We are now in July, which means hot weather, but it also means a cost-of-living adjustment (COLA) for most ATRS members.
Every year, effective July 1, ATRS provides a 3% cost-of-living adjustment (COLA) for members who have been retired for at least 12 months. The 3% increase is what is known as a “simple” increase, because it is calculated as 3% of your base amount – your original retirement benefit calculation when you first retired.
You will see the increased benefit amount in your check for July, which should go out July 29. After you receive your July payment, if anything appears to be off, please call us at (501) 682-1517 or email us at info@artrs.gov.
ATRS and Social Security Benefits
Today I want to explain a topic that may be a little obscure. For most of our ATRS members, this discussion will just be informative and it will not have any financial impact on you, your retirement, or your benefits. But if you have ever worked in another state, this issue might be relevant to you. And since this issue pops up in the national news from time to time, I thought it would be helpful to explain this to all of our members.
When the Social Security Act was first passed by Congress in 1935, public school and other government employees were not covered because of legal questions about whether states could be subjected to a payroll tax. But by the 1950s, most states had elected for their public employees to participate. In 1951, our Legislature approved Act 248 which provided that all public-school employees in Arkansas would participate in Social Security.
So, given that long history, you may be surprised to learn that unlike Arkansas, many teachers and school employees in 15 other states do not participate in Social Security. For example, in our neighboring states of Texas, Missouri, and Louisiana, full-time public-school teachers generally do not receive Social Security benefits when they retire. Unless they have savings or other out-of-state or non-school work experience, their only retirement income is their pension.
Last year, the average monthly pension paid by the Teacher Retirement System of Texas was $2,199, which is a little higher than the ATRS average pension of $2,054 per month. A Texas retiree does not receive Social Security benefits for their school work experience, only their pension. The ATRS retiree, however, is eligible for Social Security benefits on top of that $2,054 monthly pension payment. In my opinion, that puts ATRS members in a much better position financially compared to retirees in Texas, Missouri, and Louisiana.
This issue attracts some national attention because of two penalties on Social Security benefits known as the “Windfall Elimination Provision” or WEP, and the “Government Pension Offset” or GPO. The WEP reduces benefits for individuals who have some work history where they paid Social Security taxes, but they also receive a pension from a state where they did not pay those taxes. The GPO is a similar type reduction, but it applies to the survivors and spouses of these individuals.
There are several national groups that are lobbying for Congress to repeal these provisions. And in the last few months, I’ve seen several national news stories highlighting this issue. These stories feature teachers and school employees in other states who are being penalized and losing most of their Social Security benefits as a result.
So let me be very clear: the WEP and GPO Social Security penalties are not a concern for you if all of your work experience is in Arkansas public schools, or if your other work experience was always in a job where you paid Social Security taxes on your earnings. ATRS retirees who only worked in Arkansas public schools do not have to worry about their benefits being penalized.
But, if you receive or will be eligible for a public pension payment from Texas, Missouri, Louisiana, or another state where school employees do not pay Social Security taxes, then your Social Security benefits may be affected by these penalties. If so, you can learn more about WEP and GPO from the Social Security Administration at this link: https://www.ssa.gov/benefits/retirement/planner/gpo-wep.html
You can also read how AARP explains it at this link: https://www.aarp.org/retirement/social-security/questions-answers/do-pensions-reduce-social-security/
Unfortunately, this is not an issue that our ATRS counselors can help our members with. If you have work experience in another state and think you might be affected, my first suggestion is that you call your pension system in the other state with questions. You can also reach out to the Social Security Administration with questions at this link: https://www.ssa.gov/agency/contact/
Lawsuit Later This Month
There is a long-running lawsuit that relates to an ATRS investment from several years ago, and it goes to trial later this month. ATRS is not a party to the lawsuit. But because the lawsuit is connected to an ATRS investment, the out-of-state lawyers have made it clear that they want to extract dollars out of ATRS for themselves and their foreign business client.
I’m not worried about this lawsuit, and I don’t believe there’s any reason for you to be worried or concerned. We have strong attorneys who are working to protect our System’s interests, and I am confident that ATRS will not have to pay out a single dime. The only reason I am mentioning the lawsuit is so you won’t be surprised if the trial generates any media coverage.
Your ATRS Board of Trustees is aware of the lawsuit, and they have refused these out-of-state lawyers’ demands for payment. We will fight to protect you and protect this System from any attempt to extort money from your retirement. Our fiduciary obligation is to you, the members of ATRS, and we will remain faithful and loyal to your best interests, always.
As always, if you ever have a question about your retirement options or need information or advice, please reach out to our counselors by calling (501) 682-1517 or e-mailing info@artrs.gov. And if you have any concerns or questions about the System as a whole, please contact me at the email address or phone numbers below.
Mark White
Executive Director, ATRS
MarkW@artrs.gov
Office: (501) 621-8853
Cell: (501) 541-2057