Teaching Profession

Legislation Would Close Teachers’ ‘Last Day’ Loophole

By Lisa Fine Goldstein — March 19, 2003 3 min read

A controversial provision that allows some teachers to switch jobs on the last day before retirement, and thus collect both their pensions and Social Security spousal benefits, has been spared from the death sentence.

For now, at least.

Even though the House voted 249-180 on March 5 to approve a Social Security bill that would close what critics see as a loophole, 58 percent in this case was not enough. Rep. E. Clay Shaw Jr., R- Fla., funneled the bill through a parliamentary channel that would not allow for amendments, so the legislation needed a supermajority vote, at least two- thirds, to pass.

But Wendy Rosen, a spokeswoman for Rep. Shaw, the chairman of the House Ways and Means Committee’s Social Security Subcommittee, said he plans to reintroduce the Social Security bill sometime before the end of the session in a way that will require only a simple majority for passage.

She called the proposal on the loophole an issue of fairness. “They are asking for something no one else gets,” Ms. Rosen said. “The votes were there. There was too much good stuff in that bill to let it go.”

Concern over the status quo stems from a federal report released last fall that said that in the past few years, about 4,800 teachers in Texas and Georgia who worked in districts where they were eligible for pensions and did not pay into the Social Security system had used certain tactics to maximize their retirement benefits.

The teachers would spend the last day before retirement in a job covered by Social Security, such as janitorial or clerical work, or as teachers in districts where teachers pay into the Social Security system, so they could get around limitations on federal retirement aid earned through their spouses.

Those so- called “spousal benefits,” in general, are intended to go to a nonworking spouse whose wife or husband paid into the Social Security system.

The cases in the two states could cost the Social Security system at least $450 million over the lifetimes of the teachers enrolled, according to the General Accounting Office, the investigative arm of Congress. The report did not look at the number of cases nationwide, instead focusing only on Texas and Georgia. But the offset applies to government workers in 26 other states. (“Audit Criticizes ‘Last Day’ Loophole,” Sept. 4, 2002.)

A 1977 federal law created what is known as the “government-pension offset.” That law stipulates that retirees with state or local government pensions cannot also receive full spousal Social Security benefits generated by a husband’s or wife’s career. But if such employees spend the last day of work in a position covered by Social Security, they can get around the prohibition.

Rep. Shaw’s measure would require teachers to work five years in “Social Security” jobs, rather than just the last day before retirement, to be eligible for spousal benefits. In addition to closing the loophole, the bill also would have cut off Social Security benefits to felons and fugitives.

‘Rightfully Theirs’

John Cole, the president of the Texas Federation of Teachers, said the existing law helps teachers get what they deserve. He said Texas teachers had lobbied hard to stop Mr. Shaw’s bill.

“Because they teach in a district that has not participated in Social Security, even if they only teach there the last year of their career, they lose the money that is rightfully theirs,” he said. “The bill was a petty-minded, hard-hearted, bureaucratic response to an exemption that has allowed a small number of school employees to collect the benefits they have fairly earned.”

He said only 50 of the 1,100 school districts in Texas participate in Social Security.

“A teacher who teaches in a district like Austin, which participates in Social Security, for 20 years of her career, and retires her last year in Dallas, which does not participate—all her Social Security that she has paid in goes down the drain,” Mr. Cole said.

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