New teachers can expect to see their pensions reduced as a
result of a funding crunch that has left the California State
Teachers’ Retirement System wondering how to fill a $23 billion gap
over the next 30 years.
Hollister – New teachers can expect to see their pensions reduced as a result of a funding crunch that has left the California State Teachers’ Retirement System wondering how to fill a $23 billion gap over the next 30 years.
Administrators began discussion yesterday in Sacramento about how to best cut costs to save the system from going bankrupt. Some of the options on the table include reducing retiree benefits for teachers hired after Jan. 1, 2006 from $50 to $500 per month, reducing benefits and cutting the annual two percent cost-of-living adjustment.
Teachers already complain that they are unfairly treated by being disqualified from the majority of their social security benefits because they are a part of the state retirement system, known as CalSTRST. They blame two penalties by the Social Security Administration which subtract as much as 50 to 66 percent from monthly checks because they assume teachers are adequately compensated by their teacher pensions.
The penalties in question are the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP), designed to balance out income for teachers, who would otherwise get two pensions – one from the federal government and another from CalSTRST.
Barbara Ament, who taught 27 years at Hollister School District and another five at a Mountain View school, thought she knew what the federal government owed her once she retired. But when she went to the social security office in Gilroy when she retired in 2003, she was shocked at how little she got. “I didn’t know about the penalty until that day,” she said.
Instead of getting $900 like she had estimated, she received a check for only $120. Now she says she feels cheated by the system and left with a big deficit in her income for the years she assumed would be spent in comfort and financial security.
“I could have been putting money into an IRA if I had known about it,” she said.
A study released by the California Retired Teachers Association last month says teachers who work less than 30 years, will see less money in retirement and are unlikely to have full health benefits.
“What this is, is a perverse needs test,” said Ed Ely, a spokesman for the California Retired Teachers Association, which has launched a campaign against the two penalties. “It tells teachers that they don’t deserve that money simply because they chose the profession.”
But the Social Security Administration has defended the penalties as a good way to level the playing field between those with teacher pensions (fire fighters have similar pensions) and the rest of society.
“Social Security has never been advertised as something you should rely on one hundred percent,” said Steve Ponzio, manager of the Gilroy Social Security Administration office. “It is just one aspect of many that people should consider in retirement, as well as savings and work-related pensions.”
Still, retired teachers are angry and have taken it on themselves to let California politicians know. Recently San Benito County Division of Retired Teachers collected signatures opposing the penalties and sent them to the California Legislature. A proposed bill – HR4391 –that would modify GPO and WEP restrictions, giving teachers like Ament a little more each month, is also in the House.
Teachers can expect to redeem from 81 to 88 percent of their last annual income in retirement, meaning they don’t always have money to spend on things such as medicine, the cost of which rises with age, according to the study, titled “How Will You Spend Your Future?”
California teachers pay eight percent of their salaries into their pension plans, while districts contribute another 8.25 percent and the state about 2 percent. Teachers also have a voluntary savings plan, similar to a 401k, they can contribute to.
The GPO and WEP were implemented in the mid-’80s and affect an estimated 94,000 retirees, who lose an average of $3,600 a year because of the penalties.
The two social security penalties are especially unfair to those who entered teaching mid-career and contributed money to Social Security through other jobs, say teachers.
One of them is Allen Alstad who worked at a super market and served four years in the Air Force before becoming a teacher in 1968. He expected a $1,000 social security check upon retirement, but in 1996, when he finally left his teaching job in the Hollister School District, he was dismayed to find out that he would get only $350.
“I had a bond with my government that this was my investment and it would come back to me when I retired,” said Alstad.
A friend who was a stay-at-home mother her entire life and is now 65 years old, gets more money from social security than Alstad, a fact Alstad considers nothing short of outrageous.
“It’s just unfair – I worked my whole life and am penalized for it,” he said.
California is one of 15 states where the GPO and WEP penalties are in place. Pension plans were doing relatively well during the booming ’90s because of the good returns, but suffered losses starting in 2000.
Karina Ioffee covers education for the Free Lance. Reach her at (831)637-5566 ext. 335 or
ki*****@fr***********.com
