PLANS for retirement income, self-funded systems for public employees rank next to plans using TIAA contracts. These public plans have been carefully and repeatedly reviewed by the Research Division and National Council on Teacher Retirement. 5 Public plans covering college staff members are listed in Appendix B, along with the colleges concerned. General discussions of the provisions of these plans are included in Part II, and a number of the systems are described individually in Part IV. 1 National Education Association of the United States, Statutory Provision* for Statewide Retirement System» (Waihington, D. C., 1946).

18

PLANS

FOR

RELIGIOUS

WORKERS

College employees brought under public plans usually comprise only a small minority of the total number of persons covered. In some states the only college employees that are included are teachers; in others, all college employees participate; and in still others there are two or more plans, one covering teachers and another covering nonacademic staff members. Almost all state teachers colleges are included under the teacher retirement systems of their states, and in many states such plans apply to other publicly administered institutions of higher education as well. The retirement benefit provided by these plans generally varies with salary, number of years of service, and age at retirement. About half the cost is usually supported by member contributions and the other half by the state or municipality. A pension in recognition of service performed before the retirement plan was established is almost always supported by employer contributions alone, as is the case with the supplementary disability pension. If an employee dies while in service, the beneficiary or estate normally receives only the employee's contributions with interest. Usually the employee may choose among several optional retirement income arrangements: (1) an annuity ceasing at death; (2) a lesser annuity with payments continuing throughout the life of the annuitant and, in any event, until the accumulation of his contributions at the time of retirement has been paid out; and (3) a lesser annuity payable until the death of the last survivor of the annuitant and his spouse. In the typical case an employee covered by a public retirement plan who withdraws from service before retirement receives only his own contributions, with or without interest, usually in cash. It is this provision, limiting the benefit the withdrawing member receives to his own accumulations, that causes much of the criticism of retirement plans for broader groups of public employees when they are applied to colleges and universities. Restrictions as to maximum benefits that may be provided likewise work a real hardship on college personnel.

PLANS

FOR

RELIGIOUS

WORKERS

DENOMINATIONAL COLLEGES AND UNIVERSITIES I N ESTABLISHING retirement plans, these institutions have used a variety of methods, depending, among other things, upon the closeness of association between the college and the church, upon whether the college or part of the college is conducted by a religious teaching order,

PLANS

FOB

RELIGIOUS

WORKERS

19

upon whether the denomination assures its religious personnel security in their old age, and upon whether there are lay employees on the college staff. One hundred and three denominational colleges use TIAA contracts in funding their retirement plans. Thirty-one use denominational retirement plans, and thirty-four use other methods. The number of colleges at which some employees may look forward to security in old age through the church is understated in the statistical summary. After repeated inquiries aroused no reply, some institutions where faculty members will presumably be cared for through church sources had to be included in the "No Information" list. Additional colleges said they had no plans where again the church or the religious order cares for elderly and incapacitated staff members. The "forgotten men" in denominational college retirement arrangements are the lay faculty members and nonacademic employees on college staffs composed largely of religious personnel. In recent years most large denominational colleges have increased their lay staffs rapidly; yet many have established no retirement benefits for these people. An effective statement of this situation has been made by the Very Reverend Edward V. Stanford, O.S.A., of Augustinian College, Washington, D. C.: . . . . First, the lay-teacher has a permanent place on the faculties of Catholic colleges. In days gone by, especially in smaller colleges conducted by Religious Communities, lay-members of the faculty may have been considered more or less as a temporary expedient, pending the day when the Religious Community would be able to staff the entire faculty. I submit that this is no longer true— nor is it ever likely to be true—except in isolated instances. Furthermore, no Catholic college administrator that I know would wish to dispense with the lay-members of his faculty, even if he could do so. Lay faculty members have proved their worth. They help to give a well-rounded tone to the administrative and teaching personnel of a college. Second, "Social Security" as a settled policy of American life has come to stay. Had it not been for the war, the Social Security Act would have been extended to cover many other occupations which are not now included. Its further extension is only a matter of time, but this in no way lessens the obligation of the college to do something for its lay staff. In fact, it emphasizes the necessity. Third. . . . The fact of the matter is that Catholic colleges have lagged behind other colleges in this matter [retirement plans for lay staff members]. Failure to take enlightened action in this regard can be attributed to a number of factors, among which may be enumerated lack of thought and sympathetic understanding of the problems and worries of the lay personnel of the college; lack of knowledge of the social security problem as a whole, coupled with failure to think through its implications; a vague feeling of financial inability which has never been followed through with any thorough-going study or investigation.' • "Social Security for Lay-Professors in Catholic Colleges," National Catholic Educational Association Bulletin, XLIII, No. 2 (November, 1946), «4-45.

to

AGENCY

COMPANY

PLANS

Father Stanford, it would seem, has stated the case strongly in order to stimulate action among those Catholic colleges that have not protected their lay staff members. There are colleges of other denominations that have been just as lax in providing retirement arrangements for persons not eligible for denominational pensions. DENOMINATIONAL

RETIREMENT

PLANS

These plans are generally administered by organizations created for the purpose and closely associated with the parent religious institutions. For the most part college staff members eligible to participate in such plans constitute a minor classification of the broader groups of religious workers covered. Sometimes only the members of one department, i.e., the college of religion, are eligible. Benefits held out by some plans extend beyond retirement and death benefits, with liabilities that are not so clearly defined as in contracts issued by life insurance companies. One or two of the plans are nonfunded, informal arrangements providing payments only for those without independent means. The others are funded and usually are contributory. Upon withdrawal from service before retirement, the employee normally receives only his own contributions, if any, with or without interest. Other provisions of the plans will be found in the descriptions of each in Part IV. The forty-eight private, denominational, Negro and Canadian colleges in which part or all of the staff members are covered by these broader plans for religious workers are listed in Appendix C.

PLANS

USING

LIFE

CONTRACTS

INSURANCE

OF

AGENCY

COMPANIES

F O R T Y - E I G H T COLLEGES and universities fund their faculty retirement plans through agency life insurance companies. In seven of these, selection may be made among a group of companies; in seven additional, the company is unnamed. The remaining thirty-four plans are distributed among twenty-one companies. Each college plan is listed in Appendix D, and details of the plan and the name of the company underwriting it, when specified, are given in Part IV. Statistical analysis of the plans is impractical; they are more notable for their diversities than for their similarities. However, some general comments may be made. Plans with agency companies may be divided into two classes: those that use individual retirement annuity contracts and those that use

AGENCY

COMPANY

PLANS

21

group annuity contracts. A trust agreement is occasionally superimposed on the former. Under group annuity arrangements a master contract between the college and the insurance company states the provisions of the retirement plan. The staff member usually holds a certificate outlining his rights, which are subject to the master contract. Under plans using individual policies the participant may hold the policy, but it is often kept by the college or by trustees of the college retirement system to prevent use of the cash or loan provisions during employment and, sometimes, to effect the recapture of institutional contributions if the participant withdraws from service before retirement. As is to be expected where such diversity exists, some plans with agency companies include provisions widely accepted among the colleges as sound, while others include provisions considered unsound. Most of the plans introduce inflexibilities of one kind or another. As a rule, automatic adjustments to small salary changes cannot be made; in one plan no increase in retirement benefits occurs as a result of salary increases made within ten years of retirement. On the other hand, breaks in compensation payment, such as sabbatical leaves on less than full pay, can usually be handled easily under group annuity contracts. Under agency company plans, the age at which income is to commence sometimes cannot be changed; if changeable, it usually can be moved only to an earlier date. Selection among various income options, for instance, to include an income to the annuitant's wife if he predeceases her, normally must be made several years before retirement income commences. A major deviation from generally accepted college pension practice is the provision found in most of these plans for forfeitures in case an employee dies or withdraws from service before retirement. Quite frequently the death benefit is limited to an amount approximating the employee's own contributions, with or without interest, although this provision may be partially balanced by the existence of a group life insurance plan. Similarly, in most of the plans the employee forfeits the employer's contributions and, less frequently, interest on his own, if he leaves during early years of participation, and in two plans the employer's contribution never vests in the individual before retirement. The trend is toward earlier and larger vesting of the employer's contributions, and in several plans the employee owns the entire accumulation upon withdrawal from service at any time. Where individual agency company annuity contracts are used in the college plan, the participant sometimes may choose among companies

22

CANADIAN

GOVERNMENT

ANNUITIES

and among contracts. This results in a blending of agency company plans into TIAA plans. In some TIAA plans an individual may, with the approval of a designated authority, substitute a contract already in force with an agency company. Likewise, colleges with an agency company plan, or with no plan at all, often contribute on TIAA contracts when an individual brings one with him. Where individual policies are used, exceptions of one kind or another can be made to take care of individual situations, and the flexibility thus introduced is advantageous if administered judiciously.

SELF-FUNDED

PLANS

the smallest classification for college retirement plans. The list in Appendix E shows those colleges that are operating their own funded plans, and the plans are described in Part IV. T H I S IS NOW

NONFUNDED

PLANS

from informal statements of a hope to pay pensions of unstated amounts upon retirement to formal plans making definite promises of income to be expected at retirement even though separate funds are not held for their support. Colleges having such plans are listed in Appendix F, and descriptions appear in Part IV. Nonfunded plans are usually not taken too seriously by prospective pension recipients, partly because they must remain at the college until retirement if any benefit is to be received, partly because they realize that financial changes in the college budget might lead to discontinuance or revision of the plan, and partly because, under the informal statements, the amounts to be paid upon retirement are highly indefinite. A number of the colleges that had nonfunded arrangements in 1939 have now changed over to funded plans or have apparently dropped their plans entirely. T H E S E PLANS VABY

CANADIAN

GOVERNMENT

ANNUITIES

M O S T or THE Canadian colleges and universities that have retirement plans cooperate with their staff members in purchasing the maximum annuity of $1,200 a year under Canadian Government annuities. These

SOCIAL

SECURITY

CS

colleges are listed in Appendix G, and the Canadian Government annuity plan is described in Part IV. After the maximum annuity has been reached, additional amounts are usually provided by purchase of TIAA or other annuities. SOCIAL

SECURITY

of the federal Social Security Act on college employment becomes more keenly felt each year as a greater number of people come to understand social security benefits and as the employment market continues stringent. Small indeed seems to be the number of college employment officers who have not run into competitive problems in recent years in trying to maintain a competent staff of nonacademic employees. College employment continues to be excluded from social security coverage under two provisions. Employment in nonprofit institutions, including privately administered colleges and universities and religious, charitable, scientific, and literary organizations, was specifically excluded. Employment in publicly administered colleges and universities comes under the broader exclusion pertaining to employment by a government or an instrumentality of a government. When the Social Security Act was introduced college officers were among those who requested exception of employment by nonprofit institutions from its coverage. Opposition was based on fear of federal domination of colleges, an imperfect understanding of the provisions of the law, a distrust of further centralization of authority in the federal government, and reservations as to the soundness of provisions in the original law. In the ten years that have passed since the inauguration of social security, attitudes have changed greatly. The amendments of 1939 removed some objections, and many college authorities now believe it unwise for colleges to be in a position of opposing a broad social movement toward economic security in old age and for survivors. Compared with the vast veterans' program, and armed services research projects contemplated for colleges, there seems little reason to fear that federal intervention in educational affairs will be increased merely because of the inclusion of college employees under a broad plan that covers tens of millions of others. In general, sentiment among college officers now favors coverage by the old age and survivors' insurance provisions of the act, although apparently a majority continue to favor exemption from the unemployment compensation sections. It is widely T H E INFLUENCE

C4

SOCIAL

SECURITY

recognized t h a t the present old age and survivors' benefits would provide a substantial p a r t of t h e necessary pension for lower-paid, nonacademic staff members, and would provide a foundation for t h e greater benefits needed for faculty members and other higher-paid employees. Prospects for early inclusion do n o t seem bright a t present. T h e r e are no really difficult technical questions connected with extension of coverage to nonprofit organizations such as exist with respect t o public employment. However, a militant effort will probably be necessary to impress upon Congress t h e importance and urgency of extension before it will occur. Coordinated effort has not yet developed, nor has complete agreement. A minority is expressing opposition, or suggesting special t r e a t m e n t t h a t m a y sound reasonable b u t is impractical, and this weakens t h e approach of those who sincerely desire extended coverage. BENEFITS

PROVIDED

BY SOCIAL

SECURITY

P a y m e n t s t o replace loss of income a t retirement or death of an employee are determined by a formula which is a compromise between benefits proportional t o rate of contributions paid and benefits a d e q u a t e for subsistence. Low-paid workers receive greater benefits in proportion t o their contributions, and payments vary with t h e number of dependents in a manner quite impractical for life insurance companies t o arrange. T h e retirement pension will usually range from $20 t o somewhat more t h a n $50 a month for a wage-earner, with half as much for his wife after age 65, and with additional a m o u n t s if t h e y h a v e minor children. T h e widow's benefit is % of t h a t for which her h u s b a n d was or would h a v e been eligible, and a child's benefit is half t h a t of t h e worker. A moderately large low-income family t h u s has protection equivalent t o rather sizable lifetime savings available upon retirement, and a death benefit for survivors t h a t m a y be equivalent t o well over $10,000 of life insurance. As these benefits become widely appreciated, colleges without retirement and insurance arrangements m a y find it even more difficult to a t t r a c t good maintenance workers. For a number of years delay in inauguration of plans was occasioned b y the hope, if not t h e expectation, t h a t social security would soon be extended. M a n y colleges are now moving ahead t o cover all employees with plans so arranged and administered t h a t they can be easily adjusted without loss of equity t o participants if and when t h e social security exclusion is lifted.

PART P L A N N I N G C O L L E G E

II

A N D

R E V I S I N G

R E T I R E M E N T

S Y S T E M S

OBJECTIVES

OF

A RETIREMENT

PLAN

M A N Y MOEE PEOPLE seek independence in old age than ever achieve it. Freedom from financial worries, freedom from dependence on other people, freedom to throw off the harness of work when infirmities make it burdensome, freedom to pursue hobbies and studies—all of these and more contribute to the desire for independence in old age. If a college can help its staff members look forward to security during retirement, it may well expect greater loyalty and efficiency during their working years. College boards of trustees and administrative officers repeatedly verify that well-designed plans for retirement and for providing income after retirement help them: 1. To effect the orderly retirement of superannuated employees 1. To attract promising new talent 3. To retain above-average staff members 4. To part easily before retirement with those who are not measuring up to the college's standards Barring earlier death or retirement, almost all employees finally outlive their periods of usefulness to the college. In the absence of a retirement plan, a college is faced with keeping elderly persons in classrooms, research laboratories, and administrative positions to the detriment of students and the dissatisfaction of younger colleagues. Many are the disadvantages of continuing in teaching and administrative positions persons no longer competent to fill them creditably. Service employees often may be moved into successively easier jobs as the ravages of age impair their efficiency, although this may be uneconomical. But faculty members and administrative officers cannot so easily be shifted. A teacher who has endeared himself to his classes for thirty years usually continues to teach so long as he is retained on the college budget. If he happens also to be a department head, he probably will hold that title long past his period of major usefulness, if no retirement plan exists. The primary purpose of a retirement plan, then, is to assure the college that it may part in a socially acceptable manner with its older staff

28

OBJECTIVES

OF

A RETIREMENT

PLAN

members. A good plan will go much further than this. I t may improve to a marked degree the professional attitude of the entire staff; it may assist materially in attracting and holding promising men; and it may aid in parting amicably with staff members who have ceased to develop. Unfortunately, some institutions^provide satisfactory retirement income for their staff members but fail to accomplish the other objectives of a commendable retirement plan. The type of arrangement that is most faulty in this respect is the forfeiture, or nonvesting, plan, so called because a staff member whose employment at a particular institution is terminated before retirement loses all or part of the benefits built up for him by his employer's contributions on his behalf. A clear understanding of the broad objectives of a retirement plan will aid the college in avoiding the pitfalls inherent in unsound arrangements. Attracting good men.—Today colleges are in competition, not only with other colleges, but with financial and industrial employment and the government in attracting good men for teaching, research, and administrative positions. The monetary returns from college employment are meager in comparison with those from many other areas of economic life. Yet colleges have the services of many of America's most outstanding men and women. Income, though modest, is relatively stable. When satisfactory provision for retirement is available, the college staff member is assured of reasonable security throughout his life. Security is the only balance of a material sort that most teachers can set against the monetary prizes of other employment. It is obvious that a retirement plan that provides nothing for the staff member who leaves before retirement does not assure him of security. Some of the most promising professional men have declined offers of otherwise attractive college positions because there was no satisfactory provision for retirement benefits. Many of those who turn down such offers are considering more than their own retirement income; during their working years they want to be associated with enterprising, progressive leaders in their profession, in an atmosphere congenial to the greatest development of the institution and, therefore, of each individual. For many years college retirement plans have been considered advantageous in attracting superior staff members. Today presidents of many colleges without retirement plans and in serious recruitment troubles have placed establishment of a plan in the "must" category for immediate attention. Holding good men.—The same factors that help a college attract good men assist it in holding them. It is the legitimate hope of a young man

OBJECTIVES

OF

A RETIREMENT

PLAN

«9

who has already shown ability in a scholarly field to become an authority in his specialty and perhaps to assume responsibility for leading a group of able and progressive associates. In deciding whether he will stay with a particular college, he will usually consider whether or not the positions above him will be cleared through a regular pnd definite retirement procedure, and whether or not he can expect to grow in eminence and responsibility at that institution. Certainly a good retirement plan will help ease his mind on these two points. Parting with misfits.—Sometimes an individual's professional growth in a particular atmosphere becomes inhibited. From any one of a variety of causes a promising beginner may later fail to live up to his excellent prospects: overconfidence as to his inherent capacities, lack of opportunity for advancement in the special field in which he has become interested, or, perhaps, conflicting personalities among his associates or even among their wives may interfere. When such situations develop, it is often mutually advantageous for the person concerned to move on to other employment. The change is greatly facilitated if the withdrawing employee takes with him the retirement benefits that have been provided up to the time of change. Individuals employed by colleges with forfeiture retirement plans have sometimes said quite frankly that they could not afford at their age to sacrifice their retirement benefits by leaving the college, even though they were convinced that their own advancement and the health of the college would be aided by a change. A plan that entails forfeitures upon withdrawal from service gives the individual two options: (a) to "get out while the getting is good"; or (b) having stayed for a considerable length of time, to continue almost regardless of how untenable the situation becomes. An outstanding man usually can command enough salary in another position to make it worth his while to leave if he so wishes. Therefore the forfeiture plan will not hold him. But it will tend to hold the person whose capacities are limited and who, if he can get any other job, will find it so little better than the one he has that he cannot afford the loss of retirement benefits. I t is of interest to note that as a general rule the retirement plans of privately administered colleges and universities indicate a more thorough grasp of the implications involved than do self-administered plans for public employees or retirement plans for industrial workers established to supplement social security benefits. Of the colleges that have seriously defective plans, the majority are publicly administered universities and state teachers colleges.

SO

ANALYSIS

ANALYSIS

OF

OF

PROVISIONS

PROVISIONS

E N O U G H HAS B E E N SAID to illustrate the fact that a retirement system must be carefully constructed in all its provisions if it is to operate to the greatest advantage of the college. If the sole objective in setting up a plan is to provide incomes for those who stay with the college until retirement, then the cheapest plan would be one providing no benefits before retirement—no death benefit and no benefit if an employee severs his employment before he retires. But the experience of colleges that have tried "cheap" plans leads to the inescapable conclusion that their expected low cost is illusory. Unfortunate indeed is the college that finds itself hard pressed in attracting and holding good men and unable to get rid of mediocre ones simply because it paid too little attention to the details of its retirement system. Some institutions have accepted, without due consideration, the advice of an insurance specialist or actuary. An insurance specialist may well do much more harm than good if he recommends provisions borrowed from other types of plans that are wholly inappropriate for colleges. It is by no means always the case that these men are motivated by selfish desires; sometimes they have dealt so long with retirement plans for other groups that they seem unable to see their disadvantages when applied to colleges. They may be experts when dealing, for example, with industrial pension plans, but quite the opposite with regard to plans suitable for colleges. On the other hand, it is gratifying to note that insurance men who are members of college boards frequently press most strongly for plans providing free mobility of academic talent and other essentials of a good college plan. I t is a problem in tact and discretion for a college officer, a faculty committee, and members of the board of trustees to determine whether interested persons are acting from selfish motives, from a lack of understanding of the factors involved in college plans, or from a full comprehension and a sincere desire to improve the standards of the college. Planning a retirement system for a college is not a bewildering, technical job, but it is one that requires careful thought. A knowledge of the niceties of actuarial science and annuities is not necessary. The important decisions to be made have to do with college objectives and administration, and must be made by the college itself. A list of the provisions regarding which decisions must be made will illustrate: 1. Who is to participate and when? 2. Shall participation be compulsory or optional?

ANALYSIS

OF

PROVISIONS

31

8. How shall the cost be shared? 4. What shall be the retirement age? 5. Shall supplementary benefits be paid in recognition of service performed for the college prior to the establishment of a plan? 6. Shall an employee who withdraws from service before retirement retain the benefits purchased by his own and the institution's contributions? These provisions are not merely incidentals to the goal of assuring a satisfactory retirement income; they are essentials in that purpose and in the broader objective of contributing to the welfare of the college, its staff members, and its students. The plan will provide greatest advantages if decisions are not made lightly or, once made, allowed to stand for many years without review and reconsideration. Some one person or group of persons—the president, the business officer, or a committee of the faculty or board of trustees—should accept continuing responsibility for analyzing the needs of the college and fitting the retirement plan to those needs. CLASSES OF EMPLOYEES

COVERED

T o be of maximum value, a retirement plan should cover all persons for whom the institution may reasonably feel a responsibility in retirement. In early college retirement plans, faculty and administrative officers were normally the only employees included. Frequently the restrictions were even more severe, with only persons of the rank of assistant professor and higher being covered. Today most new retirement plans cover all academic staff members including instructors, and administrative officers of equivalent rank, and a growing number include all employees. College officers are now studying the problems of coverage of nonacademic employees. This subject is of such importance that a separate section will be devoted to it. Many colleges exclude part-time and definitely temporary employees. Little is gained by including temporary employees, unless some are so classified for too long a period. Whether or not to include part-time employees is largely a matter for each college to determine. They probably should be included if the college runs any risk of difficulty through retiring them with no income in sight. VOLUNTARY OR COMPULSORY

PARTICIPATION

During a major portion of an individual's normal working years, participation in a retirement plan should be a condition of employment..

32

ANALYSIS

OF

PROVISIONS

Participation may well be optional at early ages, say before age SO is attained, and during a stated preliminary service period. A college may also wish to make it optional for those in service when a plan is first established. Except for these modifications, participation should be compulsory. The experience of colleges with no retirement plans or with voluntary plans shows that it is wishful thinking to believe that all or even a substantial portion of college staff members will make adequate provision for their old age if left to their own devices. Few people realize the large sums of money that must be saved during working years in order to provide an adequate income during the rather considerable number of retirement years that lie ahead. Perhaps we are hypnotized by the oft-repeated statement that the life span from birth in America is now about 63 years for men and 67 years for women. We do not so often notice that among annuitants who have reached age 65 a man has a life expectancy of some years beyond that age, a woman has about 17J4 years, and both may live to beyond 100 years of age. Assuming present annuity rates, a capital sum of more than $15,000 is needed at age 65 to purchase a benefit of $100 a month income for the rest of a man's life; it takes $18,000 to provide the same benefit for a woman. Not only is the size of the sum necessary to provide $100 a month annuity not generally appreciated, but the improbability of saving an adequate amount independently out of college salaries in the face of changing investment conditions and fluctuating living costs is usually not weighed heavily enough by the individual. Furthermore, the capital sums mentioned assume the use of annuities so that principal as well as interest may be spent safely. If interest alone is to be used, then a capital sum of $40,000 is needed to provide $100 a month assuming a rate of interest of 3 percent, which is higher than that now obtainable on government bonds or most other conservative investments. Another interesting question might be asked here. How many members of the board of trustees of a college that has no retirement plan have an adequate conception of the money involved when they vote Professor Jones "a pension of half his present salary for life"? The full cost is to be borne by the college; Professor Jones has made no contribution to his pension. An actual case will illustrate the point. The board of one college voted a pension of $200 a month to a staff member who was believed to be on his death bed. The board thought it was making an appropriation of perhaps $600 at the outside; twenty years later the staff member was still living, having already cost the college tens of

A N A L Y S I S OF

PROVISIONS

33

thousands of dollars in spite of reductions in the original amount of the pension. The employing institution is more interested in required participation in the retirement plan than is each individual staff member. The college is willing to pay premiums on annuities in the assurance that its employees will do likewise and that upon the arrival of retirement age the change to annuity income may be made easily. Under a voluntary retirement plan a college may make substantial outlays without accomplishing this purpose. It is not merely theory that the very persons who have a tendency toward improvidence are among the ones who will not join the plan. A person who will not put up part of his salary in order to obtain an equal amount from the college either is underestimating the amount of money that must be accumulated for retirement, is unable to budget successfully, or, in the case of the few exceptions that prove the rule, thinks he will have a definite, sizable, independent income after retirement from some other source. Staff members who may be the most valuable to the college during their productive years, well liked and highly regarded by students, alumni, and faculty, may, if left to their own devices, reach retirement age without funds. The college may find itself accused of cruelty if it discharges them with no income in sight during their remaining years. Yet to keep a staff member in service for lack of income after he should be retired, is a hindrance to students and colleagues and is perhaps unfair to those who do participate in the plan and are retired at the proper age. If a free pension is granted to the improvident staff member, it may relieve his own problems, but it again is decidedly unfair to persons who have shared the cost of their retirement with the college. A few colleges have tried to solve this problem by having any employee who chooses not to participate sign a waiver freeing the college of obligation upon retirement. College officials who have had experience with this say that a waiver signed many years before provides scant surcease from embarrassment on the part of the college when a staff member must be retired without any income available. Under a voluntary plan some persons may have to be kept on the staff regardless of their capacities with resulting dissatisfaction among younger employees. One of the real advantages in a good retirement plan is the assurance it gives to men coming up that the deanships, department chairmanships, and full professorships will be cleared automatically by a sound retirement rule so that they may look forward to a successful career at the institution.

34

ANALYSIS

OF

PROVISIONS

I t may be considered impractical, when a new plan is installed, to require participation of employees who have worked at the college for some years and whose employment understanding has never included participation in a retirement plan. While some colleges require participation of all eligibles after attainment of a specified age and completion of the normal period of preliminary service, others make participation voluntary for employees in service when the plan is installed, sometimes adding that participation will be required when they receive an increase either in rank or in salary. Occasionally, participation is made voluntary until a certain date in the future, usually one or two years after the inauguration of the plan, after which date all eligible persons must participate. PRELIMINARY

SERVICE BEFORE

PARTICIPATION

Almost all college retirement plans state a preliminary service period during which participation is either not available or not required. The period chosen is not fundamentally important unless it unduly delays entrance into the plan and therefore reduces substantially the income available at retirement. A commendable suggestion that has met with widespread acceptancc in recent years is to make participation optional after a short waiting period or none at all, and compulsory only after completion of this or a longer period and attainment of some such age as 30 years. Under this minimum age rule for compulsory participation, few persons in their twenties will choose to participate, but those who do are likely to be the ones whom the employer is most anxious to develop. This age-30 rule is emphasized because it has much to commend it. I t is an automatic, easily understood rule that does away with a considerable part of the turnover problem and dissatisfaction of younger instructional, secretarial, clerical, and other employees who may not be interested in retirement benefits. There is nothing magic about age 30. Some institutions may decide that participation should begin at an earlier age. There is little to be gained by making the age of entry much higher than age 30, for this may merely result in inadequate retirement benefits. It is important that those who have reached an age at which employment is fairly stable should begin to participate in the retirement plan as early as practicable in order to spread the cost of accumulating retirement income. Therefore the waiting period after appointment and before required participation should not exceed one or two years, and the attainment of age 30. Regardless of the established waiting periods, most colleges have found

ANALYSIS

OF

PROVISIONS

35

it advantageous to permit immediate participation for those who bring with them approved annuity contracts started elsewhere. Bryn Mawr College extends the same privilege to persons who have been in employment covered by the federal Social Security Act. RETIREMENT

AGE

At what age should a college retire its staff members? As in other problems in human relations, there is no formula that will at once deal equitably with all persons concerned. Perhaps sometime we shall have developed yardsticks to measure physiological age as nicely as we now measure chronological age, to measure the intangibles of mental elasticity, artistic and scientific awareness, sensitivity to the problems of youth, and the variety of capacities that make up the good teacher, but we have not yet. Who is to say when Titian became old? At 98 he painted his "Battle of Lepanto." Or Goethe, who at 80 completed Faust? Franklin, Holmes, or our present-day elder statesmen, Stimson and Baruch? Who is to say when they should have been retired? The conspicuousness of these exceptions perhaps merely supports the generally held conclusion that the ravages of time take their toll of most men in their middle sixties or early seventies. The college board or president is faced with establishing some sort of procedure. There are several methods of dealing with the problem; each has its adherents and each its critics: 1. Establish no retirement age, allowing each person to choose his own 2. Allow gradual retirement, a "tapering-off" period 3. Retire all persons at the same age, without exception 4. Establish a "normal" retirement age beyond which continuance of employment is at the discretion of the board, with the burden of proof of fitness to continue resting on the individual Many faculty members, but few persons charged with the administration of a college, will favor allowing each person to choose his own retirement date. The second method, a tapering-off period, seems to commend itself as realistic; a man does not suddenly lose all effectiveness the day he turns 65 or 70. But apparently this method runs into so many secondary difficulties that few colleges have adopted it. Suppose a man is teaching and is also a dean or the head of a department— which of his duties should be tapered away? He may wish to retain his administrative duties, but the college officers and the younger men on the faculty may prefer that he teach a few courses. Most colleges desire a clean and complete break at retirement. 1 1 See Henry James, "How to Determine the Retirement Date," Association of American Colleges Bulletin, XXX, No. 4 (December, 1044), 542-51.

M

ANALYSIS

OF

PROVISIONS

Many college trustees and officials do not want to have to decide whether an individual should or should not continue in service. They prefer to apply a fixed retirement age to all alike, with no provision for extension of service. When this procedure is used, the retirement age selected may be fairly high—70 years—although a number of colleges use lower ages. The selection of an arbitrary age may deprive the college of some men who are in possession of their full capacities; it may delay the retirement of others too long. But it assures one and all that there is a definite date on which college salary and work will cease, and allows them to plan accordingly. Another frequently used procedure is to specify in the retirement rules a normal retirement age and to allow extensions beyond this age, but only by special vote of the board of trustees or other employing authority. This rule indicates to each person concerned that his retirement is to occur on a certain date; that if any extension of service is to be made the burden of proof as to fitness to continue rests on him; that if service is continued the decision must be reviewed and approved, perhaps each year, at the higher levels of the university administration. The danger is that such extensions of service, unless controlled, may come to be the rule rather than the exception. This can be partly mitigated by prohibiting any extensions after a specified age, 68 or 70. Combining these provisions, the typical recently established college retirement plan states a normal retirement age of 65 years and provides for extensions by the governing body on a year-to-year basis to age 70. Under skillful administration, this rule helps to avoid placing the stigma of uselessness or deterioration on the person who is retired at the normal age. The faculty may come to understand and accept the rule that no one will be continued unless there is a pressing and unusual need for his services, and yet it affords the college elasticity in meeting its own needs. This procedure was helpful during the war years, when it was often impossible to replace older staff members. When a retirement plan is first inaugurated some colleges use a higher initial retirement age for older persons on the staff. For instance, those age 67 and over when the plan begins are to retire at age 70; those between ages 64 and 66 inclusive, at age 69; and so on, with those now under age 55 to retire at age 65. Another method occasionally used is to state a retirement age, such as 65 years, and add the words "the establishment of this plan shall not require the retirement of anyone before 19 ," a date perhaps one or two years after the plan begins. A few colleges retire women at an earlier age than men. This does reduce the income available to women substantially, since not only are

ANALYSIS

OF

PROVISIONS

37

they contributing toward annuity premiums for a shorter period, but their life span is greater than that for men. However, this lower income is partially compensated for by the fact that few retired women have dependents that they must support. Neither the college nor the individual can know many years beforehand at what age a particular individual should retire. Thus it seems advisable to arrange retirement income by means of contracts that permit adjustment of the age at which annuity payments are to begin either to an earlier or a later date than originally selected. TIAA contracts provide elasticity in this respect below age 71. As a matter of practice, the company permits extensions beyond that age if college service continues. Colleges that participate in plans covering public employees vary in this respect, but most of those with compulsory retirement ages do permit earlier voluntary retirement. A lower age limit and service for a stated number of years, or both, may be specified for early disability or voluntary retirement. As a general rule, contracts of agency life insurance companies used in college plans permit anticipation of the normal retirement date but not delay. They state that annuity income will commence on the normal date regardless of whether or not service is continued. Added to this rigidity is the sometimes encountered provision that late entrance into a plan will also make retirement late. Thus a normal retirement age of 65 years may be established but with the provision that those who begin participation after age 55 will retire ten years subsequent to the date of participation. It is obviously unfair to require a man of long service to the college to retire at age 65 but to permit and almost require a man with short service to continue perhaps well after that age. The original selection and the subsequent administration of retirement ages unquestionably call for tact and administrative ability. Retirement procedure affects the attitudes, not only of those who are being retired, but also of younger members of the staff. Whatever retirement rules are set up should be widely distributed and definitely understood by each staff member years in advance of his own retirement. A good practice is to hand a copy of the rules to each newcomer to whom they will apply, and to reaffirm the rules to older persons some years in advance of their expected retirement date. Contentment in retirement depends partly upon how long and how intelligently it has been anticipated. For most persons retirement comes as a shock; the shock may be greatly reduced, however, by foreknowledge of the date and by provision of regular income.1 1 Henry James, When to Prepare for Retirement Association: New York, 1944).

(Teachers Insurance and Annuity

38

ANALYSIS

FUTURE SERVICE

OF

PROVISIONS

BENEFITS

The primary long-term objective of a retirement plan is to provide satisfactory regular incomes for retired staff members. To accomplish this most colleges make periodic contributions during employment of staff members toward the purchase of annuity benefits. There is, of course, a direct relationship between the amount contributed during the period of active service and the size of benefits resulting from these contributions. Most colleges fix the contribution rates of both the college and the individual, usually as a percentage of salary, and let the benefits purchased be what they will. Others establish beforehand a certain level of benefits and calculate the amount that the staff member and the college must pay to approximate those benefits. Still others fix the level of the employee's contribution, leaving the college to pay whatever is necessary to provide a predetermined benefit. A number of colleges and universities have established plans with predetermined benefits, usually based upon a percentage of (1) final salary; (2) average salary during the five years preceding retirement; or (3) average salary for all years of service. This method is seldom used by privately supported colleges, but it is frequently found in plans covering employees in publicly administered institutions. Careful analysis of all that is involved generally convinces college administrative officers that this method is unwise. The two major risks for the college in a fixed benefit plan should make any administrator take heed. In the first place, salaries of college staff members have varied rather widely during the twentieth century. This instability of salaries was a major factor in forcing a reduction after World War I in the free pensions granted by the Carnegie Foundation for the Advancement of Teaching. The original expectations from the foundation were based upon percentages of final salary, and when salaries were increased materially during and after World War I, the foundation found itself burdened with much heavier commitments than it had anticipated. Some colleges with similar private plans found themselves in the same trap, and a few are embarrassed in like manner by the present period of increasing staff salaries. The second major risk is that a plan guaranteeing fixed benefits involves the college indirectly in the annuity business. Declining interest rates and increasing longevity have caused life insurance companies to lower their guaranteed benefits when making commitments for the future, with consequent automatic increases in premiums to be paid by the college and perhaps its staff members if preselected benefits are to be provided.

ANALYSIS

OF

PROVISIONS

S9

The majority of institutions do not guarantee fixed benefits related directly to final or average salary. Instead, they fix contributions on the part of the individual and the college as a percentage of the individual's salary and let the benefits be whatever may be purchased by the joint contributions. This method avoids the risks mentioned above. Likewise, it automatically relates retirement income to salary and period of service. It seems equitable for an institution to contribute toward a retirement annuity contract for each member, during most of his years with the college, an amount related to his salary and to let the benefits be what can be purchased by the joint contributions. Whether the fixed benefit method or the fixed contribution rate method is used, the ultimate retirement benefits need to be adequate. Most college retirement plans are weak in this respect at the present time. A large majority of the fixed contribution plans require contributions of 5 percent of salary from the participant and 5 percent from the institution, rates that no longer produce reasonably adequate retiring allowances. Likewise, the majority of fixed benefit plans establish a ceiling on benefits that is too low to meet the needs of retiring college teachers. PRIOR SERVICE

BENEFITS

Almost all college retirement plans, when first installed, need to make supplementary provision for those persons with substantial service when the plans begin and of age so advanced that normal contributions for future service benefits will not produce satisfactory retirement incomes. While the cost of prior service benefits is only transitional, it is often substantial for a number of years and has, unfortunately, caused some colleges to delay establishment of retirement plans. They have not seen their way to meet the cost of both future and prior service benefits at the same time. For the moment they overlook the fact that the situation has little chance to improve by waiting; it will probably get worse. Hence a college will profit by establishing a plan providing at least for future service benefits and work out the problems for older persons in service as best it can. Many college retirement plans make no formal mention of prior service benefits. A number of these colleges expect to establish systematic past service allowances; others expect to consider the exigencies of individual cases and make supplementary payments only when it seems essential. Some colleges provide that, for persons in service when the plan is inaugurated, the annuity in recognition of future service will be supplemented if necessary to bring the total benefit up to a specified

40

ANALYSIS

OF

PROVISIONS

minimum. A past service benefit frequently included in plans today is one percent of salary of the eligible staff member on the date the retirement plan was installed, multiplied by the number of years of service prior to that date and after attainment of age 30. F o r example, if a staff member aged 50 has a salary rate of $5,000 on J u l y 1, 1947, the effective date of the retirement plan, and had worked for the college since he was 28 years of age, his annual retirement benefit on behalf of past service would be $1,000 (twenty years of creditable past service multiplied by one percent per year equals 20 percent multiplied by $5,000 equals $1,000). Some institutions use a higher percentage of salary and recognize prior service only after a higher attained age. T h e benefits for each year of past service normally should bear a reasonably close relationship to benefits for each year of future service. A number of colleges establish arbitrary minima and maxima to their benefits for prior service. A frequently found limitation is that the past service benefit formula shall not operate to make the total retirement benefit more than a specified dollar amount, including the amount from the annuity purchased under the regular contributory plan and allowances, if any, from the Carnegie Foundation and Carnegie Corporation. As a rule, supplementary benefits for prior service are paid out of the current budget as they become due. Some colleges build up a fund, from gifts or other sources. Additional institutions purchase annuity contracts by paying either single premiums or periodic premiums calculated to provide the desired benefits. When this is done, the contracts are normally owned by the institution so that in event the participant dies or withdraws from service, the proceeds are paid to the institution. When the burden with respect to each individual is spread over his remaining service period, the load can be fairly well distributed except for those who must retire soon. INCOME ARRANGEMENTS

AT

RETIREMENT

I t is an advantage to the individual and therefore to the college to permit selection among various income arrangements up to the time of retirement. T h e participant should be allowed to choose between an income ceasing at his death and an income continuing to his wife if she outlives him. I t is also helpful if he may choose a provision whereby if he dies before the total of annuity payments made has equaled the accumulation under his policy at the time of his retirement, the remaining payments will continue to his estate or designated beneficiary. These options are fundamental because both the college and the participant are interested in protecting the participant's wife or other dependents.

ANALYSIS

OF

PROVISIONS

41

With family conditions changing as rapidly as they do at advanced ages, the prospective annuitant should be allowed to select from among various options, and to make his selection at any time before payments begin. TIAA contracts provide these options and allow selection among them up to the beginning of annuity payments. Plans funded through contracts of other life insurance companies permit choice of methods of payment, but usually the selection must be made at least five years in advance of retirement if payments are to continue throughout the life of the spouse. Under most plans covering public employees, the annuitant has a choice among various income arrangements at retirement. There is some rigidity and difference among the various states in the options provided, but protection of the spouse of the annuitant is almost always available. EARLY RETIREMENT

FOR

DISABILITY

The economic problems arising when an employee becomes totally and presumably permanently disabled occur quite infrequently, but are distressing to the individual, his family, and usually to the employing college when they do occur. Most retirement plans provide some income for a disabled person and his family. Self-administered retirement plans for public employees and religious workers usually permit earlier retirement for total and permanent disability if certain qualifications are met; these almost always include the completion of a stated period of employment service. Benefits are usually based upon the credits already accumulated for the individual in the retirement plan, after adjustment for early retirement, and are frequently supplemented by an additional allowance. Under TIAA contracts a policyholder may start receiving annuity payments of a reduced amount at an earlier age than originally contemplated, and may at the time payments begin select among various income arrangements, including one that provides benefits throughout his life and that of his wife. Contracts of other companies likewise generally permit selection of an earlier age for commencement of the annuity. However, choice among settlement options normally must be made some years before payments commence. This may result in a difficult situation for an individual who becomes disabled, needs the income from his contract starting immediately, but has not selected an option protecting his wife after his death. Disability benefits under these arrangements vary from little or nothing during early years of participation to benefits approaching adequacy

42

ANALYSIS

OF

PROVISIONS

after many years of service. But regardless of any benefits available under a retirement plan, some cases of severe economic hardship may arise in connection with disability, especially if it occurs at an early age, and the cost of one such case may be substantial. It is suggested that the college handle cases of disability on an individual basis. Benefits can thus be adjusted to any amounts available under a retirement plan and to the needs of the disabled person and his family, and account can be taken of the college's responsibility in the matter. Individuals are probably less likely to try to take advantage of their associates and the college than of a distant insurance company. College officers can generally detect cases of malingering more quickly. Even if an appropriate arrangement can be found, the cost of handling disability benefits through an insurance company is likely to exceed considerably the cost of careful handling by college officers locally. DEATH BENEFITS

BEFORE

RETIREMENT

A useful by-product of funded retirement plans is a benefit payable in event of death occurring before annuity payments begin. This is discussed in Part I I I . RIGHTS UPON SEVERANCE OF EMPLOYMENT At first thought it might seem that an institution has little interest in the treatment accorded by the retirement plan to an employee who withdraws from service before retirement. However, this treatment is a major factor in distinguishing among satisfactory and weak college retirement plans and deserves careful study. Free mobility of academic talent among our institutions of higher learning contributes to the eminence of individuals, institutions, and the system as a whole. It is obvious that if every time a faculty member moved to another institution, he lost a large amount of his provision for retirement income, many faculty members would reach retirement age with little or no income in sight, and others would hold to jobs where growth in their specialty would be stunted. Colleges would suffer from lack of the invigorating influence of interchanging staff members. A glance at Who's Who in America and the list of those persons starred in Men of Science shows the importance of mobility. The Carnegie free pension system early in the century provided for interchange of staff members without loss of pension rights among a necessarily restricted list of institutions. At a time when little enthusiasm for full vesting of annuity rights in the individual could be found elsewhere in this country the Carnegie Foundation for the Advancement

ANALYSIS

OF

PROVISIONS

43

of Teaching was pointing out its advantages and the serious disadvantages of forfeiture, or nonvesting, plans. Later it was decided to extend the idea of full vesting, and, therefore, mobility of academic talent by funding retirement income expectations through a separate company issuing fully vested annuity contracts owned by staff members. The contract holder retains the value of all contributions made on his behalf, but he cannot cash the contract or otherwise defeat the purpose of providing a retirement benefit. Social security legislation also has incorporated the fully vested principle with respect to transfers within covered employment. A worker may change jobs freely among employments covered by social security without forfeiting his retirement or survivor benefits, and without any opportunity of dissipating them. Two related questions are pertinent to a discussion of rights granted a withdrawing employee: one is whether or not the employee is to be allowed or forced to cash in the accumulation set aside during employment for his retirement; another is whether the employee is to receive the full pension credits created by his own and the institution's contributions, or whether he must forfeit the amounts contributed by the emplojer, and perhaps all accumulated interest. There is almost nothing to be said in favor of a plan under which the withdrawing employee has no alternative but to accept cash when he leaves. Such a plan fails to help a staff member make provision during employment for his retirement if he leaves the particular job before retiring. It amounts solely to a forced-savings system under which the staff member receives back salary deductions made during his period of service. Somewhat better are plans under which the employee may elect to preserve an income right, or take his accumulated contributions in cash. The weakness is that too many persons are happy to get their hands on cash even if there is a substantial penalty for taking it instead of an annuity. To make cash available upon withdrawal may even be an inducement to quit a job. The net result is that no provision for an individual's retirement income is built up for the years he worked for a particular employer. Most college officials are determined that the college shall not encourage the dissipation for other purposes of money set aside to furnish retirement income. A more fundamental question is whether the college should contribute toward retirement income rights for staff members during their years at the college, regardless of whether they stay until retirement. Whether this question is analyzed upon the basis of advantages for society, education, the college, or the individual, the conclusion is that a satisfactory

44

ANALYSIS

OF

PROVISIONS

retirement plan must provide each participant with an individual annuity contract which he owns and can take with him upon changing employment, but which provides no settlement to him other than as an annuity. The advantages to society, to education, and to the individual require only brief statement. With respect to most withdrawing staff members, private industrial retirement plans and those for public employees usually result in liquidation of whatever provision has been made for old age income. The number of persons who change employers once or several times far exceeds the number who stay with one employer until retirement. The social loss due to the liquidation of retirement provisions that result from such transfers is immense. If national social security were organized on such a basis, it would not even approach a solution of our problems. College administrators seem to be in almost complete agreement as to the benefits of free mobility of academic talent among institutions of higher learning. An example of its workings with respect to retirement plans is in order. At the end of 1946 some 300 colleges and universities and over 150 junior colleges, private secondary schools, and scientific or research organizations were funding their retirement plans through fully vested, noncashable retirement annuity contracts issued by TIAA and owned by individual staff members. A few additional colleges provide like benefits through other sources. Teachers, research men, and scientists thus can move freely among more than 450 institutions—from college to college, from college to research organization and back to the college—all the while accumulating provision for their retirement. The growing number of research and scientific organizations with such plans is important; mobility of talent among these organizations and the colleges is beneficial both for the institutions and for the individuals concerned. It is certainly to the individual's advantage that he have the benefit of whatever contributions are made toward his retirement by each employer for whom he works. If we need any proof of this obvious statement, we have only to talk with those who have suffered severe forfeitures upon changing employment. There are all too many persons who have worked long years for one employer and then have lost their jobs and with them most of their provision for retirement income too late in life to be able to provide substitutes. It is generally accepted that a good retirement plan not only makes it possible for the college to retire its superannuated staff members, but

ANALYSIS

OF

PROVISIONS

45

also aids it materially in obtaining and holding outstanding men, parting with those who have not developed as anticipated, and, in general, improving the morale of the entire staff. In accomplishing these objectives, the provisions regarding withdrawal from service are crucial. The right to carry his pension accumulation with him unquestionably makes a strong appeal to an ambitious young man who has no way of knowing whether or not it will be to his best interests to remain throughout his working years with a particular institution. With this right he can venture with more freedom into fields which seem attractive. If he has two or more otherwise similar offers of employment, he certainly will tend to choose one in which his pension rights are vested. Colleges are now, and perhaps will be for a number of years, faced not only with an unprecedented problem of recruiting new teachers, but also with holding the ones they have against the competition of other employment. Many of the retirement plans in industry, and plans for public employees, were established partly with the thought that they would reduce turnover by inflicting forfeitures of pension rights on employees who leave. Whether or not these plans have accomplished this purpose among the employees they cover is not the question here; the question is whether such provisions are advantageous among educational institutions. College officers who have fallen heir to long-existing forfeiture plans indicate that these plans do, for a fact, reduce turnover, but only among the employees they least desire to retain. Mediocre and unprogressive staff members and those whose development has been arrested are least likely to receive or to seek attractive offers elsewhere and are thus saddled upon the college. However, if the staff member takes with him his full annuity provision, he can afford a less good offer elsewhere, and the college to which he goes can afford to experiment since the individual will not become an unduly heavy pension burden. Once a move has been accomplished, both of the colleges concerned may benefit, and the individual may be stimulated by his new environment. But what about good men? Will a forfeiture plan help to hold them as it does the mediocre and those who are in a rut? Here again, college administrators working with such plans indicate that their effect is the opposite of what might be expected. Although many college faculty members stay at a particular institution until retirement, few at any one time expect to stay that long or wish to be committed to it. If they know they stand to lose the college's contribution when they leave, their attitude is that they had better "get out while the getting is good."

46

ANALYSIS

OF

PROVISIONS

The most eminent staff members are, of course, most likely to receive interesting opportunities at other colleges, in business, or in government service. Unfortunately, some private and church-supported colleges have adopted forfeiture retirement plans. A few have apparently gone shopping for a pension bargain, accepting the "cheapest" plan without adequately considering the effect it might have on the college. Others, through well-meaning loyalty to their church, have entered denominational plans primarily designed for larger groups of religious workers. A majority of the plans in agency life insurance companies result either in complete forfeiture or in only gradual vesting of retirement rights over a number of years and permit cashing in of part or all of the provision for retirement. In nonfunded informal schemes, the withdrawing employee loses all rights or hopes in the plan. The large majority of colleges covered by forfeiture retirement plans are state teachers colleges, along with a number of state universities also brought under plans applying to larger groups of public employees. Forfeitures in these plans almost always are severe. In the typical plan, the employee leaving teaching or the state receives back only his own contributions in cash, with or without interest, regardless of how long he has served. In some states he may elect a deferred annuity or cash, but in either event, the amount is determined by his own accumulated contributions. In a few states the member may, by electing a deferred annuity, receive benefits from employer contributions, but normally only after meeting strict conditions, including a long period of service. Each year brings home to more and more staff members of publicly administered institutions the seriousness of losses that may occur upon withdrawal from service. As familiarity with the wide transferability under social security becomes more general, along with the continued extension of nonforfeiture plans at other colleges, the competitive position of state universities included in forfeiture plans may be expected to deteriorate. Some writers have pointed with pride to the fact that teachers may move about quite freely within a state's school system without suffering forfeiture of pension rights. Furthermore, a limited amount of reciprocity makes available some interchange of credits between states, either by direct transfer of pension reserves (rare) or by allowing credit for all or a part of out-of-state service. What transferability there is certainly is to be commended, but it means little for staff members of publicly supported colleges and universities. A teacher who gives thought to the matter is not likely to be attracted by a retirement plan that provides

FINANCING

AND

FUNDING

47

for transferability of pension rights only among a limited number of states and only if he remains in public employment. Public plans involving forfeitures are particularly disadvantageous in their application to institutions of higher education, but they also are socially undesirable for all public employees. Yet these plans could be arranged with fully vested rights, as is largely the case in the Wisconsin Teachers Retirement Fund. This discussion is not an argument against contributory plans for public employees, but it is a plea for modifying these plans to make them socially desirable, and beneficial when applied to colleges.

FINANCING

AND

FUNDING

N o MATTER what staff retirement plan or lack of plan is in existence at a college, a cost exists. No plan at all may show no budgetary figure, but it may be the most expensive arrangement a college could have. Aged staff members are continued in service, costly enough in itself, and the college may encounter serious difficulty in building a competent staff. Contributory and noncontributory plans.—In the great majority of college plans the participants and the college share, usually equally, in payments during employment to support retirement benefits. In nonfunded arrangements, where no money is set aside before retirement to support the benefits, the individual contributes nothing; the college bears the entire cost. In a few funded plans the college pays the full cost or a larger proportion than the participant. Occasionally, the individual makes the total contribution. This latter has seemed necessary at some state universities because of constitutional or statutory limitations on the use of state funds. The record indicates that equal contributions on the part of the participant and the college provide a satisfactory arrangement unless there is a good reason for a different apportionment of contributions. During leave of absence on part pay, most privately controlled institutions continue contributions on the basis of full compensation if the participant does likewise. Leaves of absence without pay may be handled as an individual matter, and the institution's decision whether or not to join with the individual in payment of premiums usually reflects its expectations about his return to the staff. Reductions in premiums may be made under TIAA contracts, and complete cessations with later resumption of premiums may be made under all contracts issued since

48

FINANCING

AND

FUNDING

June 30, 1941, without payment of the premiums skipped. These variations also are handled easily under group annuity contracts. Nonfunded plans.—Some of the earliest college pension plans merely announced benefits to be paid upon retirement out of current college funds. Relatively few colleges still have nonfunded, noncontributory retirement plans, and the number is decreasing. Most of the plans that remain promise either (1) an amount graded according to salary or rank, and service; or (2) a benefit expressed as a percentage of final salary, or average salary for the last five or ten years of service. Some plans are indefinite as to amount of benefits, providing for retirement "on parttime salary," or "a small salary to faculty members who retire at age 70," or a "fair share of last salary," to give three examples. The disadvantages of noncontributory, nonfunded plans are well known. Since the individual does not contribute during his working years, the college must bear the entire cost. Since the benefits are paid only if the participant remains in service at that institution and if he lives until retirement, they give little confidence except to persons nearing retirement. Furthermore, a staff member cannot place much reliance on a plan providing " a fair share of last salary" or "part-time salary." A nonfunded plan is a charge on future college budgets that cannot be determined even within fairly broad limits. Variations in longevity among small groups of people, changes in salary scales under differing economic conditions, changes in turnover of employees during favorable and unfavorable general employment situations, and fluctuations in number of persons retiring from year to year make predictions of the cost of such a plan little more than guesswork. Self-funded plans.—Another classification into which only a small number of college retirement schemes now fall is that of plans where the college itself manages the funds set aside for retirement. In the early thirties a number of prominent institutions that were administering their own retirement plans abandoned the method; these included Harvard, Yale, Wellesley, and Simmons. The University of California and Massachusetts Institute of Technology are the largest institutions that still administer their retirement accumulations independently. Both of these institutions segregate retirement funds quite separately from general university funds, and avoid the mortality risk by purchasing annuities as participants retire. It may reasonably be asked why a college should undertake the problems of providing benefits that may more easily and safely be arranged through pooling its mortality and investment risks with those of hun-

FINANCING

AND

FUNDING

40

dreds of other colleges. T h e assets of even the largest self-funded plans are relatively small when compared with those of most life insurance companies. For instance, the total assets of T I A A are in excess of the total endowment of America's most heavily endowed educational institution, not to mention the far smaller sums that may be set aside by a single college to support its retirement benefits. Plana funded through life insurance companies.—Most college and university retirement plans other than those publicly administered are contributory and are funded with an independent third party. Such plans provide maximum satisfaction for participants and assure colleges that funds will be available to pay retirement benefits. T h e advantages of pooling investment and mortality risks through agencies specifically organized to handle such risks are well known in America where the growth of life insurance companies has been phenomenal. Each interested party thus profits from the technical knowledge of experts in investments, actuarial science, and other fields and through contractual relations shares in a widely diversified investment portfolio and the leveling effect of large numbers on mortality variations. Insurance companies, like banks, are in a sense public trusts, and carefully drawn laws protect depositors and policyholders. Investments of insurance companies are limited to certain categories, and are periodically reviewed b y state supervisory authorities to assure compliance with regulations. Insurance companies must comply with laws, regulations, and rulings, must file reports giving details regarding all phases of their business, and must submit to thorough periodic examinations by the appropriate agencies. There are real advantages to the participant and the college from a contract with a third party. Where the individual owns his annuity contract without restrictions attached b y the college, he has full assurance that his savings for retirement are independent of his future personal relations with college officials or the fortunes of the college itself. The college, on the other hand, avoids the dangers of involving itself in a business foreign to its purposes and throws on the insurance company the responsibilities of handling benefit payments. T h e college may thus set up a plan under which costs are predictable and bear a direct relationship to salaries. Benefits may be purchased each year in an orderly manner. One warning should, perhaps, be mentioned here, although it is discussed elsewhere. Some college plans promise definite benefits at retirement and provide that contributions shall be enough to purchase those benefits. Usually under such plans the participant's contribution is fixed,

50

FINANCING

AND

FUNDING

with the college making up the difference to support the contemplated benefits. The institution's contribution for each participant increases rapidly as he advances in age. The college may thus obligate itself for unexpectedly large expenditures, further increased as declining interest rates and greater longevity of annuitants require life insurance companies to raise their rates. Relatively few colleges assume this indefinite financial obligation; most colleges have chosen to establish a contribution rate based on a percentage of salary, with the annuity benefits equal to whatever can be purchased with the fixed contributions. Plans for public employees.—Under these plans benefits for individuals are frequently fixed by formula, and contributions from participants and from public funds support these benefits. Complicated and careful actuarial studies are required to predict the cost of the retirement system and to set the contribution rates. Normally, the individual's contribution is fixed at a percentage of salary up to a stated maximum, and contributions from public sources are set by the actuary. The participant's contributions are accumulated in a fund to meet future benefits; support from public sources may be funded during employment or may merely cover benefit obligations as they mature. Legislative bodies have at times failed to vote expected appropriations to funded retirement systems. Some fear was expressed soon after the change in 1939 in the method of financing old age and survivors' benefits under the Social Security Act that funded state plans would also tend to move away from the reserve basis. Furthermore, state plans usually permit substantial investments in obligations of the state or its instrumentalities, placing quite narrow restrictions on other investment outlets. The money to pay obligations as they mature thus must come from taxation, from general public funds, from sale of securities in the open market, or from further borrowing. However, in spite of questionable practices with respect to maintenance of reserves in some state retirement plans, the state does have the power to tax to meet its current obligations, a power not held by a life insurance company. This provides both a safety factor for state plans and a temptation for them to go along with reserve funds that are known to be inadequate.

ADEQUACY

ADEQUACY

OF

OF

BENEFITS

51

BENEFITS

D E C L I N I N G I N T E R E S T R A T E S and increases in longevity of annuitants exert their influence on all college retirement plans. Whether this influence results in increasing the costs of the plan or reducing its benefits, or both, depends upon the type of plan in operation. A large majority of college plans now need to be revised in order to provide more nearly adequate benefits for retiring staff members. The solution to the problem of adequacy of benefits provided by retirement plans covering religious workers, agency life insurance company plans, or self-funded or nonfunded plans must be sought through study of the individual systems, since their diversity is too pronounced to permit generalized treatment. The majority of colleges and universities use TIAA contracts; hence a discussion of these plans may illustrate the principles involved. Publicly administered retirement plans likewise will be discussed. Setting annuity premium rates.—Most life insurance companies have increased their annuity rates recently, and TIAA is announcing an increase to be effective on January 1, 1948. The new TIAA rates will be the basis for this discussion, disregarding any possible dividends. Three factors are used in computing premium rates for annuity contracts: the interest earnings that may be expected from invested funds, the rate at which annuitants die, and the amount necessary to cover contingencies and expenses of administration. Annuity contracts are long-term arrangements; therefore, conditions many years in the future must be estimated. This is particularly true of deferred annuities, for which premiums often start thirty or forty years or longer before the company even begins to make payments to the annuitant. The period is usually much shorter for immediate annuities, which are normally taken out at time of retirement. TIAA's 1948 rates are based upon an interest guarantee of percent. Interest guarantees of life insurance companies have been moving downward for a number of years, in accordance with declining yields on investments, and this has been a primary factor in reducing income under annuity policies. The charge for expenses and contingencies for TIAA policies remains at 4 percent of each premium paid. This figure has not been changed since its introduction in 1936. With respect to the mortality factor, companies writing both immediate and deferred annuity contracts are faced with a difficult problem.

ADEQUACY

52

OF

BENEFITS

Actuaries seem agreed that there is a long-term improvement, gradual although not smooth, in the life-span of annuitants. A man aged 65 in 1947 has a life expectancy of about 14H years; but, if the present trend continues, a man aged 65 in 1987 may have a life expectancy of 17 or 18 years. The company issuing both immediate and deferred annuities can maintain long-term conservatism by having all annuitants pay premiums sufficient to cover the costs for persons retiring many years in the future, but in so doing it may in a sense overcharge the person retiring soon. Or, the company may charge premiums sufficient to average the costs for all annuitants, and perhaps thereby overcharge persons retiring soon and undercharge later retirants. Dividend payments may to some extent level out these inconsistencies. In announcing its 1948 rates TIAA indicates a third approach to this problem. No change is made in the mortality basis in effect since 1941 for immediate annuities, but deferred annuity premiums are again increased to conform with conservative estimates of long-range increases in longevity. As each annuitant retires, he will be given the benefit of immediate annuity rates in effect at that time for a person his age, if these immediate annuity rates are more favorable than the long-term guarantees. Thus each annuitant may be treated equitably with respect to all other annuitants. For all contracts issued on or after July 1,1941, TIAA reserves the right, after giving three months' notice, to change the rate schedule for premiums subsequently due, without affecting in any way benefits purchased by premiums due prior to the rate change. Table 6 below indicates the higher benefit, expressed as a percentage of salary, to be expected if TIAA's 1948 immediate annuity rates remain in effect until time of retirement, resulting from premium payments of 10 percent of a fixed salary continuing until retirement. If longevity TABLE

6

S I N G L E L I F E A N N U I T Y , M A L E , E X P R E S S E D AS A P E R C E N T A G E OF A F I X E D SALARY,

ASSUMING

TIAA'S

1948

RATES

R E M A I N IN Age When Firtt Premium Is Paid

FOR

IMMEDIATE

EFFECT

Contributions 10% of Salary Retirement Age 65

25

49.1%

30

40.3

35

32.5

40

25.5

45

19.2

50

13.6

55

8.5

ANNUITIES

ADEQUACY

OF

53

BENEFITS

continues to increase, Table 6 undoubtedly overstates the benefits for a person starting premiums at a younger age. Table 7 indicates the lower benefit, expressed as a percentage of a fixed salary, to be expected under the assumption that TIAA's 1948 deferred annuity rates are in effect at the time of retirement. TABLE

7

SINGLE L I F E A N N U I T Y , M A L E , E X P R E S S E D AS A P E R C E N T A G E O F A F I X E D SALARY, ASSUMING T I A A ' S 1 9 4 8 R A T I » FOR D E F E R R E D A N N U I T I E S A R E IN E F F E C T AT T I M E OF R E T I R E M E N T

Age When First Premium Is Paid 25 30 35 40 45 50 55

Contributions 10% of Salary Retirement Age 65 Retirement Age 70 46.0% 37.8 30.5 23.9 18.0 12.7 8.0

65.3% 54.4 44.7 36.0 28.2 21.2 15.0

Contributions 15% of Salary Retirement Age 65 69.0% 56.7 45.7 35.8 27.0 19.0 12.0

Table 7 is the significant table to be considered by college officers. I t illustrates the three most important factors through which the college can control the level of benefits under its retirement plan: the age at which contributions begin, the age at which annuity payments begin, and the contribution rate. The effect of each will be summarized briefly. 1. Participation in the retirement plan should begin as soon as practicable after some such age as 30 years. The retirement benefit is decreased about 4 percent by delaying the start of contributions by one year in the early 30s, and 8 percent for each year's delay in the 50s. 2. Retirement age has an important effect in determining the size of benefits. Each year's postponement of retirement after age 65 increases the benefit about l]/2 percent for a person beginning contributions at age 30, or some 11M percent for one entering at age 50. Contributions of 15 percent of a fixed salary with retirement at age 65 provide about the same benefits as contributions of 10 percent of salary continued until retirement at age 70. Both provide somewhat over half salary for men who begin participating at age 30. However, in considering delaying the retiring age the institution should balance the larger annuity benefits thereby obtained against its chances of keeping some of its older staff members on full salary after their capacities have waned, and against the effect of a high retirement age upon the attitudes of ambitious young members of the staff. A considerable majority of colleges now use a normal retirement age of 65.

«4

ADEQUACY

OF

BENEFITS

3. Early in the 1920s, when interest rates were considerably higher and when expected longevity of annuitants was less than at present, colleges established retirement plans calling for premium payments equal to 10 percent of each participant's salary. That early pattern persisted strongly until about 1943. Colleges thought of each change in annuity rates as necessarily a reduction in retirement benefits, rather than as a signal for a revision upward in the premiums to be paid. During recent years many colleges have revised their plans to provide for larger premiums and larger benefits and by the end of 1946 forty-four college plans provided for contributions in excess of the old 10 percent basis, usually about 15 percent of salary. The figures given in Tables 6 and 7 show benefits as a percentage of an unchanging salary throughout employment. In order to analyze the effect of salary changes, the following simplified salary scale is assumed: age 30-34, $2,400; age 35-39, $3,000; age 40-49, $3,600 and age 50-64, $4,800. The percentages in Table 8 hold for any salary scale bearing the proportion 4-5-6-8 at the stated age intervals. Assuming this salary scale, the annuity incomes as a percentage of average salary and of final salary are shown in Table 8: TABLE

8

SINGLE L I F E A N N U I T Y , M A L E , WITH C O N T R I B U T I O N S STARTING AT A G E 3 0 , ASSUMING T I A A ' S

1 9 4 8 R A T E » FOR D E F E R R E D A N N U I T I E S A R E IN

E F F E C T AT T I M E OF R E T I R E M E N T

Contributions 10% of Contributions 15% of Selected Salary Scale Selected Salary Scale Retirement Age 65 Retirement Age 70 Retirement Age Go Annuity as percentage of average salary Annuity as percentage of final salary

35.9%

51.4%

53.9%

28.9

42.6

43.4

Variations in salary scale have comparatively little effect on retirement benefits as a percentage of average salary. In the example given in Table 8, the salary is doubled, but the benefit as a percentage of average salary is 35.9 percent at age 65 compared with 37.8 percent, if the participant's average salary had been his actual salary throughout employment. Comparable figures for age 70 are 51.4 percent and 54.4 percent. If the college is aiming at a benefit bearing a reasonable relationship to average salary, it need not concern itself too much with salary scales. Its computations may be simplified by taking average salary throughout employment for its various classifications.

ADEQUACY

OF

BENEFITS

55

Variations in salary scale do have a marked effect upon benefits expressed as a percentage of final salary, particularly when a sharp salary increase occurs shortly before retirement. It should be noted that the benefits used in these tables and examples are based upon an annuity ceasing at the policy holder's death. In many cases provision must be made for a wife. If an annuitant selects an income method under which payments half as large as those during his lifetime will continue to his widow, his original annuity income will be decreased in the neighborhood of 15 to 20 percent, depending upon his wife's age. A college facing the problem of providing adequate benefits through its retirement plan may approach the problem by studying the typical age of new employees, the length of the preliminary period before newcomers participate in the retirement plan, the average salary throughout employment for various classifications of employees, and the anticipated retirement age. Appendix A-2 gives d a t a on TIAA plans t h a t were revised before January 1, 1947, and indicates the basis for premium contributions for the forty-four colleges t h a t have increased contributions to above 10 percent of salary. Appendix A-3 summarizes the contribution rates and retirement ages used by colleges with TIAA plans. Adjustments for entrants at high ages.—Table 7 brings out the inadequacy of benefits for persons who are middle-aged or older when they join the college staff. This need not be a deterrent to such employment when the retirement plan is flexible, but the problem should be faced at the time of employment. If the person brings a retirement annuity contract with him, there may be no problem; similarly if he has other resources. However, if the prospective employee has no provision for retirement income, the college should consider a special arrangement with him when he is employed. For instance, if the college is willing to spend, say, $6,000 to obtain a particular person who is now age 45, it may suggest a base salary of $5,400 with the agreement t h a t the staff member will pay $600 toward an annuity each year and t h e college will match this amount. This will provide a single life annuity of about $180 a month at age 65, whereas total contributions equal to 10 percent of the $6,000 salary would provide only $90 a month. Rerision of long-standing plans.—The preceding discussion is based upon TIAA's newly announced 1948 annuity rates. TIAA, like other insurers, has changed its rates several times to take into account longterm trends in interest rates and annuitant mortality. A college t h a t is contemplating revising a plan of many years standing will not need to

56

ADEQUACY

OF

BENEFITS

increase contributions on all contracts to 15 or 16 percent of salary. For persons who have contracts in force issued prior to April, 1932, premiums of 10 percent of salary should be adequate. For persons with contracts issued from April, 1932, to the present, premiums need to be scaled upward in such a way as to keep benefits to be expected by various participants in line and consistent with each other. Several methods may be used to accomplish this result, as a glance at the tabular descriptions in Appendix A will indicate. The Columbia University plan, described in detail in Part IV, offers an example of a carefully worked out arrangement, based on TIAA's 1941 rates, at a large institution where all vintages of contracts are in force. I t should be pointed out that the longer a college delays revision of its retirement plan, the greater are the contributions needed on behalf of older staff members in order to provide a selected level of benefits. Adequacy under -publicly administered plans.—In addition to the effect on benefits or costs produced by interest and mortality factors, benefits provided by publicly administered retirement plans usually are restricted by certain maxima. Two types of limitation commonly are encountered. Many plans restrict contributions to a percentage of, for example, the first $2,000 or $3,000 of annual salary, with benefits being equivalent to the modest contributions. Others set a maximum dollar amount per month or per year upon the retirement benefit. These maxima are so low that they work a hardship on college faculty members, who normally comprise only a small percentage of the persons included in the plan. Where this is the case, those institutions affected may wish to establish funded retirement plans as supplements to the publicly administered plan. For instance, if contributions to a public plan are limited to a percentage of the first $2,400 of salary, contributions on salary above that amount might be used to purchase annuities in the same manner used by other colleges for their total contributions. Likewise, if benefits under the public plan are limited to, say, $100 a month, additional benefits may be purchased through annuity contracts. The particular type of supplementary plan would, of course, have to conform to any statutory or constitutional restrictions in the particular state. Publicly administered retirement plans normally have a number of defects when applied to colleges and universities. It would seem important for any college establishing a plan to supplement benefits from the publicly administered system to follow principles generally accepted by educational institutions as fundamental for satisfactory retirement

NONACADEMIC

EMPLOYEES

67

plans. The supplementary benefits thus should be provided through noncashable retirement annuity contracts wholly owned by each participant. A publicly controlled institution automatically brought under a public retirement plan can, through establishment of a satisfactory supplementary system, gain at least some of the advantages now enjoyed by other public or private colleges that established satisfactory plans at the outset. Disposable income.—The low benefits provided by most college retirement plans constitute a problem that should be recognized and dealt with by colleges and their staff members. However, the situation is not so unfavorable as the annuity rates above might indicate. Federal taxes have increased greatly during the past few years. A college staff member with no dependents other than his wife, who has a $6,000 salary and no other income or capital gains or losses, will pay federal income tax of about $925 based upon 1946 rates. In addition, he contributes, say, $300 toward his annuity contract. Thus his "take home pay" just before retirement is approximately $4,800. After retirement, he will have no contributions to make toward his annuity, and according to currently used formulas, will probably have no federal income tax to pay for a number of years, after which he may pay a modest amount. For this man, an annuity of $2,400 would represent 40 percent of his gross salary before retirement, but about half of his take home pay before retirement. RETIREMENT

PROVISIONS

NONACADEMIC

FOR

EMPLOYEES

C O L L E G E S HAVE LONO been leaders among American employers in planning for the retirement of teachers and administrators. However, prior to the wide publicity regarding social security legislation in 1937 and 1938, relatively few colleges had bestirred themselves actively in the matter of benefit plans for their nonacademic employees other than administrative officers. When the Social Security Act was passed, excluding college employees, some institutions moved promptly to include nonfaculty employees in their retirement plans, and a number of colleges establishing new plans since 1937 have included all classes. Competition for employees under postwar conditions of full employment provided a further impetus to retirement planning for nonacademic staff members.

58

NONACADEMIC

EMPLOYEES

The fundamental needs for income in old age and for family benefits in event of untimely death of a worker are of much the same types for nonacademic employees as for faculty members. Both groups are now urbanized and dependent on earned income. Both usually must make provision from their earned income for their own retirement and for benefits to survivors. This leads to a tentative conclusion that to provide for its nonacademic employees a college should extend its faculty plan to them on the same basis. Most of the smaller colleges that include nonacademic employees in retirement plans do just that. A few use somewhat different rules as to the length of the waiting period before participation, the retirement age, and the size of contributions to be made by the college and the individual. The intimacy of contact between faculty and nonfaculty employees is an important factor in the life of the smaller college, particularly when it is located away from metropolitan areas. It would seem that these colleges are following a wise course when they make little or no distinction between faculty and nonfaculty. Of the 80 large and small colleges with TIAA plans that cover all or a substantial portion of the nonacademic employees, most include all employees on about the same basis, as do publicly administered plans covering all employees. The tabular schedule in Appendix A indicates both those TIAA plans that do and those that do not differentiate. The descriptions of individual plans in Part IV give details on other nonacademic retirement systems, including colleges that have wholly separate plans for nonacademic staff members. For instance, Princeton, Teachers College of Columbia University, Mount Holyoke, and Yale all use nonforfeiture, transferable contracts for faculty and administrative staff members, but range from group annuities to self-funded and nonfunded arrangements for other personnel. Were it not for the problem of high turnover among nonacademic staff members, probably few colleges, large or small, would consider any material differences in benefit arrangements as between these employees and faculty and administrative officers. Therefore the following discussion will be limited to turnover and its effects. Provisions not directly affected by turnover, such as the retirement age, benefits upon retirement, and death benefits, are discussed elsewhere. A simple way to avoid the difficulties of rapid shifting among jobs is merely to promise to nonacademic employees a free pension calculated in a specified way and to be paid to those who stay with the institution until retirement. Employees are not likely to object when such a plan is installed, for it costs them nothing. The college pays the full amount

NONACADEMIC

EMPLOYEES

59

for those who retire, but it pays nothing to those who withdraw from service before retirement. Payments may be made out of current budget or from funds set aside for the purpose. Another method is the group annuity system. This plan, common in industry, may provide that the employee who withdraws before retirement receives in cash whatever contributions he has made, either with or without interest, and gives up any benefits from the employer's contributions no matter how long he has served. The forfeiture of employer contributions seems to exert an influence toward reducing turnover, but at the same time the availability of a growing cash payment upon change of jobs exerts an opposite influence. Some group annuity plans provide that upon change of jobs after a substantial period of participation in a plan, usually not less than ten years, the employee either receives the entire equity supporting his anticipated benefits, or has a choice between (1) cash equal to his own contributions or (2) an annuity equivalent to his and the institution's payments. The latter seems to meet the objection that withdrawal necessarily means the destruction of retirement equities for those who meet the minimum service requirements, but, as a practical matter, it is probably of importance only to those who withdraw at relatively high ages after substantial periods of service. Although these methods of handling nonacademic employee retirement systems usually permit low cost to the institution, there are important objections to their use. The idea that the only employer who is responsible for an employee's income after retirement is his last employer should have been wholly discarded by now. Regardless of where an individual works or how often he shifts jobs, ideally each employer should help him provide during his productive years for income during those when he can no longer earn his way. The adoption of a plan under which a withdrawing nonacademic employee forfeits accumulations toward retirement should be considered an admission of a lack of social consciousness on the part of the employer. I t must be recognized that the retirement plan will have no meaning for most employees and that, if those who leave spend other working years with employers having similar plans, they will reach retirement with little or no income to see them through old age. Now that industrial employers and employees are required to participate in social security, under which shifts of employment among covered groups do not destroy pension expectations, it is doubtful that colleges can live for many years without criticism under a forfeiture plan offered as a substitute for social security. Some colleges point out

00

N O N A C A DIE MIC

EMPLOYEES

that union officials and employees at present think it perfectly fair that an employee who leaves his job should receive only his own contributions, preferably in cash. Neither union leaders nor workers yet seem to understand fully the losses involved. Should a college take advantage of this lack of knowledge with an "employee beware" attitude? Recent labor disputes indicate that union leaders are paying much greater attention to benefit plans. Sooner or later nonacademic employees will realize the difference between their treatment under a forfeiture plan and the treatment accorded to faculty members or persons covered by social securitv when they shift jobs. I t may be helpful to analyze the practical problems connected with high turnover and to see if they can be controlled within the objectives of a commendable retirement plan. As a rule, nonacademic workers are considerably less likely than faculty members to remain with one employer during long periods of service, although in small towns and among some groups of employees the opposite is often true. Turnover varies as to amount, timing, and types of worker among different institutions. Normally, (1) turnover is heavier in the early years of employment, mainly the first five years; (2) it is heavier among younger employees, particularly women; (3) it varies among classifications of employees— in one institution the dormitory workers may shift more rapidly, in another, the clerical staff, in still another, the skilled tradesmen; and (4) nonacademic employees when leaving one educational institution rarely go to another. These tendencies suggest that each institution establishing or revising a retirement plan should consider carefully which employees to include and when to include them. A thorough study of the institution's own turnover records may save much administrative difficulty later on through establishing effective provisions for waiting periods and participation in the plan. Certain groups of nonacademic employees may well be excepted from coverage by the retirement plan. There is usually no reason to include temporary or casual employees; part-time workers likewise may not need to be covered unless there is an unusual obligation on the part of the college to provide for their retirement. Employees under some designated age such as 30 years may well be included only on a voluntary basis. This eliminates the young secretarial, clerical, and other employees who are not interested in retirement benefits, and among whom turnover is high. This age-30 rule, also frequently used for faculty, eliminates at once a considerable part of the turnover problem and dissatisfaction among younger employees. Some

NONACADEMIC

EMPLOYEES

«1

waiting period in the form of preliminary service before participation begins also has advantages. If the college selects some such age as 30 years for required participation, the preliminary service period need not be long. Once employment is fairly stable, it is important that participation begin as early as practicable in order to spread the contributions toward retirement income over many years. The college might well consider, for instance, establishing a three-year waiting period for those who enter service under age 40, and a one-year period for those age 40 and above. Even with carefully selected rules for participation and waiting periods, some employees will participate in the retirement plan for a short time and then leave. If a retirement annuity contract has been purchased for them, the accumulation to their credit will be quite small, and premiums probably will cease except in the unusual instance when the nonacademic employee moves on to another college. It may be just as well in such cases to cash in the contract, returning to the college and the individual the contributions each has made. This can be readily arranged under agency company contracts. Likewise, TIAA at present allows cashing in of its contracts when the accumulations or length of time the contract has been in force are reasonably small, and when the college and the individual both join in requesting cashing of the contract. The money thus obtained may be divided between the college and the participant. Another way of handling the matter is for the college to collect contributions from each employee who has completed his preliminary service period, and to hold the contributions in a separate fund for two or three years. If the participant leaves before the period is up, his contributions are refunded; if he stays, a contract is purchased for him with his own contributions plus an agreed amount contributed by the college. Many college officers believe that, under any contributory plan, if a participant so requests he should always have the option of taking in lieu of cash a retirement annuity contract purchased with his own and the institution's contributions. These various procedures have proved effective in plans using them. They seem to take care of a major portion of the problems connected with the retirement plan and turnover among nonacademic employees, and may be expected to result in an economical and acceptable plan for the college and the participant.

6i

SUMMARY

SUMMARY T w o THIRDS OF THE COLLEGES, universities, and state teachers colleges in the United States, employing over 85 percent of the total number of faculty members, now have retirement plans, as do over half of the Canadian institutions. Thus a considerable majority of college faculty members may now look forward to some measure of security after retirement. If the college is to derive maximum benefit from its retirement plan, its objectives should go well beyond the provision of adequate income upon retirement of its staff members. A well-designed plan can help the college attract promising new staff members, hold its above-average staff members, part easily with those who are not measuring up to the institution's standards, and in general improve the morale and efficiency of the staff. Moreover, well-designed plans enable each college to operate more effectively as a part of the entire system of higher education, sharing with other institutions the mutual advantages of mobility of academic talent. The most serious deficiencies in meeting these various objectives are found in plans under which the staff member who severs his connection with a particular institution before retirement forfeits the employer's contributions toward his retirement benefits. It is suggested that a college offered a choice of entering a plan primarily devised for other types of employment should analyze it carefully to see whether it is appropriate for college needs. Retirement income for college staff members should be arranged by building up sufficient funds prior to retirement through joint contributions of the institution and its staff members. These funds should be managed by an organization specializing in insurance and annuities so that the college may avoid the risks of handling an annuity business for a small number of people and so that the staff members may have clear contractual rights wholly independent of their employment relationships. College retirement plans should provide flexibility in connection with salary changes, selection of income arrangements at retirement, and the like, in order that the colleges and individuals may have latitude in adjusting the retirement arrangements to differing college and individual needs. No forfeitures of benefits already purchased should result from cessations or changes in contributions toward retirement. In order that the college may be assured that its contributions toward retirement will

SUMMARY

63

not be mortgaged or dissipated, there should be no lump-sum payments or loan values available to participants. Other than the inauguration of plans at institutions where none now exist, the major problems with respect to college retirement plans at present are the inadequacy of benefits provided by most plans and the provision of retirement benefits for classes of employees not now protected. The extension of social security coverage to colleges and universities would assist in solving both of these problems; but whether such an extension will occur in the near future is problematical.

PART COLLEGE SURVIVOR

III

PLANS

FOR

B E N E F I T S

COLLEGE

PLANS

FOR

SURVIVOR

BENEFITS

T H E M O S T I M P O R T A N T part of employee benefit plans for colleges is the provision of satisfactory retirement income. Of lesser importance, but quite valuable, is the establishment of benefit plans for dependents of staff members who die in service. One out of four colleges now have group or collective life insurance plans in operation. The 225 United States institutions that have plans employ 44 percent of the college teachers, and about three out of four of the plans cover nonacademic employees as well as faculty members and administrative officers. Six Canadian institutions also have survivor benefit plans. TABLE

9

SUMMARY OF COLLECTIVE AND G R O U P L I F E I N S U R A N C E

PROVISIONS

U N I T E D STATES COLLEGES, U N I V E R S I T I E S AND S T A T E T E A C H E R S COLLEGES

Type of Institution

Number with Insurance

Teachers (Approximate)

Number without Insurance

Teachers (Approximate)

Publicly Controlled Privately Controlled Denominational Professional Schools State Teachers Colleges Negro Colleges

36 74 80 9 16 10

14,421 22,600 7,150 1,083 1,154 503

83 124 319 20 132 68

21,081 13,246 13,165 1,965 6,710 2,984

225

46,911

746

59,151

High among the reasons given by college officers for establishing plans is, of course, the desire to help dependents of staff members and to avoid the embarrassments that otherwise result when a widow and children are left in the college community without funds. Likewise, there is the desire to make college work advantageous for those now so employed and for those who may be attracted to it in the future by providing security plans at low cost to relieve employees of as many financial worries as possible. Colleges are increasingly recognizing the problem

68

SURVIVOR

BENEFITS

of obtaining and keeping staff members in the face of competition from industry and other employments covered by social security and, in many instances, by supplementary group life insurance plans. A number of colleges that do not have life insurance plans provide benefits to survivors of deceased staff members by direct payments out of the college treasury. 1 The methods include: 1. Continuance of full or half salary to the widow or dependents for a period usually not in excess of one year 1. Direct lump-sum payments from college funds 3. No set plan, with the college meeting each emergency as it arises by dipping into the college treasury, by "passing the hat" among colleagues, or by trying to find a job for the widow There is some merit in an announced plan of continuing part or full salary to dependents for a definite period. This shows employees that the college administration is prepared to do something for their survivors. It gives the widow a little time during which she may look around for employment, if needed. But it has serious disadvantages. So long as she is receiving money from the college, the widow is tempted not to move away from the campus or otherwise readjust her financial plans. The plan may be expensive for the college, in part because the deceased has paid no share of the cost. Furthermore, it involves the college in the insurance business because of the irregularity with which deaths occur among small numbers of people and the possibility of unexpectedly large expenditures. The procedure of handling individually the problems arising from each death may seem to commend itself from the standpoint of economy. Payments can thus be limited to cases of emergency. However, there seem to be a surprisingly large number of emergencies; widespread as has been the sale of life insurance, there are still many college staff members who have none at all or only a meager amount. Furthermore, the embarrassment caused by charity and the uncertainty of charity in a particular case create little goodwill for the institution. College officers who have felt compelled to find work for a widow on the campus, regardless of whether she has skills that are needed by the college, know the makeshift nature of this method. Collective or group insurance plans available from life insurance companies for colleges that set up a plan covering a large enough number of lives have certain advantages over informal arrangements established by colleges. 1 William C. Greenough, "Survivor Bene6t Plans for College Staff Members," Association of American Colleges Bulletin, XXXIII, No. 2 (May, 1947), 403-10.

SURVIVOR

BENEFITS

89

1. Either collective or group insurance assures the college that some life insurance is available to protect the family of each of its staff members, regardless of their financial status, their enthusiasm for life insurance, or their insurability. 2. Either constitutes an essential and recognized part of a welfare program. Both plans thus tend to reduce turnover by providing more satisfactory personnel relationships and by making the college "a good place to work." 3. Either provides insurance coverage at remarkably low cost. Insurance can be wholesaled more cheaply than it can be retailed. Large groups of policies are issued; accounting methods are simplified; expenses for premium notices, postage, etc., are minimized; and the medical examinations, averaging $5.00 per applicant, are eliminated. 4. Either permits the college and its staff members to share the cost of survivor benefits. 5. Either allows the insurance company to assume risks that colleges are not normally in a position to undertake. The insurance company can average out its experience over large numbers of colleges so that the variations in mortality that occur even among fairly large groups of people will not cause undue variations and strains on the college budget. As is the case with retirement plans, certain types of survivor benefit arrangements seem to be appropriate for college needs, and others, inappropriate. The fundamental question is whether or not the college has a retirement plan and, if so, what benefits are available from it in the event a staff member dies before retirement. Almost all funded contributory retirement plans provide death benefits. Under publicly administered retirement plans the death benefit is normally equal to the accumulated contributions resulting only from the payments made by the participant, which amount may be supplemented by a lump-sum payment equal to one or more month's salary. Under retirement plans using contracts of agency life insurance companies the death benefit may be the total of premiums paid, the face amount of the policy, or the cash value, and may or may not include the institution's contributions. Under TIAA plans the death benefit is the total accumulation, including interest, of all premiums paid by both the individual and the institution. Nearly all these arrangements share a common characteristic. During an individual's early years of participation in the retirement plan there is little or no death benefit, but during later years, as premium payments continue and in most plans as interest accumulates, the death benefit becomes substantial and is usually large enough to cover any

70

SURVIVOR

BENEFITS

college responsibility to protect survivors. At more advanced ages the college with a funded retirement plan is already providing the necessary survivor benefits without adding any life insurance. This is particularly true when considered in light of lesser family responsibilities of an older man whose children have grown up, whose house is paid for, and who may have some savings. These facts offer colleges that have funded retirement plans an unusual opportunity to add survivor benefits at modest cost. They need merely to supplement their retirement plans with life insurance arrangements providing, at younger ages, substantial insurance protection which gradually decreases to small amounts at advanced ages. In order to meet the needs of these colleges, TIAA developed in 1936 its collective decreasing insurance. In some respects this plan is similar to the typical group insurance plan issued by agency companies. One fundamental difference between the two types is in the amounts of insurance provided at various ages and the resulting premiums. Group insurance is normally written to provide a level amount of insurance within a given classification at all ages. Premiums necessarily increase rapidly as age advances and, at standard rates, amount to $0.55 at age 30, $0.67 at age 40, $1.18 at age 50, $2.52 at age 60, and $5.61 at age 70 per month per $1,000 of insurance. I t is customary for the participant to pay 60 cents a month per $1,000 of insurance, regardless of his age, although he may pay slightly more and, quite frequently, little or nothing. The college pays the balance. In a group life insurance plan calling for individual contributions of 60 cents a month per $1,000 of insurance the participant pays more than the actual cost of his insurance at ages under 37 years; he pays about half the premium for his insurance at age 50, and one ninth at age 70. Dividends usually decrease the cost to the college. If the average age of staff members at a college is increasing, it is obvious that the cost to the college even after dividends is likewise increasing. Under collective decreasing insurance the premium is fixed at $1.00 a unit per month at all ages, and the amount of insurance provided decreases as age advances, amounting to $2,470 at age 30, $1,610 at age 40, $800 at age 50, and $380 at age 60 for each unit of coverage. Insurance expires and premiums cease at age 70, unless terminated earlier by nonpayment of premiums. The amount of insurance payable in event of death has been increased each year by dividends. The college may pay the full premium or the premium may be shared between the college and the participant. Collective decreasing insurance thus is designed to provide large

SURVIVOR

BENEFITS

71

amounts of protection for younger persons for whom there is little or no death benefit resulting from the retirement plan; insurance coverage decreases gradually as the age of the participant increases, thus coordinating with the increasing accumulations under the retirement annuity contracts. In addition to its appropriateness for the needs of staff members, its cost is low since more than three times as much life insurance can be provided for each premium dollar at age 30 as at age 50, and more than six times as much at age 30 as at age 60. A plan providing small life insurance benefits for each staff member may cost the college only about a fifth of one percent of its salary budget. A generous plan covering all staff members will rarely run over 2 percent of the salary budget even if the college pays the full cost. Group life insurance issued by agency companies, or a similar form of insurance called collective level insurance issued by TIAA, both seem inappropriate for colleges that have funded retirement plans. The combination of the retirement plan and level life insurance coverage at all ages provides benefits that are too small at younger ages and are usually redundant at advanced ages. Such arrangements are likewise needlessly expensive. Where no funded retirement plan exists and where none is contemplated, a college may wish to establish a survivor benefit plan that does provide level insurance at all ages. Group life insurance and collective level insurance probably fit the needs of such colleges more nearly than does collective decreasing insurance. This is true likewise for large groups of employees who are not covered by an existing funded retirement plan and who, therefore, do not have an increasing death benefit resulting from such a plan. In general, group life insurance has given satisfaction to eligible employees and to the college administration, but it has not proved satisfactory in many cases. Certain of the difficulties are avoidable. In many college plans the amount of insurance for each participant is determined by salary or rank. Although summary figures are not available for all colleges, a considerable number provide amounts of insurance ranging from $1,000 for nonacademic or lower-paid employees to $5,000 or even $10,000 for persons with higher salary or rank. There is much to be said for a plan that covers all staff members without discrimination among them as to the amount of protection provided. Death strikes haphazardly and may leave serious problems in its wake, regardless of whether the deceased was a valuable professor of long service, a newcomer, or a member of the service staff. Moderate increases in insurance based upon rank, salary, or period of service may

7«

SURVIVOR

BENEFITS

be welcome, but insurance varying from $1,000 to $10,000 based on these factors shows that little consideration has been given to needs for emergency protection or the impact of such a plan on the college budget. A number of institutions are now embarrassed by the cost of group insurance plans arranged years ago with no provision for discontinuing coverage when an employee retires. The premium for such persons is exceedingly high; for instance, it is $12.20 a month per $1,000 of coverage at age 80, of which the participant usually pays 60 cents or nothing. Since almost all funded retirement plans allow selection of income arrangements protecting the spouse if the annuitant dies first, there is usually no genuine need for additional life insurance protection to be paid for almost entirely by the college after a staff member has ceased to render service for the college. Frequently group life insurance plans have made participation optional. They assume that a certain percentage of the staff will continue to be covered. Under such arrangements some colleges have found that their younger staff members do not enter the plan or else drop out when they find that they are paying more than the cost of their insurance. The persons covered, therefore, tend to consist of an undue proportion of older staff members for whom the college is paying most of the premium. In a few instances colleges have installed annuity plans providing that insurable individuals may have life insurance protection equal to $1,000 for each $10 of monthly income provided under retirement policies. Under this provision the very persons who will most likely die early are the ones not protected by insurance. Furthermore, the value of the insurance available for the individuals is frequently overrated. The accumulation toward retirement benefits is part of the death benefit. After a number of years of participation this accumulation usually exceeds the original face amount of the policy. Occasionally, colleges have established group life insurance plans as part of "package plans" including accident and health, hospital and surgical benefits. A college's life insurance plan should be adjusted to its retirement plan, and has little relationship to its indemnity insurance. There is no need, with Blue Cross and other arrangements available, to accept an inappropriate and therefore expensive life insurance plan merely to obtain desired indemnity insurance. Summary.—Survivor benefit plans offer colleges a method of improving the welfare of staff members and their families. Colleges with funded contributory retirement plans are in a particularly advantageous position since they need only supplement the death benefits provided by

SURVIVOR

BENEFITS

79

the retirement plan. This is done through a plan called collective decreasing insurance, which provides large amounts of life insurance for younger persons for whom the death benefits from the retirement plan are small, and modest amounts at more advanced ages when the retirement plan provides substantial benefits. For a college that does not have and does not contemplate having a funded retirement plan, the typical group life insurance plans or collective level insurance may be more appropriate. If a college installs one of these forms, it may wish to guard against provisions that have made some group life insurance plans unsatisfactory at colleges. The college budget is likely to be unduly and unnecessarily burdened if amounts of insurance increase markedly with increase in rank or salary, and if insurance continues after retirement. Likewise, group life insurance plans have not worked well when participation was made optional. They have resulted in an undue proportion of older people being covered at considerable expense to the college, without assuring the college that dependents of each of its staff members are covered by some insurance.

PART D E S C R I P T I O N S

IV OF

R E T I R E M E N T

COLLEGE PLANS

DESCRIPTIONS

OF

RETIREMENT

COLLEGE PLANS

T H I S SECTION INCLUDES DESCRIPTIONS of each college retirement plan that uses agency company contracts, that is funded and administered by the college itself, or that is nonfunded. I t also includes descriptions of all retirement plans for religious workers and a number of publicly administered plans that include staff members of colleges and universities in their coverage. Only those TIAA plans that have unusual histories or provisions are described in this section. Tabular information for all TIAA plans is given in Appendix A-2.

AGNES SCOTT COLLEGE On October 15, 1941, Agnes Scott College installed a retirement plan applying to officers and faculty members. The Connecticut Mutual Life Insurance Company is the underwriter. Participation in the plan was made optional for those who had been in the employ of the college for two years or more when the plan began, and compulsory for newcomers after two years of service. Participants contribute 5 percent of their salaries, and this is matched by the college. When salary increases occur, they are handled on an individual basis with respect to the retirement plan. Normal retirement age is 65 years. The trustees may re-elect, from year to year up to age 70, such members as they think should be retained in service. For those persons who are insurable the plan carries a death benefit prior to maturity. In the event that an employee withdraws from the service of the college, he takes his policy with him. UNIVERSITY

OF ALBERTA

In 1940 the University of Alberta revised its contributory retirement plan, originally adopted in 1928, applying to "all officers, teachers, investigators and such other persons permanently in the employ of the

78

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OF

PLANS

University on a regular basis of salary as may be determined by the Board of Governors of the University." The contribution of each member is 5 percent of his salary, and this amount is matched by the university. The retirement annuity contracts of TIAA are made the basis of the retirement system. However, new members have the option of availing themselves of Canadian Government annuities, or of both. For professors, associate professors, and administrative officers of similar rank participation begins upon appointment; for assistant professors, after one year's probation; and for instructors and lecturers, after two years' probation. The university matches the 5 percent member contributions, except that instructors and lecturers contribute for two years before the university contributes for them. Except as special arrangements are made by the board of governors in individual cases, retirement shall occur on August 31 next following attainment of age 65 for men and age 60 for women. Members in service when the plan was revised were given until a stated date to accept the plan or release the university from obligation to provide retirement allowances. For newly appointed eligible persons, participation was made a condition of appointment. AMHERST COLLEGE B y resolution of the board of trustees on June 14, 1930, Amherst College arranged for the retirement of teachers and administrative officers at age 70, with the possibility of earlier or later retirement. The benefit was to be one half of final salary but not more than $3,000, with the college furnishing that part of the benefit which was in excess of allowances available from Carnegie sources. In 1941 Amherst established a funded contributory retirement plan using TIAA contracts for full-time officers of instruction and administration and persons in designated positions at Folger Library. Participation is compulsory after completion of a three-year waiting period. Normal retirement age was 70 years originally; in 1945 it was changed to 65 years. By special vote of the board of trustees, service may be extended by one-year appointments to age 70. The college and the individual each contribute 5 percent of salary toward TIAA annuity contracts. For those who were already eligible for the plan in effect prior to 1941, Amherst expects to supplement the amount provided by the annuity contract, plus any amounts available from Carnegie sources, in order to make up a total retirement benefit of half the member's regular

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OF

PLANS

79

salary for the year preceding retirement, with a maximum of $3,000. While no formal action was taken in the change of 1945 in regard to retirement benefits, it is the presumption that the older members who had expectations of half pay to a maximum of $3,000 will retain this expectation. In 1941 Amherst likewise established a TIAA collective decreasing insurance plan providing three units of coverage for all members included in the retirement plan. ANTIOCH

COLLEGE

Antioch has a joint contributory retirement plan which applies to full-time faculty members, administrative officers, and administrative assistants. Contributions of 5 percent of salary by members are matched by payments from the college in purchasing retirement annuity contracts from TIAA. To describe participation in the plan, it is convenient to class instructors and administrative assistants as the junior group, and professors and administrative officers as the senior group. Persons newly appointed to the senior group may participate in the plan after one year of service and must do so after two years of service. Juniors newly appointed may participate after two years of service and must do so after five years of service. For those in service on August 31, 1938, the effective date of the plan, the same rules applied, with "service" referring to total service at Antioch and with the exception that participation was required only upon receipt of increase in compensation. Retirement is to occur on August 31 next following attainment of age 65, except that one-year extensions of service may be made by vote of the administrative council "for such portion of an individual's time as it is of special interest to the Council to retain." The administration recognized that benefits under this plan will be modest and hoped that contributions might be increased. During the first ten years the college undertakes to make whatever supplementary payments are necessary to bring the allowances of those retired in this period to a minimum of $300 a year. UNIVERSITY

OF

ARIZONA

For a number of years the University of Arizona has been trying to work out a contributory retirement plan for its staff members. The board of regents has approved a plan presented by a faculty committee. Amendment to the university code is being sought to authorize the university to contribute to a plan using TIAA contracts.

80

DESCRIPTIONS

OF

AUGSBURG COLLEGE AND THEOLOGICAL

PLANS

SEMINARY

This institution established a retirement plan effective July 1, 1946, applying to all full-time employees after four years of service. The employer and the employee each pay a premium of 5 percent of the salary of the employee up to a maximum of $125 each, with the combined total used as premiums on contracts issued by the Lutheran Brotherhood of Minnesota. Two contracts are available, "retirement age 68 insurance policy" and "deferred refund annuity contract." The retirement age 68 policy is issued upon request if the participant is insurable; it provides a minimum life insurance benefit of $1,000 if the member is single, or $2,000 if he is married. The normal retirement age is 68; by special vote, extensions of service may be made on a part-time basis. Salary deductions and employer contributions on behalf of employees who are within five years of retirement age when they become eligible for participation are accumulated in a separate fund and paid to each employee in a lump sum upon his retirement. For these employees and for others who come under the contributory plan a supplementary benefit is paid by the college equal to 3/10 of one percent of average annual salary per year of service up to age 68. After five years of participation in the plan the contracts are the sole property of the employee if he withdraws from service. Prior to that time he receives his own accumulations minus one half of the carrying charge if he withdraws. BOSTON

UNIVERSITY

Effective January 1, 1938, Boston University entered into a group annuity contract with the John Hancock Mutual Life Insurance Company covering all deans and full-time regular faculty members of professorial rank under 65 years of age. Participation is compulsory on September 1 next following appointment. The yearly amount of retirement annuity purchased for an employee in each year after the effective date of the plan is equal to 2 percent of the year's salary with respect to which contributions are made. Each member contributes 5 percent of his basic salary as premiums, and the university's contribution is the remainder of the cost of future service benefits purchased year by year plus the cost of pensions for past service. In recognition of service before the plan was inaugurated, the university intends, hopes, and expects, but does not guarantee, to purchase annuities for older members who entered the plan on January 1, 1938. Any past service annuity so purchased is to be such that when added to the anticipated aggregate yearly amount of annuity on account of

DESCRIPTIONS

OP

PLANS

81

current service the total yearly annuity resulting will be equal to 2 percent of the member's basic salary on the effective date of the plan for each completed year of service in professorial rank at normal retirement date, not to exceed twenty years, or $900, whichever is the smaller amount. For new entrants normal retirement age is 65 years; with the consent of the university a member may retire on a reduced annuity at an age within ten years below his normal retirement age. Retirement may be delayed beyond normal retirement age "if specifically requested by the University," but in this event contributions cease and annuity benefits begin as though retirement had actually occurred on the normal retirement date. The member's salary in such instances may then be adjusted. If a member resigns from full-time service in the university, he receives back his own contributions without interest, or he may have a paid-up deferred annuity in the amount which his contributions have purchased. He does not benefit from the university's contributions unless he remains in service until his retirement date. If he terminates his service on other than a temporary basis for leave of absence, sickness, or accident, and is later reappointed to a covered class, he enters the plan as a new member. With reference to termination of service within ten years prior to normal retirement date, the descriptive booklet states that "the University must necessarily reserve the right to determine whether a termination of service before the normal retirement date shall or shall not be considered early retirement." If a member dies in service, his beneficiary receives his contributions without interest. A member may elect to receive a reduced amount of retirement annuity, commencing on the normal or an earlier allowed retirement date, with benefits to be continued to a surviving dependent or relative for the remainder of such contingent annuitant's lifetime. If a member elects this option less than five years prior to retirement "approval of his election will be subject to his furnishing satisfactory evidence of his good health to the Insurance Company," and "if this option is elected it cannot subsequently be changed or rescinded nor can an earlier Optional Retirement Date be elected without the consent of the Insurance Company." UNIVERSITY

OF BRITISH

COLUMBIA

In 1924 a contributory retirement plan was inaugurated with TIAA covering faculty, administrative officers, and such other persons as the president may designate. Those under age 40 at that time contributed 5 percent of salary, to be matched by equal contributions from the

82

DESCRIPTIONS

OF

PLANS

university, with retirement at age 65. Retirement age for participants who in 1924 were age 40 or over is scaled from age 68 to age 66. Contributions for participants age 40 or over are scaled from 5 percent to 7 percent. The minimum retirement allowance for all those in service in 1924 who participate in the plan on the basis described above and complete fifteen years of service is to be one half of average salary for the last five years of service. If the contributions of 6 percent or 7 percent, with equal amounts from the university, do not yield half salary at the retiring ages stated, then supplementary annuities are paid out of a special grant from the Carnegie Foundation. Eligible persons under age 35 may divert 40 percent of the combined individual and university contributions to the payment of premiums for life insurance. A 1940 revision provides that old members will purchase Canadian Government annuities representing any increases in salary they may receive. Also, new members purchase Canadian Government annuities until they have reached the maximum annual annuity of $1,200 at age 65, after which both old and new members place further contributions with TIAA. As of April 1, 1946, university contributions are to be 10 percent of salary, with all persons appointed since 1936 contributing 5 percent. There are still a few of the original participants who contribute 6 percent or 7 percent, and for whom the university contributes 10 percent. BROWN

UNIVERSITY

FACULTY AND ADMINISTRATIVE

OFFICERS

In October, 1913, Brown University adopted a noncontributory pension plan. The benefits provided at retirement were essentially those established by the Carnegie Foundation rules, with the exception that the plan provided no arbitrary maximum to the pension payments. Contributory plan.—In June, 1920, the university inaugurated a voluntary contributory plan on a 5 percent matched basis, using TIAA contracts. The plan covers designated administrative officers and faculty members, including instructors, first appointed after the academic year 1919-20. Participation was not available to persons entitled to Brown University pensions under the 1913 plan or Carnegie Foundation retiring allowances, except by special agreement. Amendments of 1937.—Among the major changes made in October, 1937, is one making participation compulsory rather than optional. Participation of designated administrative officers, professors, and associate professors is obligatory, and no period of preliminary service is

DESCRIPTIONS

OF

PLANS

83

required. Assistant professors and instructors are eligible after two years of service at Brown, or at some other institution of equal rank, and must participate upon attaining age 40. Participation is required of assistant professors after three years of service as such at Brown, or after five years of service as an instructor and assistant professor. It is required of instructors after 5 years of service at Brown. A 1920 regulation limiting the university's contribution to $300 in the case of any one participant was removed in 1937. A regulation terminating the contribution of the university when the participant reaches the age of 65 was rescinded, and the university will make its contributions until the time of the participant's retirement. Participants may retire or be retired at the end of the academic year in which age 65 is attained, and retirement is required at the end of the academic year in which age 70 is attained. For one whose birthday falls between July 1 and October 1, retirement dates refer to June 30 preceding attainment of the stated retirement age. Contributions are fixed at 5 percent of annual salary to be contributed by the participant and the same by the university. Prior to the introduction of the compulsory provision, the participant was permitted to contribute in any amount up to 5 percent of salary, and the university matched this contribution. The plan provides that the optional form of settlement chosen upon retirement is to be elected only after consultation between the participant and the proper officer of the university. NONACADEMIC

EMPLOYEES

Effective July 1, 1939, Brown University inaugurated a contributory retirement plan for employees of classes not covered by the plan described above. These may be briefly designated as maintenance employees and administrative staff members other than officers. Retirement is required at the end of the fiscal year (June 30) in which age 65 is attained, with the exception that for those having birthdays between July 1 and October 1 retirement is required on June 30 preceding the sixty-fifth birthday, and a person may be retired at an earlier date because of disability. A year's service is required for eligibility, and participation is required of all eligible staff members, except that no person who is eligible for a pension or a retirement allowance from another source may participate without the consent of the university. The participant makes a contribution of approximately 4 percent of his annual salary or wage—and the university makes an equal contribution—toward the purchase of a retirement annuity contract issued

DESCRIPTIONS

84

OF P L A N S

by TIAA. In order to simplify calculation of the contributions and the making of deductions incident thereto, salary and wage classifications have been established, and contributions by the university and by the employee will be made in accordance with these classifications. BRYN

MAWR

COLLEGE

A voluntary contributory retirement plan was adopted in 1920 covering faculty members, administrative officers, and the office staff of regular employees. The individual's contribution of 5 percent of salary up to $300 a year was matched by the college as a premium toward a deferred annuity contract or an endowment life insurance policy. Likewise in 1920, a separate funding arrangement was established to allow teachers who so desired to contribute to a fund administered by the board of trustees of the college. The accumulation in the fund to the credit of an individual was payable on his behalf upon withdrawal, death, or retirement. This fund was closed to new members in 1933, but a savings account arrangement is now available through the Philadelphia Saving Fund Society. The Bryn Mawr plan covers, in general, all full-time employees of the college engaged at a stated yearly salary. An interesting provision in this plan, and probably a forerunner of a trend, is the practice of permitting immediate participation by employees in eligible classes who were previously covered by social security or by a TIAA plan, but requiring a one-year waiting period for all others. This provision has been used quite generally by colleges and universities with respect to TIAA contracts, but it is seldom as yet used in respect to social security. Usually the Bryn Mawr contracts are written with TIAA. Subject to the approval of the finance committee, the participant may choose a life insurance company other than TIAA. Contracts used in connection with the plan are filed with the college, and are released to the participant upon separation from service. UNIVERSITY ACADEMIC

OF

CALIFORNIA

EMPLOYEES

The University of California established a retirement plan in 1903 and slightly modified it in 1905. The plan provided a benefit of % of average salary for the last five years of service for those persons aged 65 who had given at least twenty years of service in a specified rank. When Carnegie Foundation free pensions became available, the plan was modified to provide the difference between the allowances formerly promised and the free pensions.

DESCRIPTIONS

OF

PLANS

85

In 1924 it was decided to establish a contributory plan, called the "retiring annuities system," and to make the arrangement for free pensions for older faculty members more definite under what is called the "pension system." Pension system.—The pension system is a transitional arrangement to take care of those who began their service prior to July 1, 1919, and who continue this service until retirement. Its membership is entirely closed. The pension system of 1924 promised free pensions for those in service on June 30, 1919, of rank higher than instructor, for administrative officers, and for instructors who had been continuously in the service of institutions associated with the Carnegie Foundation since November 17,1915—provided these employees should continue uninterruptedly with the university until retired by the regents. Retirement was available only to those of age 65 who had completed twenty years of service. The maximum benefit was ^ of the average salary for the last 5 years of service, but not more than $4,000. For those reaching age 65 between July 1, 1922, and June 30, 1923, the maximum benefit was available at age 65. The requisite age for receipt of the maximum benefit was scaled upward for those retiring later, so that for those reaching age 65 after June 30, 1928, the maximum benefit was available only after attaining age 70. Upon retirement after age 65 but before reaching the age required for maximum benefit, the retirement annuity was to be the maximum benefit less as many fifteenths of itself as the actual age at retirement fell short of the required age. Retirement benefits to be paid by the university to an individual were to be decreased by the "theoretical amount of his Carnegie Foundation retiring allowance computed upon the basis of the Carnegie Foundation's rules of retirement which the Foundation put into effect on July 1, 1923." Revised pension system.—The pension system was revised on May 12, 1931. It now bases maximum benefits on the average salary for the five years of service ending June 30, 1929, instead of for the last five years of service prior to retirement, and replaces the $4,000 maximum in the old plan by a sliding maximum varying from $3,900 for those reaching age 70 prior to July 1, 1931, to $3,000 for those reaching age 70 after July 1, 1939. As before the revision, the benefit from the university takes into account amounts to be received from Carnegie sources, but a change is made in that the university is to supplement whatever is receivable from Carnegie sources rather than to supplement the "theoretical amount" of the Carnegie Foundation retirement allowances computed on a specified basis. The revised plan permits those eligible

86

DESCRIPTIONS

OF

PLANS

under the pension system to join the contributory retiring annuities system to supplement what would be received under the pension system in making up a benefit not to exceed $4,000 a year upon retirement under the rules of the pension system. Acceptance of this option was open until June 1, 1981. Retiring annuities system.—All those of the rank of assistant professor or higher whose service began later than June 30, 1919, are required to participate in a contributory retirement plan called the "retiring annuities system," adopted in 1924. Contributions of 5 percent of salary are required beginning with July 1, 1924, and are matched by the university. The member was permitted to contribute 5 percent of his salary for the college year ending July 1, 1924, and was given three years in which to complete this contribution; if he did so, the university matched these payments. The university contributed 5 percent of salary payments for service during the four years from July 1, 1919, to June 80, 1923, these payments to be credited to the teacher in case of retirement, but to revert to the university in case of separation otherwise than by retirement. Contributions cease whenever accumulations are sufficient to purchase at age 65 an annuity which will supplement any pension available through Carnegie sources in producing a total benefit of $4,000 a year. If service is continued beyond age 65, contributions are to be discontinued. The university accepts responsibility for contributions made to the annuities fund, promises to add interest and to purchase for the member upon retirement whatever annuity can be obtained with the accumulations to the member's credit. Retirement is available at age 65 and is compulsory at age 70. Upon withdrawal from service prior to age 65 and after more than four years of service, the full accumulation to the credit of the member, with the exception of that contributed by the university for years of service from 1919 to 1923, is used to purchase an annuity of such type, either immediate or deferred, as may be selected by the beneficiary. In event of the participant's death while in service this same credit is paid to his beneficiaries or legal representatives. In event of withdrawal or death prior to the completion of four years of service, accumulated member contributions are payable in cash, and the contributions made by the university revert to it. Revised retiring annuities system.—Changes made in the retiring annuities system on May 12, 1931, were largely with regard to administration. The revision did, however, make possible the continuation of contributions after age 65 if agreeable to the university and desired by the member. Under the 1924 plan the university guaranteed at least

DESCRIPTIONS

OF

87

PLANS

4 percent interest on accumulations of contributions. Under the revised plan the rate of interest credited to individual accounts is to be at least as large as the average of the rates applied to savings deposits by the five banks of California having the largest savings deposits at the time of the interest addition. This revision lays down a definite procedure for financing benefit payments upon retirement. Whatever benefits the university undertakes to pay in the way of annuities, whether under the pension system or the retiring annuities system, are to be furnished through the purchase by the university of annuity contracts from life insurance companies. It is provided that the regents shall establish an approved list of life insurance companies from which annuities may be purchased. The retiring teacher may choose a company on this list and may choose the type of annuity to be purchased if he is willing to sign a form releasing the university from full responsibility for his retirement benefit. However, since the intention is to furnish annuity benefits, the university reserves the right to require that any cash surrender or loan privileges which may be included in any annuity purchased shall be made inoperative. The retiring annuities system was modified further in 1937 so as to admit certain administrative officers by designated titles and to admit instructors and others of comparable rank, such as lecturers, supervisors, and junior members of the experiment station staff. Participation was based on total salaries after July 1, 1937; prior to that date salaries for administrative service had been excluded. The purpose of practically all changes made at this time was to coordinate the retirement system of the university with the state employees' retirement system. This system became effective on August 27, 1937, for employees of the university who were not members of the pension system or the retiring annuities system. In December, 1946, the rate of contribution under the retiring annuities system was increased from 5 percent to 7 percent for the participant and an equal amount from the university. CALIFORNIA

STATE

EMPLOYEES'

RETIREMENT

SYSTEM

COVERING CHICO STATE COLLEGE, F R E S N O STATE COLLEGE,

HUM-

BOLDT STATE COLLEGE, SAN D I E G O STATE COLLEGE, S A N FRANCISCO STATE COLLEGE, S A N J O S E STATE COLLEGE, UNIVERSITY OF C A L I FORNIA

Employees of the state colleges who are not covered by the state teachers' retirement system or by the retiring annuities system of the University of California are included under the state employees' retire-

88

DESCRIPTIONS

OF

PLANS

ment system established January 1,1982. Rates of contribution for this plan have been changed from time to time to compensate for changes in the interest rate and mortality experience. The latest change was made October 1, 1945; this change increased the contribution rates and, at the same time, increased benefits and made full benefits available at an earlier date. A number of amendments are now pending in the state legislature. Retirement is compulsory at age 70 and optional between ages 55 and 70 provided the member has credit for more than twenty years of service or has accumulated contributions of more than $500. Any compensation in excess of $5,000 a year is disregarded in the operation of the system. A disability retirement is provided on a reduced basis prior to age 60 after ten years of service. In event of death in service, the member's beneficiary receives his contributions with interest plus one month's salary for each year of service up to six years. If a member withdraws from service, his own contributions will be refunded to him, but after he has credit for twenty years of service or has accumulated contributions of more than $500 he may leave his contributions in the system and receive a retirement allowance at any time between ages 55 and 70 based upon service at the time of withdrawal. If a withdrawn member returns to state service, he may redeposit the amount withdrawn and thus restore credit for service prior to withdrawal; otherwise, he comes in as a new member. Provision is made for transfers from the state system to the University of California system, in event of change in title or occupation, so as to maintain a uniform basis of classification under each system. Members have the privilege of making additional contributions to supplement their regular retirement allowances, but such supplementary benefits are not matched by the state. The state provides full retirement credit for members while they are in the service of the armed forces of the United States provided the member returns to university or state service within six months after discharge. A death benefit of $300 is provided for the beneficiary of a retired member. Optional allowances with survivor benefits are available to members at the time of retirement. CALVIN

COLLEGE

In May, 1937, the board of trustees of Calvin College took action to establish a voluntary, joint contributory retirement plan which applies to all members of the teaching staff of the rank of instructor or higher

DESCRIPTIONS

OP

89

PLANS

and to "such other employee* as the Synod may hereafter declare eligible to a pension." Members contribute 3 percent of their "salary rate," and the college contributes twice as much. "Salary rate" refers to the established salary for the position in question, but it does not include compensation for additional administrative duties. Retirement is normal at age 70, the benefit at that age being 25 percent of the "salary rate" if service has covered not more than five years, 33% percent after service of from five to nine years, inclusive, and 40 percent after service for a longer period. In case of retirement at any time after attaining age 65, but before reaching age 70, a reduced benefit is available. If a member dies in service and leaves dependents, contributions of both member and college are returned in a lump sum or in installments. If there are no dependents, only the member's contribution is paid to the estate. Furthermore, the death benefit when a beneficiary exists is not to be less than a temporary annuity of $500 a year payable for a period varying from three to ten years according to the period of service of the deceased. In case of death after retirement, the same provisions are carried out, but amounts already paid to the deceased while he was a pensioner are deducted. If a member withdraws from service, his contributions without interest are returned in cash. In May, 1946, Calvin College established a pension plan for "all fulltime employees except members of the faculty." This plan is the same as that described above except for the following details: Normal retirement age is 65, instead of 70 years, with possible extensions past age 65. The benefit at age 65 is 30 percent of salary after service of five to nine years inclusive; 35 percent for service of ten to nineteen years; and 40 percent for service over twenty years. A nonacademic employee who leaves his job because of disability shall be entitled to a pension. CANADIAN COVERING

GOVERNMENT ACADIA

ANNUITIES

UNIVERSITY,

DALHOUSIE

UNIVERSITY,

MCGILL

UNIVERSITY, T H E R E G E N T S OF M O U N T ALLISON U N I V E R S I T Y , Q U E E N ' S UNIVERSITY,

TRINITY

VERSITY OF BRITISH

COLLEGE, COLUMBIA,

UNIVERSITY UNIVERSITY

OF

ALBERTA,

OF K I N G ' S

UNI-

COLLEGE,

UNIVERSITY OF M A N I T O B A , U N I V E R S I T Y OF SASKATCHEWAN, U N I V E R SITY OF TORONTO, UNIVERSITY OF W E S T E R N ONTARIO

The Annuities Branch of the Department of Labour of the Dominion of Canada issues annuities either as individual contracts or under a master group contract. The annuities are used by a growing list of

00

DESCRIPTIONS

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Canadian universities and affiliated colleges to provide part of the retirement income for their staff members. The Canadian Government assumes all the administrative cost. In addition, the annuities continue to be written on a 4 percent interest basis regardless of recent declines in interest earnings, and the government guarantees this rate. The rate may be changed at any time for new participants. When master group contracts are used, the master contract states the retirement, death, and withdrawal benefits resulting from joint contributions by the employer and the participant. The retirement benefit is in all cases equal to that purchased by the joint contributions of the employer and the employee, accumulated at interest. The death benefit prior to retirement must be at least as large as the contributions made by the employee plus any part of the employer's contributions that are vested in the employee under the plan at the time of his death. The withdrawal benefit can be taken only in the form of a deferred annuity, the amount of which must be equivalent to the employee's contributions and such portion of the employer's contributions as are vested in him under the plan at that time. Within broad limits the employer may make whatever arrangements he wishes with the Annuities Branch for payment of equities in the event that an employee withdraws from service or dies before retirement. The employer may establish a plan whereby, in the event of withdrawal from service, the employee receives only the annuity purchased by his own contributions plus interest, with an equivalent benefit to be paid at death, or the plan may provide that the employee or his beneficiaries receive the full benefits from the joint contributions at all times. A departmental ruling limits any forfeitures of the employer's contributions for current service to a period of twenty years of employment, after which the entire equity must vest in the participant. If an employee withdraws from service before his retirement, an individual contract is issued by the Dominion Government providing the benefits purchased up to that time under the provisions of the master contract. There is no cash or loan value at any time. Retirement benefits under Canadian Government annuities are limited to $1,200 a year. Individual or master group contracts, when issued, state a retirement age. Once an age has been selected, retirement income may not be postponed, but it can be advanced to an earlier date. Most of the plans are written to provide an annuity ceasing at the death of the annuitant, with payments to continue for at least five years, although a straight life annuity may be provided. Up to five years before retirement a participant may choose among several settle-

DESCRIPTIONS

OF

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91

ment options: a benefit ceasing at death with payments to continue for a minimum period of ten, fifteen, or twenty years, and a joint survivorship annuity with payments to continue so long as either of two persons lives. The $1,200 maximum annuity is too small for many of the persons included under college retirement plans. A number of Canadian colleges that use the Government annuities provide that contributions under their retirement plans will be applied first to the purchase of the maximum amount allowable for a Government annuity and then to purchase annuities from TIAA or from Canadian life insurance companies. (See descriptions of individual plans for details.) CAPITAL

UNIVERSITY

Employees with professorial rank who are members of the Lutheran Church are covered by the retirement plan of the American Lutheran Church. No further information is available. CARLETON COLLEGE Carleton College established in 1919 a funded retirement plan applying to its teachers and administrative officers and using TIAA contracts. Participation was voluntary after a one-year waiting period, and retirement occurred at age 70. Effective October 1, 1946, Carleton put in effect a retirement plan applying to each full-time salaried employee whose age at his nearest birthday is at least 30 and not over 60 and who has been in the employ of tbe college for at least three years, and who, furthermore, agrees to be bound by the terms of the trust agreement. Full professors are eligible to participate immediately. TIAA contracts in effect are being continued, but new contracts are taken out with the Massachusetts Mutual Life Insurance Company. A retirement age of 65 is established, with no provision for continuance of service beyond that age. With approval of the board, earlier retirement on a reduced pension may be provided because of disability. The pension at normal retirement age is to be equal to one percent of salary for each year of past and future service at Carleton, with a maximum pension of 25 percent of salary. Additional pensions resulting from salary increases may be provided if the addition is greater than $5 a month with the limitation that no increase or decrease in retirement benefits will be made within ten years of the participant's normal retirement date. Insurable employees may apply for additional insurance protection for their beneficiaries. The

92

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OP

PLANS

death benefit for an uninsurable participant is at least equal to the sum of all contributions without interest applied to the purchase of the contract. Upon termination of employment, the employee receives only his own contributions without interest in the event of withdrawal from service before six years of service; if withdrawal takes place after six years of service, he receives the full contract. To support these benefits, the employee contributes 5 percent of his salary; the college makes a slightly larger contribution and, in addition, pays the amount necessary to fund past service benefits. CARNEGIE INSTITUTE

OF TECHNOLOGY

A voluntary retirement plan covering the teaching staff and administrative officers and using TIAA contracts was established in 1922. This plan was thoroughly revised and made compulsory in July, 1940, for the teaching staff of the rank of instructor or higher, librarians, nonteaching staff of educational departments, staffs of organized research departments, administrative officers, and secretarial and clerical employees. Members of the teaching staff, librarians, and administrative officers must participate when they reach age 35 for men and 32 for women. For other employees participation is voluntary after three years, and required after five years or attainment of age 35 for men and 32 for women, whichever is later. Retirement may be required at age 65 for men, and age 62 for women; normal retirement ages are 68 and 65, respectively, with annual trustee extensions permitted to ages 70 and 67, respectively. The participant's 5 percent of salary contribution is matched by the institute except as noted below. The institute hopes, but does not promise, to pay as a supplementary benefit the annuity that could be purchased from TIAA by a payment of 5 percent of salary accumulated at 2 ^ percent interest from the date the member would have been eligible had this plan been in effect to the actual date of his participation in the plan, or July 1, 1940, whichever is earlier. For persons with Carnegie expectations, the institute does not match contributions in the regular plan but hopes to pay a supplementary benefit figured as above, except with premiums continuing to normal retirement date and benefits decreased by the amount of Carnegie benefits. CASE SCHOOL OF APPLIED

SCIENCE

This institution established a voluntary plan for faculty members in 1919, using TIAA contracts and providing for retirement at age 60. The plan was revised in 1945, and now uses contracts of the John

DESCRIPTIONS

OF

PLANS

93

Hancock Mutual Life Insurance Company except for participants in the old plan and those with Carnegie expectations. The new plan covers teaching staff above the rank of instructor and selected administrative officers age 35 and above on a voluntary basis, with the requirement that 75 percent of those eligible must participate. Normal retirement age is 70 years, with extensions beyond that age at the option of the school. Premiums are 5 percent of salary contributed by the participant and matched by the school. The participant owns the contract and may take it with him upon severance of employment. A past service monthly pension is anticipated, computed by multiplying % of one percent of the participant's "credited average basic annual" salary by the number of completed years of credited past service divided by 12. CATHOLIC UNIVERSITY

OF AMERICA

Catholic University of America reports an informal, nonfunded pension plan based on a benefit of 80 percent of salary multiplied by the number of years of service and divided by 35. This benefit is available at age 65. The university is now considering extension of retirement benefits to all classes of employees. CENTRAL COLLEGE In June, 1941, Central College established a retirement plan applying to its officers and teachers. Contributions to the plan include 5 percent of salary from the individual and 5 percent from the institution as premiums toward contracts with the New England Mutual Life Insurance Company. Retirement is at age 70. The income provided at that age is whatever the combined premiums will purchase. If an employee leaves the service of the college before retirement, he retains his entire annuity contract. UNIVERSITY

OF CHICAGO

A definite retirement plan became effective at the University of Chicago on March 1, 1912, and investments valued at $200,200 were set aside as a first installment to support the plan. This plan provided for retirement after attaining age 65 and completing fifteen years of service, with an allowance of 40 percent of average salary for the last five years of service, plus 2 percent of this average for each year of service in excess of fifteen years, the total benefit not to exceed 60 percent of this average or $3,000 if smaller. A widow of a pensioner or of one eligible for a pension who had been a wife for ten years or more was to receive a pension equal to half that

04

DESCRIPTIONS

OF

PLANS

available to her husband. In January, 1928, additional death benefits were added. Calculations of the cost of these prospective benefits were made, and over a period of years funds were set aside to support them. In 1931, when other needs were pressing, the income from these funds was thrown in with general funds of the university with the understanding that retirement benefits would be a first charge on the total budget income. On January 1, 1922, the old noncontributory free pension plan was closed to new entrants so that none reaching the rank of assistant professor and none receiving first appointments after that date are covered by it. A contributory retirement plan took effect at the same time. Participation in this plan is open to instructors after two years of service and is required of those of the rank of assistant professor or higher, including designated administrative officers, whose terms of office in the university began later than December 31, 1921. Under the contributory plan retirement is to occur at the end of the appointment year in which age 65 is attained unless services are continued under a provision for one-year extensions. The plan uses deferred annuity contracts of TIAA, premiums for which are 10 percent of salary up to a maximum of $1,000, shared equally by the member and the university. University contributions toward annuity premiums cease at age 65. UNIVERSITY

OF

CINCINNATI

A contributory retirement plan became effective at the University of Cincinnati June 1, 1922. Members of the teaching staff and administrative officers who were not covered by the Carnegie free pension plan were made eligible after two years of service, and participation was optional. The university offered to match contributions up to 5 percent of regular yearly salary not to exceed $250 a year, ceasing when the joint contributions had purchased a single life annuity of $3,000 a year, first payment at age 65. Contributions became premiums for retirement annuity contracts issued by TIAA. When the pension rules of the Carnegie Foundation were revised, in 1929, the university extended the contributory plan to those affected and agreed to supplement the annuity thus produced and the allowance and annuity from Carnegie sources so as to make a total life annuity beginning at age 70 half as large as the average salary for the last five years of service, but not to exceed $3,000. A similar pension was granted in case of disability, effective after twenty-five years of service as a

DESCRIPTIONS

OP

PLANS

95

professor or thirty years of service as instructor and professor. Retirement is required at age 70. Modifications of 1938.—A retirement plan was established for employees of the city of Cincinnati in 1931, but university officers and staff members were excepted from the coverage at their request in order that they might continue the plan described above. In 1938 the legislature of the state of Ohio created a new retirement plan for public employees, requiring participation on the part of public employees of the state who were not covered by any other such plan. In the face of this requirement, officers of the University of Cincinnati requested and obtained a city ordinance making officers and faculty members of the university eligible to participate in the Cincinnati plan. Membership in the city retirement system is required of all officers and employees of the university except members of the faculties and of the research and teaching staffs. The latter may, at their own request, be excused from membership. Should they be so excused, the university offers to them the contributory arrangement with TIAA referred to above. As this ordinance and the city plan are now interpreted and supported by a resolution of the board of directors of the University of Cincinnati, a member who joins the city system will receive credit for service prior to 1931 and is offered the benefits supported by the regular city contributions for the years from 1931 to 1938 if he is willing to pay regular employee contributions for this period. Cincinnati plan.—This plan provides a pension upon retirement after attaining age 60 of 1/70 of the average salary for the last ten years of service for each year of service prior to the establishment of the plan and 1/140 of this average for each year of service after the establishment of the plan, in addition to the annuity that can be purchased with member contributions. These contributions are scaled to entrance age and are intended to produce an annuity about equal to the pension in recognition of current service. Retirement is required at age 70, except that two-year extensions of service may be made by the city manager upon recommendation of the administrative board. Liberal disability benefits and benefits in cases of accidental death are provided. The usual death benefit is half a year's salary plus the accumulation of member contributions. Following withdrawal from service, a member receives his accumulated contributions.

»6

DESCRIPTIONS

COLORADO

STATE

OF

PLANS

COLLEGES

T I A A P L A N C O V E B I N G COLORADO A G R I C U L T U R A L AND M E C H A N I C A L COLLEGE,

COLORADO S T A T E C O L L E G E o r

EDUCATION,

UNIVERSITY

O F COLORADO

In 1929 the University of Colorado, Colorado Agricultural and Mechanical College, and Colorado State College of Education established voluntary TIAA retirement plans to cover their faculty members. In 1931 the secretarial and custodial staffs of these institutions became subject to the state employees' retirement law. Later amendments to the law resulted in extending the Public Employees' Retirement Association plan to members of the teaching staff, except at the University of Colorado. When the association extended its benefits to teaching faculty, the university made a study of the plan. As a result, it decided to keep the TIAA plan for teaching faculty. Therefore, at the present time, faculty members of the University of Colorado are covered by a TIAA retirement plan; faculty members of Colorado Agricultural and Mechanical College and Colorado State College of Education who were employed before July 1, 1945, are, in general, members of the TIAA plan, and all other employees are covered by the Public Employees' Retirement Association. The colleges continue to match 5 percent contributions for those faculty members who chose to remain in the TIAA plan subsequent to July 1, 1945, and continue to accept under the TIAA program those members appointed to faculty rank who have obtained elsewhere an active TIAA contract. All new employees engaged after July 1, 1945, are restricted to the PERA system as established by state law. PUBLIC

EMPLOYEES'

RETIREMENT

ASSOCIATION

OF COLORADO

C O V E R I N G A D A M S S T A T E C O L L E G E , COLORADO AGRICULTURAL AND MECHANICAL STATE

COLLEGE,

COLORADO SCHOOL OF M I N E S ,

C O L L E G E OF E D U C A T I O N ,

COLORADO

U N I V E R S I T Y OF COLORADO

(NON-

ACADEMIC STAFF ONLY), W E S T E R N S T A T E C O L L E G E OF COLORADO

The state system permits retirement at age 65 on half pay up to a single life annuity of $1,800 a year. To qualify for a full annuity, a Public Employees' Retirement Association member must have had to his credit at retirement 20 or more years of service and have attained age 65. Fractional annuities are available at age 65 for those with less than twenty years of service. After 35 years or more of state employment a member may retire at any age on a full annuity. The basis for

DESCRIPTIONS

OF

PLANS

97

determining the salary applicable to an annuity payment is the average salary received during the last five years of employment. Each member of the P E R A contributes percent of his salary to the state fund, and such payments are credited to his individual account. percent of salary, but this amount The college pays a matching goes into the general fund of the P E R A and is not refundable as is the individual account on withdrawal from service. A service-incurred disability allowance becomes available to the employee after five years of employment. A proved disability for any cause entitles the member to annuity rights after fifteen years of service. An employee leaving employment in any Colorado state office may withdraw his own deposits without interest from the P E R A fund, or he may continue premium payments to the fund and obtain fractional retirement benefits. If death occurs prior to retirement, the member's deposits in the P E R A fund may be returned to his estate or beneficiary if proper claim is made. Joint survivorship options are provided under the amended P E R A law of 1945, and a cash refund annuity option is also available. COLUMBIA

UNIVERSITY

From its earliest history the policy of Columbia University has been consistently to provide retiring allowances for its officers at the end of their terms of service. The first president of King's College, Samuel Johnson, was retired in 1763 on a pension of 50 pounds per annum. Before the adoption of a general rule on the subject and while the number of staff members was still very small, retiring allowances were provided by special action of the trustees in the following cases: 1820, Professor Wilson, $1,500 (his active salary was $2,500 and house); 1842, President Duer, $1,200 per annum; 1864, Professor McVickar, $1,000; 1880, Professor Schmidt, $1,000; 1881, Professor Nairne, $1,000; 1888, President Barnard, full salary. In 1892 the trustees inserted in the university statutes a general regulation providing that any professor at the age of 65 who had completed fifteen years or more of service might be retired on half salary, either upon his request or upon the motion of the trustees. This plan remained in effect until the establishment of the Carnegie Foundation, which under its original rules provided still more generous allowances. Benefits were paid by the Carnegie Foundation as early as the college year 1906-07, but Columbia continued to support pensions already started under its old plan. Columbia was among the first institutions

98

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accepted by the Carnegie Foundation for receipt of retiring allowances, this occurring at its first meeting for this purpose, held April 9, 1906, and allowances were initiated for new Columbia pensioners during the then current college year. Contributory plan.—On April 7, 1919, the board modified its retirement rules and added a new section to inaugurate a contributory plan for retirement income, using retirement annuity contracts of TIAA. The contributory plan was devised for those newly appointed on July 1,1917, or later. Participation was made available at once to appointees of the rank of assistant professor or higher and to instructors with salaries of $1,200 or more after three years of service. Contributions were to be 5 percent of salary from the individual and the same from the university, and the university offered, temporarily, to match contributions retroactively to July 1, 1917. Retirement may be brought about at any time after attainment of age 65 "upon the motion of the Trustees," and, since no supplementary benefits are involved in this part of the plan, the individual may withdraw without loss at any time. Participation in this plan was voluntary until the statute was amended on April 7, 1930, so as to require participation on the part of those above the rank of instructor who were newly appointed or who received promotions or increases in salary after July 1, 1930. Those in service when the plan was adopted who had been appointed subsequent to November 17, 1915, when the lists of the Carnegie Foundation were closed, were eligible to participate; but to those who did not accept the contributory plan the university guaranteed the expectations of those on the Carnegie list. Supplementing Carnegie expectations.—The university offered to supplement the allowances expected from Carnegie sources after the change of rules of May, 1929. For those with Carnegie expectations who joined the contributory plan as of July 1, 1929, the university agreed to add what might be necessary upon retirement at age 65 or thereafter to bring the total benefit, including Carnegie Foundation allowance and Carnegie Corporation annuity, to an amount equal to half the average salary for the last five years of service plus $400, but not more than $4,000; 110 officers accepted this plan. For those who did not accept the contributory plan the university has agreed to restore the Carnegie expectation under the rules of 1922, that is, to provide a total allowance of half the active pay, not to exceed $3,600 if retirement is at age 70, this to be reduced by 1/15 for each year by which actual retirement anticipates that age. In

DESCRIPTIONS

OF

PLANS

09

both cases a widow's pension of half the officer's pension is provided. Amendments of 1945.—These amendments were made largely to take into consideration the decreased returns from annuities issued subsequent to March 31, 1932, because of the use of more modern annuity tables and the assumption of lower interest rates in those contracts. All full-time officers of administration or instruction who were participating in the retirement plan on December 31, 1945, and whose contracts were dated prior to April, 1932, continue to contribute 5 percent of their salaries, and this is matched by the university. Those whose contracts are dated within the periods specified below are required to continue to participate, and their contributions are increased by the following percentages of salary (over their 5 percent contribution): April 6, 1932, to December 31, 1935, both inclusive, Yi percent; January 1, 1936, to November 30, 1938, both inclusive, 2 percent; December 1, 1938, to December 31, 1945, both inclusive, IVi percent. Subject to these provisions, any officer of administration or instruction whose contract is dated within the period April 6, 1932, to December 31, 1945, and who started contributions at or above age 34, shall have the option of authorizing additional contributions at such a rate as will not make the aggregate exceed the following percentages of Age at lime 34-35 36-37 38-39 40-41

Contribution Percentage 6M 7 8

Age at Contribution I»tue Percentage 42-43 m 44-45 9 46-47 VA 48 and over 10

"The officer's contribution, whether required or optional, shall be deducted from his stated salary payments and paid on his behalf, together with an equal amount provided by the university, to the Teachers Insurance and Annuity Association of America." With respect to those entering service on or after January 1, 1946, participation is required of full-time officers of professorial grade, including administrative officers having salaries at least equal to the minimum salary of an assistant professor, and, after three years of full-time service from date of appointment, of full-time instructors, lecturers, and associates, including administrative officers designated as such by, or by authority of, the trustees if annual salary is $2,400 or more. The member contributes IY2 percent of his salary, and the university adds a like amount toward premiums for a TIAA annuity. Individual adjustments may be made in agreement with an authorized university

100

DESCRIPTIONS

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officer, to take account of any provision for retirement already made or of age attained at time of appointment. Contributions under this and the earlier plans are to cease whenever the joint contributions already made will produce a single life annuity of $4,000 a year with payments beginning at age 65. The retirement provisions of Barnard College are the same as those of Columbia University. The provisions of the College of Pharmacy may be found in Appendix A. TEACHERS

COLLEGE

Faculty and administrative officers.—Teachers College established a retirement plan for the benefit of officers and teachers of the college and related schools, under which contributions were collected as early as the year 1913. In the year 1922 the college adopted a voluntary joint contributory plan using TIAA contracts, and at that time the accumulations of members under the old plan, together with contributions of like amount from the college, were applied as premiums on these contracts. On July 1, 1941, participation in the plan became compulsory for faculty employees. The Teachers College statute introduces the limitation that college contributions shall cease when the accumulation to the credit of an individual's contract will purchase a half-pay annuity at age 65. It provides for resumption of premium payment if salary is increased after such a cessation, but states that the annuity shall not be more than half the average salary for the last five years of service. The Teachers College plan provides for retirement at age 60 unless extension of time is granted, but this provision has been waived since the year 1922. I t provides for the continuation of contributions to age 65 if service is continued until that age is reached. In 1946 Teachers College increased contributions on annuity contracts issued subsequent to March 31,1932, above the 5 percent matched level. The amounts of the compulsory and voluntary contributions under the revised plan are identical with those described for the Columbia University plan. Likewise, all eligible persons whose terms of service begin on or after September 1, 1946, will contribute 7Yi percent of their salaries, with a like amount being contributed by the college. Nonacademic employees.—Employees other than officers of administration and instruction are eligible to participate under a group annuity contract between Teachers College and the Metropolitan Life Insurance Company after they have completed one year of service. Participation

DESCRIPTIONS

OF

PLANS

101

was optional for those who were in service in August, 1937, when the contract became effective, but compulsory for full-time employees engaged after that time. Effective July 1, 1941, participation of each fulltime employee with one or more years of full-time service became compulsory, unless specifically excused by the trustees. Under this contract annuity benefits are available at age 60; and unless service is continued by special request, retirement is expected at age 65. For determining contributions and benefits, compensation ranges $400 in width are constructed. The employee's contribution is S.6 percent of the midpoint of his compensation range, and the increment to his annuity benefit for each year's service is percent of the same figure. To illustrate, for salaries between $1,000 and $1,400 the monthly contribution is $3.60, and the increase in annuity due to a year's service at this salary is $1.50 a month. The contribution of the college is whatever is necessary when added to the employee's contribution to buy the increment of annuity for the corresponding service. If an employee withdraws from service, he may have his contributions returned to him in cash or he may wait until he reaches normal retirement age and receive an annuity. If he has contributed for 10 years or more, this annuity will be the full retirement annuity purchased for him during his years of service. If he has contributed for less than 10 years, the annuity is that "purchased by his own contributions." If an employee dies before he has received his contributions in cash or before he has received as much as 1^2 times his contributions in the form of annuity payments, his beneficiary will receive \x/2 times his contributions less whatever has been paid to him in the form of an annuity. The trustees declare the intention, "without creating a legal obligation on the part of the college," of recognizing service prior to the inauguration of the plan by paying upon retirement a pension of one percent of the "annual rate of earnings for 1936-37" for each year of service after attaining age 35 and prior to the inauguration of the plan. RETIREMENT FUND FOR LAY WORKERS OF THE CONGREGATIONAL CHRISTIAN CHURCHES COVEBING

DILLARD

UNIVERSITY,

COLLEGE,

TALLADEGA

COLLEGE,

FISK

UNIVERSITY,

TILLOTSON

COLLEGE,

LEMOYNE TOUGALOO

COLLEGE

The Retirement Fund for Lay Workers, incorporated under the laws of New Jersey in 1930, is a society for beneficial and protective purposes to its members, who must be lay workers of Congregational churches,

10«

DESCRIPTIONS

OF

PLANS

or of religious, charitable, or educational bodies or organizations affiliated, merged, or consolidated with said churches. Institutions having such affiliations with t h e Congregational churches m a y use this f u n d as t h e instrument for a contributory retirement plan for their lay employees. T h e certificates issued t o each worker vary in accordance with the standards set b y each employer, except t h a t t h e rules of the fund do not permit a membership contribution of less t h a n 3 percent of salary, matched by equal p a y m e n t s from the employer. I n practice, Dillard University and Fisk University require membership contributions of 5 percent, matched by equal payments by the employer. In t h e case of t h e last four institutions listed, membership contributions of 3 percent are matched by contributions of 8 percent by t h e employer. Retirement m a y be required after age 60 is reached, may be demanded by t h e participant after age 65, and must occur not later than age 68. The retirement benefit is whatever a n n u i t y can be purchased with accumulated contributions. I n case of total and presumably permanent disability, a retirement benefit is available before age 65 is attained. If a member withdraws from service, he m a y h a v e his contributions returned t o him, b u t if he leaves his contributions with the retirement plan, he retains credits provided by t h e employer's contributions and m a y receive t h e a n n u i t y t h a t both accumulations will purchase upon his reaching age 60. In case of death in service, accumulated credits will support an annuity for dependents; otherwise, they will be paid in a lump sum to a named beneficiary or t o t h e estate of the deceased. CORNELL

UNIVERSITY

Endowed colleges ai Ithaca.—In 1903 Cornell University initiated a plan b y which interested full professors contributed to a retirement fund which was started with an anonymous gift of $150,000. This arrangement and Carnegie Foundation retiring allowances were t h e only provisions for retirement income in operation in t h e endowed colleges at I t h a c a until a joint contributory plan was inaugurated, effective July 1, 1937. This plan covers designated administrative officers and faculty members above t h e r a n k of instructor b u t does not cover instructors in t h e endowed colleges or t h e lower administrative, operating, and maintenance group. T h e university hopes, as soon as it can see its way clear t o do so, t o provide a contributory retirement plan for these groups. Participation in t h e contributory plan is optional for eligible persons and for those in service on July 1, 1937, who subsequently receive pro-

DESCRIPTIONS

OF

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103

motions in rank or increases in salary. F o r members born in 1903 or later, retirement is normal on t h e first d a y of J u l y of t h e calendar year in which age 65 is attained. N o r m a l retirement age is scaled upward for older members t o age 68 for those born in 1898 or earlier. T h e university may continue t h e service of a member a f t e r his normal retirement date, and retirement a n n u i t y p a y m e n t s will begin when retirement occurs. With certain exceptions concerning older employees, contributions both of the employee and of t h e university are 5 percent of salary, with a salary limit for this purpose of $6,000. These contributions become premiums for retirement a n n u i t y contracts, and t h e benefit is whatever the premiums will buy. For persons in service J u l y 1, 1937, and past age 40 on t h a t date, these contracts are issued by t h e Prudential Insurance Company of America. Younger persons in service July 1, 1937, and new appointees had a choice between t h e Prudential and T I A A . At present all contracts for new employees are issued b y T I A A . Contracts with other companies in effect prior to a p p o i n t m e n t m a y be submitted to the board of trustees by a n y employee as substitutes. Without going into t h e details of special provisions for older staff members, the objective is given in t h e following paragraph from t h e printed statement of t h e plan, dated a t I t h a c a on J u n e 21, 1937: The intent of the plan is to enable members to purchase annuities with contributions by the university amounting to 5% of their respective salaries and equal contributions by the members respectively. Eventually the entire plan will work down to that basis. It is the purpose of the plan that in the meantime the university's contributions shall be greater to the extent necessary to recognize past service at the university of those members who have no Carnegie expectations and who are, on July 1, 1937, over age 40, so as to put them in the same position, so far as the university's contributions are concerned, as they would have been in had this plan been in force at the time they respectively entered the service of the university or reached the age of 40, whichever was the later date. State colleges.—Practically all persons in the service of t h e Colleges of Agriculture, Home Economics, and Veterinary Medicine, and the Experiment Station, are paid from state and federal government funds. By special act of the state legislature, in 1930, all such persons were included in the New York S t a t e employees' retirement system and were granted credit for past service upon p a y m e n t of contributions corresponding to this service.

104 DARTMOUTH

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COLLEGE

Dartmouth College inaugurated a voluntary, joint contributory retirement plan in 1926 for all faculty members, including instructors, and for administrative officers other than those looking forward to allowances from the Carnegie Foundation. In 1929 this plan was opened to Carnegie expectants on a voluntary basis, and in 1930 the college made certain supplementary provisions for the older members of this class. For Carnegie expectants reaching age 70 prior to June 30, 1940, the college agreed to supplement the allowance expected from Carnegie sources to make up at age 70 benefits calculated by the 1922 Carnegie Foundation rules. For those reaching age 70 after June 30, 1940, the college agreed to purchase supplementary annuities to cover the difference between the allowance at age 70, based on the 1922 Carnegie Foundation rules with salary for 1929-30 substituted for the average salary for the last ten years of service, and $1,500 more than the annuity that could be purchased at age 70 by contributions of 5 percent matchcd beginning with May 1, 1930. UNIVERSITY

OF

DELAWARE

In December, 1934, the University of Delaware inaugurated a plan for retirement income covering teachers, deans, the business administrator, and the president. Those who were nearing or beyond age 70 when the plan was inaugurated are to receive annuities of 40 percent of annual salaries upon retirement. Eligible persons beyond age 50 are required to purchase annual premium deferred annuity contracts with 8 percent of salary payments, and the university purchased single premium deferred annuities to supplement the benefits purchased by members in order to provide at age 70 annuities of 40 percent of salary. Eligible persons between ages 40 and 50 are required to contribute from 5 percent to 7% percent of salary, depending upon entrance age, for the purchase of annual premium deferred annuities, and these are matched with similar contracts of equal value purchased by the university. Teachers under age 40 are required to participate in the plan when they reach age 40 by contributing 5 percent of salary, this contribution to be matched by equal payments on the part of the university. For those past age 40 when the plan was inaugurated participation in the plan was optional. For persons past age 40 when engaged after the plan was inaugurated participation is required. As increases of $500 in salary are completed, consideration is given to purchasing additional benefits.

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105

Retirement is required at age 70 "on a pension of approximately 40 percent of present salary." Retirement is available at age 65 "on whatever annuity is then purchasable by the combined contributions of individual and university" and before reaching age 65 in case of disability that seems to be permanent. Separate contracts are purchased with contributions of the member and the university, both being filed with the business administrator while service continues. The contract purchased with university contributions is "owned by the university"; the contract purchased by the member's contributions is owned by the member, but so long as he is in service he may not surrender, mortgage, assign, or alter his contract. If a member should withdraw from service, his contract is released to him free from all restrictions, the university retaining the policy it has carried for said member's retirement for conversion into cash to be placed in a reserve fund which will be used ultimately to provide more liberal retirement allowances. In case of death in service the member's beneficiary receives the death benefit under both contracts. The single premium annuity contracts needed for older members of the existing staff in establishing this plan were purchased from the Mutual Life Insurance Company. No further purchases of this kind are anticipated in carrying out the provisions of the plan. Annual premium contracts are purchased from the New England Mutual Life Insurance Company. Employees of the extension service staff are eligible for the federal retirement system, and employees of the state institutions paid by the state treasurer are eligible under the state plan. DENISON

UNIVERSITY

From 1921 until the fall of 1941 Denison University had a nonfunded, noncontributory retirement plan under which it provided retirement income out of its current budget. Effective September 1, 1941, Denison adopted a contractual plan applicable to all regular salaried faculty and nonfaculty personnel who receive compensation of at least $1,200 a year. The plan was voluntary for employees over age 35 on the effective date of the plan. It is compulsory after two years of service and attainment of age 35 for all new employees and for old employees who were under age 35 on the effective date. Each participant contributes 4 percent of his regular salary; this is matched by an equal amount from the university and paid to the Equitable Life Assurance Society of the United States as premiums under a group annuity contract. If a member dies before retirement, his bene-

10«

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ficiary receives the contributions he has made, plus 1 percent compound interest. If the employee leaves the service of the university before retirement, he receives the noncashable annuity that his own contributions and those of the university will provide. Retirement occurs at age 70, with provision for earlier retirement at the discretion of the university or the member. The member may elect optional modes of settlement, but if they are elected too near to the retirement date, he must give evidence of insurability; such an election once made cannot be rescinded without consent of the Equitable and/or the university with the requirement of satisfactory evidence of good health. DEPAUW

UNIVERSITY

DePauw University inaugurated a partially funded, noncontributory pension plan in 1922 and revised it in 1935. The revised plan applied to "officially appointed and ranking administrative officers and teachers" and was called the "mutual assurance plan for retirement." It required retirement at age 65, but was amended in 1938 to permit continuation of service at the option of the staff member until age 67. This plan provided a pension of half the "active salary" upon retirement at age 65, or later, after twenty-five years or more of service. If upon reaching retirement age a member had not served for twenty-five years, the pension was to be half pay minus 4 percent of salary for each year that the service period fell short of twenty-five years, with the additional limitation that a pension was not payable after a service period of less than fifteen years. If a pensioner left a widow who was his wife during fifteen years of service, the widow was to receive a pension of half her husband's pension, but not more than $1,200 a year. Effective July 1, 1944, DePauw University inaugurated a contributory plan using TIAA contracts for faculty and administrative officers and announced that "The practice of granting noncontributory pensions to faculty and administrative officers of the University shall be discontinued as to those who retire after July 1, 1944, except as may be provided in the supplementary plan." Membership in the new plan is voluntary after two years of service and compulsory after two years of service and attainment of age 30. The participant contributes 5 percent of salary; the university contributed 5 percent of salary for the first two years of the plan, but since July 1,1946, it has contributed 8 percent. The retirement age is scaled from 68 to 65 according to age on July 1, 1944. DePauw University plans to supplement the annuity purchased by

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107

joint contributions by a pension of 2 percent of salary on June 30, 1944, multiplied by the number of years of service, not exceeding twenty-five, after age 35 and prior to July 1, 1944. One half of this amount may continue to a surviving spouse who has shared fifteen consecutive years of married life immediately prior to the death of the participant. PENSION

FUND

OF THE DISCIPLES

OF

CHRIST

COVERING ATLANTIC CHRISTIAN COLLEGE, B E T H A N Y COLLEGE, B U T LER U N I V E R S I T Y , C H A F U A N C O L L E G E , C U L V E R - S T O C K T O N DRAKE

UNIVERSITY,

EUREKA

COLLEGE, HIRAM

BURG C O L L E G E , M I L L I G A N C O L L E G E , P H I L L I P S

COLLEGE,

COLLEGE,

LYNCH-

UNIVERSITY

The pension plan will receive as members, teachers and administrators of colleges of the Disciples of Christ Brotherhood, also known as Christian Churches and Churches of Christ. Part or all of the staff members of these colleges are covered by the pension fund. Bethany, Culver-Stockton, Drake, and Hiram colleges also have TIAA plans. The pension plan includes provision for retirement, death, and total and permanent disability. Dues are based upon the member's salary and are 1 0 ^ percent for men and percent for women. Usually, dues are divided 5 percent for the member and 5 % percent for the college (4 percent for the women members and 4 ^ percent for the college). However, a different division of the dues may be arranged if preferred. Some colleges pay 8 percent, with the member paying 1 l /2 percent. The age retirement pension accumulates on the basis of 1/70 of the salary during active membership. Thus after thirty-five years of membership, the age retirement pension would be equivalent to half of the average salary. The minimum retirement age is 65 years. One half of the member's pension is continued to his widow. A cash death benefit is available which is equal to 75 percent of the current salary, not to exceed $1,000. No cash death benefit is payable upon the death of a member who has been receiving a disability or an age retirement pension. If the deceased member in active service leaves a widow, there is a pension equivalent to 25 percent of the average salary throughout membership but not to exceed $300 a year unless accrued retirement pension credits are more than $600, in which event the widow's pension is to be half the credits. Minor children receive pensions of $100 each automatically to age 18, to continue to age 21 if they are still in school. The children's pensions, in the aggregate, are not to exceed the widow's pension. A total and permanent disability pension is available after one year

108

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of membership. The pension is 40 percent of the average salary for the last five years of membership, or portion thereof, but not to exceed $600 a year. One half of this pension is continued to the widow. DREXEL

INSTITUTE

OF

TECHNOLOGY

Drexel Institute of Technology established a voluntary contributory retirement plan in 1929, together with a group life insurance plan with the Metropolitan Life Insurance Company. As amended to 1945, the plan covers full-time employees whose compensation is included under the educational budget of the institute. There is no waiting period except that newly eligible persons may join the plan on either March 1 or September 1. Each participant pays 5 percent of the midpoint of his salary range as premium. Salary ranges are $600 wide, starting at a yearly salary of $900. The amount of life insurance provided is equal to the midpoint of the salary range, with a maximum of $5,000. Normal retirement age is 65 years, with provision for retirement from age 55 to age 70 upon consent of the individual and the institute. Total permanent disability benefits are available. If the employee has completed less than 10 years of service and becomes totally and permanently disabled before age 60, the disability income is granted in lieu of the life insurance. A monthly amount equal to l l Y i percent of salary is paid until the full amount of the life insurance with interest is exhausted. In case of disability occurring after ten years of participation and before attainment of age 65, the benefit is equal to the retirement benefit already purchased, with a minimum of l l Y i percent of current monthly salary, and a maximum of $100 a month. If a member withdraws from service, he receives only his own contributions in cash or as a paid-up annuity. ELMHURST

COLLEGE

Elmhurst College established a retirement plan in the early 1930s by which the college purchases from the Pacific Mutual Life Insurance Company retirement annuity contracts to provide faculty members with $30 a month upon retirement at age 70. The individual likewise purchases a retirement income of $20 a month. Participation in the plan is voluntary. In case of withdrawal from service before the seventh year of service begins, the equity in the contract reverts to the college. In the event of death the college is beneficiary for its share of the contract. Retirement is available at age 65 and is required at age 70. This arrangement is not satisfactory to the administration as a plan for retirement income and is now in process of being revised.

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100

ELMIRA COLLEGE A voluntary retirement plan for faculty members above the rank of instructor and for designated administrative officers was established in 1922. In 1945 this plan was entirely rewritten to apply to all regular full-time employees of the college. Participation is available after one year of service and is mandatory after a one-year waiting period and attainment of age 27. Retirement will occur "without exception" on June 30 following the sixty-fifth birthday if that occurs during the regular instructional year; otherwise, on the last day of the month in which the sixty-fifth birthday occurs. Participants contribute, to the nearest dollar, 7 percent of salary as premiums for TIAA annuity contracts, except that participants holding active TIAA contracts issued prior to January 1, 1936, for which the college has shared premium payments, contribute 5 percent instead of 7 percent, and participants holding such contracts issued between January 1, 1936, and November 30, 1938, contribute percent instead of 7 percent. The college matches these payments. Past service benefits are funded by means of additional college contributions paid monthly on these contracts. This additional contribution equals 5 percent of total regular compensation for all years of fulltime employment after each participant reached age 35 and up to June 30, 1945, minus the total of premiums paid by the college toward a retirement annuity contract for the participant, and divided by the number of months between June 30, 1945, and retirement date. Participants already having contracts with other insurance companies which "provide benefits comparable to those of TIAA under the plan" will, upon approval of the chief fiscal officer of the college, receive the same basic contribution for future service benefits as described above. In addition, Elmira established, in 1945, a collective decreasing insurance plan providing three units of coverage for administrative officers and faculty members above the rank of instructor, two units for instructors and administrative staff members, and one unit for all other employees. COLLEGE OF EMPORIA A contributory retirement plan for all faculty members and selected administrative staff members was established by this college on April 9, 1946. Participation is compulsory for all regular faculty members. Contributions are 5 percent of salary by the staff member and 5 percent by the college toward the purchase of annuity contracts with the John

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Hancock M u t u a l Life Insurance Company. T h e retirement age is 65, except for participants past t h a t age on t h e effective d a t e of t h e p l a n ; for these t h e retirement age is 70 years. N o general plan for paying supplementary benefits is included. FORT HAYS

KANSAS

STATE

COLLEGE

F o r t H a y s Kansas S t a t e College has a practice whereby a person who is age 70 and has twenty-five years or more of service is placed on salary not exceeding half his average salary for the five years immediately preceding his seventieth birthday and not exceeding $2,000 a year. Proportionate allowances are m a d e for periods of less t h a n twenty-five years, with a minimum of ten years. T h e president, with t h e approval of the board of regents, determines what service t h e staff member shall perform while on a part-time basis. GOSHEN

COLLEGE

This college cooperates with t h e Mennonite Board of Education teacher retirement plan. Retirement is optional a t age 65 and compulsory at age 70. All academic staff members and other employees who have served ten years or more are given a n annual allowance equal t o 1 times the number of years of service multiplied by t h e average annual salary for t h e last ten years of service, half t o continue to widow, with a maximum of $1,000. Disabled or incapacitated staff members receive t h e same benefits after twenty-five years of participation. All persons of independent means whose income equals or exceeds the retirem e n t allowance shall not be eligible for a retirement allowance. T h e plan states t h a t "Schools should provide for the costs involved in these plans through their current budgets or from f u n d s built u p through general donations and in no case b y assessment against workers' allowances. T h e Mennonite Board of Education m a y assist t h e schools in providing retirement allowances." GUSTAVUS

ADOLPHUS

COLLEGE

Effective J a n u a r y 28, 1946, Gustavus Adolphus College established a retirement plan applying to all regular full-time employees of the college after a three-year waiting period. Retirement is automatic a t age 70. Each participant contributes 5 percent of basic compensation for t h e purchase of an annual premium retirement income, endowment, or annuity policy on his life. T h e college likewise contributes 5 percent and, if necessary, an additional a m o u n t t o provide a normal retirement

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111

income of $50 a month reduced by any payments made by the college to the Augustana Pension and Aid Fund. If an employee leaves the service of the college prior to retirement, he receives his own share of the policy purchased to that time plus 25 percent of the college's share if he has participated in the plan for more than five years but less than ten years. Full vesting of the college's part of the contract occurs after twenty years, or at age 65. The death benefit is the full value of the contract. For persons 60 years of age and over, no contract is purchased. Each participant over age 60 contributes 5 percent of his salary, and upon retirement receives an income of $50 a month. HARDIN-SIMMONS UNIVERSITY This institution has an informal, noncontributory, nonfunded retirement plan whereby employees who reach age 70 may be retired on parttime salary after twenty-five years of service. Its board of trustees is now considering the installation of a funded contributory plan. II ART WICK COLLEGE A pension trust plan, underwritten by the Equitable Life Assurance Society of the United States, was established by Hartwick College, effective October 1, 1946. Individual contributions of 5 percent of salary are matched by the college on behalf of all faculty members after a oneyear waiting period. Normal retirement age is 65 years, except that for those employees who enter the plan after attaining age 56, retirement shall be ten years after entry. In case of death before retirement of a participant past age 50 or uninsurable when participation begins, a death benefit approximating the total premium payments is provided. For insurable persons the death benefit is $1,000 for each $10 of monthly income or the cash value of the contract, whichever is larger. If a participant withdraws from service he is entitled to his policy. He may continue it in force in whole or in part or may choose paid-up insurance and endowment. HARVARD

UNIVERSITY

FACULTY AND ADMINISTRATIVE

OFFICEBS

Noncontributory pension plan, 1899.—In the year 1899 the president and fellows of Harvard established a noncontributory retirement plan for officers of instruction and administration under which any person aged 60 or more who had served at least twenty years with the rank of

112

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assistant professor or higher was entitled to retire with an allowance of 1/60 of his last year's salary for each year of credited service, the allowance not to exceed % of salary. The university could require retirement at age 66. On March 29, 1915, the president and fellows voted that this plan should not apply to persons receiving a first appointment in the rank of assistant professor or higher after that date, in view of the fact that, having accepted the system of pensions established by the Carnegie Foundation, the university had not added to its retirement fund, which was consequently entirely inadequate to furnish retirement benefits. Contributory j>lan, 1920.—Between the years 1915 and 1920 the university offered no cooperation to those entering service or reaching the rank of assistant professor, so far as provision for retirement was concerned. In 1920 a contributory plan was established. Participation was required of all teachers appointed after September 1, 1920, for a period longer than one year. Participation was optional up to December 31, 1920, for those who had entered the university's service after November 17, 1915. As adopted in 1920 this plan required each participant to contribute 10 percent of his salary, and no contribution was made by the university. This feature was modified in 1926 so that now the teacher contributes 5 percent, and this is matched by the university. The plan provided that interest be "payable upon such payments" at the rate earned on the general funds of the university, less such deduction for expenses as the corporation might deem best and less whatever the corporation might see fit to reserve for the purpose of protecting investments against depreciation. While the plan permitted the university to invest these funds separately, "at the risk of the teacher," no segregation was made between them and the funds belonging to the corporation. Retirement is available at age 60 and may be required at age 66. Upon retirement at least 95 percent of the accumulation (this was 90 percent prior to a revision in 1926) was to be used to purchase an annuity or annuities of a type agreed upon between the university and the teacher or at the discretion of the university if the teacher's request was not satisfactory. The part of the accumulation not used to purchase such contract or contracts was to be paid in cash upon retirement. Upon withdrawal or death prior to retirement, the full accumulation was payable in cash, with the exception that if withdrawal should occur within five years of eligibility for retirement, the university might require that the accumulation be applied to the purchase of an annuity. Shift to retirement annuity contracts.—Harvard continued to finance

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113

its 1920 contributory plan internally until September 1, 1936. Then the corporation decided to modify the plan, after a vote of approval by the participants, by purchasing retirement annuity contracts with the accumulations already to the credit of members and by applying future joint contributions to the purchase of similar contracts. The accumulations credited to individuals were used to purchase single premium deferred annuities, and current contributions were applied as premiums on separate monthly premium retirement annuity contracts. This separation was determined upon in part because the old plan promised payment in a lump sum upon withdrawal from service, except when nearing retirement age. Although Harvard wished to honor this understanding with respect to past contributions and TIAA was willing to provide for it by special endorsement of single premium contracts, the Harvard Corporation considered t h a t this feature was of doubtful value and was ready to eliminate it in so far as future contracts were concerned. Other modifications of the old plan that were necessary t o make possible the use of monthly premium retirement annuity contracts of TIAA with reference to current service were minor and were made. Contributory plan, 1929.—When the Carnegie free pensions were scaled down, in 1929, Harvard made a special offer to 162 officers of instruction and administration who had Carnegie expectations and to 24 others entitled to university pensions. For each of those officers who agreed t o contribute 5 percent of their salaries thereafter toward retirement benefits, the total benefit including payments from Carnegie sources was to be half the average salary for the last five years of service, but not more than $4,000. The practical effect of this offer was to make allowances of at least half pay available to teachers eligible for noncontributory pensions who were willing to share in the cost. I t did not apply to those who would have pensions of more than half pay under the rules without the proposed contributory supplement. The offer was accepted by all but 31 of those to whom it was made. NONACADEMIC

EMPLOYEES

In November, 1937, Harvard inaugurated a joint contributory retirement plan for employees "not appointed by the Corporation," consisting largely of the maintenance staff. Participation is required of all those who had completed three years of service on February 1, 1937, and of others on the first of February following completion of three years of service. Participants are to retire on February 1 following attainment of age 65 "unless specifically permitted to remain in service." Contributions

114

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toward TIAA contracts used in this plan, during each year beginning with February 1, are dependent upon the salary or wage during the preceding calendar year. Compensation ranges $200 in width are constructed, and an individual's contribution is 4 percent of the lower limit of the salary range in which his compensation fell during the preceding year. Upon retirement of a regular employee who had completed three years of service on February 1, 1937, and who was in service at that time, the university plans, without undertaking an obligation, to pay a pension in recognition of prior service. This expected pension is one percent of compensation during the calendar year 1936 for each year of service prior to February 1, 1937, and after attainment of age 35, plus percent of this compensation for each year of such service at an earlier age. IIENDRIX

COLLEGE

On October 1, 1944, Hendrix College inaugurated a retirement plan, with participation compulsory for all instructional and administrative employees and optional for dormitory matrons, the dietitian, permanent clerical and secretarial employees, and the supervisor of campus and grounds. The instructional and administrative employees may join any time during the first five years of employment. The college will contribute after three years and may contribute during the first three years. Participants contribute 6 percent of their salary payments as premiums for TIAA annuities; this is matched by the college except that for present employees age 32-50 the college will pay additional premiums over the 6 percent. Retirement is automatic at age 65 unless the board of trustees extends service of an individual for one year at a time. For persons past age 50 when the plan began the total retirement income is 5 / 6 of one percent of the average salary for the last twelve years of employment prior to retirement multiplied by the number of years of service after age 30, not to exceed thirty years. This benefit will include any amounts purchased by the college's 6 percent contribution on the part of those individuals age 50 or over, but it is in addition to any amounts purchased by the contribution of the employee. HOPE COLLEGE This college funds its retirement plan for all lay workers under the Layman's Contributory Annuity Fund of the Reformed Church in America. There is a waiting period of two years for participation, after which the college and the individual each contribute 3 percent of salary toward the cost of retirement benefits. Retirement occurs at age 70.

DESCRIPTIONS HOWARD

OF

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115

UNIVERSITY

In 1927 Howard University announced a noncontributory pension plan under which administrative officers and faculty members above the rank of instructor who had completed twenty years of service could retire at their option upon reaching age 65, could be retired by the university at age 68, and should retire automatically at age 70. A pension of H the average salary for the last five years of service was payable upon retirement. Effective July 1,1934, a contributory retirement plan was inaugurated calling for contributions of 5 percent of salary from each participant and an equal amount from the university, these contributions to become premiums on TIAA contracts. Participation in this plan was required in case of advance in rpnk or salary of all administrative officers and faculty members above the rank of instructor who were then under age 45 and of all newly appointed staff members of this class regardless of age. Most of those in service who were above age 44 at the inauguration of the new plan were given some of the advantages of the earlier pension plan. Participation in the contributory plan is available to those between age 45 and age 60 and required of them upon advance in rank or salary. For those who participate in the contributory plan and complete twenty years of service the total retirement benefit at age 65 is to be not less than % of average salary for the last five years of service— the benefit under the old pension plan. No such expectations are held out to persons who join the staff after the plan was inaugurated. UNIVERSITY

RETIREMENT

SYSTEM

OF

ILLINOIS

COVERING EASTERN ILLINOIS STATE TEACHERS COLLEGE, ILLINOIS STATE NORMAL UNIVERSITY, NORTHERN ILLINOIS STATE TEACHERS COLLEGE, SOUTHERN ILLINOIS NORMAL UNIVERSITY, UNIVERSITY OF ILLINOIS, WESTERN ILLINOIS STATE TEACHERS COLLEGE

Effective September 1, 1941, this retirement system applies to employees of the University of Illinois, the state normal universities and teachers colleges, and three state scientific surveys. Participation is required of "permanent and continuous" employees of these institutions past age 30 and is available to younger persons. Each participant contributes 3Yl percent of salary payments; retirement benefits in recognition of current service are three times as much as the participant's contributions will provide but not more than 60 percent of average salary for the five consecutive years of employment

116

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that will produce the highest such average, this being defined as the "final rate of earnings." A supplementary annuity is provided in recognition of prior service. This depends in a complicated manner on length of service, age at retirement, benefit in recognition of current service, and final rate of earnings. The state guarantees the payment of benefits and contributes each year whatever is necessary to meet benefits and expenses of that year and to maintain a reserve estimated to be sufficient to pay benefits and expenses for one year. Mental or physical disability is compensated by a benefit of 50 percent of earnings at the time disability occurs. In event of death in service, employee contributions are returned with interest and, if the beneficiary was dependent upon the deceased, the benefit is to be not less than $2,000 nor more than $5,000. At the death of a retired participant, the death benefit is at least the return of accumulated member contributions that may not yet have been paid in the form of annuity benefits but not less than $500 or six times the amount of any monthly supplementary annuity that may be payable. Retirement is available at the option of the employee between the ages of 60 and 68, may be permitted by the administrative board at ages 55-59, inclusive, and is required at age 68 unless further service is approved by the employer. If service is discontinued when retirement is not available, employeeaccumulated contributions will be paid upon request and, if so paid, past service credits are forfeited upon any later participation in the system. No benefit supported by the state is available if service of the employee is discontinued for reasons other than death or disability prior to his attaining age 55. INDIANA CENTRAL COLLEGE Indiana Central College established in 1944 a retirement plan covering all full-time administrative and instructional employees. Participation is compulsory after one year of service and the attainment of age 30. Participants in the plan pay 40 percent of the annual gross premium for annuity and life insurance policies and, in addition, any charge for disability waiver of premium provision. The remainder of the total premium is paid by the college, and the college receives any dividends on the policies. The amount of the policy applied for is such as to provide $800 a year as an annuity at age 65 after 35 years of service, or a smaller amount for less service. If the participants are insurable, they are to take out life insurance of $1,000 for each $10 of monthly income

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117

for men, or $1,124 for each $10 of monthly income for women. Retirement is at age 65, at which age annuity payments begin even though the college may ask a participant to remain in its employ. In case of death before retirement, the beneficiaries receive the full cash value of the policy or the death benefit, whichever is greater. If a participant leaves the employ of the college during the first five years of participation, he receives only his own contributions less the payment for disability waiver of premium plus 2 percent interest, as an annuity or in cash. If he leaves after five years of service, the college's contribution is gradually vested for the participant's benefit. In either of these events, the employee may continue the entire contract by paying to the college an amount equal to the value that would otherwise be forfeited. INDIANA

UNIVERSITY

In 1937 Indiana University inaugurated, concurrently with the other state-supported schools—Purdue University, Ball State Teachers College, and Indiana State Teachers College—a contributory retirement plan using TIAA contracts. Under the Indiana University plan participation is required of assistant professors and those of higher rank, and of administrative and junior administrative officers after one year of service; instructors must participate after three years of service. Participation is optional from the beginning of service for those who come to the university with TIAA annuities in force, administrative officers, and faculty holding tenure and professorial rank. Participants contribute 5 percent of salary, and this is matched by the university. Retirement is required at age 70. The university pays a supplementary benefit of 2 percent of the 1936-37 salary for each year of an individual's service after age 45 and prior to July 1, 1937, with the limitation that this supplementary benefit is not to exceed the amount necessary to bring the total benefit to $1,500 a year, including the contributory annuity contract and any pension from Carnegie sources. In April, 1945, disability benefits were added to the plan. If "total and permanent disability" occurs after ten years of service, the benefit is 10/20 of the amount the participant would receive at age 70; if after eleven years, 11/20 of that annuity, and if after twenty years of service, the benefit is equal to what the retiring allowance would be at age 70. The participant's TIAA annuity, plus any payments from Carnegie sources, count toward disability benefits. Participation in the Indiana State Teachers Retirement Fund is required of teachers in the University School. This is a state-managed retirement plan for teachers in the public schools of Indiana.

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OF

PLANS

The Public Employes' Retirement Fund of Indiana became operative on January 1, 1946. Tbis covers nonacademic staff members not included in either of the two above-described plans prior to January 1, 1946, and all subsequently employed nonacademic staff members after six months of service. Normal retirement age is 65, with retirement compulsory at age 70 or upon the completion of fifteen years of service if later, but retirement is mandatory at age 75. IOWA STATE

COLLEGES

COVERING IOWA STATE COLLEGE OF AGRICULTURE AND M E C H A N I C A R T S , IOWA STATE T E A C H E R S COLLEGE, STATE UNIVERSITY OF IOWA

These three institutions established TIAA retirement plans, effective July 1, 1944. Under present rulings none of the colleges can make payments to individuals unless service is given in return, and they cannot contribute toward the purchase of retirement annuity contracts. However, effective July 1, 1944, each person who became a participant in the plan and who was in service prior to that date was credited with an increase of 10 percent of his basic salary not to exceed $5,000. Each participant purchases an annuity contract from TIAA with 10 percent of this basic salary. Participation was voluntary for those in service when the plan was inaugurated, but it is compulsory for newcomers. Normal retirement age is 70 for Iowa State College; for the other two institutions, it is age 70 for persons past age 59 on July 1, 1944, age 69 for those age 59 on that date, and age 68 for all others. Extensions to age 70 are permitted at Iowa State Teachers College. Retirement after age 65 is voluntary at the State University of Iowa. For certain groups who were in service on July 1, 1944, each institution provides part-time employment after retirement age to supplement the available TIAA annuity income. All employees, whether members of the TIAA plan or not, are covered by the old age and survivors insurance system created by act of the Iowa General Assembly, effective January 1, 1916. IOWA STATE COLLEGE OF AGRICULTURE AND M E C H A N I C

ARTS

Participation was voluntary for instructors and those above that rank, administrative officers, and major members of the permanent nonacademic staff on July 1, 1944. New employees of rank equivalent to or higher than that of assistant professor, must participate immediately, and others may participate after three years. Supplementary compensation for part-time service after retirement equals 2 percent of the average annual salary for the ten years immediately preceding retirement multiplied by the number of fiscal years of service after age 38

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119

and prior to July 1, 1944, but is not to be greater than the difference between 50 percent of the average salary or $2,500, maximum, minus the amount provided by the TIAA annuity. IOWA STATE TEACHERS

COLLEGE

Full-time faculty members, administrative officers, and library staff members comprise the eligible classes. The minimum benefit upon retirement is to be $100 a month, with the college providing part-time employment, if necessary, to make up the difference between the amount provided by the annuity contract and $100 a month. STATE UNIVERSITY OF IOWA

Full-time faculty members and administrative staff members comprise the eligible classes. A three-year waiting period before participation is required of research associates, instructors, demonstrators, and administrative assistants. The university is authorized to pay to certain groups in service on July 1, 1944, annual compensation after retirement age for part-time service to the extent of the difference between the single life annuity of the TIAA contract and a percentage of the average salary for the ten years immediately preceding retirement (limited to $5,000) ranging from 50 percent for those age 65-69 on October 1, 1944, to 40 percent for those age 60 and less. JOHN CARROLL

UNIVERSITY

A voluntary retirement plan for lay faculty members with the rank of instructor or above and major lay administrative officers between ages 30 and 60 was established on October 1, 1946. The participant and the university each pay 5 percent of the participant's basic annual wage for contracts issued by the John Hancock Mutual Life Insurance Company. Normal retirement occurs at age 65; for those who are over age 55 when participation begins, retirement will be ten years later. Retirement benefits include a future service pension resulting from contributions by the participant and the university, and a past service pension from the university alone. The monthly past service pension is 1/12 of one percent of the participant's basic annual salary on October 1, 1946, multiplied by the number of years of service prior to that date. In event of the member's death before retirement, the cash surrender value of the contract or the total premiums paid, whichever is larger, is available to beneficiaries. If a member terminates his employment before the completion of five years of participation, he receives his own contributions without interest; if later, the participant becomes the sole owner of the policy.

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JOHNS HOPKINS

OF

PLANS

UNIVERSITY

In 1930 the Johns Hopkins University adopted a voluntary, contributory plan, using T I A A contracts, to cover professors, associate professors, and "other officers of equal rank." As early as 1927 a similar plan had been inaugurated for staff members of the School of Hygiene. F o r those with expectations from the Carnegie Foundation the plan provided an additional annuity of $1,500 a year at age 70. F o r this purpose the university matched member contributions up to 5 percent of salary, and if the annuity thus provided was less than $1,500 at age 70, the university intended to make up the difference. F o r those with no expectations from the Carnegie Foundation the plan normally provided an annuity of half the average salary for the last five years of service, but with limitations on the university's contribution to 5 percent of salary and to not more than half the amount necessary to purchase an annuity of $4,000 a year at age 70. After adoption of the plan, the retirement age was fixed at 65 with not more than two annual renewals. When this was done, it was expected that the annuity should be the same figure as contemplated under the plan at age 70, with the university making up the difference upon retirement at age 65 or later. UNIVERSITY

OF

KANSAS

T h e University of Kansas inaugurated a noncontributory, nonfunded retirement plan in 1944. The plan covers all members of the staff. On authority from the state board of regents, the university carries in its current budget provision for retirement allowance, after at least twentyfive years of service equal to one half of the average pay for the five years preceding retirement at age 70, with a maximum allowance of $2,000. The same benefits may be provided in event of disability after age 65. KANSAS

WESLEY AN

UNIVERSITY

This institution has a nonfunded, noncontributory pension plan under which monthly payments equal to one dollar a month for each year of service are paid to retiring professors. UNIVERSITY

OF

KENTUCKY

In the year 1928 the University of Kentucky inaugurated what is called a "change of occupation" plan under which, upon attainment of age 70 after fifteen years of consecutive employment, or at an earlier

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age if necessary, a staff member no longer performs the duties theretofore assigned to him, but instead has "such duties as may be designated by the president of the university." As compensation, he receives 20 percent of his salary at age 70 plus one percent of this salary for each year of service in the university, up to 50 percent of final salary. Although the resolution mentions only teachers and administrative officers, the principle of the plan has been extended to other members of the staff. The age of "change of occupation" has been altered with the provision that a staff member may, upon request approved by the president, have it take effect at age 65. I t must take effect at age 70. No contributions are made for this plan by the individual; the institution's annual budget takes care of persons on "change of occupation" plan. Regular full-time employees of the Division of Agricultural Extension not permanently located on the campus are included in a TIAA plan. UNIVERSITY

OF KING'S COLLEGE

Early in 1939 the University of King's College announced a plan by which the college will contribute, dollar for dollar, up to 5 percent of each faculty member's salary, but not to exceed $200 a year, toward the purchase of a retirement annuity contract maturing at age 65. The participant may choose Dominion Government annuities up to the maximum, or the annuities of other companies acceptable to the board. LINCOLN

UNIVERSITY1

This institution established a retirement plan, effective September 1, 1945, covering all employees. Participation for the president, deans, professors, associate professors, and administrative officers is compulsory upon appointment. Assistant professors and instructors are eligible after three full years of service; all other employees are eligible after three years of service and attainment of age SO. For present employees of the university participation in the retirement plan is voluntary for those who have time to accumulate a retirement annuity of $300 a year at age 70 by paying 10 percent of their salaries as premiums. For employees with twenty years or more of service who do not have time to accumulate $300 per year, annuity participation in the plan is compulsory. It is the intention of the curators, if funds are available, "to provide limited service for these employees at age 70 for such a period as they are able to render useful service" and thereafter to retire them, supplementing their annuities to make a total of $300. 1

Missouri.

IK

DESCRIPTIONS

OF

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Normal retirement age is 70, with annual extensions by the curators upon recommendation of the president. E a c h participant in this retirement plan pays 10 percent of his monthly basic salary, including a 5 percent contribution by the institution, as a premium for a retirement annuity contract issued to him by one of the following companies. General American Life Insurance Company, Great West Life Assurance Company, Occidental Life Insurance Company, and T I A A . When the value of a single life annuity purchased by these premiums reaches $1,500 a year at age 70, the individual's salary will be reduced by 5 percent, and the individual will no longer be required to remit contributions on his retirement annuity contract. LIN DEN WOOD COLLEGE Teaching faculty and heads of administration are eligible to participate in the retirement plan established by Lindenwood College in May, 1946. Participation is voluntary after a waiting period of three years, except that a person who comes to the college with a contract in force may participate at once. T h e college will match individual contributions up to 5 percent of salary, and the college pays no supplementary benefits on behalf of service performed prior to the establishment of the plan. T h e normal retirement age is 65, and, by special vote of the board of directors, extensions may be made for definite periods but not beyond age 70. T h e participant owns the policy in its entirety and may take it with him if he leaves the employ of the college. In the event of his death, his beneficiary receives the full benefit. This plan is underwritten by the General American Life Insurance Company. UNIVERSITY

OF

LOUISVILLE

T h e University of Louisville started a retirement plan on December 12, 1938. All full-time faculty members of the rank of assistant professor and above who are age 30 or over, and such members of the general university staff as the board of trustees may designate, are eligible to participate. Participation is voluntary for those in service when the plan began and compulsory for all new appointees. The retirement age is scaled from 70 to 65 according to the participant's age on January 1, 1939. T h e board of trustees may extend service, by special vote, beyond normal retirement age up to age 70. Contributions toward an annuity contract are paid either to the New England Mutual Life Insurance Company, the J o h n Hancock Mutual Life Insurance Company, or, if a participant already has a T I A A contract, to T I A A . Payments by the University of Louisville are scaled

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123

according to age, varying from $37 a year for a person age 30 to $115 for a person age 61. The contribution of the individual ranges from $88.30 at age 30 to $348.57 at age 50. LOYOLA

UNIVERSITYJ

This institution has established a retirement plan into which faculty members are admitted, in general, upon appointment. Retirement is at age 65, at which time the faculty member may choose between a cash payment of $17,000 or $100 a month for life with the income to continue for 125 months in any event. The benefit is the same for all persons who are under 50 years of age at the time the policy is taken out. Thus the premium for a younger man is lower than that for a person approaching 50 years of age. Premiums are shared equally between the college and the participant. If a member withdraws from the service of the university before retirement, he receives the premiums he paid plus 2 percent compound interest. The plan is underwritten by the Occidental Life Insurance Company. MACALESTER

COLLEGE

All employees of Macalester College who have attained age 70 are to retire at that age or, in case of individual extensions of service, at age 75, under a plan established by the college on July 1, 1941. The pension plan of the college is operative, however, only for those persons holding professorial rank and for the chief administrative officers of the college, although it may be extended later. Participation in the pension plan is optional. Each employee who participates contributes 5 percent of his compensation, with the college contributing an equal amount to the retirement plan fund. Annuity contracts shall be applied for on behalf of members by the pension committee in such insurance companies as the committee shall from time to time approve. If the employee leaves the service of the college before retirement, he receives sole and absolute ownership of the policy. In event of death the beneficiary receives the rights established by the contributions of the member and the college. McGILL

UNIVERSITY

This university was among the first institutions to inaugurate a retirement plan. General rules were not established, each application for an allowance being handled as an individual case. Later it was included in the Carnegie grants. In 1920 McGill established a voluntary con2

Los Angeles, California.

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tributory plan using TIAA contracts for teachers without Carnegie expectations and with a salary of $1,200 or more. Retirement age was fixed at 65, and free supplementary pensions were provided for Carnegie pensioners to bring their allowances at age 65 up to the maximum of half the average salary for the last five years of service. This plan stood until 1942, when it was closed to new entrants except those coming to McGill with TIAA contracts in force. Effective June 1, 1942, each full-time member of the teaching and administrative staffs receiving over $900 a year from the university must, if not covered as described above, contribute 5 percent of his salary, to be matched by the university, toward an annuity policy with either the Dominion Government or the Sun Life Assurance Company of Canada. Choice between the two carriers is optional at time of entry into the pension plan of the university and, once made, is final. Effective January 1, 1946, the university increased its contribution to 7J/2 percent of salary for all employees over age 40. Participation in the pension plan takes place upon appointment, but in the cases of lecturers and nonteaching staff there is a waiting period before the annuity policy is purchased. Lecturers wait five years, nonteaching staff members wait three years, and during these periods the university accumulates a fund bearing interest at 2 percent per annum. If a person in these classes leaves McGill during the three- or five-year period, he receives his own contribution, with interest, in cash. Normal retirement age is 65 years, with retirement earlier or later permitted in special cases. The maximum annuity available under the Dominion Government plan is $1,200 a year. In case of death in service before retirement, all contributions, including those of the university on behalf of an individual, with interest, will be paid to his beneficiary or estate. If an individual who has a contract with the Sun Life Assurance Company leaves the service of the university before retirement, he has his choice of a paid-up policy purchased by all contributions, or cash equal to his own contributions with interest credited except during the 3 years prior to his withdrawal. Under the Dominion Government plan the individual may take a paid-up annuity policy purchased by the joint contributions or may continue payments himself. MACMURRAY

COLLEGE

Members of the faculty and secretaries are eligible for the MacMurray College retirement plan established in September, 1943. The plan is voluntary, with no waiting period required before employees may participate. Premiums on annuity contracts are shared equally by the

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ISA

college and the participant. Benefits at retirement age, 68 years, are whatever have been purchased by joint contributions, with no supplementary benefit paid by the college for service prior to the installation of the plan. UNIVERSITY

OF MAINE

In the year 1933 the University of Maine inaugurated a voluntary contributory retirement plan, making use of retirement annuity contracts of the John Hancock Mutual Life Insurance Company. Participation is available to all classes of employees except maintenance and dormitory workers, after completion of two years of service at the university. A participant contributes 5 percent of his monthly compensation to the nearest dollar as premium to purchase a retirement annuity contract, and the university does likewise. Upon retirement from service at age 65, or earlier by mutual consent of the university and the staff member, the retiring member receives the annuities furnished by both these contracts. If a participant withdraws from service "prior to retirement," he may continue his contract in force and may purchase the university's contract and continue it in force by payment of premiums; or he may request a fully paid-up income at age 65 for his contract in the amount that contributions he has already made will purchase; or he may surrender his contract for its cash value. After a dozen years this cash value becomes as large as the sum of premiums he has paid, and after longer periods of participation it becomes substantially larger than the sum of premiums. If a participant withdraws from service after having completed twenty-five years of service, premiums will be discontinued on the contract purchased by the university. If when the participant reaches retirement age his contract is still in force, and if it provides an annuity at least as large as that provided by the university contract, the latter will be released to him. If a participant dies in service, his beneficiary receives the sum of premiums that he paid or the cash value of his contract, if larger. Several different forms of optional settlement are available when annuity payments are to begin. Supplementary benefits.—The university announced that it was building up a "contingent f u n d " for the purpose of supplementing the benefits for those who were so far along in years when they entered the plan that the annuities purchased would not produce a total benefit at age 65 of 25 percent of final salary. The university expects to keep this fund "sufficient at all times to guarantee the minimum retirement income"

126

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of 25 percent of final salary. Reductions are made in this supplement if the participant chooses an option resulting in annuity payments smaller than under regular settlement or if he fails to become a participant at the earliest opportunity. MARQUETTE

UNIVERSITY

Marquette University established a retirement plan on December 31, 1946. Full-time administrative, teaching, and clerical employees of the university are eligible after five years of service, except that professors and associate professors with permanent tenure may participate after two years. Participation is voluntary for those persons in the employ of the university when the plan was inaugurated and required for others when they become eligible. Each member contributes an amount equal to 40 percent of the gross premium for an annuity policy, but not to exceed 5 percent of the first $3,000 of earnings, and 7 percent of any excess earnings above $3,000 each year. For all persons who are 55}^ years old at the time of entrance into the retirement plan, the normal retirement date will be ten years after date of entry; normal retirement age is 65 years for all other persons. In the event that an employee withdraws from the service of the university before retirement, he will receive the surrender value of his own contributions, plus 5 percent of the surrender value of the annuity policy in excess of his own contributions for each full year of service with the university. This withdrawal payment is usually made in the form of a paid-up retirement annuity contract. If the participant dies before retiring, his beneficiaries receive an amount equal to the total contributions of the participant and the university. If the participant is insurable, the beneficiaries will receive a minimum death benefit of $1,000 for each $10 of monthly retirement income. This plan is underwritten by the Northwestern Mutual Life Insurance Company. MARY BALDWIN COLLEGE In the year 1936 Mary Baldwin College inaugurated a contributory retirement plan covering faculty members and administrative officers. Participation is required of those with salaries of $1,000 or more after two years of service. Member contributions of 5 percent of salary are matched by equal contributions on the part of the college, these contributions becoming premiums for a retirement annuity contract issued by the New England Mutual Life Insurance Company. For those under age 50 when the plan was inaugurated retirement will

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127

normally occur at age 65, while for older participants retirement will be normal at age 70. However, the college may retire individuals before they reach normal retirement age and may extend service beyond that age. If a member withdraws from service at an age more than ten years lower than normal retirement age, he receives half the cash value of his retirement annuity contract, the other half being returned to the college. If a member withdraws within ten years of attainment of normal retirement age he has no right to lump-sum cash settlement without the consent of the college. If the annuitant should die in service, the whole of the death benefit under the retirement annuity contract accrues to the beneficiary or estate of the deceased. For each of those above age 50 when the plan was inaugurated who cannot through regular contributions accumulate a retirement annuity equal to ^ of salary, the college purchases from the insurance company additional benefits sufficient with the regular annuity to produce at age 70 a benefit of of salary. MARYLAND

COLLEGE FOR WOMEN

In June, 1945, Maryland College for Women established a retirement plan applying to all employees. Participation in the plan is automatic, and the college pays full premiums for all persons employed more than three years. Retirement is at age 65, with the benefits at that age equal to what can be provided by the premiums paid up to that time. MASSACHUSETTS

INSTITUTE

OF TECHNOLOGY

FACULTY P L A N AND ADMINISTRATIVE OFFICERS

Massachusetts Institute of Technology has a combined annuity and insurance plan which became effective October 1, 1926. Membership was made optional for faculty members in service at the time of adoption, so long as they were not promoted, but compulsory for new appointees and for others upon promotion. The plan applies to instructors and to teachers of higher rank and to such administrative officers as the executive committee may determine. Each member contributes 5 percent of his salary to what is called the "Teachers Annuity Fund," while the institute contributes 5 percent of each member's salary to another fund called the "Pension and Insurance Fund"—3 percent to support pension payments and 2 percent for payment of premiums on group insurance furnished by a commercial life insurance company. Pennon Association.—This plan is administered through the Massachusetts Institute of Technology Pension Association, consisting of the

128

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institute and the contributing members, with a board of five trustees, three of whom are appointed by the executive committee of the institute and two elected by the members of the association; a president and a secretary are elected annually by the members. Upon retirement that annuity is payable which can be purchased "at the most favorable rate" with the teacher's accumulation in the Annuity Fund and, up to a limit of $1,200 a year, this is matched by an annuity from the Pension and Insurance Fund. Normal retirement age was 70 years until 1946 and is now set at age 65. In case of death prior to retirement the member's own accumulations plus the proceeds of a $5,000 group life insurance policy are paid to a designated beneficiary or to his estate. Upon separation from service prior to age 55 for any cause other than retirement, a member receives in cash his accumulated salary deductions plus interest earned. If such separation occurs at age 55, the member receives a sum equal to 160 percent of his accumulated contributions, and for each additional year of age this benefit is increased by 4 percent of the accumulated contributions up to 196 percent for retirement at age 64. This is limited by the proviso that the additional separation benefit after a member attains age 65 shall not exceed the value of a life annuity of $1,200 a year, first payment at age 65. With the approval of the treasurer of the institute a member who has already provided for an annuity payable to him at age 65 or earlier may be excused from salary deductions and a member may substitute payment of life insurance premiums for half his salary deductions without sacrificing the annuity benefit payable by the institute. NONACADEMIC

EMPLOYEES

Effective July 1, 1938, the institute inaugurated a contributory retirement plan for office, laboratory, and maintenance employees, in which participation was required of all regular employees under age 60 after the completion of three years of service. The plan is administered through a group annuity contract with the John Hancock Mutual Life Insurance Company. Retirement will normally occur on the first day of July nearest to the member's sixty-fifth birthday, but with the consent of the institute a member may retire as much as ten years earlier and receive a reduced retirement benefit. If services are continued beyond normal retirement date, retirement annuity payments will be made during such service. Member contributions are %Yl percent of basic salary. The increment

DESCRIPTIONS

OF

PLANS

12»

of retirement annuity purchased each year is percent of the basic salary, so that the total of retirement annuity payments to be made each year for life is \]/2 percent of the total of salary payments corresponding to which contributions have been made. If the participant dies in service a named beneficiary or the member's estate receives the total contributions of the member without interest. In case death occurs after retirement, if an optional settlement has not been chosen, the benefit is the excess, if any, of member contributions without interest over the sum of annuity payments already made. If a member withdraws from service, he may have his contributions, without interest, returned to him. If he has completed ten years of participation in the plan, he may choose, instead, an annuity with payments to begin at his normal retirement date and to be purchased with his own and the institute's contributions on his behalf. If he has not completed 10 years of participation in the plan, he may choose an annuity of this type if the payments will be as much as $5 a month, but the institute's contributions are not available to aid in this purchase. If request is made as much as five years before retirement, a member may choose an annuity under which payments shall continue to a named "contingent annuitant" if this beneficiary is living after the death of the retired member, but if such a choice is made it cannot be rescinded unless the contingent annuitant should die, "nor can earlier optional retirement date be elected without the consent of the Insurance Company." UNIVERSITY

OF

MICHIGAN

In April, 1919, the university adopted a contributory plan for those without Carnegie expectations, participation in this plan being a condition of employment for those of professional rank appointed after the adoption of the plan. For instructors who had been in service less than three years, participation was made optional. Participation was also optional for those in service when the plan was adopted if they had joined the university since November 17, 1915, and if they had no Carnegie expectations due to earlier service elsewhere. The member contributes 5 percent of his salary toward purchase of a TIAA retirement annuity contract, and this was matched equally by the university up to July 1, 1945. Subsequent to that date the university's contribution has been 5 percent for all TIAA contracts issued prior to April 1, 1932; 6 percent for those issued from April 1, 1932 to December 31, 1935; 9 percent for those issued from January 1, 1936 to November 30,

130

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1938; and 10 percent for those issued after November 30, 1938. Service automatically terminates at the end of the semester in which age 70 is reached or on the seventieth birthday, if this occurs between commencement day and the opening of the fall semester, except that services may be extended by mutual agreement. Supplementing Carnegie expectations.—The university offered to supplement expectations of those whose terms of service began prior to November 17, 1915, and who would join the contributory plan as of January 1,1931. The university offered to add what might be necessary upon retirement at age 70 to bring the total benefit, including the annuity purchased by joint contributions and the Carnegie Foundation allowance and the Carnegie Corporation annuity, to $400 more than half the average of salaries for the last five years of service, but not more than $4,000. In case of retirement between ages 65 and 70, for each year that retirement anticipates age 70, the maximum benefit is to be decreased by 1/15 of what it would be at age 70 if the salary being paid at retirement were continued to age 70. Contributions by the university are to cease if and when the accumulated premiums are sufficient to purchase at age 70 an annuity large enough to supplement Carnegie expectations in making up the maximum. Retirement is permissible for those who have reached age 65 and have completed fifteen years of service as a professor, or twenty-five years as instructor or instructor and professor (not limited to service at the University of Michigan). Retirement for permanent total disability is allowable prior to age 65 for those who have completed twenty-five years as a professor or thirty years as instructor and professor. The benefit in case of retirement for disability is that which would be available to the member upon retirement at age 65 if the salary being received at the time of disability were continued until age 65. If a participant dies without having completed the requirements for retirement, the death benefit of the deferred annuity contract is available to the named beneficiary or to the estate. In case of death after retirement or after service requirements for retirement have been completed, half the benefit being received or half the benefit that would be available to the teacher in case of retirement is paid to the widow provided she has been his wife for at least 10 years. The regents stated that they will not be responsible for retirement benefits for those who do not accept this offer. Out of approximately 162 persons to whom this supplementary offer was open, all but 8 accepted it, and these 8 signed papers purporting to release the university of responsibility for old-age benefits.

DESCRIPTIONS NONACADEMIC

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131

EMPLOYEES

The University of Michigan Employees' Retirement Fund was established for the benefit of full-time regular nonacademic employees age 30 and above. The employee contributes 5 percent of his compensation if he earned over $1,500 during the last preceding fiscal year, and this is matched by the university. If the employee earned from $1,000 to $1,499, he contributes 4 percent and the university 6 percent. If he earned under $1,000, he contributes 3 percent and the university 7 percent. The normal retirement allowance is percent of average final compensation up to $5,000 of such compensation for each year of continuous service up to a maximum of 30 years. This benefit is payable to an employee after he reaches the normal retirement age as fixed by the Board of Regents, currently age 70. If an employee retires between age 60 and the normal retirement age, his benefit is reduced by 1/30 for each year by which he anticipates the normal retirement age. In case an employee withdraws from university service or dies before retirement, he or his estate receives the total of the funds he has contributed, with interest, and does not receive amounts contributed by the university. MICHIGAN STATE

COLLEGE

A noncontributory pension plan was approved by the State Board of Agriculture for all employees of Michigan State College on September 9, 1937. Those on the salary pay roll are eligible for immediate membership, while those on the labor pay roll are eligible after six months of service. Retirement is provided for at age 65, but service may be continued longer by invitation, and such service is added to the years of credit in calculating the pensions. Superannuation retirement is available at age 65 or after twenty-five years of service. A disability pension is available after 15 years of service. The pension is one percent of the average salary during the five consecutive years of service for which salary was highest, multiplied by the number of years of service, but shall not be less than $40 a month or more than $125 a month. In calculating the pension for anyone who retires after twenty-five years of service, but before attaining age 65, the years of service credited may be decreased by 65 minus the age of retirement. If an employee is discharged or voluntarily leaves the service of the institution, he shall "forfeit all right or claim to any service or disability pension which has accrued prior t o " severance of service. Likewise, in

1S2

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case of the death of an employee in active service of the institution, his "heirs, assignees and others shall forfeit all right or claim to any service or disability pension which has accrued prior to his death." No disbursements are to be made against the pension fund unless properly approved and authorized by the pension committee. MIDLAND COLLEGE Lay faculty members and other employees of Midland College on permanent appointment who have served one year are participants in the lay pension plan of the United Lutheran Church in America. The college plan was established in 1946. Each member contributes 4 percent of his salary, and this is matched by the college as premiums to the pension board, the college's contributions being subject to a deduction not to exceed ]/g thereof toward the expenses of administering the plan. Upon retirement at age 65, the member receives the annuity that can be purchased from the combined accumulation according to the rates then in force. In event of death before retirement, the beneficiaries receive the accumulation of the participant's contributions. If the participant withdraws from employment of the college before retirement, the accumulation of his contributions is paid to him in cash, or, if he so chooses, he may have the annuity provided by all contributions on his behalf. MILWA UKEE-DOWNER COLLEGE For the past quarter century or more the trustees have made provision for the protection of members of the professional and service staffs. On March 8, 1945, the executive committee of the board of trustees voted that full-time members of the faculty who have served the college for at least fifteen years may receive the retiring allowance at age 65 and shall retire at age 70 unless special action is taken. Subject to later action by the executive committee, the retiring allowance is $600 a year for those who have served the college for fifteen years, $800 for those who have served twenty years, and $1,000 for those who have served twenty-five years or more. In 1946-47, additional payments of $200 were approved for those receiving $1,000, and corresponding additions were made for other annuitants. Provision is also made for other staff members, likewise on a nonfunded, noncontributory, promissory basis. UNIVERSITY

OF MINNESOTA

In 1929 the University of Minnesota accepted the Minnesota state employees retirement plan for members of the nonacademic staff, and in the following year, on December 18, 1930, it began to provide, out of

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1SS

current funds, retiring allowances for the upper ranks of the academic staff. This noncontributory, nonfunded plan continued to operate until 1935 when retirement benefits were extended to all members of the academic staff with the rank of instructor or above, and gradual and partial funding of the state retiring allowances began. At present, participation in the contributory plan is open to the following full-time members of the university staff under age 60 who receive not less than $1,800 a year: professors and associate professors, after one year of service; assistant professors, after two years of service; and instructors and other full-time persons receiving not less than $3,600, after three years of service. Participation in the plan is optional, and for a staff member who chooses not to participate the total allowance that the member may expect at age 68 will be decreased by the amount provided by any annuities offered to him and refused. The contributory plan provides for purchase, by means of annual premiums, of annuity contracts that would be worth $1,000 each at retirement age 68. One $1,000 unit is offered each year until the staff member has accepted sufficient units to provide his retirement allowance, or until he has accepted the maximum number of units offered one individual, or until the university's contribution reaches $400 a year. The individual may apply for either an annuity or an endowment contract, each having disability provisions of $10 for each $1,000 of maturity value. The university's contribution toward the contract is equal to half the premium for the annuity contract. The university's contributions cease when annuities purchased, together with benefits anticipated from Carnegie sources, reach 50 percent of the average base salary for full-time service during the five years preceding retirement, with individual maximums of $3,500 for deans graded downward to $1,000 for instructors. The university agrees, in so far as it is able to do so, to supplement pensions, including any Carnegie allowance, in cases where the individual does not have time to build up an adequate retirement allowance. These contracts permit the choice of one of several options upon retirement. When a member withdraws from service, he may continue the contracts in force by paying total premiums direct to the insurance companies; he may surrender the contracts for cash; or he may leave the proceeds with the company, using one of the settlement options contained in the contracts. MISSISSIPPI

COLLEGE

Effective January 1, 1944, Mississippi College established a noncontributory, nonfunded retirement plan. Retirement benefits are paid

184

DESCRIPTIONS

OF

PLANS

out of the operating fund of the college "unless some other source of income may be found for this purpose." Retirement is at age 70 except that after fifteen years of service the staff member may retire at his own volition at age 65 or the board of trustees may request his retirement. The benefits are graded upward according to years of service and age at retirement, varying from $25 a month for retirement at age 65 after fifteen to twenty years of service to $75 a month for retirement at age 70 after twenty-five years of service. UNIVERSITY

OF MISSOURI

Effective September 1, 1940, the University of Missouri established a compulsory contributory retirement plan. No waiting period for participation is required of faculty members of the rank of associate professor and higher or of administrative officers; a three-year waiting period is required of other eligible employees, including assistant professors, agricultural extension agents, county and home demonstration agents, and subadministrative officers. For persons who were on the staff of the University of Missouri on September 1, 1940, participation is required only upon promotion in rank or increase in salary. Each participant in the retirement plan pays 10 percent of his basic monthly salary as premium for a retirement annuity contract issued by any one of four companies: General American Life Insurance Company, John Hancock Mutual Life Insurance Company, New England Mutual Life Insurance Company, and TIAA. Half of this contribution is provided by an initial salary increase. For those persons who were in service when the plan began and who do not have time to accumulate an annuity of $1,500 at age 70, the university hopes, but does not promise, to provide limited service after age 70 is attained, with compensation equal to the difference between the retiring allowance purchased under the annuity contract and $1,500 a year, or half salary if that is less, provided the individual participates in the plan from the date of his eligibility. MOUNT HOLYOKE COLLEGE FACULTY AND ADMINISTRATIVE OFFICERS

Mount Holyoke College established a funded retirement plan in 1921. This plan has been revised and improved at various times, the latest revision being in 1946. Participation is now required of all professors, associate professors, and assistant professors who are appointed for more than a one-year term and who have no Carnegie expectations, and of designated administrative officers. Lecturers and visiting professors may

DESCRIPTIONS

OF

PLANS

135

participate after one year of service, and instructors and others who receive salaries of $3,000 or above may participate after three years. Retirement may occur at the end of the college year in which age 65 is reached and is compulsory at the end of the college year in which age 68 is attained. "Initiative with regard to deferring of the time of the retirement beyond sixty-five should be taken by the Board." Each participating person contributes 6 percent of his basic salary, and this is matched by the college as premiums on TIAA annuity contracts. Those persons who are participating in the plan on a voluntary basis may continue on a 5 percent matched basis until July 1, 1948, if they so choose. NONACADEMIC

EMPLOYEES

Any employee who does not participate in the faculty system of retiring allowances is eligible for the benefits of this plan. The pension benefit is equal to one percent of the average annual earnings of the last three years, for each year of service up to thirty years. The maximum salary on which the benefit may be computed is $2,500. No person having less than ten years of service will be entitled to a pension. After a year's service, a $500 death benefit is included in the plan. Likewise, the salary of an employee who has served ten years or more and who becomes totally and permanently disabled prior to the normal retirement date will be continued for 6 months. If an employee withdraws from service before retirement for reasons other than for disability, he loses all expectations under the plan. "Mount Holyoke College will pay the full cost of this pension plan from reserves to be set aside for this purpose and will retain full title to the funds thus created." Employees do not make contributions toward the support of the plan. NATIONAL COLLEGE OF EDUCATION Under a pension trust arrangement, retirement income or annuity contracts are purchased for employees who have completed more than two years of service and who elect to participate. Each participant contributes 6 percent of his salary, and the college contributes 6 percent plus 34 of one percent for each two years of service. Contributions remain stationary regardless of increases in salary or years of service until such time as increases make possible the purchase of an additional $5 or more of monthly income. Retirement contracts are held by the trustees during employment but are turned over to participants upon retirement or termination of service for any cause. If an employee is insurable, a death benefit is included; if not, beneficiaries receive the total of all

IM

DESCRIPTIONS

OF

PLANS

premiums paid by the college and the individual or the cash value of the policy, whichever is greater. NEWARK

COLLEGE OF

ENGINEERING

A voluntary contributory retirement plan was inaugurated at this college on November 1 , 1 9 3 6 , providing for benefits to be funded through a group annuity contract with the Prudential Insurance Company of America. Regularly employed men under age 65 and women under age 60 are eligible to participate after the completion of one year of service. Contributions of a participant are \Yi percent of the midvalue of the salary range, $600 in width, in which his salary falls. T h e annual benefit purchased by contributions of a particular year is percent of the midvalue of the salary range for that year. Contributions of the college are whatever are necessary when added to the member's contributions to purchase these benefits. In recognition of service before the plan was inaugurated the college is purchasing benefits of one percent of the midvalue of the individual's salary range on November 1, 1936, for each year of service, less one, prior to the inauguration of the plan. Benefit payments begin on November 1 nearest to attainment of age 65 for men and age 60 for women regardless of whether or not service continues beyond that age. A member may retire earlier for a smaller benefit if this is approved by the college. I f a member dies in service, his beneficiary or estate receives an amount equal to his total contributions, accumulated at 3 percent interest for contributions made before November 1, 1941, and 2 percent interest thereafter. Upon withdrawal from service a member may have his total contributions returned to him with interest from the end of the third contract year following that in which they were paid to the beginning of the month in which service is terminated. Otherwise, the withdrawing member will receive, upon reaching retirement age, the annuity that these contributions will purchase, and if withdrawal is preceded by fifteen or more years of participation in the plan he will receive the whole retirement income that was credited to him just prior to withdrawal. UNIVERSITY

OF NEW

BRUNSWICK

Employees of the University of New Brunswick are included under the retirement plan for employees of the Province of New Brunswick. T h e university contributes 5 percent of salary, and the employee contributes a like amount toward the purchase of benefits beginning at age 65.

DESCRIPTIONS

UNIVERSITY

OF NEW

OP

PLANS

187

HAMPSHIRE

F A C U L T Y AND A D M I N I S T R A T I V E

OFFICERS

Effective July 1, 1938, a retirement plan was established applying to members of the faculty and administrative officers of the University of New Hampshire under age 65 who are on permanent appointment under tenure rules. For staff members in service when the plan began, the date of retirement is scaled from June 30 following attainment of age 69 to June 30 following attainment of age 65. For all newcomers the retirement age is 65 years. Benefits are funded through TIAA contracts. Annuity premiums of a member are to be at the rate of 2 percent of his salary while he is under age 40; 4 percent when he is between ages 40 and 49, inclusive; and 5 percent at older ages. The university matches these contributions. Participation is required of new appointees as soon as they are eligible; it is optional for those in service when the plan was inaugurated. The university reports participation of all members eligible upon inauguration of the plan. New members of the staff will receive at retirement whatever annuities have been purchased by premiums paid. A "planned annuity" of $200 more than }/% of current salary not exceeding $4,000 is the maximum basis in computing retirement salary for members of the staff in service at the time of adoption of the plan. For older members the annuity that can be purchased with premiums described above will be less than this planned annuity, even for retirement at age 69. In such cases the university undertakes to continue members in part-time service after they attain age 69 and to pay, as compensation for this service, the difference between the planned annuity and that purchased by premiums actually paid. Whenever the annuity purchased with regular premiums reaches the planned annuity at an age earlier than 69 years, retirement age is to be reduced to age 65, and without part-time service after retirement. NONACADEMIC

EMPLOYEES

A reduced service plan is in effect for nonacademic staff members, providing percent of salary for each of the last ten years of service and one percent of salary for each year of earlier service, with a maximum of 35 percent of average salary. Reduced service status begins at age 70.

DESCRIPTIONS

138

OF

PLANS

NEW MEXICO COVERING E A S T E R N N E W M E X I C O COLLEGE, N E W M E X I C O OF A G R I C U L T U R E AND M E C H A N I C A R T S , N E W

COLLEGE

MEXICO

HIGHLANDS

UNIVERSITY, N E W M E X I C O STATE TEACHERS COLLEGE,

UNIVERSITY

OF N E W

MEXICO

The state legislature of New Mexico in 1945 authorized the various publicly administered educational institutions to set up retirement plans. The law is permissive and not compulsory ; five institutions have availed themselves of its provisions. Teachers and other employees who are members of the plans may retire at age 60 after twenty years of service, fifteen of which must be in New Mexico, or may be retired by the regents of the institution at age 65. The institution may require participants to share the cost of benefits; however, at least two of the college plans require no contributions from individuals. Under two of the plans the benefit upon retirement is 60 percent of average annual salary for the last five years of service, with a maximum benefit of $1,800 a year. NEW YORK

UNIVERSITY

In 1919 the council of New York University inaugurated a joint contributory retirement plan for full-time administrative officers, faculty members above the rank of instructor, and instructors with three years of service. I t was limited to those without expectations from the Carnegie Foundation. The resolution states that "in lieu of all other pension obligations" the university will contribute 5 percent on behalf of individuals of the classes mentioned above, regardless of whether or not they contribute in their own behalf. A major change was made in 1930 when the university announced that it would thereafter contribute only on behalf of those who chose to contribute for themselves. Participation in the plan continued to be optional. At the same time, eligibility was extended to those with Carnegie expectations, and for those Carnegie expectants who chose to participate the university offered to supplement Carnegie allowances and annuities purchased by joint contributions whenever necessary so as to bring the total benefits to $4,000 a year upon retirement at age 70. In 1939 participation in this plan was made compulsory as follows: for new appointees of the rank of assistant professor or higher and administrative employees other than clerical, immediately upon appointment; for newly appointed instructors, after ten years; for those in service in 1939 participation is to be required only upon promotion in rank

DESCRIPTIONS

OF

139

PLANS

or increase in compensation; for clerical employees, participation is optional after five years but is never required. In 1945 the plan was extended to laboratory employees and technicians under the same arrangements which pertain to clerical employees. NORTH DAKOTA RETIREMENT

TEACHERS FUND

INSURANCE

AND

COVERING N O R T H DAKOTA AGRICULTURAL COLLEGE, STATE N O R M A L AND INDUSTRIAL SCHOOL, STATE T E A C H E R S COLLEGES AT D I C K I N S O N , MATVILLE,

MINOT,

AND

VALLEY

CITY,

UNIVERSITY

OF

NORTH

DAKOTA

Teachers in any state institution, including these colleges, are covered by the North Dakota Teachers Insurance and Retirement Fund. The plan is compulsory for all participants except for those who are 50 years or over when entering service in the state for the first time. Teachers are required to contribute one percent of salary, not to exceed $20 a year, for the first eight years of service; 2 percent of salary, with a $40 limit during the next eight years of service; and 3 percent of salary, but not more than $60 a year, thereafter until a total of twenty-five years of service has been performed, at which time assessments cease. The state contributes twenty cents per pupil of school age for each year, taken from the county tuition fund. After an aggregate period of twenty-five years of service as a teacher, of which eighteen, including the last five years of teaching, shall have been in North Dakota, a teacher is entitled to a retirement benefit beginning at age 50 or later. If the teacher is age 55 at the time of applying for the annuity, he is eligible for an amount equal to 1/50 of his average annual salary for the years of service for which assessments were paid multiplied by the whole number of years of service as a teacher, with a maximum annual annuity of $750 and a minimum of $350. A lesser annuity is available at ages 50-55. A disability annuity is available after fifteen years of service. The board may reduce the annuities provided for whenever, in its judgment, the condition of the fund requires a reduction in such annuities. If a teacher withdraws from service before retirement, he shall be entitled to the return of half the amount he has paid into the fund without interest. If he re-enters the fund, he shall return, within one year after he again becomes a teacher, the amount paid to him accumulated at interest at a rate of 4 percent. The same benefit of half the member's contributions without interest is payable to beneficiaries or the estate in case of death of a member before retirement.

140

DESCRIPTIONS

OF

PLANS

Amendments of 1947 have raised the contribution rate for the teacher to 2 percent, 4 percent, and 6 percent, with yearly maxima of $40 for the first eight years, $80 for the next eight years, and $120 thereafter to twenty-five years of service. The employing agency now must match the participant's contributions. The maximum annuity has been raised to $1,200 a year and the minimum to $550 or $600. A withdrawing employee now receives his full contributions without interest. NORTHWEST NAZARENE

COLLEGE

This college established a retirement plan in October, 1946, applying to all regular employees. Staff members are required to participate after three years of service but may do so after two years by paying the full premium themselves. Normal retirement age for faculty members is 65 years, with provision for extensions of service on a full-time or parttime basis to age 70 at the discretion of the president or the board of regents. Life insurance coverage is provided for all persons age 55 and under. The premiums of 10 percent of salary, shared equally between the staff member and the college, purchase contracts from the Western Life Insurance Company of Helena, Montana. OBERLIN COLLEGE FACULTY AND ADMINISTRATIVE OFFICERS

Oberlin had no retirement plan prior to 1906, but the college had pensioned three faculty members, all past the age of 70. When the Carnegie plan was announced, Oberlin adopted a resolution affirming its nonsectarianism (June, 1906) and became an associated institution. The Carnegie plan did not apply to the Conservatory of Music, the Academy, or the Slavic Department, and in these divisions retirements were cared for entirely by the college. Contributory plan as adopted in 1922.—On November 17, 1922, the trustees adopted a resolution providing for the establishment of a contributory retirement plan, making use of contracts of TIAA. The plan became effective as of January 1, 1923. Membership was made optional for eligibles who entered service prior to September 1, 1923, but compulsory for later appointees. Teachers and administrative officers who had no Carnegie expectations were made eligible upon permanent appointment or after having served three years. Announcement was made that noncontributory pensions would not be granted to those retiring after August 31, 1924, provision being made for special treatment of certain individual cases. Regular contributions of college and teacher were each 5 percent of

DESCRIPTIONS

OF

PLANS

141

salary up to $225 a year; if the teacher chose to pay more, this did not change the obligation of the college. College contributions ceased when joint contributions had accumulated sufficiently to provide for the purchase of an annuity of $1,800 a year beginning at age 68, with payments of $900 to be continued to the wife if she survived the pensioner. The college offered to match dollars retroactively to September 1, 1922, for those who were interested in making retroactive contributions. For those who entered service prior to November 20, 1918, but who were not eligible for Carnegie pensions, the college offered to supplement the accumulation resulting from participation in the contributory plan to the extent necessary to make up the maximum benefit toward which the college would contribute for other members of the contributory plan. This, of course, was an inducement for the older men without Carnegie expectations to join the contributory plan. Restriction was placed on benefits to be supported by the college in case both husband and wife are members, and no benefit is to continue to a widow who was a wife for less than ten years prior to the retirement of the teacher. Retirement was made available at age 65, but Oberlin's support to the contributory annuities will be such as to produce a total benefit of 1/15 less than that available at age 68 for each year that the age of retirement anticipates age 68. In June, 1929, arrangement was made to supplement the other benefits anticipated by the older faculty members in order to make adjustment for the drastic reduction made at that time in the Carnegie benefits. The general plan was to require contributions from the faculty members with Carnegie expectations and then to promise to supplement benefits otherwise available so as to make up, at age 65, the benefits that were stated in the Carnegie plan in 1922 at age 70. Briefly stated, this benefit is half the average salary for the last ten years of service with a maximum of $3,600. Likewise in June, 1929, and again in 1938, provisions of the contributory plan were liberalized. Limits on college contributions were removed, and in those cases for which the college had agreed to supplement annuities to bring the benefit to $1,800, the limit was changed to $2,400. Normal retirement age was placed at 65 years, with provision for special annual extensions of service. The waiting period for those not on permanent appointment was changed from three years to two years, and this was reduced to one year in 1945. No waiting period is required for those who come to Oberlin with a TL\A contract in force. Participation was made compulsory for eligibles receiving salaries of $2,500 or more, and optional for eligible persons with lower salaries.

14e

DESCRIPTIONS

OF

PLANS

Amendments of 1946.—Recognizing the reduced interest guarantees and retirement income provided by later vintages of retirement annuity contracts, Oberlin College in 1945 liberalized its contributions on these contracts. All eligible teachers and administrative officers continue to contribute 5 percent of their salaries, except that the college provides the total contribution for those whose salaries are less than $2,500. The college continues to contribute 5 percent for those persons whose TIAA contracts are dated prior to April 1, 1932; 6 percent for those dated from April 1,1932, to December 31,1935; 9 percent for those dated January 1, 1936, to November 30, 1938; and 10 percent for those dated thereafter. In special cases the president may arrange that the contribution of the college will be increased above the usual amount in order to provide an adequate retirement allowance, but the college assumes no obligation to provide any supplementary benefit beyond that provided by the annuity policy. NONACADEMIC EMPLOYEES

Effective September 1, 1938, Oberlin College adopted a contributory plan for nonteaching employees and, in addition, has paid, and hopes to continue to pay, pensions in recognition of past service to those who bad completed ten years of service on August 31, 1938. Administrative assistants and employees who give substantially more than half time to the college and who have served the college for the equivalent of a college year are eligible for coverage under the new plan. Participation is required of eligible persons who are twenty-five years old and is optional for younger persons. Contributions of a participant approximate 3 percent of compensation, the college contributing 7 percent. Wage ranges $200 in width are set up, and the participant's contribution is 3 percent of the midvalue of the wage range in which the participant's compensation falls. Contributions become premiums for retirement annuity contracts issued by TIAA. Retirement occurs normally at age 65, but annual reappointments may be made in special cases. The pension in recognition of past service which the college hopes to continue to pay to older employees is one percent of the average salary for the ten-year service period next preceding September 1, 1938, multiplied by the number of years of service to the college prior to that date. In certain circumstances when an employee or a teacher leaves Oberlin College before retirement, the college will consent to the repurchase of the TIAA annuity contract, i.e., if TIAA approves, to the refunding of the accumulation established therein but only on condition that the

DESCRIPTIONS

OF

PLANS

143

portion of the accumulation provided by the college's contribution be paid to the college. The participant need not request repurchase of his contract, and if he does not, he retains, as is always the case with TIAA contracts, the full accumulation resulting from his own contributions and those of the college. OCCIDENTAL COLLEGE Effective September 1, 1938, Occidental College inaugurated a contributory plan for retirement income, participation in which is required of all persons of recognized tenure and of all other employees upon the completion of three years of service. Contributions of faculty members are 6 percent of compensation; those of the administrative and labor staff members are 5 percent of compensation. The college makes equal contributions in recognition of current service. Retirement age is normally 68 years, although the college may request retirement as early as age 65 and may extend service of individuals until age 70. If retirement is requested at an age earlier than 68 years, it is expected that the college will make the necessary contributions to support the retirement benefit expected at age 68 and will pay corresponding benefits for the years preceding attainment of that age. For those in service who were age 60 or older on September 1, 1938, contributions of the college and the individual are funded by the college, and the accumulation is available to the individual or his representative if service is discontinued for some reason other than retirement. For those who were younger than age 60 on September 1, 1938, contributions under the plan become premiums for TIAA retirement annuity contracts. For those who were age 60 or older in 1938 the college expects, without promising, to supplement the annuity purchased through joint contributions so that the total monthly retirement benefit shall be at least one dollar for each year of service prior to September 1, 1938, plus $50 for faculty members and $35 for administrative staff members. For those younger than age 60 on September 1, 1938, the college pays additional monthly premiums for retirement annuity contracts if needed to bring the total retirement benefit up to the amount provided for the older staff members. OGLETHORPE

UNIVERSITY

In 1943 Oglethorpe University established an informal, nonfunded, contributory retirement plan whereby a professor is retired on " a fair share of his last salary," paid out of the current budget.

DESCRIPTIONS

144

STATE

TEACHERS

RETIREMENT

OF

SYSTEM

PLANS

OF OHIO

COVERING BOWLING G R E E N STATE UNIVERSITY, K E N T STATE

UNI-

VERSITY, M I A M I U N I V E R S I T Y , O H I O S T A T E U N I V E R S I T Y , O H I O

UNI-

VERSITY, U N I V E R S I T Y 9 F A K R O N , U N I V E R S I T Y O F T O L E D O , FORCE

WILBER-

UNIVERSITY

PROFESSIONAL

STAFF

Originally inaugurated in 1920, this plan was revised broadly in 1945. I t covers, among others, teachers in schools and colleges supported in whole or in part and wholly controlled and managed by the state or any subdivision thereof, provided the boards of trustees agree to such membership. Under this provision these schools cover their instructional staff under this plan, except t h a t Wilberforce University covers only its college of education and the industrial arts department. Participation is required of eligible persons who enter scrvicc after the plan was established. Until the latest amendment to the act, contributions were 4 percent of salary up to $2,000; they are now 5 percent of salary, not to exceed $3,000. These contributions are matched by the employer only for those who ultimately retire and not for those who withdraw or die. In addition, the employer makes a "deficiency contribution" on behalf of those who retire with past service credit. Retirement is available after thirty-six years of service at any age, or at age 60 after five years of service, or at age 55 with thirty years of service. The law provides t h a t with the consent of the employer in each case, the retirement board shall retire teachers at the end of the school year in which age 70 is attained. The retiring allowance is equal to an annuity twice as large as t h a t which can be purchased with accumulated contributions, plus a pension for prior service equal to 2 percent of the final average salary times the number of years of prior service. For service credit purchased prior to June 25, 1945, this pension is l j ^ percent of the final average salary multiplied by the number of years of such purchased credit. Retirement for disability is available after ten years of service, the benefit being equal to 1.6 percent of final average salary for each year of service, with a minimum of 80 percent of the final average salary and a maximum of 9/10 of the benefit t h a t would have been available at age 60. In case of death before retirement or withdrawal from the retirement system, the member or beneficiary receives the member's own contributions with interest. Under the new law, members with ten or more years of service who discontinue contributions may preserve their equity in the retirement system and apply for retirement benefits. In

DESCRIPTIONS

OF

PLANS

this event the allowance for retirement will include an annuity twice that provided by the member's account and a prior service pension, if any, provided by the employer. NONACADEMIC

EMPLOYEES

The nonacademic employees not covered in the state teachers retirement system are eligible for membership in the school employees retirement system of Ohio. OHIO WESLEYAN

UNIVERSITY

Ohio Wesleyan University established a retirement plan on June 11, 1912. It applies to all teachers and officers of the university of whatsoever rank and to their widows. The plan is noncontributory and makes clear the fact that no legal obligations are established by it. Retirement is provided at age 65 for those who have served for fifteen years, and the trustees may take special action for those who have served more than ten years but less than fifteen years. The benefit equals 1/60 of the average salary during the last five years of service for each year of service, but in no case is it more than 50 percent of such average salary. A widow older than age 60 of a pensioner or of a person eligible for benefits may receive a pension half as large as that to which her husband was entitled, provided she had been his wife for at least ten years prior to his death or retirement. The plan includes a number of special benefits which the trustees may vote under different circumstances. TEACHERS'

RETIREMENT

SYSTEM

OF

COVERING C E N T R A L STATE COLLEGE, LEGE,

LANGSTON

NORTHWESTERN

UNIVERSITY,

OKLAHOMA

E A S T C E N T R A L STATE

NORTHEASTERN

STATE COLLEGE,

OKLAHOMA

STATE

AGRICULTURAL

M E C H A N I C A L COLLEGE, P A N H A N D L E AGRICULTURAL AND OF TECHNOLOGY,

UNIVERSITY

OF OKLAHOMA,

AND

MECHANI-

CAL COLLEGE, SOUTHEASTERN STATE COLLEGE, SOUTHWESTERN STITUTE

COL-

COLLEGE,

IN-

OKLAHOMA

COLLEGE FOR W O M E N

By act of the state legislature in 1943 this system was established covering all persons regularly employed under contract by the public schools and state colleges of Oklahoma and employees of any state department or board dealing with public education. Membership is optional for teachers who were in active service at the time of passage of the act, but compulsory as a condition of employment thereafter. The individual's contribution of 4 percent of salary is matched by the state. Retirement is to occur at age 70 up to the year 1950, and at age 65

14«

DESCRIPTIONS

OF

PLANS

thereafter, with optional retirement at age 60 or after thirty years of service. Benefits on behalf of membership service at retirement are supplemented by prior service benefits supported by contributions of the state. The annual prior service benefit equals 8/10 of one percent of the teacher's annual salary for the last five complete years immediately preceding the school year 1943-44 multiplied by the number of years of prior teaching service in Oklahoma after 1907-08. A member may select from among optional modes of settlement at time of retirement. If a teacher leaves the profession permanently, he may apply for the return of his own contributions with interest. The same amount is available to beneficiaries upon the death of a member while in service before retirement age. MUNICIPAL

UNIVERSITY

OF

OMAHA

Enabling legislation was passed by the Nebraska legislature to provide the legal authority for a retirement plen for the Municipal University of Omaha in 1943, and the plan was installed on September 1, 1943. All regular employees of the university are eligible to participate after one year of service and are required to participate after three years of service. Each participant contributes 5 percent of his monthly base salary, not exceeding $12.50 a month, and the university matches this contribution. The combined premiums are used to purchase a retirement annuity contract from the United Benefit Life Insurance Company of Omaha. The Municipal University was authorized to supplement its contributions for employees who had had service with the university prior to the effective date of the plan by contributing, within six months after installation of the plan, an amount not to exceed 5 percent of the employee's total salary from the university between the date of organization of the Municipal University (September 1, 1931) and the installation of the retirement plan, provided that the total of such contributions was computed on the basis of not more than a $3.000 salary in any one year and that the employee made an equal contribution on a voluntary basis. The university's supplementary contribution was made from funds derived from private gifts and not from taxation or student fees. At the time the retirement plan was established, the university put in a TIAA collective decreasing insurance plan providing one unit of coverage for all regular employees.

DESCRIPTIONS PUBLIC

EMPLOYEES

COVERING

EASTERN

RETIREMENT OREGON

OF

PLANS

SYSTEM

COLLEGE

OF

147

OF OREGON EDUCATION,

OREGON

COLLEGE OF EDUCATION, O R E G O N STATE C O L L E G E , SOUTHERN O R E GON C O L L E G E O F E D U C A T I O N , U N I V E R S I T Y O F O R E G O N

T h e Public Employees Retirement System, which was established in 1945, became functional on J u l y 1, 1946. All employees of the state of Oregon who are employed in a position which normally calls for 600 hours or more of work per year are included in t h e public retirement system except those members who, prior t o July 1, 1946, or prior t o t h e starting date of their state employment, entered into a n a n n u i t y contract with a private company and have elected t o substitute their private annuity for participation in the state retirement system. Such substitutions are approved by t h e employing state d e p a r t m e n t if it is considered t h a t t h e employee's private annuity will return a retirement benefit approximately equal to t h a t which he would receive under the public employees retirement system. Employees' contributions under the public employees retirement system are scaled from 8.71 percent for men and 4.06 percent for women a t age 18 and under, up to 9.24 percent for men and 10.56 percent for women age 64 and over. Each individual employee m a y elect t o contribute a t either his fixed rate or a t a r a t e of 5 percent, if his fixed rate is over 5 percent. T h e elected r a t e of contribution m a y be applied t o $200 of the employee's monthly salary, or it m a y be applied to the employee's full salary. The employer actuarially matches the employee's contributions based upon his elected r a t e applied to not more t h a n $200 of his monthly salary. Normal retirement under t h e system is a t age 65, although after July 1, 1951, an employee may elect t o retire a t age 60 a t reduced benefits. As a general goal for benefit payments, t h e state has a t t e m p t e d t o fix contribution rates t h a t will return approximately 50 percent of the employee's salary for his last five years of employment u p t o $200 per m o n t h after 30 years of service. These benefits are scaled downward considerably for lesser periods of service and are also scaled down in case the employee elects t o retire earlier t h a n t h e normal retirement age. In case of a job-connected total disability occurring after five years of service or any total disability occurring after 15 years of service, t h e employee is retired with benefits equal t o those payable at his earliest optional retirement age. I n addition t o t h e above benefits, which are based upon employees' contributions and employer matching, there is a provision in the retire-

148

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OP

PLANS

ment act for payment of retirement benefits based upon prior service, i.e., that service rendered prior to the establishment of the public employees retirement system. The cost of prior service benefits is borne solely by the agency employing the individual at the time he becomes a member of the retirement system. The prior service benefit amounts to a fixed annuity payment of $2.50 a month for each year of service prior to the adoption of the retirement act, with a ceiling payment of $50 a month. These payments are, of course, in addition to payments based upon employee participation. An individual who leaves the state service before he has been a member of the state retirement system for ten years may secure a refund of all deductions made from his pay, and, in case this refund is made, the employer recaptures its contributions for this employee. An employee who terminates his service after he has been a member of the retirement system for ten years or longer may not receive a refund of deductions made from his pay, but at retirement age he receives an annuity based upon the total accumulation of his contributions and the amount paid by the employer. In case an employee dies while a member of the retirement system, the person whom he has designated as beneficiary will receive the amount credited to the account of the employee from the employee's contributions and interest thereon. UNIVERSITY OF OREGON

In the year 1929 the University of Oregon inaugurated a retirement plan covering staff members on permanent appointment with two years of service who were administrative officers or faculty members above the rank of instructor. Salaries were increased on condition that twice as much as the increase should be contributed by the members as premiums for TIAA retirement annuity contracts. At present this plan applies only to staff members who elected to participate when the plan was inaugurated, plus any who, coming to the university with a TIAA contract, substitute it for participation in the public employees retirement system. OTTERBEIN COLLEGE In 1931 Otterbein College inaugurated a noncontributory, nonfunded pension plan under which retirement is available at age 65 and required at age 70. I t applies to all faculty members, librarians, and the college treasurer. If retirement occurs after the completion of 40 years of service, the pension is half the salary; this pension is prorated for longer

DESCRIPTIONS

OF

PLANS

149

periods of service and for shorter periods down to £ of the maximum salary after ten years of service, the least period that is recognized in granting pensions. In December, 1941, this plan was made contributory; the participants and the college each pay to the Midland Mutual Life Insurance Company half the premium necessary to supply these benefits. OUACHITA

COLLEGE

A small retirement allowance results from the group insurance plan in effect at Ouachita College. Each employee is allowed $1,000 of insurance; each department head, $2,000; and each administrative officer, $2,500. The college pays half the premium. This insurance provides a retirement benefit of $10 a month per $1,000 of insurance. PACIFIC

LUTHERAN

COLLEGE

In 1938 this college established a plan applying to its faculty members who are eligible for coverage by the Lutheran Brotherhood. Premiums based on 3 percent of salary paid by the annuitant, and matched by the college, are used to purchase a deferred annuity. Income payments begin at the annuitant's age 70 nearest birthday unless a different beginning date is selected. In event of death of the annuitant prior to the maturity date, a death benefit equal to the reserve is paid to the beneficiary. UNIVERSITY

OF

PITTSBURGH

In 1919 this university installed a voluntary retirement plan using TIAA contracts and covering faculty members and administrative staff. Effective July 1, 1946, the university extended its old plan and made it compulsory. Professors, associate professors, deans, directors, the university librarian, and general administrative officers participate immediately; other members of the professional and administrative staffs participate after a three-year waiting period and attainment of age 30. Contributions are 5 percent of budget salary up to $5,000, paid by the individual, and 5 percent by the university. The university agrees to pay a special annuity for those who were eligible but did not enter the previous voluntary plan. The amount of the annuity is equal to what could have been bought from TLAA on July 1, 1946, with a single premium equal to 5 percent of the employee's base salary for whatever period the employee was eligible but did not participate in the voluntary plan. This total special benefit is not to exceed the difference between one half of the participant's average base

150

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OF

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salary for five years before retirement and the amount of annuity purchased by matched contributions for current service. Retirement under this arrangement may occur in cases of total and permanent disability after age 60. BOARD OF MINISTERIAL UNITED PRESBYTERIAN

PENSIONS CHURCH

AND RELIEF OF NORTH

OF THE AMERICA

COVERING K N O X V I L L E COLLEGE, M O N M O U T H COLLEGE, COLLEGE,

STERLING

COLLEGE,

TARKIO

COLLEGE,

MUSKINGUM WESTMINSTER

COLLEGE

This is a contributory pension plan under which pension benefits are available to some staff members of each college at age 65 or later. Participation for ministers is required by act of the general assembly. The member contributes 3 percent of his salary, and the church or organization, 8 percent. The pension annuity benefits are 1/70 of each year's salary times the number of years of premium participation. Benefits are paid in case of disability. There is also a widow's annuity benefit of one half of the member's accrued pension, and a minor children's benefit of $100 yearly. PRINCETON

UNIVERSITY

FACULTY AND ADMINISTRATIVE OFFICERS

During the period from 1930 to 1934 the first formal contributory annuity and life insurance plan was established. In 1946 the plan was revised. Staff members with the rank of full-time instructor or higher are eligible and may begin participation on July 1 following their appointment but must participate on July 1 next following attainment of age 30. Contributions of the members are scaled upward according to age on each July 1. Those under age 35 will contribute 5 percent of salary; those 35-44, 6 percent; those 45—49, 8 percent; and those age 50 and over, 10 percent. Contributions are not made on that part of salary which is in excess of $8,000. The university contributes an amount equal to the participant's contribution and forwards the total to TIAA for purchase of annuity contracts. Normal retirement occurs on July 1 following attainment of age 68 for men and 65 for women, except that one-year extensions may be made by vote of the board of trustees or retirement can occur earlier in case of disability. Under a group life insurance plan with the Prudential Insurance Company, each participating staff member has $10,000 group life insurance until retirement, for which he pays $72 per year, the university paying the balance of the premium.

DESCRIPTIONS

OF

PLANS

151

NONACADEMIC EMPLOYEES

Princeton has had a noncontributory pension plan since 1911 and a noncontributory group life insurance plan since 1919. On July 1, 1946, the retirement plan for nonacademic staff members was thoroughly revised. The new plan applies to persons over age 85. Normal retirement age is 68 years for men and 65 for women. Retirement may occur at an earlier date or a later date, although in the latter case retirement benefits begin at the normal retirement date. The total contributions for this plan are made by the university to the Prudential Insurance Company of America. Retirement income will be equivalent to 2 percent of annual earnings for each year in which the participant is in the plan. A supplementary benefit for past service is provided equal to V/2 percent of the rate of annual earnings in effect on June 30, 1946, multiplied by the number of full years of past service after age 35 and prior to July 1, 1946. An individual who leaves the university prior to retirement and before ten years of service are completed receives none of the contributions of the university. If he leaves after ten years' service, he receives 50 percent of the university's contribution, plus 5 percent for each year over ten and up to twenty, as a retirement income credit. No death benefit is available under this plan because the separate noncontributory group life insurance plan with the Equitable Life Assurance Society provides coverage ranging from $1,000 to $3,500 according to rate of earnings, reduced to $500 at age 68 for men and age 65 for women. RANDOLPH-MACON

WOMAN'S

COLLEGE

In 1946 faculty members and designated administrative officers were brought under a retirement plan using TIAA contracts. The plan is voluntary for those persons who were on the staff on September 1, 1946, and is compulsory for new appointees after three years of service and attainment of age 35. Normal retirement age is 68 years. Extensions of service beyond this age may be made for definite periods of not more than one year each by the executive committee of the board of trustees. Participants whose age was 59 or less on the effective date of the plan contribute 5 percent of their salaries, and this is matched by the college as premiums for TIAA annuity contracts. For those persons age 35-59 on September 1, 1946, the college plans, but does not promise, to pay a monthly pension of one percent of salary on the effective date of the plan for each year of service prior thereto, but such pension, when added to the single life annuity available from

16«

DESCRIPTIONS

OF

PLANS

contributions for current service, shall not make the total benefit exceed 35 percent of salary on September 1, 1046. Participants who are over age 60 on the effective date of the plan contribute 5 percent of their monthly compensation into a special fund entitled the "Randolph-Macon Woman's College Retirement Fund," and the college adds a like amount. Upon retirement of these persons, the college promises to pay in monthly installments of $125, or 30 percent of salary, whichever is smaller, the total amount to the credit of the participant in the retirement fund. The college proposes, but does not promise, to continue these monthly installments, after the credit to the individual in the fund is exceeded, for as long as the participant lives. RENSSELAER

POLYTECHNIC

INSTITUTE

Effective October 1, 1044, Rensselaer Polytechnic Institute established a retirement plan using the contracts of the Bankers Life Company of Des Moines, Iowa. The plan was voluntary for those in service on October 1, 1944, who were less than years of age and is compulsory for all persons appointed after that date. There is a three-year waiting period for the maintenance staff, two years for instructors and members of the administrative staff, and none for persons of professorial rank and officers of administration. Retirement is at age 65 for those who were less than 55% years old on the effective date of the plan, and is graded from age 70 to age 66 for the others. In case an extension of service is granted by the institute, the retirement pension nevertheless begins at the normal retirement age. Individuals contribute 6 percent of salary, and this is matched by the institute. No increase is made in the contribution rate to compensate for salary increases unless the increase is large enough to purchase an additional retirement pension of at least $5 a month. A supplementary benefit for past service is granted by the institute equal to one percent of the salary rate on July 1, 1944, multiplied by the number of full years of past service since the attainment of age 35. Insurance benefits are equal to $1,000 for each $10 of monthly retirement pension up to a maximum amount of $10,000 without evidence of insurability. If an individual leaves the institute prior to retirement, he may elect to receive his own contributions at 2 percent interest in cash, or he may leave his contributions with the company, in which case his own and the institute's contribution for future and past service are retained to his credit.

DESCRIPTIONS

RICE

OF

PLANS

153

INSTITUTE

The William M. Rice Institute retirement plan became effective September 1, 1946. It applies to faculty members with the rank of assistant professor and above immediately, and to instructors and administrative employees after they have completed 2 years of service and have attained age 30. Participation was optional for those in service on the effective date, but it is compulsory for new employees. The normal retirement age is 70, although retirement on a reduced annuity may occur at any time after age 60 upon the completion of five years of service. The institute and the participants each contribute 5 percent of salary, up to an amount necessary to provide a total pension including past service pension of $350 a month at age 70. A past service benefit is provided for those who participate on the effective date of the plan. The benefit is equal to one percent of salary on September 1, 1946, multiplied by the number of years of service rendered prior to that date. In the event that an employee leaves the service of the institute, a paid-up single premium deferred annuity is purchased with the institute's and the participant's contributions. The full benefit is likewise available to the beneficiaries of an employee who dies in service. The institute guarantees interest on the accumulated funds, at present 3 percent per annum, and in addition pays all the expenses of administration. UNIVERSITY

OF RICHMOND

The University of Richmond established a retirement plan, effective September 1, 1940, covering faculty members and officers of administration and such other employees as may be designated by the executive committee of the board of trustees. The plan is compulsory after two years of service. Retirement age is 70 years, with special trustee extensions permitted. Participants under age 60 on September 1, 1940.—Each such participant contributes 5 percent of his salary as a premium for a TIAA retirement annuity contract, and this contribution is matched by the University of Richmond. For those past age 45 and under age 60 on the effective date of the plan, the university proposes, but does not promise, to make monthly payments equal to one percent of salary for each year of service from September 1 following the forty-fourth birthday to September 1, 1940, with the limitation that this supplementary benefit is not to exceed the amount necessary to bring the total benefit to $1,200

154

DESCRIPTIONS

OF

PLANS

a year, including the single life annuity in TIAA purchased by these provisions. Participants age 60 or over on September 1, 1940.—Each such participant contributes 5 percent of his salary plus of one percent of salary for each year, up to 10, by which his age exceeds 60 years at the inauguration of the plan. Upon retirement the university promises to pay in monthly installments of $100 or 30 percent of salary, whichever is smaller, the total amount to the credit of the participant in the University of Richmond retirement fund, with any amount remaining unpaid at the time of the participant's death to go to his beneficiaries. When the participant's credit in the fund becomes exhausted, the university expects, but does not promise, to continue monthly installments of the same amount for as long as the participant lives. ROANOKE COLLEGE In 1944 Roanoke College established a noncontributory retirement plan. "A Pension Fund shall be set up by an initial payment of $10,000, and subsequent payments each month of $250." Grants on account of retirement are considered by the college as "gifts for long and faithful service" and apply to all employees. An employee with twenty-five years of service shall be retired on a pension at age 70, or earlier if his efficiency is impaired. A full-time employee with twenty years of service may be retired with a pension if permanently incapacitated. The pensions are to be one percent of base pay for the last twelve months of full-time service preceding retirement multiplied by the number of years of service. In 1947 the trustees of the college hope to increase the benefits under the plan to V/i percent of final salary multiplied by the number of years of service. UNIVERSITY ACADEMIC

OF ROCHESTER EMPLOYEES

In 1920 the University of Rochester inaugurated a retirement plan for faculty members making use of TIAA contracts. Participation in this plan is required of all full-time faculty members of the rank of assistant professor and higher and of staff members of certain other designated classes. Contributions of 5 percent by members are matched by contributions from the university up to $500 a year. Retirement occurs normally at age 65. NONACADEMIC

EMPLOYEES

In 1936 the university inaugurated a compulsory, joint contributory retirement plan for nonacademic employees. Participation was recom-

DESCRIPTIONS

OF

PLANS

15$

mended to those in service at that time and is required of all new appointees after the completion of one year of service. The plan is administered through a group annuity contract with the Metropolitan Life Insurance Company. Retirement occurs normally on the fifteenth of the month nearest to the sixty-fifth birthday, but it may be either earlier or later with the approval of the university. The benefit in case of earlier retirement is less than at age 65, but if retirement is delayed beyond age 65 the benefit is the same as if retirement occurred at age 65. Member contributions are 3.6 percent of the midpoint of the compensation range ($400 in width) in which the member's compensation falls, and the corresponding increment of benefit is percent of the same figure. The university's contributions are whatever are necessary to supplement member contributions in purchasing the benefits. If a member withdraws from service, he has a choice between leaving his contributions with the insurance company and receiving at normal retirement date the retirement income that has been purchased by his contributions or having the contributions, without interest, returned to him in one payment or spread over a period of twelve months at the option of the insurance company. If withdrawal occurs after ten years of participation and the member leaves his contributions with the company, he obtains the annuity purchased with his own and the university's contributions. If a member dies while employed, his beneficiary receives his contributions without interest. ST. LOUIS

UNIVERSITY

St. Louis University established a retirement plan in February, 1946, applying to all full-time lay faculty members and administrative employees. Employees in the service of the university when the plan was established are eligible after one year of service or on January 4, 1947, whichever is earlier. Employees appointed after the effective date of the plan are eligible on January 4 following two years of service. Each employee receives a certificate, with trustees holding the policies issued by the Lincoln National Life Insurance Company. Employees' contributions vary according to age at the beginning of participation as follows: 21-34, 3 percent of monthly salary; 35-49, 5 percent; 50-65, 7 percent. The university makes up the difference to provide the stated retirement income, which is to be the sum of one half of one percent of the employee's basic annual wage multiplied by the number of years of full-time service prior to participation, plus % of one percent of his basic annual wage multiplied by the number of years of full-time service from

156

DESCRIPTIONS

OF

PLANS

date of participation to retirement age. In no event shall retirement benefits exceed $125 a month. For those 55 years of age or younger when participation begins the retirement age is 65; for those 56-60, retirement will occur after ten years of participation; and for those 6165, the retirement age is 70. If a participant dies before retirement, his beneficiaries receive an amount equal to his own contributions without interest. If he leaves the employ of St. Louis University before retirement, he receives his own contributions, plus l/i of the institution's contributions if he has served between five and ten years; this sum is graded upward, according to length of service, until it reaches a 100 percent return of the institution's contributions for a person with twenty years or more of service. UNIVERSITY

OF SANTA

CLARA

A voluntary contributory retirement plan for faculty members was inaugurated January 1, 1939, at the University of Santa Clara through a contract with the Occidental Life Insurance Company. For a member under age 60 with five years of faculty service contributions are equally divided between the university and the member. If an employee who has had less than five years of service joins, he must pay the whole premium for the benefit to be provided, but if and when he completes five years of service, half of this contribution is refunded to him with interest. Each contract is written to provide an annuity of $100 a month beginning on the policy anniversary nearest the sixty-fifth birthday of the member. If a member withdraws from service, he can surrender his contract for cash or make a payment to the university and thereafter remit the premium stated in the contract directly to the insurance company. If withdrawal occurs within twelve years of the date of issue of the contract, the member receives his contributions with interest. If withdrawal occurs after the contract has been in force for thirty years, the member receives the full cash surrender value. For periods between twelve and thirty years the rate is scaled upward from member contributions with interest to the full cash value. The university receives that part of the cash value that is not paid to the member. A second option that the member has upon withdrawal is to pay to the university the amount that it would receive from the insurance company under the first option and to continue the contract as his individual policy. While service continues, the contract is the joint property of the member and the university. If a member dies in service, the benefit is the same as the cash value.

DESCRIPTIONS

SCARRITT

COLLEGE FOR CHRISTIAN

OF

PLANS

157

WORKERS

On July 1, 1944, Scarritt College for Christian Workers established a retirement and pension plan applying to all employees then between ages 30 and 60. The plan is compulsory only for those individuals whose salary exceeds $1,500 a year, and for new employees upon completion of one year of service. Employees contribute 5 percent of their annual salary, and an equal amount is contributed by the college to purchase annuity contracts from the American National Insurance Company. The normal retirement age is 65 years, with extensions of service permitted to age 67. Employees of the college who had completed ten years or more of continuous service on the effective date of the plan and who must retire within ten years are to receive, in so far as funds are available, an annual pension equal to one percent of their average annual salary times the number of years of service at the college. An upper limit of $900 a year is placed on this benefit. If an employee withdraws from the service of the college before retirement, he takes the annuity contract with him. SUSTENTATION FUND OF THE GENERAL OF SEVENTH-DAY ADVENTISTS COVERING

SOUTHERN

MISSIONARY

CONFERENCE

COLLEGE,

WASHINGTON

MIS-

SIONARY COLLEGE

Denominational employees may be covered by this fund, with assistance available after a minimum service period of fifteen years. If an employee becomes incapacitated, he is granted either temporary or permanent assistance, as may be necessary. The scale of allowances is graduated, depending on length of service and family status. An individual who has given fifteen years of service and who is married may receive $58.50 a month. If there are children, an additional $10 a month may be given for each child. If hospital care and constant medical attention are needed, some of the cost may be assumed by the fund. Single workers are usually paid retirement or disability allowances equal to 75 percent of the rate for married persons. SIMMONS

COLLEGE

In 1924 Simmons College established a contributory retirement plan making membership compulsory for teachers of a rank higher than that of instructor, and optional for instructors and administrative officers receiving salaries of $2,000 or more. The retiring allowance fund set up

158

DESCRIPTIONS

OF

PLANS

by this action was closed to new participants after July 1, 19S5. Under present retiring allowance rules participants contribute 5 percent of their salary, and this is matched equally by the college. These contributions are credited with interest at the average rate received on college investments, but not at a higher rate than 5 percent, and the total of contributions with interest is referred to as the "accumulation." At the time of retirement or earlier withdrawal from the service of the college, the participant's accumulation "shall regularly be paid over to an established insurance or annuity company as premium for a contract providing annuity benefits for such participant." At the request of the participant, the executive committee of the college is given discretion to substitute for the annuity, direct payments by the college over a period of five years or less. Retirement is at age 66 unless appointment is continued for one-year periods by vote of the executive committee. For persons employed after July 1, 1935, and for previous participants if they so elect, TIAA annuities are purchased. If the total accumulation, including any TIAA contract, is less than $10,000 at age 66 for a person who has served since 1924, the corporation may vote to bring the benefit up to $10,000. If a participant dies while in the service of the college, his accumulation in the retiring allowance fund is paid to his estate; if he leaves dependents, his accumulation or an amount equal to one year's salary, whichever is larger, is paid to the beneficiaries. SOUTH

CAROLINA

RETIREMENT

SYSTEM

COVERING T H E CITADEL, CLEMSON AGRICULTURAL COLLEGE, COLLEGE OF CHARLESTON, STATE COLORED NORMAL, INDUSTRIAL, AGRICULTURAL

AND

MECHANICAL

COLLEGE,

UNIVERSITY

OF

SOUTH

CAROLINA, WINTHROP COLLEGE

In 1945 South Carolina established a retirement system by act of the General Assembly covering, among others, the presidents, deans, professors, teachers, and employees of any college, university, or educational institution of higher learning supported by, and under control of, the state. Participation of present teachers and state employees in the retirement system is optional; all future employees must participate. Contributions of members are 4 percent of salary. Contributions of the institution will be fixed by actuarial valuation; until such valuation is made, the state contributes 2.6 percent for teachers and 2 percent for employees for current service benefits, and 4 percent for teachers and 2 percent for employees for past service benefits. Participants may retire at age 60. Normal retirement age is 65, with extensions from age 70

DESCRIPTIONS

OF

PLANS

159

to age 72 on a year-to-year basis. The retirement benefit is the total annuity available from member contributions up to the time of retirement, plus employer contributions up to age 60, plus a past service allowance based on twice the contributions the member would have made hrd a plan been in effect during his entire employment. A disability benefit is available after 10 years of service. If a participant ceases his employment, he may request return of his own contributions without interest. The same amount, plus 4 percent interest, is payable to the beneficiary if a participant dies before retirement. From 1922-45 the University of South Carolina maintained a voluntary retirement plan for its officers of instruction, using TIAA contracts. When it was included under the state retirement act, the university stopped its 5 percent contribution toward the purchase of TIAA annuities, although many annuitants elected to continue premiums on the contracts themselves. Likewise, Clemson Agricultural College had a plan whereby faculty members were given an emeritus salary after age 70 of $600 a year for those of the rank of associate professor or higher, $450 a year for assistant professors, and $300 a year for those of lower rank. RELIEF AND ANNUITY SOUTHERN BAPTIST

BOARD OF THE CONVENTION

COVERING BAYLOR UNIVERSITY, C A R S O N - N E W M A N COLLEGE,

EAST

T E X A S BAPTIST COLLEGE, GEORGETOWN COLLEGE, JOHN B . STETSON UNIVERSITY, LOUISIANA COLLEGE, M A R Y HARDIN-BAYLOR COLLEGE, MERCER

UNIVERSITY,

MEREDITH

COLLEGE,

OKLAHOMA

BAPTIST

UNIVERSITY, U N I O N UNIVERSITY

This fund, incorporated in the state of Texas in July, 1918, provides the facilities through which these Baptist senior colleges and universities make provision for the retirement of their staff members. Participation is voluntary and usually is available for all staff members. Participants usually contribute 5 percent of their salary, and an equal amount, sometimes within a prescribed maximum, is applied by the institution, with the total being sent to the relief and annuity board. After deducting toward expenses of administration not more than one percent of the total salaries of the individuals concerned, the annuity board credits the remainder of the payments to individual accounts. If the employee dies before retirement, his own accumulations are available to his beneficiary. If he transfers to another Baptist institution which has in effect a similar retirement plan administered by the annuity board, he retains credit for the employer's contributions. In case of discontinuance of

160

DESCRIPTIONS

OF

PLANS

service for any other reason, only the participant's own contributions and accumulated interest are available in cash or as a credit toward annuity payments. Normal retirement age varies from institution to institution: at Baylor University it is age 70 for men and age 65 for women; at Mercer University and Oklahoma Baptist University it is age 65 for men and age 62 for women, with required retirement at age 70 for men and age 68 for women; and at Union University retirement is voluntary at age 65 and compulsory at age 70. For individuals who remain in the employ of these institutions until retirement, the benefit, whether retirement be for age or disability, is the annuity that can be purchased with contributions accumulated to the credit of the individual. Contributions are accumulated at rates of interest adopted by the annuity board from time to time, and the annuity is based upon the table of mortality and rate of interest in force at the date of retirement. If supplementary benefits in recognition of service prior to participation in the plan are to be paid, they are handled by the employing institution separately. This is usually done by supplementing the retirement annuities created under the plan by an amount equal to one percent of the salary received the year the plan was inaugurated for every year of prior service up to and including 10 years, with the maximum retirement annuity being half the average salary of the individual. SOUTHERN

METHODIST

UNIVERSITY

For a number of years this institution has had a nonfunded, noncontributory plan for its employees. The retirement benefit is based upon years of service and average salary during the last five years of service, but is not to exceed $1,000 a year. The board may retire employees at any age between 65 and 70 at a scaled-down benefit. A reduced pension is available in event of permanent disability occurring after age 60. The university has authorized the establishment of a funded retirement plan, effective July 1, 1947. STERLING

COLLEGE

Sterling College pays a small salary to those faculty members who retire at age 70. No faculty contributions to this plan are required.

DESCRIPTIONS

OF

PLANS

SWARTHMORE COLLEGE In the year 1919 Swarthmore College inaugurated a voluntary retirement plan for faculty members, calling for contributions of 5 percent of salary from participants and the same from the college. In 1937 this plan was revised and extended to nonfaculty employees. Participation is now voluntary during the first three years of service and required thereafter. Faculty members contribute 5 percent of salary; for nonfaculty members the contribution of a participant is 5 percent of the midvalue of the salary range in which his salary falls. The contributions of the college are the same as those of the participant, except that for an employee receiving less than $1,080 a year the college pays for both, no charge being made against the worker. Contributions become premiums for TIAA contracts. Retirement age for faculty members is fixed by action of the board at 68 years. All nonfaculty members retire at age 65 unless service is extended for periods of one year each by the president and the comptroller. Employment is not to continue beyond age 70. Supplementary benefits.—The college plans, "insofar as its resources permit," to supplement the annuity purchased for a nonfaculty member by joint contributions, with a pension of one percent of salary for the year ending July 1, 1937, for each year of service after the year in which age 35 was attained and prior to July 1, 1937. This supplementary benefit shall not increase the total retirement benefit to beyond $100 a month, but it is to be larger than the formula would produce if an increase is necessary in order that the total benefit be as much as one dollar a month for each year of total service up to thirty years. UNIVERSITY

OF TENNESSEE

A contributory plan for retirement at the University of Tennessee was developed and approved by the board of trustees in 1941. However, operation of the plan was suspended until the close of the war. At present the plan is being carried on a nonfunded basis, and retirement payments are made from the general university funds. Plans are being made to establish the contributory part of the plan, with 3 percent of salary contributed by the individual and a like amount by the university.

162

DESCRIPTIONS

TENNESSEE

TEACHERS'

COVERING

EAST

OF

RETIREMENT

TENNESSEE

STATE

PLANS

SYSTEM COLLEGE,

MEMPHIS

STATE

COLLEGE, M I D D L E T E N N E S S E E STATE COLLEGE, T E N N E S S E E

AGRI-

CULTURAL

POLY-

TECHNIC

AND

INDUSTRIAL

STATE

COLLEGE,

TENNESSEE

INSTITUTE

Effective July 1, 1945, this plan covers teachers and certain other employees in the public schools and institutions of higher education, except where the employing institution has a local retirement plan. Participants contribute 5 percent of their salary, and the state contributes an amount based on a certain percentage of compensation, known as the "normal contribution," and set at 3.56 percent until a valuation is made, plus an amount for accrued service liabilities and for expenses. An employee may retire at age 60; he must retire at age 65 unless the employer requests him to stay in service, and must, in any event, retire at the end of the school year in which he attains age 70. His annuity is the actuarial equivalent of his own accumulations at the time of retirement, plus state annuities for current and prior service up to age 60. If a member withdraws or dies before retirement, an amount equal to his own contributions is refunded to him or is paid to his estate or beneficiaries. TEACHER RETIREMENT COVERING

SYSTEM

AGRICULTURAL

AND

OF TEXAS

MECHANICAL

COLLEGE

OF

TEXAS,

C O L L E G E OF M I N E S AND M E T A L L U R G Y , N O R T H T E X A S A G R I C U L T U R A L C O L L E G E , P R A I R I E V I E W U N I V E R S I T Y , SAM H O U S T O N S T A T E T E A C H E R S C O L L E G E , S T A T E T E A C H E R S C O L L E G E S OF E A S T , N O R T H , S O U T H WEST,

AND

WEST

TEXAS,

STEPHEN

F.

AUSTIN

STATE

TEACHERS

COLLEGE, SUL R O S S STATE TEACHERS COLLEGE, T E X A S COLLEGE OF A R T S AND I N D U S T R I E S , T E X A S S T A T E C O L L E G E FOR W O M E N ,

TEXAS

TECHNOLOGICAL COLLEGE, UNIVERSITY OF T E X A S

This system was inaugurated June 9, 1937, and from the beginning it applied to all educational organizations supported wholly or partly by the state under the authority and supervision of a legally constituted board or agency having authority and responsibility for any function of public education. I t covers persons "in professional and business administration and supervision and instruction." Those in service when the plan was inaugurated were covered unless within ninety days they gave notice of their desire to be exempt. All persons appointed for the first time after August 31, 1938, are required to participate. Contri-

DESCRIPTIONS

OF P L A N S

163

butions of participants are 5 percent of compensation up to $3,600 a year. The plan calls for equal contributions from the state. Service retirement is available at age 60 and required at age 70, after a minimum of twenty years of teaching in Texas. Extensions past age 70 are permitted with approval of the employer. The benefit is twice the annuity that can be purchased with member contributions plus an annuity of one percent of "average prior-service salary" for each year up to thirty-six years. The "average prior-service salary" is the average of the salaries for the last 10 years of service prior to September 1, 1937, or of all the years of service in this period if less than 10 years. In computing the average, no salary for any one year shall be more than $3,000. Several different forms of optional settlement are available. The disability benefit payable in case of disability after the completion of twenty years of service and before becoming 60 years of age is the actuarial equivalent of twice the accumulation of member contributions plus 50 percent of the award for prior service. The amount of interest allowed on contributions is determined by the amount of interest earned after percent interest is allowed on the reserve funds. When a member withdraws from service or dies in service, accumulated member contributions are available, and they must be taken within five years. It is because the state does not match the benefit from member contributions in case of death or withdrawal that the system has funds from which to pay past service benefits and disability benefits. The plan states specifically that if available funds are not sufficient to pay past service and disability benefits on the scales stated above, these benefits shall be reduced as much as may be necessary in order that they may be covered by the funds available. It is the present policy of the University of Texas to permit interested teachers to continue service on a modified basis at reduced compensation. THIEL

COLLEGE

Thiel College has a noncontributory, nonfunded retirement plan for administrative staff and faculty members. Voluntary retirement may occur at age 62, with compulsory retirement at age 65. The board of trustees may ask a faculty member to continue in service on an annual basis past age 65 if the faculty member can provide sufficient evidence as to his fitness. A retiring allowance of $25 a month is paid after ten years of service, plus $2.50 a month for each additional year of service up to a maximum benefit of $50 a month.

164

UNIVERSITY

DESCRIPTIONS

OF

PLANS

OF TORONTO

FACULTY

In the year 1891 a retirement fund was established at the University of Toronto through monthly deductions from salaries of faculty members. These deductions followed a scale of percentages of salaries increasing up to 15 percent of salaries of $5,000 or more. Participation was not compulsory. The university made no corresponding contribution, but it allowed interest at 6 percent per annum on the accumulations. When the Carnegie Foundation developed its plan for retiring allowances, the University of Toronto became an associated institution, and the accumulations of the old retirement fund were returned to the contributors. In order to supplement the Carnegie allowances, an Academic Pension Fund administered by the university was established in July, 1929. In 1919 a contributory retirement plan using TIAA contracts was inaugurated for faculty members appointed after November 17, 1915. This plan applied to faculty members of the rank of lecturer or higher with a salary of $1,200 or more. I t was voluntary for those appointed between November 17, 1915, and July 1, 1919, and was compulsory for later appointments. A waiting period of two years was established for persons below the rank of associate professor. The individual contributed 5 percent of salary up to $4,000, which was compulsory, and the university matched this up to $200. Additional voluntary contributions by the individual were allowed. Normal retirement age was 65 years, with trustee extensions permitted. In 1946 the University of Toronto adopted a pension plan with the annuities branch of the Dominion Government, described elsewhere in this book. Premium payments on TIAA contracts in force at that time were discontinued, except for those individuals who wished to continue premium payments themselves. The Dominion Government annuities are limited to $1,200 a year retirement income, and for those individuals who may accumulate a larger annuity the contracts of a group of Canadian insurance companies will be used. Nonfaculty

Effective October 1, 1929, a contributory pension plan covering appointed full-time administrative and clerical staff members and employees not covered by the faculty plan was established by the University of Toronto. Participation' is required after two years of service. The rates of contribution increase according to entrance age from 1 x /i

DESCRIPTIONS

OF

PLANS

1«

percent for those under age 21 to 7 % percent for those age 49. No individual contribution is to be more than $200 a year. The university's contribution is to be 5 percent of the member's salary up to a maximum contribution of $200. If a member leaves the service of the university without being entitled to a pension or dies in service before completing ten years of service, or after ten years but leaving no widow or child under 18 years of age, personal contributions are returned with interest at 4 percent compounded semiannually. A pension is available at age 70, after at least ten years of service; or at age 65 after thirty-five years of service; or at an earlier age, in case of disability approved by a medical adviser, after ten years of service. The monthly pension payments are 1/60 of the average monthly salary for the last five years of service multiplied by the number of full years of service up to thirty years, with a minimum of $360 a year and a maximum of $2,000 a year. If an employee dies in service or as a pensioner and leaves a widow who has been his wife for ten years or more or a child under age 18, there is payable a monthly pension of 1/120 of the average monthly salary for the last five years of service multiplied by the number of full years elapsed between the date of marriage and the date of death of the employee. This pension is not to exceed one half of the pension that the member might have received. The plan is administered by the university. TRANSYLVANIA

COLLEGE

In February, 1943, Transylvania College established, by executive committee action, a noncontributory, nonfunded retirement plan for the year 1943 only and subject to further review of the committee at its discretion. The action provided that the college might grant retiring allowances to faculty members who have been with the college for a minimum of fifteen years and who have reached the age of 65, or, at the option of the executive committee, up to age 70. If such allowance is granted, it shall be 20 percent of the faculty member's average salary during his entire period of service, plus one percent for each year of such service, with a maximum of 50 percent of average salary or $900 a year, whichever is smaller. UNION THEOLOGICAL

SEMINARY

F A C U L T Y AND A D M I N I S T R A T I V E

OFFICERS

For a number of years this institution has been paying pensions to superannuated faculty members. Beginning January 1, 1935, a contributory plan for retirement income was inaugurated which required par-

16«

DESCRIPTIONS

OF

PLANS

ticipation of faculty members above the rank of instructor and of designated administrative officers and under which participation is optional for other members of the teaching staff and for "other persons specifically permitted by the Board" after two years of service. Participants contribute 5 percent of salary payments, and the seminary contributes 7)^ percent. Retirement normally occurs at the end of the fiscal year nearest the sixty-fifth birthday of the member, but service may be extended to age 70. In recognition of past service, the seminary established a fund to pay to all annuitants who were over age 50 at the time the plan was inaugurated, fixed pensions, with half the pension payable to their widows. These fixed pensions are approximately half salary. In recognition of past service of the participants who were under age 50 at the time the plan was inaugurated, the seminary raised a fund to cover the amount that would have been in the retirement account if the plan had been in effect during the participant's service at the seminary. Pensions in effect at the time the plan was inaugurated were reduced by 1/6. All annuities purchased by the seminary have been issued by TIAA, except where participants have special rights in the various church pension plans which make it more advisable for them to continue in these plans. NONACADEMIC

EMPLOYEES

In 1930 the seminary inaugurated a plan for retirement income for nonacademic staff members. The seminary announced that it would set aside S percent of salary payments for each employee, to be accumulated while employment continues and to be used to purchase an annuity for the retiring employee at age 65. If an employee will contribute 2 percent of his salary to the same fund, the seminary offers to contribute 4 percent instead of 3 percent; and if the employee will contribute 5 percent, the seminary does likewise. If his employment ceases before age 65 is attained, the employee's contributions, with interest, will be returned to him, and if he has been contributing for twenty or more years, the seminary's contributions, with interest, likewise will be returned. UNITED STATES

COAST GUARD ACADEMY

Military staff members, whether academic or nonacademic, are eligible under the retirement provisions for commissioned officers and enlisted men. Nonmilitary staff members are chiefly civil service employees who qualify under civil service retirement provisions.

DESCRIPTIONS UNITED

STATES

MILITARY

OF

PLANS

167

ACADEMY

The faculty of the Military Academy is composed, in general, of commissioned officers of the regular army, and as such their retirement provisions, as established by law, are identical for all retired officers. After thirty years of service they may retire at % of their base pay plus increase for length of service. UNITED

STATES

NAVAL

ACADEMY

COMMISSIONED OFFICERS

Faculty members who are commissioned officers are covered by retirement provisions for commissioned officers and enlisted men. After thirty years of service they may retire and receive pensions of % of their base pay, plus increase for length of service. CIVILIAN TEACHERS

By act of Congress, in 1936, civilian teachers thereafter appointed to the United States Naval Academy and the Postgraduate School are required to contribute 10 percent of compensation payments (5 percent offset by increased salary payments) toward purchase of deferred annuity contracts from a joint stock life insurance corporation having a charter restriction that its business must be conducted without profit to its stockholders. Civilian teachers in service when the act was approved had the privilege of doing likewise, beginning within sixty days. All civilian teachers are to retire on June SO following attainment of age 65, except that the Secretary of the Navy may extend the retiring age to not more than the seventieth birthday in special cases. Those in service when the act was approved were encouraged to participate in the plan by a provision that if the annuity purchased under it is less than $1,200 a year beginning at age 65, the difference is to be paid by the Secretary of the Navy. Furthermore, if such a member is required to retire because of disability before reaching age 65, his annuity is to be supplemented so as to produce a benefit as large as it would have been had the plan been in effect from the time of his appointment, the total benefit not to exceed $1,200 a year. The United States Naval Intelligence School and the United States Naval School—General Line are now included in this plan. URSINUS

COLLEGE

This institution installed a retirement plan in 1946 covering the members of the faculty. Participation is voluntary for those in the employ of the college on July 1, 1946, who were under 40 years of age. It is

188

DESCRIPTIONS

OF

PLANS

compulsory for all new faculty members after a waiting period of two years. Normal retirement is at age 68, although the board of directors may invite a professor to remain on the active list for one or two years after he has reached that age. All newly appointed faculty members contribute 7 percent of their base salaries, and the college matches this contribution as premiums for TIAA annuity contracts. Retiring allowances for those persons over age 40 on July 1, 1946, are set at $1,800 a year. Those under age 40 on that date may elect whether to take out an annuity contract or to receive the $1,800 free, unfunded pension. For persons appointed after July 1, 1946, the retiring allowance will be whatever the joint contributions will purchase. VASSAR COLLEGE In 1024 Vassar College inaugurated a contributory retirement plan covering faculty members, designated administrative officers, and staff members who were not eligible for Carnegie pensions. Participation was optional until 1938 when it was made compulsory for eligibles reaching age 35 or receiving an advance in rank. Participants contributed up to 5 percent of salary which was matched by equal contributions from the college. These contributions were used to purchase retirement annuity contracts in a company chosen by the participant. In 1929 the trustees voted to help supplement the benefits available from the Carnegie Foundation and the Carnegie Corporation to provide total benefits half as large as the average salary for the ten years of service previous to 1929, and subsequently adjusted to 1934. The college and the individual share equally in contributions to this fund, and upon retirement payments are made directly from the fund to retiring staff members. An April, 1937 revision allowed the same supplementary annuity at age 67 as was formerly available at age 70. In 1945 Vassar completely revised its plan. All members of the teaching staff of the rank of assistant professor or above who are over 30 years of age must participate immediately, and all instructors and others with similar salary must participate after two years of service and attainment of age 30. Each participant contributes 7Yi percent of his annual compensation, and this amount is matched by Vassar College, the total to be paid as premiums on TIAA annuity contracts. All eligible persons retire at the end of the fiscal year in which they attain age 65. The trustees may make annual extensions of service on their own initiative but not beyond the end of the fiscal year in which age 68 is attained.

DESCRIPTIONS

UNIVERSITY

OF

PLANS

169

OF VERMONT

In January, 1944, a retirement plan was established for employees of the Vermont Agricultural Experiment Station and the Vermont Agricultural Extension Service. Effective in 1946, this plan was revised and extended to cover the University of Vermont and the State Agricultural College and to include all full-time officers of instruction, administration, research, extension, and related services and all part-time officers who receive $2,000 a year or more. There is no waiting period for participation, except that persons under 27 years of age are not eligible. Participants contribute 5 percent of their annual base salary, and this is matched by the university toward premiums for TIAA annuity contracts. Retirement occurs at age 65, with provision for annual trustee extensions to age 68. The university continues to guarantee a retirement income, for those full-time members now on the staff, of 50 percent of the average salary during the last five years of service, not to exceed $2,000 for married persons and $1,200 for unmarried persons, including benefits from Carnegie sources and from the annuity purchased by joint contributions. WARTBURG COLLEGE This institution lists its academic staff as being covered by the American Lutheran pension plan. No further information is available. STATE COLLEGE OF

WASHINGTON

The State College of Washington established on January 1, 1942, a retirement plan available, on a voluntary basis, to both academic and nonacademic staff members. Participation begins after two years of service. Premiums of 5 percent of salary from the individual are matched by the university to purchase an annuity from the Aetna Life Insurance Company. The policy belongs entirely to the individual and may be cashed in or continued by him if employment is terminated. Normal retirement age under the plan is 65 years. WASHINGTON

AND JEFFERSON

COLLEGE

The faculty and trustees of the college are now engaged in creating a retirement plan with adequate retirement allowances financed through joint contributions to TIAA. WEBSTER

COLLEGE

In 1946 Webster College established a retirement plan applying to all full-time lay faculty members and administrative employees. Present

170

DESCRIPTIONS

OF

PLANS

employees are eligible to participate in the plan after one full year of service; new employees participate on October 1 after completion of two full years of service. Retirement is to occur at age 65, except that a participant may retire earlier on a reduced benefit in case of disability. For persons between ages 56 and 60, retirement will occur after ten years of participation in the plan. The benefits at retirement are equal to 30 percent of the participant's basic salary at the time he first participated in the plan. If prior to ten years before retirement date a participant's salary is increased sufficiently to provide an additional $10 a month of retirement benefit, this additional amount shall be purchased by his own and the college's contributions. Each participant contributes 5 percent of his annual salary, and the college pays the remainder of the premium. In case of termination of employment for reasons other than disability, the participant receives his own contributions without interest. He forfeits the total contributions of the college if his service at the college has been less than ten years; 10 percent of the college's contributions are vested in the employee for each year of service after ten years up to 100 percent. In event of death of the employee before retirement, the beneficiary receives an amount equal to the total contributions of the participant without interest. These benefits are provided under a trust agreement, using contracts of the Lincoln National Life Insurance Company of Fort Wayne, Indiana. WELLESLEY

COLLEGE

In 1927 Wellesley College adopted a contributory retirement plan for the instructional staff, administrative officers, and librarians. For participants in this plan who were in service prior to July 1, 1936, the college hopes and expects to see that the total retirement benefit shall be at least equivalent to a single life annuity of $100 a month beginning July 1 following attainment of age 65 or later, as determined by the board of trustees. For those who expect free pensions from the Carnegie Foundation, the college intends to see that the total benefit shall be not less than would have been provided by the 1922 rules of the Carnegie Foundation. A new contributory plan was adopted January 1, 1938, which applies to officers of instruction and administration, college physicians, and members of the library and administrative staffs. Participation is required of everyone with three years of service who is appointed for a term of more than one year. Participation is available to, but not required of, persons on annual appointment, if they have had three years

DESCRIPTIONS

OF

PLANS

171

of service. N o preliminary service period is required for those who wish to participate if they are appointed for terms of more than one year. Contributions of all participants and of the college are 5 percent of the participants' salaries, these contributions being applied to purchase TIAA retirement annuity contracts, with retirement beginning July 1 following the attainment of age 65 or later, as determined by the board of trustees. The obligation of the college does not extend beyond the purchase of a single life annuity of $100 a month. UNIVERSITY

OF WESTERN

ONTARIO

In 1939 the University of Western Ontario adopted a contributory retirement plan covering all employees. The waiting period for administrative officers and faculty members is two years; for all other employees it is five years. The waiting period may be waived by action of the board of governors for employees transferring from other institutions or joining the university from active service. Retirement occurs at age 60 for women, and is graded upward from 65 to 70 for men, according to the time they enter the plan. Contributions of individuals are scaled upward according to salary and according to age at entrance into the plan, with the university providing the balance of future service annuity. The annuity, likewise, is graded according to salary and years of service. For instance, a person who has remained in the salary range $2,250$2,549 throughout his service is paid a monthly pension of $3 for each year of service. The monthly pension credit for each year of service is 13^ percent of the mean salary for the participant's salary class. The university's contributions also support a benefit on behalf of past service equal to % of one percent of the employee's earnings on March 1, 1939 up to $4,000 a year, multiplied by the number of completed years of past service minus two years. The annuity for past service is without cost to the employee. Annuities are purchased from the Government of the Dominion of Canada up to $1,200, and annuities over that amount are purchased from four associated life insurance companies. STATE

TEACHERS RETIREMENT

SYSTEM

OF WEST

COVERING CONCORD COLLEGE, FAIRMONT STATE

VIRGINIA

COLLEGE,

GLEN-

VILLE STATE COLLEGE, M A R S H A L L COLLEGE, S H E P H E R D STATE COLLEGE, W E S T L I B E R T Y STATE COLLEGE, W E S T VIRGINIA

INSTITUTE

OF TECHNOLOGY, W E S T VIRGINIA STATE COLLEGE, W E S T VIRGINIA UNIVERSITY

Teachers and administrative officers are included under the state teachers retirement system established July 1, 1941. Each eligible per-

172

DESCRIPTIONS

OF

PLANS

son contributes 4 percent of his salary up to $2,500, and the state's contribution supports an annuity equal to that provided by the member's contribution plus any past service benefit. A member is eligible for retirement at age 60 after five years of service, or after thirty-five years of service as a teacher in West Virginia. The normal retirement age is 65 years, although an employer can request an extension of service beyond that age. The allowance upon retirement equals twice the actuarial equivalent of the contributions and deposits of the member with interest. A prior service benefit equal to \]/i percent of the base average salary during the last fifteen years of prior service multiplied by the number of years of service prior to July 1, 1941, is available to persons with thirty years of service, and to teachers who served in 1939-41. After ten years of employment a disability benefit is available. If a member withdraws from employment, he receives his accumulated contributions. However, if he has a total of twenty years of service, he may elect to receive at retirement age an annuity which is the actuarial equivalent of his accumulated contributions plus the employer's contributions. If the member dies before retirement, his beneficiaries receive an amount equal to his accumulated contributions. A rarely found provision is incorporated in the teachers retirement law of West Virginia: a member may borrow from his individual account up to half of his contributions but not more than twice his monthly salary; he may not borrow from the fund after thirty years of teaching or after reaching age 55. Members absent from teaching service may protect their membership rights, including eligibility for prior service pensions, if any, by depositing in their individual accounts in the retirement office an amount equaling the last annual contribution, for each year of absence. WHEAT ON COLLEGE

In November, 1935, Wheaton College adopted a policy with reference to age of retirement. All regular employees were to be eligible to retire on reaching age 65, and they were required to retire at age 70, except that the service of an individual may be extended from year to year beyond age 70 by special action of the trustees. Upon retirement, an employee is "given the advantage of the then existing pension arrangement." Wheaton College is in the process of adopting new rules covering the amount of pension to be paid. It is proposed that the rate of pension will be one percent of the total salary compensation for the ten years preceding retirement multiplied by 1/10 of the number of years of serv-

DESCRIPTIONS

OF

PLANS

173

ice. Retirement is to occur at age 65, with extensions permitted. The maximum proposed pension is $1,200 for the head of a family and $900 for s single person, a widow, or a widower. WHITWORTH

COLLEGE

This institution has established a retirement plan under which its faculty members pay 5 percent and the college pays 5 percent as premiums on individual contracts issued by the Bankers Life Insurance Company. N o further information is available. MUNICIPAL

UNIVERSITY

OF

WICHITA

On Januaiy 1,1938, the Municipal University of Wichita inaugurated a contributory retirement plan applying to the faculty and library staffs, and financed through a group annuity contract with the Aetna Life Insurance Company. Participation was made optional to persons in service when the plan was inaugurated, but was required of new appointees and of those in service when the plan began, if and when they were promoted. Normally, retirement is to occur on the first of July nearest to the member's seventieth birthday, but, with the consent of the board of regents, a member may retire at any time within ten years prior to normal retirement date and receive a reduced retirement benefit. Until July 1, 1944, contributions of members were 3 percent of their regular salary, and the university contributed a like amount. Effective on t h a t date, contributions of both the individual and the institution were increased to 5 percent. Retirement income is whatever these contributions will purchase according to the company's published rates. If a member who has been in service less than three years withdraws from the university before retirement, he receives in cash the sum of his own contributions. If a member withdraws after having completed three years of service, he may have a so-called "cash value" based on his contributions, and a paid-up retirement income based on the university's contributions, or he may have a paid-up retirement income based on both his own and the university's contributions. The cash value is the sum of contributions plus interest at 3 percent accumulated on each contribution up to July 1, 1944, after which date a 2 percent rate is used. If the member dies in service, his beneficiary receives the sum of the contributions he has made plus interest on each from the end of the year of payment to the date of death. The regular retirement income is in the form of a single life annuity, but optional methods of settlement are available at retirement.

DESCRIPTIONS

174

WILBERFORCE

OF

PLANS

UNIVERSITY

This institution established early in 1947 a contributory retirement plan using TIAA contracts. A number of its teachers and employees who previously were covered by the Ohio state retirement plan will continue to be so covered. COLLEGE OF WILLIAM

AND

MARY

On March 6, 1943, the College of William and Mary established a plan for its faculty members and employees as a supplement to its benefits from the state retirement plan. This supplementary benefit equals one percent of the average annual salary during the last five years of service for each year of service at the College of William and Mary up to a maximum of $1,800, or half the annual salary at the time of retirement including both the state annuity and the supplementary benefit. Normal retirement is to occur at age 70, and a participant may retire voluntarily between the ages of 65 and 70. WILMINGTON

COLLEGE

Effective January 1, 1944, Wilmington College established a retirement plan for full-time "contract" workers. Each participant contributes 5 percent of his sa'ary, and this, with an equal amount as the college's contribution, is used to purchase an annuity contract from the Midland Mutual Life Insurance Company of Columbus, Ohio. Retirement under the plan is to occur at age 65, with benefits being equal to those purchased by the joint contributions of the individual and the college. Participation in the plan is optional for the first year of servicc and required the second year. WISCONSIN

TEACHERS RETIREMENT

FUND

COVERING STATE T E A C H E B S COLLEGES AT E A U CLAIRE, L A C R O S S E , M I L W A U K E E , OSHKOSH, PLATTEVILLE, R I V E R F A L L S , STEVENS P O I N T , SUPERIOR,

AND

WHITEWATER,

STOUT

INSTITUTE,

UNIVERSITY

OF

WISCONSIN

This contributory plan for retirement income, established by law in 1921, requires contributions of 5 percent of salary from teachers past the age of 25 in the University of Wisconsin, the state teachers colleges, various state institutions, and in the public schools of Wisconsin other than those in large cities. Persons for whom teaching is not a major occupation do not participate. Teachers in the university are excluded if below the grade of instructor or if entitled to benefits from the Car-

DESCRIPTIONS

OF

PLANS

175

negie Foundation for the Advancement of Teaching. The state contributes a definite amount for each teacher, which amount increases with the length of service of the teacher in the state or elsewhere, but it is a smaller percentage of the salary for those with higher salaries. The average state contribution is about the same as the average personal contribution for the university and is considerably greater than the average personal contribution for the normal school and public school members. For a teacher newly appointed with a salary of less than $1,200 the amount is $25 plus percent of the salary. The maximum amount contributed is $25 plus 10 percent of the salary, but it never exceeds $325 a year. No retirement age is stated in the plan. There is no distinction between retirement and withdrawal from service before retirement. Whenever a member ceases to be a teacher, he may withdraw his accumulated contributions in a single payment, in installments, or as an annuity of any one of several types. Accumulated contributions of the state are available in the form of an annuity to begin not earlier than age 50, except that in case of disability the annuity may begin earlier. Those retiring before age 50 profit by the accumulated state contributions when they reach that age. A member who becomes "permanently removed from the state" before the age of 36 may withdraw his accumulated contributions in cash even if he does not leave the teaching profession, but in doing so he must sign a release of claim on the accumulated state contributions in his behalf. In case of death in service or before the granting of an annuity, the accumulation of both the member's and the state's contributions is available in a lump sum, in installments, or as an annuity to a beneficiary or beneficiaries as directed by the member. In the event of death of a member before entering upon an annuity, his beneficiaries will receive the total accumulation of his deposits remaining in the fund and the accumulation of his state deposits. Whenever an annuity or death benefit is payable to a teacher who was in service when the plan was inaugurated and who has completed 25 years of service, the annuity or death benefit from the state is what it would have been had the state contributed throughout the period of service prior to the inauguration of the plan. WISCONSIN STATE EMPLOYES' RETIREMENT SYSTEM

All full-time state employees not covered by the Teachers Retirement Fund are included in the Wisconsin state employees retirement system, established by law in May, 1943, covering noninstructional staff. Under

DESCRIPTIONS

176

OP

PLANS

this system all employees must retire at age 70, and may retire at age 65 if they have thirty years of service to their credit. Each participant contributes 3 percent of his wage or salary. The state's contributions toward retirement income are not funded, but are paid on a month-tomonth basis only after the employee has retired. Upon death or withdrawal of a member before retirement, his own contributions plus interest will be paid. WOFFORD

COLLEGE

Effective September, 1945, Wofford College set up a noncontributory, nonfunded retirement plan providing benefits for faculty members after age 70. The expected benefit is one percent of final salary before retirement multiplied by the number of years of active teaching or service at the college. UNIVERSITY

OF

WYOMING

The noncontributory, nonfunded retirement plan was revised at the University of Wyoming in June, 1946. Employees may retire after thirty years of service or after attaining age 65. Compulsory retirement is at age 70. Upon retirement, deans are to receive from $1,500 to $1,800; professors, from $1,200 to $1,500; and others, from $900 to $1,200. The minimum retiring allowance is granted after fifteen years of service. For each year of service in addition to the fifteen years, employees receive $25 a year additional until the maximum retirement figure is reached. YALE

UNIVERSITY

F A C U L T Y AND A D M I N I S T R A T I V E

OFFICERS

In 1897 Yale University provided for retirement on half pay at age 65 of persons who had served the university for twenty-five years in a rank higher than that of assistant professor. The corporation might at its discretion reduce the number of required years of service at Yale by as much as fifteen years for those who entered the service with the rank of professor at unusually advanced ages. In 1905 the corporation added the provision that retirement should be compulsory at age 68 except in case of special action. In January, 1920, the corporation provided that for those having Carnegie expectations the retirement allowance should be $400 more than half the average salary for the last five years of service, with a maximum allowance of $4,000; that for those without Carnegie expectations who were appointed to positions of rank equivalent to that of

DESCRIPTIONS

OP

PLANS

177

professor prior to January 10, 1920, the retirement allowance should be half the average salary for the last five years of service, with a maximum of $4,000; and that no others should expect free pensions. The university offered at the same time to match dollar payments up to 5 percent of salary, not to exceed $300 a year, with members not covered by these provisions, after they had served two years with the rank of instructor or higher, in payment of premiums on deferred annuity policies with TIAA or on a different form of contract or with a different company if the treasurer of the university was satisfied with the reasons for such different choice. In 1930 this voluntary contributory arrangement was changed by making the limit of the university contribution $500 a year instead of $300 and by providing that the university should accumulate the contributions instead of paying them as premiums on deferred annuities or other forms of contracts with life insurance companies. The university promised to add interest "at a rate which shall be the same as the average rate of income derived during the preceding fiscal year by the University from its General Funds," but not to exceed 5 percent. Upon withdrawal or retirement after less than three years of service, the teacher received his accumulated contributions. Upon withdrawal after three years of service or in case of death prior to retirement, accumulated contributions of both teacher and university were to be paid. In case of withdrawal within five years of reaching retirement age, the university could require that the equity be taken in the form of an annuity. The university was to purchase for the teacher, upon his retirement, an annuity from TIAA or from "some recognized company dealing in such coverage." The teacher could choose the type of annuity, but his choice must meet the approval of the corporation; otherwise the corporation could use its judgment as to the annuity to be purchased. The administration of this plan was modified fundamentally as of October 1, 1938. At that time accumulations to the credit of members in the contributory plan were applied to purchase retirement annuity contracts issued by TIAA, with the understanding that in case of withdrawal from service prior to attaining age 60 the accumulations to the credit of these contracts will, upon request of members, be payable in cash rather than as annuities. This form of settlement is also to be available, with the approval of the university, when the member attains age 60. Subsequent monthly contributions of both university and member become premiums for regular monthly premium annuity contracts of

178

DESCRIPTIONS

OF

PLANS

TIAA; no right to lump-sum settlement is granted under these contracts. The plan continues on a voluntary basis. Its revised statement defines the eligible classes as all full-time faculty members above the rank of instructor, instructors with two years of service, persons holding academic rank, and persons in administrative positions with the "assimilated rank" of assistant professor or higher. Persons expecting retirement allowances from the Carnegie Foundation and those with claims for university pensions because of service prior to October 1, 1920, are not eligible to participate in the contributory plan. NONACADEMIC

EMPLOYEES

Yale University likewise has set up a retirement plan for its administrative and service employees. This is a nonfunded, noncontributory plan providing free pensions upon retirement after ten years of service. Men age 70 and over, and women age 65 and over may retire at their own request. Men age 65-70 and women 60-65 may retire, if forced to cease work for mental or physical disability, or if released by the university for other than disciplinary reasons. Retiring allowances are to be one percent of current annual salary or earnings times the number of years of service, up to a maximum of $600 a year for both men and women. The minimum retiring allowance is $360 for men and $180 for women. YANKTON COLLEGE In 1944 Yankton College established » retirement plan applying to full-time administrative contractual employees of the college. The plan is optional for present employees except that it is compulsory if and when any present employee receives permanent tenure. For new employees the plan is optional after one year of service and obligatory after three years unless an individual comes from an institution where he has participated in a similar plan, in which case he may participate immediately. Each participant contributes 5 percent of his salary toward a TIAA annuity, and this amount is matched by the college up to a total college premium of $200 a year. The retirement age is 70. For those who had reached retirement age by September 1, 1943, the college provides a minimum amount of $300 a year. For certain other employees, the college plans to supplement the TIAA annuity if this is necessary to bring the total benefit to $600 a year. This annual supplement is not, however, to exceed one percent of an individual's salary multiplied by his years of service prior to September 1, 1943.

DESCRIPTIONS

OP

179

PLANS

YORK COLLEGE Effective September 1, 1946, York College established a retirement plan for all full-time members of its staff. Participation is compulsory after one year of service. Normal retirement occurs at age 65, and retirement income begins at that age even though the participant may be re-employed on a year-by-year basis until age 70. Retirement benefits are whatever can be provided by the joint contributions of the participant and the college, except that the college is paying supplementary benefits to persons who had more than ten years of service prior to the inauguration of the plan. The National Life Insurance Company of Vermont is the insurer. YOUNG MEN'S CHRISTIAN ASSOCIATION RETIREMENT COVERING GEORGE

DETROIT WILLIAMS

INSTITUTE

OF T E C H N O L O G Y ,

COLLEGE,

NORTHEASTERN

FENN

FUND COLLEGE,

UNIVERSITY,

G E O R G E WILLIAMS COLLEGE, SPRINGFIELD C O L L E G E ,

SIR

YOUNGSTOWN

COLLEGE

The Young Men's Christian Association Retirement Fund was incorporated in 1921 by an act of the New York Legislature, "for the benefit of employed officers of Young Men's Christian Associations after their retirement from active service." Among others, teachers of the Y M C A colleges are eligible to participate in this plan. Participation is voluntary for eligible persons whose employers are willing to contribute. In most cases participation in this plan is a requirement of employment by the member associations. The amount to be contributed by a member is 5 percent of monthly salary, and the association's contribution is 7 percent of monthly salary. Service retirement is available at age 60, the benefit being: (a) "the annuity that can be provided with member contributions accumulated at a rate of interest of 3 percent, called the 'secretarial annuity' " ; and (b) "an 'association annuity* which shall be equal to the amount of the secretarial annuity." Optional forms of retirement income include the maximum settlement, with all payments ceasing in the event of death, and payments at a lower rate covering Ihe lifetime of the annuitant and his beneficiary. Disability retirement is provided for after five years of participation. If a member's service is discontinued, or if a member dies in service, the benefit is equal to his own contributions accumulated at interest. Instead of taking his accumulation in a lump sum, the withdrawing member may use the money to provide an annuity.

180

DESCRIPTIONS

OF

PLANS

On July 1, 1937, an additional plan, known as the savings and security plan, was made available to all nonprofessional employees of the YMCA. Participation in this plan is generally a condition of employment by the member associations. The rate of employee contributions may be 3 percent or 5 percent of monthly salary with the organization contribution equal to that of the employee. Service retirement is available at age 65, the benefit being: (a) "the annuity that can be provided with member contributions accumulated at a rate of interest of 3 percent, called the 'employee's annuity' "; and (£>) "an 'association annuity' equal to the amount of the employee's annuity." Special service retirement may be granted at the request of the organization to an employee 50 years of age or over after five years of participation. Disability retirement is permissible after ten years of participation. If a member's service is discontinued, the benefit is equal to his own contributions accumulated at regular interest, or an annuity at age 65 based upon his personal accumulations and the organization contributions. If a member dies in service, his designated beneficiary receives all the member's contributions plus interest and, in addition, after one year of participation in the plan, receives a death benefit equal to one half of the member's salary for the previous year. The participating organization may pay into the retirement fund additional funds to provide for the service of an employee prior to the adoption of the plan by the employing organization.

APPENDICES

A P P E N D I X AND 1. SAMPLE TIAA

A:

ANNUITY

T E A C H E R S

INSURANCE

ASSOCIATION

FORM OF RESOLUTION PLANS'

FOR

PLANS

ESTABLISHING

The draft of a resolution given below is offered merely as a guide. The Association makes no attempt to control retirement plans; on the contrary, every effort is made t o achieve flexibility. I t s contracts are available to all employees of colleges and universities in the United States, Canada, and Newfoundland. They may be used t o implement any college retirement plan t h a t makes no promises in conflict with their provisions. RESOLUTION

I. Participation.—A retirement plan is hereby established participation in which shall be available to upon the completion of years (months) of service. (The eligible group may be defined as desired.) Participation shall be required of eligible individuals who have not attained normal retirement age as defined in Section I I , when they have completed years of service and have attained age 30. Completion of the preliminary service period will not be required for participation of an employee who comes from an institution where he has participated in a similar plan and who holds a retirement annuity contract. II. Retirement.—Except as provided in Section I I I , all participants in this retirement plan shall retire at the end of the academic year in which they attain age , herein called normal retirement age, but the establishment of this plan shall not require the retirement of anyone prior to 10 I I I . Extension of Service.—By special vote of [the body that has the power to make appointments] extensions of service beyond normal retirement age may be made for definite periods not to exceed one year each, but no such extensions shall postpone retirement beyond the end of the academic year in which age is attained. IV. Contributions.—Each participant in this retirement plan shall contribute, to the nearest dollar, percent of his regular monthly compensation; " Introductory note and draft of resolution reprinted from "Planning a Retirement System," revised February, 1947, by Teachers Insurance and Annuity Association of America.

184

APPENDIX name of institution

A shall deduct such contributions

from compensation payments, add equal amounts as its contribution, and forward these combined sums to Teachers Insurance and Annuity Association as premiums for a retirement annuity contract on the participant's life. V. Leave of Absence.—During leave of absence on part pay, name of

institution

will continue contributions on the basis of full compensation

if the participant does likewise. VI. Contracts.—Each retirement annuity contract written in accordance with Section IV is the property of an individual participant; each contract is between a participant and the insurance company. VII. Supplementary Benefits.—Upon retirement as provided in Sections I I and I I I of a participant who had passed age 30 on the effective date of this plan, plans, but does not promise, to pay a nunc of institution

monthly pension to the participant of one percent of regular monthly compensation on the effective date of this plan for each year of service after the college year in which age 30 was attained and prior to the effective date of the plan; but no such pension shall result in a total retirement allowance, including the single life annuity available from the contract provided in Section IV, of more than $ a year. V I I I . Amendment.—While it is expected that this plan will continue indefinitely, reserves the right to modify or disnmme of institution

continue it at any time. I X . Effective Date.—The

effective date of this retirement plan shall be 19—

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