WASHINGTON, D.C. – House Ways and Means Social Security Subcommittee Chairman Sam Johnson (R-TX) and Oversight Subcommittee Chairman Vern Buchanan (R-FL) announced today that the Subcommittees will hold a joint hearing, entitled “Complexities and Challenges of Social Security Coverage and Payroll Tax Compliance for State and Local Governments,” on Thursday, June 29, at 10:00 AM in room 1100 of the Longworth House Office Building. The hearing will focus on the complexity of Social Security coverage and payroll tax compliance under Section 218 of the Social Security Act. Members will also discuss the responsibilities of the Social Security Administration (SSA), the Internal Revenue Service (IRS), and State Social Security Administrators in ensuring proper administration.
Upon announcing the hearing, Chairman Johnson and Chairman Buchanan said:
“Not all state and local employees have Social Security coverage, but, for those who do, Social Security provides important benefits to them and millions of other Americans. We need to make sure Social Security and the IRS have the information and processes in place to ensure state and local government employees pay the right amount of taxes and get the right amount of benefits. The American people want, need, and deserve no less.”
Section 218 of the Social Security Act allows state and local governments to enter into voluntary agreements between the state and the SSA to allow their employees to participate in Social Security. All 50 states, Puerto Rico, and the Virgin Islands have established 218 agreements, which outline which employees are covered by Social Security.
States and territories that have 218 agreements are required to designate a state employee to serve as a State Social Security Administrator. The State Administrator acts on behalf of the state to administer and maintain the state’s 218 agreement, including any subsequent modifications.
The SSA, IRS, and State Administrators share responsibility for administering 218 agreements and ensuring that state/local entities are paying the correct amount of payroll taxes for workers covered by Social Security.
However, a 2010 Government Accountability Office report found that the SSA and IRS have limited ability to fully identify problems related to Social Security coverage for state and local government employees. According to the report, the SSA could not verify that state and local governments were properly reporting wages for covered workers, and the IRS lacked the information necessary to ensure payroll tax compliance. Over the past seven years, little progress has been made. The SSA and IRS continue to rely on public employers to properly categorize their employees, calculate and withhold the correct payroll tax amounts, and disclose and correct any errors that occur.