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Loophole Lets Teachers Avoid Government Pension Offset
The Star-Telegram
June 29, 2004
Texas: Wednesday's expiration of a little-known loophole in a federal law has thousands of Texas teachers rushing to retire.
The loophole lets teachers get around the Government Pension Offset, a provision created to treat people who don't pay into Social Security the same way as those who do.
Created by Congress in 1977, the offset keeps teachers who do not pay into Social Security from receiving a full spousal benefit based on their husband or wife's work.
The spousal benefits were designed to support couples with one spouse who never worked outside the home. The dependent benefit is worth one-half of the working spouse's monthly Social Security benefit, while the survivor benefit is worth 100 percent.
For couples with two incomes, the lower-paid spouse's individual benefit is subtracted from the potential spousal benefit. The couple claims what, if anything, is left over.
When one of the spouses is a Texas teacher, the offset subtracts two-thirds of his or her teacher pension from the potential spousal benefit. Again, the couple can claim any amount left over.
The loophole, however, lets the Social Security Administration ignore a teacher's pension if his or her "last working day" was spent in a job that pays into Social Security. That means there is nothing to subtract from the spousal benefit, so the couple can claim the entire amount.
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