Identification Number:
SL 50001 TN 1
Intended Audience:See Transmittal Sheet
Originating Office:ORDP OISP
Title:Mandatory Coverage
Type:POMS Transmittals
Program:All Programs
Link To Reference:
 

PROGRAM OPERATIONS MANUAL SYSTEM
Part SL – State and Local Coverage Handbook
Chapter 500 – Mandatory Coverage
Subchapter 01 – Mandatory Coverage
Transmittal No. 1, 01/29/2020

Audience

Originating Component

OISP

Effective Date

Upon Receipt

Background

We are streamlining policy for clarity, merging sections, and archiving duplicate information. We are also amending the format in several of the sections, standardizing citations and abbreviations, and creating new policy to expand on existing sections for better understanding of content.

Summary of Changes

SL 50001.501 Mandatory Social Security Coverage

  • We amended the title to the section to remove “and Medicare Provisions” and added the word “Coverage” to distinguish between Mandatory Social Security Provisions and Mandatory Medicare Only. We added a NOTE under subsection A to indicate that employees covered under mandatory Social Security Coverage automatically covered for Medicare.

  • We expanded the section by folding in multiple sections and renumbered the subsections accordingly.

  • We amended the citation and rephrased the introductory paragraph for easier readability and folded it into subsection A. We amended title to subsection A for clarity. Subsection A now also contains information formerly in SL 50001.550.

  • We changed the term “public” to “qualified” throughout the section as Section 210(a)(7)(F) does not use the word public. The term “qualified retirement system” is further explained in the NOTE portion of the subsection B. We deleted the example, as it was very confusing and not helpful to understanding the content.

  • Newly created subsection C contains information that was formerly in RS 01505.013 and SL 50001.550. We are planning to subsequently archive section RS 01505.013 and SL 50001.550. We are also amending the content for clarity to distinguish concepts between mandatory Medicare and Mandatory Social Security Coverage. We amended the content for clarity.

  • Newly created subsection D contains information that was formerly in SL 50001.560. We are archiving section SL 50001.560 for streamlining purposes. In subsection D, we added “volcano” to the temporary basis emergency exceptions to be consistent with the corresponding regulation. We amended the title to remove “and Medicare” to distinguish between Mandatory Social Security Provisions and Mandatory Medicare Only. We added the link in this section to the Election Workers Coverage Chart on the SSA State and Local Government Employees page.

SL 50001.510 Mandatory Medicare Coverage

  • We added a citation to the Act at the beginning of the section.

  • We expanded the section by folding in content from other SL sections and reformatted/renumbered the subsections.

  • Newly created introductory text contains information that was already in SL 50001.510. We rephrased the content for clarity and added cross references.

  • Newly created subsection A contains information that was formerly in SL 50001.520. We rephrased the content for clarity.

  • Newly created subsection B contains information that was formerly in SL 50001.530. We added the link in this section to the Election Workers Coverage Chart on the SSA State and Local Government Employees page.

SL 50001.520 Continuing Employment Exception

We archived this section and folded the content into SL 50001.510B.

SL 50001.530 Services Not Subject to Mandatory Medicare Coverage

We archived this section and folded the content into SL 50001.510C.

 

SL 50001.540 Voluntary Medicare Coverage

We archived this section, as information is duplicate of what is already in SL 30001.395.

 

SL 50001.550 Mandatory Social Security and Medicare Coverage

We archived this section and folded the content into SL 50001.501 A and B.

 

SL 50001.560 Services Not Subject to Mandatory Social Security and Medicare Coverage

We archived this section and folded the content into SL 50001.501D.

 

SL 50001.570 Effect of Mandatory Coverage on Section 218 Coverage

  • This section contains duplicate information as RS 01505.012. We reformatted this section to make it flow better and plan to subsequently archive RS 01505.012.

  • We also reformatted subsections from all CAPs to sentence case.

  • We amended the language throughout the section for clarity.

  • We added language to say “on or” in subsection B for better understanding of the content.

  • We deleted subsection B.5, as the content was repeating the continuation coverage rule about absolute coverage groups without adding anything additional, and the material is already included in #1 and #2. We renumbered the remaining points accordingly.

SL 50001.580 Rehired Annuitants

We are archiving this section, and moving the content to newly created section SL 30001.396 and SL 30001.397, which contains a more elaborate explanation of rehired annuitants for clarity purposes.

Conversion Table
Old POMS ReferenceNew POMS Reference
SL 50001.520SL 50001.510
SL 50001.530SL 50001.510
SL 50001.540SL 30001.395
SL 50001.550SL 50001.501
SL 50001.560SL 50001.501
SL 50001.580SL 30001.396

SL 50001.501 Mandatory Social Security Coverage

CITATIONS:

Social Security Act, Sections 210(a)(7)(F) and 210(p)

A. Mandatory Social Security coverage

Beginning July 2, 1991, Section 11332 of Public Law 101-508 mandates Social Security coverage for State and local government employees who are neither members of a qualified retirement system nor covered by a Section 218 Agreement, unless coverage is specifically excluded by law. The mandatory Social Security provisions apply to those State and local employees who have the option to become members of the retirement system but have chosen not to do so (optionals) as well as those employees who are personally ineligible for membership in the retirement system (ineligibles).

Because voluntary coverage under a State’s Section 218 Agreement precludes application of the mandatory provisions, always verify whether a position is covered under the State’s Section 218 Agreement first before considering whether the individual employee in that position is subject to mandatory Social Security coverage. If the employee’s position is covered by the State’s Section 218 Agreement, then the employee is covered regardless of possible participation in a qualified retirement system.

NOTE: 

Section 226 of the Social Security Act (Act) provides Medicare Hospital Insurance (HI) coverage automatically to individuals who have Social Security coverage.

B.  Qualified Retirement System for purposes of mandatory coverage

A “qualified retirement system” is a pension plan maintained by a public employer that meets certain criteria established by the Internal Revenue Service (IRS) (see IRS Revenue Procedure 91-40; 26 C.F.R. § 31.3121(b)(7)-2). The mandatory Social Security provisions do not apply to any individual employee who participates in a qualified retirement system

IRS is responsible for determining whether an employee is a member of a qualified retirement system under its rules.

NOTE: 

Be extremely cautious not to confuse “retirement system” as the Social Security Administration (SSA) defines it for purposes of voluntary Section 218 coverage (SL 30001.302) and “retirement system” as IRS defines it for purposes of mandatory Social Security coverage. For purposes of Section 218 coverage, SSA defines “retirement system” broadly to establish a basic standard governing when a State must provide referendum procedures to employees before expanding voluntary coverage to certain positions. For purposes of mandatory Social Security coverage, IRS defines “retirement system” with highly specific qualitative standards that govern the applicability of mandatory coverage. In order to distinguish the two concepts, SSA uses the term “qualified retirement system” when referencing a retirement system that satisfies IRS’s qualitative standards for purposes of mandatory Social Security. An employee can be a member of a retirement system that does not constitute a qualified retirement system.

C. Cessation of mandatory coverage for State and local government employees

Mandatory Social Security coverage ceases either (1) when a state or local government employee becomes a member of a qualified retirement system or (2) where a State expands coverage under its Section 218 Agreement to the employee’s position.

NOTE: 

Cessation of mandatory Social Security coverage may affect an employee’s Medicare coverage under SSA’s continuous employment exception rules (see 50001.510.B).

D. Services not subject to mandatory Social Security coverage

The following services are excluded from mandatory Social Security coverage. Some services, while excluded from mandatory coverage are optional exclusions under Section 218 and, therefore, may be covered under a Section 218 Agreement. The exclusions that may be covered under a Section 218 Agreement are noted below.

  • Services performed by individuals hired to be relieved from unemployment. (This does not include many programs financed from Federal funds where the primary purpose is to give the employee work experience or training.)

  • Services performed in a hospital, home, or other institution by a patient or inmate of such institution as an employee of a state or local government employer.

  • Services performed by an employee on a temporary basis in case of fire, storm, snow, earthquake, volcano, flood, or other similar emergency.

  • Services performed by non-resident aliens with F-1, J-1, M-1, and Q-1 visas.

  • Services in positions compensated solely by fees that are subject to Self-Employment Contributions Act (SECA), unless a Section 218 Agreement covers these services.

  • Services performed by a student enrolled and regularly attending classes at the school, college, or university where they are working, unless a Section 218 Agreement covers student services.

  • Services performed by an election worker or official whose pay in a calendar year is less than the amount mandated by law, unless a Section 218 Agreement covers election workers. To find the coverage status of election workers for each State, see the Election Worker Coverage Chart.

  • Services that would be excluded if performed for a private employer because it is not work defined as employment under Section 210(a) of the Act, unless a Section 218 Agreement covers certain agricultural services.

NOTE: 

If the services are covered under a Section 218 Agreement, they are subject to Social Security and Medicare under the terms of the Agreement because coverage under a Section 218 Agreement supersedes all other considerations. First determine whether a worker's services are covered under an Agreement; if not, coverage is determined under the mandatory coverage and exclusion rules.

SL 50001.510 Mandatory Medicare Coverage

The Social Security Administration (SSA) uses the term "mandatory Medicare coverage" to refer to Medicare Hospital Insurance (HI) coverage for employees who are not covered under Social Security. Section 13205 of Public Law 99-272 mandates Medicare HI coverage for State and local government employees hired (or rehired) on or after April 1, 1986, who do not have Social Security coverage. These employees are required to pay the Medicare HI portion of the Federal Insurance Contributions Act (FICA) tax even though they do not have Social Security coverage and do not pay the Social Security portion of the FICA tax.

The following rules only apply to State and local government employees who are not covered by Social Security.

By contrast, the following rules do not apply to employees in positions already covered under a Section 218 Agreement or to employees who are currently subject to the mandatory Social Security provisions. Section 226 of the Social Security Act (Act) provides Medicare HI coverage automatically to individuals who are entitled to Social Security benefits.

A. Continuing employment exception

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:

  • The employee was performing regular and substantial services for remuneration for the State or political subdivision employer before April 1, 1986;

  • The employee was a bona fide employee of that employer before April 1, 1986;

  • The employment relationship with that employer was not entered into for purposes of avoiding the Medicare tax;

  • The employment relationship with that employer has been continuous since before April 1, 1986; and

  • 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).

NOTE: 

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.

NOTE: 

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).

B. Services not subject to mandatory Medicare coverage

The following services are not subject to mandatory Medicare coverage even though the services are performed by an employee hired after March 31, 1986:

  • Services performed by individuals hired to be relieved from unemployment (this does not include many programs financed from Federal funds where the primary purpose is to give the employee work experience or training);

  • Services performed in a hospital, home, or other institution by a patient or inmate of such institutions as an employee of a State or local government employer;

  • Services performed by an employee on a temporary basis in case of fire, storm, snow, earthquake, volcano, flood, or other similar emergency;

  • Services performed by non-resident aliens with F-1, J-1, M-1, and Q-1 visas;

  • Services in positions compensated solely by fees that are subject to the Self-Employment Contribution Act (SECA), unless a Section 218 Agreement covers these services;

  • Services performed by a student enrolled and regularly attending classes at the school, college, or university where they are working, unless a Section 218 Agreement covers student services;

  • Services performed by an election worker or official whose pay in a calendar year is less than the amount mandated by law, unless a Section 218 Agreement covers election workers (to find the coverage status of election workers for each State, see the Election Worker Coverage Chart); and

  • Services that would be excluded if performed for a private employer because it is not work defined as employment under Section 210(a) of the Act, unless a Section 218 Agreement covers certain agricultural services.

SL 50001.570 Effect of Mandatory Coverage on Section 218 Coverage

CITATIONS:

Social Security Act, Sections 210(a)(7)(F), 218

A. Introduction

States may continue to enter into voluntary Section 218 Agreements to extend coverage to employees who are covered mandatorily for Social Security and to employees who are members of a qualified retirement system. A State may wish to do so because voluntary coverage under the State's Section 218 Agreement eliminates variability in a State's tax obligations that may be difficult to administer or cause reporting errors.

Example: If an employee is covered mandatorily for Social Security and becomes a member of a qualified retirement system, the State's tax obligations change along with the employee's coverage status. By extending coverage to the retirement system under its Section 218 Agreement, the State can ensure that the employee remains covered for Social Security and that the State’s ongoing tax obligations remain consistent.

NOTE: 

The enactment of mandatory coverage did not eliminate or reduce the responsibilities of the States in the administering voluntary coverage Agreements.

B. Effect of mandatory coverage on the different types of voluntary coverage Agreements

1. Section 218 Agreements or Modifications executed on or before July 1, 1991

Services covered under Section 218 Agreements executed and effective on or before July 1, 1991, are not affected by the mandatory coverage provisions, regardless of whether such services are performed by employees who are or are not members of their employer's retirement system. Such services continue to be covered under the State’s Agreement after July 1, 1991.

2. Section 218 Agreements or Modifications executed after July 1, 1991

A State may continue to expand voluntary coverage under its Section 218 Agreement for services performed by State or local employees. The Social Security Administration (SSA) will execute such Agreements even though mandatory coverage may apply to some or all of the services involved. Once the State expands voluntary coverage, employees performing the voluntarily covered position will be covered for Social Security regardless of whether they are a member of a qualified retirement system.

3. Medicare Hospital Insurance (HI)-only Agreements in effect on or before July 1, 1991

Medicare HI-only coverage obtained under a Section 218 Agreement on or before July 1, 1991, continues after July 1, 1991.

4. Medicare HI-only Agreements executed after July 1, 1991

If a Section 218 Agreement for Medicare HI-only coverage was retroactive to periods on or before July 1, 1991, services performed by employees on or before July 1, 1991 are covered for Medicare under the Agreement. However, services performed after July 1, 1991 by employees who are not members of a qualified retirement system are covered mandatorily for Social Security.

5. Error Modifications executed after July 1, 1991

An Error Modification should list the date the coverage error began as the effective date regardless of whether the coverage error began prior to, on, or after July 1, 1991 (see SL 40001.465B). Coverage will continue from the effective date forward.

6. Services optionally excluded from a Section 218 Agreement

Under a Section 218 Agreement, a State has the option to exclude certain services from coverage. If the Agreement does not specifically exclude these services, they are covered. Beginning after July 1, 1991, mandatory coverage may apply to services that were excluded optionally by the State, unless the service is excluded from mandatory coverage by law (SL 50001.501D). As with all mandatory coverage, an employee in one of these excluded positions will be covered mandatorily unless the employee participates in a qualified retirement system.

Example: A City’s Section 218 Agreement excludes part-time positions that require less than 20 hours of work per week. The City’s cafeteria has part-time employees who work part-time 15 hours per week. The City’s retirement system membership is only for employees who work in full-time positions. Therefore, part-time employees of the cafeteria are subject to mandatory Social Security and Medicare.


SL 50001 TN 1 - Mandatory Coverage - 1/29/2020