Teachers Use Social Security Loophole

More than 4,800 public school teachers in Texas and Georgia used a Social Security loophole to qualify for increased benefits that during their lifetimes could total $450 million, congressional investigators said Thursday.

Benefits are usually payable to the spouses of retired, disabled or deceased workers covered by Social Security. A 1977 law reduced those spousal benefits for state and local government workers who also receive a pension from work not covered by Social Security.

But 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 said in a report.

The investigators said 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 the GAO that use of the exemption would likely 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, the GAO said.

The investigators said they did not have time to confirm whether government workers outside Texas and Georgia were using the loophole, but the exemption could be used in about 2,300 government retirement plans in other states.

The GAO said Congress should change the rules by setting a longer minimum working period.