What is a Section 218 Agreement?
What is a Section 218 Agreement?
Under the original Social Security Act of 1935, state and local government (public) employees were excluded from Social Security coverage because of state sovereignty guaranteed by the Tenth Amendment of the U.S. Constitution and concerns about the federal government’s authority to impose taxes on state and local governments and their employees. To overcome this issue, Congress amended the Social Security Act was in 1950 to allow each state to enter into voluntary Social Security coverage agreements on behalf of the state and any of its political subdivisions beginning in 1951.
These arrangements to provide Social Security coverage to public employees are called “Section 218 Agreements” because they are authorized by Section 218 of the Social Security Act.
A copy of Colorado’s Master State-Federal Agreement (Section 218 Agreement) and a sample 218 Modification Agreement (aka “Plan and Agreement”) extending full Social Security coverage is available in the attached Analysis of Section 218 Agreement with Sample Plan and Agreement. Note that the Analysis cover page explains how some of the original terms and conditions in Section 218 Agreements are no longer in force and effect due to changes in federal laws.
Find a 218 Agreement
If the services the employee is performing are covered under a Federal-State Agreement, then coverage is straightforward—the employee must be covered for FICA. Prior to July 2, 1991, the only way a local government (city, village, county, etc.) could cover its employees under Social Security was for the state to include it under the state’s Federal-State Agreement (Section 218 Agreement) with the Social Security Administration (SSA). The agreement extended Social Security coverage to government employers at the state’s request.
Employees performing services covered by a Federal-State Agreement are required to pay FICA. Social Security coverage obtained through a Federal-State Agreement cannot be terminated. The employee may also be covered by a retirement plan but this must be in addition to the FICA coverage.