Update on social security coverage for public employees
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Update on Social Security Coverage for Public Employees. Nicholas C. Merrill, Jr. CPA, CGFM Wednesday April 16, 2:05p.m. – 2:55p.m. Social Security History. Social Security Act Signed into law in 1935 Excluded state and local government employees Added new section (Section 218) in 1950

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Update on Social Security Coverage for Public Employees

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Update on social security coverage for public employees

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


Social security history

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


Social security history1

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


Section 218 agreements

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


Section 218 agreements1

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


Section 218 agreements2

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


Retirement system coverage group

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


Retirement system coverage group1

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


Retirement system coverage group2

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


Mandatory exclusions

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


Mandatory exclusions1

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


Optional exclusions

Optional Exclusions

Elected class

Part-time class

Payment on a fee-basis

State Employees’ Retirement System


Mandatory medicare effective april 1 1986

Mandatory Medicare(Effective April 1, 1986)

New hires on and after April 1, 1986

Continuous employment exception

See Revenue Rulings 86-88 and 88-36 for additional information in a Q & A format

State Employees’ Retirement System


Mandatory medicare irc section 3121 u effective april 1 1986

Mandatory MedicareIRC 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


Mandatory social security irc section 3121 b 7 f effective july 2 1991

Mandatory Social SecurityIRC 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


Federal state reference guide

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


Social security provisions affecting benefits

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


Useful websites

Useful Websites

Social Security Administration (SSA)

www.socialsecurity.gov

Internal Revenue Service (IRS)

www.irs.gov

National Conference of State Social Security Administrators (NCSSSA)

www.ncsssa.org

State Employees’ Retirement System


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