Public Pensions and Social Security

The theory is that for public employees not covered by Social Security their government pensions should be higher (as should the amount they contribute towards their pension).  Since we have the raw data from actuarial reports* and have now found a website that lists states where public employees are not covered by Social Security:

  • Alaska
  • California
  • Colorado
  • Connecticut
  • Georgia (certain local governments)
  • Illinois
  • Louisiana
  • Kentucky
  • Maine
  • Massachusetts
  • Missouri
  • Nevada
  • Ohio
  • Rhode Island (certain local governments)
  • Texas (certain local governments)

we can test that theory.  As it turns out the top eight states where retirees receive the largest average payouts are all in the list above.  State number 9 is…

Oregon followed closely ($4) by New Jersey:

When you compare average employee deposits:


X – States not covered by Social Security
Y – States where certain local governments are not covered by Social Security



* since some of the actuarial reports did not break out employee deposits we excluded those plans from the second spreadsheet above


22 responses to this post.

  1. Posted by on August 31, 2016 at 12:25 am

    You might want to show whether state is a right to work state too.

    Sent from my Verizon Wireless 4G LTE Smartphone


  2. Posted by Thomas Foregger on August 31, 2016 at 12:29 am

    You might want to show whether state is a right to work state too. See also book called Shadowbosses for more information on government sector unions.


  3. Posted by S Moderation Douglas on August 31, 2016 at 2:23 am

    1) Don’t believe everything you see on the web. All miscellaneous California state employees are in Social Security. The cities and counties are a mixed bag. Teachers, as a rule, are not (don’t trust me on that either). The website listed is NEA, so they may concentrate on those teachers.

    2) According to Biggs and Richwine, the “value” to the employee of SS is about 2.4% of salary (because of the progressivity of SS). But the cost to the employer is still 6.2%.

    The subject of pensions in Fresno (city) and Sonoma County came up a few months back. Fresno is unique because they have a comparatively low pension formulae and no SS for either safety or misc. workers (no retiree healthcare, either). Sonoma is the opposite; high formulas and SS for both safety and non safety.

    As a general rule, nearly all safety workers and most teachers are non SS. All state misc. and most local non safety are in SS.

    Another general rule, for some reason, many, maybe most, California teachers have little, if any, retiree healthcare.

    For Thomas; California is not a right to work state. Employees must belong to the union or pay a “fair share”.


    • Posted by Theodore Konshak on August 31, 2016 at 10:51 pm

      The absence of Medicare looms large. These cost of these post-retirement medical benefits can be pay-as-you-go. Having looked most extensively at the Chicago Teachers’ Pension Fund, retiree health insurance is partially reimbursed. This is going to emerge someday as even a hotter issue than their pension plan.


    • It often varies by type of worker. So there are more states, and some of these states have some workers in Social Security.

      In states with underfunded pensions, the workers should be demanding to be added to Social Security. They were left outside SS at the demand of states, who said they could run their own pension systems better than the federal government. Does anyone believe that now?

      Adding to the Social Security/non-Social Security distinction is the taxable/non-taxable distinction.

      California teachers not only do not get Social Security, but their pension income is subject to that’s state’s income tax while Social Security payments are exempt.

      New York teachers not only get Social Security, but their pension income and Social Security income is entirely exempt from NY State and NYC income taxes. Private sector pensions are also excluded, but only after age 59 1/2 (down from 62) and only up to $20,000.

      So where does New Jersey fall?


  4. Posted by Anonymous on August 31, 2016 at 8:21 am

    A few BILLION of new jersey’s number is police and fire and over 80% of them are NOT covered under social security. Is that part of total amount?


  5. Posted by Anonymous on August 31, 2016 at 8:24 am

    A couple of additional points worth mentioning; average employer contributions and considering what sets Oregon and NJ pension policy apart ( because, according to your previous post, Oregon is ~100℅ full def).


  6. Posted by Anonymous on August 31, 2016 at 8:28 am

    Also, I thought P&FRS and SPRS use to be (not sure if they still are) FICA exempt.


  7. Posted by anon on August 31, 2016 at 9:20 am

    A quick look at this list combined with states that I know leads me to think this list is based primarily on whether teachers are in SS or not. There are definitely mixed bags of different types of employee groups and employers in states, as seen by the fact that at least 21 states have divided retirement system coverage. If you really want to check this, you need to check the Section 218 agreements for the government. .

    Some good info on SEction 218 agreements:


  8. Posted by dentss dunnigan on August 31, 2016 at 10:28 am

    Kiplingers newsletter say’s enough NJ # 5 least tax friendly state ,and sinking .Plus, with more than $188 billion in unfunded pension liabilities, the state’s long-term financial prospects are grim. A report by J.P. Morgan estimates that, in order to cover its massive debts, New Jersey would need to raise taxes by 26%, cut spending by 24% or increase pension plan participants’ contributions by 471%.


    • Posted by Anonymous on August 31, 2016 at 11:05 am

      burypensions on August 29, 2016 at 6:11 pm
      Can’t speak to other states but if New Jersey wanted to free up money to fund pensions all they have to do is wake to the billions of dollars being spent on useless projects that benefit primarily campaign donors. I am doing a series now on about Roselle needed room for an extra 100 pre-K kids so they’re building a $59 million mind/body complex and nobody at the Local Finance bursts out in either laughter or rage.

      This is also something the public sector unions might want to looks at though not the private sector unions who also benefit from all this questionable building.


    • Posted by Anonymous on August 31, 2016 at 12:42 pm

      Taking the day off from work or just a better opportunistic blog post to comment on?

      dentss dunnigan on August 30, 2016 at 10:15 am
      Absolutely …most are at work paying out well over half in taxes …


  9. Posted by Greg Lamon on August 31, 2016 at 11:32 am

    Here we go again with the average payout debate – does it include short timers or not in all states? Does it include part timer or not in all states? Just what does average mean and are the figures for each state really comparable with the others?. Then again, what is the cost of living in each state compared to each other? For instance, is the average Californian at $ 42,877 able to live a more extravagant lifestyle than the average Colorado retiree at $ 38,352 or the average Texan at $23,205? Note sure these averages mean much.


    • Posted by Anonymous on August 31, 2016 at 11:47 am

      Plus you have people that retired in the 70’s that only collect 10K ,the avg retiree that retired in 2014 collected 45K …..


  10. Posted by Zachary Janowski on August 31, 2016 at 11:46 am

    In Connecticut, only teachers are exempt from Social Security. State workers participate in SS.


  11. More and more people are beginning to realize that Defined Benefit plans like public pensions are not sustainable, including the private sector which has more or less done away with them. Here is my solution to this looming crisis that is only going to get worse without any correction of course:

    Please help spread the word…


    • Posted by Anonymous on September 1, 2016 at 5:09 pm

      In the end, no one can escape reality. And reality is that one must create one’s own value by one’s own efforts. Some people who got so much handed to them still didn’t put forth any effort, and for some inexplicable reason, some of them still blame the taxpayers …


  12. Posted by Mike on September 3, 2016 at 11:51 am

    I recall looking at the Illinois teachers’ plan, which has a relatively novel method of screwing new teachers to help bail out the State as well as this hopelessly underfunded plan. New teachers contribute 10% of salary, but receive a benefit expected to be worth 8% of salary. And….since these teachers are not covered by SS, the state need not make an employer SS contribution. Cash cow!


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