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Mr. Sayen - 2                   March 21, 1949

of retirement (Section 2(e)) and would have been for a life annuity and not subject to recalculation for anything that happened subsequently (Section 3(g)). 

If, however, by using the word "retires" you merely meant that the pilot left the industry for reasons having nothing to do with his ability to fly, the answer is that, up to the age of 60, Section 2(a)6 would apply. The minimum would not. Therefore, the annuity would be based on the 10 years of service and credited compensation. 

I should doubt very much if the idea of large cash payments such as you suggest would be acceptable to Congress. The only argument that I can see for the refund of each is an argument which denies the need for a retirement system. That is, under the kind of option which I take it you have in mind, an employee who chose to quit on the day before, or perhaps even the day, when he might retire, could elect to take cash in lieu of the annuity. I say this because there is no logical place to stop short of actual award of the annuity. To offer the cash option means that you are not uncertain whether the annuity is the best thing for the pilot to have. This, of course, would be immediately apparent to the numbers of the committee who would be considering the bill. As I have stated on other occasions, Congress will not legislate an annuity (or anything else) for any group which is not quite certain of what it wants. The amount of cash which might become payable under the refund arrangement could run as high on a 2 per cent interest basis as $20,000 to $25,000. It could, theoretically, be even higher. You will not, in my judgement, get far with Congress when you say, in effect, give us an annuity of $200 per month; but let us decide to take $5000 or $10,000 or $15,000 in each if we want to. 

The offer of this kind of an option would probably not result in any additional cost. Many men would quite mistakenly elect to take a fairly large cash settlement in place of an annuity. The cases in which the cash settlement would be somewhat larger than the lump sum now provided would, for some years, not produce significant additional cost, while some years hence the cash settlements in some cases would be worth more than the annuities. I would expect this to be off-set by the other type of election. In any event, a cost estimate would involve the wildest kind of guessing about a non-actuarial question: the valuation placed by pilots on cash as against a future income. (?) statement as to probability of no cost is based on the feeling that the pilots' desire for the option is a result of an over-valuation of cash and an under-valuation of the annuity.

So far as I know, there are two legislative enactments which have a more or less similar application to what you propose. One is the election given to survivors under the Railroad Retirement system. The values involved there are small; and the experience to date indicates that it has