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Harvard Pension Plan Claimed Preferable to Federal System

Officials Show Progressiveness of Scheme Where Employer Pays More Than Worker


Breaking a long silence, University officials last night explained their pension plan for employees, asserting that it is more progressive than the pension system of industrial corporations and the federal government. The University, it was pointed out, is contributing $108,000 annually to the pension and insurance plans while the employees pay only $85,000. In most other pension plans, it was stated, employer and worker share the burden equally.

Commenting upon criticisms that the lowest paid workers, the maids, after twenty years service may receive pensions amounting to as little as four dollars a month, University officials stated that most of these employees are married women whose earnings are not the sole support of their families.

University Maids Better Off

Their treatment under the University plan is actually more generous than it would be under the Social Security Act, it was said, as maids become eligible for pension payments under the University system after working a shorter period than would be necessary under the federal act. The Social Security Act requires that workers earn at least $2000 after January 1, 1936 before they can be eligible for payments, while the University requires three years preliminary service. It would take maids five years to earn enough money to qualify for federal pensions.

It was computed that if a maid were to start work at the age of twenty-five and continue until the retirement age, she would receive a pension of $14 a month or $168 a year. However, University officials agreed that relatively few maids start to work for Harvard at the age of twenty-five and that an employee receiving the same salary as the hypothetical maid in question would after forty years under the federal plan receive $300 a year or 75 per cent of his salary.

Pensions for Past Service

University officials pointed out that in addition to pension payments most employees would receive payments for past service based on 1% of their previous salaries. The employees do not contribute anything to this plan. The percentage on which the grants are com- puted is typical in such arrangements, it was stated.

Another superiority of the University's plan over other plans was considered the fact that employees who leave the University's service for any reason take the full value of their pension with them. Under many other plans, it was stated, the employee has to give up the amount his employer has contributed.

All pensions, of course, vary in amount according to the employee's length of service. Thus it was computed in the case of employees in the fifteen hundred dollar class that forty years service from the age of twenty-five would bring a pension 54% of the worker's salary, thirty years service 34%, 25 years 26%.

When asked to comment upon the Pension plan, a University Hall pension authority issued the following statement:

"The Social Security Act provided for the exemption of educational and other similar institutions. This was in part because the pension sections of the Act were not well adapted to such groups as college faculties, but principally because the application of the unemployment compensation sections of the Act to such institutions would have created a heavy tax on account of individuals not likely to receive benefits. It is believed that various features of the Act may be changed within the next few years, and it is possible that the institutional exemption may be modified.

"For the majority of the University's long-service employees the University pension and insurance plan now provides for larger pensions than would be received under the terms of the Social Security Act. The groups of long-service employees to whom this does not apply would not, if in similar non-exempt employment, become eligible for pensions under the Social Security Act for several years. The point has accordingly not been reached where University employees actually retiring receive smaller pensions than they would receive under the Social Security Act, and with the present possibility, of changes in the Act it does not appear desirable to attempt to anticipate the action to be taken if and when that point is reached.

"It is estimated that for the first full year of operation of the University plan the contribution of the University toward future service pensions and insurance will amount to 126% of the contributions of its employees. In addition to this, the University has established a substantial reserve for the payment of pensions for past service, toward which its employees make no contribution.

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