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An audit by the U. S. Office of the Inspector General has concluded that a vast majority of Texas employees retiring after utilizing the one-day exemption from the Government Pension Offset are not entitled to full spousal Social Security benefits.
The Office has released an audit report on seven Texas school districts that hired thousands of employees in the summer of 2004 for one day to allow those employees to utilize the one-day exemption from the GPO before it was repealed. The audited districts are West, Hudson, Lindale, Premont, Coleman, Sweeny and Kilgore ISDs.
The audits were triggered by a complaint in 2005 that around 22,000 employees retiring from 15 different districts may have been improperly exempted from the GPO.
The Office maintains five of the seven audited districts did not have the authority to provide Social Security coverage to one-day employees. Each district participating in Social Security operates under a Section 218 agreement that specifies the terms of participation. The agreements of five districts prohibited Social Security participation for part-time employees, and the Inspector General asserts that one-day employment is considered part-time.
The Office also objected to the practice of charging a fee to employees for the opportunity to utilize the one-day exemption, asserting that this could be considered an improper reimbursement of wages.
The audit concludes:
"We found that individuals employed as 1-day workers by the seven Texas school districts did not appear to meet the requirements to receive a GPO exemption. This occurred because of the questionable nature of these individuals’ employment. We also found that five of the school districts did not have the authority to provide these individuals Social Security coverage."
"We identified 20,248 individuals who were employed as 1-day workers by the 7 school districts. Based on our review of a random sample of 665 of these individuals, we determined that 629 should not have been exempt from GPO. Projecting our sample results to the population, we estimate that 19,212 individuals will receive $110 million in spousal benefits annually to which they may not be entitled. Over their lifetimes, they will potentially receive about $2.2 billion in spousal benefits."
Recommendations to the Social Security Administration follow:
- Develop policies and procedures to ensure individuals employed as 1-day workers only receive GPO exemptions if appropriate. For example, SSA should obtain documentation to evaluate whether the terms and conditions of the employment are valid and whether the school district’s Social Security coverage complies with its section 218 agreement.
- Reexamine the decisions to grant an exemption from GPO for the 168 spouses in our sample. (TCTA note: this refers to the retirees sampled who are currently receiving spousal benefits.)
- Identify and reexamine any decisions to grant exemptions from GPO for spouses in the population of 20,248 1-day workers employed by the 7 school districts.
- Review the 1-day worker programs at the other eight Texas independent school districts identified in the allegation to determine whether their 1-day workers programs would result in inappropriate GPO exemptions.
It is important to note that the Social Security Administration (SSA) disagreed with the report in some key areas. Specifically, SSA noted that it is left up to the employing districts to determine whether an employee is considered part-time, so if the district determined that an employee is a full-time employee, the GPO exemption could be valid. SSA also said it had no evidence that the fees paid by employees were considered to be a reimbursement of wages.
It is unfortunately unclear from the report and from the SSA remarks whether there will be any attempt to recover benefit payments from any employees currently receiving spousal benefits, or whether future payments will be cut off. TCTA will be working through our lobbyist in Washington and through other means as needed to protect employees who utilized a legal strategy in order to receive spousal Social Security benefits.
We have no additional information at this time regarding what this will mean for retirees who are currently receiving benefits under the one-day exemption, or who utilized the exemption with the intent of applying for benefits at a later date. Presumably these issues will be addressed by the Social Security Administration, and TCTA will take appropriate action to protect our members’ interests. We will keep you informed as developments occur.
