or loan institutions should be encouraged; that the local institutions should be intrusted with local representation of the pension insurance fund; that the local institutions should also be encouraged to contribute to the central fund a definite proportion of their profits, which would go to increase the pensions; that the capital of the fund should consist of a state subsidy, the premiums of the insured, and such other contributions as the Provinces or localities might make; that the insurance should be free from all taxation, similarly to the existing savings banks and mutual accident insurance companies; and that the oldage pensions should not be subject to assignment or attachment.

To carry these general principles into effect a special commission of the Institute of Social Reforms prepared the draft of a bill for the establishment of the national insurance institute. This bill was laid before the Institute of Social Reforms on May 25, 1905, and, with a few minor changes, was unanimously approved and transmitted to the Cortes on November 2, 1905.

The aim, organization, and methods of the institute were briefly summarized in the report of the special committee which accompanied the draft of the bill. The duty of the institute was stated to be, not only the management of a particular fund but also the stimulation of the popular interest in savings, insurance, and especially in oldage insurance, as well as in the encouragement of other local institutions of the same type. It was expressly recommended that the institute strictly adhere to the technical conditions of insurance. It was also suggested that the institute should be national in its scope, as the insurance theory and statistics are true only when applied to large numbers, and the larger the number of insured the less will be the friction in the application of theoretical calculations to actual practice. However, it is not the aim of the new institute to destroy or to compete with those pension insurance institutions which exist in Spain at the time of the organization of the National Institute for Old-Age Insurance. The purpose is not to establish a monopolistic institution but a model one. Therefore, cooperation between the national institute and the local institutions, such as the funds of Guipuzcoa and Barcelona, would be permitted, provided the local funds were also organized with strict adherence to insurance principles. This cooperation would take the form of coinsurance or reassurance. In the distribution of state subventions the local funds would be permitted to participate. In this way it was thought that the organization of the national institute, in order to engage the power of the Central Government in the movement to stimulate old-age insurance, would not interfere with any private efforts that might be made in the same direction, and that private old-age insurance might grow even faster under the stimulus of the example set by the national institute. Financially the plan deviated from the wish

which carried the majority of votes in the conference, that the State assume the entire guarantee and financial responsibility of the institute. This was termed an "excessive official intrusion," and an autonomous institute was recommended. But in place of a continuous guarantee the State was expected to furnish the capital necessary for the organization and in addition to furnish annual subsidies, which would serve as a source of subventions to the pensions and also to cover the cost of administration. In the administration the autonomous principle is combined with that of state control, the power of appointment of the governing council being divided between the Ministry of Interior and the Institute of Social Reforms. After a delay of over two years the bill was passed by the Cortes without discussion and without any changes, and approved by the Crown on February 27, 1908.

The law establishing the National Institute for Old-Age Insurance, as passed and approved on February 27, 1908, stipulated that the minister of interior should immediately appoint a commission, in conformance with the rules for the governing council, to prepare the statutes, regulations, and tariffs, and that efforts should be made to make the organization of the office feasible within one year from the date of the promulgation of the law.

In conformity with these demands of the law a commission was appointed on March 8, 1908, with the chairman of the Congress of Deputies as presiding officer, and the commission held its first meeting for organization on May 11, 1908.

The constitution of the national institute, prepared by that commission, was approved by the royal decree of December 24, 1908. Notwithstanding this lengthy document of some 125 articles, the details of the operation of the institute were not yet determined, these depending upon the regulations (reglamento) and the tariffs to be prepared by the supervisory council of that institute. The constitution took effect on January 1, 1909.

PROVISIONS OF THE LAW OF FEBRUARY 27, 1908.

GENERAL PURPOSE AND SCOPE.-The general purposes of the institute are stated broadly as follows: (1) To inculcate among the masses habits of provision for old age, especially in the form of old-age pensions; (2) to administer the mutual insurance of those who may voluntarily associate themselves for that purpose under the conditions most favorable to them, and (3) to stimulate and encourage the purchase of old-age pensions by procuring subsidies from public or private sources. Practically, however, the operations of the institute consist mainly in selling old-age pensions or deferred annuities to individuals of the working classes, either for "single time pay

ments,'' as explained below, or for recurrent premiums, to be paid for either by the beneficiaries or by other persons for the beneficiaries. PERSONS INSURED.-The insurance is intended exclusively for the working classes, including those employed by the State. A salaried employee or an officeholder may be insured in the institute, if his salary does not exceed 3,000 pesetas ($579) per annum and he has no right to a pension under other existing legislation. Foreigners of the male sex and of age, residing in Spain, may take out such pension insurance, provided they agree to abide by the decisions of the Spanish courts. Minors and married women may purchase insurance with reserved capital without anyone's authorization, while minors under 18 years of age require the authorization of the parent or guardian, and married women require the authorization of the husband for purchase of the old-age pension with alienated capital.

FORMS OF INSURANCE. Similarly to the French, Belgian, and Italian systems, after which the Spanish institute is modeled, both forms of annuity insurance-those with alienated and those with reserved capital-may be written. In the former case no repayments are made at death of the insured, whether it occurs before or after reaching the pension age; in the latter case the entire capital, or the greater portion of it, is returned at death to the heirs.

PENSIONS. The system of insurance being entirely voluntary, no definite pension is guaranteed. The amount of the pension insured, as well as the fact of insurance, is left entirely to the insured. The amount of the pension acquired is made dependable upon the free contributions of the insured or for the insured by other persons. The only limitation is that no premiums shall be received which would bring the amount of the pension acquired over 1,500 pesetas ($289.50) to the same person.

The pensions purchaseable for given premiums will naturally differ for the two methods of insurance described above-that with alienated capital and that with reserved capital.

In accordance with the usual life insurance practice, various provisions are made for changes in the plan of insurance. In case of the insurance of an old-age pension with reserved capital the insured may demand the paid-up value of the reserved capital at any time before the old-age pension begins, or, before his old-age pension matures, he may use the value of this reserved capital for the purchase of a temporary annuity.

In the case of insurance with reserved capital the distribution of the capital among the relatives at the death of the insured does not depend upon the will of the deceased, but is regulated by law according to the degree of consanguinity, as follows: The widow, the children, and the parents have the preference, and only in the absence

of all such relatives does the capital go to other heirs. When the deceased leaves a family the capital is divided equally between the widow and the children, the widow receiving one-half and the children the other. If there are no children, the widow receives three-fifths and the parents the remainder. The amounts due to the heirs. designated shall not be subject to any claims of other heirs or of creditors.

INVALIDITY.—The institute's activity does not contemplate special invalidity pensions. The constitution provides, however, that in case of absolute disability due to an industrial accident the insured person has the right to demand the conversion of his deferred annuity into one to begin immediately, provided it will amount to at least 60 pesetas ($11.58) per annum. If not, the conversion must be delayed until the pension has reached that value. The pensions are not subject to cession or seizure.

SOURCES OF REVENUE.-The sources of revenue are as follows: (1) Endowment of not less 500,000 pesetas ($96,500) presented by the State.

(2) The premiums of the insured.

(3) Interest and revenues of social funds.

(4) An annual subsidy from the state budget, proportionate to the needs and the development of the institute, but not less than 125,000 pesetas ($24,125) per annum.

(5) Other donations or legacies from public or private bodies or individuals.

The main sources of revenue for payment of the pensions is derived from the premiums to be paid by the insured.

The rates of insurance are not stated in the law. The general principle is laid down that the technical demands of the insurance theory must be strictly complied with. The governing council, with the assistance of a professional insurance accountant, is required to elaborate these rates in accordance with this principle, on the basis of the best mortality tables used by life insurance companies until a national mortality table may be obtained.

An assumed rate of interest not to exceed 3 per cent and a loading necessary to form a special reserve sufficient to meet the effects of fluctuations in mortality and in the interest rate must be charged in the premium tables.

In the constitution the French mortality table of 1902 (Rentiers Francais, usually designated as R. F.) is specifically selected. The difference between the "one-time payment" and the "recurrent payment" plan is an actuarial difference, necessitating different premium tables. The "one-time payment" system leaves the amount of payments entirely to the insured, but assigns a definite pension value to each payment made, the actual pension to consist eventually

of the total amount of pensions acquired. The pension value of each payment is determined from tables prepared in accordance with the general requirements outlined above and depends upon the age of the insured and the age at which the pension is payable. In the recurrent premium plan the premiums are computed at an annual rate, but payments at slightly increased rates may be made semiannually, quarterly, monthly, or even weekly. Premiums which exceed 60 pesetas ($11.58) annually must be paid monthly.

The voluntary character of the insurance is the essential feature of the system, and the employers are not required to make any contributions to the fund, but the necessity of some form of material subsidy as an encouragement to individual thrift was recognized in the law. Accordingly the law provided for an initial capital of at least. 500,000 pesetas ($96,500) to be contributed by the state treasury, as well as annual appropriations to cover the cost of administration and also for subsidizing the individual accounts. These subsidies are to be distributed among the persons insured in the institution (including the business of reinsurance and coinsurance) with the following limitation: The subsidies are to be distributed only among such persons as have made some payments during the preceding year.

The constitution of the institute further excludes persons receiving pensions from government or private sources, or who are assisted in the payment of their premiums by the State, Province, or municipalities, or who are in a favorable economic condition as evidenced by payment of direct taxes above a certain limit to be decided upon the regulations.

in

All such members who are Spanish citizens living in Spain and over 18 years of age are entitled to participate. There are some limitations upon the right of foreigners living in Spain to share in the subsidy. In order to obtain it, they must have lived ten years in Spain and must be citizens of a country which grants similar privileges to Spanish citizens. This latter qualification is waived in case of Portuguese subjects of Spanish-American countries. It may also be modified by diplomatic action.

The constitution of the institute further provides that the council elaborate rules for distribution of the subsidies to insured persons who have chosen the age of 55, 60, and 65 for maturity of pensions.

The amount of subsidy thus granted must be converted into additional pensions in accordance with the conditions and rates at the time of payment, or it may be converted into a temporary annuity to run until the maturity of the contracted pension. No subsidy to anyone insured shall exceed 12 pesetas ($2.32) per annum during the first ten years of the existence of the institute. Preference should also be given to individuals whose insurance amounts to a pension of less than 365 pesetas ($70.45) per annum, as against those whose pen