Why would Texas
teachers use a questionable loophole in the law to get Social
Security benefits that they are not qualified for? That loophole
might allow them to pay as little as $3 in Social Security taxes
and receive Social Security benefits worth about $5,200 a year for
the rest of their lives. Even worse, why would they block needed
legislation that would keep fugitives from receiving Social
Security benefits and help to prevent sharp lawyers and others from
taking advantage of senior citizens?
Needed
reforms that were blocked
The legislation the
incensed the Texas teachers was H.R. 743, the Social Security
Protection Act, which is mainly concerned with making sure that
senior citizens and disabled workers who are unable to manage their
own affairs are not defrauded by the attorney or other person who
is handling their payments. It also would prohibit escaped
prisoners, parole violators and people deported because they
smuggled aliens into the United States from receiving Social
Security benefits.
A similar bill was
approved in the last Congress by a vote of 425-0. However, on March
5, after strenuous lobbying by Texas teachers and national teachers
unions, H.R. 743 failed to get the necessary two-thirds vote
necessary to pass the House of Representatives under a special
procedure designed for non-controversial bills. The final vote was
249-180, with 166 Democrats and 13 Republicans voting "no" even
though the Ranking Democrat on the Social Security Subcommittee,
Rep. Bob Matsui (CA) both co-sponsored the bill and voted for
it.
A costly
loophole
What made the bill
suddenly controversial was Section 418, which would close a minor
loophole that allows some teachers to receive more Social Security
benefits than they should. The loophole allows workers whose
pension plans are not part of Social Security to receive a share of
their spouse's Social Security benefits. The law decides this
eligibility based on the last day of employment before retirement.
If a worker is employed in a position that pays Social Security
taxes on that last day, then the worker is eligible for some of his
or her spouse's Social Security benefits even if he or she has
never paid Social Security taxes before.
In 2002, according to
the US government's General Accounting Office (GAO), 3,521 Texas
teachers spent their last day before retirement employed as a
janitor instead of as a teacher. In Texas, most teachers are in a
retirement system that is not part of Social Security, while most
janitors do pay Social Security taxes. By paying just a couple of
dollars in Social Security taxes, they qualify for both their own
non-Social Security pensions and a Social Security payment equal to
half of their spouse's benefits. GAO estimates that these teachers
and others who have used this loophole will receive a total of $450
million over their lifetimes.
How the
loophole worked
Normal workers in jobs
covered by Social Security qualify for retirement benefits based on
their own work record. If both husband and wife worked, then both
would receive retirement benefits based on their individual work
histories. Thus, the husband might qualify for $1000 a month from
his work record and his wife might qualify for $800 a month from
hers.
However, if one spouse
has no work record because he or she remained home to raise
children of for other reasons, then that spouse also qualifies for
a retirement benefits equal to half of that of the spouse who
worked. In this case, if the husband got $1000 a month from his
employment history, then his wife would also receive $500 a
month.
If both spouses have an
earnings record, the lower paid spouse gets the higher of either
her own benefit or a spousal benefit from the other spouse. Thus,
if the lower paid spouse qualified for $800 from his or her own
employment and a $500 spousal benefit, then he or she would receive
only the $800 from her own employment.
In the Texas case, the
teachers are part of a state retirement system that is not part of
Social Security. Before 1983, any state or local government could
decide if their retirement system would be part of Social Security
or not. Texas chose not to have their teachers retirement system be
part of Social Security.
Because the teacher is
not part of Social Security, his or her Social Security earning
record looks the same as if he or she was not working. Thus, even
though that teacher is receiving a Texas pension, he or she might
qualify for Social Security benefits from a spouse's work record.
In this case, the teacher might get $1500 a month from the Texas
system, his or her spouse might get $800 a month from Social
Security, and the teacher might also qualify for Social Security
spouses benefits of $400 a month.
Government
Pension Offset prevents double dipping
To treat people whose
retirement systems is not part of Social Security the same as those
who were part of Social Security, Congress created a mechanism in
1977 called Government Pension Offset (GPO). This provision counts
two-thirds of the non-Social Security pension as though it came
from Social Security. Then the Social Security spousal benefit is
reduced by that amount.
In this case, if the
teacher was to get $1500 monthly from the Texas system, and the
spouse $800 a month from Social Security, Social Security would
treat $1000 (two-thirds) of the teachers pension as though it came
from Social Security. Since that $1000 is more than the $400
spousal benefit, then GPO would keep the teacher from receiving any
spousal benefit. However, the law says that if the teacher is
employed in a position that pays Social Security taxes on the last
day before retirement, then GPO does not apply. This is the
loophole that HR 743 would close.
Teachers and other
government workers whose retirement systems are not part of Social
Security claim that GPO is unfair, but it really treats them the
same as other workers.
Teachers
who cheat
It is one thing to want
to repeal or to change Government Pension Offset. There are several
bills in Congress that would do just that. However, blocking
necessary reforms in order to preserve a loophole is just cheating.
How can teachers expect their students to behave honorably if they
intend to cheat the Social Security system to get more benefits
than they deserve?