A Lesson in Subtraction
By Dawn Ruth
That perception is accurate for many – but there are also many exceptions to the rule. A large number of teachers learn that lesson too late.
Hurricane Katrina shattered that illusion for many. Others discovered their perception was false during the five or six-year period before retirement when they begin the serious business of planning for the future. Others discover this during retirement. When it comes to teacher retirement in Louisiana, there are landmines everywhere.
Take Janice Cullen, for example.
She retired in 1985 from the Orleans Parish School system after teaching American history and Spanish for 20 years. All went well for a while. With a $750 benefit, she found she could easily make up the difference in her $23,000 salary by picking up part-time employment. She didn’t need a job that offered health benefits because it came with her teacher retirement as long as she paid a lump sum premium every six months.
Then trouble hit. She didn’t have the money one period to pay the premium and she lost her health benefits forever. The loss was irrevocable.
For a while, she paid for an American Association of Retired Persons policy but when she turned 65, the age at which most people get Medicare benefits, the AARP dropped the policy. During the time she worked for the Orleans Parish School Board teachers didn’t pay Medicare taxes so she wasn’t entitled to those benefits either. Now she’s 66 years old with no health insurance and no way to get it.
“That wasn’t right. I was a person who paid into it for over 20 years,” Cullen says. “That just proves that education doesn’t have as good of benefits as people think.”
Many recently retired teachers are suffering, too, for a variety of reasons, mostly connected to Hurricane Katrina. When the state fired 8,600 New Orleans teachers after the storm, many weren’t hired back. Some went to work for quasi-independent charter schools but their health insurance didn’t follow them because the New Orleans school system had a self-insured program.
Many face losing their health benefits because of the same irrevocable rule that snared Cullen back in the late 1980s. The state is still considering solutions for the working charter teachers but many retired teachers have fallen into Cullen’s quagmire.
When the New Orleans School Board’s system shrank to a few schools, and hundreds of teachers instead of thousands, the insurance program member pool decreased too, and retired school board teachers got socked with steep premium hikes. Mytris Johnson, a United Teachers of New Orleans staff member, says the premium went from $236 a month to $612. Many couldn’t pay the increase and lost their benefits before the state figured out a way to give them some temporary relief.
In this case, the retirees who didn’t pay and lost their health insurance were able to buy back in for a short period, but Johnson says many retirees lost their window of opportunity because they couldn’t be found to be notified about the temporary waiver.
“They got shafted,” Johnson says. “That’s it in a nutshell. They lost their houses, their jobs and then their insurance. It’s so upsetting.”
Even those who managed to pay for or buy back into the insurance program aren’t safe from future losses of benefits, Johnson says. The temporary relief that the state provided has expired and the premiums are expected to increase again by as much as $200 a month, an amount that many can’t pay on their fixed incomes, she says. Fortunately for them, when they turn 65, Medicare will cover them because rule changes since Cullen’s day have allowed them to pay Medicare taxes.
The teacher retirement system, a pension program that gives a percentage of pay based on years of service, is designed for people who join TRSL immediately after college and teach for 30 to 40 years. Teachers with 30 years of service receive 75 percent of the average of their highest three years of salary for life. Teachers who teach for 40 years receive 100 percent. By any measure, that’s a generous pension, but that result isn’t possible for teachers who turn to teaching later in life. A person who starts teaching in his or her 40s may teach for 20 years to receive half pay, not considered near enough by today’s experts who advise retiring with no less than 75 percent of one’s income.
Many expect to reach the 75 percent figure by adding Social Security benefits. But loss of earned federal benefits is another potential side effect of receiving Louisiana teacher retirement. Most know that they are not paying into Social Security but they’re unaware of the partial to full loss of the benefits they’ve earned from outside employment until late into their teaching careers.
Because they haven’t read the fine print, many naively count on a patchwork of benefits to make up for the loss of a full salary – the partial salary granted by the TRSL plus the Social Security benefits that either they earned themselves during a 40- to 50-year working history or their spouses earned during theirs.
For those who paid substantial Social Security taxes before becoming a teacher and joining TRSL, or through a second job while teaching, it can come as a shock to learn that a significant percentage of the Social Security benefit that the federal government promised at age 62, 65 or 66 won’t be paid after all. Because TRSL members don’t pay Social Security taxes – they pay into TRSL instead – their compiled Social Security benefit from other employment is reduced. In 2005, the Windfall Elimination Provision reduced Social Security benefits as much as $313.50 per month. The amount differs per individual and year of retirement, depending on pre-teaching earnings and annual benefit adjustments.
Under Social Security rules, the surviving spouse of a deceased pensioner is paid one-half of the deceased person’s benefit if the spouse didn’t work long enough under Social Security to have earned a benefit of his or her own. But a vested TRSL member loses most or all of that benefit under the Government Pension Offset provision, an additional federal rule designed to prevent government-related retirees from “double dipping.” There are some exceptions to the Windfall Elimination Provision and Government Pension Offset but they leave few teachers untouched.
These reductions may seem fair to taxpayers who worked long and hard for their modest Social Security benefits, but in some circumstances these provisions create situations where teachers must work long past regular retirement age to earn enough benefits to support their retirement. Many feel betrayed.
“To me, it’s an outrage to pay into an insurance policy and then when you reach the age of maturity, they find an excuse for not giving it to you. It’s Katrina all over again,” says Ron Chapman, a history professor at Nunez Community College and former small business owner who paid Social Security taxes for decades before switching careers.
Teachers who thought they could retire at 62 or 65 often learn in state-sponsored retirement workshops that the Social Security reductions mean working well into their 70s.
“I’ve seen some really upset people,” says Heather Landry, a TRSL representative who travels around the state holding teacher workshops. “They expect to get Social Security and all of a sudden it’s taken away.”