PREPARING THE HOBBS FIRE DEPARTMENT FOR ENDING SOCIAL SECURITY PARTICIPATION

Transcription

1 1 PREPARING THE HOBBS FIRE DEPARTMENT FOR ENDING SOCIAL SECURITY PARTICIPATION STRATEGIC MANAGEMENT OF CHANGE BY: Steve Henry Hobbs, Fire Department Hobbs, New Mexico An applied research project submitted to the National Fire Academy as part of the Executive Fire Officer Program December 1999

2 2 ABSTRACT This research project reviewed retirement, disability, and survivor benefits available through Social Security and Public Employees Retirement Association (PERA). Because of the possibility of ending Social Security participation by the Hobbs Fire Department, management had the problem of how to adequately prepare its members for this change. The purpose was to gather and organize information concerning benefits that would be lost if Social Security participation ended, and what impact this would have on personnel. PERA benefits were examined to determine what benefits would still be available. This was accomplished using descriptive and evaluative research methods to determine (a) Social Security benefits and requirements for eligibility, (b) PERA benefits and eligibility requirements, (c) if any career fire departments in New Mexico did not participate in Social Security, and (d) opinions of Fire Department employees about Social Security participation. Procedures used included a literature review of materials addressing Social Security and PERA benefits, evaluation of survey materials from the New Mexico Municipal League, and a survey of department personnel. The findings were evaluated and recommendations were made to address the problem of preparing personnel for this change. Research revealed similar benefits were available through both PERA and Social Security. Social Security had benefits that were not available from PERA, and some of the benefits required less contribution time than PERA. PERA retirement benefits were

3 3 substantially better than Social Security. There were a substantial number of departments in the state that did not contribute to Social Security, and department personnel were largely in favor of ending Social Security participation. It was recommended the department educate its personnel on the benefits that would be lost with the stoppage of Social Security contributions. Personnel should also be encouraged to acquire disability and life insurance and invest part of the income gain that would be experienced.

4 4 TABLE OF CONTENTS ABSTRACT... 2 TABLE OF CONTENTS... 4 INTRODUCTION... 5 BACKGROUND AND SIGNIFICANCE... 6 LITERATURE REVIEW... 9 PROCEDURES RESULTS DISCUSSION RECOMMENDATIONS REFERENCES APPENDIX A (Social Security Credits) APPENDIX B (Age to Receive Full Social Security Benefits) APPENDIX C (Earning Limits) APPENDIX D (Credits Required for Social Security Disability Benefit) APPENDIX E (Sample of Social Security Survey) APPENDIX F (Social Security Survey results)... 32

5 5 INTRODUCTION The Hobbs Fire Department currently participates in both Social Security and the Public Employees Retirement Association (PERA). There is an existing modification that would allow for the City of Hobbs to not participate in Social Security for police and fire department employees. Personnel in our Fire Department, as well as the Personnel Department, have been considering adhering to this existing modification in order to stop Social Security contributions for these two departments. This modification does not include the funds contributed by both the employee and the City of Hobbs for Medicare. The retirement plan which City of Hobbs Police and Fire Department employees participate in allows for retirement with twenty years of service at any age. Therefore, employees can retire as early as 38 years of age, well before they are eligible for Social Security retirement benefits. The possibility that members of the Hobbs Fire Department, in the near future, may be excluded from Social Security participation presents management with the problem of preparing our organization and its personnel for this change and insuring that all the implications of the change are understood. The purpose of this research project was to determine what benefits would be lost if Social Security participation by the Hobbs Fire Department ceased, and what impact this would have on department employees now and in the future. Evaluative and descriptive research methods were utilized to answer the following questions: 1. What benefits are offered through Social Security, and what are the requirements to receive these benefits?

6 6 2. What benefits are available through PERA, and what is required to receive these benefits? 3. Are there any career fire departments in New Mexico that do not participate in Social Security? 4. What is the opinion of the employees of the Hobbs Fire Department about Social Security participation? BACKGROUND & SIGNIFICANCE The original Social Security Act of 1935 excluded government workers as well as some other groups (Kollmann, 1996). However, many changes have occurred which have extended Social Security coverage to these groups since this original legislation. In 1954, coverage was extended to state and local government employees, except firemen and policemen, who were in positions covered by a state or local pension plan, but only if coverage was agreed to by a majority of employees who were members of the pension plan. Firemen and policemen in some state and local governments were extended Social Security Coverage in the 1956 amendments. In 1967, firemen under retirement systems in all states were extended the opportunity for coverage under Social Security, and in 1990 employees of state and local governments not covered under a retirement plan were included (Kollmann, 1996). The Hobbs Fire Department is a career department employing 71 uniformed personnel who participate in a PERA retirement plan allowing for retirement with 20

7 7 years of service regardless of age. Additionally, personnel currently contribute to Social Security. The cost to the employee of these two programs is 16.2 percent of gross income for PERA and 7.65 percent for Social Security, including Medicare, which accounts for 1.45 percent of the Social Security contribution. The City of Hobbs pays percent for PERA and matches the 7.65 percent for Social Security and Medicare. During the past few years, the City of Hobbs has been in an economic decline due to the slowing of production in the oilfield, the main industry in the area. Because of this decline, there has been a decrease in working population and revenue for the City of Hobbs. This has consequently necessitated budget cuts. One of the cuts made in this year s fiscal year budget effective July 1, 1999 was the elimination of holiday pay for shift personnel in both the Police and Fire Departments. Prior to July, employees who worked shift work in these two departments, as well as a few shift workers in other city departments, received a set number of hours as extra pay for ten holidays each year regardless of whether they were actually working on those days. For Fire Department employees this amount was hours for each holiday. Additional leave time rather than pay now compensate these holidays. Holiday pay had totaled hours each year, which accounted for approximately 3.85 percent of a Fire Department shift worker s annual gross income. In addition, cutbacks were made in extra duty hours, which further decreased the annual income of many Hobbs Fire Department employees. In response to these decreases in income, some Fire Department employees began to look into various methods to increase their net income as well as save budget

8 8 money for the City. Additionally, the Personnel Director for the City of Hobbs, through a workshop he attended, had become aware that Fire and Police Department employees in the City of Hobbs might not have to participate in Social Security. Fire Department employees already knew of other departments and employers that did not participate in Social Security and had been considering this as an option for our department. Because discontinuing Fire Department participation in Social Security is an option being seriously considered by both department members and City management, it is imperative to examine the effects of that action in order to best prepare employees for changes which may occur. The National Fire Academy s Strategic Management of Change student manual states that resistance to change can be prompted by individuals not understanding the change. One of the reasons they may resist is because they do not comprehend the consequences of the change (National Fire Academy, 1996). Personnel need to be well informed in order to insure minimal resistance to this change. By determining answers to the research questions posed in this project, management will be best prepared to educate employees about the consequences and benefits of discontinuing participation in Social Security.

9 9 LITERATURE REVIEW A literature review was conducted in order to determine what information was available about Social Security and PERA benefits, and the requirements for eligibility. This review included materials obtained from the Social Security Administration in the form of pamphlets from the local office and publications from their web site. Materials were also obtained from the Congressional Research Service as well as items from the Hobbs Public Library. Under the Social Security Act, several benefits are provided. These include retirement insurance, survivors insurance, disability insurance, and health insurance, commonly referred to as Medicare (Tomkiel, 1996). Specific requirements must be met in order to be eligible for each of these benefits. For any benefit, a person must have enough work covered by Social Security to achieve insured status for the particular benefit. In order to receive benefits from Social Security, a certain number of credits must be earned. The number of credits required varies with each of the different benefits. A credit is received for each quarter of a calendar year. Prior to 1978 credits were given for each calendar year quarter in which a minimum of $50.00 was earned. If a person received the maximum yearly earnings subject to Social Security, four quarters were credited, even if the earnings were paid in less than four quarters. Beginning with 1978, quarters of coverage credited are based on total yearly earnings paid within a calendar year instead of earnings per calendar quarter (Tomkiel, 1996). The maximum credits that can be obtained for each year are four (Social Security Administration [SSA], 1998a). Appendix A lists the amount of earnings required for a credit for each year from

10 to Social Security Retirement Benefits The number of credits required to receive retirement benefits is 40 for those born in 1929 or later. For those born prior to 1929, the number of credits required for retirement benefits is reduced by one for each year prior to For example, those born in 1928 require 39 credits and those born in 1927 require 38 (SSA, 1999c). To be fully insured a person must earn one quarter of coverage for every year from attainment of age 22 up to and including the year in which age 62 is attained (Tomkiel, 1996). The amount of benefit a person receives upon retirement at full retirement age is determined using an extremely complicated formula. Full retirement age varies from 65 to 67 depending on the year of birth, see Appendix B (SSA, 1999c). All years of earnings are indexed and then the Social Security Administration determines how many years to use for computation. The number of computation years is determined by subtracting the year a person attained age 22 from the year that age 62 was attained. This figure is 40. Then, for retirement benefits, the five lowest years of earnings are subtracted. This leaves 35 years that are used in the computation of benefit amounts (Tomkiel, 1996). A person can take early retirement at age 62, however, benefits are permanently reduced based on the number of months the person will receive checks before full retirement age (SSA, 1999c). A person can also delay retirement beyond the normal retirement age. This delay will result in increased benefits for each year of delay up to age 70. For those turning 65 in 1999 that increase is 5.5 percent per year. The rate

11 11 gradually increases until it reaches 8 percent per year for those turning 65 in 2008 or later (SSA, 1999d). There are reductions in Social Security retirement benefits if you exceed certain annual earnings limits. Income that counts in this annual earnings test includes gross wages plus net income from self-employment minus any loss from self-employment. Wages count even if they are not covered by Social Security tax. Items such as interest, dividends, capital gains, legal damages (unless a result from a legal action for wages), rental income, income from a hobby, prizes and awards, and royalty from a work personally created on which a person received a copyright or patent prior to attaining age 65 do not count toward the annual earnings test (Tomkiel, 1996). The earnings limit for a person less than 65 in 1998 was $9,120, and the limit for someone ages 65 to 69 was $14,500 (SSA, 1998a). The earnings limits for 1978 through 1998 are listed in SSA Publication No and are included in Appendix C. Pensions received based on work in which Social Security taxes are not withheld can also reduce Social Security benefits. The formula used to figure your benefit amount is modified, resulting in a lower Social Security benefit. When the Social Security Administration figures benefits, they separate the average earnings into three amounts and multiply those amounts using three different factors. For a person who turns 62 in 1999, the first $505 of average monthly earnings is multiplied by 90 percent; the next $2,538 is multiplied by 32 percent; and the remainder by 15 percent. In the modified formula, the 90 percent factor is reduced to 40 percent for those who reach 62 in 1990 or later (SSA, 1999a). Spouses are also eligible for retirement benefits. A spouse receives one-half of

12 12 the retired worker s full benefit unless the spouse begins collecting benefits prior to age 65. If a person is eligible for both their own retirement benefits and for benefits as a spouse, their own benefit is paid first. If their benefit as a spouse is higher than their own benefit, a person will get a combination of benefits equaling the higher spouse benefit (SSA 1999c). Social Security Disability Benefits In order to qualify for disability benefits from Social Security a person must have earned a certain amount of work credits depending on the age that he or she became disabled. Before age 24, six credits in the three-year period ending when the disability starts are required. From ages 24 to 31 a person must have credit for having worked half the time between age 21 and the time of disability. For example, a person disabled at age 27 would need three years of work, 12 credits, out of the past six years. A person older than 31 must have from 20 to 40 credits depending on his or her age at time of disability, see Appendix D. At least 20 of these credits must have been earned in the 10 years immediately prior to the time of disability (SSA, 1999b). Disability benefits are based on a person s lifetime average earnings covered by Social Security and can be affected by other disability payments, workers compensation, and pensions from work not covered by Social Security (SSA, 1999b). Social Security Survivor Benefits Other members of a covered person s family can also qualify for benefits on his or her record. These include the following: a spouse who is age 62 or older, or any age if he or she is caring for a child of the covered person who is under age 16 or disabled

13 13 and also receiving checks; a disabled widow or widower age 50 or older if the disability started before or within seven years after the death of the covered person; an unmarried son or daughter, including an adopted child, who is under age 18, or age 19 if attending elementary or secondary school full time; and an unmarried son or daughter, age 18 or older if he or she has a disability that started before age 22 and remained disabled (SSA, 1998b). There is a special rule which allows for benefits to be paid to a person s children and the spouse who is caring for those children, even though a person does not have the number of credits needed. They can receive benefits if the covered person has credit for one and one-half years of work in the three years just before death (SSA, 1998b). A special one-time payment of $255 can be made when a covered person dies if they have enough work credits. This payment can be made only to the person s spouse or minor children if they meet certain requirements. (SSA, 1998b) Public Employees Retirement Association Benefits Members of PERA become fully vested after five years of service credit. Service is credited on a monthly basis and is not credited for a month where employment began after the sixteenth day or for a month where termination occurred before the fifteenth day. Service is also not credited for any month in which a person receives less than 50 percent of his or her regular monthly salary. No more than 12 months of service can be credited in a calendar year (Public Employees Retirement Association [PERA], 1996). A vested member in PERA has retirement, disability, and survivor benefits. These benefits are calculated based on the amount of service credit. In Municipal Fire

14 14 Plan 5, which the Hobbs Fire Department participates in, benefits are calculated at a rate of 3.5 percent of the final average salary (FAS) multiplied by the service credit. FAS is the monthly average salary for the 36 consecutive months of service credit producing the highest average (PERA, 1996). The service requirement for retirement under Municipal Fire Plan 5 is 20 or more years of service credits at any age. At 20 years, a retiree is eligible for benefits in the amount of 3.5 percent multiplied by 20 years. This calculates to 70 percent of the FAS. For each additional month of service credit, the benefit amount increases by one twelfth of 3.5 percent or percent to a maximum of 80 percent. This maximum is obtained with 22 years and 10 months of service credit. There are optional forms of payment for benefits. These provide varying degrees of survivor benefits after the retiree s death to his or her spouse or eligible children under the age of 25, and reduce the monthly amount of benefit (PERA, 1996). Disability benefits under PERA are figured two different ways. Disabilities occurring in the line of duty are covered from the first day of employment and are calculated using the service credit a person would have obtained if he or she continued membership until eligible for normal retirement. Non-duty disabilities are covered only after the member has become vested with five years of credit, and are calculated with actual service credit (PERA, 1996). There are many benefits common to both Social Security and PERA. Both programs provide for retirement income as well as disability and survivor benefits. Income from PERA retirement is substantially higher than can be achieved from Social Security and it can be accessed sooner. However, Social Security does provide for

15 15 disability and survivor benefits early in employment. Other than duty related disabilities or death, PERA does not provide benefits until the employee is vested with five years of service. It should also be noted that a PERA pension from an employer not contributing to Social Security impacts the amount of benefit a person can receive from Social Security. PROCEDURES Research Methodology The purpose of this research project was to determine what benefits would be lost if the Hobbs Fire Department were to end participation in Social Security, and what impact this would have on Hobbs Fire Department members. In an effort to answer the research questions posed in this project, descriptive and evaluative methods were used. Descriptive research was conducted in order to arrive at answers concerning the available benefits and requirements for benefit eligibility through both Social Security and PERA. This was accomplished using various written materials obtained, and compiling information in a manner which provided answers to the specific research questions. The information pertaining to Social Security was obtained primarily from the local Social Security Administration office. This information was in the form of government publication pamphlets which are specific to various aspects of Social Security. Upon checking with the local office, however, some publications were not

16 16 available. Additional publications were then located and downloaded from the SSA web site. One book was located at the Hobbs Public Library, which was useful in clarifying information on Social Security benefits. It was found that the SSA has numerous publications available. This project concentrated on the retirement, survivor, and disability benefits offered by Social Security and PERA. The materials gathered and researched were those that dealt with these aspects, therefore, it was necessary to sort through the descriptions of these publications in order to determine which were most appropriate for this research project. The only publication that was available to research PERA benefits was the Member Handbook. This handbook, although somewhat limited, did provide information needed to describe retirement, survivor, and disability benefits available from PERA. In order to answer the final two questions presented, evaluative methods were utilized. Determination of which career departments in New Mexico participated in Social Security was accomplished by evaluating survey information complied by the New Mexico Municipal League. These survey results were obtained from the City of Hobbs Personnel Director and provided information to answer the third research question. It was felt that members of the Hobbs Fire Department were in favor of ending participation in Social Security because of the comments that had been heard from various individuals. However, to adequately evaluate the opinions of Hobbs Fire Department employees, a survey was developed and distributed to 62 uniformed department members. Of the distributed surveys, 50 were completed and returned which accounted for an 81 percent response rate. Responses to this survey were then

17 17 compiled and evaluated to determine the answer to the fourth research question. A sample of this survey is included in Appendix E, and the survey results are presented in Appendix F. Assumptions and Limitations The primary assumption made in this research project was that the existing modification to end Social Security participation by the Hobbs Fire Department could actually be exercised. When an attempt was made to see and read this modification, it was not available. Due to the unavailability of this modification, this project was somewhat limited in its ability to fully research the ability of the Hobbs Fire Department to discontinue Social Security contributions, or the requirements to accomplish this. It was only assumed this could occur. However, this assumption should in no way affect the significance of this research or the validity of its results. RESULTS Answers to Research Questions Research Question 1. Social Security, not including Medicare, basically provides retirement, disability, and survivor benefits, provided the covered individual meets certain eligibility requirements. These requirements vary with each of the different benefits. In addition, certain members of a covered individual s family may be eligible for benefits. These include widow or widower, and unmarried children under age 18, or up to 19 if attending elementary or secondary school (SSA, 1998b). In order to be eligible for Social Security benefits, a person must work and pay

18 18 taxes to Social Security, although some people get benefits as a dependent or survivor on another person s Social Security record. As a person pays Social Security taxes, he or she earns credits based on the amount of annual earnings up to a maximum of four credits per year. The amount of earnings required to earn one credit is $740 in 1999 and goes up every year (SSA, 1999d). For a person to receive Social Security retirement benefits, 40 credits are required for a person born in 1929 or later. Retirement benefits can begin at age 62, however, in order to receive full benefits, an individual must wait until the age of 65 to 67 depending on their year of birth (SSA, 1999c). Also, to be fully insured, a person must earn one credit for every year from age 22 up to and including the year he or she reaches age 62 (Tomkiel, 1996). A person who does not work up to age 62, having at least one credit for each year from age 22 to 62 cannot achieve fully insured status. However, some retirement benefits are still available as long as the 40 credit minimum has been met. To determine benefit amounts, the Social Security Administration uses a complicated formula which utilizes the highest 35 years of reported earnings (Tomkiel, 1996). Because of this, if a person does not have 35 years of reported earnings, benefit amounts will be less. Benefit amounts are also reduced if post retirement earnings limits are exceeded (Tomkiel, 1996). These limits change each year. If a person is receiving a pension from an employment that did not pay Social Security taxes, benefits are also reduced due to the Social Security Administration s utilization of a modified formula in determining benefits (SSA, 1999a). Disability and survivor benefits require fewer credits, depending on age, for

19 19 eligibility. The number of credits required for these benefits range from six to 40 (SSA, 1998b). The number of computation years used to determine these benefit amounts are determined by subtracting the year a person reached 22 years of age from the year of onset of disability or death. The five lowest years of lowest earnings are then subtracted unless the person is 26 years of age or younger (Tomkiel, 1996). Research Question 2. Retirement, disability, and survivor benefits are also available from PERA. Except in the case of duty related disability or death, a member of PERA is not eligible for benefits until vested. In order to become vested in PERA, five years of service credit must be earned (PERA, 1996). Benefit amounts for the plan, which the Hobbs Fire Department participates in, are determined by multiplying the years of service credit by 3.5 percent. This same formula is used for all benefits except for survivor benefits in the case of a duty related disability. In this case, the service credit used is the amount a person would have had if he or she had continued membership until eligible for normal retirement. Research Question 3. The New Mexico Municipal League conducts annual surveys of municipal and county governments in the state of New Mexico. Included in the results of this survey is a benefit breakdown in which employer contributions to various benefit packages are listed. From these results employer contributions to Social Security from various municipal fire departments were available. Evaluation of these results revealed that ten of the responding entities had reported employer contributions of 1.45 percent for Medicare with no contributions to Social Security (New Mexico Municipal League, 1999). Seven of the municipalities that did not contribute into Social Security for fire department employees are fully paid career departments. Those

20 20 municipalities are Alamogordo, Albuquerque, Farmington, Las Cruces, Los Alamos, Rio Rancho, and Santa Fe. It is apparent, from these results, that there are career departments in New Mexico that do not participate in Social Security. Research Question 4. The opinions of Hobbs Fire Department employees were evaluated through the use of a survey distributed to the department s uniformed personnel, a sample of which is included in Appendix E. The results of this survey, as can be seen in Appendix F, revealed that a large majority, 88 percent, of the respondents was in favor of not participating in Social Security. Somewhat surprisingly, only 54 percent of the responding personnel felt that they would ever receive Social Security benefits. This would seem to indicate a substantial number of Hobbs Fire Department Personnel feel they are currently contributing to a program from which they do not expect to reap benefits. This being the case, it should be expected that those individuals would want to stop contributions. Two other questions were asked to determine whether personnel would invest the 6.2 percent gained from ending Social Security participation for insurance or investments. One-half of the personnel stated they would consider purchasing disability or life insurance, while 70 percent indicated that they would invest part of it. The survey results were also evaluated in terms of years of service and age of the respondents. The only pattern identified from this evaluation was in response to the question of whether the individual felt he or she would ever receive Social Security benefits. Affirmative answers to this question increased with more time in service and age. DISCUSSION

21 21 Since its inception in 1935, many changes have been made to Social Security. These changes have primarily been ones of expansion (Kollman, 1996). Changes have been made allowing groups not originally included to be covered. However, in 1983, a gradual increase in the age of eligibility for full retirement benefits from age 65 to 67 was implemented (Kollman, 1996). Individuals can now expect a longer wait before becoming eligible for full benefits. The Hobbs Fire Department survey results indicate younger employees do not expect to ever receive benefits from Social Security. The disability and survivor benefits offered by Social Security are far more expansive than those available from PERA. Social Security provides benefits to disabled children under a parent s record (SSA, 1998b). PERA has no benefits for this situation. Additionally, Social Security survivor benefits are available, under a special rule, when an individual has as little as one and one-half years of work in the three years prior to death (SSA, 1998b). PERA survivor benefits are not available until an individual has five years of service credit except for death in the line of duty (PERA, 1996). Retirement benefits under PERA municipal fire plan five allow for benefits at any age with 20 years of service (PERA, 1996). These benefits are available as much as 29 years earlier than Social Security retirement benefits. In 1996, the maximum Social Security retirement benefits for an individual 65 years old were $1,248 per month. For a person with average annual earnings of approximately $24,000, it was approximately $860 (Tomkiel, 1996). In comparison, a Hobbs Fire Department employee that retires with an average annual income of $24,000 would be eligible for $1,400 per month as early as age 38 if employment began at age 18. The retirement benefits of PERA are

22 22 higher than those of Social Security. Because of the complexity of Social Security, few members of the Hobbs Fire Department fully understand what benefits are available, or what is required to receive benefits. The large percentage of department personnel in favor of ending Social Security participation could be attributed, in part, to this lack of understanding. However, a compelling statistic to which this response may be attributed is the percentage of personnel, 70 percent, who indicated they would invest part of the money they are currently contributing to Social Security. It would appear that many employees feel that they can get a higher return on their earnings through private investment than they can by contributing to Social Security. RECOMMENDATIONS In order to prepare members of the Hobbs Fire Department for the possibility of ending Social Security participation, management needs to inform them of what benefits will potentially be lost. Personnel need to be made particularly aware of the survivor and disability benefits Social Security offers, and be encouraged to seriously consider acquiring disability insurance and life insurance in order to compensate for these lost Social Security benefits. Although personnel are well aware of the gain in net income that would result from ending Social Security participation, efforts should be made to stress this point, given the recent decreases in revenue experienced by many members of the Hobbs

23 23 Fire Department. Emphasis should be placed on educating department personnel in various investment opportunities this additional 6.2 percent of income affords employees. Additional research should be conducted to determine the exact impact a PERA pension will have on Social Security retirement benefits if the Hobbs Fire Department stops contributions to Social Security. Research for this project revealed a modified formula is used in determining benefits when an individual is receiving a pension from employment not covered by Social Security. However, there is still a question as to the effect of a pension from employment that was partially covered by Social Security.

24 24 REFERENCES Kollmann, G. (1996, December). Summary of Major Changes in the Social Security Cash Benefits Program: (Report for Congress). Washington, DC: Congressional Research Service. New Mexico Municipal League. (1999) Compensation Survey Response. Santa Fe, NM: Author. National Fire Academy. (1996). Strategic Management of Change (NFA-SMOC- SM). Emmitsburg, MD: Author. Public Employees Retirement Association. (1996, November). Member Handbook. Santa Fe, NM: Author. Social Security Administration. (1999, January). A Pension From Work Not Covered By Social Security (SSA Publication No ). Washington, DC: U.S. Government Printing Office. Social Security Administration. (1999, September). Disability Benefits (SSA Publication No ). Washington, DC: U.S. Government Printing Office. Social Security Administration. (1998, April). Facts And Figures (SSA Publication No ). Washington, DC: U.S. Government Printing Office. Social Security Administration. (1999, February). Retirement Benefits (SSA Publication No ). Washington, DC: U.S. Government Printing Office. Social Security Administration. (1998, July). Survivors Benefits (SSA Publication No ). Washington, DC: U.S. Government Printing Office. Social Security Administration. (1999, January). Understanding The Benefits

25 25 (SSA Publication No ). Washington, DC: U.S. Government Printing Office. Tomkiel, S. A., III. (1996). Social Security Benefits Handbook. Clearwater, FL: Sphinx Publishing.

26 26 APPENDIX A Social Security Credits One credit of coverage for each $250 in annual earnings to a maximum of four for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $ for each $

27 27 APPENDIX B Age to Receive Full Social Security Benefits Year of Birth Full Retirement Age 1937 or earlier and 2 months and 4 months and 6 months and 8 months and 10 months and 2 months and 4 months and 6 months and 8 months and 10 months 1960 and later...67

28 28 APPENDIX C Earnings Limits Under $3,240...$4, $3,480...$4, $3,720...$5, $4,080...$5, $4,440...$6, $4,920...$6, $5,160...$6, $5,400...$7, $5,760...$7, $6,000...$8, $6,120...$8, $6,480...$8, $6,840...$9, $7,080...$9, $7,440...$10, $7,680...$10, $8,040...$11, $8,160...$11, $8,280...$12, $8,640...$13, $9,120...$14,500

29 29 APPENDIX D Credits Required for Social Security Disability Benefits (born after 1929) Age at Disability Needed Credits 31 through or older... 40

30 30 APPENDIX E Social Security Survey The following survey is being conducted as part of a National Fire Academy Executive Fire Officer applied research project. Your participation in this survey is appreciated. Do Not put your name on this. 1. How many years of service with PERA do you have? 2. How many years have you contributed to Social Security? 3. What is your age? 4. Do you feel that you will ever receive any Social Security benefits? 5. Are you in favor of the Hobbs Fire Department opting out of Social Security? 6. If the Hobbs Fire Department opted out of Social Security would you be inclined to purchase disability or additional life insurance? 7. If the Hobbs Fire Department opted out of Social Security would you invest any or part your extra net pay for retirement?

31 31 APPENDIX F Survey Results Percentage of yes responses to the listed questions according to the years of service in PERA: 15 or more Do you feel that you will ever receive Social Security Benefits? 17% 40% 60% 93% Are you in favor of the Hobbs Fire Department opting out of Social Security? 100% 87% 100% 71% If the Hobbs Fire Department opted out of Social Security would you be inclined to purchase disability or additional life insurance? 33% 66% 60% 29% If the Hobbs Fire Department opted out of Social Security would you invest any part of your extra net pay for retirement? 66% 73% 73% 71% Percentage of yes responses to the listed questions according to age: Do you feel that you will ever receive Social Security Benefits? 22% 50% 71% 100% Are you in favor of the Hobbs Fire Department opting out of Social Security? 78% 91% 88% 100% If the Hobbs Fire Department opted out of Social Security would you be inclined to purchase disability or additional life insurance? 33% 68% 41% 0% If the Hobbs Fire Department opted out of Social Security would you invest any part of your extra net pay for retirement? 66% 77% 71% 0% Percentage yes of responses to the listed questions overall:

32 32 Do you feel that you will ever receive Social Security Benefits? Are you in favor of the Hobbs Fire Department opting out of Social Security? If the Hobbs Fire Department opted out of Social Security would you be inclined to purchase disability or additional life insurance? If the Hobbs Fire Department opted out of Social Security would you invest any part of your extra net pay for retirement? 54% 88% 50% 70%