1. Social Security and Medicare Coverage for State Employees
John Neely Kennedy
State Treasurer and State Social Security Administrator
Linda Yelverton
Social Security Program Director
(225)
Angie Dowdy
Social Security Program Analyst
(225)
SHRMA September 30, 2009

2. We will discuss… History of Section 218
Role of State Social Security Administrator
Section 218 coverage of State Employees
Mandatory Medicare and Social Security
Majority and Divided Vote Referendums
WEP and GPO
Social Security Disability

3. History of Section 218…
1935 Original Social Security Act provided NO coverage for state and local government
1951 Section 218 allowed voluntary coverage of Non-retirement system positions
1952 Louisiana entered into a Section Agreement with SSA
1955 Coverage of retirement system positions by majority vote referendum
2004 Coverage of retirement system positions by divided vote referendum

4. Role of State Administrator…
Administers the Section 218 Agreement
Negotiates modifications to Agreement
Conducts Referendums
Resolves coverage and taxation issues with the Social Security Administration and Internal Revenue Service
Provides information to state and local government agencies

5. (Medicare tax withholding)
Mandatory Medicare…
1986 Congress mandated Medicare coverage of all employees hired, re-hired or elected after March 31, 1986
(Medicare tax withholding)

6. Medicare eligibility…
Generally individuals are eligible for premium free Medicare “Part A” if they, their spouse, divorced spouse or deceased spouse worked for at least 10 years (40 or more credits) in Medicare- Only or Social Security covered employment and are age 65.

7. (based on Timely Enrollment)
Medicare Premiums…
Individuals who do not qualify for premium free “PART A” can purchase Medicare.
2009 MONTHLY PREMIUMS
(based on Timely Enrollment)
Purchaser has credits: at least less than 30
Part A $ $
Part B-everyone pays
TOTAL Monthly Premium $ $503.50

8. Mandatory Social Security…
1991 Congress mandated Social Security withholding for services after July 1, 1991
All employees not participating in a retirement system which meets certain minimum benefit requirements established by the IRS, and not covered by a Section 218 Agreement

9. Majority Vote Referendum…
If a majority of eligible members of the retirement system/plan vote in favor of coverage, ALL eligible employees and future employees would be covered (Even those that voted “NO”)

10. (Those that vote “NO” are not covered)
Divided Vote Referendum…
Each eligible member of the retirement system/plan, on the date the referendum is held, may make an individual choice as to whether or not he/she elects to be covered. The members who vote “YES” are covered and all future members
(Those that vote “NO” are not covered)

11. WEP … Windfall Elimination Provision:
If you didn't pay Social Security taxes on your government earnings and you are eligible for Social Security benefits, the formula used to figure your benefit amount may be modified, giving you a lower Social Security benefit.

12. Standard Calculation of benefit…
Social Security benefits are based on the worker’s average monthly earnings adjusted for inflation.
Example, for a worker who turns 62 in 2009, the first $744 of average monthly earnings is multiplied by 90 percent; the next $3,739 by 32 percent; and the remainder by 15 percent.
The sum of the three amounts equals the total monthly payment amount.

13. Calculation of WEP offset…
The 90 percent factor is reduced in the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and
For those who reach 62 or became disabled in 1990 or later, the 90 percent factor is reduced to 40 percent.
The maximum WEP offset for 2009 is $372.00

14. Exception to WEP offset…
For example, the 90 percent factor is not reduced if you have 30 or more years of “substantial” earnings in a job where you paid Social Security taxes.
If you have 21 to 29 years of substantial earnings, the 90 percent factor is reduced to between 45 and 85 percent.

15. GPO… Government Pension Offset:
If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced.

16. Standard Calculation of benefit…
For Example, a woman worked and earned her own $800 monthly Social Security retirement benefit, but she also was due a $500 wife’s benefit on her husband’s Social Security record, Social Security could not pay that wife’s benefit because her own Social Security benefit offset it.
When both spouses receive a Social Security benefit based on their own earnings, the offset is dollar for dollar

17. Calculation of GPO offset…
Your Social Security benefits will be reduced by two-thirds of your government pension.
Example, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits.
If you are eligible for a $500 spouse’s, widow’s or widower’s benefit from Social Security, you will receive $100 per month from Social Security
($500 – $400 = $100).

18. Exceptions to GPO offset…
Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you:
Are receiving a government pension that is not based on your earnings
Are a state or local employee whose government pension is based on a job where you were paying Social Security taxes

19. Social Security Disability Coverage…
If you become disabled
before age 24, you generally need one and a half years of work during the three-year period before your disability begins.
24 through 30, you generally need to have worked for half of the period between age 21 and the time you become disabled.
31 or older, the amount of work you need depends on your age when you become disabled. Also, you
must have worked for five years out of the 10 years immediately before you become disabled.
Eligibility for Social Security Disability is lost after 5 years of non-covered earnings

20. Resources… Social Security Administration
ISIS HR Tax Models/Retirement Plans
Social Security Administration
(800)
7am-7pm Eastern Standard Time
Baton Rouge Office – Bankers Ave (866)
Baton Rouge Office – Harding Blvd (225)
Internal Revenue Service – IRS Publication 963
As a State Human Resource employee you have lots of Resources:
ISIS HR Tax Models/Retirement Plans has a document on their website that I am sure each of your have used to determine which tax model to place your employees in when they are hired.
Remember: Almost every rule written has an exception, which are listed on Pages 3 & 4 of the document.
In most cases you can contact your the OSUP Wage & Tax employee for assistance. If they do not have the answer to your question they will contact either Angie or Linda for clarification.

21. Department of the Treasury Social Security Division
Contact Information…
State of Louisiana
Department of the Treasury
Social Security Division
Linda Yelverton
(225)
Angie Dowdy
(225)