BASIC (12-03)

Services performed after March 31, 1986 and before July 2, 1991, by an employee who was hired by a State or political subdivision employer before April 1, 1986, are exempt from mandatory Medicare coverage if the employee meets all of the following requirements:

• Employee was performing regular and substantial services for remuneration for the state or political subdivision employer before April 1, 1986;

• Employee was a bona fide employee of that employer on March 31, 1986;

• Employment relationship with that employer was not entered into for purposes of avoiding the Medicare tax; and

• Employment relationship with that employer has been continuous since March 31, 1986.

NOTE: For services performed beginning July 2, 1991 and thereafter, the employee must meet all the requirements shown in the list above and be a member of a qualifying retirement system to be exempt from mandatory Medicare coverage. (See SL 50001.550.)

An employee hired before April 1, 1986 by a State employer and who transfers after March 31, 1986, to another State employer of the same State qualifies for the continuing employment exception, provided the transfer was made without a termination of the employee’s overall employment relationship with that State. The same rule applies to an employee hired before April 1, 1986, by a political subdivision employer, who transfers after March 31, 1986, to another employer of the same political subdivision.

However, an employee hired before April 1, 1986, does not qualify for the continuing employment exception if after March 31, 1986, the employee transfers from a State employer to a political subdivision employer, or from a political subdivision employer to a State employer. Likewise, an employee does not qualify for the exception if the employee transfers from a political subdivision employer in one political subdivision to a political subdivision employer in a different political subdivision.