A recent story on a federal rule that could reduce the Social Security
benefits of public employees brought a slew of responses from readers,
especially teachers.
They told of a little-known loophole to a Social Security law that can
prevent teachers and other public employees from receiving reduced or no
Social Security benefits at retirement.
The law they're referring to is the "government pension offset" or GPO.
It's a one of two little-known amendments to the Social Security Act
aimed at keeping government workers who receive civil-service pensions
from double-dipping into public money.
The government pension offset applies to the Social Security benefits a
public employee would receive through his or her spouse.
According to the rules, if a person works for a federal, state or local
government that is exempt from paying Social Security taxes, the pension
the person receives from that agency will reduce – and possibly
eliminate – benefits received from Social Security.
The offset reduces the amount of a public employee's Social Security
spouse benefits by two-thirds of the amount of the government pension.
For example, if an affected teacher gets a monthly civil service pension
of $600, two-thirds of that, or $400, must be used to "offset" the
Social Security spouse benefits. If the teacher is eligible for a $500
spouse benefit, he or she will receive $100 per month from Social
Security – $500 minus $400.
In some cases, the offset may cause a person to receive no Social
Security benefits at all, experts say.
The offset is aimed at making benefits more equitable across the board
between those who have paid Social Security taxes and those who have
not, Social Security officials say.
Social Security spouse benefits are intended to provide income to wives
and husbands who have little or no Social Security benefits of their own
but who are financially dependent on their spouses who worked at jobs
covered by Social Security.
"Those people who have contributed into another pension not covered by
Social Security are not seen as dependent on spouses," says Raúl
Garduño, spokesman for the Social Security Administration in Dallas.
Before the offset provisions were enacted, many government employees
qualified for a pension from their agency and for a spouse's benefit
from Social Security, even though they weren't financially dependent on
their husbands or wives.
Teachers, who make up the largest group affected by the rule, have been
particularly vocal about the hardship the offset imposes on them.
The problem is particularly acute in Texas because it's one of 15 states
where some public employees, including teachers in many school
districts, don't have Social Security taxes withheld from their
paychecks. Many school districts opt instead to pay into the Teacher
Retirement System of Texas, or TRS.
But there's a little-known exception to the GPO.
In the loophole
Exempt from the rule are state, local or military-service employees whose
government pension is based on a job where he or she was paying Social
Security taxes on the last day of employment.
So some teachers are getting around the GPO by resigning from their
school district that doesn't withhold Social Security taxes and going to
work for one day for a district that pays into both Social
Security and the teacher retirement system.
This maneuver makes them eligible to receive full spousal benefits from
Social Security, as well as benefits from the teacher retirement system.
"It is absolutely true that if you work for even one day in a school
district that pays Social Security and then you leave or retire, you can
in fact draw both," says Aimee Bolender, president of the Alliance of
Dallas Educators, which represents teachers in the Dallas Independent
School District. "This is a huge benefit that we have discovered."
The union is educating its members about the loophole.
Congress' intent
Congress intended the exemption to encourage public agencies to pay into
the Social Security system, Mr. Garduño says.
"It was designed to encourage employers as a whole to bring their
employees over into Social Security," he says. "The intent was never to
have individuals go over to another position to go ahead and claim
Social Security."
'Hit or miss'
Eric Hartman, legislative director for the Texas Federation of Teachers,
says it's not easy for Texas teachers to take advantage of the exemption.
"There are very few districts that you could resort to to find that
employment and gain Social Security coverage," he says. "We're talking
about no more than 50 districts in the whole state, and most of them are
quite small. Very few positions would be available for someone to fill,
even on a short-term basis."
Of that 50, only about half "would be contributing to Social Security
for someone in a teaching position," Mr. Hartman says.
Instead, they choose to pay Social Security taxes for support staff,
such as clerical workers, janitors and bus drivers, he says.
"As a practical matter, it's very hit or miss," Mr. Hartman says.
