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ministration for aged individuals covered under the health insurance program. Since July 1966, when the program began operating, almost 4.8 million hospital admission notices have been received. For the same 11-month period, about 217,000 home health "start of care” notices have been received; 22,000 of them were received in May. Since the start of extended-care benefits in January 1967, almost 167,000 such admission notices have been received, arriving at the Social Security Administration at a rate of 8,000 to 9,000 per week. More than 34,000 extended-care admission notices were received in May.

From July 1966 to the end of May 1967, benefit payments from the hospital insurance trust fund totaled $2.2 billion; the total paid from the supplementary medical insurance trust fund was $564 million. Benefits paid from the two funds in May were $311 million, and $102, respectively.

Aid to the permanently and totally disabled recorded an April-to-May increase of 6,800 recipients. About 12,000 or 1.7 percent fewer persons were on the general assistance rolls in May than in April, and the changes in the numbers receiving old-age assistance and aid to the blind were slight.

Total expenditures for assistance, including vendor payments for medical care, amounted to $625.7 million in May-a decline of $7.4 million from the April figure that reflected the lower total for payments to medical vendors. These payments were $8.9 million less in May than in the preceding month, and most of the change occurred in medical assistance under title XIX of the Social Security Act. Total money payments to recipients rose $1.5 million, with larger amounts reported for all programs except general assistance.

Average money payments per recipient for the Nation as a whole changed relatively little from April to May. For the year, however, the average rose $9 in aid to the permanently and totally disabled, $5 in old-age assistance, $4 in aid to the blind and general assistance, and $3 in aid to families with dependent children.

NET RISE IN INCOME-MAINTENANCE PAYMENTS

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May payments under public income maintenance programs totaled $4,241 million-$30 million higher than the April total. Declines in most programs were offset by an over-the-month rise of $60 million in OASDHI payments, most of which occurred in the health services sector. All of the decline of $7.4 million in public assistance payments was attributable to the medical assistance program. Unemployment insurance benefits paid during May were $18 million less than the amount paid in April.

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PUBLIC INCOME-MAINTENANCE

PROGRAMS
Total payments (millions)'.

OASDHI..
Railroad and public employee retirement...
Unemployment and temporary disability

insurance, workmen's compensation,
ARA (Nov. 1961-June 1966), and

MDTA training benefits... Veterans' compensation and pension. Public assistance...

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State and Local Government Retirement Systems, 1966: Provisions for Employees Not Under OASDHI

by SAUL WALDMAN*

ment, vesting of benefit rights, and provision for increases in benefits for retired persons.

SURVEY METHODOLOGY

The development of State and local government retirement systems in the last half of the nineteenth century represented one of the first efforts in this country to protect the worker against the major economic hazards of our modern society. The Social Security Administration, as part of its continuing concern with methods of providing protecting against economic insecurity, has long included studies of State and local systems among its research activities. This article summarizes the findings of the 1966 survey of the State and local government retirement systems whose members are not covered under the Federal old-age, survivors, disability, and health insurance (OASDHI) program. The full findings of the survey are to be published as a research report in the coming months.

SURVEYS of the State and local government retirement systems whose members are also covered under the Federal program of old-age, survivors, disability, and health insurance (OASDHI) have been made in recent years, and the findings of these surveys have been reported by the Social Security Administration.'

The present study of retirement systems not under the Federal program fills out the information on the protection afforded by these systems. The report, based on the study of 87 retirement systems with 1,000 or more members, includes discussion of the systems' provisions governing retirement for age and service, disability retirement, and death benefits. Special emphasis is given to the recent developments in providing survivor protection, and information is included on such matters of current interest as early retire

The Social Security Amendments of 1954 made coverage under OASDHI available, at the option of the State, for most employees under State and local government retirement systems if the employees involved vote in favor of coverage. As a result, some OASDHI coverage of retirement system members has been implemented in nearly all States.

The survey included all retirement systems with 1,000 or more members who were not covered under OASDHI, according to the 1962 Census of Governments.” Systems with incomplete OASDHI coverage resulting from a "divided retirement system” election were omitted from the survey, since eventually all the members will be covered. Systems with incomplete OASDHI coverage on a permanent basis, which is permitted under certain other provisions, were generally included. Excluded were (1) closed systems, which do not accept new employees, (2) supplementary systems, covering employees receiving substantial protection under another public retirement system, and (3) systems covering unsalaried employees such as volunteer firemen.

The systems selected were limited to those with 1,000 or more members. Though there is a relatively great concentration of small systems among those whose members are not covered under

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• Division of Program and Long-Range Studies, Office of Research and Statistics.

*Joseph Krislov, State and Local Government Retirement Systems, 1965 (Research Report No. 15), Social Security Administration, Office of Research and Statistics, 1966, and Joseph Krislov, A Survey of State and Local Government Retirement Systems .. 1961, Social Security Administration, Bureau of Old-Age and Survivors Insurance, 1962.

* Bureau of the Census, 1962 Census of Governments: Topical Studies, No. 1, Employee-Retirement Systems of State and Local Governments.

• Under the "divided retirement system" provision, applicable in States specified in the Social Security Act, only those members who elect to be covered are brought under OASDHI, with all new members automatically covered on a compulsory basis. Under other provisions of the law, coverage may be arranged for only certain groups of members—the employees of various local governments who are members of a statewide system, for example--and the noncovered groups are permanently excluded, unless additional arrangements are made.

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OASDHI, only an estimated 10 percent of employees were excluded for this reason.

The final listing of systems to be surveyed included exactly 100 retirement systems with an estimated 1.5 million members in January 1966 or about one-fourth of all State and local government employees under staff retirement systems. A questionnaire was mailed to the administrator of each system by the Bureau of the Census, acting as agent for the Social Security Administration. Sixty-three of the 75 general systems, with an estimated 94 percent of the members, responded to the survey. Only one of the 25 systems for policemen and firemen—a small one-failed to respond.

The systems for policemen and firemen are analyzed separately because their provisions tend to differ considerably from those of the general systems, though for the most part they are homogeneous among

themselves. The term "general system" is used here to refer to all systems other than those for policemen and firemen (unlike the term as used by the Census Bureau). The terms “members” or “membership” refer to active members and are used synonymously with "employees."

with 1,000 or more members, have been brought under OASDHI. Measured by the number of employees, the survey is dominated by three States (Ohio, California, and Illinois) that together included 62 percent of all employees in the systems surveyed. Massachusetts contributed the largest number of systems 18 of the 63 systems-followed by Illinois with nine systems and California with six systems. The fact that the retirement systems within a State tend to have similar provisions has a significant effect on the results of the survey. The Massachusetts systems, for example are virtually identical, and most of the Illinois and California systems are closely similar.

The two largest systems in the survey (one California system and one Ohio system) include 28 percent of the total membership represented in the survey and the eight largest have almost 60 percent of the total membership. About half the systems had fewer than 5,000 members, and this group included 5 percent of all employees in the survey (table 2).

GENERAL SYSTEMS

Characteristics

Only 20 States were represented in the survey of general systems (table 1), since in many States the members of all systems, or at least all those

TABLE 1.-General systems in survey, by State, January 1966

Major Findings

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The survey findings indicate that, during the post war years, the retirement systems have considerably strengthened the protection they provide for their members. The greatest improvements have been in provisions for monthly benefits for disability and death-types of protection offered by nearly all the systems in the survey.'

Ohio.
California.
Mlinois
Massachusetts.
Louisiana.
Florida.
Colorado.
Missouri.
Maine..
Connecticut.
Kentucky.
Nevada.
Georgia.
Minnesota.
Texas.
Alaska
Tennessee
New Jersey.
Virginia..
Nebraska.

4 6 9 18 3 3

332.8 260.7 216.8 94.6 81.1 63.9 59.2 35.0 34.2 33.0 30.0 18.2 12.8 10.4 9.1 3.2 2.7 2.4 1.5 1.1

*For a description of the retirement systems in the early 1940's, see Dorothy F. McCamman, The Scope of Protection Under State and Local Government Retirement Systems, Social Security Board, 1944. Although information is not available from that study on the specific systems in the survey, the improvements have been so widespread as to indicate revision of the great majority of systems.

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employee may retire on his own volition and receive the full amount of retirement benefits to which he is entitled on the basis of his earnings and length of service. Similarly, where retirement based on length of service alone is possible, "normal" retirement is retirement at the earliest time full benefits become available. The earliest age at which retirement for age and service is possible, but with benefits reduced because of age, is defined as the "early retirement age.”

To qualify for normal retirement, the member usually has to meet both an age and length-ofservice requirement, typically age 60 with 10-20 years' service, but many systems permit retirement on the basis of age alone (at age 60–65) and a few on the basis of service alone (with 30–35 years). Many systems offer alternative eligibility requirements for normal retirement. They may, for example, permit members with long service to retire at an earlier age or to retire on the basis of service alone, without meeting any age requirement (table 4).

The normal retirement age specified under the age or age-and-service provisions is usually 60, but age 65 is also frequently found. Many employees continue to work beyond the age that normal retirement first becomes available.

60

99.5

24

100.0

58 21

99.1 20.7

24 22

100.0 69.5

1 Benefit specified in the law (excluding joint-and-survivor option).

The type of protection offered by OASDHI has been one of the factors influencing the direction of improvements of those systems whose members have not come under the Federal program (as well as the systems whose members were brought under coverage 5). The influence on noncovered systems is most apparent in new provisions for monthly benefits to widows and children that resemble the provisions for survivors in the OASDHI program.

The study also reveals an apparent modification of the principle of individual equity (under which benefits are based solely on the contributions or credits of the member) that has been an important element of the benefit provisions of many systems. Relatively few systems in the survey, for example, still use the money purchase method of computing benefits, under which benefits are actuarially based on the contributions credited to the member's account. Modification of this principle is revealed too in the growing tendency toward providing full or substantial benefits, without regard to contributions or length of service, to disabled members and, especially, to the survivors of deceased members.

Involuntary retirement.-Although employees usually may continue to work beyond normal retirement age, under most systems they may be required, at the discretion of the employer, to retire at a specified age commonly at age 70 and to a lesser extent at age 65. This type of provision is called a compulsory retirement provision. Some systems require the “automatic” retirement of their members, typically at age 70, with neither the employee or employer having any discretion (table 4).

Benefit amounts.-Except for one system with a money-purchase formula, the amount of the retirement benefit is always based on the member's average salary and length of service. The benefit amount is usually determined by com

Retirement for Age and Service

Eligibility.The “normal retirement age” is considered here as the youngest age at which an

• The survey questionnaire requested information on the number of retirees who were under age 62 (an age when employees of most systems could take normal retirement). The 42 systems that reported on the subject indicated that only 20 percent of the men and 28 percent of the women were unuer age 62 at the time of retire. ment in the fiscal year 1965.

5

See Joseph Krislov, State and Local Government Retirement Systems, 1965.

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Adjustment of benefits.-In recent years, there has been increasing interest in the problem of protecting the purchasing power of pension benefits after retirement. The laws of a few of the systems surveyed provide for an automatic increase in benefits to persons on the retirement rolls (usually annually) without requiring additional legislation. The automatic increase is usually specified as 1 percent or 11/2 percent annually. For almost one-half the systems in the survey, additional legislation was enacted that provided an across-the-board increase in benefits during the 3 years 1963–65.

1 Systems that provide alternative requirements are counted more than once.

? Earliest age required for normal retirement under the age or age-andservice provisions.

Health plan.Participation after retirement in a group health plan established by the former employer provides a means of obtaining health

TABLE 5.-General systems: Calculation of normal retirement benefits, January 1966

puting a percentage of average salary for each year of service, commonly 123 to 212 percent." The "final" average salary of the member is based usually on the 5 highest years of earnings, and many systems require that the years be consecutive or years during a specified period (usually the last 10 years) of employment (table 5). Some systems provide a minimum benefit amount, usually $30-$70 monthly or $6-$7 monthly for each year of service, payable for members who meet certain eligibility requirements, commonly 10–15 years' service.

Illustrative median benefits payable to members aged 65 with 10, 20, and 30 years of service would replace about 21, 40, and 54 percent of salary, respectively. Based on the actual experience of the system, the average benefit amount awarded to men in the fiscal year 1965 was about $235 monthly, for the 44 systems that supplied benefit data.

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Some retirement systems reported the benefit as a specified percentage of salary (say, 40 percent) payable upon completion of a certain period of service. Percentages have been converted to a percent-per-year formula, where possible, in this analysis.

* The illustrative median benefits used throughout the article are based on a distribution of employees by the benefit amounts payable at specified ages and length of service, as indicated, and an assumed monthly salary of $100 and $600.

1 6 3

Provision for minimum benefit.
Monthly benefit amount:

Less than $30..
$30-70

$70-100 Monthly benefit amount per year of service:

Less than $4.00. $6.33 6.67

$7.50 -7.80. Other...

3 103 28

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