Become a teacher — and lose the Social Security benefits you paid for while holding other jobs!
A good recruiting slogan it’s not.
But a pair of three-decade-old federal laws, aimed at preventing “double-dipping” in government pensions, are penalizing some Californians who take public service jobs in teaching, firefighting and law enforcement.
U.S. Sen. Dianne Feinstein, D-California, who has been trying to get the federal laws repealed, estimated two years ago that the penalty could affect nearly one million persons nationwide, about 200,000 in California.
It’s called a “heroes’ penalty” by Assemblyman Tom Torlakson, D-Antioch. He is carrying yet another resolution in the California Legislature, AJR 10, urging Congress to repeal the penalty.
“This comes under a couple of possible labels,” Torlakson told an Assembly committee last month. “It would be a ‘Catch 22’ or it would be a massive rip-off.”
Torlakson told a Senate committee this week about Margaret “Peg” Cagle, a “wonderful, brilliant architect” who paid into Social Security for two decades before becoming a teacher in the Los Angeles Unified School District.
Cagle became an outstanding math teacher. Among her awards: LAUSD Teacher of the Year; the USA Today All-USA Teacher Team; and the Presidential Award for Excellence in Math & Science Teaching.
“She went to retire and found out she had lost about half of her Social Security because she was in STRS (the California State Teachers Retirement System),” said Torlakson.
In another example, said Torlakson, a woman whose husband died could have begun receiving about half of her husband’s $1,600 a month Social Security payment. But she was a member of CalSTRS.
“When she went in to reconcile she was surprised to learn she would only get a $225 death benefit to bury her husband,” Torlakson said.
As an Assembly committee heard Torlakson’s resolution last month, Rhoda McFarland of Sacramento told how she had taught for 25 years before working for 15 years in other public service jobs, this time paying into Social Security.
“When I got ready to get my Social Security, I was told I couldn’t have the whole thing because I had taught in California,” she said, which forced her to continue working and delay retirement until five years ago.
McFarland said it took her two years and four trips to a Social Security office to learn that her payment of $272 a month ($185 after a Medicare payment) would have been $568 if she hadn’t been a teacher.
“Even though I paid what someone else paid I’m told you can’t have it because you taught in California,” she said. “It’s so devastating to feel that way. I could not believe it.”
In a survey of its members last year, CalSTRS found that many are unaware of the penalty or “offset,” as it is formally called. About 32 percent of active members expected to have between 10 and 30 years of Social Security credits.
The survey found that 29 percent of those with Social Security credits were unaware of the income offset. In addition, 44 percent of active members were unaware of the spousal benefits offset.
A law that took effect in 2005 requires employers not covered by Social Security to tell new hires about the offsets. And the new hires are required to sign a statement saying they are aware of possible reductions in their Social Security benefits.
“Until recently, many educators were told they would not be affected by these penalties when they retired,” Dave Walrath, a lobbyist for the California Retired Teachers Association told the Senate committee.
“But when they did retire, when they did need the income, all of a sudden they were told, ‘No, we will penalize you. We will reduce your benefits that you paid for and earned,’” he said.
Why did Congress impose the penalties or offsets? Social Security replaces a greater percentage of the income of a lower-paid worker than of a worker who earns a higher income.
The theory is that if benefits such as CalSTRS are not counted, a higher-wage worker could be regarded as a lower-wage worker and receive a Social Security payment based on a greater percentage of the income.
In 1977, Congress passed the “government pension offset,” which reduces a spouse’s Social Security benefit by two-thirds. In some cases, such as the one cited by Torlakson, the result is that the benefit is totally eliminated.
In 1983, Congress passed the “windfall elimination provision,” designed to prevent workers from receiving higher benefits than they would if all of their earnings were covered by Social Security.
Once again legislation has been introduced in Congress to repeal these two Social Security penalties or offsets, S 484 by Feinstein and HR 235 by U.S. Rep. Howard Berman, D-Los Angeles.
A major budget problem is that repealing the two laws would be costly. Recent estimates range from $61 billion to $80 billion over the next 10 years. And Social Security is already projected to run short of money in the decades ahead.
A major political problem is that California is one of only 15 states where some or all of the public employees are not covered by Social Security. So most states, including many of the big ones, do not have a problem with the penalties or offsets.
Legislation in 1961 allowed most California state workers to coordinate their pensions through what is now the Public Employees Retirement System with pensions they receive through Social Security.
Nearly two-thirds of the 800,000 active state and local government workers in the CalPERS system are also covered by Social Security. Among those not covered by Social Security are the California Highway Patrol and state firefighters and correctional officers.
In addition to teachers, other public employees in California not covered by Social Security include judges, University of California employees, and the employees of more than 450 cities, counties and special districts.
State and local governments are in a deep fiscal crisis now. But if repeal continues to fail, California might think about avoiding the devastating impact of Social Security penalties for future public employees by putting them all under Social Security.
The current Social Security contribution rates are 6.2 percent of payroll from employees and 6.2 percent from employers. For the uncovered public employees in California, that’s a lot of money that might be welcomed by Social Security.
A CalPERS analysis of Torlakson’s resolution said that repealing the offsets “could further exacerbate” the fiscal problems of a Socail Security program projected to run out of money in about 30 years.
“In addition, the greater the funding imbalance of Social Security, the greater the likelihood that lawmakers will consider other alternatives, such as mandatory coverage of newly hired state and local public workers to shore up the program,” said the analysis.
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at http://calpensions.com/ Posted 25 Jun 09
Tags: Reforms
June 25, 2009 at 11:09 pm
Josh Richman’s blog had an entry about this. If you read through the comments you’ll see my criticism of news media that doesn’t explain the facts and allows politicians to exploit that lack of understanding. There are explanations from myself and another person as to the rationale behind the rules. This is opportunistic demagoguery by Feinstein and the like. I hope you will try to hold her and others accountable.
“Rally for ‘Social Security fairness for teachers”
http://www.ibabuzz.com/politics/2009/05/27/rally-for-social-security-fairness-for-teachers/
June 26, 2009 at 5:46 pm
Were was the California Teachers Association when these laws were passed?
June 26, 2009 at 6:02 pm
At one time I thought you were a balanced reporter. Clearly, that has changed, or perhaps was never the case as you now appear to be little more than a mouthpiece for civil service employees.
It isn’t hard to understand why the “windfall elimination provision” is appropriate. But, to make it simple, SS counts 35 years of employment in computing average pay. If you work 20 years in SS-covered employment and move on to civil service, the other 35-20=15 years are averaged in with zeros bringing way down your average pay. This results in a much higher ss wage replacement ratio, as though you earned the lower average pay for the full 35 years. But you didn’t, you started a new career. You think this penalized the employee. It doesn’t. It prevents them from abusing the system.
Start being more balanced …. or don’t call yourself a reporter.
June 26, 2009 at 8:43 pm
Ed, Tired of you is correct. You should better understand the basis for the windfall elimination provision before calling it a social sectuirty ripoff.
As to ripoffs, CALPENS opens supports a continuation (and often further improvement) of the generous benefits of CA workers with absolutely no consideration of the taxpayers who pay for most of these benefits and must make up for asset shortfalls. To me, that is the real ripoff, a ripoff of the state’s taxpayers.
June 28, 2009 at 9:35 pm
In defense of Ed, he put “ripoff” in quotes. That means the phrase is one attributed to the advocates, not Ed. That said, there is no interest groups with a self-interested stake comparable to those government employees and the dishonest politicians who are pushing this. And it is a matter of fundamental fairness, which was why it was implemented. Under such circumstances it seems appropriate to seek comments from experts on Social Security to balance the arguments that readers are exposed to so as to increase their understanding of the issue.
June 29, 2009 at 6:31 pm
“Become a teacher — and lose the Social Security benefits you paid for while holding other jobs!”
Not really. Since you are not paying SS taxes for the years you are teaching, you don’t get to count your teacher’s income for SS purposes. Whatever income you had before teaching, and paid SS taxes on, gets counted in determining your SS benefits. Too bad you can’t double dip anymore (like was possible before these adjustments were made). For the non-double dippers, seems eminently fair.
July 1, 2009 at 10:56 pm
Ridge Runner … though it seems like double dipping let me stress that your statement “Whatever income you had before teaching, and paid SS taxes on, gets counted in determining your SS benefits.” is exactly the problem.
These teachers paid into SS while working non-teaching jobs and they AREN’T getting the SS benefits based on that work – not their teaching years but the years that they did pay into SS.
If someone worked in a private sector job with a pension for 20 years and then a non-pension job for the other 15, that person would get his/her pension PLUS the SS benefits they paid for. But not teachers.
I don’t see how anyone can think that’s fair.
July 2, 2009 at 7:42 pm
“I don’t see how anyone can think that’s fair.”
Because you see what you want to see instead of looking at it honestly. Follow the link in the first post and read what was written. Then come back here and post why you think it’s unfair in light of that information.
July 2, 2009 at 9:55 pm
I’ve read ALL the posts both here and on the other site… it’s unfair because the feds made the change retroactive and changed the rules after people made decisions based on the rules in place when they paid into Social Security.
Here’s a different example … let’s say I played baseball for three innings and hit an RBI and my team was even with the opponents. I left after three innings under the belief the run would still be counted. After the game was over the umpire decided that only runs produced by people who had played all nine innings would count.
Would that be fair? Since when do we support changing the rules after the players have followed the rules? If the WEP/GPO had been made for new employees hired in Social Security after 1986, that would be a different matter but they were applied to people after the person left Social Security.
July 2, 2009 at 11:17 pm
It’s not a game. It’s the distribution of limited pot of money that already isn’t adequate to meet the existing obligation among those who paid and still pay into the system. Removing a unearned windfall that must come out of the pockets of those who get no such windfalls serves the cause of fairness more than preserving that unearned windfall because of the claim that people supposedly planned to get those unearned windfalls.
July 3, 2009 at 12:07 am
Quoting … “….. Removing a unearned windfall that must come out of the pockets of those who get no such windfalls serves the cause of fairness more than preserving that unearned windfall because of the claim that people supposedly planned to get those unearned windfalls.”
Excellent comment … and this same logic explains why pension formulas for current Civil Servants should be reduced for future years of service. Politicians are so scared of losing union support that they only suggest pension formula reductions for new civil servants. Changing formulas for new employees will save nothing for 25+ years. We need that savings today.
Granted that reducing benefits for past years of service seems unfair, but with everyone (except civil servants) agreeing that the current civil service pension formulas are too generous and unsustainable, why should the financial pain be further increased by continuing this excess for future years of service ???
It shouldn’t … !
July 13, 2009 at 8:26 pm
as far as I can tell my Social Security benefit will be reduced from four-hundred and some odd dollars to $56 a month with WEP. Not much considering how much I paid into Social Security.
Maybe WEP is good to keep the richer Admin from double dipping, but for part-time teachers who have low pensions and SS benefits (due to single parenthood) it really will be stripping some much needed money.
July 21, 2009 at 9:11 pm
soni and Debbie, you won’t scratch the surface of the whiners on here with logic or morality. Logic and morality says if you make a set of rules and someone follows the rules, you have to comply with the promises you made. The dim wits that post here whining about public employee benefit plans that were designed and implemented with zero complaints over the years suddenly is idiotic and unsustainable. These ‘neo-econs’ have no problem underpaying public servants and using pensions to bridge the gaps when everyone else is making money hand over fist and stuffing their retirements month after month. But let the economy dip and you won’t hear them calling for shutting their police patrols down or leaving their kids without educators. You won’t hear them begging to close their fire station or turning off the electricity to the signal light at their intersection, but by God, watch and see if they won’t renege on the benefits package that they held out there to get you to WORK those years at substandard pay. Yeah, the people who want you to give up your SS benefits that you would be entitled to if you had made different career decisions don’t seem to want to boost your pay retroactively to what it should have been when they were LURING you with those benefits. These blogs are chock full of people who are immoral and self serving. Period. When you mind the business of making their lives safe and educating their most prized entities for ridiculously low wages where often you have to commute long distances to serve those populations because your wages will in no wise support your actually residing in your area of employ, these whiners have no problem with that. But when you’re wiping their kids nose, educating them, putting that pesky fire out in their attic, mopping up that disturbing hazardous material spill over on the railroad, or wrestling some meth head with a knife, their paying you substandard wages and making it appealing by promising to put part of the difference toward a very desirable retirement seems completely logical and desirable to them. To those citizens I say STFU and pay your bills. When you get ready to change the commitments you made to me 20 years ago then file the paperwork, declare bankruptcy, close the departments down and teach your own damn kids, clean up your own damn railroads, cardiovert your own damn arrhythmias, vest up and wade into the crime infested crack house your own damned self, and I’ll gladly go about competing for your job just like I did for this one.
July 22, 2009 at 6:07 pm
If people don’t want to be subject to WEP and the GPO, then they ought to be able to pay Social Security the net present value of all the taxes that would have been collected had they been in the system when they weren’t. Then their benefits could be calculated on all their income, just like everyone else.
July 26, 2009 at 6:26 pm
I agree with Ed that this is a ripoff. I work for a school as a secretary and also have worked 4o years in the public sector. I am also a widow. I checked with social security and cannot receive the widows pension because i make to much money and am a school employee. I have only worked part time in public sector and did not make substantial earnings to cover the credits. Out of 40 years, I have a total of 6 substantial years of earning. This is not right.
July 28, 2009 at 7:33 pm
Bev, it wasn’t Ed who termed it a “ripoff.” I can’t understand your case from what you wrote. But according to the SSA, your survivors benefit is reduced by 2/3’s of the amount of your government pension that came from work where you weren’t part of the Social Security system.
http://www.ssa.gov/pubs/10007.html#how
For those in the system, “The law has always required that a person’s benefit as a spouse, widow or widower be offset dollar for dollar by the amount of his or her own retirement benefit.” The purpose of the GPO is to bring the treatment of government employees who are ought of the system with those who are in it.
August 24, 2009 at 7:36 pm
I PAID into social security for twenty years before I became a teacher. I will recieve less teacher retirement than the teachers that started teaching right out of college… but I can’t get the social security I PAID for????
Screw that!
August 29, 2009 at 4:49 pm
I was widowed after 31 years of marriage, 26 of which I stayed home to raise 4 children and look after a mother-in-law. I received no “child are credits.” Before marriage and along the way I earned a minimum SS on my own meagre minimum wage SS record. When my husband died I went to work at a public non-ss covered job and worked 18.9 years. When I retired at age 70, my modest pension (38% of my salary) caused me to lose ALL of my widow’s benefit, leaving me with only a SS benefit of $144 on my own record under the WEP. But if my husband had not died, and I did at 70 he would have collected a pension on my record and still kept HIS SS. Where is my compensation for my 26 years of child raising? Isn’t that what a spousal benefit is about?
October 26, 2009 at 2:30 pm
I worked for 39 years, paid into SS for the first 15. As I figure it, my SS gets reduced to ZERO due to my pension coming partly from wages that did not have a SS deduction. Is there a maximum that WEP reduces SS ??
November 11, 2009 at 4:34 pm
How do we get the full benefits for all of those jobs we needed to survive when we were young. Now receiving a very meager teachers pension and being penalized 50% of a very,very meager social security pension which I worked so hard to obtain. What a rip off. I took ss at 62 expecting not to live past 65 with cancer.