1. Update on Social Security Coverage for Public Employees
Nicholas C. Merrill, Jr. CPA, CGFM
Wednesday April 16,
2:05p.m. – 2:55p.m.
State Employees’ Retirement System

2. Social Security History
Social Security Act
Signed into law in 1935
Excluded state and local government employees
Added new section (Section 218) in 1950
Effective 1951, for non-retirement system government employee coverage
Subsequent modifications allowed
For retirement system coverage and Medicare-only coverage
State Employees’ Retirement System

3. Social Security History
Federal Insurance Contributions Act (FICA)
Added to Internal Revenue Code in 1939
Medicare Program
Signed into law in 1965
Employees covered for Social Security under a Section 218 agreement automatically covered, effective July 1, 1966
State Employees’ Retirement System

4. State Employees’ Retirement System
Section 218 Agreements
Three-party contract between:
Social Security Administration (SSA)
State and/or local unit of government
State Social Security Administration
(designed in state statute)
State Employees’ Retirement System

5. State Employees’ Retirement System
Section 218 Agreements
Absolute coverage group:
Positions are not covered by a retirement system
coverage is extended to all current and future employees
State Employees’ Retirement System

6. State Employees’ Retirement System
Section 218 Agreements
Retirement System coverage group:
a pension, annuity, retirement or similar fund or system established by a state or political subdivision
1954 amendments authorizing retirement system coverage also required that employees be allowed to vote for/against coverage
Federal law gives States flexibility in deciding what shall be the retirement system for referendum and coverage purposes
State Employees’ Retirement System

7. Retirement System Coverage Group
Referendum types :
Majority of the eligible members
Divided- each employee selects their own choice of coverage or non-coverage (not available to all States)
State Employees’ Retirement System

8. Retirement System Coverage Group
Federal requirements for referendum :
Secret ballot
Opportunity was given and limited to eligible employees
Not less than 90 days notice of the vote
Supervised by Governor or his /her designee
State Employees’ Retirement System

9. Retirement System Coverage Group
Federal requirements for referendum :
Majority of eligible employees voted for coverage (except for the divided referendum type)
If majority referendum passes, all future employees will be covered
After a divided referendum has been conducted, all future employees will be covered
State Employees’ Retirement System

10. State Employees’ Retirement System
Mandatory Exclusions
Employees hired to relieve them from unemployment
Services performed in a hospital, home or other institution by a patient or inmate
Covered transportation services
State Employees’ Retirement System

11. State Employees’ Retirement System
Mandatory Exclusions
Service other than agricultural labor and student services which would be excluded from coverage of performed for a private employee
Emergency services
State Employees’ Retirement System

12. Elected class Part-time class Payment on a fee-basis
Optional Exclusions
Elected class
Part-time class
Payment on a fee-basis
State Employees’ Retirement System

13. Mandatory Medicare (Effective April 1, 1986)
New hires on and after April 1, 1986
Continuous employment exception
See Revenue Rulings and for additional information in a Q & A format
State Employees’ Retirement System

14. Mandatory Medicare IRC Section 3121 (u) (Effective April 1, 1986)
Exclusions for Mandatory Medicare are the same as those for mandatory Social Security
Can execute a Medicare-only Section 218 Agreement for pre-April 1, 1986 hires
State Employees’ Retirement System

15. State Employees’ Retirement System
Mandatory Social Security IRC Section 3121(b)(7)(F) (Effective July 2, 1991)
Default if neither of the following is true
Position is not covered under a Section 218 Agreement
Position is not covered by a public retirement system
State Employees’ Retirement System

16. Federal-State Reference Guide
IRS Publication 963
Federal-State Cooperative publication
Social Security Administration
Internal Revenue Service
National Conference of State Social Security Administrators
Excerpts from Publication 963
State Employees’ Retirement System

17. Social Security Provisions Affecting Benefits
Windfall Elimination provision (WEP)
affects the employee’s benefits
Government Pension Offset (GPO)
affects the survivor’s benefits
Form SSA 1945
State Employees’ Retirement System

18. State Employees’ Retirement System
Useful Websites
Social Security Administration (SSA)
Internal Revenue Service (IRS)
National Conference of State Social Security Administrators (NCSSSA)
State Employees’ Retirement System