SOCIAL SECURITY/MEDICARE EXEMPTIONS
NOTE: The exemption status of an individual should be determined before the employee is entered on a 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.
Students employed as Graduate Assistants have no Social Security or Medicare deductions made from their salary.
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.
Compensation paid to individuals participating in either of the above programs is exempt from Social Security and Medicare.
Services performed in return for assistance payments are excluded from Social Security and Medicare.
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.
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.
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.
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
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.
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.
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.
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
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.
Public Law 101-508 provides the mandatory FICA (Medicare and OASDI) will apply for all employee except for those employees specifically excluded because:
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
|CPC||PROSTATE COURT JUDGES AND
|PDR||PUBLIC DEFENDERS' RETIREMENT
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.
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