Happy outside Social Security system

Philadelphia Inquirer ^ | March 28, 2005 | Larry Eichel

[RWR8189]

About 6 million, or 4% of American workers, largely in government jobs, don't pay the taxes or get the pension - and most prefer it so.

In some plans for revamping Social Security, there's a call to make the system mandatory.

You're forgiven if you thought it already was.

Roughly 4 percent of American workers - as many as six million - are outside the system. And most of them have no desire to get in.

The vast majority are state and local employees, including members of police and fire departments in Philadelphia and throughout the country.

Most state and municipal workers in most places, Pennsylvania and New Jersey included, are enrolled in Social Security.

But nationally, because of the way the system has developed over its 70-year history, more than one-quarter of such employees are outside it, including hundreds of thousands of teachers.

The numbers vary wildly from state to state. In Ohio, for instance, 97 percent of nonfederal public employees are outside the system; in Massachusetts, 94 percent. But it's well under 10 percent in New York and North Carolina.

From a purely actuarial standpoint, forcing all newly hired state and local employees into Social Security would be a very alluring prospect.

Here's why: Those workers would start making payroll-tax contributions immediately, but most wouldn't qualify for retirement checks for years.

According to the Social Security Administration, the influx of cash would fill about 9 percent of the system's projected 75-year funding gap. So it would help, at least a little.

"I also think it's better as a matter of public policy to have everyone under one system," said Edith U. Fierst, a lawyer who served on former President Bill Clinton's Social Security Advisory Council in the 1990s. "It works better for people who change jobs, who become disabled, for spouses and survivors."

As a practical matter, though, making Social Security mandatory, even for future public workers, would be a tough sell. It would disrupt existing retirement programs and subject state and local governments to transition costs that the federal government would surely be asked to pay.

The change also would anger lots of exempt workers, especially in the 12 states, including Texas, California and Illinois, where they make up more than 40 percent of the whole.

They are convinced that they're better off with the status quo - as part of pension funds free to invest in the private sector - even though many of those workers contribute more now than they would under Social Security.

Opponents of mandatory coverage include the Fraternal Order of Police, National Education Association, American Federation of Teachers, and American Federation of State, County and Municipal Employees. And it's not just the public employees unions. The National Association of Counties and the National League of Cities are against it, too.

Recently, 11 senators, led by Dianne Feinstein (D., Calif.) and George Voinovich (R., Ohio), signed a statement saying that mandatory coverage "would disproportionately harm America's uniformed employees and place an undue burden on cities, counties and states."

Even the AARP, which has supported universal Social Security since 1977, is doing so these days with less fervor than in years past.

"It's not the huge revenue-raiser people once thought it was," explained Evelyn Morton, the organization's national coordinator for economic issues. "There's also concern that the state retirement systems now in place would face financial difficulties if this became law."

In the 1930s, when Social Security was created, state and local employees (like federal workers) were kept out. Most of them already had pension systems, and there was a constitutional question of whether Washington could make them join.

Participation by new federal workers became mandatory in 1984; about 800,000 federal workers hired before then remain outside the system, their numbers dwindling. But state and local governments were never forced in.

Starting in 1951, Congress let states in on a voluntary basis. The result of that and subsequent legislation has been near-universal coverage in some places, the opposite in others. (Medicare is mandatory for all public employees hired since 1986.)

Through it all, most police officers and firefighters have stayed out, as the law allows, largely because most leave their jobs long before normal retirement age.

"When everybody says police have generous pensions, no we don't," said Kenneth Rocks, a Philadelphia police officer and national vice president of the Fraternal Order of Police. "We're saving the city tens of millions of dollars in Social Security taxes."

Rocks and other leaders of exempt employees would like to see at least one change in Social Security: the end of the windfall elimination provision. Under WEP, individuals with work histories in both exempt and nonexempt jobs end up getting a lot less from Social Security than they'd otherwise expect.

Some advocates of Bush's plan for private accounts accuse the public employees unions of being two-faced in the current debate.

On the one hand, they bash the White House approach, saying the system is fine as is. On the other, they insist that Social Security isn't good enough for their exempt members, part of whose pension funds are in the private sector now.

"It demonstrates a remarkable level of hypocrisy for them to attack the President's efforts to strengthen Social Security while fighting to keep their own members out," said Danny Diaz, a spokesman for the Republican National Committee.

Labor leaders say there's no inconsistency: They are opposed to personal accounts, not to private-sector investments.

Regardless, the strength of the opposition to mandatory coverage makes it unlikely that the issue will be at the center of the debate in the weeks ahead.

"If the President's scheme doesn't succeed and there's a desire to do something else quickly, whatever's on the table might wind up in the package," said Thomas R. Lussier, a top lobbyist against mandatory coverage. "We want to make sure we're not on the table."

[Cathy]

My husband is a Police Officer and his county opts out of SS - it is the best thing that happened to us. He will make about 5 times what SS would pay from his pension and he can retire afer 25 years. I don't think they will eliminate this loophole unless they want about half a million PO'ed cops across the country.

This is the fix to SS?

[Cathy]

My husband is a Police Officer and his county opts out of SS - it is the best thing that happened to us. He will make about 5 times what SS would pay from his pension and he can retire afer 25 years. I don't think they will eliminate this loophole unless they want about half a million PO'ed cops across the country.

This is the fix to SS?

[tnlibertarian]

there was a constitutional question of whether Washington could make them join.

I doubt it's Constitutional to make me join, either, but that doesn't stop that money from evaporating from my paycheck.

That's okay, I really wasn't using that 'equal under the law' thing anyway.

[jeremiah]

Kenneth Rocks, Philadelphia police officer is a liar. They cost more than they save. Most cops I know of, retire with a disability at full pension, years before most of us dream of. I went to high school with one well respected officer, he was a football and basketball referee on his off time too. When the time came for him to be evaluated, he voiced the words his superiors were supposed to look for, he was angry and hated minorities. He was diagnosed with a stress condition, and retired with full benefits. He was 48 years old, and one of the happier guys I know. Of course he is even happier now, toiling on the greens of a local golf course for free green fees. Counting heads of local elk herds, for the benefit of hunters (psssst, he knows where to hunt), and refereeing games. I suspect anyone that knows cops personally, have similar stories.

[IMRight]

I doubt it's Constitutional to make me join, either, but that doesn't stop that money from evaporating from my paycheck.

Sure it's Constitutional! It was adjudicated long ago... Social Security taxes are really just regular old taxes and the goverment can adjust (or cancel) benefits any time they feel like it. If they want you in, they can put you in.

[Altamira]

"Recently, 11 senators, led by Dianne Feinstein (D., Calif.) and George Voinovich (R., Ohio), signed a statement saying that mandatory coverage "would disproportionately harm America's uniformed employees and place an undue burden on cities, counties and states."

But it's okay to burden the rest of us?

[ozzymandus]

I'm self-employed and pay only the minimum necessary into SS to have the required 40 credits at retirement age. I'm not concerned about the SS payments, but I want to have medicare, particularly when it looks like the govt is going to take over the health care industry.

[tnlibertarian]

URRight that it was adjudicated and found Constitutional, but look at the folks decidin'. They find all kinds of things in that dusty old, worn-out parchment that we ordinary mortals are unable to see.

Actually, I really don't have much of a point, I just wanted to use the 'URRight' line.

[Tripleplay]

My husband is a Police Officer and his county opts out of SS - it is the best thing that happened to us. He will make about 5 times what SS would pay from his pension and he can retire afer 25 years. I don't think they will eliminate this loophole unless they want about half a million PO'ed cops across the country. This is the fix to SS?

I work in the private sector, why can't I have the same option as your husband?

[Go_Raiders]

I work in the private sector, why can't I have the same option as your husband?

I am exempt like her husband. You are asking the right question.

Unfortunately, Bush is not offering a fully funded Defined Benefit pension plan, and nobody else seems to be screaming loud enough to get one.

The amount of money you and your employer "invest" in SocSecurity is enough to fund a privately invested, fiscally sound pension plan that could easily pay you 2% times your years of service times your final pay rate at age 55. You would be able to retire for about a third less at 50.

[iopscusa]

Here's the deal, either SS is good enough for everybody or not good enough. Everybody means exactly that, no alternatives to Federal SS for retirement and that goes for anybody that gets a paycheck from the Presidentes, the Congress crappers, the Judges and all public or private employees...let's suck it up and put that on the table for all to digest. Then let's discuss the whole program for retirement benies. The SS is a scam/tax on many but not all and needs to be exposed as such.

[tahiti]

"Sure it's Constitutional! It was adjudicated long ago"

I am not so sure.

U.S. Supreme Court RAILROAD RETIREMENT BOARD v. ALTON R. CO., 295 U.S. 330 (1935)

The Railroad Retirement Act is considered the "first" Social Security Act.

The court decided the act was unconstitutional:

"The federal government is one of enumerated powers; those not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states or to the people. The Constitution is not a statute, but the supreme law of the land to which all [295 U.S. 330, 347] statutes must conform," (I don't thing Rush Limbaugh believes this because he does not like judicial review)

This court has repeatedly had occasion to say that the railroads, though their property be dedicated to the public use, remain the private property of their owners, and that their assets may not be taken without just compensation. (Amendment V - nor shall private property be taken for public use without just compensation) 7 The carriers have not ceased to be privately operated and privately owned, however much subject to regulation in the interest of interstate commerce. There is no warrant for taking the property or money of one and transferring it to another without compensation,

"The court below held the provision deprived the railroads of their property without due process, and we agree with that conclusion."

"The act is not in purpose or effect a regulation of interstate commerce within the meaning of the Constitution."

There was now no way that Congress could alter the Railroad Retirement Act to make it unconstitutional because compulsatory retirement legislation was beyond the powers of Congress.

So, to circumvent that decree, an international labor "treaty" was ratified by the Senate and signed by FDR.

Under Article VI, Section 2

"...and all treaties made, or which shall be made, under the authority of the United States shall be the supreme law of the land;"

Congress then passed the "new" Social Security Act and FDR signed it.

"Aliens" were required to have a Social Security number. Citizens were not.

Social Security was considered a "benefit" to be offered by a employer to an employee. That is why the "tax" was paid half by the employer, the other half paid by the employee. (this we now know to be charade because all the employer does is reduce the wage to the employee to pay the employer share of tax.)

So, for citizens obtaining a Social Security number and accepting Social Security benefit from an employer it is voluntary.

You ask, "well, I can't get a job unless I have a Social Security number, right?"

Not necessarily. In 1992 an employee filed a complaint against a Dallas company with the EEOC accusing the Dallas company of violating his rights for requiring him to have a Social Security number contigent for his employment.

He won. The EEOC said that employment contingent on a Social Security number was discriminatory.

You must also note that on the W9 form, the instructions specifically state do not send the completed form to the IRS.

And if audited, a company would only be fined $50 for not having the form on file.

I will agree that there is a social security tax but to be in the "system" is voluntary.

Is that practical is a whole different question.

Exerting your constitutional right of voluntray particpation in the Social Security system may be as daunting of a task as our founding fathers had fighting the British for independence.

[trillabodilla]

I work in the public secter (sp?) and I do not contribute to social security. I am glad because I have a strange feeling I would never reap any so called "benefits" from it anyway.

[Fledermaus]

Great for you. But this should be unconstitutional under hte 14th amendment in that I'm FORCED into this worthless ponzi scheme.

And frankly, I don't give a rats you-know-what if 6 million public employees get PO'd! What makes them so special they are treated differently? Why are they allowed to stay out of a lying pyramid system based on worthless promises to pay by other jerk-off public employees - Congress?

I appreciate your husband's service as a police officer but that doesn't matter when it comes to equality.

Maybe forcing these government employees into the same system will make the system get eliminated and we the people can do what we want with our money.

Oh, sorry. That would mean freedom and we can't have that.

[JoeGar]

Ask yourself: If Social Security is such a good deal, why does government have to force people to join it?

[MamaTexan]

Exerting your constitutional right of voluntray particpation in the Social Security system may be as daunting of a task as our founding fathers had fighting the British for independence.

Government has become a master at getting third parties to do it's dirty work.

[Lancey Howard]

Yeah, most government "workers" know all the angles.

[Go_Raiders]

Here's the deal, either SS is good enough for everybody or not good enough.

Everybody knows it's not good enough. The problem is inertia. The Democrats are afraid that fixing it will mean the end of Big Government (they are likely right). The Seniors are afraid that their benefits will be cut (they are wrong, but have you ever tried to tell a Senior they're wrong?). The public at large doesn't understand investments (thanks for nothing Public Schools!) The Republicans are too chicken to go for the big enchilada (a fully funded defined benefit plan), they think they can make everybody happy with a system nobody understands, doesn't really fix the problem and is easily distorted as a deficit balloon by the Democrats.

Checkmate. Here's what's going to happen.

The Democrats and Republicans will agree to tax increases (bye bye $90,000 cap, hello means testing) and benefits cuts ("early" SS retirement goes from 62 to 65, full SS retirement goes to 70).

Nobody's going to touch the real third rail (public employee pensions) which wouldn't solve the problem anyway and basically would tax state and local government. If you're very lucky, they'll let you put some pathetically small portion into a private account to let Bush save some face.

[Cathy]

I didn't say it was fair, I was just thankful we are not contributing to SS. I am forced to pay into SS just like you - and don't think that I am not PO'ed. My husband's County's retirment system should be a model for how and why to do away with SS.

Sorry you are so mad.