To insure accurate SSA and IRS Section 218 coverage records, a State should notify
SSA and IRS of the existence of a new component that is an integral part of a political
subdivision. The component is usually created by an existing political subdivision,
such as a city or county, which has previously covered its employees under a Section
218 Agreement. Unlike other integral parts in the political subdivision, this component
has its own payroll, bookkeeping, tax reporting system, employer identification number
(EIN), etc. There is no need for a new modification, but still, SSA and IRS should
know the political subdivision’s existing modification covers the new component.
For example, a city has executed a Section 218 Agreement that covers all services
performed by city employees for Social Security purposes. The city subsequently creates
a recreation board to oversee the city’s recreational facilities. However, the recreation
board is not a separate political subdivision under state statute, but constitutes
a department of the city. The recreation board has a separate payroll system from
the city, applies for and receives an EIN, withholds the appropriate employment taxes
and reports such taxes and wages to the SSA and IRS.