For Immediate Release
Tuesday, May 18, 1999
Forcing All Public Workers into Social Security Carries $26 Billion Price Tag
WASHINGTON —A new report by the Segal Company, a leading actuarial consulting firm specializing in pensions and employee benefits, estimates that the total cost to states of shifting public workers into Social Security would exceed $26 billion in the first five years. Currently, some 5 million state and local government employees nationwide do not participate in Social Security -- including police, firefighters, correctional officers, teachers and others. All are covered by employer-based public pension plans that provide benefits similar to those provided by Retirement Security. The report, which was commissioned by the American Federation of State, County and Municipal Employees (AFSCME) and the Coalition to Preserve Social Security (CPRS), contains cost projections for each of the 50 states if Congress mandates Social Security coverage for all future public employees. The report also shows how mandatory Social Security coverage would raise the cost of maintaining current benefit levels; reduce public pension plan benefits; impact current as well as newly hired public employees; and would ignore the diverse requirements of the public sector workforce.
The report details the cost to each state over the course of five years that will result from shifting workers -- who have always been excluded from the program -- into Social Security. In those states with particularly large populations of uncovered public workers, the costs are truly staggering.
In Ohio, for example, where some 900,000 public workers are enrolled in state pensions that provide benefits similar to those from Social Security, the cumulative costs of implementing this change for the first five years is nearly $4 billion. Massachusetts, which has more than 300,000 public workers who are not covered by Social Security, would weigh-in with costs exceeding $2 billion. Among the other findings of the report mandatory coverage could:
- Lead to substantial tax increases. In order to pay for the additional costs of providing Social Security coverage to public workers, states and localities may have to increase taxes or reduce public services.
- Destabilize public pension plans for current participants. If new employees are put into separate retirement plans, it will cut off new funding to the existing plans upon which current workers and retirees depend. This will almost certainly destabilize these plans, reduce their assets and threaten benefits for current participants.
- Reduce benefits for future retirees. It’s likely that states will attempt to reduce costs by integrating existing retirement plans with the national system. This would require a restructuring of state plans that will result in significantly lower benefits for future retirees.
- It won’t solve Social Security’s future shortfall. Even if mandatory coverage were enacted for new hires, it would add only two years to the life of the Social Security trust fund.
“We believe that Social Security is a great program that provides much-needed retirement and disability insurance to the vast majority of the nation’s workers, including most public employees,” said AFSCME President Gerald W. McEntee. “But it makes no sense to spend billions of dollars to force the minority of public workers who have always been excluded from the program and who have paid into public pension plans all their lives, into a national program that essentially duplicates these benefits. Most taxpayers want their elected leaders to spend tax dollars on police, fire, sanitation and emergency services -- not on this.”
Full text of report.
