Publication 963 (Rev. October 1997) - Uncle Fed's Tax*Board

Social Security Coverage
Chronology
1935 Social Security Act passed providing for Federal
old-age insurance, Federal State public
assistance and unemployment compensation,
and extension of public health services, maternal
and child health services, services for crippled
children, child welfare services, and
vocational rehabilitation services; three member
Social Security Board created to administer
the Act.
1939 Federal Security Agency created with Social
Security Board within it.
1946 Social Security Board abolished and functions
transferred to the Federal Security Administrator
who created the SSA with a Commissioner
of Social Security to run it.
1949 Bureau of Employment Security which administered
unemployment insurance transferred
from SSA to Labor Department.
1950 Social Security Amendments of 1950 allowed
States to cover, on a voluntary basis, employees
not under a retirement system by means of
a Section 218 Agreement beginning in 1951.
1953 Federal Security Agency abolished; SSA
transferred to Department of Health, Education,
and Welfare. Commissioner of Social
Security to be appointed by the President with
the advice and consent of the Senate.
1954 Social Security Amendments of 1954 extended
coverage even further by allowing
states, on an elective basis, to cover State and
local government employees under existing
retirement systems. Many groups of employees
under existing retirement systems had been
adamant against even elective coverage in
1950. However, other groups desired coverage,
so the provision in the 1954 Amendment
resulted. In fact, in a few instances after the
1950 Amendment was passed, an existing retirement
system would be repealed so that coverage
could be obtained, followed shortly
thereafter with the previous system (or a modification)
being reinstituted.
1956 Social Security Amendments of 1956 gave
more opportunities for coverage for State and
local government employees under existing
retirement systems.
1958 &
1960
The 1958 and 1960 Social Security Amendments
added only slightly to the coverage of
the program by bringing in a small number of
individuals in certain categories, principally in
State and local government employment. The
1960 Amendments added a small amount of
coverage, including employment in American
Samoa and Guam.
1965 Medicare was legislated.
1983 States were no longer permitted to terminate
Section 218 Agreements (and those that had
withdrawn in the past were allowed to opt in
again).
1985 Consolidated Omnibus Budget Reconciliation
Act (COBRA) of 1985 mandated, with certain
exceptions, Medicare HI-only coverage for
State and local government employees hired or
rehired after March 31, 1986.
1986 In 1986, Congress enacted the Omnibus
Budget Reconciliation Act (OBRA ‘86). It had
two major effects on the way State entities treat
Social Security taxes under the Federal Insurance
Contribution Act (FICA). First, OBRA
‘86 enacted Section 3121(b)(7)(E) of the IRC
which provides that services covered under a
Section 218 Agreement will be treated as employment
for purposes of FICA, effective with
respect to wages paid after December 31, 1986.
Second, OBRA ‘86 amended Section 218 of
the Social Security Act so that beginning January
1, 1987, State governments were relieved
from the collection of Social Security contributions
from local government entities, and the
liability for verifying and depositing the
amounts owed by local governments. Instead,
each State and political subdivision became
responsible for FICA tax collection and payment
to the IRS, in the same manner as private
employers.
4-6 Federal-State Reference Guide (1997 Edition)