Social Security Parity for Tribes
Corrine Wilson | September 24, 2018
On September 6, the Senate passed H.R. 6124, the Tribal Social Security Fairness Act of 2018. The bill, which amends Title II of the Social Security Act, was passed by both the House and Senate by unanimous consent in identical form. It was presented to the President on September 12 and signed into law on September 20.
Currently, tribal council members are not allowed to pay into the Social Security program, but state and local government officials are. The Act corrects this by allowing tribal governments to opt in to agreements that provide Social Security coverage (including Old Age, Survivors, and Disability Insurance benefits) to council members.
The Act also allows tribal council members to receive Social Security credit for taxes paid prior to the establishment of the agreement, if taxes were paid on time and in good faith and were not refunded.
Senator John Hoeven (R–ND), chairman of the Senate Committee on Indian Affairs, stated that “Congress is taking an important step to provide the same opportunities for tribes that are afforded to other governments and municipalities. As Chairman of the Senate Committee on Indian Affairs, I will continue to identify and remove bureaucratic impediments that inhibit the fulfillment of the government-to-government relationship with tribes. I urge the President to sign this legislation expeditiously.”
When Social Security was established, state and local government employees were excluded from Social Security coverage due to concerns that the 10th Amendment prohibited the federal government from requiring states to join Social Security. The Social Security Amendments of 1950 added Section 218 to the Social Security Act, which allowed state and local governments to extend Social Security (and later Medicare) coverage to their employees through a voluntary agreement, known as a 218 agreement, between the state and the SSA.
Under Section 218, the state/local government may only extend coverage following a vote by members of the retirement system through a referendum process. The agreements generally cover all positions within a coverage group, not just specific individuals. Once a group is covered, the employer may not revoke coverage and employees filling the covered positions may not decline coverage.
In 1959, the Internal Revenue Service (IRS) ruled that services performed by tribal council members in their role as council members do not constitute ‘‘employment’’ for FICA tax purposes, meaning that these earnings are not subject to Social Security and Medicare taxes.
In the early 2000s, the SSA began receiving inquiries regarding the Social Security coverage status of tribal council members, as some members may have been paying Social Security taxes erroneously and believed their earnings would count toward future benefits.
In 2006, the SSA updated its program instructions to clarify that tribal council members’ earnings do not count toward Social Security benefits, consistent with the 1959 revenue ruling. The SSA’s instructions state that the SSA will provide benefit credits for payroll taxes paid erroneously prior to 2006. However, some tribal council members may have paid payroll taxes after this date.
The Tribal Social Security Fairness Act of 2018 brings about long-overdue changes, as evidenced by its strong bipartisan support. It will put tribal governments on a more level playing field with their non-tribal counterparts, giving them the option of paying into and receiving benefits from the Social Security program, just like other working Americans.
Please contact Corrine Wilson, Tribal practice leader, if you would like to discuss this article.