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plans being that in the former, in case of death before a right to an annuity is acquired, the accumulated payments are paid to the heirs of the deceased, while in the latter plan such payments are distributed among all other members insured according to the same plan. As a matter of fact, the difference is not so great as might appear, for the insurance with reserved payments has also the element of mutuality in it. Only the actual contributions of the member are returned to his heirs and all the additions made to the accounts are redistributed among the other members. The amount of annuity purchasable for a stated amount is much greater under the mutual plan, but the plan of reserving the payments may appeal more forcibly to a workman who does not wish his family to lose his accumulations in case of his premature death.
The amount of annuity purchasable for $1 per annum under each plan is shown in the following table:
AMOUNT OF ANNUITY PURCHASABLE FOR $1 PER ANNUM UNDER THE MUTUAL
PLAN AND UNDER THE RESERVED PLAN.
It is seen from the above that the system established was primarily one of old-age insurance, the provisions for invalidity being insignificant. It was permitted to grant an annuity on the basis of accumulated accounts in case of invalidity, provided five years have elapsed since the beginning of insurance. In addition a special invalids' fund was established for granting additional increases of annuity to invalids, but the sources of this invalids' fund are very meager.
AMENDING ACT OF 1901.—The amending act of July 7, 1901, introduced many changes which, though of considerable importance, did not affect the general principles of the old-age insurance system outlined above. The changes introduced are mainly in the nature of slight financial benefits to the institution:
1. In 1893 and 1894 small treasury notes of 1 lira (19 cents) and 2 lire (39 cents) denominations were issued for circulation to the amount of 110,000,000 lire ($21,230,000). According to the law of February 11, 1899, these notes were ordered taken out of circulation on December 31, 1901. The amount of such notes outstanding and not presented for payment and cancellation by the end of 1902 were deposited in January, 1903, as a voluntary interest-bearing deposit in the Bank of Deposits and Loans, to serve as a fund for redemption of the outstanding notes. The interest from this deposit is transferred to the old-age insurance institution for the increase of its endowment fund.
2. A modification was introduced in the method of reverting to the old-age insurance institution fund one-half the value of such bank notes as should not be presented for redemption before June 30, 1904. It was estimated by the Government that about 8,000,000 lire ($1,544,000) worth of these bank notes were probably lost, and they were taken out of circulation. The law ordered, therefore, that the three banks of issue (Banca d'Italia, Banca di Napoli, and Banca di Sicilia) pay to the Bank of Deposits and Loans the sum of 8,000,000 lire ($1,544,000), proportionately to their amounts of outstanding circulation. This fund was invested in 8 per cent Government bonds and divided equally, one-half being to the credit of the old-age insurance institution and one-half to the credit of the three banks named, proportionately to the sums contributed by them. This fund is to be held for the redemption of bank notes, and as they will become invalid the deposit will be turned over, onehalf to the old-age institution and one-half to the banks named. Thus the revenue from the sum had been anticipated nearly three years before the final invalidation of the bank notes.
3. The regulations concerning the contribution from the religious fund have been stated above. The new law provided that within the five years beginning with the year 1901–2 these payments should constitute 2,950,000 lire ($569,350).
While the above amendments referred mainly to the sources of revenue, others introduced some changes in the methods of insurance. The age of liquidation of accounts was reduced for female members from 60 to 55 years, and the period for accepting shorter time insurance was extended until December 31, 1903. Participation in the distribution of additional increments to their accounts was permitted to those members who have not paid in within the year the minimum of 6 lire ($1.16), provided the sum of payments made by them was not less than 6 lire ($1.16) multiplied by the years of membership; regulations were provided for continuation of membership of persons who ceased to be wage-workers; the list of securities in which the institution might invest its funds was extended by including guaranteed railroad securities; and a few changes were introduced in the system of administration.
LAW OF 1904.—A few additional changes were introduced by the brief act of March 13, 1904. The right to issue insurance for periods as short as 10 years was extended from December 31, 1903, to December 31, 1905, as almost one-third of all persons insured had taken out insurance for less than 25 years, and this form was evidently very popular.
The lists of permitted investments were further extended by including securities of loan banks and urban real estate; the latter having been specifically prohibited by the law of July 17, 1898, which even required the institution to dispose of all real estate involuntarily acquired within five years, and forbade the acquisition of buildings even for its own use. The amount invested in real estate must not, however, exceed one-fifth of the amount invested in government bonds.
AMENDING ACT OF 1906.—While the preceding amendatory acts only slightly modified the provisions of the law of July 17, 1898, the act of December 30, 1906, substituted an almost entirely new act, amending about 20 out of the 32 sections of the consolidated act of July 28, 1901.
On February 2, 1906, a bill containing an entirely new text of the whole law governing the old-age and invalidity insurance institution, and embodying the ideas of the administrative council of the institution(), was introduced in the lower chamber. The main changes proposed by this bill were as follows:
The insurance for periods shorter than 25 years (thus enabling persons over 40 years of age to insure), permitted temporarily in the original law and the temporary permission extended repeatedly, proved so popular that the authors of the bill proposed to embody a permanent provision to that effect.()
Furthermore, to facilitate this form of insurance, it substituted for the demand of a lump-sum payment for all insurance for less than 25 years, an additional annual payment of 1 lira (19 cents) for each year less than 25.
The second and most important change suggested was in the method of computing annuities. According to the previous legislation, the accounts consisted of 6 and 7 items annually. Especially in case of mutual insurance, when an annual redistribution of the accounts of deceased members was required, very elaborate rules for such redistribution were necessary. In reality the system was found to work very poorly. In many cases of death notice failed to reach the institution, as in a case of mutual insurance there was no material consideration to prompt the relatives of the insured to give such notice. The computation of interest on all the accounts was also a very complicated process. The bill proposed therefor the substitution of an assumed mortality table for the mutual insurance and also interest tables, and a computation of the annuity value of each in
a See Bollettino di Notizie sul Credito e sulla Previdenza, 1906.
6 See statement accompanying the text of the bill, in Bollettino di Notizie sul Credito e sulla Previdenza, 1906, vol. 24.
dividual payment or of any other addition to individual accounts, so that the computation of the total annuity may be quickly computed by addition of the separate annuity items. In case of postponement of the annuity until 65 years of age, a recomputation on the basis of the tables of mortality and probability of life could be easily accomplished.
The third important change proposed consisted in strengthening the invalidity pensions. The actual determination of the amount was left to the administrative council. The invalidity fund, amounting to only about 2,000,000 lire ($386,000), did not permit of very large annuities. The Government had previously announced its intention of allowing the invalidity fund a special subsidy of 10,000,000 lire ($1,930,000). Upon the basis of this increase in the invalidity fund, the bill proposed to establish a minimum invalidity annuity of 120 lire ($23.16). A bill introduced in the Chamber of Deputies on March 20, 1906, also included these three important proposals and several other minor changes which eventually were embodied in the law.)
On May 17, 1906, the government bill was introduced in the Chamber of Deputies. The cabinet having undergone a reorganization soon after that, practically the same bill was reintroduced by the new minister of agriculture, industry, and commerce, supported by other new ministers. On November 27, 1906, the bill was referred to a parliamentary commission, which brought in its report, with very few changes, on November 27, 1906. It became a law on December 30, 1906, without any deviations from the text as amended by the commission.
The essential changes introduced by this act were as follows:
(1) The material simplification of personal accounts, as explained above, by substituting tables for computation of the annuity value of each payment and benefit, for a complex annual redistribution and computation of interest upon all the accounts.
(2) The establishment of a minimum invalidity annuity of 120 lire ($23.16) by means of the addition of 10,000,000 lire ($1,930,000) to the invalidity fund.
(3) The part of the net profits of the postal savings banks, reverting to the old-age institution, was definitely established at 70 per cent.
(4) The extension of all the benefits of membership in the institution to such independent producers as do not pay over 30 lire ($5.79) per year in taxes.
(5) The maximum limit of annual contributions previously put at 100 lire ($19.30) was eliminated. The minimum was raised from 50 centesimi (10 cents) to 1 lira (19 cents).
a Bollettino di Notizie sul Credito e sulla Previdenza, vol. 24, 1906.
(6) This rule in combination with the preceding one evidently created the danger of growth of excessively large accounts. To counteract this danger, persons with an acquired annuity of over 1,000 lire ($193) were debarred from further benefits.
(7) While the normal age of maturing of annuity was left as before, an earlier age of 55 years was established in certain kinds of work requiring severe physical exertion, such as mining, blast furnaces, foundries, steam boilers, glass factories, and railroad service.
(8) For this lower annuity age, a higher minimum of payments, 9 lire ($1.74) instead of 6 lire ($1.16), was required.
(9) The requirement of 25 years of insurance was left in normal cases; but payment of annuities before the expiration of the period was permitted on condition of higher minimum premiums, provided the required age was reached.
(10) The financial organization was somewhat changed. A members' fund was added to the existing four funds, the endowment fund, annuity fund, invalidity fund, and reserve fund; and the latter was made to protect not only the annuity fund but also the members' fund.
(11) The deductions from the annual incomes to strengthen the permanent funds were left to the discretion of the administrative council, but must not be less than 30 per cent, to be used in necessary proportions to increase the endowment fund, the invalid fund, and the extraordinary reserve fund.
(12) The maximum amount of the annual ordinary benefits was reduced from 12 to 10 lire ($2.32 to $1.93).
The amending act of December 30, 1906, went into effect immediately, with the exceptions indicated below, and the codified text of the law was published by royal decree of May 30, 1907.
Excepted were (1) the provisions, as to changes in the administrative council and (2) the changes in the methods of keeping the individual accounts and computing the value of annuities, which were made dependent upon the promulgation of a new constitution and regulations for the old-age insurance institution. The administrative council of the insurance institution at its sessions in December, 1907, adopted the texts of both the constitution and the regulations, and they were approved by royal decree of March 18, 1909.
ANALYSIS OF LEGISLATION IN FORCE,
The institution is officially known as “The National Institution for the Insurance of Workers against Invalidity and Old Age” (Cassa Nazionale di Previdenza per la Invalidità e per la Vecchiaia degli Operai), and its purposes are apparent from this name. This insurance is entirely voluntary, and the privilege of being insured in this institution is offered to all Italian citizens engaged mainly in manual