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Most Texas teachers and other school employees who are entitled to Social Security benefits through a current or former spouse are subject to a reduction in those benefits known as the Government Pension Offset (GPO). The GPO applies to any government employee who retires from a government position in which he/she did not pay into Social Security.

The GPO reduces the spousal Social Security benefit by 2/3 of the government pension. For example, if a teacher retired and had earned a $2,400 monthly TRS pension, the spousal Social Security benefit would be reduced by $1,600. In many cases, this completely eliminates the Social Security benefit for the retired school employee.

A separate exemption applies to employees who have earned Social Security benefits through their own previous employment. The Windfall Elimination Provision, or WEP, reduces Social Security benefits for retired government employees receiving a pension for work in which they did not participate in Social Security. The reduction is calculated differently from the GPO reduction, and in no case will it fully eliminate the Social Security benefit. The primary way to avoid the WEP reduction is to have at least 30 years of participation in Social Security. The last-day exemption discussed in the following paragraphs DOES NOT APPLY to the WEP offset. The Social Security Administration has additional information about the WEP.

An exemption in law that allowed many school employees to receive full spousal benefits became popular several years ago. The exemption provided that the GPO would not apply to an employee who worked in a position paying into both the government pension (in this case, TRS) and Social Security on the last day of employment prior to retirement. This was interpreted in a way that allowed an employee to work for as little as one day in one of the few school districts that pay into Social Security, or in one of the community colleges or other entities that pay into both TRS and Social Security.

Congress passed a law removing that last-day exemption effective June 30, 2004. This provided an opportunity for many employees who were eligible for retirement to take advantage of the one-day exemption prior to the effective date of the new provision. Several of the Texas school districts that participate in Social Security hired school employees from across the state for one day to allow them to benefit from the one-day exemption before it was eliminated.

More information: TCTA Q&A on the new law

For several years, both before and after Congress passed the bill removing the last-day exemption, attempts have been made at removing the GPO and WEP benefit reductions, or revising them in a matter more favorable to school employees. To date, the following bills have been filed:

HR 147 would repeal both the Government Pension Offset and the Windfall Elimination Provision. It was filed by Rep. Buck McKeon of California and referred to the Social Security subcommittee of the Committee on Ways and Means. Despite having 310 co-sponsors, a clear majority of Congress, the bill, filed in January of 2005, has not been scheduled for a committee hearing.

Texas co-sponsors:

  • Rep. Henry Bonilla
  • Rep. Michael Burgess
  • Rep. John Carter
  • Rep. Michael Conaway
  • Rep. Henry Cuellar
  • Rep. Lloyd Doggett
  • Rep. Chet Edwards
  • Rep. Louie Gohmert
  • Rep. Charles Gonzalez
  • Rep. Al Green
  • Rep. Gene Green
  • Rep. Ralph Hall
  • Rep. Ruben Hinojosa
  • Rep. Sheila Jackson-Lee
  • Rep. Eddie Bernice Johnson
  • Rep. Kenny Marchant
  • Rep. Michael McCaul
  • Rep. Randy Neugebauer
  • Rep. Solomon Ortiz
  • Rep. Ron Paul
  • Rep. Ted Poe
  • Rep. Silvestre Reyes
  • Rep. Pete Sessions

S 619 is the Senate companion to HR 147. It was filed by Sen. Dianne Feinstein of California and has 27 co-sponsors. It was referred to the Senate Committee on Finance and has not been scheduled for a committee hearing.

Texas co-sponsors:

(none)

HR 3661 is known as the Texas Educator Retirement Equity Act. It was filed by Rep. Ron Paul of Texas and referred to the Social Security subcommittee of the House Committee on Ways and Means. The bill would restore the last-day exemption to the Government Pension Offset that was previously available to Texas school employees seeking full spousal benefits. The bill has 3 co-sponsors, including 2 from Texas.

Texas co-sponsors:

  • Rep. John Carter
  • Rep. Ralph Hall

HR 750 by Rep. Clay Shaw, Jr., of Florida, is a wide-ranging Social Security bill that includes a reduction in the Government Pension Offset from the current 2/3 to 1/3. The bill was referred to the Social Security subcommittee of the House Ways and Means Committee, and has 5 co-sponsors.

Texas co-sponsors:

(none)

S 1799 by Sen. Barbara Mikulski of Maryland would reduce the Government Pension Offset – instead of a reduction of 2/3 of the TRS benefit, the reduction would equal the amount by which 2/3 of the combined TRS and Social Security benefits exceed $1,200. The bill was referred to the Senate Finance Committee and has 14 co-sponsors.

Texas co-sponsors:

(none)

HR 1690 would restrict the application of the WEP to individuals with a combined benefit of over $2,500, providing for a graduated implementation of the provision on amounts above that minimum. The bill was filed by Rep. Barney Frank of Massachusetts, was referred to the Social Security subcommittee of the Committee on Ways and Means in April of 2005, and has not yet been scheduled for a committee hearing.

Texas co-sponsors:

  • Rep. Charles Gonzalez
  • Rep. Ron Paul

S 866 would eliminate the WEP and replace it with a different formula for calcuating benefits. It was filed by Sen. Kay Bailey Hutchison of Texas and was referred to the Senate Committee on Finance. No committee hearing has been scheduled.

Texas co-sponsors:

(none)

HR 1714 is the House companion to S 866 (above). The bill was filed by Kevin Brady, a Texas Republican from The Woodlands. It was referred to the Social Security subcommittee of the House Ways and Means Committee, and has not been scheduled for a committee hearing.

Texas co-sponsors:

  • Rep. Michael Burgess
  • Rep. John Carter
  • Rep. Michael Conaway
  • Rep. Henry Cuellar
  • Rep. John Culberson
  • Rep. Tom DeLay
  • Rep. Chet Edwards
  • Rep. Kay Granger
  • Rep. Ralph Hall
  • Rep. Ruben Hinojosa
  • Rep. Sam Johnson
  • Rep. Kenny Marchant
  • Rep. Michael McCaul
  • Rep. Randy Neugebauer
  • Rep. Ron Paul
  • Rep. Ted Poe
  • Rep. Pete Sessions
  • Rep. Lamar Smith

HR 5210, the newest bill filed, is sponsored by Rep. Ron Paul of Texas. The bill includes the elimination of the 60-month requirement as seen in Rep. Paul's HB 3661 (above) and adds a tax credit of up to $1,000 for full time K-12 teachers or other school employees involved in the formulation or implementation of K-12 academic programs. The bill, which has no co-sponsors at this time, was referred to the House Committee on Ways and Means and has not been scheduled for a committee hearing.

Texas co-sponsors:

(none)

 

“Last-day exemption” employment under investigation

The Social Security Administration, through its Office of Inspector General, has conducted investigations of some Texas school districts that participate in Social Security. Many of these districts offered the one-day exemption option to school employees on the verge of retirement before that exemption was shut down in 2004.

Background information

When the U.S. Congress passed HR 743 in 2004 removing the one-day exemption for the Government Pension Offset, several Texas districts that did participate in Social Security provided employment opportunities to school employees from across the state to allow them to take advantage of the exemption before the new law went into effect.

It appears that a national watchdog organization dedicated to examining efficiencies and waste in government programs conducted a private, unofficial audit of the last-day exemption practice in Texas and drew alleged violations to the attention of the federal government, prompting the current investigations. 

At this time we do not know how many districts were investigated, or what the possible consequences would be to individual retirees. As of mid-August, it is our understanding that the audits have concluded and a report will be released in September 2006.

We will report any new information on this matter; TCTA members affected by an investigation should contact the TCTA Legal Department at 888-879-8282 with any questions.

One Texas charter school created a unique problem when it began offering Texas school employees the opportunity to take advantage of the “last-day” exemption for Social Security. The John H. Wood Charter School in San Antonio advertised itself as a participating entity, in which employees could pay several hundred dollars to the school for the privilege of working their last day and paying into Social Security.

Unfortunately, the school did not have a Section 218 agreement in place that allows government entities (such as school districts) to participate in Social Security. Nearly 700 employees who utilized the school’s “last-day” service have now found that they are ineligible for the exemption, and their spousal benefits will either be reduced or eliminated completely. The matter is currently pending with the Social Security Administration.  TCTA is pursuing legal recourse on behalf of TCTA members in this situation, and any TCTA members who participated in the last-day exemption at the John H. Wood Charter School and who have not yet been in touch with TCTA should contact the TCTA Legal Department immediately at 888-879-8282.