In 1986, Medicare coverage was extended to all state and local government employees who were hired or reinstated on or after April 1, 1986, unless their state had already entered into a Section 218 agreement subjecting them to both Social Security and Medicare coverage. In 1991, social security became mandatory for state and local government employees, unless they are affiliated to an eligible public pension scheme (sometimes referred to as a “social security replacement plan” or “replacement plan”) or are covered by an agreement under Article 218. In other words, a local government employee who does not have an agreement under Article 218 must be covered by social security, unless the employee participates in a replacement plan. All States, including the 50 States, Puerto Rico, the Virgin Islands and about 60 intergovernmental instruments, have an Article 218 agreement with the SSA. These agreements allow states, if they wish, to provide Medicare (HI) or Medicare HI social security and hospital insurance coverage only for public employees. Because some states did not have their own pension systems, Congress amended the law in 1950 to create a mechanism for a state that chooses Social Security for state employees. Under section 218 of the Act, and known as the “Section 218 Agreements,” a state can voluntarily enter into an agreement in which the federal government agrees to cover state employees for social security, and the state and its employees are subject to FICA taxes. Once concluded, an agreement to cover a class or group of employees cannot be terminated or amended to exclude that class of employees in the future. Each state has a social security administrator who oversees social security programs in the state. This suddenly became so important because California`s Social Security Administrator recently began asking all state and local government agencies if they have a Section 218 agreement, if they participate in Social Security, and if they provide a replacement plan. We think they might be shocked to learn how many public institutions have been caught up in their own “generosity.” Wait a moment. An Article 218 agreement is a voluntary agreement between the state and the Social Security Administration (SSA) to provide Social Security and Medicare (HI) coverage or Medicare HI only to employees of state and local governments.
These agreements are called “Article 218” agreements because they are authorized by Article 218 of the Social Security Act. Article 218 Agreements are irrevocable. Here is the “gotcha”: If a local government employee who does not have an agreement under Section 218 participates in a replacement plan, that employee cannot also participate in Social Security. This can be a very big problem, because in California alone, there are dozens, if not hundreds, of local governments and instruments that do not have an agreement under Section 218, but participate in Social Security on a “voluntary” basis. Of course, they can do this as long as they don`t provide any of their FICA-insured employees with replacement plan benefits. The problem is that most of them “unknowingly” offer replacement plan-type benefits. When this happens, it can be done on an employee and payroll basis. As a result, the employees concerned also cannot charge the employer`s or employee`s social security contributions on their behalf. In addition, these billing periods cannot be factored into employees` ultimate Social Security benefits. services provided by election workers and election officers that are below the legislated threshold for the calendar year; unless the agreement under section 218 applies to election workers. There are thousands of local government agencies (cities, counties, special counties, school districts, JPAs) in California. Of these, only about 500 are parties to the State`s Article 218 agreement with the SSA.
This means that there are thousands of people who do not have an agreement under Article 218. Section 218 of the Social Security Act SSA Regulations 20 CFR 404.1200 All services in one or more categories of elective positions, employees hired before April 1, 1986, may be covered by Medicare by an agreement under section 218. Social security coverage can vary greatly within a state or even a local region. Do not assume the coverage of Section 218 for a company and the compliance of all applicable laws solely on the basis of the status of a similar company. If you have any questions about Section 218 coverage, contact your state`s Social Security Administrator (see www.ncsssa.org). For questions about mandatory coverage, visit IRS.gov/FSLG and SSA.gov/slge. The effective date of coverage is the date specified in the section 218 agreement or amendment for the beginning of coverage. Does compulsory social security apply to employees? Full social security coverage (compulsory social security tax) was imposed from 2 July 1991 for employees of state and local governments who are not affiliated to an eligible public pension scheme (FICA replacement scheme) and who are not covered by an agreement under Article 218, unless a specific exclusion under the law applies….