The Role of the Division of Retirement and Benefits The Division of Retirement and Benefits (Division) Internal Audit Unit is the home of the State Social Security Administrator (Administrator). The Division is responsible for administering the voluntary and mandatory provisions of Social Security and Medicare coverage for public employers in the state of Alaska.

Public employers are termed voluntary or mandatory for purposes of social security withholding. Voluntary coverage is also known as Section 218 coverage (pursuant to Section 218 of the Social Security Act). Voluntary employers voluntarily enroll employees in Social Security and Medicare, even if they are already members of a qualifying FICA replacement plan.

Mandatory coverage is pursuant to Section 210 of the Social Security Act. Mandatory employers must either enroll employees in social security OR in another qualifying FICA replacement plan (e.g., PERS and TRS).

Every state subject to mandatory Social Security rules, or with a Section 218 agreement, must have an Administrator according to federal law. The Administrator works to ensure state and local governments are withholding Social Security and Medicare taxes correctly, and is the liaison between public employers, the Social Security Administration, and the Internal Revenue Service.

FICA stands for the Federal Insurance Contributions Act. It is the law set up to fund the Social Security Act of 1935. This act created a law stipulating that employers and employees would pay into the Federal Social Security and Medicare systems in order to create a retirement plan.

The original FICA rate did not differentiate between Social Security and Medicare, and was 1% on the first $3,000 earned. In 1991, the Social Security rate and the Medicare rate were separated. Today’s combined FICA rate is 7.65%; made up of 6.2% Social Security and 1.45% Medicare.

The Division has the responsibility to act as intermediary and provide assistance to the State of Alaska and all State political subdivisions in fulfilling their obligations under Social Security Administration Section 218 rules, mandatory Social Security rules, and mandatory Medicare rules, as required by the FICA laws.

The Division collects from the State and all participating political subdivisions a pro rata share of the expenses incurred for Social Security and Medicare administration according to Alaska Statute Alaska Statute 39.30.050 . All revenue is deposited in the FICA fund and is available for State Social Security Administration use only. As also required by AS 39.30.050, annual billing is reviewed to prevent the accumulation of more money than is needed for program administration.

Annual billings are based on the gross wages reported to the Department of Labor.

When the federal Social Security Act (Act) was enacted in 1935, public employees were not eligible for Social Security benefits. This was due to a constitutional question regarding the federal government’s power to tax state and local governments. Consequently, many government employees were without a retirement plan.

In 1951, Section 218 of the Act authorized states to voluntarily elect Social Security coverage for public employees. These federal-state agreements, often referred to as Section 218 agreements, were entered into with the Social Security Administration.

In 1991, state and local government employees became subject to mandatory Social Security, unless they were

• members of a qualifying public retirement system, or
• covered under a Section 218 agreement.

Today, state and local government employers are classified as either voluntary (Section 218) employers or mandatory employers. Voluntary employers have voluntarily enrolled all eligible employees in Social Security. Mandatory employers must enroll their employees in Social Security unless they are already enrolled in a qualifying public retirement system.

When Section 218 of the Act authorized states to voluntarily elect Social Security coverage for public employees in 1951, existing retirement systems were excluded by federal law from participation in Section 218 agreements. For Alaska, this meant members of the original Anchorage Police and Fire system were excluded from coverage.

In 1955, the Social Security Administration decided to let these excluded systems enroll in Social Security coverage. The Social Security Administration declared that members of an excluded system could hold a vote and elect whether or not they wanted Social Security coverage.

Police and Fire organizations lobbied Congress to be excluded from this 1955 decision and won. Police and Fire retirement systems are some of the oldest in the country. Police officers and firefighters already had retirement systems; they did not want Social Security at that time.

From 1955 to 1994 police and firefighters in Alaska were not enrolled in Social Security. Twenty-three states received exceptions to this rule. Alaska was not one of them.

In 1994, the Social Security Independence and Permanent Improvement Act gave states the option to extend Social Security and Medicare coverage to police and fire positions already under a retirement system.

States could extend this coverage if:

1. If the authority to extend coverage existed in state law, and
2. If the State’s Section 218 agreement has a modification to cover these police and fire positions.

The State of Alaska has satisfied both conditions.

When Section 218 of the Act authorized states to voluntarily elect Social Security coverage for public employees in 1951, existing retirement systems were excluded by federal law from participation in Section 218 agreements.

The same Section 218 provision that excluded members of the original Anchorage Police and Fire system in 1951 also excluded members of the Teachers’ Retirement System (TRS), since they already had an existing retirement system (Territorial Teachers’ Retirement System, which later became TRS.)

Four years later, in 1955, the Social Security Administration decided to let these excluded systems enroll in Social Security coverage. The Social Security Administration declared that members of an excluded system could hold a vote and elect whether or not they wanted Social Security coverage.

TRS Members Can Vote for Social Security Coverage

The State Social Security Administrator holds the federal Social Security vote. To start the voting process, the governing body of the entity must pass a resolution to hold a vote. The resolution must state if the entity wants a majority rule or a divided vote.

Majority Rule Vote
In a majority rule vote, all TRS members vote. If the majority of TRS members vote yes, all TRS members, even those who voted no, are enrolled in Social Security immediately.

All future TRS members hired into favorable vote positions are enrolled in Social Security throughout the life of the entity. Section 218 modifications cover positions not people.

If a majority rule vote fails, a new vote can be held after the mandatory one-year waiting period.

Majority means the majority of TRS members at the entity, not the majority of the TRS members who voted. A no show is a no vote.

Divided Vote
Alaska is one of the 23 states authorized by the Social Security Administration to hold a divided vote.

In a divided vote, TRS members who vote no are not enrolled in Social Security and TRS members who vote yes are immediately enrolled in Social Security.

When a no vote leaves the entity that held the vote, the position rolls into Social Security coverage. Eventually all TRS positions will roll under Social Security coverage in a divided vote.

A no votes stays with the voter. If a TRS members votes no and is later employed by another school district with the same retirement system, they are not enrolled in Social Security at their new school district, should the new district offer it.

The University of Alaska was, and is still today, the only entity with TRS members who held a vote. The vote was successful and in 1958, the University of Alaska enrolled their TRS employees in Social Security. The University of Alaska later terminated their Section 218 agreement. Today, there are no TRS employees in Alaska enrolled in Social Security.

The Windfall Elimination Provision (WEP) can affect how the Social Security Administration calculates your retirement or disability benefit. If you work for an employer who doesn’t withhold Social Security taxes from your salary, such as a federal, state, or local government agency, a nonprofit organization , or an employer in another country , any retirement or disability pension you get from that work can reduce your Social Security benefits.

A pension based on earnings not covered by Social Security can affect the amount of your Social Security benefit. The Social Security Administration does not know whether you are eligible for such a pension, so the benefit estimates you have received may not have been adjusted for such a possibility.

The WEP factsheet published by the Social Security Administration explains whether you might be affected.

• Information for Government Employees (WEP) website

How WEP Can Affect Your Benefit

If you think your pension will affect your Social Security benefit, you can

• Look at the WEP chart to see how WEP affects Social Security benefits.
• Use the WEP Online Calculator to see how your benefit may be reduced by WEP.

WEP Examples

The Windfall Elimination Provision reduces your Eligibility Year (ELY) benefit amount before it is reduced or increased due to early retirement, delayed retirement credits, cost-of-living adjustments (COLA), or other factors. The following examples show how the WEP reduction changes when the ELY benefit is affected by other factors.

Retirement Examples

The monthly retirement benefits are increased or reduced based on your age after WEP reduces your ELY benefit.

If you turn 62 in 2016 (ELY 2016) and you have 20 years of substantial earnings, WEP reduces your monthly benefit by $428.

Your full retirement age is 66. If your full retirement benefit is $1,396, your ELY benefit after the WEP reduction would be $968.

• If You Choose Early Retirement
  If you begin receiving retirement benefits the month you turn 62, you will receive benefits before you reach full retirement age. Your monthly benefit is reduced to 75% because you will receive benefits for 48 additional months. Your age 62 retirement benefit is $726 ($968 x 75% = $726) per month. If your full retirement benefit had not been reduced by WEP, your age 62 retirement benefit would have been $1,047. Early retirement changed the reduction for WEP from $428 to $321.
• If You Choose Delayed Retirement
  You decided to wait to age 70 to receive benefits so you could receive Delayed Retirement Credits. Your ELY is still 2016. If your retirement benefits start after your full retirement age (66 years), the benefit increases 8% for each year before age 70 that you delay retirement. If your benefits start at age 70, you receive credit for the 48 additional months that you did not receive benefits. Your monthly benefit will be 32% higher. Your age 70 retirement benefit is $1,277 ($968 x 132% = $1,277). If your full retirement benefit had not been reduced by WEP, your age 70 retirement benefit would have been $1,842. Delaying retirement increased the reduction for WEP from $428 to $565.

Cost-of-Living-Adjustment (COLA) Example

The COLA is added to your monthly benefit amount after WEP reduces your ELY benefit.

When you became disabled in 2016 (ELY 2016) WEP reduced your $1,396 ELY benefit to $968.

The following year, the 0.3% January 2017 COLA increased your benefit by $2 ($968 x 0.3% = $2). If it were not reduced by WEP, your benefit amount would have increased by $4 ($1,396 x 0.3% = $4). The new benefit would have been $1,400 instead of $970. COLA increased the reduction for WEP from $428 to $430 ($1,400 - $970).

Benefit amounts are rounded to the nearest dollar. The examples above apply only to benefits paid to the worker and do not include future COLA increases. The WEP reduction may be larger if family members qualify for benefits on the same record. However, the total WEP reduction is limited to one-half of the pension based on the earnings that were not covered by Social Security.

Since its formation in 1952, the National Conference of State Social Security Administrators (NCSSSA) has worked closely with the Social Security Administration (SSA) and the Internal Revenue Service (IRS) to address Social Security and Medicare coverage and employment tax issues raised by state and local employers and State Social Security Administrators throughout the United States.

NCSSSA works with federal officials to ensure that legislative and regulatory changes address state and local concerns. NCSSSA provides leadership to state and local governments through accurate interpretation of federal laws and regulations, communication of federal tax policy, and resolution of problems arising at the state and local level.

NCSSSA hosts national workshops and annual meetings where SSA and IRS officials address the concerns of state and local government representatives in a face-to-face format.

The annual conference serves as a major forum to address a broad range of issues and concerns of state and local employers and State Social Security Administrators, enabling them to communicate efficiently and effectively with appropriate federal officials about those matters. Among those who can benefit from attending the conference are:

• New State Social Security Administrators and/or new staff or other state officials.
• Current State Social Security Administrators and staff or other state officials.
• State payroll/wage reporting officials and staff.
• IRS officials and staff involved with state and local FICA and/or employment tax matters.
• SSA officials and staff involved with state and local governments’ coverage, benefits, and W-2 reporting matters.
• Anyone else interested in discussing and sharing matters of concern and interest to state and local governmental employers throughout the country.

The NCSSSA annual conference involves the discussion of topics of current interest and importance to state and federal officials involved in state and local Social Security, Medicare, and employment tax matters. The specific topics and timing of the sessions vary from year-to-year, depending on which issues are of the most immediate concern.

Division of Retirement and Benefits

• State Social Security Administrator:
  

Social Security Administration

Contact the SSA Alaska Field Office:

• Telephone:
  
• Address:
  709 W. 9th St., Suite 231
  Juneau, AK 99501
  Website: SocialSecurity.gov

State of Alaska Medicare Information Office

If you are looking for information about Medicare, please visit the AlaskaCare Retiree Health Plans page.

• Go to the SSA website
• SSA Program Operations Manual System SL: State and Local Coverage Handbook on the SSA website
• SSA Form 1945: Statement Concerning Your Employment in Job Not Covered by Social Security (current version) PDF
• Get or replace a Social Security Card on the SSA website
• Apply online for retirement benefits on the SSA website
• Apply online for Medicare on the SSA website
• Estimate your retirement benefits on the SSA website
• SSA forms on the SSA website
• SSA publications on the SSA website
• Government Pension Offset (GPO) on the SSA website
• Windfall Elimination Provision (WEP) on the SSA website
• Benefits affected by GPO and WEP on the SSA website
• Social Security Number Verification Service Handbook on the SSA website