Press Release: University of Memphis Lays off Workers 6 Days before Christmas to Dodge Social Security

University of Memphis Lays off Workers 6 Days before Christmas to Dodge Social Security

December 16, 2014
Memphis, TN - On Tuesday, December 9th, the University of Memphis sent a memo to its temporary employees informing them that in lieu of Social Security coverage, they would be enrolled in a Federal Insurance Contributions (FICA) alternative plan. FICA alternative plans were created in 1990 by the Omnibus Budget Reconciliation Bill, which allowed public employers to enroll temporary, seasonal employees in them. In order to ensure employees meet this status, the university plans to fire these workers on December 19th, force them to reapply for their jobs and rehire them next year without Social Security benefits. Workers were surprised to see this cut in retirement benefits presented as a positive change.

“The university implied in their memo that we would make more with this new plan and that they were offering us an exciting new benefit. The truth is the opposite though, this plan means a real pay cut for us, as well as a less stable retirement",” said Jeffrey Lichtenstein, a temporary employee in the University of Memphis CPGIS department. “They didn't give us any opportunity for input. Instead, they just laid us off, told us to reapply for our jobs, and enrolled us in the new program. That one of our state institutions would conduct itself in such a way is really an issue of public concern.”

This is a deliberate move by the university to avoid contributing to their workers’ retirement. Today, workers and the university each contribute 6.2 percent earnings into the Social Security system. Under a 401(a) plan, workers are forced to put 7.5 percent of their pay into a riskier retirement fund managed by Wall Street investment bankers; the university pays nothing into this fund. Rather than the guaranteed lifetime income that Social Security provides, the 401(a) plan puts the entire retirement risk on the backs of workers.

In addition, initial 401(a) investment options typically have interest rates of only between 1-3%. Workers can opt into higher risk, higher return investments, but these typically have hefty fees, which can erode retirement savings dramatically.

This plan is not just problematic for university employees whose retirement savings will soon be subject to the volatility of the stock market. It also threatens the stability of the Social Security system for current retirees.

“I was a teacher for 39 years in Memphis City Schools. Social Security is my income! It’s a real part of what keeps me living. It’s food, clothing and shelter. I put it aside during my working years as a main part of my retirement plan” said Mrs. Earline Duncan, retired teacher from Lester Elementary School, MCS. “It’s cruel to deny a worker the opportunity to participate in Social Security."

“FICA alternative plans represent a partial privatization of Social Security,” said Dr. David Ciscel, Professor Emeritus of Economics from the University of Memphis. “Current retirees depend on current workers to continue paying into the program to keep it solvent. Every time an employer chooses to enroll employees in individual investment accounts instead of Social Security, the program is threatened. Social Security is designed to ensure that all Americans have a dignified retirement, those currently working and those who are already retired.”

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For more information, please contact:

Tom Smith

United Campus Workers – Communications Workers of American Local 3865

865-454-0241 (cell)