At least one Texas school district is using the internet to promote a temporary employment program as a way for teachers who are not covered by Social Security to exploit a loophole in the program’s exemption laws. The little-known loophole allows participants to recoup money paid into the system, which they say is lost through a provision known as the Government Pension Offset.
The Coleman Independent School District in Texas advertises through its web site that by accepting positions of temporary employment, teachers who work in school districts not covered by Social Security can become eligible to receive full spousal benefits from the system for the rest of their lives. In exchange for as little as $3 in Social Security tax, a teacher and spouse can receive as much as $150,000 in benefits during their lifetimes.
It’s an exemption the federal government says could cost the Social Security program more than $450 million over the retired teachers’ lifetimes.
“Coleman ISD employs people for temporary employment (sometimes as little as one day) in a non-professional role. This may include custodial work, cafeteria work, clerical work, classroom aide, etc. If employed by Coleman ISD in a temporary role, your compensation for the work will have deductions for the Teacher Retirement System and for Social Security,” advertises the district on its site.
Social Security benefits are usually payable to the spouses of retired, disabled, or deceased workers. But a 1977 law, the Government Pension Offset (GPO), reduced those spousal benefits for state and local government workers who also receive a pension from work not covered by Social Security.
However, the law allows workers to avoid that reduction in benefits if they are covered by both Social Security and their government pension during their last day on the job, the General Accounting Office (GAO) said in a report Aug. 16.
The investigative arm of Congress said at least 4,795 teachers in Texas and 24 in Georgia have used this loophole, transferring briefly to jobs covered by Social Security before retiring.
In Texas, the teachers typically worked a single day in clerical or maintenance jobs before retiring, paying about $3 in Social Security taxes, the GAO said. In Georgia, teachers worked a year in another teaching position in a school district covered by Social Security.
Officials in both states told GAO investigators that use of the exemption likely would grow as more people become aware of it, the report said. Teaching associations and web sites have been spreading information on how to use the exemption, according to the agency.
Coleman ISD charges teachers a $200 “application fee” to take advantage of the loophole. It’s unclear how much money the district has collected from the scheme, and officials there did not return an eSchool News reporter’s phone calls before press time. But the GAO report said at least 31 Texas districts were involved in similar schemes, and one districtwhich the agency did not namehas reaped $283,000 in such fees. Some districts charge as much as $500 per application, the GAO reported.
Lonnie Hollingsworth, director of legal services for the Texas Classroom Teachers Association, said his group does not discourage teachers from taking advantage of the exemption and argues that teachers are perfectly within their legal right to do so.
“This is not a loophole,” he said. “It’s an exemption written into the GPO. It was obviously intentioned to function the way that it functions. Whether it was intended for teachers to be able to take advantage after one day, I don’t know.”
But Hollingsworth said it has been the teachersnot the teacher unionswho have spearheaded efforts to exploit the exemption.
“It’s really been a grassroots movement led by teachers. We got so many inquires that we decided to stick the information on our web site,” he said. “It’s kind of like ‘Field of Dreams’if you build it, they will come.” Ideally, Hollingsworth said, the association would prefer to see the pension offset eliminated. “Now that this exemption has bee brought to light, we are hoping there will be more efforts to eliminate the GPO altogether,” he said. Until then, “if teachers can find a way to maximize their benefits, more power to them.”
The stance taken by the Texas association was echoed to some extent by officials with the National Education Association (NEA).
“We have not publicized [the exemption] one way or the other,” said Carrie Lewis, a policy analyst with the NEA. But “there are folks who need those benefits and who count on those benefits when they retire,” Lewis said. “Our overall feeling is that the [exploitation of the loophole] is more indicative of an overall problem with the system itself.”
There are 15 states in which public employees are not covered by Social Security, the Associated Press reported: Alaska, California, Colorado, Connecticut, Georgia, Illinois, Louisiana, Kentucky, Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island, and Texas. However, four of those statesGeorgia, Kentucky, Rhode Island, and Texasremain uncovered only in certain local municipalities.
That means teachers in those states who wish to exploit the GPO “loophole” can do so by accepting part-time positions in districts where the Social Security coverage is employed.
While investigators said they did not have time to confirm whether government workers outside of Texas and Georgia were using the loophole, the exemption could be used in about 2,300 government retirement plans in other states, the report said.
Despite teacher enthusiasm, some lawmakers say the exemption undermines the ability of Social Security to provide equal coverage.
“Equal treatment under Social Security is impeded when over 4,800 people are changing jobs at the last moment, and even switching from teaching to janitorial work, in order to take advantage of a loophole,” said Rep. Clay Shaw, R-Fla., who requested the report. Shaw said he has proposed legislation to address the problem.
The GAO said Congress should change the rules allowing the last-day exemption by setting a longer minimum time period to avoid abuses.
General Accounting Office
Social Security Administration
Coleman Independent School District
Texas Classroom Teachers Association
National Education Association