Texas teacher last day exemption fraud

Social Security fraud in Texas

If you read my book, How Social Security Picks Your Pocket, you know about the outrageous scandal in Texas, where a few tiny school districts hired thousands of retiring teachers to work (pose?) as "janitors" for a single day. This was done to exploit a loophole in Social Security law. Essentially, the loophole worked like this: If a retiring teacher paid FICA tax related to his last day of earnings (prior to retirement), and he or she was also covered by the Texas Teacher Retirement System (the state governmental pension plan), that person would be eligible to "double dip" for Social Security benefits. Specifically, he or she could collect his normal government pension while simultaneously collecting spousal or survivor Social Security benefits. This loophole gave the retiring teachers benefits that 96% if American workers can never qualify for. And, in many cases, the retiring teachers received the benefits after a lifetime of NOT paying any FICA tax, whatever.

Indeed, many teachers paid just $2.31 in FICA tax related to their one-day stints as "custodians." Often, that was the only amount paid during their entire careers because Texas teachers are normally exempt from Social Security tax. As a result of this little farce, these teachers will collect, on average, $113,000 in extra benefits - each! In total, the Social Security trust fund will lose $2.5 billion.

Why did the school districts create these one-day janitor mills? Perhaps it was due to the huge "payroll processing fees" they collected from the teachers. A retiring teacher would pay as much as $1,200 for the privilege of working a single day as a custodian at minimum wage. Some school districts hired thousands of "custodians" and several collected over $1,000,000 in fees, in just a few months. Also, there were some individuals within the school districts who personally made thousands of quick bucks due to these bogus hiring practices. For example, in a 30-day period the ex-superintendent of one school district, and his family, made over $60,000 in program administration fees.

After writing my book, I investigated many of the school districts, using the audit skills I have developed as a veteran CPA and, in many cases, using information obtained via the Public Information Act of Texas. Working with the Public Program Testing Organization (PPTO) I produced a 63-page outline of fraud, which was presented to Social Security Inspector General Patrick O'Connell in October, 2005. This triggered a lengthy OIG audit culminating in a Report that confirmed every allegation. Although the OIG urged the Social Security Administration to take action, it appears that none was taken. Instead, SSA has adopted a defensive attitude and an unwillingness to acknowledge the huge financial scandal that took place in its programs.

Details about one of the abusive school districts (West) are presented on this page:

West ISD - Did it cheat?