SL 30001.357 Optional Exclusions
When a State elects to extend Section 218 coverage to a coverage group, it has the option of excluding or covering certain services and positions. The State may take these optional exclusions for absolute and retirement system coverage groups. It may exercise these exclusions on a statewide basis or selectively by coverage groups. Optional exclusions not taken when the coverage group is brought under the agreement are covered.
If the exclusion is a position exclusion (elective, part-time, fee-basis), it may be taken for a class or classes of the positions. A class of positions is a group of positions which have common characteristics. Positions in a single organizational unit of the coverage group do not constitute a class of positions. For example, while all of the part-time clerical employees of a county could be excluded under the part-time position exclusion, the exclusion could not be taken for part-time employees of the Office of the County Clerk, which is an organizational unit of the county.
The optional exclusions include:
Agricultural labor, but only those services that would be excluded if performed for a private employer;
Election workers and election officials whose pay in a calendar year is less than the amount mandated by law, unless Section 218 agreement covers election workers;
Positions compensated solely by fees that are subject to SECA (Self-Employment Contributions Act), unless Section 218 Agreement covers these services;
Students enrolled and regularly attending classes at the school, college or university where they are working.
The optional exclusions can be taken by the State in any combination for each separate coverage group. Any services a State excludes can be included later if permitted by Federal and State law and the State’s Agreement. Generally, if the services are covered under a Section 218 Agreement, it cannot later be removed from coverage except for services performed by election officials and election workers and solely fee-based positions.
NOTE: Beginning July 2, 1991, services optionally excluded from coverage under a Section 218 Agreement may be mandatorily covered unless the employee is a member of a public retirement system or the services are excluded from mandatory coverage.
A. Agricultural Services
When a State extends coverage to a group, it has the option of excluding agricultural labor that would be excluded if performed in private employment. A State, which initially excludes agricultural labor, may later modify its agreement to cover it. However, if agricultural labor is not excluded initially, it cannot be excluded later. If a State has not taken the agricultural exclusion, then all remuneration for agricultural labor is covered.
B. Elective Positions
A State may exclude the services in any or all classes of elective positions. Elective positions are those filled by an election. The election may be by a legislative body, a board or committee, or by the qualified electorate of a jurisdiction. The method of selection must constitute an election under State law. It may be by open voting by the electorate at large or by a chosen body from a list of candidates. Generally, elective positions fall into three classes: executive, legislative, and judicial. There may be other elective positions with common characteristics that would also constitute a separate class, e.g., elective executive positions filled by vote of statewide electors, elected executive positions filled by vote of electors of a specific circuit, elected positions of members of boards and commissions.
A mayor, member of a legislature, county commissioner, State or local judge, justice of the peace, county or city attorney, marshal, sheriff, constable, or a registrar of deeds is a public official. Other examples are tax collectors, tax assessors, road commissioners, members of boards and commissions, such as school boards, utility districts, zoning boards, and boards of health.
C. Election Officials and Election Workers
Prior to the 1967 Social Security Amendments, there was no specific provision for the exclusion of election officials and election workers. The exclusion was possible by excluding election officials/workers as a class of part-time positions.
Effective January 1, 1968, the Act was amended to allow each State to modify its agreement to exclude the services of election officials/workers whose pay in a calendar quarter was less than $50. For years 1978 through 1994, the threshold amount was $100 a calendar year. The threshold amount was $1,000 for years 1995-1999. The election worker threshold amount for calendar years 2000 and 2001 was $1,100; for the calendar years 2002 through 2005, the election worker threshold amount was $1,200; for calendar years 2006 through 2007, the election worker threshold amount was $1,300; for calendar year 2008, the threshold amount was $1,400; and for calendar years 2009 through 2012, the threshold amount was $1,500. For calendar years 2013 through 2015, the threshold amount was $1,600. Beginning January 1, 2016 and going forward, the election official/worker threshold amount increases to $1,700 a calendar year.
Many States have excluded election workers paid less the threshold amount mandated by law. Therefore, Social Security and Medicare taxes do not apply until the election worker is paid the threshold amount or more. Some State agreements specify a lower threshold amount for election workers, e.g., $50 a calendar quarter or $100 a calendar year. In these States, the Social Security and Medicare tax applies when the amount specified in the State’s agreement is met. States may modify the State’s agreement to exclude the services of election workers paid less than the threshold amount mandated by law. Such modifications are effective in the calendar year the modification is mailed or delivered to SSA.
If the State’s agreement does not have an election worker exclusion or the entity has a Section 218 Agreement that does not exclude election workers, Social Security and Medicare taxes apply from the first dollar paid. If the entity is not covered under a Section 218 Agreement, the rules for mandatory Social Security and Medicare apply. To find the coverage status of election workers for each State, click the Election Worker Coverage Chart (http://www.ssa.gov/slge/election_workers_chart.htm ).
D. Fee-Based Public Officials
A fee-based public official is one who receives and retains remuneration directly from the public, e.g., justice of the peace, local registrar of vital statistics. An individual who receives payment for services from government funds in the form of a wage or salary is not a fee-based public official, even if the compensation is called a fee.
The fee-based public official provisions do not apply to notary publics. A notary public is not a public official even though he/she performs a public function and receives a fee for services performed. The services of a notary public are not covered for Social Security purposes.
REFERENCE: Social Security Ruling 92-4p
1. Fee-Basis Exclusion – Position Compensated Solely by Fees
Services in positions compensated solely by fees are excluded from coverage under Section 218 Agreements (unless the state specifically included these services) and are covered as self-employment and subject to SECA.
Beginning 1968, services performed in positions compensated solely by fees are excluded from coverage under Section 218 Agreements unless the State specifically covers these services. If a State covered these positions before 1968, it may modify its agreement to exclude these positions prospectively. The exclusion is effective the first day of the year following the year in which the modification is mailed or delivered by other means to SSA. If a State covered and later excluded these positions, the State cannot again cover these positions.
2. Fee-Basis Exclusion – Position Compensated by Salary and Fees
Generally, a position compensated by a salary and fees is considered a fee-basis position if the fees are the principal source of compensation, unless a state law provides that a position for which any salary is paid is not a fee-basis position. A State may exclude services from Social Security and Medicare coverage under Section 218 Agreements in positions compensated by both salary and fees. If the exclusion is taken, none of the compensation received, including the salary, is covered wages under the State’s 218 Agreement. In this case, the salary payment, while excluded under the Agreement, would be subject to mandatory Social Security if the official is not a member a public retirement system.
E. Part-Time Positions
A part-time position is one in which the number of work hours normally required by the position in a week or pay period is less than the normal time requirements for the majority of positions in the employing entity. The part-time position exclusion is based on the normal time requirements of the position and not the time spent by an employee in the position.
If a position is established as a full-time position but the employee works part-time in this position, the exclusion does not apply. Conversely, if a position is established as a part-time position and the employee works full time in this position, the services of the employee are excluded even though the employee works full-time. However, if the work required for a position originally classified as part-time increases to the extent the normal time requirements of the position no longer meet the adopted definition of part-time, the position would no longer constitute a part-time position.
If the part-time position exclusion is taken, the State should define the part time position in the modification if one has not been previously established. A definition may apply on a statewide basis or different definitions may be given for different coverage groups. Some acceptable definitions of part-time positions are:
any position which normally requires less than 20 hours of work each week;
any position which does not normally require over 50 hours of service per month in any calendar year; and
services performed by an employee in a position that does not normally require actual performance of duty for at least 600 hours each year.
CAVEAT: The definition of a part-time position for mandatory Social Security may be different from the definition of a part-time position under a Section 218 Agreement.
EXAMPLE: A city extended Section 218 coverage to its employees and excluded part-time positions. A part-time position was defined in the agreement as any position that requires 15 hours or less of service per week. The city must apply the Section 218 definition of part-time positions to determine which positions are excluded from coverage under the agreement.
Whether seasonal or temporary positions, which require full-time services for a period of short duration, are part-time positions depends on the definition of part-time established for the coverage group. Such a position might be a part-time position if, for example, the definition of part-time is based on an established number of hours per year.
To determine whether an elective or public office, which requires that an individual be on duty or available at all times is part-time, the normal time requirements for actual performance of services would govern.
The part-time exclusion for a coverage group may be limited to any class or classes of positions, such as elective or legislative. The amount of compensation may not be used to define part-time, but may be used to define a class of part-time positions. Examples of acceptable classes of part-time positions are:
all part-time positions the compensation for which is less than $50 per calendar quarter;
all services in part-time legislative elective positions;
all services performed in part-time positions by employees working on a retainer basis.
If the definition of part-time or class of part-time contains multiple conditions, all of the conditions must be met for the exclusion to apply.
NOTE: The 1972 Social Security Amendments allowed States until January 1, 1974 to exclude services performed in part-time positions where this exclusion was not taken initially. Where this was done, States cannot again cover these positions unless Congress enacts legislation to do so.
F. Student Services
Students are excluded from Social Security and Medicare coverage if the student is performing services in the employ of a school, college or university where the student is enrolled and regularly attending classes.
Most States have excluded students from coverage under the State’s Section 218 Agreement. Some States, however, elected to provide coverage for student services in certain schools. Student services covered under a Section 218 Agreement cannot be excluded unless Federal legislation authorizes it.
The student exclusion applies only during periods of regular school attendance, whether during the regular academic year or in summer session. The exclusion does not apply to work done during summer vacation if the student is not attending a summer session. Services performed by students during the holidays (e.g., Christmas break), weekends, seasonal breaks and between semesters falling within the academic year when classes are not scheduled are excluded.
NOTE: The 1972 Amendments allowed States until January 1, 1974 to exclude student services where this exclusion was not taken initially. Then, Public Law 105-277, Section 2023, enacted October 21, 1998, provided a 3-month period for States, who had not taken advantage of the 1972 legislative provision to modify their Section 218 Agreements to exclude student services. The exclusion was effective July 1, 2000. States that exercised this option cannot again cover these services unless Congress enacts legislation to do so.