and the Misses Y and Z of the story above will be left out in

the cold.

Modern retirement systems are coming to accept this logical con-
clusion of the retirement-on-service principle. Witness the prior serv-
ice provisions of nearly all states, the five years of grace allowed
ex-teachers in Texas, the life-time option allowed ex-teachers in Wis-
consin, and the complete coverage of Pennsylvania. Pennsylvania pro-
vides a school retirement allowance for anyone who ever taught
twenty years or more in the state. Our suggested plan is patterned
after Pennsylvania.

8. Retirement allowances to fall into three classes.

A. School employees who begin after the pay roll tax is put in
operation, would retire at ages 60 to 70 as they choose, on
full annuities, for half of which they themselves have paid.
The earlier the annuity starts, the less they draw each year.
The teacher who taught and contributed only five years, or

- ten years, would retain retirement rights in proportion.

B. Employees with records prior to the beginning of the pay
roll tax to have their allowances in two parts. The first part
to be a full allowance in proportion, covering the years
under the pay roll tax. The second part to be a half allow-
ance, under the title “prior service,” covering the years
when the employee did not herself contribute any cash. She
contributed service only, which is counted as half pay. -

C. Ex-employees who quit before the pay roll tax is put in oper-
ation, and who themselves contributed no cash (only serv-
ice), and who in most cases could not now make any back
payments in cash, would receive only half of a full annuity
in proportion. For these ex-employees it seems necessary to
follow the Pennsylvania precedent, omit the temporary em-
ployees of the past, and provide only for those with a service
record of perhaps twenty years or more no matter when
they quit, or at what age they quit. Since there can be no
optional age for quitting for those who are already ex-
employees, their allowances might all begin at age 65, which
is the median school retirement age, and also the standard
American retirement age.

ALTERNATIVE PLANS FOR A RETIREMENT SYSTEM

Should the retirement system build up cash reserves like old line
insurance, or pay-as-you-go without cumulative cash reserves? Either
method could carry out the program outlined above.

The Reserve System

The reserve method enjoys public confidence, and is thought to
offer stability and permanence. It is highly individualistic: each
annuity is bought with the actual savings of the person concerned and
the state’s service savings in her name. So it makes no difference
whether others contribute or not. Texas has a reserve plan which
illustrates the system. It squarely faces the modern interest situation.
The pay roll tax is 5 per cent on the teacher, and 5 per cent paid out of
the state treasury. These 50-50 contributions accumulate .in parallel
savings accounts in the state treasury, and interest is added as earned.
At retirement, the two accumulations are combined to buy or to issue
whatever annuity the current market offers. Thus, like building and