4
Public Employees Retirement Plan
and the Social Security Act
I. A. D e FRANCE
service. Furthermore, the man whose
In the February, 1944, issue of the
wages have been $100 a month receives,
in addition to his basic benefit of $25,
magazine Municipal Finance, John B.
only 1% of this amount for each year of
St. John, Chief Actuarial Section Bur
membership in the system. If his mem
bership in the plan lasts 40 years, he can
eau of Old Age and Survivors Insur
only increase the amount of his benefit
by $10, .that is, to $35. The average amount
ance, compared the objectives, meth
of monthly benefit currently payable for
ods and benefits of the Federal Old
a single man is about $23.”
Age and Survivors Insurance and Pub
Mr. St. John compares the objectives
lic Employee Retirement Plans, show of the two plans saying:
“ Old age and survivors insurance is
ing that the benefits of both types of
concerned primarily with the provision of
systems are needed to provide adequate
a subsistance income which will enable
the
recipient to avoid destitution.”
protection for both employees and em
The accomplishment of the above
ployer.
objective by the public employee re
It is because of major differences
that the two types of plans each have tirement plan is incidental or secondary
a part to play in the furnishing of ap to the major purpose of such plans
which Mr. St. John describes as fol
propriate retirement benefits to all em
lows:
ployees of State and local governments.
“Most formal retirement plans . . . are
more concerned with the interests of the
Mr. St. John compares the benefits of
employer in maintaining an efficient em
the two systems as follows:
ploye organization than with the inter
“Public employe retirement plans pro
vide amounts of retirement income char
acteristically related closely to the em
ploye’s wages and his length of service
or to the amount of his contributions.
Two retiring employes, whose lengths of
service have been the same, may expect
to receive amounts of benefit which dif
fer proportionately with their respective
wages or salary earned. Two retiring em
ployes, whose wages have been the same
but whose lengths of service have been
different, may expect to receive amounts
of benefit which differ proportionately
with their respective lengths of service.
“Benefits are characteristically substan
tial in amount when considered in rela
tion to the worker’s wage or salary—
50% to 75% of pay.' The average amount
of monthly benefit payable, according to
a recent release by the Bureau of the
Census, is about $77.
“In Contrast, old-age and survivors in
surance provides retirement benefits in
tended, first, to provide a minimum sub
sistence income and only secondarily re
lated to length of service and amount of
wages. The basic benefit for a regular
worker whose wages have been $100 a
month is $25 a month. Another regular
worker, whose earnings have been only
half as much, or $50 a month, has a basic
benefit of $20 or 80% as much as the
$100 man. A third worker, whose earnings
have been three times as great, or $300
a month, receives only 60% more bene
fit. or $40 a month. The benefit formula
is heavily weighted to secure for the ma
jority of regular workers a benefit of
$20-$30 a month, regardless of length of
ests of individual superannuated employ
es. An employe retirement system may
have a number of other purposes . . . may
be a measure of economy to remove
superannuated employes from the pay
roll and substitute younger, more vigor
ous workers . . . may be a measure to
secure general efficiency by removing
older less efficient workers from posi
tions in which they obstruct the progress
of younger more productive workers.”
Mr. St. John compares the methods
or technique of the two systems, point
ing out that the Federal system, to
achieve its objective, is adapted to
meet the needs of the typical or aver
age wage earner, keeping records for
nearly 40 million current contributors
as well as for many others not current
ly contributing; which job requires a
large administrative organization. Re
finements or options in the benefit
provisions would add much to the task
of administration, so that simplicity of
provisions and of administration seems
certain to remain a basic characteristic
of the Federal system. This simplicity
results in the treatment of individuals
in ways which often seem arbitrary.
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