Overview of Commonwealth's Provision for Social Security for Public Employees (SSPE)
When initially enacted in 1935, the Social Security Act (Act) did not include public employees as eligible for Social Security because of the constitutional question regarding the power of the federal government to tax state and local governments.
Since 1950, state and local employers have been able to offer Social Security coverage to their employees under an agreement between the commonwealth of Pennsylvania and the Social Security Administration (SSA), known as a Section 218 Agreement.
Section 218 of the Act permits a state to participate in Social Security coverage for its employees or employees of political subdivisions within the state. Many government employers did not have their own retirement systems. In 1950, the United States Congress amended the Act to allow states to voluntarily enter into agreements with SSA, on behalf of the Department of Health and Human Services.
Each state designated an official to administer the agreement on behalf of the state. This official is referred to as the State Social Security Administrator. In 1952, the Pennsylvania Department of Labor & Industry was designated by the Governor to administer the Amendments to the Act which permitted public employers to voluntarily provide their employees with Social Security coverage.
Notices and Updates
Attention! If you hire new employees not covered by Social Security: Section 419(c) of Public Law 108-203, the Social Security Protection Act of 2004, requires state and local government employers to disclose the effect of the Windfall Elimination Provision and the Government Pension Offset to employees hired on or after January 1, 2005, in jobs not covered by Social Security. The law requires newly hired public employees to sign a statement that they are aware of a possible reduction in their future Social Security benefit entitlement.
For more detailed information about this law, and to view a copy of the statement concerning employment in a job not covered by Social Security (Form SSA-1945), refer to the following site: http://www.socialsecurity.gov/form1945/
- Referendum Procedure for Obtaining Social Security Coverage
SSPE Frequently Asked Questions (FAQs)
Is there some type of handbook for public employers?
Yes. Publication 963, Federal-State Reference Guide, prepared by the Internal Revenue Service (IRS) and the Social Security Administration (SSA), contains detailed information for public employers on Social Security and Medicare coverage.
The Federal-State Reference Guide is available via the Internet at http://www.irs.gov/pub/irs-pdf/p963.pdf Opens In A New Windowor you may call 1-800-829-3676.
What will the IRS accept as evidence of authority to withhold FICA?
A copy of the Master Plan and Agreement should be on file with any public employer who withholds FICA from the pay of fulltime uniformed and non-uniformed employees who belong to a "qualified pension plan."
A political subdivision can obtain a copy of their Master Plan and Agreement and any subsequent modifications by contacting the State Social Security Administrator and providing the name of the entity, Employer Identification Number (EIN), and email address or fax number.
What is the Pennsylvania Department of Labor & Industry’s role?
In 1952 the Department of Labor & Industry was designated by the Governor to administer the Amendments to the Act which permitted public employers to voluntarily provide their employees with Social Security coverage.
The Commonwealth of Pennsylvania, Department of Labor & Industry is responsible for administering the law and procedures governing Social Security and Medicare coverage by State and local public employers.
What is the Social Security Administration’s role?
The SSA is responsible for administering the law and procedures for governing Social Security and Medicare coverage, benefits, and entitlements.
What is the Internal Revenue Service’s role?
The IRS is responsible for collecting the taxes through quarterly payroll tax returns.
SSPE FAQs have been organized by the list of topics below. Please click on any link to display the questions and answers provided for the topics listed.
SSPE Distinctions, Key Dates & Roles
Public employees covered for Social Security and their employers pay the same FICA taxes as other employees and their employers.
Public employees covered for Social Security receive the same benefits as other employees.
Social Security coverage of state and local employees involves a complex set of laws and regulations that provide exceptions for unique coverage and tax/withholding requirements that do not apply to private employers.
The Section 218 Agreement for the state establishes Social Security coverage for public employees. Classifications of public employees may be specifically covered by or exempt from Social Security coverage under the Section 218 Agreement.
- Since 1950, state and local employers have been able to offer Social Security coverage to their employees under an agreement between the commonwealth of Pennsylvania and the Social Security Administration (SSA) known as a Section 218 Agreement.
- As of April 20, 1983, employers who are under a Section 218 Agreement can no longer opt out of Social Security coverage.
- In 1986, Medicare coverage was mandated for all newly hired state and local public employees.
- As of January 1987, FICA and Medicare taxes are submitted directly to the Internal Revenue Service (IRS). Previously, the State Social Security Administrators collected the taxes.
- In 1991, Social Security and Medicare coverage was mandated for virtually all public employees not covered by either a public retirement system or a Section 218 Agreement.
- Beginning in 1994, employers may offer coverage to police officers and firefighters, previously excluded classes.
Social Security for public employees is a cooperative effort between the public employer, the Pennsylvania Department of Labor & Industry, the Social Security Administration (SSA) and the Internal Revenue Service (IRS).
- Determine which employees are exempt from Social Security and/or Medicare taxes.
- Withhold, report and pay appropriate Social Security and/or Medicare taxes for each employee.
- Obtain clarification of laws, regulations, and other appropriate information from the State Social Security Administrator, IRS and SSA.