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Friday, October 21, 2016

Why Some Workers Aren’t Covered By Social Security

Q: Hey Tom — I like your style. You’ve helped clear up so many of the false stories out there about Social Security. And I realized I might have been spreading one of them!

I’ve complained for years about members of Congress excluding themselves from Social Security and setting up cushy retirement plans like none other. But one of my friends told me I was wrong. Then we got to talking about other groups not covered by Social Security, like railroad workers. I want you to set the record straight. Can you print a list of all the groups of employees in this country who are not covered by Social Security?

A: You’ll learn in a minute why I can’t give you such a list. But I can tell you now that your friend is right: Members of Congress aren’t on it. They do pay into Social Security. Here’s the story about how Social Security coverage has changed over the years.

When Social Security was born in the 1930s, most people in this country didn’t have pension plans, and a government program like Social Security was necessary for them. So just about everyone who worked for wages was covered by Social Security from day one. (Self-employed people came under Social Security’s umbrella a decade or so later.)

But some groups of employees already had pension plans in place. The two largest were railroad workers, who were covered by the railroad retirement system, and federal government employees (including members of Congress), who were covered by the civil service retirement system. Both of those pension plans had been around long before Social Security started. So it was decided to exclude these two large groups from Social Security.

In addition, Congress felt that it would be unconstitutional to force a federal government pension plan — Social Security — on state and local governments. So employees of state and local government entities were given the option of joining Social Security. Most did. About 80 percent of all such public employees became part of Social Security.

So that’s what happened when Social Security started in the 1930s. Nobody thought twice about any of these decisions, because they made sense.

But then, over the years, people started griping about the fact that members of Congress and other high-level government officials were not covered by Social Security. Just as silly and false Web rumors about Social Security exist today, stories began to circulate in the pre-Internet world that Congress had specifically excluded itself from Social Security in order to set its members up with a nice “Cadillac retirement plan.” Eventually, simply too much political pressure came to bear on Congress for it to remain outside of Social Security.

So in 1983, as part of a package of major Social Security-reform legislation, Congress passed a law mandating that all of its members, the president and vice president, all other high-level government leaders, and all federal employees hired after 1983 would be covered by Social Security.

Today, that leaves railroad workers as the only major nationwide group of employees still not covered by Social Security.

You asked for a list of other groups not covered. But that would be almost impossible. There are thousands of them. All are various state and local employee groups around the country (again, about 20 percent of the total). Those groups could be anything from a small sewer district of maybe 10 employees to a large group of thousands of employees, such as teachers. In fact, the largest groups of non-Social Security covered workers tend to be teachers — in states like California, Texas and Ohio. Also, many law enforcement agencies in these same (and some other) states are not covered by Social Security.

Today, around the country as a whole, about 93 percent of workers are covered by Social Security.

People still gripe about members of Congress and their pensions. They do get a pension that supplements their Social Security. But that’s the way the system is supposed to work.

For example, my wife was a county librarian in a state that was covered by Social Security. She gets Social Security, and she gets a pension from the county where she worked to supplement it. My neighbor worked for a large, national corporation. He gets Social Security, and he collects a nice pension from his former employer to supplement it. But as we all know, most company pensions are getting to be a thing of the past, replaced — if they are replaced at all — by 401(k) plans. That’s not the way things were supposed to work — but it’s the way this country’s retirement systems have evolved.

And one final point: As part of any upcoming reforms to Social Security, one commonly discussed proposal is what’s called “universal coverage.” That essentially means everyone in the country would be covered by Social Security. It’s an easy political fix, because it impacts only a relatively small group of people (the 7 percent of the population not covered by Social Security). But folks who work for state and local government agencies not participating in Social Security are worried that they’ll be dragged kicking and screaming into the federal pension system.

To ease their minds a bit, I would wager that any push for universal coverage will impact only newly hired employees.

If you have a Social Security question, Tom Margenau has the answer. Contact him at [email protected] To find out more about Tom Margenau and to read past columns and see features from other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at


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  • jams

    Well Tom, you’re right and you’re wrong. Though railroad workers do not collect Social Security, they do contribute to Social Security through payroll taxes called Tier 1. Their payroll taxes don’t go into the general Social Security fund however. They pay Tier 1 and Tier 2 taxes – one is for the railroad and the other is for Social Security. Their Tier 1 tax rate is the same as those who pay into Social Security, but they pay an additional tax for the railroad portion. When they retire, all of their Social Security earnings are indexed by year, then the highest three years of pay are used to calculate pension benefits.

    It’s important in these hard times, not to say anything that would misrepresent anyone’s contributions to these systems. They don’t collect it per se, but it’s not as if they don’t contribute either. If you don’t work for the railroads long enough to collect benefits, the money you contributed to Tier 1 is put back into your Social Security account and you receive Social Security instead – as long as you’re vested. Your Tier 2 contributions are lost to you forever.