Facing Pension Woes, Maine Looks to Social Security

[Elmore Furth]

Source: NY Times

Just as workers in the private sector participate in Social Security in addition to any pension plan at their companies, most states put their workers in the federal program along with providing a state pension.

Some variation on this idea could ultimately appeal to other states grappling with their own exploding pension costs and, in extreme cases, quietly looking for help from Washington. In troubled states, some employees have wondered whether they might be allowed to begin paying in and collecting from the federal system even before they have contributed a career’s worth of taxes.

More than six million public employees work outside the Social Security system, including roughly 1.7 million teachers in California, Illinois and Texas, and nearly two million employees of all types in Alaska, Colorado, Massachusetts, Nevada and Ohio, as well as Louisiana and Maine. For years, these and other states have insisted they could provide richer pensions at a lower cost, both to workers and taxpayers, because of investments.

Whether Maine joins Social Security or not, painful choices must be made. The state pension fund lost $2.25 billion in 2008, and taxpayers will have to replace the lost money. But they have less time to do so than most states, thanks to tough financing rules in the constitution. Projections show that Maine will not have enough money to do much else in the coming years if it adheres to those rules.

Read more: http://www.nytimes.com/2010/07/21/business/economy/21states.html

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Maine's motto is "I lead" and now I guess they are leading the way to the public trough.

Where are the Maine small government conservatives, now?

[customerserviceguy]

1. Sort of like

leaping from a leaky lifeboat onto the Titanic.

[Yupster]

5. At least we'll all be in it together

There's no reason why the universal program of social security should have $ 6 million people not in it.

I've asked that question many times and never got an answer to why most Texas teachers are not in social security.

[mbperrin]

8. Because if Texas teachers were in SS, the districts or the state would have

to contribute the other half of their withholding. This way, they're on their own. BTW, even if you worked for 29 years and paid in to SS before you became a teacher, you cannot draw any SS - you can only draw your teacher retirement. They say that's double-dipping. Of course, everyone else, military, state employees, you name it, can draw both if they paid both.

But teachers are special, so we get singled out.

[Yupster]

9. So the state contributes the other half of the withholding to TRS

instead of FICA. Makes no difference to the school district either way.

So who comes out best?

The teachers who contribute the same percentage they would under social security but end up with twice or more of the benefit. That's because they don't contribute to workers who are disabled and qualify for SSI or they don't contribute to the fund for kids whose parents die, or they don't help the lowest paid workersd who are helped by social security's very progressive payout bendpoint formula.

Yes, tecahers get to be on their own.

Do doctors get to set up their own system? Of course not. We need their contributions to help the poorest workers pay for the progressive payout. Would lawyers rather have their own system. Of course but they can't. What about stockbrokers. Again, they must contribute to social security.

For some reason only teachers are allowed to set up their own much better system.

It's weird.

Like you said, teachers are special. I don't know why.

They should be addeed into the social security system like everyone else, but then they'd scream bloody murder as they see their pensions reduced by more than half.

[mbperrin]

11. First, the state contribution is 6.6%. That saves them much money over

the SS rate.

Second, medicare is still deducted from every check.

You weren't listening. I paid SS as a self-employed person from 1968 to 1997, 29 years, when I paid BOTH the employer and employee halves, yet I won't get a dime from SS. So I HAVE paid, but will receive zip.

Go ahead and justify it.

[Yupster]

13. I don't justify it at all

I think teachers should be treated just like any other worker.

The Teacher Retirement system should be folded into social security and everyone should get benefits based on the same bendpoint formula social security uses.

That will hurt teachers severely as they will get much lower retirements like everyone else, but I just can't see any justification for treating them any differentlyt than anyone else.

[virgogal]

17. I'm appalled. Is this a Texas thing or a teaching thing or what? I

assumed if you paid into it you collected.

Pardon my ignorance but I would be royally pissed !

[Davis_X_Machina]

12. Not limited to teachers, not in many states...

...where state employees don't contribute, or get credit towards, social security. In Maine, it's court employees, state public safety officers, the whole kit-and-kaboodle.

[Yupster]

14. I remember the President in the campaign

talking about healthcare saying it must be universal -- he said the reason social security is succesful is because it's a universal program and I thought, yeah -- tell a schoolteacher.

[mbperrin]

16. Just like the rest, you will ignore my 29 years of paying in as self-employed

to SS without receiving anything back.

Because you will not address it, I wish you a good day.

[Yupster]

18. Many school districts are not in social security

Instead they have a much, much, much better system for themselves.

Would doctors, lawyerrs, stockbrokers like to have their own systems instead of social security? Of course but they don't have the option. Teachers do. Why are they treated specially? I have no idea, but specially they are treated.

Just to give an example.

You have a plumber who worked from age 25 to age 60. His last five years he made $ 55,000 a year. He will get about $ 1,600 a month social security at age 66, or $ 1,300 a month at age 62.

Now you have a schoolteacher who works from age 25 to age 60. His last five years he made $ 55,000 a year. Let's put this teacher in Texas since their retirement system is one of the least generous. The formula is 2.3 times the years experience equals the percent pay.

In this case it would be 35 X 2.3 = 80.5 %

The teacher would get over $ 3,600 per month and it would start at age 60.

So why does the teacher make just about three times what the plumber makes though they both contributed the same amount?

Because teachers are treated specially.

Yet you will still hear teachers complain that they should get their incredibly generous and special benefit and they should get social security too. Maybe a pony would be nie too.

PS -- There may be cases where the special benefit works to a teacher's disadvantage though those cases are much less common, but that's what happens when you have a special benefit different from anyone else's. I think my example is pretty typical of a typical teacher except I think I lowballed the final salaries by quite a bit.

For you I would offer the advice to retire from a district that does contribute to social security. Then you'd get both.

[Davis_X_Machina]

19. Doesn't work that way.

For you I would offer the advice to retire from a district that does contribute to social security. Then you'd get both.

For every $3 you get from the job(s) that didn't pay into SS, $2 is deducted from your SS retirement benefit.

Government Pension Offset.

I'm close to retirement -- 30 years public, 10 private -- well paid. 30 years x .02 per year = .6

60% of $50,000 = $30,000 -- that's enough to offset $20,000 of SS -- few people see that much.

I just make the 40 quarters cut, so my SS retirement benefit of $143/mo x 12 = $1,700 p/a. That's all eaten up by the GPO. Something similar happens to any survivors' benefits I might receive via my wife.

[Yupster]

20. It seems like even in your bad situation, you're still better

off than if you were the non-teacher working only in a social security job your whole life.

I guess it's only natural for everyone always to want more even when they get more than most.

[Davis_X_Machina]

21. But only if SS were all I had....

Some folks don't find themselves in that position, some do.

[Yupster]

22. But TRS and social security are not all you have either

is it?

Just like many people have 401 (k)'s, don't you have a 403 (b) ?

[Davis_X_Machina]

24. My wife has a 403(b) -- no pension, but SS.

I have the pension, no 403(b) and an SS that's zeroed out by GPO.

My pension buy-in is about 8.7% of my gross. Her 403(b) contributions last year ran about 11% of her gross.

[Yupster]

25. I thought you were a teacher?

If you're a teacher why wouldn't you have a 403 (b) ?

If you're not a teacher, then I've been thinking wrong this whole conversation. I thought I was talking to a public school teacher.

[Davis_X_Machina]

2. In 1990 Gov. Jock McKernan....

...Olympia Snowe's wife, by the way, led the first major pension fund raid of the Bush I recession.

The rules refered to in the article were created when then-Gov. McKernan and the Legislature balanced the budget by cutting retirement benefits.

A constitutional amendment followed in 1993 requiring all state pensions to be fully funded. It was approved by voters during a 1995 referendum and requires paying off the current unfunded liability in 31 years and to prohibit the creation of new unfunded liabilities.

The drive to Social Security, and away from the MSRS, is being spearheaded by Peter Mills, a Republican, needless to say.

[Po_d Mainiac]

7. Jocko's gimicks got the can rolling down the road

But the legislature had been AWOL as well.

The recent tax "revolt" by the teabaggers has really brought this to a head. Mills was the only (R) candidate for Governor to address the issue.

LePage..meh

[Davis_X_Machina]

10. The teabaggers...

....led the charge to repeal a law that made the state income tax less progressive. I'm still trying to figure that one out.

As for the legislature -- everyone out there who wants a part-time, term-limited citizen legislature, come to Maine, and take ours. Please.

The idea that this is the secret to good governance, and a return to Pres. Monroe's Era of Good Feelings is to laugh.

[dixiegrrrrl]

3. So, any one being sued for "losing" the state's pension money?

Every pension fund invests in something, and more and more stories are surfacing
of how funds were ripped off by the big banks.
Calipers in Ca. as a case in point, which I follow since we have some money in it.

[Davis_X_Machina]

4. No malfeasance...

...just the magic of the market. The trustees may have been pressing a bit for high returns so as to minimize the drain on the state's general fund -- no good deed goes unpunished -- but that's not criminal. Most endowments did the same -- the Portland Symphony got its tail caught in the same screen door.

[Po_d Mainiac]

6. Rigged casinos are no place for taxpayer money to be flushed

Even Maine’s $9.6 billion pension fund, which analysts regard as having one of most conservative investment mixes in the country, has lost 14.5 percent in value since January.

http://www.stateline.org/live/details/story?contentId=349061
..........
The rating agencies should be the first target of clawbacks, but by statute the biggest (S&P, Moody's and Fitch) are exempt from reprisals/liability. The SEC originally exempted rating agencies from liability to encourage securities to get credit ratings and be registered.

Eliminating the exemption was in the initial financial reform package. I'm not sure if it survived.

[Yupster]

15. Each pension fund or charitable foundation

has rules on which investments they are able to use.

Some have rules which are much more liberal than others.

[Po_d Mainiac]

23. And if the rating agencies fudge the ratings?

What are supposed to be AAA (Almost can't lose) investments become junk.

[Yupster]

26. No doubt

there are risks to every investment. No doubt about that.