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Illinois Teachers and Social Security

Why Illinois Teachers Aren’t in Social Security

Updated December 13, 2019

Issue: Illinois teachers are not, and never have been, participants in Social Security. And even if TRS members do pay into Social Security through other employment and build up credit in the system, the resulting Social Security benefit in retirement is reduced because the member is receiving a TRS pension.

Many people wonder why Illinois teachers are not in Social Security. There is also a school of thought that says placing Illinois teachers in Social Security would reduce the state’s costs and obligations to TRS members.

Discussion: When Social Security was created in 1935, all state and local government employees across the country, including public school teachers, were prohibited from participating in the program because of constitutional concerns about levying a federal tax on state governments.

Because many government employees around the country did not have stand-alone pension plans like TRS, in 1950 Congress amended the Social Security Act to allow state and local government employees, including teachers, to voluntarily participate in Social Security — but only if they were not covered by another stand-alone retirement system like TRS. Illinois teachers have been TRS members since 1939.

All 50 states signed agreements with the Social Security Administration to permit these uncovered government employees to enter the system, but it was left to each state to decide which government employees would be covered by Social Security. In 1954, the Social Security Act was amended again to allow state and local government employees, except police and firefighters, to participate in the system even if there were covered by a stand-alone retirement plan like TRS.

At that time teachers in Illinois and 14 other states did not push for participation in Social Security for three main reasons:

  • Participation in Social Security would have required teachers and their local school district to pay an additional tax to Social Security; increasing costs to taxpayers.
  • Currently, teachers pay 9 percent of their salary and school districts pay 0.58 percent of its teachers’ salaries to TRS. The federal Social Security tax is 12.4 percent, split evenly between the employee and the employer. For school districts, placing teachers in Social Security would result in a 137 percent increase in total taxes and contributions devoted to retirement. TRS members would see their total retirement contribution rise to 15.2 percent of pay, a 68 percent increase.
  • Teachers' Retirement System retirement benefits were significantly better than those offered under Social Security.

That is still the case. The average TRS benefit in fiscal year 2019 was $54,268. The average Social Security benefit in 2019 is $17,532.

It would not save taxpayers money to place Illinois teachers in Social Security and correspondingly reduce TRS benefits and contributions.

Along with the increased cost to local governments for Social Security, adding teachers to the system would not wipe out the $131.5 billion that TRS currently owes all active and retired TRS members for the next 30 years. These are retirement benefits that already have been earned. Of that $131.5 billion, $78.1 billion is not covered by existing assets and still must be funded. The cost to state government of paying down this unfunded liability is currently about $6.9 billion per year.

Until the mid-1980s, teachers were allowed to receive both TRS benefits and full Social Security benefits earned from other employment. TRS members whose primary employment was as an educator not covered by Social Security had their Social Security benefits calculated as if they were long-term, low-wage workers.

Congress, however, saw these Social Security collections as a “windfall,” and passed the Windfall Elimination Provision in 1986. The WEP automatically lowers Social Security benefits for most retired TRS members unless the member accumulated 30 years of “substantial earnings” in other employment — essentially holding a second full-time job while being a full-time teacher.

In addition, Congress passed the Government Pension Offset to remove a similar perceived advantage from TRS members collecting Social Security benefits as a “dependent” of their spouse. The GPO automatically reduces the benefits a TRS member could normally expect to receive from a spouse’s participation in Social Security. Spousal benefits were originally designed to protect stay-at-home parents.

For more information on WEP and GPO, check the Social Security website:
WEP: http://www.socialsecurity.gov/pubs/10045.pdf
GPO: http://www.socialsecurity.gov/pubs/10007.pdf