Los Angeles County set to withdraw its workers from social security

On New Year's Day, Los Angeles County is scheduled to set a dubious record.

Effective that day, the county's 55,000 employees will be withdrawn from the social security system - making the county the largest unit ever to defect. But it's a move that flies in the face of proposals being discussed to help cure the system's financial woes.

At issue is how to mandate participation in social security for those groups left out of the system when it was set up in 1935: federal employees, nonprofit employees, and state and local government employees. (The two latter groups were given the option to join, with a right to withdraw later, under federal legislation passed in 1950. Federal employees, who wield considerable political clout, have always fought inclusion in the system.)

The concept, known as ''universal coverage,'' has been debated by the presidentially appointed National Commission on Social Security Reform and is generally considered to be - in some form - one of the recommendations it will make by the end of the year.

Although the commission's staff estimates that mandated participation by all three groups would raise $110 billion in social security revenues by 1989, it's unlikely that the commission will propose such a sweeping move. Instead, those involved with the advisory group say, some modified form of universal coverage is likely to be proposed as a way to help raise the estimated $150 billion to $ 200 billion the system will need by 1989.

''Most of us will vote for including newly hired federal emloyees and those with less than five years' experience,'' says Robert Ball, former commissioner of the social security system and leader of the Democrats on the bipartisan reform commission. He explains that it takes five years as a federal employee to earn vested rights in civil service.

It is also considered likely that the advisory group will vote to include all nonprofit employees in the program. Of the estimated 5.3 million employees of nonprofit organizations, about 85 percent now participate in the social security system.

The stickiest problem, however, is what to do about state and local employees. The Social Security Administration (SSA) statistics show that 71 percent, or 9.4 million of the 13.2 million state and local employees, currently are covered by social security.

But the case of Los Angeles County highlights what observers say is an increasing and disturbing trend: Since 1981 - when US legislation was introduced , but not passed, to revoke the withdrawal clause - more and more state and local units and nonprofit organizations have filed to opt out of the system in favor of setting up, or enhancing, their own retirement programs.

As of the first of this year, according to SSA spokesman Jim Brown, 396 state and local employers with 189,000 employees and 723 nonprofit employers with approximately 290,000 employees have filed - under a two-year-long process - to pull out. Traditionally, only half of those who file to withdraw actually do so, but if all these organizations were to pull out, they would cost the system an estimated $7 billion over the next five years - a sum that goes on top of the estimated $150 billion to $200 billion needed to bail the system out by 1989.

''If major state and local units start pulling out, it would deprive the system of revenues right now. Savings wouldn't show up until several years down the line,'' says Dr. Robert Kaplan, a social security expert and dean of the Graduate School of Industrial Administration at Carnegie-Mellon University. ''It would aggravate an already severe situation.''

In addition, advocates of mandatory participation argue, the present system just isn't fair. For example, a state employee who has been covered under social security for 10 years reaps essentially full benefits even if his employer decides to withdraw from the system - thereby passing on the costs of his benefits to those who remain in the national pension program.

''If the average Joe working in a gas station doesn't have the right to pull out, why should anybody else?'' asks one insider, who requests anonynmity because his job is closely related to the issue.

One other argument against allowing voluntary participation in social security, say observers, is that no other plan can meet the benefits social security offers. In fact, some members of the local union have voiced concern that the county may not be able to provide as good a package.

State and local authorities - including those in Los Angeles County, where the pullout move has been taken by the Board of Supervisors as a way to augment declining revenues - argue that the US government is prohibited under the 10th Amendment from interfering with the reserve powers of states on this issue.

Universal-coverage proponents agree the problem is a tricky one. ''If we made participation mandatory, there would be a race to see who could get to the Supreme Court first to challenge it,'' says one congressional aide. But backers argue for plunging ahead and letting the courts settle the issue.

''The extent of the national government's power to impose'' social security participation on state and local employees ''is uncertain,'' says Jesse Choper, dean of Boalt Hall law school at the University of California, Berkeley, and a constitutional law expert. ''The question is by no means settled.

''The court could certainly find a way to uphold it if it chose,'' he adds. ''The general doctrine is sufficiently ambiguous (on Congress interfering at the state and local level) that it could be done.''