STATEMENT OF FREDERICK MacMILLIN, EXECUTIVE DIRECTOR, 'WISCONSIN RETIREMENT FUND, MADISON, WIS.

Mr. MACMILLIN. I have filed with the committee, Mr. Chairman, copies of the statement, but I would like to speak orally to it.

My name is Frederick MacMillin. I am the executive director of the Wisconsin retirement fund, which has been constituted by the Wisconsin Legislature, the basic retirement system for the State of Wisconsin, and ultimately this system will replace all other publicemployee systems in the State with the exception of the teachers and the Milwaukee systems.

At the present time this system comprises about 30,000 covered individuals.

My presentation will be confined to a discussion of the integration of existing public employee retirement systems with social security, as is now proposed in the bill as it was passed in the House. I have no illusions as to the development with respect to this point of view. I am well aware of the thousands and tens of thousands of communications which have been received by members of this committee and other Senators in opposition to that viewpoint, but I hope to clearly demonstrate, and least to my satisfaction, that these fears are ungrounded and that integration of existing retirement systems for public employees with social security will benefit those now included under these systems.

First of all, I am amazed at the implications being broadcast that the Congress is trying to force something on the States with respect to the coverage of State and municipal employees. And, of course, the facts are just the opposite. The proposal in the bill at present is in accord with the best traditions of States' rights. It simply constitutes an enabling act and must be implemented by the act of each State legislature if it is to be effective in that particular State. If the State legislature does not act, it is the same, for all practical purposes, as if Congress had never acted on this point; and therefore I am unable to understand why any legislature should memorialize Congress when they have the control within their own power.

Of course, obviously it is true that when this decision is made by any State legislature, the members of any retirement system will have the same opportunity to present their viewpoint and exert the same pressure on the State legislatures as they are now existing on Members of Congress. If for any reason a decision in a State legislature does not please the members of any system, of course, it is also true, as you know, that these members still retain the complete control, because of the referendum feature. There is no way of forcing them to take the integration against their wishes.

Now, in the testimony that is printed in part 2, frequently in response to questions on this referendum feature, as to which objections were raised, several individuals admitted that regardless of how the referendum feature was worded they would be opposed to it. They don't want any referendum on any basis.

I would like to say this to the committee: that rather than incorporate in the bill, if you retain this particular provision in the act, a referendum feature which is impossible of attainment, it would be much better to take the Lehman amendment straight and extend it to

everybody. For instance, it has been recommended that there be a two-thirds vote of all those under the system. In other words, if a person doesn't vote, it would be the same as if he voted "no." Well, you know better than I the difficulty of getting people to vote. I think that would be just as improper as to say that no Member could sit in the Congress unless he received a majority of all the electors in his district.

Senator BREWSTER. We would not have any President if that had been in effect.

Mr. MACMILLIN. That is true.

Incidentally, I do agree with the contrary view, that it is not desirable to include in any referendum the provisions that those now receiving pensions should be allowed to vote. I agree that that should be stricken, if for no other reason than because it would be cruel in giving them an idea that their benefits could be extended; which, of course, would not be possible under this bill.

In discussing this referendum feature, the contention has been made frequently that the issue is so complicated that it is not possible to conduct an educational campaign so that the members of these systems know what this is all about. Then I submit to the members of this committee that if, after an educational campaign, they can't understand the issues, then the people who have been flooding you with letters and telegrams don't understand the issue either. And I think that is true.

Senator MILLIKIN. Well, where does that bring us? Nobody understands it, so where do we come out?

Mr. MACMILLIN. As far as our own system is going to be concerned, Mr. Chairman, I am going to suggest an amendment in just a minute which I think would at least solve our dilemma without interfering with some of the these other people who are squawking.

Of course, these people are fearful that their systems are going to be abolished. I think these are reckless statements. I think the State legislatures are just as conscientious in dealing with this matter in good faith as is the Congress; and, as I indicated, I think the same pressures will be exerted there that were exerted here. I think it is perfectly possible to integrate any existing system with social security, with at least four results: first, that the aggregate annuities paid to the individuals will be increased; second, that there will be better provision for the dependents; third, that there will be better provision for survivors; and fourth, that there will be no material change in cost either to those under the system or to the taxpayers in the States. And that is a staement which you will challenge, but as to which I will explain my point of view in just a minute.

Now, several times members of this committee have inquired whether a system could be evolved whereby the integrity and individuality of the different existing retirement plans could be maintained and at the same time provide a method for giving a man coverage as he moves in and out of public and private employment. Well, Wisconsin has such a plan, which is written into our law and has been there from the beginning. We now provide, in the law pertaining to the Wisconsin retirement fund, for integration with social security as soon as the Congress acts. It will be automatic. It will not even require action by the legislature. It will go into operation at once unless the Congress includes provisions which would require legislative action.

Now, here is the way it would work under the Wisconsin system. At the present time most employees contribute 5 percent of their earnings, and the State, or the counties and the cities, match that with another 5 percent. The provision in our law is that as soon as they become covered by social security-and next January 1 that would go to 2 percent under this bill-they would pay 2 percent to Washington, or Baltimore, and 3 percent under our system. The result would be that all of their prior service credits up to now would remain unchallenged. They would build up their credits in the future at the rate of 3 percent instead of 5 percent, and they would in addition get all of the benefits of social security.

I think that any plan can be modified to accomplish the same result, and therefore I submit that the contentions which have been advanced to this committee, that there are grave doubts that many States and subdivisions thereof can afford to have both, and the statement that this would impose a double burden of contributions upon the underpaid public employee, are completely unfounded.

Now, as to the reasons why integration is desirable: First of all, the members of this committee are aware of the rapidly accelerating tendency to provide supplemental retirement plans in private industry, and we think it is grossly discriminatory to deny that same right to those employed by States and localities. We do not believe that they are second class citizens. We think that they should have the same opportunities that those in business and industry have.

Senator MILLIKIN. But if they do not want it, why should we compel them to take it?

Mr. MACMILLIN. You should not; and that is why you have a referendum feature, Senator Milliken."

Senator MILLIKIN. It deals with two things. First, it deals with a very small number of people who are hustled into a meeting to make the decision. And second, even if you did it with a 90-percent vote or a 95-percent vote, if an individual in there has a vested right in what you have got, you would have no right to vote him out of it. It is just a funny little American principle that we can not vote certain things out of existence in this country, even though 99 percent of the people favor it.

Mr. MACMILLIN. Are you thinking, for example, of the New York provision, the provision in their constitution?

Senator MILLIKIN. I am thinking that if they have a system where the individual has a vested right as of today, his vested right should not be destroyed by a two-thirds vote of all, a one-third vote of all, a majority, or any other portion of those present. Make it any figure you want to. There is just a certain little principle that we have there, about not voting people's vested rights away from them.

Mr. MACMILLIN. There are court opinions, of course, on both sides of the question, depending upon the wording in each particular system. Senator MILLIKIN. I agree.

Mr. MACMILLIN. But that is a problem that, it seems to me, each system will have to face, and it may be that in some they can only make it applicable to new employees.

Senator MILLIKIN. The contracts are affected by public policy. There is no question about that. And how far public policy could reach in to mitigate what I have said to you, I am not prepared to state, because I do not know the details of the particular systems. But

this business of voting people's rights away by any percentage of those who are affected is a serious business.

Mr. MACMILLIN. My answer to that would be, Senator, that if there is a vested-right provision in a system, integration would probably be impossible for the existing employees. It would only be possible to make it applicable to new employees. But I think the States can take care of that adequately.

I just want to mention one other phase of that, and that is that it has been suggested that this plan will result in loading responsibilities upon the State and the Federal Government. I don't think that holds water, because after all we are not asking for anything more than employees in private business and industry are getting. We are not asking for more than they are.

Secondly, as was discussed, I understand, yesterday morning, because of the fact that this system has fallen far short of being selfsupporting when considered on an actuarial basis, and since there seemed to be general agreement that there are financial burdens which are being shifted to the future, and which the people under our system and the taxpayers of our State and cities and counties are going to have to pay, we think we should be allowed to participate in the benefits.

Now, it is true that we could extend our own system to give the same benefits such as are expanded under social security. But that would mean that we would have to increase the 5 percent that the individuals pay, we would have to increase what the taxpayers pay, and we would have to increase our costs to get what we are already paying for or will have to pay for ultimately in supporting social security.

Senator MILLIKIN. Do you object to the pay-as-you-go principle? Mr. MACMILLIN. I think that is something that I am not prepared to take a position on one way or the other, Senator. I admit the difficulties of accumulating enough security to put this on an actuarially sound basis. I have no illusions as to the problem there.

As to how each individual would benefit from being under both systems: Our system provides that an individual coming to work at 30 and continuing to work until he is 65 will build up enough credits to give him half pay. We have about 1,200 annuitants at the present time, and only a very small percentage of those come anywhere close to half pay. Our average annuity is $50 per month. I think that less than one-third of our people over 65 have retired, because the annuity they would get is so small. And why? Because they have only been working for the Government for a short time. Their previous employment record was in private industry and business. Under this integration which we are supporting, here, let us take a man who is earning $250 a month and who was under our system from age 45 to 65. Under our system at 65 he would get only $66 a month. If the integration were to become effective, instead of getting $66 a month he would get anywhere from $130 a month to $161, depending upon when the service occurred. And I think you would concede that that is a tremendous increase in benefit to the person who would be so affected. In terms of benefit some would get a smaller increase and some a larger increase, depending upon the facts in each case.

Fourth, this integration would provide very valuable protection for dependents. Under most existing retirement systems, including our own, if an employee dies his widow gets either only a refund of his own contributions or a very nominal death benefit, as contrasted with what is provided under this bill, where a widow with two minor children would be getting $123 a month if her husband had been earning $200 a month. And I think you can realize the peace of mind that would give the people under our system.

Fifth, of equal value is the protection to surviving widows. Under most systems, including our own, widows receive little or nothing. I think about 90 percent of our annuitants have life annuities for the individual only, and, of course, the benefits under social security would be immeasurable to these surviving widows.

Sixth, and I think this is one of the most important points, existing retirement systems provide very limited protection for persons who have spent most of their working career in private business or industry. We receive many pathetic letters saying: "My husband is only getting $30 a month from your system" or "only $40 a month." Of course, it is obvious they can't live on that. Why do they get so little? They have been working for the Government for a short time, and they may have spent 20 or 25 years in private employment; and without integration they get no credit for private employment, and they receive only the pittance they get for their short period of governmental

service.

Seventh, we think integration is essential for those who leave uncovered employment in the future to enter covered employment. I think that should be obvious to this committee. Our turn-over figures show that last year there was a turn-over of 12 percent of the people under our system. Every day we receive numerous applications of people who have left to go into private industry.

Now, I would like to suggest to the committee that if the amendment which is being proposed is adopted, to exclude all public retirement systems, you consider an amendment which would allow Wisconsin to be used as a guinea pig. Wisconsin, as far as I know, has the only law which has already provided for integration; and therefore, you could adopt this amendment which I shall read to the committee. This wording probably is not correct, but it will give you the idea. There could be added on to the Lehman amendment, for example:

Such exclusion shall not be applicable to the individuals included under any retirement system of any State or political subdivision thereof if the enactment ment establishing such system on February 1, 1950, expressly provided for making such system supplementary to the Federal old-age and survivors insurance system.

Now, that would give you a chance to, as I say, use Wisconsin as a guinea pig, our particular system. It would not affect the teachers' system in our State. It would not affect the Milwaukee system. It would not affect the police and firemen's insurance systems.

Senator MILLIKIN. Would you mind reading that again?

Mr. MACMILLIN. The part to be added on to the Lehman amendment?

Senator MILLIKIN. Yes.