Division of Retirement and Benefits

Robert GreggRobert.Gregg@alaska.gov

907 465-4469

Section 218 Coverage – Social Security & Medicare

HistoryHistory• Before 1951: No coverage• 1951: Section 218 added• Coverage available• Positions not under retirement system

• 1955: Retirement systems included• Until 4/83: Termination possible

HistoryHistory• 4/1/86: Mandatory Medicare coverage• New hires

• 7/2/91: Mandatory Social Security• Unless qualifying retirement system

• Since 1986: Tax deposits/941s filed with IRS• Intent is to protect workers and families

Get IRS Publication 963!Get IRS Publication 963!• Complex provisions• Provides good explanations• Resources• http://www.irs.gov/pub/irs-pdf/p963.pdf

218 Agreements218 Agreements• Coverage Groups• Absolute• Retirement system

Referendum required Police and fire positions

• Exclusions•Mandatory• Optional

Alaska 218 AgreementsAlaska 218 Agreements• Original and 183 modifications• Significant variations• Retirement positions generally not

covered TRS, PERS Divided vote option

• Several entities covered, then terminated• State positions

Alaska 218 AgreementsAlaska 218 Agreements• Exclusions vary• Election workers• Students• Part-time positions• Elected officials• Fee-based positions

• New hire notification• SSA-1945

Your 218 AgreementYour 218 Agreement• Reference copy in agency files• Contact state Social Security administrator

for interpretation• Kay Gouyton• (907) 465-5707

Determining CoverageDetermining Coverage• Position covered under your 218 agreement?• If yes, withhold social security and

Medicare taxes• Deposit withholding and employer match

Determining CoverageDetermining Coverage• Position not covered by agreement• Hired since 4/1/86?

If yes, withhold Medicare tax• Covered by public retirement system?• If no, withhold Social Security and

Medicare taxes• Unless excluded services

Qualifying Retirement SystemQualifying Retirement System• Used to determine if mandatory Social

Security applies• System that matches OASI• Different standard than 457, 403(b) or

401(a)• Details in rev. Proc. 91-40

Qualifying Retirement SystemQualifying Retirement System• Defined Benefit Plan•Minimum retirement payment of 1.5 X

average of last 3 years pay X years of service

• Defined Contribution Plan•Minimum allocation of 7.5% of pay• Employer and employee funds count• Earnings not included in 7.5%• Reasonable earnings requirement

Qualifying Retirement SystemQualifying Retirement System• Employee must meet all standards of the

plan to be a participant• Length of service• Dates employed• Age

• Special rules for part time, seasonal or temporary employees• Contact IRS for determinations

Additional ConsiderationsAdditional Considerations• Elected or appointed officials• Election workers• $1500 threshold (same for 2010)

• Police and fire positions• “Volunteer” firefighters

• Rehired annuitants

Additional ConsiderationsAdditional Considerations• Students• Rev. Proc. 2005-11

•Military differential wage payments• Accountable plans

ResourcesResources• Your 218 Agreement• Alaska state Social Security administrator• Kay Gouyton 907 465-5707• Robert Gregg 907 465-4469

• SSA Government Employer Web Page• www.ssa.gov/slge/

• IRS Government Employer Web Page• www.irs.gov/govt/fslg/index.html

ResourcesResources• Qualifying Public Retirement System• IRS-877 829-5500

• SSA Employer Web Page• www.socialsecurity.gov/employer

•W2 Issues• Tim Beard, Social Security

Administration Tim.Beard@ssa.gov (206) 615-2125