stofct2.gif (2235 bytes)

SOCIAL SECURITY/MEDICARE EXEMPTIONS

NOTE: The exemption status of an individual should be determined before the employee is entered on a payroll.

  1. Nonresident Aliens under "F-1", "J-1" or "M-1" Visas
    1. ) A foreign national in this country on an "F-1" (nonimmigrant student), "J-1" (exchange alien) or "M-1" (trainee) type visa is exempt from Social Security and Medicare provided that they are engaged in the program for which they were granted this type of visa. In some cases, work for the purpose of support is authorized, in which case, such employment is considered as under the program for which the employee was granted the special visa.
    2. ) Nonresident aliens under "F-2", "J-2" or "M-2" visas and resident aliens, receive the same treatment as U.S. citizens.
  2. Student Payroll

    Service performed in the employ of a school, college or university is exempt from Social Security and Medicare if such service is performed by a student who is regularly enrolled and attending classes at such school, college or university.

    1. ) Do not deduct Social Security or Medicare for student on the student payroll during the regular school session.
    2. ) During the summer, the determination of the exempt status must be made for each student. If the student is enrolled in the current summer session or should the student be a foreign national with an "F-1" visa and be exempt as outlined in section 1(a) above, no Social Security or Medicare should be taken.
    3. ) In all other cases of summer employment, full Social Security and Medicare should be taken.
  3. Graduate Assistants

    Students employed as Graduate Assistants have no Social Security or Medicare deductions made from their salary.

    1. ) All students being paid on other than the student payroll and with a title other than Graduate Assistant who are exempt must have this exemption detailed in a letter of explanation which must accompany each and every employment authorized for that individual during their period of exemption.
    2. ) The agency payroll section must be notified promptly of the termination of an exemption.
  4. Advanced Degree Programs

    Persons enrolled in an advanced degree program who have completed their course requirements continue to be students while continuing to actively complete their degree program. Such services as they may perform must be connected with their degree program.

    Follow the procedure outlined in section 3.

  5. Retired Senior Volunteer Program and Foster Grandparent Program

    Compensation paid to individuals participating in either of the above programs is exempt from Social Security and Medicare.

  6. Workfare Program Recipients

    Services performed in return for assistance payments are excluded from Social Security and Medicare.

  7. Patients and Inmates

    Services performed for a state agency by a patient or inmate of a state hospital, home or other institution are excluded from Social Security and Medicare.

  8. Emergency Workers

    Temporary employees, including State National Guard members, are excluded from Social Security and Medicare for services in connection with fire, storm, snow, earthquake, flood, riot, strike, civil disorder or similar emergency situation.

  9. Deputy Sheriffs Compensated Solely by Fees for Process Serving

    Such services are excluded from Social Security and Medicare.

    However, said fee income is to be included by the individual in the determination of net earnings from self-employment and is thereby subject to the self-employment tax.

  10. Service Covered Under the Teachers' Retirement System, Judges and Compensation Commissioners Retirement System or the States' Attorneys' Retirement System.

    An employee newly eligible for membership in one of the above-named retirement systems is excluded from Social Security for service covered under such system.

    Medicare coverage, however, is required for such members whose state employment or reemployment commenced after March 31, 1986.

MANDATORY MEDICARE COVERAGE FOR CERTAIN NEW EMPLOYEES

  1. AUTHORITY

    Federal Public Law 99-272, the Consolidated Omnibus Budget Reconciliation Act of 1985, was signed by the President on April 7, 1986. The bill's provisions include mandatory Medicare coverage for certain state employees hired after March 31, 1986, for services performed after that date.

    The Medicare-only coverage applies to new employees not already covered under the state's Social Security agreement. Such employees will be liable for the Medicare portion of the Federal Insurance Contributions Act (FICA) tax. The current rate for Medicare-only is 1.45% (on earnings to a maximum of $132,200) which will be subject to payroll deductions. A matching 1.45% contribution will be required from the State.

  2. MEDICARE COVERAGE/EXCLUSIONS:
    1. Public Law 99-272 provides that mandatory Medicare coverage will apply for all employees hired or rehired after March 31, 1986 who are not specifically excluded because:
      1. they are covered by full Social Security;
      2. they are hired to relieve them from unemployment, e.g., Workfare;
      3. they are patients or inmates performing services in an institution;
      4. they are temporary workers hired on account of a fire, storm, snow, flood or similar emergency; or
      5. they are non-resident aliens (F-1 or J-1 classification) who are performing services as authorized by the U.S. Immigration and Naturalization Service to carry out the purposes for which they were admitted to this country.
    2. The mandatory Medicare coverage now includes employees in the following categories:
      1. Alternate Retirement Program (TIAA-CREF);
      2. Teachers' Retirement Program; and
      3. Members of boards and commissions and other employees paid on a "per diem" basis.

        Under P.L. 99-272, all employees in these categories who were hired after March 31, 1986 will be subject to Medicare coverage unless they are excluded under the preceding Section II.A.

  3. EXCLUSION OF STUDENT WORKERS

    The following exclusion of student workers, including graduate assistants was determined recently: Students (including those employed under a College Work/Study Program) who are employed by, are enrolled at, and regularly attend classes at Educational Institutions, continue to be exempt from Social Security withholding tax. Since the new law does not affect the student exemption from FICA taxes, students employed by their institutions are not required to pay the hospital insurance portion of the FICA tax; i.e., 1.45% Medicare.

  4. ASSISTANCE

    If you encounter difficulty in determining the status of a particular employee, please contact the Retirement Division of the Office of the State Comptroller at 566-2626.

NEW MANDATORY SOCIAL SECURITY COVERAGE (FICA) FOR EMPLOYEES
WHO ARE NOT MEMBERS OF A STATE RETIREMENT SYSTEM

AUTHORITY

Public Law 1012-508 (Consolidated Omnibus Reconciliation Act of 1990) signed by the President on November 5, 1990, imposes FICA tax on employees of State and Local governments who are not members of a retirement system of the State or Local government.

This provision went into effect on July 1, 1991. Such employees will be required to pay, in addition to the Medicare Hospital Insurance (HI) Tax paid at 1.45% (on earnings to a maximum of $130,200), the Old Age, Survivors and Disability Insurance (OASDI) Tax at 6.2% (on earnings to a maximum of $55,500). Matching contributions will be required from the State.

Those employees whose service is covered under the State's 218 agreement should not be affected by the new law because those employees currently pay the identical amount of taxes as required by FICA.

COVERAGE EXCLUSIONS

Public Law 101-508 provides the mandatory FICA (Medicare and OASDI) will apply for all employee except for those employees specifically excluded because:

  1. they are members of a retirement system of the State;
  2. they are hired to relieve them from unemployment (e.g., work/relief programs such as "Work Fare");
  3. they are patients or inmates performing services in an institution;
  4. they are temporary workers hired on account of a fire, storm, snow, flood, or similar emergency;
  5. they are non-immigrant, non-resident aliens (F-1, J-1 or M-1 classification) who are performing services as authorized by the U.S. Immigration and Naturalization Service to carry out the purposes for which they were admitted to this country;
  6. they are students (including those employed under a College Work/Study Program) who are employed by, are enrolled at and regularly attend classes at Educational Institutions;
  7. they are paid solely on a fee basis where the fee is paid directly by the public (however, such fees are to be included by the individual in net earnings from self employment); or
  8. they are an election official or election worker and the remuneration paid in a calendar year for such services is less than $100.

The mandatory FICA coverage now includes all full-time, part-time, temporary and seasonal state employees not members of a state retirement system except if excluded under the preceding Section II.A. Retirement systems of the state include the following:

ABBREVIATION RETIREMENT SYSTEM NAME
SER STATE EMPLOYEES RETIREMENT SYSTEM
SRS (PART OF SER) STATUTORY RETIREMENT SYSTEM
ARP ALTERNATE RETIREMENT PLAN
TRS TEACHERS' RETIREMENT SYSTEM
JCC JUDGES AND WORKERS' COMPENSATION
COMMISSION RETIREMENT SYSTEM
SCJ (PART OF JCC) SUPERIOR COURT JUDGES
SAR STATE ATTORNEYS' RETIREMENT
SYSTEM
CPC PROSTATE COURT JUDGES AND
EMPLOYEES
PDR PUBLIC DEFENDERS' RETIREMENT
SYSTEM

ASSISTANCE

If you encounter difficulty in determining the status of a particular employee, please contact the Office of the State Comptroller, Accounting Systems Division at 566-3782.


Back to Table of Contents
Back to Comptroller's Home Page