Social Security moves back deadline to change school employees' contributions

Wednesday, January 14, 2009

School district employees who faced a big increase in their retirement contributions will get at least a temporary reprieve, the Social Security Administration has decided.

In a letter sent last week to Sen. Claire McCaskill, David Rust, deputy commissioner of Social Security for Retirement and Disability Policy, said a July 1 deadline for deciding which school employees should be paying Social Security taxes has been set aside. Rust also said any changes imposed on school employees would apply only to future earnings and no attempt would be made to impose retroactive taxes.

That decision is good news both for employees and school districts, said Dr. Jim Welker, superintendent of the Cape Girardeau School District. "It is a relief, at least for right now," he said.

In November, McCaskill and most other members of the Missouri Congressional delegation protested a planned move by Social Security to begin collecting payroll taxes from some school employees who are also enrolled in the Missouri Public School Retirement System.

While the Social Security Administration had not yet determined which employees must pay the tax, the state Office of Administration issued a letter in October listing the positions of teacher, substitute teacher, supervisor, principal, librarian, nurse, superintendent and assistant superintendents as exempt.

That meant counselors, teacher's aides, bus drivers and some others were likely to begin paying 6.2 percent of their pay into the Social Security system along with a 9 percent contribution to the state retirement plan. Employees who remain enrolled only in the retirement system pay 13.5 percent of their salary into the state-provided retirement plan.

Districts must match employee contributions, whether to the school retirement system or to Social Security.

In the letter, Rust said Social Security is working with the state to create the precise list of employees who must pay the tax. He said Social Security must resolve the issue by July 1, 2010.

"To us, that is a win," said Leila Medley, political director of the Missouri National Education Association, a teachers organization. "July 2009 was looming, there were rumors of who would pay and who wasn't and what kind of penalties would be imposed. Everybody was running scared."

The key question facing the state and Social Security is the interpretation of how federal and state law interact, Sen. Jason Crowell, R-Cape Girardeau, said in a news release. The Missouri Legislature expanded the list of school district employees who benefit from the retirement system in 1984, ending their contributions to the Social Security system. But Social Security has determined that those changes were not retroactive and that only employees exempt from Social Security taxes before the law change remain exempt.

It is not enough to delay implementation of the taxes, Crowell said. "We still need to remain vigilant and work to get this decision totally reversed."

The issue must be settled, Rust said. "We first would like to emphasize that there has not been a change in the federal interpretation of the coverage laws," Rust wrote to McCaskill. "The issues we now face resulted instead from a misunderstanding of the absolute coverage agreement and the complexities of the varied positions in the numerous school districts."


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