Division of Retirement and Benefits

Robert GreggRobert.Gregg@alaska.gov

907 465-4469

Section 218 Coverage – Social Security & Medicare

HistoryHistoryHistoryHistory

• Before 1951: No coverage

• 1951: Section 218 added

• Coverage available

• Positions not under retirement system

• 1955: Retirement systems included

• Until 4/83: Termination possible

HistoryHistoryHistoryHistory

• 4/1/86: Mandatory Medicare coverage

• New hires

• 7/2/91: Mandatory Social Security

• Unless qualifying retirement system

• Since 1986: Tax deposits/941s filed with IRS

• Intent is to protect workers and families

Get IRS Publication 963!Get IRS Publication 963!• Complex provisions

• Provides good explanations

• Resources

• http://www.irs.gov/pub/irs-pdf/p963.pdf

218 Agreements218 Agreements218 Agreements218 Agreements

• Coverage Groups

• Absolute

• Retirement system Referendum required Police and fire positions

• Exclusions

•Mandatory

• Optional

Alaska 218 AgreementsAlaska 218 AgreementsAlaska 218 AgreementsAlaska 218 Agreements

• Original and 183 modifications

• Significant variations

• Retirement positions generally not covered TRS, PERS Divided vote option

• Several entities covered, then terminated

• State positions

Alaska 218 AgreementsAlaska 218 Agreements• Exclusions vary

• Election workers

• Students

• Part-time positions

• Elected officials

• Fee-based positions

• New hire notification

• SSA-1945

Your 218 AgreementYour 218 AgreementYour 218 AgreementYour 218 Agreement

• Reference copy in agency files

• Contact state Social Security administrator for interpretation

• Kay Gouyton

• (907) 465-5707

Determining CoverageDetermining CoverageDetermining CoverageDetermining Coverage

• Position covered under your 218 agreement?

• If yes, withhold social security and Medicare taxes

• Deposit withholding and employer match

Determining CoverageDetermining CoverageDetermining CoverageDetermining Coverage

• Position not covered by agreement

• Hired since 4/1/86? If yes, withhold Medicare tax

• Covered by public retirement system?

• If no, withhold Social Security and Medicare taxes

• Unless excluded services

Qualifying Retirement SystemQualifying Retirement SystemQualifying Retirement SystemQualifying Retirement System

• Used to determine if mandatory Social Security applies

• System that matches OASI

• Different standard than 457, 403(b) or 401(a)

• Details in rev. Proc. 91-40

Qualifying Retirement SystemQualifying Retirement SystemQualifying Retirement SystemQualifying Retirement System

• Defined Benefit Plan

•Minimum retirement payment of 1.5 X average of last 3 years pay X years of service

• Defined Contribution Plan

•Minimum allocation of 7.5% of pay

• Employer and employee funds count

• Earnings not included in 7.5%

• Reasonable earnings requirement

Qualifying Retirement SystemQualifying Retirement SystemQualifying Retirement SystemQualifying Retirement System

• Employee must meet all standards of the plan to be a participant

• Length of service

• Dates employed

• Age

• Special rules for part time, seasonal or temporary employees

• Contact IRS for determinations

Additional ConsiderationsAdditional Considerations• Elected or appointed officials

• Election workers

• $1500 threshold (same for 2010)

• Police and fire positions

• “Volunteer” firefighters

• Rehired annuitants

Additional ConsiderationsAdditional Considerations• Students

• Rev. Proc. 2005-11

•Military differential wage payments

• Accountable plans

ResourcesResourcesResourcesResources

• Your 218 Agreement

• Alaska state Social Security administrator

• Kay Gouyton 907 465-5707

• Robert Gregg 907 465-4469

• SSA Government Employer Web Page

• www.ssa.gov/slge/

• IRS Government Employer Web Page

• www.irs.gov/govt/fslg/index.html

ResourcesResourcesResourcesResources

• Qualifying Public Retirement System

• IRS-877 829-5500

• SSA Employer Web Page

• www.socialsecurity.gov/employer

•W2 Issues

• Tim Beard, Social Security Administration Tim.Beard@ssa.gov (206) 615-2125