Longtime Employees Penalized Twice – Losing COLA and Social Security

(Editor’s Note – The Addison City Council voted NOT to pay a cost-of-living increase to retired employees in 2016. This series will explain WHY a COLA is important and how it impacts retired employees. It has been prepared by former and current employees and local residents who are knowledgeable about the issue.)

Second in a series

Longtime Employees Penalized Twice –
Losing COLA and Social Security

The Addison City Council’s refusal to pay retirees a Cost of Living Adjustment (COLA) in 2016 creates a “double whammy” to their pocketbooks, thanks to changes in Social Security benefit payments since the Town opted to join the Texas Municipal Retirement System (TMRS). A bit of history explains why Addison Employees and retirees are so unhappy.

In 1981, Addison decided to move away from Social Security and rely, instead, on TMRS to provide a secure retirement for employees. This included a full range of ancillary benefits that included COLA. Having this full range of benefits helped Addison maintain a competitive position in recruiting new employees.

Later, the Town added a deferred compensation program with a contribution from the Town, to further assist employees who chose to save additional amounts for retirement. Participation in the deferred compensation program was always voluntary and participation rates varied greatly over the years. The program was never intended, implied or advertised as a way to take the place of TMRS or any of its benefits.

Most of our competitive cities also have deferred compensation plans. Some cities make additional contributions, as Addison did, and others did not. But, those cities that DID make additional contributions also enjoyed a more competitive position when prospective employees compared benefit programs. Some cities also began to pay a monthly stipend for additional education, certifications and assignment pay. These stipends can easily reach $300 a month or more. Addison chose not to compete in these areas.

The “double whammy” came about when the federal government added the Windfall Elimination Provision to the Society Security Act. This provision reduces any Social Security benefits for employees who worked for a municipal, county or state government that opted out of Social Security as Addison did. Simply put, if you worked for Addison for a significant period of time and retired but then re-entered the workforce where Social Security was deducted, any benefits paid as a result of the new employment would be significantly reduced.

So here’s the result: For the last several years, Addison salaries have been lower than those paid by competitive cities, resulting in frequent turnover. An Addison employee retires, counting on the COLA to stay even with inflation but the Council decides not to pay COLA for retirees. If the retiree, seeking to maintain some semblance of his/her former standard of living, takes another job, the Social Security benefits earned from that job are significantly reduced.

Is it any wonder that employees and retirees are angry? Not only are they earning LESS than employees in nearby cities, but they get penalized TWICE when they retire. Do you think an unhappy employee is going to make the effort of continuing the exemplary performance expected by the Addison Way? Not likely.