Illinois State University
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SURS Exemption

As a SURS member, you do not contribute to Social Security as part of your SURS-covered employment.

When enacted in 1935, the Social Security Act did not provide coverage for state and local government employees. The two main reasons for this were that numerous states and municipalities already had retirement systems and there was a concern about whether the federal government had authority to impose a tax on state and local governments. As a result, state and local government employees were initially excluded from Social Security and did not pay Social Security taxes imposed by the Federal Insurance Contributions Act (FICA).

Because some states did not have their own retirement systems, Congress amended the Act in 1950 to provide a mechanism for a state to elect Social Security coverage for the state’s employees. Provided under Section 218 of the Act, and known as “Section 218 Agreements,” a state may voluntarily enter into an agreement under which the federal government agrees to cover the state’s employees under Social Security and the state and its employees are subject to FICA taxes. Once made, an agreement to cover a class or group of employees cannot be terminated or modified to exclude that class of employees in the future. Each state has a Social Security Administrator to oversee Social Security programs in the state.

In 1986, Medicare coverage was extended to all state and local government employees hired or rehired on or after April 1, 1986, unless their state had already entered into a Section 218 agreement subjecting them to both Social Security and Medicare coverage.

Continuing Employment Exception

An employee hired before April 1, 1986 by a state employer and who transfers after March 31, 1986, to another state employer of the same state qualifies for the continuing employment exception, provided the transfer was made without a termination of the employee's overall employment relationship with that state. The same rule applies to an employee hired before April 1, 1986, by a political subdivision employer, who transfers after March 31, 1986, to another employer of the same political subdivision.

However, an employee hired before April 1, 1986, does not qualify for the continuing employment exception if after March 31, 1986, the employee transfers from a state employer to a political subdivision employer, or from a political subdivision employer to a state employer. Likewise, an employee does not qualify for the exception if the employee transfers from a political subdivision employer in one political subdivision to a political subdivision employer in a different political subdivision. 

Rehired Annuitants

Under the IRS regulations, rehired annuitants are exempt from Social Security coverage (but not Medicare withholding) if the annuitant is employed by the same employer OR the annuitant is employed by a different employer who maintains the same retirement system.

2014-01-10T10:55:10.766-06:00 2014
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