washingtonpost.com  > Politics > Bush Administration

Bush Lauds Ohio's Non-Social Security Plan

Retirement System Offers State Workers Personal Accounts, Matches More Money

By Michael A. Fletcher
Washington Post Staff Writer
Saturday, April 16, 2005; Page A04

KIRTLAND, Ohio, April 15 -- President Bush continued his campaign to restructure Social Security on Friday, participating in an event showcasing public retirement plans in Ohio that have operated outside the federal system.

Taking part in a town-hall-style meeting at Lakeland Community College, 20 miles northeast of Cleveland, Bush touted two state programs that allow employees to have personal accounts, much like those he has proposed for the federal retirement system.

_____Special Report_____
Social Security

Bush said employees in Ohio's retirement plans have greater flexibility, more control and the potential to build greater wealth than those who are part of Social Security.

"It makes sense. The more somebody owns something in America, the more they're going to have a vital stake in the future of this country," Bush said. "The state of Ohio has incorporated a lot of really important principles in this bill. . . . One of the key principles is government has got to trust people. The more government trust people, trust people with their own money, the more content, the more prosperous our society will be."

In Ohio, about 846,000 workers -- 97 percent of the state's public employees -- are exempt from Social Security. Instead, they have the option of investing in plans that guarantee a certain payout at retirement; plans that allow them to invest in a menu of stock and bond funds, much as employees do with 401(k) plans; or a combination of both.

The plan covering the vast majority of this state's non-university workers requires employees to invest 8 percent of their income -- higher than the 6.2 percent that workers are required to contribute under Social Security. That contribution is matched by a 13.31 percent contribution by the state, which is more than double the 6.2 percent employers are required to pay to Social Security.

"It's an interesting concept that the people of Ohio put in place. The government said, 'Why don't we trust people -- after all, it's their own money,' " Bush said.

Critics of Bush's plan to allow workers 55 and younger to divert up to 4 percent of their pay into private accounts say such accounts work to the disadvantage of low-income people, who have the least to invest.

"Usually what happens is that these plans cover people with pretty good salaries, but not many low-income people," said John Rother, policy director of AARP, the advocacy group for older Americans, which opposes Bush's proposal. "These kinds of plans have their place, but they're not a substitute for Social Security."

The employees in Ohio are among 5 million state and local government employees who do not belong to Social Security. The exemption is a holdover from the original Social Security law, which excluded state and local workers when it was enacted in 1935.

The law was amended in 1950 to allow the workers the option of joining Social Security, which many did. The law was changed again in 1983 to prevent any more state and local workers from opting out.

AARP has suggested that all new government workers -- even those working for employers outside the Social Security system -- be required to join the system to help bring more money in.

Earlier in the day, White House spokesman Scott McClellan declined to rule out the possibility of Bush backing a plan to include individual investment accounts as an add-on to the Social Security system, rather than financing them with Social Security taxes. "We're not going to get into ruling anything in or out," he said as Bush traveled here.

Ohio is the 20th state Bush has visited to promote his proposal since his Feb. 2 State of the Union address. He has said the accounts would provide a buffer to protect people from the cuts that are almost certain to come because of Social Security's funding problems. But his plan faces near-unanimous opposition from congressional Democrats and deep skepticism among Republicans. Polls have found that support for private accounts wanes as people learn more about the idea.

In remarks to a meeting of newspaper editors Thursday, Bush said he is determined to forge ahead, saying that he is making progress even if it is not evident to outside observers. "I'll continue talking about the issue a lot," he said, adding that some lawmakers are privately signaling their intention to engage the idea. "But it's kind of a -- beginning a little movement up there. People are talking. They just haven't made their cards public, yet."

© 2005 The Washington Post Company