How Many Public Workers without Social Security Could Fall Short?

Social Security is designed to serve as the base of retirement support, to be supplemented by employersponsored plans. However, some state and local government employees – approximately one-quarter, or 5 million workers annually – are not covered by Social Security on their current job. Federal law allows these noncovered workers to remain outside of Social Security if their state or local plan provides comparable benefits. This brief addresses the extent to which lifetime benefits received by noncovered workers are equal to what they would have received from Social Security alone, had they been covered. Hence, the brief compares the pensions of noncovered workers to a very low bar, leaving to later discussion the broader question of how their total retirement income compares to workers with a lifetime of Social Security and employer-provided benefits. This brief follows up on a CRR study that found that while all state and local plans currently satisfy the letter of the law, 43 percent do not provide Social Security-equivalent resources for some hypothetical new hires. Specifically, these plans shortchange workers who spend 6 to 20 years in noncovered employment before finishing their careers in a covered job. The first question addressed here is: how often do noncovered workers leave with 6 to 20 years of tenure? The second question is: do most of these medium-tenure workers start, or end, their careers in government? The discussion proceeds as follows. The first section sets the stage for the analysis by explaining why lifetime benefits for noncovered workers who stay 6-20 years fall short. The second section introduces the data and methodology used to analyze state and local tenure patterns. The third section presents the results, showing that around one-third of state and local workers – regardless of Social Security coverage or occupation – leave the government with 6 to 20 years of tenure. And around half of these medium-tenure workers finish their careers in a private (or federal) job. The final section concludes that a situation where hundreds of thousands of noncovered workers, in any given year, may not receive the basic level of Social Security protection from their pension raises concerns about their overall retirement security.