Evading Social Security--Not Much Chance of It

by Ron Snell

Efforts to remove some state and local employees from Social Security coverage come up now and then.  It's not possible under current law.

When the Social Security program was begun in 1935, it excluded all state and local government employees because of concerns about the constitutionality of the federal government's taxing state employers.  The issue was resolved by legislation enacted in 1950 (and thereafter) that provided for voluntary membership of state and local governments.  Since then some governments have joined, some have not, and some have joined and later withdrew.

Legislation enacted in 1983 prohibited any state or local government employer from withdrawing from membership thereafter. Under prior law, state and local groups could withdraw by giving two years' notice in writing.  The law also provided that any government that had withdrawn could be covered again, a change from previous law. Those provisions may be found in Title 1 of the "Social Security Amendments of 1983,"  H.R. 1900/P.L.98-21, enacted April 20, 1983.

Although no governmental employer can withdraw from the Social Security system, many public  employees remain outside Social Security because their governments were not members of Social Security in 1983 and have not joined since.  There is no state where all public employees are in Social Security: police and firefighters are outside the system in many states because its retirement age does not work well for them (they tend to retire in their 50s or even earlier).  In Ohio and Massachusetts, less than 10 percent of public employees are covered. On the other hand, in two-thirds of the states, between 80 and 97 percent of public employees are in the system.

The Congressional Research Service compiled a brief history of Social Security legislation, and much more detail is available on the Social Security history Web site.

Federal law enacted in 1991 mandates Social Security coverage for all state and local government employees who are not covered by a public retirement system.  Mandatory coverage of all new public employees remains an issue and is often recommended to Congress as a method of strengthening the financing of the Social Security system.  NCSL policy opposes mandatory coverage, but has not taken a position on the issue of whether state and local governments should once again be permitted to withdraw from Social Security.