Section 218 Coverage – Social Security & Medicare

1. Section 218 Coverage – Social Security & Medicare Division of Retirement and Benefits Robert Gregg Robert.Gregg@alaska.gov 907 465-4469

2. History • Before 1951: No coverage • 1951: Section 218 added • Coverage available • Positions not under retirement system • 1955: Retirement systems included • Until 4/83: Termination possible

3. History • 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

4. Get IRS Publication 963! • Complex provisions • Provides good explanations • Resources • http://www.irs.gov/pub/irs-pdf/p963.pdf

5. 218 Agreements • Coverage Groups • Absolute • Retirement system • Referendum required • Police and fire positions • Exclusions • Mandatory • Optional

6. Alaska 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

7. Alaska 218 Agreements • Exclusions vary • Election workers • Students • Part-time positions • Elected officials • Fee-based positions • New hire notification • SSA-1945

8. Your 218 Agreement • Reference copy in agency files • Contact state Social Security administrator for interpretation • Kay Gouyton • (907) 465-5707

9. Determining Coverage • Position covered under your 218 agreement? • If yes, withhold social security and Medicare taxes • Deposit withholding and employer match

10. Determining 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

11. Qualifying 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

12. Qualifying 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

13. Qualifying 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

14. Additional Considerations • Elected or appointed officials • Election workers • $1500 threshold (same for 2010) • Police and fire positions • “Volunteer” firefighters • Rehired annuitants

15. Additional Considerations • Students • Rev. Proc. 2005-11 • Military differential wage payments • Accountable plans

16. Resources • 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

17. Resources • 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