Social Security Administration: Revision to the Government Pension Offset Exemption Should Be Reconsidered

GAO-02-950 Published: Aug 15, 2002. Publicly Released: Aug 15, 2002.
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Social Security benefits are payable to the spouses of retired, disabled, or deceased workers. The benefits often provide income to wives and husbands who have little or no Social Security benefits of their own. Until 1977, workers receiving pensions from government positions not covered by Social Security could receive their full pension benefit and their full spousal benefits as if they were nonworking spouses. Since then, a government pension offset has been in effect to equalize the treatment of workers covered by Social Security and those with noncovered government benefits. This report was prompted by a referral to GAO's Fraudnet that questioned a practice in which individuals in Texas were transferring to Social Security-covered positions for one day to avoid the offset. GAO found no central data on the use of the offset exemption by individuals, and time constraints did not permit in-depth audit work on the 2,300 state and local government retirement plans. However, GAO did establish that, as of June 2002, more than 4,800 persons in Texas and Georgia worked for brief periods in jobs covered by Social Security to qualify for the "last-day exemption." GAO estimates that the long-term Social Security payments to these individuals could be as high as $450 million. Such abuses of the offset exemption could be prevented by (1) changing the last-day provision to a longer minimum time period or (2) using a proportional approach based on the number of working years as a government employee spent in covered and noncovered employment to determine the extent to which the government pension offset applies.

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Matter for Congressional Consideration

Matter Status Comments
Considering the potential for abuse of the last-day exemption and the likelihood for its increased use, GAO believes timely action is needed. Congress may wish to consider that the last-day GPO exemption be revised to provide for a longer minimum time period. This action would provide an immediate "fix" to address possible abuses of the GPO exemption identified in the review.
Closed – Implemented
Congress passed the Social Security Protection Act of 2004, which included a provision that increased the time period required to qualify for the GPO exemption to 60 months. This legislative change eliminated the exemption for individuals to receive social security benefits if their last day of state/local employment is in a social security covered job.

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