BASIC (12-03)

Citations:

Soc. Sec. Act, Sections 210(a)(7)(F) and 210(p)

Section 13205 of Public Law 99-272, mandated Medicare (Hospital Insurance (HI)) coverage for State and local government employees hired (or rehired) after March 31, 1986. Section 11332 of Public Law 101-508 mandated Social Security and Medicare coverage for State and local government employees who are not members of a public retirement system and not covered by a Section 218 Agreement beginning July 2, 1991.

The mandatory Social Security and Medicare provisions are in the Internal Revenue Code (IRC). IRS determines whether an employee is a “member” of a public retirement system and what constitutes a “retirement system” for mandatory Social Security coverage purposes.

CAUTION: Mandatory Social Security coverage only applies after it is determined that the employee’s position is not covered by a Section 218 Agreement and the employee is not a member of a public retirement system.

A. Definition of Public Retirement System

For mandatory Social Security coverage purposes, a public retirement system is a pension plan maintained by a public employer that meets the requirements of IRC Section 3121(b)(7)(F). (IRS Revenue Procedure 91-40, and IRS Reg. Sec.31.3121(b)(7)-2 of the Employment Tax Regulations.) These requirements must be met for a retirement system to be used as an alternative to mandatory Social Security coverage.

NOTE: A retirement system for retirement system group coverage under a Section 218 Agreement is any pension, annuity, retirement or similar fund or system established by a State or political subdivision to cover the services or positions of its employees. For Section 218 purposes, the retirement system does not need to meet the minimum benefit standards required by IRS.

B. Example

An individual holds two positions with the same political subdivision. Wages earned in one position are covered for Social Security and Medicare under a Section 218 Agreement. The Social Security system is not a retirement system for this purpose. Therefore, mandatory Social Security applies to service in the other position, unless the employee is a member of a public retirement system with respect to that position. (IRS Regulations Section 31.3121(b)(7)-2(e)(1).)