Regarding FICA & Maine civil servants

[foglover]

kellysmith, thanks for the info. I'm sure that my sister will appreciate all the data that I've gathered with everyone's help.

[flycessna]

Originally Posted by kellysmith

Wait until you read about the Windfall Elimination Provision in the link below, foglover...WEP is a federal provision, not state. Totally unfair, but law of the land.

http://www.mainepers.org/PDFs/other%...203-9-2010.pdf

I had this debate with my Mother in law who is a teacher. I dont understand the confusion.. and personally how can ANYONE say it is unfair.

First let me say that I am a member of Maine pers and am subject to this..

The Windfall provision act was created to keep state and municiple workers from taking an advantage of a loop hole in the system.

Social Security benefits are intended to replace only a percentage of a worker’s pre-retirement earnings. The way Social Security benefit amounts are figured, lower-paid workers get a higher return than highly paid workers. For example, lower-paid workers could get a Social Security benefit that equals about 55 percent of their pre-retirement earnings. The average replacement rate for highly paid workers is about 25 percent.

Before 1983, people who worked mainly in a job not covered by Social Security had their Social Security benefits calculated as if they were long-term, low-wage workers. They had the advantage of receiving a Social Security benefit representing a higher percentage of their earnings, plus a pension from a job where they did not pay Social Security taxes. Congress passed the Windfall Elimination Provision to remove that advantage.

[kellysmith]

Originally Posted by flycessna

I had this debate with my Mother in law who is a teacher. I dont understand the confusion.. and personally how can ANYONE say it is unfair.

First let me say that I am a member of Maine pers and am subject to this..

The Windfall provision act was created to keep state and municiple workers from taking an advantage of a loop hole in the system.

Social Security benefits are intended to replace only a percentage of a worker’s pre-retirement earnings. The way Social Security benefit amounts are figured, lower-paid workers get a higher return than highly paid workers. For example, lower-paid workers could get a Social Security benefit that equals about 55 percent of their pre-retirement earnings. The average replacement rate for highly paid workers is about 25 percent.

Before 1983, people who worked mainly in a job not covered by Social Security had their Social Security benefits calculated as if they were long-term, low-wage workers. They had the advantage of receiving a Social Security benefit representing a higher percentage of their earnings, plus a pension from a job where they did not pay Social Security taxes. Congress passed the Windfall Elimination Provision to remove that advantage.

The WEP would be fair if it was only in effect for the wages a teacher/state worker paid into SSI during the time they were also paying into state retirement. I'm talking about the summer job painting houses, or what ever it is that the individual did to pick up a few thousand dollars during the summer. No problem with WEP applying to that. That was the purpose of it. If the individual wasn't paying SSI on the state wages, they should be able to go out and earn a few thousand dollars and get a year's worth of SSI credit.
What I'm talking about is someone who starts in a teaching career or state job right out of college. Teaches or works for the state for 25 years. That means at 47 this person has his/her 25 years in. He/she can at this point take the pension...(bad choice--it's over 6% penalty for each year the person is under 62, so basically it would be almost nothing)--or wait until they are 62 and start drawing the pension. Assume this person decides to change careers, and get a job covered by SSI. This individual would have 18 years in SSI at age 65. WEP would apply because the individual does not have 30 years of substantial earnings under SSI. Instead of having a retirement based on 25 + 18 years of working, The SSI portion is reduced by the WEP, so that the last 18 years of employment gets very little in return.
A fair system would have WEP only apply if there were SSI credits earned during the years the individual was earning state retirement credit. You can never convince me otherwise!

[flycessna]

Originally Posted by kellysmith

The WEP would be fair if it was only in effect for the wages a teacher/state worker paid into SSI during the time they were also paying into state retirement. I'm talking about the summer job painting houses, or what ever it is that the individual did to pick up a few thousand dollars during the summer. No problem with WEP applying to that. That was the purpose of it. If the individual wasn't paying SSI on the state wages, they should be able to go out and earn a few thousand dollars and get a year's worth of SSI credit.
What I'm talking about is someone who starts in a teaching career or state job right out of college. Teaches or works for the state for 25 years. That means at 47 this person has his/her 25 years in. He/she can at this point take the pension...(bad choice--it's over 6% penalty for each year the person is under 62, so basically it would be almost nothing)--or wait until they are 62 and start drawing the pension. Assume this person decides to change careers, and get a job covered by SSI. This individual would have 18 years in SSI at age 65. WEP would apply because the individual does not have 30 years of substantial earnings under SSI. Instead of having a retirement based on 25 + 18 years of working, The SSI portion is reduced by the WEP, so that the last 18 years of employment gets very little in return.
A fair system would have WEP only apply if there were SSI credits earned during the years the individual was earning state retirement credit. You can never convince me otherwise!

WEP has provisions exactly for that scenerio.. IF a teacher wants to retire and get a private sector job and work for another 25 years that would be fine.

There are exceptions to this rule. For example, the 90 percent factor is not reduced if you have 30 or more years of “substantial” earnings in a job where you paid Social Security taxes. See the first table that lists the amount of substantial earnings for each year.

The second table shows the percentage used depending on the number of years of substantial earnings. If you have 21 to 29 years of substantial earnings, the 90 percent factor is reduced to between 45 and 85 percent.

Again the only whinning I hear is that this should be eliminated..

As a teacher would you prefer just to participate in BOTH SS and Maine Pers.. personally I think that is the fairest scenero

Surely US state and municiple workers where this would apply cannot sit here and say it was fair PRIOR to the WEP being enacted..

[flycessna]

Originally Posted by kellysmith

Instead of having a retirement based on 25 + 18 years of working, The SSI portion is reduced by the WEP, so that the last 18 years of employment gets very little in return.
A fair system would have WEP only apply if there were SSI credits earned during the years the individual was earning state retirement credit. You can never convince me otherwise!

My bad kelly... I missed that you see that you need more than 20 years for the exception..

However your scenerio is rather subjective implying they work 18 years in a SS covered position with substantial earnings rather then just work the required 21..

Again though, would you support just FULL participation in SS??

That would illeviate all of these concerns..

As a member of Maine PERS I consider it a privledge and a benifit.. I dont think we are markedly over rewarded and I agree with your points about the state raiding the fund for many years and not repaying it..

Not to Pick on teachers, I have repeatedly said I have close friends who teach and my wifes family has quite a few teachers, but for some reason I only hear the teachers constantly whining and complaining about this.. I see it in blogs every where and from their own mouths.. Where I worked I never heard one person complain about it and till this day Have never heard one person complain about it..

I just think sometimes why can't people be hapy with their careers and realize what they have is pretty good.

It could be a lot worse!

[kellysmith]

Originally Posted by flycessna

[i]There are exceptions to this rule. For example, the 90 percent factor is not reduced if you have 30 or more years of “substantial” earnings in a job where you paid Social Security taxes.

As a teacher would you prefer just to participate in BOTH SS and Maine Pers.. personally I think that is the fairest scenero

25 years under state retirement, 30 years under SSI in order to avoid WEP means one will be in the work force for 55 years. Assuming this individual is 22 when entering the work force,(assuming they spent 4 years in college) he/she is 77 when he/she could collect benefits without penalty for those 55 years of work. Doesn't sound fair to me...

As for double dipping--paying into state retirement and SSI on the same income, how does that work? You're saying the state is willing to pay 5.5% of an employee's wages to state retirement and 6.2% to SSI? I fail to see how one year's work earns you a retirement from two different systems. Deals like that are partly what got us in a bind in the first place, and caused the FED's to create WEP.

[flycessna]

Originally Posted by kellysmith

25 years under state retirement, 30 years under SSI in order to avoid WEP means one will be in the work force for 55 years. Assuming this individual is 22 when entering the work force,(assuming they spent 4 years in college) he/she is 77 when he/she could collect benefits without penalty for those 55 years of work. Doesn't sound fair to me...

As for double dipping--paying into state retirement and SSI on the same income, how does that work? You're saying the state is willing to pay 5.5% of an employee's wages to state retirement and 6.2% to SSI? I fail to see how one year's work earns you a retirement from two different systems. Deals like that are partly what got us in a bind in the first place, and caused the FED's to create WEP.

I dont know what the state would be willing to do? Most cities and towns have to do both minus police and fire..

My question is to the teachers who keep bringing this issue up. Would they be willing to pay for BOTH like most people in the private sector do? UPS, and any union jobs get pensions that they pay into and also they get 401ks and YES they also have to pay into SS.

Just about ALL of the municiple PLD plans for maine cities and towns participate in both SS and the state retirement accept (generally) for police and fire... and again there are still some acceptions to the rules.. Brunswick PD participates in both..

My wife as a city hall employee In lewiston and she participates in both. She had a choice to to participate in MPERS or A 457b plan with a match from the city.. She chose Maine state PERS.. SS is automatic.

Like I said I do not know the sordid history of why and why some states and municipalities are exempted and some are not.. But I am pretty sure that it was considered benificial to be EXEMPT from SS..

Would the teachers of Maine go for that.. I bet not.. It would certainly solve the problem of WPA..

The rule and the percentages change after 21 years.. Subtantial earnings are detailed So it is possible to work 25 years and then work another 21+ years..

They basically do not want to give full social security benifits to part time workers who have had the opportunity to earn a retirement under a plan which allowed them to work and earn money and NOT pay into the system

And again you dont have to work 25 years its 21 years.. and their substantial earnings are not much more than minimum wage..