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).
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).