In addition, the subcommittee found the normal costs of the state’s retirement systems — the amount needed each year to cover benefits earned that year — to be less than those of neighboring states and of private sector employers, chiefly because almost 80 percent of the workers covered by the state plans are not eligible for Social Security, so the state does not pay a federal tax on their salaries. In contrast, private sector employers must pay a 6.2 federal payroll tax to provide Social Security coverage for their workers, and on average contribute 4.4 percent of payroll to 401(k) and other retirement plans, for a total cost of 10.6 percent, compared with state government’s normal cost, which averages about 9 percent of payroll.
In other words--state and local governments "opt-out" of participating in Social Security and pay less! (Wish I could do that!)
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