“Most public pension plans without Social Security – which account for about 27% of state and local workers, including 40% of teachers—fail to meet The Pew Charitable Trusts’ guidelines for retirement security for career workers,” according to a March report from the Pew Charitable Trusts by Mollie Mills and Aleena Oberthur.

By contrast, according to Pew, practically all of the plans that participate in Social Security “provide or come close to providing retirees with at least 90% of their preretirement take-home pay, Pew’s target replacement income ratio.

This outcome wasn’t the design for entities that lack access to Social Security. The Federal law that allows them to opt out of Social Security requires that they provide retirement benefits that are comparable to the rest.  Unfortunately, it hasn’t worked that way.

Despite the fact that retirement plans that don’t participate in Social Security tend to provide higher benefits than those that do, “public workers in states that do not participate in Social Security fall behind” reports Pew. “That’s because those in participating states often receive healthy state-sponsored benefits—in addition to ones from Social Security. And these differences are exacerbated by the fact that workers receiving Social Security benefits tend to be protected by cost-of-living adjustments (COLAs) that are higher than those offered by most public sector retirement programs.” In fact, Social Security has provided COLAs that keep up with inflation, while other types of state or local benefits haven’t come close. 

Aware of this issue some state and local systems have been making efforts to help employees without Social Security to keep up. 

For example, according to Pew, “The Public School Retirement System of Missouri, a defined benefit plan for the state’s teachers, offers a substantial 2.55% multiplier for members with at least 32 years of service and a COLA based on the Consumer Price Index, with a cap. In addition to offering a generous benefit, plan members’ contribution rates are relatively high, which drives the take-home pay adjusted replacement rate to slightly over 100%.”

As the report concludes “there is no one approach that works for all, but state policymakers can look to creative and tested solutions to ensure that workers continue to have sufficient income once they retire.”

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