Wednesday, August 21, 2002

The U.S. General Accounting Office REPORTS that public school teachers in Texas and Georgia are using a Social Security loophole to qualify for increased benefits that during their lifetimes could amount to about $450 million. Workers enrolled in state and local government retirement plans do not pay social security taxes or receive benefits. There are about 2,300 of these retirement plans in existence, with approximately one-third of the workers not covered by Social Security.

Generally, Social Security benefits are payable to the spouses of retired, disabled, or deceased workers covered by Social Security. If both spouses worked in positions covered by Social Security, each may not receive both the benefits earned as a worker and the full spousal benefit. The worker receives the higher amount of the two. Until 1977, workers receiving pensions from government positions not covered by Social Security could receive their full pension benefit and their full Social Security benefits, as if they were non-working spouses. In 1977, legislation created a Government Pension Offset (GPO) to equalize the treatment of individuals covered by Social Security and those with non-covered government pensions. GPO prevented workers from receiving a full spousal benefit on top of a pension earned from non-covered government employment. The intent of the law was to treat government workers just like everyone else.

The law allows workers to avoid that reduction in benefits if both Social Security and their government pension cover them during their last day on the job. As you might expect, teachers are transferring to clerical and maintenance jobs outside the government pension system before they retire. In Texas, some teachers are working a single day as a janitor before retiring, and paying about $3 in Social Security taxes for that day of work to take advantage of the loophole.

The investigators said they did not have time to confirm if government workers outside of Texas and Georgia were using the loophole—which surely they are.

Dave’s quick analysis and recommendations:
1. Workers in all 2,300 government retirement plans could be taking advantage of this scam, which could put the cost to taxpayers at over $100 billion. Of course this scam will only grow in size, as more government workers become aware of it.
2. This gross conduct shows the inherent problems of exempting some people from laws. Either a law is good enough for all of us or none of us. In case you didn’t know, Congress has its own pension plan, and is exempt from Social Security taxes.
3. Since Social Security isn’t good enough for government workers or the people who make the laws, it’s not good enough for the rest of us second-class citizens. Dump Social Security and give Americans the freedom to manage their own retirement.

Someone tell me again why public school teachers are supposed to be revered.