Overview of Commonwealth's Provision for Social Security for Public Employees (SSPE)

• 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.

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.

The SSA is responsible for administering the law and procedures for governing Social Security and Medicare coverage, benefits, and entitlements.

The IRS is responsible for collecting the taxes through quarterly payroll tax returns.

The 1991 change covered virtually all public employees. The exceptions are divided into two groups.

The first are the classes of employees excluded from voluntary Social Security coverage. These employees cannot be covered by a Section 218 (voluntary) Agreement.

The second are classes that are not considered employees and therefore excluded from voluntary Social Security coverage. These individuals would not be covered by a Section 218 (voluntary) Agreement.

• Non-resident aliens with F-1, J-1, M-1, or Q-1 visas.
• Employees hired temporarily to handle disaster emergencies (fire, floor, storm, snow, earthquake and similar emergencies.)
• Individuals paid for services performed in a hospital, home or other institution where they are a patient or inmate.
• Persons hired to provide transportation services that are covered under Section 210(k) of the Social Security Act.
• Persons hired to be relieved from unemployment.
• Election officials and election workers paid less than the national threshold, regularly updated by the Social Security Administration and listed here​
  
• Workers who are self-employed and compensated for services solely on a fee basis.

• Jurors and Notaries Public are not considered to be employees under the common law.
• If the services are not covered under a Section 218 Agreement, Section 530 (Safe Haven) of the Internal Revenue Act of 1978 is applicable. If the requirements of Section 530 are met, the employer (not the worker) is relieved of federal employment tax obligations.

A Federal law passed in October 1998 (Public Law 105-277) allowed Pennsylvania to modify its Section 218 Agreement with the Social Security Administration to exclude public school student workers from the FICA (Federal Insurance Contributions Act) tax. After June 30, 2000, all but ten of the more than 530 eligible Pennsylvania public school districts, colleges and universities will be exempt from the FICA tax of 7.65 percent of gross wages paid by both the school and the student.

Effective July 1, 2000, public schools covered under Section 218 of the Social Security Act should NOT withhold or pay FICA (Social Security and/or Medicare) taxes on services performed by students in the employ of the school, if such service is performed by a student who is enrolled and regularly attending classes at the school. Note that the services (employment) and enrollment relationship must be within the same school entity.

Requirements of coverage for some classes of employees are determined based on the individual Section 218 Agreement in place for the entity. These employees may be covered by a Section 218 (voluntary) Agreement:

• Appointed Officials, Elected Officials
• Elections Officials, Election Workers
• Employees covered by a qualified Public Retirement System
• Firefighters
• Police Officers

In addition, public officers are generally considered employees for FICA purposes and may be covered by a Section 218 (voluntary) Agreement. If there is any question whether a person is a public officer, obtain a copy of, or a reference to, the pertinent statute or ordinance relating to the establishment of the position.

The following normally are public officers:

• Assessors
• District Magistrates, Justices of the Peace, Magistrates
• Members of Boards or Commissions
• Tax Collectors

Requirements of coverage for these classes of employees are determined based on the political subdivision’s pertinent statute or ordinance relating to the establishment of the position.

The governing body of a political subdivision initiates social security coverage for its employees by contacting the Pennsylvania Department of Labor & Industry (State Administrator in Pennsylvania) to amend the Section 218 Agreement. For your information the legal references are listed below.

Reference:

Section 206 of the act of January 5, 1952, as amended (the Pennsylvania law pertaining to social security for public employees, hereinafter referred to as "the Act") (65 P.S. §206) provides, in part, as follows:

"Each political subdivision or instrumentality thereof of the Commonwealth is hereby authorized to submit for approval by the State agency a plan for extending the benefits of Title II of the Social Security Act, in conformity with applicable provisions of such act, to employees of such political subdivision...."

The second sentence of Section 206.1 of the act (65 P.S. §206.1) provides as follows:

"With respect to employees of any political subdivision other than an instrumentality of the Commonwealth whose employees are members of the State employees retirement system or a school district or vocational school district or joint school system, he [the Governor] shall authorize a referendum upon the request of the governing body of the subdivision." [Emphasis added]

Note that the procedure for the implementation of the referenda, as enunciated under §206.1, may differ depending upon the covered class of employees involved.

The regulations promulgated under the Act also include provisions with respect to the submission of a plan by a political subdivision (34 Pa. Code §71.2-71.6). 34 Pa. Code §71.2 provides that each political subdivision which desires to be covered under social security must submit an application to the Department of Labor & Industry for its approval

"...together with one authenticated copy of the ordinance or resolution passed by the governing body setting forth the authority of the political subdivision or instrumentality thereof for its submission of the plan and agreement."

The referendum procedure must be conducted under the direction of the State’s Social Security Administrator. Remember, the referendum is the process by which a retirement system is divided into two parts (employees who are covered for Social Security and employees who are not covered for Social Security).

Governing Body Steps:

• Initiate the division procedure by adopting a resolution to request authorization to divide the entity’s retirement system(s) by conducting a divided vote referendum. Sample Resolution (PDF);
• Authorize the appropriate individual to execute an agreement pursuant to the referendum;
• Establish within the Resolution the effective date of coverage; and
• Acknowledge the applicable state and federal laws and regulations regarding employee withholdings, employer contributions and record keeping.

Political Subdivisions Steps:

• Submit the original signed and properly certified Resolution adopted by the governing body of the political subdivision. The person executing the resolution and modification to the Commonwealth's Section 218 Agreement must have the authority to do so.
• Completes and submits the Section 218 Checklist (PDF)
• Prepare and provide to the State Administrator a Notice of Referendum to be distributed to eligible employees. To give notice to all eligible employees, the notice may be given to employees by personal delivery, e-mail or first class mail and must be posted on all bulletin boards maintained by the political subdivision. Notice must be given to eligible employees on leave of absence. If any doubt arises as to an employee's eligibility to participate in the referendum, a notice should be provided, and his or her status can be resolved later.
• Prepare a listing (electronic format) with the names, hire dates, and Social Security Numbers of eligible employees of the retirement system(s) who are members of the retirement system(s) on the date of the referendum, and were employed on the date the Notice of Referendum is posted. This list will be modified during the period between the Notice of Referendum and the referendum date for retirements and other separations from service.
• Mail all documents to:

Social Security for Public Employees
Attn: State Administrator
Room 1719-A, L&I Building
Harrisburg, PA 17121

• Upon SSA’s approval of the State’s request to modify its agreement, the political subdivision prepares and submits a Plan and Agreement (PDF)

State Administrator Steps:

• Upon receipt of the executed Resolution, if all information is found to be in order the State Administrator establishes the date on which the referendum will be held. The referendum must be held no less than 90 days after the date the Notice of Referendum is distributed to eligible employees.
• Coordinates an informational meeting with the Social Security Administration for the Referendum eligible employees during the 90-day notice period. The informational meeting will be offered to each eligible employee to inform them of the benefits that may accrue to them and their spouses if their services are covered under Social Security. Additionally, the informational meeting shall include an explanation of the tax liabilities to which they will be subject if coverage is chosen in the referendum process. If the State Administrator is present for the informational meeting balloting instructions will be reviewed.
• Oversees the proper conducting of the referendum 
  • The referendum will be held by written ballot on the question of whether members of a  retirement system desire to be included in the part of the system to be covered for Social Security, or whether he or she desires to be included in the part of the system not covered for Social Security.
  • All members of the retirement system will have the opportunity to vote.
  • The ballots will be distributed and collected by the State’s representative.
  • Failure to properly execute a ballot on the referendum date shall be deemed an election by the member to be included in the part of the retirement system that does not desire Social Security coverage.
  • The State Administrator certifies the referendum results and notifies the employer in writing of each eligible members choice.
  • The State Administrator prepares a Modification to the State’s section 218 Agreement and sends it to the Social Security Administration for approval to add the political subdivision to its’ agreement of August 20, 1952.
  • After SSA has approved the Modification, the State Administrator will execute the political subdivision’s Plan and Agreement.

All states are authorized to use the majority vote referendum procedures. In addition, Pennsylvania is authorized to use the "Divided System Retirement Referendum," which means that coverage is extended based on whether the individual employees in positions under that system want Social Security (or Medicare) coverage.

For example, Employer "A" is extending coverage to a group of ten employees. All ten employees will make an individual choice, through an election, selecting what type of coverage he or she desires. In this case, the voting ballots are not secret since the individuals choosing coverage must be identified for the employer to correctly withhold and pay FICA taxes. The employer will only cover those employees selecting Social Security coverage (or Medicare only, if applicable). The employer will not cover any employee who elects not to participate. However, if one or more employee elects full Social Security coverage, any employee hired after the date of the election is automatically covered for full Social Security.

By contacting the State Social Security Administrator at the Pennsylvania Department of Labor & Industry, a presentation can be arranged to provide you and your employees with information about Section 218 coverage and Social Security benefits.

Additional information is available by contacting your State Social Security Administrator in the Pennsylvania Department of Labor & Industry:

Kristen Gardner, State Social Security Administrator
Department of Labor & Industry
651 Boas Street, Room 1719-A
Harrisburg, PA 17121
Phone: 717-346-1497
Email: krgardner@pa.gov