National Association of State Retirement Administrators

Social Security Coverage

Approximately one-fourth of employees of state and local government participate in a public retirement system in lieu of Social Security. This includes approximately 40 percent of public school teachers and over two-thirds of firefighters, police officers, and other first responders. Every state has groups of public employees that do not participate in Social Security. Most to substantially all of the public employees iAlaska, Colorado, Louisiana, Maine, Massachusetts, Nevada, and Ohio are not in Social Security.

Employers and employees who do not participate in Social Security do not pay the Social Security portion of the FICA tax, (6.2 percent of payroll each). Thus, public pension benefits for non-Social Security-eligible employees usually are higher than those of other public employees, to compensate for the absence of Social Security benefits.

Non-participation in Social Security dates to the origins of the Old Age, Survivors, and Disability Insurance program in 1935, when coverage was limited to private sector workers due to constitutional concerns regarding the authority of the federal government to impose taxes on states and political subdivisions. After the Social Security Amendments of 1950, states were allowed to enter into voluntary agreements with the Federal government to provide Social Security coverage to public employees. 

Many state and local government pension have elected to complement their own pension programs through coverage under Social Security. Other governments decided not to participate in Social Security but rather provide their own independent programs of retirement benefits. 

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