Tuesday, March 11, 2014
Many people do not seem to realize that state employees/educators pay into the state retirement program and not Social Security, and will not receive Social Security in old age.
Social Security benefits (individual and beneficiary) are withheld from state employees who have had private-sector jobs in their lifetime and have paid into Social Security.
As an employer, the state actually contributes significantly less for the existing pension plan than it would if the state was to pay the employers contribution for Social Security, a reason for having the existing state pension plan in the first place.
In fact, the state contribution is lessened even more since the state has failed to pay in what is due, and has, in fact, borrowed from this same fund. How many private employers could fail to pay in its mandated Social Security benefit share?
Recent proposals by the LePage administration to "freeze" the cost of living adjustment appear to be a mean-spirited attempt to attack state employees/educators. Those receiving Social Security will receive a true COLA. State employees already have had their COLAs frozen for the last two years.
So what is the effect of a frozen COLA? For a retiree with a $20,000 "pension," at an average 4 percent inflation rate for 25 years, a retiree would need $53,316 to have the equivalent buying power. Looked at another way, after 25 years this 4 percent inflation rate would erode the value of $20,000 to $7,502.34. That income has fallen in real terms by 62.49 percent.
I hope that state employee and the general public will keep these numbers in mind as we address the state's failure to honor its responsibility to support the fund the state developed for state employees' social security.