On today's front page, Laura Clawson draws attention to President Obama's response to a teacher's question regarding collective bargaining. Although Laura does a great job, as do many in the comments, of taking the President to task for the second part of his answer, I want to focus on one specific part of his response that I think a lot (and by a lot I mean almost all) of people don't fully understand.
...this is an area where there’s got to be burden sharing as well. If a public sector employee is able to retire at 55 with 80 percent of their wages, and the average public sector employee has got a 401(k) that they’ve just seen decline by about 20 percent and they have no idea how they’re going to retire...
In this short little statement, President Obama seems to be forgetting about something we public employees know all too well.
Public sector pensions and 401(k) plans are, as the president did in his response, often compared as if they are equal. Unfortunately, this is not really the case. A 401(k) plan is a supplemental retirement option, often entered into voluntarily, used to augment a retiree's social security benefits. Many people who receive a public pension, however, do not pay into Social Security and therefore are not eligible for their full, if any, social security benefits thereby leaving their public pension as their sole retirement benefit. Why? Because of GPO/WEP.
GPO (Government Pension Offset) and WEP (Windfall Elimination Provision) are government provisions put in place to ensure that public sector employees are not able to "double-dip" and they apply to many (not all) public sector workers who are eligible to receive a public pension. I first wrote about this last December but I feel like it is appropriate to bring it up again.
Enacted as a part of the 1977 Social Security Ammendments, GPO, or Government Pension Offset, reduces an individual’s Social Security survivor benefits (available to a person whose deceased spouse had earned Social Security benefits) by an amount equal to two-thirds of his or her public pension. For example:
A widowed retired educator has earned $600 per month from her state retirement plan after 25 years of service. Her deceased husband worked in the private sector and paid into Social Security his entire working life. She normally would be entitled to monthly Social Security survivor benefits of $850.
Because she works in a state where public employees do not participate in the Social Security system, the Government Pension Offset cuts her survivor benefits by two-thirds of her $600 monthly retirement payment or $400. Her survivor benefits instead equal $450 - nearly half of the $850 she would normally receive.
Then, in 1983, to combat the unintended advantage that the regular Social Security benefit formula provided to persons who also had pensions from non- Social Security-covered employment, the government enacted WEP, or the Windfall Elimination Provision, thereby reducing an individual’s own Social Security benefits earned while working in a job covered by Social Security. Another example from the same source:
A teacher taught 17 years in one state, then moved to a different state and taught another 14 years. According to the Social Security Administration, she earned monthly benefits of $540 per month for her contributions paid into the Social Security system while she worked in the first state.
Because public employees in the second state do not participate in the Social Security system, her actual monthly benefits will be cut $196 due to the Windfall Elimination Provision. She will receive $344 per month from Social Security instead of the $540 she earned.
For many of us (my wife and I are both public school teachers in Illinois and have been for the past 20 years), we have virtually no Social Security income coming to us in retirement as teaching has been our only profession aside from the part-time minimum wage jobs we had during high school and college from which we paid very little into the system. So when the president, or anybody else, makes a statement like he did today implying that public employees should be willing to sacrifice part of their pensions in an act of "shared burden," it's akin to telling the general public that they should be willing to accept lower social security benefits, which we know to be an extremely unpopular proposition.
There are many other issues regarding public pensions that I think deserve attention but they would cause this diary to become quite lengthy. In short, President Obama appears to be forgetting about GPO/WEP, is uninformed about GPO/WEP, or is hoping we won't remember GPO/WEP. I hope it isn't the latter two of those three choices.
*Author's note: None of this is to imply that the loss of anyone's 401(k) is not a cause for concern. I am simply stating that they are quite different from a public pension and should not be referred to as if they serve the same purpose.
Update: From the comments comes this brilliant analysis by Phoebe Loosinhouse:
Most Americans are unaware of the fact (2+ / 0-)
that many public employees were outside of the Social Security system and that they forwent salary increases many times to maintain pension benefits.
The President here is pitting one public employee against another, very consciously in my opinion. And as always, the effort never seems to be geared in how to raise the retirement security of all, but rather how to bring retirement insecurity to parity.
by Phoebe Loosinhouse on Wed Aug 17, 2011 at 10:51:27 AM CDT
Thanks, Phoebe!