Social Security coverage is available to state and local government employees through a unique voluntary federal-state agreement authorized by Section 218 of the Social Security Act. Employees covered under a Section 218 Agreement have the same coverage and benefit rights as employees mandatorily covered for Social Security and Medicare.

Section 218 Agreements cover positions, not individuals. If the position is covered for Social Security and Medicare under a Section 218 Agreement, then any employee (except for rehired annuitants) filling that position is subject to Social Security and Medicare taxes.

Public employees are brought under a Section 218 Agreement in one of two basic coverage groups:

  • Absolute coverage group - Employees whose positions are not covered under a public retirement system
  • Retirement system coverage group - Employees whose positions are covered under a public retirement system

Section 218 Agreements are irrevocable.  Once coverage is provided, it cannot be terminated.

In California, contracting for a Section 218 Agreement provides Social Security and/or Medicare coverage in conjunction with an already established qualifying public retirement system.

There are two methods to contract for a Section 218 Agreement:

  • Referendum - Social Security and/or Medicare is determined by the majority of eligible voters. If the majority votes in favor, all current and future employees in positions under the retirement system will be covered. All new employees are also subject to coverage on the date they become members of the retirement plan. If the majority votes against, no employees will be covered at this time. After a "no" vote, another referendum could be held later.
  • Division - Social Security and/or Medicare coverage is determined on an individual basis. The eligible member of the retirement system makes an individual choice. A "yes" vote means employees and all future employees will be covered. New employees are subject to coverage on the date they become members of the retirement plan. A "no" vote means employees will not be covered as long as they maintain continuous employment in a position within the same public retirement system.

For employment positions considered "safety" (e.g., police, sheriff, firefighters), Social Security and/or Medicare coverage is provided on referendum. In "non-safety" positions, coverage is provided via division or referendum.

In all cases, the first step in the contracting process is for an agency to adopt a formal resolution (documents provided by CalPERS) requesting permission to conduct a referendum or division among eligible employees. In addition, the agency will provide detailed demographic information specific to affected employees, status of retirement system, and governing body of agency.

Public agency employers interested in contracting for a Section 218 Agreement can email the CalPERS State Social Security Administrator Program.

Retroactivity

A Section 218 Agreement may be made retroactively, up to five coverage years from the date of federal approval of the agreement. It takes approximately six months to receive this approval. For example, if you request retroactivity in 2014, it would probably be approved in 2015, so that coverage would begin in the 2011 coverage year.

Both employers and employees have to pay retroactive contributions for retroactive coverage.

Certain services and positions can be excluded from Social Security coverage under the Section 218 Agreement, if requested by the state. Exclusions are limited to the services listed as optional exclusions in Section 218 of the Social Security Act. Those optional exclusions include:

  • Agricultural labor, but only those services that would be excluded if performed for a private employer
  • Elective positions
  • Election workers and election officials whose pay in a calendar year is less than the amount mandated by law, unless Section 218 agreement covers election workers
  • Part-time positions (as defined by the employer in terms of hours per week/month/year)
  • Positions compensated solely by fees that are subject to Self-Employment Contributions Act (SECA), unless Section 218 Agreement covers these services
  • Students enrolled and regularly attending classes at the school, college, or university where they are working
Generally, a Section 218 Agreement may be modified to increase the extent of coverage (e.g., to remove certain optional exclusions), but not to reduce the amount of coverage (e.g., exclude future hires).

Section 218 Agreements can be modified to:

  • Cover additional services in a group already covered (e.g., services previously optionally excluded)
  • Cover employees changing to the "yes" group in a divided retirement system within two years of the original federal approval date
  • Cover previously terminated groups
  • Include additional coverage groups

Contact us in advance of any proposed mergers, reorganizations, transfers, etc., so we can make a determination of the employee status of such persons.

Section 218 Agreement Entities

If the name of your organization changes from what is specified on the Section 218 Agreement, contact us and provide documents that note the name change (e.g., minutes from board meetings, resolutions approved, etc.). CalPERS will notify the Social Security Administration of the name change.

If employees are being reorganized/merged into the entity named in the Section 218 Agreement, they are subject to Social Security coverage with the named entity.

Example: The Laguna Lakes Water District transferred in whole to the Water Department of the City of Laguna Lakes, which has a Section 218 Agreement. All employees will now have Social Security. If Laguna Lakes Water District ceased to exist, any Section 218 Agreement would be terminated.

Government Entities

If employees of the named entity are being reorganized/merged (or otherwise transferred) to another governmental entity, they will have the same Social Security status as other similarly situated employees of the other governmental entity.

Example: Some employees of the Water Department of the City of Laguna Lakes have been transferred to the Laguna Lakes Water District. Their coverage depends on whether the Laguna Lakes Water District has a Section 218 Agreement.

Joint Powers Authority (JPA)

If employees of the named entity are merged/transferred into an agency (such as a newly formed JPA) that doesn't have a Section 218 Agreement, their Social Security coverage will end. The JPA will have the option of contracting for its own Section 218 Agreement.