TN 31 (06-04)

Citations:Social Security Act—Secs. 226 and 226A

Regulation 42 CFR--Sec.406.15

A. Background — Federal employment

Prior to 1983, Federal employees who were covered under a Federal retirement system did not have FICA taxes withheld from their Federal earnings. As a result, their Federal earnings could not be used to insure them for title II benefits or for hospital insurance (HI).

Beginning 1/1/83, section 278 of P.L. 97-248 amended the law to provide for deduction of the HI portion of the FICA tax from Federal earnings. Also, individuals who were Federal employees at any time during January 1983 are deemed to have paid the HI portion of the FICA tax on their Federal earnings prior to 1/83. These individuals earn government employment quarters of coverage (GEQCs) which may be used to insure them for HI but not for title II benefits.

Federal employees hired after 12/31/83 are subject to the full FICA tax and earn regular Social Security quarters of coverage (SSQCs).

The first possible month of HI entitlement based on Federal GEQCs is 1/83.

B. Background — State and local employees

Prior to 4/1/86, State and local government employees were subject to payment of the full FICA tax only if they were covered under a voluntary Social Security agreement under section 218 of the Act. Other State and local employees paid no FICA taxes.

Section 13205 of P.L. 98-272 amended the law to provide that State and local government employees who were hired after 3/31/86, and are not covered under a section 218 agreement, are subject to the HI portion of the FICA tax.

The State may elect to cover employees hired before 4/1/86 for the HI portion of the FICA tax by requesting an agreement or modification of its existing agreement under section 218.

There is no provision for granting deemed HI wage credits for State or local government employment prior to 1986. The first possible month of HI entitlement based on State and/or local GEQCs is 4/86.