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American Federation of State, County and Municipal Employees
AFSCME
White House Conference on Social Security: AFSCME ViewpointThere is no financial crisis in Social Security. Full benefits will be paid on time for another 35 years. The system will face a 25% shortfall after 2032, but we believe it is a manageable problem that can be solved with the right mix of benefit changes and revenue enhancers. Certainly, there is no need to dismantle or dramatically alter a system that continues to serve its constituents so well. AFSCME strongly opposes using any portion of the Social Security payroll tax to fund unreliable personal retirement investment accounts. Social Security was designed to protect American families from risk by providing guaranteed benefits and a secure foundation for retirement income. Introducing risk to such a system makes no sense at all. This is not to say that AFSCME frowns on personal investing for retirement. In fact, we've negotiated hundreds of workplace savings plans on behalf of our members and encourage them to participate by taking as much risk as they can afford. But investing is a gamble. So, we urge our members not to gamble with their most basic income -- the money they need for food and shelter. For most Americans, turning over a portion of Social Security to private accounts means risking the food money. They can easily end up with lower returns than expected, or outlive their accounts. Also, personal accounts schemes are very expensive. Providing promised payments to current beneficiaries while diverting payroll taxes to fund private accounts for younger workers would mean billions of dollars in new costs. These costs could only be met by big benefit cuts or big tax hikes. Clearly, every payroll-tax dollar that's diverted to private accounts is a dollar added to Social Security's eventual shortfall. In most of the private accounts schemes already proposed, benefit cuts figure prominently. AFSCME opposes these cuts, particularly raising the normal retirement age beyond current law (which already provides for a gradual rise from 65 to 67 by 2027). Many of our older members work in physically strenuous jobs, such as sanitation and nursing. Many more are in poor health. But proposals to raise the retirement age to as high as 70 would require that they either stay on the job or take significantly reduced Social Security benefits -- a decision that could destroy their health and quality of life. Millions of Americans would face this dilemma. So, raising the normal retirement age would be both impractical and cruel. The same can be said for another often-heard Social Security proposal: mandatory coverage of state and local government workers. The history of this issue dates to 1935, when the original Act excluded all public employees from Social Security participation. The law has been gradually amended over the years, allowing public employee groups to join the system voluntarily. Today, 75% of state and local government workers participate in Social Security. Law requires that the other 25% be covered by employer-sponsored retirement systems, most of which are traditional defined-benefit pension plans. While the vast majority of our members participate in Social Security and depend on its protection, AFSCME strongly opposes mandatory coverage of public employees who work in jurisdictions that do not participate in Social Security -- even if the coverage would apply only to new hires. Following are reasons we believe mandatory coverage is unnecessary, and would be harmful to our current and future members: Public Workers already covered by pension plans: State and local government employees who are not in Social Security are covered under public pension plans that were designed to replace Social Security's basic retirement and disability protection and provide some additional pension benefits; they do not need another retirement system that would duplicate the coverage they have now. Big expense for workers and employers: Mandatory coverage would be a big expense for newly hired workers and their public employers. While private sector pension plans usually require no direct contribution from employees, employee contributions in these public plans average between 8 and 9% of pay; employer contributions average between 13 and 14%. Social Security payroll taxes of 6.2% for both worker and employer would be added to these amounts. New tiers mean lower benefits: Faced with a mandate to contribute to Social Security, many public employers will attempt to reduce their costs by integrating their public retirement plans with the national system. This would force a restructuring of the plans for new hires and the establishment of separate tiers that would provide lower benefits to future retirees. An opening for privatizers: Since many legislators would like to replace traditional "defined benefit" public pension plans with risky "defined contribution" plans (aka personal investment accounts), restructuring retirement systems to accommodate Social Security would clearly add fuel to this fire. The fire could easily spread beyond these plans to endanger all state and local government pension plans. Destabilizes pension plans for-current participants: If new hires are put into separate and restructured retirement plans, it would cut off new funding to the existing plans on which current workers and retirees depend. This would reduce investment capital and plan assets, threatening benefits for current participants. Higher taxes: If mandatory Social Security coverage requires governments to expend more resources on public pension plans, it could mean higher state and local taxes. Not a good solution anyway. Bringing new state and local employees under Social Security won't solve the system's future shortfall. Estimates show it will extend the life of the Trust Fund by only two years. In the long run, it could actually lead to greater outlays for Social Security as new beneficiaries become eligible for benefits.
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