State and local government employees may be covered for Social Security and Medicare through a Section 218 Agreement between the State and the Social Security Administration (SSA) or mandatorily under Section 210(a)(7)(F) of the Social Security Act (Act).

The original Act of 1935 did not extend Social Security coverage to State and local government employees, because there was a legal question regarding the Federal government’s authority to tax State and local governments. However, because many government employers did not have their own retirement system, Congress amended the Act in 1950, and created Section 218 of the Act (codified at 42 U.S.C. § 418). Since it became effective on January 1, 1951, Section 218 of the Act has permitted States to cover State and local employees' positions voluntarily through an Agreement with SSA. Over time, Congress has expanded the scope of these Agreements to give States more flexibility to cover their employees.

To date, all 50 States, Puerto Rico, the Virgin Islands, and a number of interstate instrumentalities have entered into Section 218 Agreements with SSA to cover at least some of their State and local employees. This is equivalent to providing Social Security and Medicare or Medicare-only coverage to approximately 22 million employees.

The following is a chronology of relevant dates and facts throughout the history of State and local coverage:

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  1950: On August 28, 1950, Section 218 of the Act was enacted, allowing states, voluntarily, to extend Social Security coverage to governmental employees not covered under a retirement system by entering into a Section 218 Agreement (P.L. 81-734, Section 106).

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  1954: The Social Security Amendments of 1954 expanded the Act to allow states to extend Social Security coverage to state and local government employees who were members of a public retirement system (except police officers and firefighters), provided coverage was authorized by the state and approved through a voluntary referendum of all retirement system members (P.L. 83-761, Section 101).

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  1956: The Social Security Amendments of 1956 authorized certain states to divide a retirement system and cover only those members who voted for coverage, and all new members. Additional States have been authorized to use this procedure through subsequent amendments to Section 218 (P.L. 84-880, Section 104).

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  1965: Medicare was legislated and employees covered by Social Security were automatically covered for Medicare Hospital Insurance (HI). This included employees covered under a Section 218 Agreement (P.L. 89-97, Section 101).

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  1983: Before 1983, States could terminate Social Security coverage for employees covered under the States' Section 218 Agreements. The 1983 Social Security Amendments rescinded this provision of the Act and prohibited States from terminating coverage beginning April 20, 1983 (P.L. 98-21, Section 103).

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  1986: Medicare coverage became mandatory for State and local government employees hired or rehired after March 31, 1986 (P.L. 99-272, Section 13205).

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  1987: Prior to 1987, SSA and the States were responsible for collecting Social Security and Medicare payments from governmental employers. Effective January 1, 1987, that responsibility shifted to the Internal Revenue Service (IRS). Governmental employers now pay Social Security and Medicare taxes directly to the IRS under the Federal Insurance Contributions Act (FICA) (P.L. 99-509, Section 9002).

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  1991: On July 2, 1991, Social Security and Medicare coverage became mandatory for State and local government employees who were not members of a public retirement system under IRS rules and who were not covered under a Section 218 Agreement (P.L. 101-508, Section 11332).

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  1994: On August 16, 1994, all States were authorized to extend Social Security and Medicare-only coverage to police officers and firefighters covered by a retirement system. Prior to this date, only certain States could cover the services of these positions (P.L. 103-296, Section 305).

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  2004: The Social Security Protection Act of 2004 was enacted, requiring state and local government employers to disclose the effect of the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) to employees hired on or after January 1, 2005, in jobs not covered by Social Security. Employers must provide this disclosure using Form SSA-1945, Statement Concerning Your Employment in a Job Not Covered by Social Security (P.L. 108-203, Section 419).