Section 9002 of Public Law 99-509 transferred responsibility for collecting Federal Insurance Contributions Act (FICA) taxes for wages paid under Section 218 Agreements from the Social Security Administration (SSA) and the States to the Internal Revenue Service (IRS). State and local employers are required to file quarterly IRS Form 941, Employer's Quarterly Federal Tax Return, with IRS. IRS is responsible for collecting Social Security and Medicare taxes, verifying the amount owed, and determining that the amount owed has been deposited.

The following subsections of Section 218 of the Social Security Act (Act) were repealed but still remain applicable to wages paid before 1987:

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  Section 218(e)—Payments and Reports by States;

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  Section 218(h)—Deposits in Trust Funds;

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  Section 218(i)—Regulations;

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  Section 218(j)—Failure to Make Payments;

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  Section 218(q)—Time Limitation on Assessments;

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  Section 218(r)—Time Limitation on Credits and Refunds;

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  Section 218(s)—Review by Secretary;

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  Section 218(t)—Review by Court; and

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  Section 218(w)—Payments of Medicare Tax.

Although the State’s liability and collection responsibility ended after 1986, States are still responsible for resolving Social Security payment and wage reporting questions concerning wages paid before 1987.

SSA was responsible for ensuring that each State paid the correct amount of Social Security contributions for all employees covered under its Section 218 Agreement. The State Social Security Administrators were responsible for ensuring that State and local government employers filed timely and accurate returns and that they collected and paid the proper amount of Social Security and Medicare contributions to the Federal government.

With few exceptions, all required wage reports have been filed by all States for years prior to 1987 and all audits closed. Therefore, information regarding the reporting of pre-1987 wages, liability, auditing, adjustments, and corrections to pre-1987 wage reports is not included in the SL POMS. However, this information is still pertinent with respect to wages paid before 1987. Similarly, the statute of limitations concerning the extent of time under which States are held liable for contributions on wages paid prior to 1987 are not included in the SL POMS.

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  Review and process Section 218 Agreements and Modifications;

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  Define and resolve issues related to Social Security coverage and benefits, including but not limited to, defining wages for Social Security coverage purposes;

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  Determine the amount of wages placed on an individual’s Social Security and Medicare earnings record, and correct erroneously posted amounts, as required by law;

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  Review Social Security and Medicare coverage, ensuring proper Social Security coverage and benefit payments;

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  Receive and process annual wage reports (IRS Forms W-2 and W-3 data) from employers;

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  Answer reporting questions from employers, whether filing via e-file, or paper; and assist employers in reporting correctly; and

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  Assist employers with reconciliation of Forms W-2 data with Form 941 totals.

Prior to 1987, SSA assigned identification numbers (sometimes referred to as "69-numbers") to identify State and local entities and interstate instrumentalities that obtained Social Security coverage under a Section 218 Agreement. Because SSA was responsible for processing the wage reports and accounting for the Social Security contributions paid by State and local government employers, this number was used for reporting and record keeping purposes through tax year 1986.

Beginning with wages paid after 1986, State and local government employers with Section 218 Agreements report Social Security and/or Medicare Qualified Government Employment (MQGE) wages under their IRS-assigned Federal Employer Identification Numbers (EINs).

Some States, on their own, assign and use 69-numbers for administrative recordkeeping purposes. If a State uses a 69-number and submits a Modification that extends coverage to one or more years prior to 1987, the State should notify the SSA regional office in a cover letter what 69-number(s) should be used for the newly covered entity. However, the State still needs to provide the EIN number assigned by IRS in the Modification.

If retroactive coverage involves periods prior to 1987, the State needs to make the deposit with a Federal Reserve Bank (FRB) or branch in the same manner that pre-1987 deposits were made. This is because those subsections of Section 218 of the Act that were repealed by Public Law 99-509 are still in effect for pre-1987 years and continue to govern deposits. If the State experiences problems with a FRB deposit, contact the SSA Office of Income Security Programs.