Publication 963 (Rev. October 1997) - Uncle Fed's Tax*Board
Publication 963 (Rev. October 1997) - Uncle Fed's Tax*Board Publication 963 (Rev. October 1997) - Uncle Fed's Tax*Board
Commonly Asked Questions Questions & Answers Below are listed frequently asked questions and answers which highlights some of the main issues of public employees’ Social Security and Medicare. Because of the complexity of the issues and unique circumstance of each entity, only a few general questions have been selected. Check the appropriate chapter(s) for more detailed information about specific questions. NOTES 1. What is a Section 218 Agreement? SSA STATE A written voluntary agreement between the State and the Social Security Administration pursuant to the provisions of Section 218 of the Social Security Act to provide Social Security and/or Medicare coverage for State and local government employees. The term refers to the original agreement and all subsequent modifications. To determine if your entity is covered under a Section 218 Agreement, or needs to execute one, contact your State Social Security Administrator. (See list of State Administrators beginning on page 7-5.) 2. What is a qualified public retirement system? IRS A qualified public retirement system is a retirement system maintained by a State, political subdivision or instrumentality thereof that meets the qualification test under section 3121(b)(7)(F) of the Internal Revenue Code. (See Revenue Procedure 91-40, Appendix A-25.) IRS STATE 3. What determines whether an organization is a public or private employer? Contact IRS concerning the status of an entity for FICA purposes. Refer questions concerning the status of an entity for Section 218 purposes to the State Social Security Administrator. 4. Why don’t all public employees pay Social Security and Medicare when all private employees are required to do so? SSA When initially enacted in 1935, the Social Security Act did not cover public employees under Social Security because there was a Constitutional question regarding the power of the Federal government to tax State and local governments. Subsequently, because many government employers did not have their own retirement systems, in 1950 the United States Congress added Section 218 to the Social Security Act to allow States to voluntarily enter into agreements with the Social Security Administration (SSA) to permit coverage for some or all their employees. These agreements are known as voluntary, Federal-State and Section 218 Agreements. 5. Which employees are covered under Social Security and Medicare? IRS SSA Full-time, part-time, temporary, and seasonal employees who are not participating in a qualified public retirement system made available through their employer must be covered by Social Security and Medicare. It is possible for employees under a public retirement systems to also be covered under Social Security because they are covered under a Section 218 Agreement. All employees hired after March 31, 1986, are covered under Medicare. Federal-State Reference Guide (1997 Edition) 2-3
Commonly Asked Questions NOTES Under existing law, elected officials are considered employees as defined in IRC section 3401. The regulations do not change this treatment of appointed and elected officials. Although appointed and elected officials are considered employees, the special rules that govern part-time, seasonal and temporary workers do not apply. 6. What is FICA? IRS Federal Insurance Contribution Act (Chapter 21 of the Internal Revenue Code). FICA includes Old-Age, Survivors and Disability Insurance (OASDI or Social Security) and Hospital Insurance (HI or Medicare) taxes. IRS SSA STATE 7. Are there any services which are excluded from FICA and public retirement system coverage? Yes, the following services are excluded unless covered by a Section 218 Agreement: ♦ ♦ ♦ ♦ ♦ ♦ full-time students enrolled and regularly attending classes at the school they are working, employees hired temporarily to handle disaster emergencies (fire, flood, storm, snow, earthquake or similar emergencies), election officials and election workers paid less than the threshold amount mandated by law in a calendar year, persons hired to be relieved from unemployment, individuals paid for services performed in a hospital, home or other institution where they are a patient or inmate non-resident aliens with F-1, J-1, M-1 or Q-1 visas. 8. My entity was never covered under a Section 218 Agreement. Therefore, we have not been subject to Social Security or Medicare. Why should I care about changes in the laws related to these programs? Significant changes in the laws have altered the status of entities and their Social Security and Medicare responsibilities. If an employee is not covered under a Section 218 Agreement or covered by a public retirement system and is not mandatorily excluded from FICA taxes under Federal law, FICA taxes must be withheld, reported and paid. In addition, any employees hired after March 31, 1986, even if covered under the public retirement system, are subject to the Medicare portion of the FICA. The laws have changed so dramatically that if an entity and its employees were exempt from FICA responsibilities 5 or 10 years ago, it may no longer be exempt. Requirements not only vary from one entity to another but on an employee-by-employee basis within the entity. Contact your State Social Security Administrator to determine whether or not you are in compliance with Federal and State laws. (See page 7-5.) 9. I have a question regarding Social Security and Medicare coverage requirements, but I’m not sure who to contact. STATE The State Social Security Administrator (see page 7-5) should always be an entity’s first contact on any questions regarding coverage under Social Security or Medicare. 2-4 Federal-State Reference Guide (1997 Edition)
- Page 1 and 2: FEDERAL-STATE REFERENCE GUIDE Socia
- Page 3 and 4: 4. Social Security Coverage Social
- Page 5 and 6: 10. Public Employers State Governme
- Page 8 and 9: Preface Objectives of this book Th
- Page 10 and 11: Introduction Introduction Social Se
- Page 12 and 13: Introduction Who Is Responsible for
- Page 14 and 15: 2 Frequently Asked Questions
- Page 18 and 19: Commonly Asked Questions 10. Where
- Page 20 and 21: Commonly Asked Questions SSA 21. My
- Page 22 and 23: Determining Worker Status 3
- Page 24 and 25: Determining Worker Status Introduct
- Page 26 and 27: Determining Worker Status The gover
- Page 28 and 29: Determining Worker Status The deter
- Page 30 and 31: Determining Worker Status Audits co
- Page 32 and 33: Determining Worker Status COMMON LA
- Page 34 and 35: Determining Worker Status Presence
- Page 36 and 37: Determining Worker Status ♦ ♦
- Page 38 and 39: Determining Worker Status In practi
- Page 40 and 41: Determining Worker Status If statut
- Page 42 and 43: Determining Worker Status FORM SS-8
- Page 44 and 45: Determining Worker Status Penalty R
- Page 46 and 47: Social Security Coverage 4
- Page 48 and 49: Social Security Coverage Social Sec
- Page 50 and 51: Social Security Coverage Note NOTES
- Page 52 and 53: Social Security Coverage Chronology
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- Page 56 and 57: Social Security Coverage Note: Serv
- Page 58 and 59: Social Security Coverage Positions
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- Page 62 and 63: 5 Medicare/Hospital Insurance Cover
- Page 64 and 65: Medicare/Hospital Insurance Medicar
Commonly Asked Questions<br />
NOTES<br />
Under existing law, elected officials are considered employees as defined in IRC<br />
section 3401. The regulations do not change this treatment of appointed and elected<br />
officials. Although appointed and elected officials are considered employees, the<br />
special rules that govern part-time, seasonal and temporary workers do not apply.<br />
6. What is FICA?<br />
IRS<br />
Federal Insurance Contribution Act (Chapter 21 of the Internal <strong>Rev</strong>enue Code).<br />
FICA includes Old-Age, Survivors and Disability Insurance (OASDI or Social<br />
Security) and Hospital Insurance (HI or Medicare) taxes.<br />
IRS<br />
SSA<br />
STATE<br />
7. Are there any services which are excluded from FICA and public<br />
retirement system coverage?<br />
Yes, the following services are excluded unless covered by a Section 218 Agreement:<br />
♦<br />
♦<br />
♦<br />
♦<br />
♦<br />
♦<br />
full-time students enrolled and regularly attending classes at the school they<br />
are working,<br />
employees hired temporarily to handle disaster emergencies (fire, flood,<br />
storm, snow, earthquake or similar emergencies),<br />
election officials and election workers paid less than the threshold amount<br />
mandated by law in a calendar year,<br />
persons hired to be relieved from unemployment,<br />
individuals paid for services performed in a hospital, home or other institution<br />
where they are a patient or inmate<br />
non-resident aliens with F-1, J-1, M-1 or Q-1 visas.<br />
8. My entity was never covered under a Section 218 Agreement.<br />
Therefore, we have not been subject to Social Security or Medicare.<br />
Why should I care about changes in the laws related to these<br />
programs?<br />
Significant changes in the laws have altered the status of entities and their Social<br />
Security and Medicare responsibilities. If an employee is not covered under a<br />
Section 218 Agreement or covered by a public retirement system and is not<br />
mandatorily excluded from FICA taxes under Federal law, FICA taxes must be<br />
withheld, reported and paid. In addition, any employees hired after March 31, 1986,<br />
even if covered under the public retirement system, are subject to the Medicare<br />
portion of the FICA. The laws have changed so dramatically that if an entity and<br />
its employees were exempt from FICA responsibilities 5 or 10 years ago, it may no<br />
longer be exempt. Requirements not only vary from one entity to another but on an<br />
employee-by-employee basis within the entity. Contact your State Social Security<br />
Administrator to determine whether or not you are in compliance with Federal and<br />
State laws. (See page 7-5.)<br />
9. I have a question regarding Social Security and Medicare coverage<br />
requirements, but I’m not sure who to contact.<br />
STATE<br />
The State Social Security Administrator (see page 7-5) should always be an entity’s<br />
first contact on any questions regarding coverage under Social Security or Medicare.<br />
2-4 Federal-State Reference Guide (<strong>1997</strong> Edition)
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