Wisconsin's 218 Agreement with Social Security

If you are unsure of your 218 Agreement status, please email us at ETFSMBWRSNewEmployer@etf.wi.gov or contact the WRS Unit of the Employer Services Bureau at 1-877-533-5020, option 2.

Employers with a FICA alternative plan are not eligible to join the WRS or the 218 Agreement. To join the 218 Agreement and the WRS, the employer must: 

1. End the FICA alternative/replacement plan;
2. Begin deducting FICA taxes from its employees; and
3. Meet Wisconsin’s three-part test.

Under the Social Security Act, certain employee services must be excluded from Social Security coverage under a Section 218 agreement. If requested by the state (or local entity), certain services and positions may be excluded from Social Security coverage under the State’s Section 218 agreement.

Required exclusions include:

• Services performed by individuals hired to be relieved from unemployment.
• Services performed by an employee, that they wouldn’t otherwise be required to perform, on a temporary basis in case of fire, storm, snow, earthquake, flood, or another similar emergency.
• Services performed in a hospital, home, or other institution by a patient or inmate thereof as an employee of a state or local government employer.
   

Note: Wisconsin state law generally requires WRS employers to cover all their WRS-eligible employees for Social Security, apart from certain firefighters. State law also requires that all state employees and teachers be covered under the Section 218 Agreement.

An employer must give any employee taking a job that is not covered under Social Security the Social Security Statement SSA-1945. The statement explains how not being subject to Social Security may affect future benefits and must be signed by the employee.

The 1990 Omnibus Budget Reconciliation Act (OBRA) made Social Security coverage mandatory for state and local government employees who are not:

• Already covered under a Section 218 Agreement.
• Covered by an Internal Revenue Code Federal Insurance Contributions Act (FICA) replacement plan.
• Excluded from Social Security coverage under the terms of the Section 218 Agreement or the Social Security Act (See the question Some of our employee positions are excluded from Social Security. Can we join the 218 agreement? above).
   

These provisions were intended to give public employees some type of retirement protection, either from Social Security or through a plan offered by the employer.

Generally, creation documents establish:

• How an employer was created.
• When the employer was created.
• Legal authorities of the employer. 

Examples of creation documents include:

• Wisconsin Territorial Act, State of Wisconsin Act, or a citation in Wisconsin Statutes
• Ordinance
• Resolution
• Cooperative/intergovernmental agreement

Creation documents may include a Wisconsin Territorial Act, State of Wisconsin Act, a citation in Wisconsin Statutes, or some other legal process, such as an ordinance or resolution that might have been used to create the employer.

If you need help locating creation documentation, several online resources exist to assist you.

The Wisconsin Legislative Documents Archive contains:

1. Wisconsin Constitution:  1989-90 to present
2. Statutes:  1941-42 to present
3. Statutes Index:  1989-90 to present
4. Acts: Wisconsin Acts 1848 to present (After Wisconsin became a state)
5. Territory Acts:  1836 to 1848 (prior to Wisconsin becoming a state on 5/29/1848)
6. Joint Resolutions:  1845 to 1933-34
    

The Municipal Data System (MDS) provides records of changes to Wisconsin municipal boundaries (e.g. incorporating, name changes and other legal procedures regarding towns, villages, cities, etc.) and a directory of municipal and county clerks.

The MDS contains:

1. Petitions:  Proposed Annexations from Towns to Cities & Villages
2. Ordinances:  Municipal Annexations, Attachments or Detachments
3. Boundary Agreements:  Land Exchange Agreements Between Municipalities
4. Corporate Boundaries:  Updated City/Village Boundaries
5. Supervisory Districts:  District Changes in Wisconsin Counties
6. Charter Ordinances:  Passed by Cities of Villages
7. Contiguity Reviews:  Contested Annexations Under DOA Review
8. Clerk Information:  A Directory of Municipal and County Clerks
9. Incorporations:  Recently Incorporated Municipalities
10. Historical Municipal Records from the Office of the Secretary of State
     

Counties have started sending their oldest paperwork to UW System Libraries for archiving. If the creation documentation is unavailable at the county or on the sites listed above, the employer may see if the county sent documents to UW Systems Libraries for archiving and if so which library. Documentation can be requested directly from the UW System Libraries.

The Social Security Administration has been reluctant to approve charter schools under the 218 Agreement unless specific legislation grants them public institution status. Wisconsin does not have this type of legislation.

Under Federal Internal Revenue Code (IRC Section 414 (d)), qualified government plans (like the WRS) can only cover employees of the state, its political subdivisions, agents, and instrumentalities. Eligibility under the 218 Agreement depends on whether the school is chartered through a public school district or if it is independent. Even when chartered through a public school, they still may not be eligible.

In the 2011-12 session, the Social Security Administration reviewed WI SB22 as it applied to a charter school’s ability to join the 218 Agreement. They were not able to determine whether all charter schools qualify as separate political subdivisions.

If you’d like ETF to review, please submit your creation documentation to ETFSMBWRSNewEmployer@etf.wi.gov. If you need help locating creation documentation, see the General Information section of this FAQ.

The Social Security Administration (SSA) does not generally consider nonprofit corporations under IRC Section 501(c)(3) (whether private or publicly supported foundations) to be governmental employers. As a result, nonprofits generally may not join the Section 218 Agreement.

Special information for joint employers/districts seeking to join the WRS (joint fire, police, EMS, or similar districts of two or more municipalities)

The first step to joining the WRS or ETF-administered health insurance is being accepted for coverage under Wisconsin’s 218 Agreement with Social Security. To do this, a prospective employer must submit their entity’s creation documentation to ETF for review.

Unlike a town, village, city, county, or school district, which are separate and independent municipalities and almost always public bodies corporate and politic under the Wisconsin Statutes, a joint employer/district may or may not be separate and independent.

For example, Village of Apple and Town of Orange agree under the appropriate Wisconsin Statute (e.g., Wis. Stat. 66.0301) to create a joint EMS district. The joint EMS district may or may not be separate and independent from the creating municipalities (Village of Apple and Town of Orange).

Whether or not a joint instrumentality/employer is sufficiently separate and independent is based on federal and state statute and subject to review and determination by ETF, the Social Security Administration, and/or Internal Revenue Service.  If a joint district/employer is determined not to be separate and independent, they cannot join the State’s 218 Agreement or the WRS by themselves.

There are, however, other options available to get WRS and other benefit coverage for a joint district/employer and its employees.

• Option 1: According to ETF Admin. Code 10.55, the municipalities that created the joint district or for which it provides service, could agree to share the responsibilities (service, earnings, contributions) for the employees of the joint district. This means that the creating municipalities will pay a proportionate share of the costs for things like contributions, disability payments, etc., and will report the service and earnings similarly. This option also assumes one or both of the municipalities in question are already WRS participating employers.
  • Example: Village A and Village B both participate in the WRS.  Those villages create a joint fire district, but the district is not separate and independent from the creating village’s and therefore can’t join the WRS by itself. Village A and B decide to share the responsibilities for the joint fire district under the WRS.  Village A and B can decide how to share the costs as long as it’s within ETF Admin. Code 10.55.  Effectively, the fire district is a joint operation of both of the WRS-participating villages.
• Option 2: The joint district and its employees are attached to (i.e., made part of, controlled by) one of the municipalities where the joint district provides services.  In this case, the joint district would look more like a department of the municipality and not be a separate entity.  Any other municipalities for which the joint district provides services could negotiate and contract with the municipality which the joint district has attached itself to provide services, but the joint district and its employees would be part of the municipality to which it’s attached.

Example: Village A and Village B both participate in the WRS. A joint fire district provides services for both Village A and B.  The fire district does not meet eligibility to join the 218 Agreement/WRS/ETF-administered insurances independently. Village A agrees to operate the fire district as part of its municipality and to cover its employees under WRS and ETF-administered insurances. Village A accepts responsibility for all aspects of administering the benefits and reporting to ETF. Village B has can negotiate an agreement with Village A for the fire district to provide services and pay an amount towards that cost. How Village B pays Village A for these benefits is out of ETF’s purview.

To join the 218 Agreement, an employer must be authorized to do so under federal law, be a governmental entity, and pass Wisconsin’s three-part test:

1. Be created by an entity or entities with the power to do so under Wisconsin statutes.
2. Be an independent legal entity.
3. Perform a governmental function.

American Indian tribes do not meet all the criteria above and do not “pass” all three parts of the test because Tribes have sovereign status under Chapter 24 of Wisconsin State Statute. As such, tribes are not considered a political subdivision of the state of Wisconsin because each tribe has its own government, land base, and membership.

Furthermore, the IRS, via publication 963, has stated that, “Indian tribal governments are not considered states or subdivisions of states for Section 218 purposes.” See also IRC Section 7871. For more information about Social Security coverage, Medicare, and tribal governments, see the IRS Indian Tribal Governments website.

When a participating WRS employer is dissolving or merging with another employer, a formal dissolution must be filed with the Social Security Administration since the employer is under the Wisconsin’s 218 Agreement.

To begin this process, the employer(s) should submit documentation to ETF outlining the dissolution or merger. Examples include a resolution, ordinance, State of Wisconsin Act, or a citation in Wisconsin statutes.

After ETF has reviewed the information, your next steps will be provided.

To submit dissolution or merger documentation, please email ETFSMBWRSNewEmployer@etf.wi.gov. 

Social Security benefits may be reduced in one of two ways:

1. Government Pension Offset:  may apply to the spousal or survivor benefit of an individual who receives a pension for work not covered by Social Security. For more information see the Government Pension Offset fact sheet.
2. Windfall Elimination Provision:  may apply to an individual whose employer does not withhold Social Security taxes from their salary. For more information see the Windfall Elimination Provision fact sheet.
    

Note:  ETF does not have access to specific individual information, such as information about an employee’s total work history, Social Security work credits, or any potential spousal or survivor benefits. For more information, please contact the Social Security Administration at 1-800-772-1213 or visit their website at www.ssa.gov.