Employees who have been continuously employed with the employer since before April
1, 1986, remain exempt from mandatory Medicare taxes and corresponding coverage unless
either: (1) the State has voluntarily covered their positions using an HI-only Agreement
(SL 30001.395), or (2) the employee is currently subject to the mandatory Social Security provisions
under Section 210 (SL 50001.501). In the absence of Social Security coverage, these employees may not make Medicare
contributions.
For purposes of this exception, SSA considers the employee to be continuously employed if
all of the following requirements are met:
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The employee was performing regular and substantial services for remuneration for
the State or political subdivision employer before April 1, 1986;
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The employee was a bona fide employee of that employer before April 1, 1986;
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The employment relationship with that employer was not entered into for purposes of
avoiding the Medicare tax;
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The employment relationship with that employer has been continuous since before April
1, 1986; and
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•
For services performed after July 1, 1991, the employee was not subject to mandatory
Social Security coverage for the time period corresponding to those services (see
SL 50001.501).
If mandatory Social Security coverage, applicable to services performed after July
1, 1991, ceases because the employee becomes a member of a qualified retirement system,
then the employee will lose corresponding Medicare coverage if they are exempt from
mandatory Medicare under the continuous employment exception. If the employee was
hired on or after April 1, 1986, mandatory Medicare provisions would apply (see SL 50001.510).
An employee hired before April 1, 1986, by a State employer and who transfers on or
after April 1, 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 on or after April 1, 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 on or after April 1, 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.
Section 218(n) authorizes a State to modify its Agreement to request HI-only coverage
for those employees who meet the continuing employment exception and who are not otherwise
covered under a Section 218 Agreement (see SL 30001.395).