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SOCIAL SECURITY FOR STATE AND LOCAL GOVERNMENT EMPLOYEES
A GUIDE TO SOCIAL SECURITY PROVISIONS THAT CONCERN MANY PUBLIC EMPLOYEES AND TEACHERS~ THE GOVERNMENT PENSION OFFSET AND THE WINDFALL ELIMINATION PROVISION
© 2020 by Daniel W. Ryan. All rights reserved.
DISCLAIMER
Social Security benefits are created and governed by laws. Such laws are subject to change and interpretation. The material in this book is presented solely for educational purposes to supplement and illuminate the information available to you from the only definitive sources: federal law and regulation.
The author and publisher are not offering financial, legal or tax advice, or any other professional service. The reader should not make any decision that affects his or her retirement benefits without consultation with the Social Security Administration, a pension or retirement board, a deferred compensation company’s credentialed agent, an attorney, a certified public accountant, or similarly qualified professional.
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without permission in writing from the publisher.
Please contact publisher for permission to make copies of any part of this work.
Windy City Publishers
2118 Plum Grove Road, #349
Rolling Meadows, IL 60008
www.windycitypublishers.com
Published in the United States of America
eBook ISBN:
978-1-941478-94-3
Paperback ISBN:
978-1-941478-89-9
Library of Congress Control Number:
2020901408
Cover Image: ImagePixel/Shutterstock.com
WINDY CITY PUBLISHERS
CHICAGO
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FOR ADDIE
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CONTENTS
FOREWORD
INTRODUCTION
CHAPTER 1STATE AND LOCAL GOVERNMENT EMPLOYEES AND SOCIAL SECURITY
CHAPTER 2SOCIAL SECURITY: THE BASICS
CHAPTER 3THE WINDFALL ELIMINATION PROVISION (WEP)
CHAPTER 4THE GOVERNMENT PENSION OFFSET (GPO)
CHAPTER 5RUMORS
CHAPTER 6SOCIAL SECURITY AND PUBLIC EMPLOYEES: WRAP-UP
CHAPTER 7ADDITIONAL RESOURCES
NOTEINFORMATION APPEARING ELSEWHERE
APPENDIX 1WINDFALL ELIMINATION PROVISION
APPENDIX 2GOVERNMENT PENSION OFFSET
ACKNOWLEDGMENTS
REFERENCES
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FOREWORD
RETIREMENT INCOME IS OFTEN DESCRIBED as a “three-legged stool” consisting of a pension, Social Security, and personal savings.
For employees of state and local government, those legs are structured and operate differently than your private sector relatives and neighbors. The pension systems fortunately are still there, not having given way to the less stable 401(k) approach. Your personal savings is likely through a public employee deferred compensation plan under Section 457 or an educator’s savings plan under 403(b). These are valuable, voluntary plans which are highly utilized to the great betterment of public servants.
Your expected benefits from Social Security may or may not be the same as other working Americans. It all depends on whether or not you participate in Social Security in the classroom, fire house, police station, city hall or elsewhere in public service.
It is estimated that 28% of state and local government employees do not participate in Social Security. Many are public school teachers and those in fire/police/EMS. In some states, virtually no public employees are in Social Security. This materially affects their future retirement benefits. These public servants need to know the rules and their projected benefits in order to plan for a secure retirement.
To achieve that goal, a staff member at the Illinois Public Pension Fund Association (IPPFA) has written this book. Daniel Ryan is retired from careers as a municipal treasurer and a union-employer benefit fund administrator. He is also a long term police pension plan trustee and has worked with IPPFA since 2017, primarily on research as well as communicating benefits to active and retired police and fire professionals.
This material on Social Security first appeared in Dan’s book for Illinois public safety personnel. It has been expanded and updated here with the goal of providing a complete picture of the impact of public employment on Social Security benefits nationwide. The information is presented in an easy to read, conversational manner by an author who understands the subject matter and the need for it to be understood by public servants.
There is presently proposed legislation that would materially change the Windfall Elimination Provision. This is discussed in the book and this matter is worth keeping an eye on by all stakeholders. The proposed changes could improve the fairness of the treatment of many public employees.
Enjoy the book, and thank you for your career commitment to serving others.
JAMES McNAMEE
President
Illinois Public Pension Fund Association (IPPFA)
Elgin, Illinois
March 2020
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INTRODUCTION
THERE ARE TWO TYPES OF Public Sector professionals who are impacted by the Social Security program: those who are enrolled in Social Security during their government and teaching careers and those who are not.
There are more than six million state and local employees who do not participate in Social Security during their public service years. The information in this book is specifically directed toward those people and their families.
My interest in this subject dates back to my time as Finance Director for the Village of Skokie, Illinois. It was in the late 1980s and we were dealing with a lot of rumors and misinformation about the Social Security benefits that would be paid to our police officers and firefighters. This workforce does not participate in Social Security, setting them apart from the rest of the Village workforce in finance, public works, public health and other departments. We heard a lot of talk to the effect that the fire/police group would not receive any Social Security, even from credit they earned at other jobs. Another rumor said they would get one-half of what they earned; still another rumor put it at 40%. Someone told me that a retired firefighter was getting $9 a month from Social Security. Really?
The Human Resources Director and I set out to get the right story. We researched the subject, obtained the publications, and met with a Social Security “field rep” at the Evanston, Illinois office. We came away with a pretty good understanding and held a series of meetings with the employees to explain their federal benefits.
What we learned back then has been updated over the years, but the core is essentially unchanged. The key takeaways are:
Public employees who participate in Social Security at their government job earn and receive the exact same benefits as their private sector counterparts.
Public employees who do not participate in Social Security while in government or education often qualify for Social Security benefits from their private sector work before, during and after their public service careers.
Public employees who earn pensions from work that is not covered by Social Security are subject to some different Social Security rules and benefit formulas than those whose career work is covered under Social Security. These special formulas are intended to be fair and generally do not punish or penalize public servants when compared to private sector workers with similar lifetime earnings.
The special formulas appear complex, but their essential operation can be easily understood.
Finally, while there is no critical need for modifying these laws, legislation which has been introduced could smooth out the potential unwarranted impact on some public employees. This legislation should be understood and followed closely by all concerned.
INFORMATION TO FOLLOW
We’ll start with an explanation and a little history lesson as to why some public employees do not participate in Social Security and how that works out nationwide. Next, a basic overview of Social Security is presented, with emphasis on how employees at varying wage levels are treated. After that, we cover the two major provisions that affect public employees who work outside the Social Security system (and compare this to how it works for those inside Social Security). We’ll look at the Social Security benefits of a group of hypothetical retirees, covering those inside and outside of Social Security for their main careers. The goal is to both explain the benefits and examine how fairly the Social Security rules treat everyone. This will include a discussion of some merit-based legislation that is being seriously discussed at the time of publication.
We’ll conclude with a conversation on some commonly heard rumors about public employees and Social Security, a summary of all the material plus a Q&A, and then close with some resources that the reader can use to explore this subject further.
During the discussion I’ll sometimes use the shorthand “SSA” to represent Social Security, as in Social Security Act—or—Social Security Administration.
DANIEL W. RYAN
Skokie, IL
March 2020
Dkryans514@yahoo.com
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STATE AND LOCAL EMPLOYEES AND SOCIAL SECURITY
WHY ARE SOME PUBLIC EMPLOYEES OUTSIDE OF SOCIAL SECURITY?
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