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.