Social Security Coverage of State and Local Government Employees

Changes from March 19, 2024 to April 8, 2026

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Social Security Coverage of State and Local
~~March 19, 2024~~
~~Government Employees~~
~~Zhe Li~~
Government Employees Updated April 8, 2026 (R46961) Jump to Main Text of Report

Introduction
Background on Social Security
Nearly Universal System
Major Categories of Work Not Covered
Social Goals of the Program
State and Local Government Employees
State and Local Coverage Under Current Law
Alternative Public Retirement Systems
Section 218 Agreements
Legislative History Highlights
Social Security Coverage by State
Mandatory Coverage Proposals
Issues Surrounding Mandatory Coverage
Projected Effect on the Social Security Trust Funds
Projected Effect on Federal Revenues
Comparability of Noncovered Pensions and Social Security
Social Security Benefits for Individuals with Noncovered Earnings
Special Considerations for Certain Occupational Groups
FERS Accommodations for Certain Occupational Groups
Protections for Workers and Family Members
Disability Insurance Protection
Portability
Benefits for Dependents and Survivors
Cost-of-Living Adjustments (COLAs)
Progressive Benefit Formula
Net Effect on Total Benefits
Effect on State and Local Plans
"Closed System" Option
Administrative and Cost Issues
Funding Status of State and Local Plans
Overall Impact on State and Local Plans
Conclusion
Additional Resources

Figures

Figure 1.Share of State and Local Government Employees Not Covered by Social Security, 2023
Figure 2. Share of State and Local Government Employees Not Covered by Social Security, 2023

Tables

Table 1. Social Security Coverage of State and Local Government Employees, by State, in 2023

Summary

Social Security is the single largest federal program in terms of the number of beneficiaries as ~~Social Security is the single largest federal program in terms of the number of beneficiaries as~~
~~Analyst in Social Policy~~
well as budget. It pays cash benefits to over well as budget. It pays cash benefits to over 6770 million beneficiaries each month, and total benefit million beneficiaries each month, and total benefit

payments are payments are ~~almost $119~~more than $136 billion on a monthly basis. Beneficiaries include retired or disabled billion on a monthly basis. Beneficiaries include retired or disabled
workers and their eligible family members and eligible family members of deceased workers. workers and their eligible family members and eligible family members of deceased workers.

People become eligible for Social Security benefits for themselves and their family members by People become eligible for Social Security benefits for themselves and their family members by
working in jobs that are covered by Social Security. Most jobs in the United States are mandatorily covered by Social working in jobs that are covered by Social Security. Most jobs in the United States are mandatorily covered by Social
Security. An estimated Security. An estimated 9493% of workers in paid employment and self-employment are covered under the program, and an % of workers in paid employment and self-employment are covered under the program, and an
estimated estimated ~~182~~186 million people work in covered jobs. Workers in covered jobs and their employers are required to pay Social million people work in covered jobs. Workers in covered jobs and their employers are required to pay Social
Security payroll taxes that are the primary source of funding for the program. In Security payroll taxes that are the primary source of funding for the program. In ~~2024~~2026, workers and their employers each , workers and their employers each
contribute 6.2% (for a total tax rate of 12.4%) of the workercontribute 6.2% (for a total tax rate of 12.4%) of the worker’'s earnings up to a maximum earnings level of $s earnings up to a maximum earnings level of $~~168,600~~184,500. Current . Current
payroll tax collections are used to fund current benefit payments. People who work in jobs that are not covered by Social payroll tax collections are used to fund current benefit payments. People who work in jobs that are not covered by Social
Security (noncovered workers) do not pay Social Security payroll taxes based on those earnings (nor do their employers), and Security (noncovered workers) do not pay Social Security payroll taxes based on those earnings (nor do their employers), and
they do not receive Social Security benefits based on those earnings.they do not receive Social Security benefits based on those earnings.
Over the years, Congress expanded coverage under the program, making it a nearly universal system. On the basis of equity, Over the years, Congress expanded coverage under the program, making it a nearly universal system. On the basis of equity,
some argue that certain noncovered workers should be brought into the system to share in the programsome argue that certain noncovered workers should be brought into the system to share in the program’'s broader social goals. s broader social goals.
Social Security keeps many beneficiaries out of poverty, which benefits the nation as a whole. In addition, some argue that Social Security keeps many beneficiaries out of poverty, which benefits the nation as a whole. In addition, some argue that
certain noncovered workers should share in the ongoing costs associated with the startup of the program (the certain noncovered workers should share in the ongoing costs associated with the startup of the program (the legacy costs). In ). In
the early years, workers who had paid into the system for a short period received benefits far in excess of their contributions. the early years, workers who had paid into the system for a short period received benefits far in excess of their contributions.
Because the family members of noncovered workers (e.g., grandparents) likely benefitted from the program in its early years, Because the family members of noncovered workers (e.g., grandparents) likely benefitted from the program in its early years,
they argue that noncovered workers should share in the systemthey argue that noncovered workers should share in the system’'s legacy costs.s legacy costs.
The largest and most high-profile group of noncovered workers is the segment of state and local government employees who The largest and most high-profile group of noncovered workers is the segment of state and local government employees who
are not covered by Social Security through their government employment. Social Security coverage is are not covered by Social Security through their government employment. Social Security coverage is voluntary for state and for state and
local government employees covered under public retirement systems that meet certain requirements. These employees may local government employees covered under public retirement systems that meet certain requirements. These employees may
elect Social Security coverage through Section 218 Agreements between the states and the Social Security Administration. elect Social Security coverage through Section 218 Agreements between the states and the Social Security Administration.
Coverage is elected through referendums held at the option of the state. Social Security coverage is Coverage is elected through referendums held at the option of the state. Social Security coverage is mandatory only for state only for state
and local government employees who are not covered under alternative retirement systems. Most state and local government and local government employees who are not covered under alternative retirement systems. Most state and local government
employees participate in Social Security. In employees participate in Social Security. In ~~2021~~2023, there were , there were ~~nearly 21~~approximately 22.9 million state and local government employees, and .9 million state and local government employees, and
about about ~~15.9~~16.7 million (73%) had Social Security coverage. The other million (73%) had Social Security coverage. The other ~~5.9~~6.3 million (27%) did not have Social Security coverage million (27%) did not have Social Security coverage
through their government employment. The largest share of noncovered state and local government employees work at the through their government employment. The largest share of noncovered state and local government employees work at the
local level, and most noncovered local government employees are police officers, firefighters, and teachers.local level, and most noncovered local government employees are police officers, firefighters, and teachers.
Proposals to make Social Security coverage mandatory for newly hired state and local government employees have been part Proposals to make Social Security coverage mandatory for newly hired state and local government employees have been part
of the policy debate for years. These proposals have drawn strong support and opposition for a variety of reasons. Supporters of the policy debate for years. These proposals have drawn strong support and opposition for a variety of reasons. Supporters
argue that mandatory coverage for newly hired state and local government employees would have a net positive effect on the argue that mandatory coverage for newly hired state and local government employees would have a net positive effect on the
Social Security trust funds and on federal revenues. Estimates show that the policy change would close 4% of the Social Social Security trust funds and on federal revenues. Estimates show that the policy change would close 4% of the Social
Security systemSecurity system’'s projected long-range funding shortfall. ~~s projected long-range funding shortfall. It would eventually eliminate the need for two controversial and~~
~~administratively burdensome Social Security provisions that affect people who receive pensions from noncovered~~
~~employment: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).~~ Supporters also Supporters also
maintain that mandatory Social Security coverage would eliminate gaps in Social Security and pension coverage for workers maintain that mandatory Social Security coverage would eliminate gaps in Social Security and pension coverage for workers
who move between covered and noncovered positions during their careers. Compared to state and local pension plans in who move between covered and noncovered positions during their careers. Compared to state and local pension plans in
general, Social Security provides better inflation protection, disability benefits, benefits for dependents and survivors, and a general, Social Security provides better inflation protection, disability benefits, benefits for dependents and survivors, and a
progressive benefit formula intended to help workers with lower career-average earnings. Benefit protections provided by progressive benefit formula intended to help workers with lower career-average earnings. Benefit protections provided by
Social Security could be particularly important for noncovered workers in states and localities with underfunded pension Social Security could be particularly important for noncovered workers in states and localities with underfunded pension
plans and whose future pensions may be at risk.plans and whose future pensions may be at risk.
Opponents maintain that mandatory coverage could pose administrative and cost burdens on state and local governments and Opponents maintain that mandatory coverage could pose administrative and cost burdens on state and local governments and
their employees at a time when many state and local pension systems are underfunded. State and local governments would their employees at a time when many state and local pension systems are underfunded. State and local governments would
have to negotiate with employee representatives and legislatures on the redesign of existing retirement systems in response to have to negotiate with employee representatives and legislatures on the redesign of existing retirement systems in response to
a Social Security coverage mandate, a process that could take years, and could have to administer existing retirement systems a Social Security coverage mandate, a process that could take years, and could have to administer existing retirement systems
alongside new retirement systems for many decades. alongside new retirement systems for many decades. ~~Moreover, they point out that~~Opponent also say mandatory coverage could threaten or mandatory coverage could threaten or
~~Congressional Research Service~~

~~Social Security Coverage of State and Local Government Employees~~

undermine existing retirement systems, particularly those tailored to workers in certain occupations such as police officers undermine existing retirement systems, particularly those tailored to workers in certain occupations such as police officers
and firefighters. The cost impact to state and local governments and their employees would depend on the type of pension and firefighters. The cost impact to state and local governments and their employees would depend on the type of pension
benefit structure states and localities adopt in response to a Social Security coverage mandate, among other factors.benefit structure states and localities adopt in response to a Social Security coverage mandate, among other factors.
Overall, the impact on state and local plans and the net effect on total benefits would vary across plans and across Overall, the impact on state and local plans and the net effect on total benefits would vary across plans and across
individuals, depending on how states and localities would respond to a coverage mandate, the relative differences between individuals, depending on how states and localities would respond to a coverage mandate, the relative differences between
existing pension plans and new or modified plans incorporating Social Security, and other factors. Any future legislative existing pension plans and new or modified plans incorporating Social Security, and other factors. Any future legislative
changes to Social Security to address the systemchanges to Social Security to address the system’'s projected funding shortfall and achieve other policy objectives would also s projected funding shortfall and achieve other policy objectives would also
be a factor.be a factor.
Every state has a mix of state and local government employees with and without Social Security coverage, so every state Every state has a mix of state and local government employees with and without Social Security coverage, so every state
would be affected by a Social Security coverage mandate. Some states would be affected to a larger degree than others given would be affected by a Social Security coverage mandate. Some states would be affected to a larger degree than others given
the variation in coverage rates among the states under current law. In the variation in coverage rates among the states under current law. In ~~2021~~2023, the share of state and local government , the share of state and local government
employees employees with Social Security coverage ranged from Social Security coverage ranged from 32% to 98% among the states. Overall, eight states accounted for almost % to 98% among the states. Overall, eight states accounted for almost
three-fourths (three-fourths (7675%) of noncovered state and local government employees (%) of noncovered state and local government employees (from largest to smallest: California, Texas, Ohio, : California, Texas, Ohio,
Massachusetts, Illinois, Colorado, Louisiana, and Georgia). Three states accounted for almost half (49%) of noncovered state Massachusetts, Illinois, Colorado, Louisiana, and Georgia). Three states accounted for almost half (49%) of noncovered state
and local government employees (California, Texas, and Ohio).and local government employees (California, Texas, and Ohio).
~~Figure 1.Share of State and Local Government Employees Not Covered by Social Security, 2021~~

Source: Data from the Social Security Administration obtained by CRS in February 2024.

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~~link to page 17 link to page 17 link to page 34~~ ~~Social Security Coverage of State and Local Government Employees~~

~~Tables~~
~~Table 1. Social Security Coverage of State and Local Government Employees, by State,~~
~~in 2021 ........................................................................................................................................ 12~~

~~Contacts~~
~~Author Information ........................................................................................................................ 29~~

~~Congressional Research Service~~

~~Social Security Coverage of State and Local Government Employees~~

~~Introduction~~

Figure 1.Share of State and Local Government Employees Not Covered by Social Security, 2023

Source: Data from the Social Security Administration obtained by CRS in February 2026.

Introduction

The focus of this report is Social Security coverage among state and local government employees The focus of this report is Social Security coverage among state and local government employees
under current law and issues surrounding proposals to make Social Security coverage mandatory under current law and issues surrounding proposals to make Social Security coverage mandatory
for newly hired state and local government employees.for newly hired state and local government employees.11 To provide context for the discussion, the To provide context for the discussion, the
report begins with background on the Social Security program, including the expansion of report begins with background on the Social Security program, including the expansion of
coverage over time that has coverage over time that has today resulted in coverage for an estimated resulted in coverage for an estimated 9493% of workers in paid % of workers in paid
employment and self-employmentemployment and self-employment ~~today~~. The report identifies the major categories of . The report identifies the major categories of
work/workers not covered by Social Security under current law, including the segment of state work/workers not covered by Social Security under current law, including the segment of state
and local government employees who have not elected coverage (27% in and local government employees who have not elected coverage (27% in ~~2021).2~~2023).² It briefly It briefly
discusses reasons often cited for why Social Security should be a more fully universal system—discusses reasons often cited for why Social Security should be a more fully universal system—
the social goals of the program and the legacy costs associated with the startup of the program. the social goals of the program and the legacy costs associated with the startup of the program.
The report then focuses on state and local government employees.The report then focuses on state and local government employees.
Background on Social Security
Social Security is the nationSocial Security is the nation’'s largest federal program in terms of the number of beneficiaries as s largest federal program in terms of the number of beneficiaries as
well as budget. It pays monthly cash benefits to over well as budget. It pays monthly cash benefits to over 6770 million people, with million people, with ~~almost $119~~more than $136 billion billion
in benefits paid each month.in benefits paid each month.33 Beneficiaries include retired workers and their eligible family Beneficiaries include retired workers and their eligible family
members, disabled workers and their eligible family members, and eligible family members of members, disabled workers and their eligible family members, and eligible family members of
deceased workers.deceased workers.
Social Security is a work-related program that is funded primarily with dedicated payroll tax Social Security is a work-related program that is funded primarily with dedicated payroll tax
revenues. In all cases, a Social Security beneficiary becomes eligible for benefits either by revenues. In all cases, a Social Security beneficiary becomes eligible for benefits either by
working in a job that is covered by Social Security (a covered worker), by having a close family working in a job that is covered by Social Security (a covered worker), by having a close family
relationship to a covered worker, or both (among other requirements). For people who work in relationship to a covered worker, or both (among other requirements). For people who work in
jobs that are covered by Social Security, participation is mandatory.jobs that are covered by Social Security, participation is mandatory.44 Covered workers and their Covered workers and their
employers are required to pay Social Security payroll taxes. In employers are required to pay Social Security payroll taxes. In ~~2024~~2026, workers pay 6.2% of , workers pay 6.2% of
earnings in covered employment, up to a maximum earnings level of $earnings in covered employment, up to a maximum earnings level of $~~168,600~~184,500. The maximum . The maximum
earnings level is adjusted annually based on average wage growth in the national economy. (The earnings level is adjusted annually based on average wage growth in the national economy. (The
adjustment is made in years when a Social Security cost-of-living adjustment is payable.) adjustment is made in years when a Social Security cost-of-living adjustment is payable.)
Employers pay a corresponding amount—6.2% of the workerEmployers pay a corresponding amount—6.2% of the worker’'s covered earnings up to the annual s covered earnings up to the annual
maximum. Self-employed workers pay 12.4% of net earnings up to the annual maximum.maximum. Self-employed workers pay 12.4% of net earnings up to the annual maximum.
To become eligible for benefits, a worker must have a sufficient connection to covered To become eligible for benefits, a worker must have a sufficient connection to covered
employment, which is measured in terms of employment, which is measured in terms of Quarters of Coverage (QCs). In . In ~~2024~~2026, a worker earns , a worker earns
one QC for every $1,one QC for every $1,~~730~~890 in covered earnings up to a maximum of four QCs for the year (i.e., in covered earnings up to a maximum of four QCs for the year (i.e.,
covered earnings of $covered earnings of $~~6,920~~7,560 or more). The amount needed to earn one QC is adjusted annually or more). The amount needed to earn one QC is adjusted annually
based on average wage growth in the national economy.based on average wage growth in the national economy.⁵ When a worker has earned a sufficient When a worker has earned a sufficient
number of QCs, he or she is number of QCs, he or she is insured under the program. The number of QCs needed for insured under the program. The number of QCs needed for insured
status varies depending on the circumstances and type of benefit, ranging from a minimum of six status varies depending on the circumstances and type of benefit, ranging from a minimum of six
QCs to a maximum of 40 QCs. Insured status allows a worker to establish eligibility for retired-QCs to a maximum of 40 QCs. Insured status allows a worker to establish eligibility for retired-

~~1 Generally, mandatory coverage proposals affect newly hired state and local government employees, not current~~
~~employees. Therefore, this report focuses on the mandatory coverage issue with respect to new hires.~~
~~2 It is the option of the state to hold a referendum on coverage among eligible employees covered by a retirement~~
~~system.~~
~~3 Social Security Administration (SSA), Monthly Statistical Snapshot, January 2024, Table 2, https://www.ssa.gov/~~
~~policy/docs/quickfacts/stat_snapshot/index.html.~~
~~4 Social Security coverage is tied to positions, not to individuals.~~
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worker or disabled-worker benefits and to establish eligibility for benefits for the workerworker or disabled-worker benefits and to establish eligibility for benefits for the worker’'s family s family
members in the event of the workermembers in the event of the worker’'s retirement, disability, or death.s retirement, disability, or death.5
6 Most jobs in the United States are covered by Social Security. The Social Security Administration Most jobs in the United States are covered by Social Security. The Social Security Administration
(SSA) estimates that about (SSA) estimates that about 9493% of workers in paid employment and self-employment are covered % of workers in paid employment and self-employment are covered
under the Social Security program and that an estimated under the Social Security program and that an estimated ~~182~~186 million people will work in covered million people will work in covered
~~employment in 2024.6~~
employment or self-employment in 2026.⁷ If a job is not covered by Social Security, the workerIf a job is not covered by Social Security, the worker’'s earnings are not subject to Social Security s earnings are not subject to Social Security
payroll taxes. As a result, the earnings do not count toward the worker gaining insured status payroll taxes. As a result, the earnings do not count toward the worker gaining insured status
under the program (i.e., the earnings do not count toward establishing future benefit eligibility for under the program (i.e., the earnings do not count toward establishing future benefit eligibility for
the worker and his or her family members). In addition, the earnings are not included in the the worker and his or her family members). In addition, the earnings are not included in the
computation of benefits.computation of benefits.
Nearly Universal System
Social Security began as a compulsory federal old-age benefits program established under Title II Social Security began as a compulsory federal old-age benefits program established under Title II
of the Social Security Act of 1935 (P.L. 271, of the Social Security Act of 1935 (P.L. 271, ~~74th Congress~~74^th Congress). The original program covered ). The original program covered
employees under the age of 65 in commerce and nonagricultural industry (excluding railroads) in employees under the age of 65 in commerce and nonagricultural industry (excluding railroads) in
the 48 states that existed at the time, plus Alaska, Hawaii, and the District of Columbia (about the 48 states that existed at the time, plus Alaska, Hawaii, and the District of Columbia (about
56% of the workforce at the time).56% of the workforce at the time).78 Initially, the program provided monthly Initially, the program provided monthly “"old-age benefitsold-age benefits”" for for
insured workers aged 65 or older.insured workers aged 65 or older.
Over the years, Congress expanded coverage under the Social Security program, bringing most Over the years, Congress expanded coverage under the Social Security program, bringing most
employees and self-employed workers into the system. Today, most jobs in the United States are employees and self-employed workers into the system. Today, most jobs in the United States are
covered by Social Security, regardless of whether the work is performed by U.S. citizens or covered by Social Security, regardless of whether the work is performed by U.S. citizens or
noncitizens, with some exceptions.noncitizens, with some exceptions.89 In some cases, work performed outside the United States by In some cases, work performed outside the United States by
U.S. citizens or resident aliens (noncitizens) is covered by Social Security (for example, if the U.S. citizens or resident aliens (noncitizens) is covered by Social Security (for example, if the
person is employed by an American employer, employed by a foreign affiliate of an American person is employed by an American employer, employed by a foreign affiliate of an American
employer that has elected coverage for its employees, or, under certain circumstances, self-employer that has elected coverage for its employees, or, under certain circumstances, self-
employed).employed).910 Over the years, Congress also expanded the types of benefits available under the Over the years, Congress also expanded the types of benefits available under the
program. For example, Congress extended benefits to a workerprogram. For example, Congress extended benefits to a worker’'s dependents and survivors in s dependents and survivors in
1939 and to disabled workers in 1956.1939 and to disabled workers in 1956.
Major Categories of Work Not Covered
The rules surrounding Social Security coverage and exceptions are extensive.The rules surrounding Social Security coverage and exceptions are extensive.1011 The The major
~~categories of work/workers that are not covered by Social Security include~~

~~5 For more information, see CRS Report R42035, Social Security Primer.~~
~~6 SSA, Office of the Chief Actuary (OCACT),~~ ~~Fact Sheet on the Old-Age, Survivors, and Disability Insurance~~
~~Program, January 29, 2024, https://www.ssa.gov/oact/FACTS/index.html.~~
~~7 William J. Nelson Jr., “Employment Covered Under the Social Security Program, 1935-84,” Social Security Bulletin,~~
~~vol. 48, no. 4 (April 1985), Table 2, p. 34, https://www.ssa.gov/policy/docs/ssb/v48n4/v48n4p33.pdf.~~
~~8 The term United States is defined as the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the~~
~~territories of Guam and American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana~~
~~Islands.~~
~~9 See Internal Revenue Service (IRS), Social Security Tax Consequences of Working Abroad, https://www.irs.gov/~~
~~individuals/international-taxpayers/social-security-tax-consequences-of-working-abroad.~~
~~10 For more information on the definition of employment for Social Security purposes, see (1) Section 210 of the Social~~
~~Security Act [42 U.S.C. §410]; (2) Title 20, Part 404, of the Code of Federal Regulations, Subpart K; and (3) SSA’s~~
~~Program Operations Manual System [POMS], Coverage and Exceptions.~~
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• categories of work/workers that are not covered by Social Security includeMost civilian federal employees hired before 1984 (federal employees covered Most civilian federal employees hired before 1984 (federal employees covered
under the Civil Service Retirement System [CSRS]),under the Civil Service Retirement System [CSRS]),11
• 12 Segment of state and local government employees who have not elected coverage Segment of state and local government employees who have not elected coverage
~~(28~~(27% of state and local government employees in % of state and local government employees in ~~2018),~~
• 2023),¹³ Railroad workers (the Railroad Retirement System and Social Security are Railroad workers (the Railroad Retirement System and Social Security are
separate but coordinated systems),separate but coordinated systems),
• Certain family employment,Certain family employment,
• Certain work performed by students,Certain work performed by students,
• Certain members of the clergy and others, andCertain members of the clergy and others, and
• Certain work performed by noncitizens.Certain work performed by noncitizens.
For some types of work, there are coverage thresholds. If the workerFor some types of work, there are coverage thresholds. If the worker’'s earnings are below a s earnings are below a
specified threshold, the work is generally excluded from Social Security coverage. These specified threshold, the work is generally excluded from Social Security coverage. These
categories arecategories are
~~• Farm work,~~
• Farm work, Self-employed workers,Self-employed workers,
• Election officials and election workers, andElection officials and election workers, and
• Household employees.Household employees.
Different coverage thresholds apply for each category; in all cases, the threshold is relatively low. Different coverage thresholds apply for each category; in all cases, the threshold is relatively low.
For example, the coverage threshold for self-employed workers is $400. Self-employed workers For example, the coverage threshold for self-employed workers is $400. Self-employed workers
with net earnings below $400 for the year are generally excluded from Social Security coverage.with net earnings below $400 for the year are generally excluded from Social Security coverage.12
14 Social Goals of the Program
Social Security is a Social Security is a social insurance system that is primarily self-financing with payroll taxes paid that is primarily self-financing with payroll taxes paid
by workers in covered employment and their employers, as well as self-employed individuals. It by workers in covered employment and their employers, as well as self-employed individuals. It
provides monthly cash benefits to insured workers and their family members when there is a loss provides monthly cash benefits to insured workers and their family members when there is a loss
of earnings due to the workerof earnings due to the worker’'s retirement, disability, or death. Social Security provides benefits s retirement, disability, or death. Social Security provides benefits
to people of all ages, including retired workers, disabled workers, spouses, former spouses, to people of all ages, including retired workers, disabled workers, spouses, former spouses,
surviving spouses, and dependent children. For many beneficiaries, Social Security represents a surviving spouses, and dependent children. For many beneficiaries, Social Security represents a
sizable share of their total income and serves to keep them out of poverty.sizable share of their total income and serves to keep them out of poverty.1315 Given Social Given Social
~~Security’~~Security's role in reducing poverty, which benefits the nation as a whole, some argue that Social s role in reducing poverty, which benefits the nation as a whole, some argue that Social
Security should be a more fully universal system.Security should be a more fully universal system.1416 That is, on the basis of equity, certain That is, on the basis of equity, certain
noncovered workers should be brought into the system to share in the programnoncovered workers should be brought into the system to share in the program’'s broader social s broader social
goals.goals.
On a related point, noncovered workers do not share in the costs associated with the startup of the On a related point, noncovered workers do not share in the costs associated with the startup of the
program. In the early years of Social Security, workers who had paid into the system for a short program. In the early years of Social Security, workers who had paid into the system for a short
period received benefits far in excess of their contributions. The inherited unfunded liability period received benefits far in excess of their contributions. The inherited unfunded liability

~~11 For more information, see CRS Report 98-810, Federal Employees’ Retirement System: Benefits and Financing.~~
12 For more information, see CRS In Focus IF11824, Social Security: Who Is Covered Under the Program?
~~13 For more information, see CRS Report R47341,~~ ~~Income for the Population Aged 65 and Older: Evidence from the~~
~~Health Retirement Study (HRS)~~.
~~14 For example, Social Security lessens the reliance on need-based programs such as Supplemental Security Income~~
~~(SSI), which is funded with federal general revenues. SSI provides monthly cash payments to aged, blind, or disabled~~
~~individuals who have limited income and resources. For more information, see CRS In Focus IF10482,~~ ~~Supplemental~~
~~Security Income (SSI)~~.
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associated with the startup of the program is referred to as the associated with the startup of the program is referred to as the legacy costs..1517 It is estimated that It is estimated that
about 3 percentage points of the current 12.4% Social Security payroll tax goes toward covering about 3 percentage points of the current 12.4% Social Security payroll tax goes toward covering
these costs.these costs.1618 Benefits paid during the early years of the program often went to the parents, Benefits paid during the early years of the program often went to the parents,
grandparents, and great-grandparents of current noncovered workers. Therefore, on the basis of grandparents, and great-grandparents of current noncovered workers. Therefore, on the basis of
equity, some argue that certain noncovered workers should be brought into the system to share in equity, some argue that certain noncovered workers should be brought into the system to share in
the legacy costs.the legacy costs.
State and Local Government Employees
The largest and most high-profile group of noncovered workers is the segment of state and local The largest and most high-profile group of noncovered workers is the segment of state and local
government employees who participate in alternative public retirement systems that do not have a government employees who participate in alternative public retirement systems that do not have a
Social Security component. Under current law, state and local government employees are not Social Security component. Under current law, state and local government employees are not
required to participate in Social Security if they participate in public retirement systems through required to participate in Social Security if they participate in public retirement systems through
their employers that meet certain requirements.their employers that meet certain requirements.1719 However, they may elect coverage as a group However, they may elect coverage as a group
through a coverage agreement between the state and SSA. These agreements, called through a coverage agreement between the state and SSA. These agreements, called Section 218
~~Agreements~~Agreements, are authorized under Section 218 of the Social Security Act (42 U.S.C. §418). Social , are authorized under Section 218 of the Social Security Act (42 U.S.C. §418). Social
Security coverage is mandatory only for those state and local government employees who do not Security coverage is mandatory only for those state and local government employees who do not
participate in public retirement systems that qualify as an alternative to Social Security. SSA data participate in public retirement systems that qualify as an alternative to Social Security. SSA data
shows that there were shows that there were ~~nearly 21~~approximately 22.9 million state and local government employees in .9 million state and local government employees in ~~2021.18~~2023.²⁰ Of Of
those, about those, about ~~15.9~~16.7 million (73%) were covered by Social Security. The other approximately million (73%) were covered by Social Security. The other approximately ~~5.9~~
6.3 million state and local government employees (27%) were not covered by Social Security through million state and local government employees (27%) were not covered by Social Security through
their government employment. Over the years, there have been proposals to make Social Security their government employment. Over the years, there have been proposals to make Social Security
coverage mandatory for newly hired state and local government employees.coverage mandatory for newly hired state and local government employees.
The remainder of the report discusses Social Security coverage among state and local government The remainder of the report discusses Social Security coverage among state and local government
employees under current law and provides a brief legislative history of coverage for these employees under current law and provides a brief legislative history of coverage for these
workers. It then discusses proposals to mandate coverage for newly hired state and local workers. It then discusses proposals to mandate coverage for newly hired state and local
government employees and issues to consider with respect to mandatory coverage.government employees and issues to consider with respect to mandatory coverage.
Key Points (Part I): Recap
•
Participation in Social Security is mandatory for most workers. An estimated Participation in Social Security is mandatory for most workers. An estimated 9493% of workers in the United % of workers in the United
States participate in Social Security, making it a nearly universal system.States participate in Social Security, making it a nearly universal system.
•
The largest and most high-profile group of noncovered workers is the segment of state and local government The largest and most high-profile group of noncovered workers is the segment of state and local government
employees who do not participate in Social Security through their government employment.employees who do not participate in Social Security through their government employment.
•
Participation in Social Security is Participation in Social Security is voluntary for state and local government employees who are covered by for state and local government employees who are covered by
alternative public retirement systems that meet certain requirements. Participation is alternative public retirement systems that meet certain requirements. Participation is mandatory only for only for
those state and local government employees who are not covered by such systems.those state and local government employees who are not covered by such systems.
•
State and local government employees covered by alternative public retirement systems may elect Social State and local government employees covered by alternative public retirement systems may elect Social
Security coverage via referendums held at the option of the state.Security coverage via referendums held at the option of the state.
•
~~In 2021~~ In 2023, there were , there were ~~21.9 mil ion~~22.9 million state and local government employees. Based on data from SSA, 73% of state and local government employees. Based on data from SSA, 73% of
these workers were covered by Social Security. The other 27% of workers were not covered by Social these workers were covered by Social Security. The other 27% of workers were not covered by Social
~~Security through their government employment.~~

~~15 See Dean R. Leimer, “The Legacy Debt Associated with Past Social Security Transfers,” Social Security Bulletin,~~
~~vol. 76, no. 3 (2016).~~
~~16 Alicia H. Munnell, Jean-Pierre Aubry, and Anek Belbase, “The Impact of Mandatory Coverage on State and Local~~
~~Budgets,” Center for Retirement Research at Boston College, CRR WP 2014-9, May 2014, pp. 6-7, available at~~
~~https://crr.bc.edu/the-impact-of-mandatory-coverage-on-state-and-local-budgets/.~~
~~17 To qualify as an alternative to Social Security, the public retirement system must provide a minimum level of~~
~~benefits. In general, it must provide a retirement benefit that is comparable to Social Security.~~
~~18 Data from SSA obtained by CRS in February 2024.~~
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•
Security through their government employment. There have been proposals to make Social Security coverage mandatory for newly hired state and local There have been proposals to make Social Security coverage mandatory for newly hired state and local
government employees. On the basis of equity, some argue that Social Security should be a more government employees. On the basis of equity, some argue that Social Security should be a more ~~ful y~~
fully universal system given the programuniversal system given the program’'s broader social goals and the systems broader social goals and the system’'s legacy costs.s legacy costs.
State and Local Coverage Under Current Law
Unlike most employers, state and local governments are not required to participate in Social Unlike most employers, state and local governments are not required to participate in Social
Security. Social Security coverage is Security. Social Security coverage is voluntary for state and local government employees who are for state and local government employees who are
covered under alternative public retirement systems that meet certain requirements. If these state covered under alternative public retirement systems that meet certain requirements. If these state
and local government employees choose to participate in Social Security, they may elect coverage and local government employees choose to participate in Social Security, they may elect coverage
as a group through the stateas a group through the state’'s Section 218 Agreement with SSA. Coverage is elected through a s Section 218 Agreement with SSA. Coverage is elected through a
referendum held by the state. Ultimately, the decision to extend coverage to certain state and local referendum held by the state. Ultimately, the decision to extend coverage to certain state and local
government positions lies with the state, as the state must hold a referendum among eligible government positions lies with the state, as the state must hold a referendum among eligible
employees covered by a retirement system before Social Security coverage can be extended.employees covered by a retirement system before Social Security coverage can be extended.19
21 Social Security coverage is Social Security coverage is mandatory for state and local government employees who are not for state and local government employees who are not
covered under alternative public retirement systems, with some exceptions.covered under alternative public retirement systems, with some exceptions.2022 Every state has a Every state has a
mix of state and local government employees with and without Social Security coverage, and the mix of state and local government employees with and without Social Security coverage, and the
relative share of covered and noncovered workers varies widely by state. By comparison, relative share of covered and noncovered workers varies widely by state. By comparison,
Medicare coverage is mandatory for state and local government employees.Medicare coverage is mandatory for state and local government employees.21
23 Alternative Public Retirement Systems
A public retirement system must meet certain requirements to qualify as an alternative to Social A public retirement system must meet certain requirements to qualify as an alternative to Social
Security. For example, the system must provide a minimum level of benefits. In general, an Security. For example, the system must provide a minimum level of benefits. In general, an
alternative public retirement system is a pension, annuity, retirement, or similar fund or system alternative public retirement system is a pension, annuity, retirement, or similar fund or system
maintained by a state or local government that provides a retirement benefit to the employee maintained by a state or local government that provides a retirement benefit to the employee
comparable to the benefit provided under the old-age component of the Old-Age, Survivors, and comparable to the benefit provided under the old-age component of the Old-Age, Survivors, and
Disability Insurance (Social Security) program.Disability Insurance (Social Security) program.
In general, there are two types of public retirement systems that may meet the minimum benefit In general, there are two types of public retirement systems that may meet the minimum benefit
requirement: defined benefit retirement systems and defined contribution retirement systems. requirement: defined benefit retirement systems and defined contribution retirement systems.
Defined benefit plans provide lifetime benefits based on a formula, generally taking into account Defined benefit plans provide lifetime benefits based on a formula, generally taking into account
the employeethe employee’'s salary, years of service, and an accrual rate (benefit multiplier).s salary, years of service, and an accrual rate (benefit multiplier).2224 Defined Defined
~~contribution plans provide an individual account for each participant. The employer and/or the~~

~~19 As noted in SSA’s POMS, “Ultimately, it is within the state’s discretion to determine for whom, whether, and when~~
~~to extend Section 218 coverage, subject to the requirements of the [Social Security] Act” (POMS, Section SL~~
~~30001.301, Section 218 Agreements, Paragraph C, https://secure.ssa.gov/apps10/poms.nsf/lnx/1930001301#c).~~
~~20 Under Section 210(a) of the Social Security Act (42 U.S.C. §410(a)), certain categories of employees are not subject~~
~~to mandatory Social Security coverage, including state and local government employees who fall within these~~
~~categories. For example, services performed by individuals hired to be relieved from unemployment are not subject to~~
~~mandatory Social Security coverage. For more information, see IRS Publication 963, Federal-State Reference Guide,~~
~~Revised July 2020, Chapter 5: Social Security and Medicare Coverage, pp. 44-45, https://www.irs.gov/pub/irs-pdf/~~
~~p963.pdf.~~
~~21 Medicare payroll taxes generally apply to all wages (not limited by the taxable maximum) of all state and local~~
~~government employees hired or re-hired after March 31, 1986, unless specifically excluded under Section 210(p) of the~~
~~Social Security Act (42 U.S.C. §410(p)). This requirement was mandated by the Consolidated Omnibus Budget~~
~~Reconciliation Act (COBRA) of 1985 (P.L. 99-272). See IRS Publication 963, pp. 49-50.~~
~~22 A traditional defined benefit formula would be: annual benefit = an accrual rate X the number of years of service X~~
~~the average of the worker’s final years of salary. The accrual rate is a percentage factor typically ranging from 2% to~~
~~3% in most traditional defined benefit plans.~~
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5

~~Social Security Coverage of State and Local Government Employees~~

contribution plans provide an individual account for each participant. The employer and/or the employee contribute a specific dollar amount or percentage of pay into an account, which is employee contribute a specific dollar amount or percentage of pay into an account, which is
usually invested in stocks and bonds. Upon retirement, the employee receives the balance in the usually invested in stocks and bonds. Upon retirement, the employee receives the balance in the
account, which is the sum of all the contributions that have been made plus interest, dividends, account, which is the sum of all the contributions that have been made plus interest, dividends,
and capital gains (or losses), and capital gains (or losses), minus fees and expenses. Generally, the employee may choose to fees and expenses. Generally, the employee may choose to
receive the funds as a series of payments over a period of years (for example, as an annuity) or as receive the funds as a series of payments over a period of years (for example, as an annuity) or as
a lump sum. In a defined benefit plan, the a lump sum. In a defined benefit plan, the employer bears the financial risk. In a defined bears the financial risk. In a defined
contribution plan, the contribution plan, the employee bears the financial risk. Most state and local government bears the financial risk. Most state and local government
employees are covered by traditional defined benefit plans.employees are covered by traditional defined benefit plans.23
25 The requirements that public retirement systems (defined benefit, defined contribution, or hybrid The requirements that public retirement systems (defined benefit, defined contribution, or hybrid
plans) must meet to qualify as an alternative to Social Security are explained in Internal Revenue plans) must meet to qualify as an alternative to Social Security are explained in Internal Revenue
Service (IRS) Publication 963 (Service (IRS) Publication 963 (Federal-State Reference Guide).).2426 A defined benefit retirement A defined benefit retirement
system, for example, must provide the employee with an annual benefit that is at least equal to the system, for example, must provide the employee with an annual benefit that is at least equal to the
annual primary insurance amount (PIA) the employee would have under Social Security.annual primary insurance amount (PIA) the employee would have under Social Security.2527 The The
benefit must start on or before the employee attains the Social Security full retirement age benefit must start on or before the employee attains the Social Security full retirement age
(FRA),(FRA),2628 which is 67 for most current workers. which is 67 for most current workers.2729 A defined benefit plan that provides a benefit A defined benefit plan that provides a benefit
that is, for example, at least 1.5% of average compensation during an employeethat is, for example, at least 1.5% of average compensation during an employee’'s last three years s last three years
of employment, multiplied by the employeeof employment, multiplied by the employee’'s years of service, would generally meet the s years of service, would generally meet the
requirement of providing a retirement benefit comparable to Social Security.requirement of providing a retirement benefit comparable to Social Security.28
30 Section 218 Agreements
Social Security coverage is extended to state and local government employees through voluntary Social Security coverage is extended to state and local government employees through voluntary
agreements between the states and SSA, known as Section 218 Agreements.agreements between the states and SSA, known as Section 218 Agreements.2931 All states have a All states have a
Section 218 Agreement with SSA. However, the extent of coverage under these agreements varies Section 218 Agreement with SSA. However, the extent of coverage under these agreements varies
from state to state.from state to state.3032 A majority of state and local government employees may be covered by ~~A majority of state and local government employees may be covered by~~

~~23 For data on how pension plan access and participation rates compare among public- and private-sector employees,~~
~~see CRS Report R43439, Worker Participation in Employer-Sponsored Pensions: Data in Brief.~~
~~24 IRS Publication 963, Chapter 6: Social Security and Public Retirement Systems. See also (1) Section 31.3121(b)(7)-~~
~~2(e) of the IRS Employment Tax Regulations, https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-31/~~
~~subpart-B/subject-group-ECFR996050e2e4c4937/section-31.3121(b)(7)-2#p-31.3121(b)(7)-2(e); and (2) IRS Revenue~~
~~Procedure 91-40, which sets forth rules related to the minimum retirement benefit requirement prescribed under Section~~
~~31.3121(b)(7)-2 of the IRS Employment Tax Regulations. IRS Revenue Procedure 91-40 is included as an appendix in~~
~~IRS Publication 963, and it is available at https://www.ssa.gov/slge/revenue_procedure_91-40.htm.~~
~~25 In the Social Security program, the worker’s PIA is the benefit payable at full retirement age (FRA), before any~~
~~applicable adjustments are taken into account.~~
~~26 The Social Security FRA is the age at which full (unreduced) Social Security retirement benefits are first payable.~~
~~The FRA ranges from 65 to 67, depending on the worker’s year of birth. Workers born in 1960 or later have an FRA of~~
~~67. Retirement benefits are payable as early as age 62, but benefits claimed between age 62 and the FRA are~~
~~permanently reduced to take into account “early retirement.”~~
~~27 See Section 31.3121(b)(7)-2(e)(2) of the IRS Employment Tax Regulations at https://www.ecfr.gov/current/title-26/~~
~~chapter-I/subchapter-C/part-31/subpart-B/subject-group-ECFR996050e2e4c4937/section-31.3121(b)(7)-2#p-~~
~~31.3121(b)(7)-2(e)(2).~~
~~28 IRS Publication 963, p. 54.~~
~~29 Section 218 Agreements are governed by Section 218 of the Social Security Act (42 U.S.C. §418) and the~~ ~~Code of~~
~~Federal Regulations~~ ~~(20 C.F.R. §§404.1200-404.1219). See also SSA’s POMS beginning with the section~~
~~“Introduction to State and Local Coverage Handbook” at https://secure.ssa.gov/apps10/poms.nsf/lnx/1910000000.~~
~~30 The term state includes the 50 states, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands. It also includes~~
~~interstate instrumentalities. An interstate instrumentality is an independent legal entity organized by two or more states~~
~~to carry out one or more governmental functions, such as police power, taxing power, and/or power of eminent domain.~~
~~For example, the New Jersey–New York Port Authority is an interstate instrumentality. Approximately 60 interstate~~
~~instrumentalities have Section 218 Agreements with SSA (IRS Publication 963, p. 1).~~
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Social Security in one state, while a small percentage of workers may be covered in another state. Social Security in one state, while a small percentage of workers may be covered in another state.
There can be variation within a state as well. For example, teachers in one county may be covered There can be variation within a state as well. For example, teachers in one county may be covered
by Social Security, while teachers in a neighboring county may not be covered.by Social Security, while teachers in a neighboring county may not be covered.
Section 218 Agreements cover positions, not individuals (i.e., Social Security coverage is tied to a Section 218 Agreements cover positions, not individuals (i.e., Social Security coverage is tied to a
particular job, not to a particular individual). If a position is covered by Social Security under a particular job, not to a particular individual). If a position is covered by Social Security under a
Section 218 Agreement, generally any current or future employee who fills that position is subject Section 218 Agreement, generally any current or future employee who fills that position is subject
to Social Security payroll taxes.to Social Security payroll taxes.3133 A state A state’'s Section 218 Agreement specifies which state and local s Section 218 Agreement specifies which state and local
government positions are covered by Social Security.government positions are covered by Social Security.
Under Section 218 Agreements, Social Security coverage is extended to groups of employee Under Section 218 Agreements, Social Security coverage is extended to groups of employee
positions known as positions known as coverage groups. Coverage is not extended on an individual basis. Various . Coverage is not extended on an individual basis. Various
laws and regulations govern how coverage may be extended to state and local government laws and regulations govern how coverage may be extended to state and local government
positions through referendums held by the state among eligible employees covered by a positions through referendums held by the state among eligible employees covered by a
retirement system. All states are authorized to use a retirement system. All states are authorized to use a majority vote referendum process. Twenty-referendum process. Twenty-
three states are also authorized to use a three states are also authorized to use a divided vote referendum process (discussed below). referendum process (discussed below).
Typically, states allow their political subdivisions (such as a school board) to decide whether to Typically, states allow their political subdivisions (such as a school board) to decide whether to
hold a referendum on coverage.hold a referendum on coverage.
Generally, Section 218 Agreements may be modified to increase (but not reduce) the extent of Generally, Section 218 Agreements may be modified to increase (but not reduce) the extent of
Social Security coverage. Once coverage is provided, it cannot be terminated, and all future Social Security coverage. Once coverage is provided, it cannot be terminated, and all future
employees in covered positions are required to participate in Social Security.employees in covered positions are required to participate in Social Security.
Each of the 50 states, as well as Puerto Rico and the U.S. Virgin Islands, has a state Social Each of the 50 states, as well as Puerto Rico and the U.S. Virgin Islands, has a state Social
Security administrator (state administrator). The state administrator is a designated state Security administrator (state administrator). The state administrator is a designated state
employee who is the main resource for information about Social Security (and Medicare) employee who is the main resource for information about Social Security (and Medicare)
coverage and reporting issues for state and local government employers and employees under the coverage and reporting issues for state and local government employers and employees under the
terms of the stateterms of the state’'s Section 218 Agreement.s Section 218 Agreement.3234 Among other duties, the state administrator Among other duties, the state administrator
maintains the statemaintains the state’'s Section 218 Agreement, prepares modifications to the agreement, and serves s Section 218 Agreement, prepares modifications to the agreement, and serves
as a bridge between (1) state and local government employers and (2) SSA and the IRS.as a bridge between (1) state and local government employers and (2) SSA and the IRS.33
35 Legislative History Highlights
The original Social Security Act (1935; P.L. 74-271) did not extend Social Security coverage to The original Social Security Act (1935; P.L. 74-271) did not extend Social Security coverage to
state and local government employees. State and local government employees were excluded to state and local government employees. State and local government employees were excluded to
avoid the constitutional question of whether the federal government had the authority to impose avoid the constitutional question of whether the federal government had the authority to impose
payroll taxes on state and local governments and their employees. In addition, the objective of the payroll taxes on state and local governments and their employees. In addition, the objective of the
program was to cover employees most in need of coverage, and many state and local government program was to cover employees most in need of coverage, and many state and local government
employees were already covered under pension plans. Over time, coverage was extended to state employees were already covered under pension plans. Over time, coverage was extended to state
and local government employees as outlined below.and local government employees as outlined below.3436 In 1951, certain state and local government employees first became eligible for Social Security coverage.³⁷ ~~In 1951, certain state and local government~~

~~31 See the discussion below regarding divided vote referendums/divided retirement systems authorized in certain states.~~
~~32 A list of state Social Security administrators is available at http://www.ncsssa.org/statessadminmenu.html. For~~
~~information on SSA contacts regarding Section 218 Agreements, see “SSA Regional Office State and Local Coverage~~
~~Specialists” at https://www.ssa.gov/slge/specialists.htm.~~
~~33 See SSA, “State Social Security Administrator,” https://www.ssa.gov/slge/state_ssa.htm. For information on the~~
~~management of Section 218 Agreements, see U.S. Government Accountability Office (GAO),~~ ~~Social Security~~
~~Administration: Management Oversight Needed to Ensure Accurate Treatment of State and Local Government~~
~~Employees, GAO-10-936, September 2010, http://www.gao.gov/new.items/d10938.pdf.~~
~~34 For key dates in the history of coverage for state and local government employees, see also IRS Publication 963, p. 2.~~
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~~employees first became eligible for Social Security coverage.35~~ Before 1991, Social Security Before 1991, Social Security
coverage was generally optional for state and local government employees. In 1991, Social coverage was generally optional for state and local government employees. In 1991, Social
Security coverage became mandatory for most state and local government employees who were Security coverage became mandatory for most state and local government employees who were
not covered under public retirement systems.not covered under public retirement systems.36
• 1950
38

1950

Among other provisions, the Social Security Act Amendments of 1950 (P.L. 81-734) extended Among other provisions, the Social Security Act Amendments of 1950 (P.L. 81-734) extended
Social Security coverage to various groups of workers, including workers in Puerto Rico and the Social Security coverage to various groups of workers, including workers in Puerto Rico and the
U.S. Virgin Islands (i.e., those in the general workforce).U.S. Virgin Islands (i.e., those in the general workforce).37
39 It also extended voluntary coverage to state and local government employees It also extended voluntary coverage to state and local government employees not covered under covered under
retirement systems (an estimated 1.5 million people at the time).retirement systems (an estimated 1.5 million people at the time).3840 State and local government State and local government
employees covered under retirement systems were excluded from voluntary Social Security employees covered under retirement systems were excluded from voluntary Social Security
coverage. Section 218 was added to the Social Security Act to allow the 48 states that existed at coverage. Section 218 was added to the Social Security Act to allow the 48 states that existed at
the time plus Alaska, Hawaii, Puerto Rico, and the U.S. Virgin Islands to elect Social Security the time plus Alaska, Hawaii, Puerto Rico, and the U.S. Virgin Islands to elect Social Security
coverage for certain state and local government employees through voluntary agreements coverage for certain state and local government employees through voluntary agreements
between the states and the federal government. Coverage became effective January 1, 1951.between the states and the federal government. Coverage became effective January 1, 1951.
The 1950 amendments permitted states to terminate coverage for state and local groups provided The 1950 amendments permitted states to terminate coverage for state and local groups provided
the coverage had been in effect for at least five years and notice of intent was given two years in the coverage had been in effect for at least five years and notice of intent was given two years in
advance. Termination of Social Security coverage was permanent.advance. Termination of Social Security coverage was permanent.
• 1954
1954Among other provisions, the Social Security Amendments of 1954 (P.L. 83-761) extended Among other provisions, the Social Security Amendments of 1954 (P.L. 83-761) extended
voluntary Social Security coverage to state and local government employees covered under voluntary Social Security coverage to state and local government employees covered under
retirement systems (except police officers and firefighters).retirement systems (except police officers and firefighters).
Under the 1954 amendments, police officers and firefighters covered under retirement systems Under the 1954 amendments, police officers and firefighters covered under retirement systems
continued to be excluded from voluntary Social Security coverage. The exclusion was left in continued to be excluded from voluntary Social Security coverage. The exclusion was left in
place because most of the organizations representing police officers and firefighters were opposed place because most of the organizations representing police officers and firefighters were opposed
to the coordination of their systems with the Social Security system, even on a voluntary basis.to the coordination of their systems with the Social Security system, even on a voluntary basis.39
41 The 1954 amendments specified that state and local government employees covered under The 1954 amendments specified that state and local government employees covered under
~~retirement systems could elect Social Security coverage if a referendum by secret written ballot~~

~~35 For state and local government employee coverage data for 1951-1981, see Bert Kestenbaum, “State and Local~~
~~Government Employees Covered Under Social Security, 1977-81,” Social Security Bulletin, vol. 45, no. 12 (December~~
~~1982), https://www.ssa.gov/policy/docs/ssb/v45n12/v45n12p11.pdf.~~
~~36 Those who oppose mandatory Social Security coverage for newly hired state and local government employees~~
~~sometimes argue that it would raise constitutional issues and might be challenged in court. In 1998, the General~~
~~Accounting Office (now the Government Accountability Office) wrote, “we believe that mandatory coverage is likely~~
~~to be upheld under current U.S. Supreme Court decisions.” See GAO,~~ ~~Social Security: Implications of Extending~~
~~Mandatory Coverage to State and Local Employees, GAO/HEHS-98-196, August 1998, pp. 19-20,~~
~~http://www.gao.gov/archive/1998/he98196.pdf. A discussion of any potential legal issues associated with mandatory~~
~~coverage for newly hired state and local government employees is beyond the scope of this CRS report.~~
~~37 Coverage was extended to the U.S. Virgin Islands on an automatic basis. Puerto Rico had to elect coverage. The~~
~~1950 amendments permitted coverage to be extended to Puerto Rico provided the governor of Puerto Rico certified to~~
~~the President of the United States that the legislature of Puerto Rico resolved (via concurrent resolution) to elect the~~
~~extension. Social Security coverage became effective in Puerto Rico and the U.S. Virgin Islands on January 1, 1951.~~
~~38 Social Security Act Amendments of 1950, P.L. 81-734, §106 (Coverage of State and Local Employees).~~
~~39 Wilbur J. Cohen, Robert M. Ball, and Robert J. Myers, “Social Security Act Amendments of 1954: A Summary and~~
~~Legislative History,” Social Security Bulletin, vol. 17, no. 9 (September 1954), p. 4, at https://www.ssa.gov/policy/~~
~~docs/ssb/v17n9/index.html.~~
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retirement systems could elect Social Security coverage if a referendum by secret written ballot was held among the members of the retirement system and a majority of those eligible to vote in was held among the members of the retirement system and a majority of those eligible to vote in
the referendum voted in favor of coverage.the referendum voted in favor of coverage.4042 Coverage became effective January 1, 1955. Coverage became effective January 1, 1955.41
43 The 1954 amendments made Social Security coverage available to about 3.5 million state and The 1954 amendments made Social Security coverage available to about 3.5 million state and
local government employees. Social Security coverage was now available to almost all state and local government employees. Social Security coverage was now available to almost all state and
local government employees. The only sizable group not eligible for Social Security coverage local government employees. The only sizable group not eligible for Social Security coverage
was about 200,000 police officers and firefighters who had their own retirement systems.was about 200,000 police officers and firefighters who had their own retirement systems.42
• 1956
44

1956

Among other provisions, the Social Security Amendments of 1956 (P.L. 84-880) allowed certain Among other provisions, the Social Security Amendments of 1956 (P.L. 84-880) allowed certain
states to divide any state or local retirement system into two divisions: one division for the states to divide any state or local retirement system into two divisions: one division for the
positions of employees who want Social Security coverage and one division for the positions of positions of employees who want Social Security coverage and one division for the positions of
employees who do not want Social Security coverage. Each division may be treated as a separate employees who do not want Social Security coverage. Each division may be treated as a separate
retirement system.retirement system.4345 Under the 1956 amendments, eight states (Florida, Georgia, New York, Under the 1956 amendments, eight states (Florida, Georgia, New York,
North Dakota, Pennsylvania, Tennessee, Washington, and Wisconsin), the then-territory of North Dakota, Pennsylvania, Tennessee, Washington, and Wisconsin), the then-territory of
Hawaii, and their political subdivisions were permitted to operate Hawaii, and their political subdivisions were permitted to operate divided retirement systems in in
which some positions are covered by Social Security and some positions are not covered. When a which some positions are covered by Social Security and some positions are not covered. When a
divided retirement group votes to elect Social Security coverage, coverage is extended only to divided retirement group votes to elect Social Security coverage, coverage is extended only to
current employees who choose to participate in the Social Security system. Coverage is not current employees who choose to participate in the Social Security system. Coverage is not
extended to current employees who choose not to participate in Social Security. However, all extended to current employees who choose not to participate in Social Security. However, all
future employees in the group employees in the group’'s positions are covered by Social Security on a mandatory basis. s positions are covered by Social Security on a mandatory basis.
Under current law, 23 states are authorized to operate divided retirement systems.Under current law, 23 states are authorized to operate divided retirement systems.44
46 In addition, the 1956 amendments permitted police officers and firefighters covered under In addition, the 1956 amendments permitted police officers and firefighters covered under
retirement systems in five states to elect Social Security coverage (Florida, North Carolina, retirement systems in five states to elect Social Security coverage (Florida, North Carolina,
Oregon, South Carolina, and South Dakota).Oregon, South Carolina, and South Dakota).45
• 1983
47

1983

Before April 1983, states that elected Social Security coverage had the option to withdraw from Before April 1983, states that elected Social Security coverage had the option to withdraw from
the program. A state could terminate coverage for state and local groups provided the coverage the program. A state could terminate coverage for state and local groups provided the coverage
had been in effect for at least five years and written notice was given to the Secretary of Health had been in effect for at least five years and written notice was given to the Secretary of Health
and Human Services two years in advance.and Human Services two years in advance.4648 There was no requirement in the law that employees There was no requirement in the law that employees
~~be notified when a notice of termination had been filed or when coverage had been terminated.47~~

~~40 In a majority vote referendum, a majority of all the eligible employees covered by the retirement system (not a~~
~~majority of the eligible employees casting votes) must vote in favor of coverage.~~
~~41 Social Security Amendments of 1954, P.L. 83-761, §101(h) (Employees Covered by State or Local Retirement~~
~~Systems).~~
~~42 James E. Marquis, “Old-Age and Survivors Insurance: Coverage Under the 1954 Amendments,”~~ ~~Social Security~~
~~Bulletin, vol. 18, no. 1 (January 1955), p. 7, https://www.ssa.gov/policy/docs/ssb/v18n1/index.html.~~
~~43 Social Security Amendments of 1956, P.L. 84-880, §104(e) (Certain State and Local Employees).~~
~~44 Most recently, Kentucky and Louisiana were added to the list of states authorized to operate divided retirement~~
~~systems as part of the Social Security Protection Act of 2004 (P.L. 108-203, §416). The 23 states authorized to hold~~
~~divided vote referendums are listed in Section 218(d)(6)(C) of the Social Security Act (42 U.S.C. §418(d)(6)(C)). In~~
~~addition, under Section 218(g)(2) of the Social Security Act (42 U.S.C. §418(g)(2)), all interstate instrumentalities may~~
~~divide a retirement system based on whether the employees in positions under that system want coverage.~~
~~45 Social Security Amendments of 1956, P.L. 84-880, §104(g) (Policemen and Firemen in the States of Florida, North~~
~~Carolina, Oregon, South Carolina, and South Dakota).~~
~~46 At the time, SSA was part of the U.S. Department of Health and Human Services. The Social Security Independence~~
~~and Program Improvements Act of 1994 (P.L. 103-296) established SSA as an independent agency.~~
~~47 U.S. Congress, House Committee on Ways and Means, Social Security Act Amendments of 1983, report to~~
~~accompany H.R. 1900, 98th Cong., 1st sess., March 4, 1983, H. Rept. 98-25, Part 1, p. 18.~~
~~Congressional Research Service~~

9

~~Social Security Coverage of State and Local Government Employees~~

be notified when a notice of termination had been filed or when coverage had been terminated.⁴⁹ Among other provisions, the Social Security Amendments of 1983 (P.L. 98-21) prohibited states Among other provisions, the Social Security Amendments of 1983 (P.L. 98-21) prohibited states
from terminating coverage for state and local government employees if the termination had not from terminating coverage for state and local government employees if the termination had not
become effective before the date of enactment of the legislation (April 20, 1983).become effective before the date of enactment of the legislation (April 20, 1983).4850 The 1983 The 1983
amendments also allowed state and local groups whose coverage had already been terminated to amendments also allowed state and local groups whose coverage had already been terminated to
elect coverage again. Under prior law, groups whose coverage had been terminated were elect coverage again. Under prior law, groups whose coverage had been terminated were
prohibited from regaining coverage.prohibited from regaining coverage.49
51 The House report accompanying the 1983 legislation explains that the provision was in response The House report accompanying the 1983 legislation explains that the provision was in response
to an increase in the number of termination notices, attributed in part to the Social Security to an increase in the number of termination notices, attributed in part to the Social Security
~~system’~~system's financing problems in the late 1970s and early 1980s. The House report states:s financing problems in the late 1970s and early 1980s. The House report states:
~~The number of governments filing termination notices did increase in conjunction with~~
The number of governments filing termination notices did increase in conjunction with widespread concern about the financial conditions of social security that preceded the 1977 widespread concern about the financial conditions of social security that preceded the 1977
~~Amendments. While this rate of filing slowed down after the 1977 Amendments,~~
~~considerable acceleration in filing for terminations for State and local governments has~~
~~occurred since 1980, again in conjunction with widespread concern about the~~ Amendments. While this rate of filing slowed down after the 1977 Amendments, considerable acceleration in filing for terminations for State and local governments has occurred since 1980, again in conjunction with widespread concern about the financial financial
viability of the trust funds, and about the economy in general.viability of the trust funds, and about the economy in general.
During the five-year period from 1977 through 1981, when termination activity was greater During the five-year period from 1977 through 1981, when termination activity was greater
~~than in the previous ten years, coverage was terminated for 96,000 State and~~ than in the previous ten years, coverage was terminated for 96,000 State and local local
government employees; as of December, 1982 coverage had been terminated for 595 State government employees; as of December, 1982 coverage had been terminated for 595 State
~~entities employing 190,000 workers. In contrast, for the two-year period of~~ entities employing 190,000 workers. In contrast, for the two-year period of 1983-84, 1983-84,
terminations are pending for 634 State and local entities employing 227,000 workers.terminations are pending for 634 State and local entities employing 227,000 workers.
[The] Committee strongly feels that the ability to terminate coverage for State and local [The] Committee strongly feels that the ability to terminate coverage for State and local
government employees is inequitable both for the employees who lose coverage and for government employees is inequitable both for the employees who lose coverage and for
the vast majority of the nationthe vast majority of the nation’'s workforce who continue to pay into the system.s workforce who continue to pay into the system.50
52 In addition, the 1983 amendments mandated Social Security coverage for newly hired In addition, the 1983 amendments mandated Social Security coverage for newly hired federal
employees (i.e., those hired January 1, 1984, or later).employees (i.e., those hired January 1, 1984, or later).
• 1990

1990

Among other provisions, the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) made Among other provisions, the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508) made
Social Security coverage mandatory for most state and local government employees not covered Social Security coverage mandatory for most state and local government employees not covered
under public retirement systems. Students employed by their educational institutions were under public retirement systems. Students employed by their educational institutions were
excluded from mandatory coverage.excluded from mandatory coverage.5153 Coverage became effective for service performed after July Coverage became effective for service performed after July
1, 1991.1, 1991.52
• 1994
54

1994

Among other provisions, the Social Security Independence and Program Improvements Act of Among other provisions, the Social Security Independence and Program Improvements Act of
1994 (P.L. 103-2961994 (P.L. 103-296) gave all states the authority through their Section 218 Agreements to provide ~~) gave all states the authority through their Section 218 Agreements to provide~~

~~48 Social Security Amendments of 1983, P.L. 98-21, §103 (Duration of Agreements for Coverage of State and Local~~
~~Employees).~~
~~49 The State of California challenged the 1983 law prohibiting the termination of coverage on the basis that it deprived~~
~~states of contractual rights without just compensation, thus violating the Fifth Amendment of the Constitution. The U.S.~~
~~Supreme Court rejected California’s arguments and, on June 19, 1986, ruled that the provision was constitutional under~~
~~the authority of Congress to provide for the general welfare. Bowen v. Pub. Agencies Opposed to Social Security~~
~~Entrapments, 477 U.S. 41 (1986).~~
~~50 U.S. Congress, House Committee on Ways and Means, Social Security Act Amendments of 1983, report to~~
~~accompany H.R. 1900, 98th Cong., 1st sess., March 4, 1983, H. Rept. 98-25, Part 1, pp. 18-19.~~
~~51 Students employed by educational institutions operated by state or local governments may be covered by Social~~
~~Security under the terms of a state’s Section 218 Agreement with SSA.~~
~~52 Omnibus Budget Reconciliation Act of 1990, P.L. 101-508, §11332 (Coverage of Certain State and Local Employees~~
~~Under Social Security).~~
~~Congressional Research Service~~

10

~~link to page 16~~

~~Social Security Coverage of State and Local Government Employees~~

Social Security and Medicare coverage or Medicare-only coverage for police officer and Social Security and Medicare coverage or Medicare-only coverage for police officer and
firefighter positions already covered under retirement systems (effective August 16, 1994). With firefighter positions already covered under retirement systems (effective August 16, 1994). With
congressional authorization in place, states could begin modifying the language of their Section congressional authorization in place, states could begin modifying the language of their Section
218 Agreements and begin holding referendums to extend coverage to these positions.218 Agreements and begin holding referendums to extend coverage to these positions.
Social Security Coverage by State
Data from SSA shows that there were Data from SSA shows that there were ~~nearly 21~~more than 22.9 million state and local government employees .9 million state and local government employees
in the United States in in the United States in ~~2021~~2023. The majority of these workers had Social Security coverage based . The majority of these workers had Social Security coverage based
on their state and local government employment. Specifically, 73% of state and local government on their state and local government employment. Specifically, 73% of state and local government
employees (about employees (about ~~15.9~~16.7 million workers) had Social Security coverage. The remaining 27% (about million workers) had Social Security coverage. The remaining 27% (about
~~5.9~~6.3 million workers) did not have Social Security coverage. million workers) did not have Social Security coverage.5355 The largest share of noncovered The largest share of noncovered
state and local government employees work at the local level, and most noncovered local state and local government employees work at the local level, and most noncovered local
government employees are police officers, firefighters, and teachers.government employees are police officers, firefighters, and teachers.54
56 As shown inAs shown in Figure 2, the share of state and local government employees the share of state and local government employees ~~with~~without Social Security Social Security
coverage in coverage in ~~2021~~2023 varied widely by state, ranging from 2. varied widely by state, ranging from 2.~~5% in Massachusetts and Ohio~~9% in Oregon to 97. to 97.7%
~~in Vermont.~~
5% in Ohio.⁵⁷

Figure 2. Share of State and Local Government Employees Not Covered by Social
~~Security, 2021~~

~~Source:~~Security, 2023 Source: Data from the Social Security Administration obtained by CRS in February Data from the Social Security Administration obtained by CRS in February ~~2024.~~

~~53 These workers did not have Social Security coverage based on their state and local government employment. In some~~
~~cases, they may have Social Security coverage based on other employment, or they may have a family connection to a~~
~~Social Security–covered worker that makes them potentially eligible for Social Security spousal benefits, for example.~~
~~54 IRS Publication 963, p. 1.~~
~~Congressional Research Service~~

11

~~link to page 17~~ ~~Social Security Coverage of State and Local Government Employees~~

2026. The following statistics are based on the data shown The following statistics are based on the data shown inin Table 1.
• In 27 statesIn 27 states and Puerto Rico, 90.0% or more of state and local government employees had Social , 90.0% or more of state and local government employees had Social
Security coverage.Security coverage.
• 58 In eight states, fewer than 50.0% of state and local government employees had In eight states, fewer than 50.0% of state and local government employees had
Social Security coverage (Social Security coverage (~~Massachusetts, Ohio, Nevada~~Alaska, California, Colorado, Louisiana, , Louisiana, ~~Colorado,~~
~~California, Texas, and Alaska).~~
• Massachusetts, Nevada, Ohio, and Texas). Eight states accounted for Eight states accounted for ~~over~~ three-fourths (three-fourths (7675%) of noncovered state and local %) of noncovered state and local
government employees (government employees (from ~~largest to smallest~~most to least: California, Texas, Ohio, California, Texas, Ohio,
Massachusetts, Illinois, Colorado, Louisiana, and Georgia).Massachusetts, Illinois, Colorado, Louisiana, and Georgia).
• Three states accounted for almost half (49%) of noncovered state and local Three states accounted for almost half (49%) of noncovered state and local
government employees (California, Texas, and Ohio).government employees (California, Texas, and Ohio).
Table 1. Social Security Coverage of State and Local Government Employees, by
~~State, in 2021~~
~~State and~~
~~Noncovered Workers: State~~
~~Local~~
State, in 2023

State and Local Government Employees

Covered Workers: State and
~~and Local Government~~
~~Government~~
Local Government Employees With Social Security Coverage Noncovered Workers: State and Local Government Employees
~~Employees~~ Without Social
Security Coverage

State

Number

Percentage

Number

Percentage

Alabama

369,300

341,200

.3%

28,100

.6%

Alaska

75,400

35,100

.5%

40,300

.4%

Arizona

342,900

324,700

.6%

18,200

.3%

Arkansas

190,400

173,000

.8%

17,400

.1%

California

2,165,100

1,008,500

.5%

1,156,600

.4%

Colorado

488,300

144,700

.6%

343,600

.3%

Connecticut

263,200

192,700

.2%

70,500

.7%

Delaware

64,200

62,100

.7%

2,100

.2%

~~Employees~~
~~With Social Security Coverage~~
~~Security Coverage~~
~~State~~
~~Number~~
~~Number~~
~~Percentage~~
~~Number~~
~~Percentage~~
~~Alabama~~
~~357,000~~
~~331,400~~
~~92.8%~~
~~25,600~~
~~7.1%~~
~~Alaska~~
~~74,500~~
~~33,900~~
~~45.5%~~
~~40,600~~
~~54.4%~~
~~Arizona~~
~~325,900~~
~~310,800~~
~~95.3%~~
~~15,100~~
~~4.6%~~
~~Arkansas~~
~~183,400~~
~~168,500~~
~~91.8%~~
~~14,900~~
~~8.1%~~
~~California~~
~~2,036,800~~
~~933,000~~
~~45.8%~~
~~1,103,800~~
~~54.1%~~
~~Colorado~~
~~458,400~~
~~132,800~~
~~28.9%~~
~~325,600~~
~~71.0%~~
~~Connecticut~~
~~247,600~~
~~178,200~~
~~71.9%~~
~~69,400~~
~~28.0%~~
~~Delaware~~
~~59,700~~
~~57,300~~
~~95.9%~~
~~2,400~~
~~4.0%~~
~~District of~~
~~Columbia~~
~~75,000~~
~~60,300~~
~~80.4%~~
~~14,700~~
~~19.6%~~
~~Florida~~
~~1,081,200~~
~~963,200~~
~~89.0%~~
~~118,000~~
~~10.9%~~
~~Georgia~~
~~639,400~~
~~462,800~~
~~72.3%~~
~~176,600~~
~~27.6%~~
~~Hawaii~~
~~103,600~~
~~80,000~~
~~77.2%~~
~~23,600~~
~~22.7%~~
~~Idaho~~
~~143,000~~
~~137,800~~
~~96.3%~~
~~5,200~~
~~3.6%~~
~~Il inois~~
~~872,000~~
~~475,600~~
~~54.5%~~
~~396,400~~
~~45.4%~~
~~Indiana~~
~~461,600~~
~~411,800~~
~~89.2%~~
~~49,800~~
~~10.7%~~
~~Iowa~~
~~285,300~~
~~261,300~~
~~91.5%~~
~~24,000~~
~~8.4%~~
~~Kansas~~
~~288,300~~
~~267,600~~
~~92.8%~~
~~20,700~~
~~7.1%~~
~~Kentucky~~
~~330,700~~
~~272,100~~
~~82.2%~~
~~58,600~~
~~17.7%~~
~~Louisiana~~
~~279,700~~
~~69,200~~
~~24.7%~~
~~210,500~~
~~75.2%~~
~~Maine~~
~~95,200~~
~~51,100~~
~~53.6%~~
~~44,100~~
~~46.3%~~
~~Maryland~~
~~498,500~~
~~468,300~~
~~93.9%~~
~~30,200~~
~~6.0%~~
~~Congressional Research Service~~

12

~~link to page 19~~ ~~Social Security Coverage of State and Local Government Employees~~

~~State and~~
~~Noncovered Workers: State~~
~~Local~~
~~Covered Workers: State and~~
~~and Local Government~~
~~Government~~
~~Local Government Employees~~
Employees Without Social

~~Employees~~
~~With Social Security Coverage~~
~~Security Coverage~~
~~State~~
~~Number~~
~~Number~~
~~Percentage~~
~~Number~~
~~Percentage~~
~~Massachusetts~~
~~482,600~~
~~12,500~~
~~2.5%~~
~~470,100~~
~~97.4%~~
~~Michigan~~
~~607,900~~
~~545,800~~
~~89.7%~~
~~62,100~~
~~10.2%~~
~~Minnesota~~
~~447,500~~
~~417,000~~
~~93.1%~~
~~30,500~~
~~6.8%~~
~~Mississippi~~
~~243,900~~
~~229,800~~
~~94.2%~~
~~14,100~~
~~5.7%~~
~~Missouri~~
~~434,900~~
~~329,800~~
~~75.8%~~
~~105,100~~
~~24.1%~~
~~Montana~~
~~96,100~~
~~85,900~~
~~89.3%~~
~~10,200~~
~~10.6%~~
~~Nebraska~~
~~147,300~~
~~140,800~~
~~95.5%~~
~~6,500~~
~~4.4%~~
~~Nevada~~
~~153,900~~
~~17,500~~
~~11.3%~~
~~136,400~~
~~88.6%~~
~~New~~
~~Hampshire~~
~~99,500~~
~~88,500~~
~~88.9%~~
~~11,000~~
~~11.0%~~
~~New Jersey~~
~~612,500~~
~~560,400~~
~~91.4%~~
~~52,100~~
~~8.5%~~
~~New Mexico~~
~~183,200~~
~~164,900~~
~~90.0%~~
~~18,300~~
~~9.9%~~
~~New York~~
~~1,646,200~~
~~1,579,000~~
~~95.9%~~
~~67,200~~
~~4.0%~~
~~North~~
~~Carolina~~
~~628,200~~
~~585,000~~
~~93.1%~~
~~43,200~~
~~6.8%~~
~~North Dakota~~
~~81,100~~
~~73,200~~
~~90.2%~~
~~7,900~~
~~9.7%~~
~~Ohio~~
~~753,200~~
~~18,900~~
~~2.5%~~
~~734,300~~
~~97.4%~~
~~Oklahoma~~
~~235,700~~
~~225,200~~
~~95.5%~~
~~10,500~~
~~4.4%~~
~~Oregon~~
~~265,600~~
~~258,700~~
~~97.4%~~
~~6,900~~
~~2.5%~~
~~Pennsylvania~~
~~691,100~~
~~643,400~~
~~93.0%~~
~~47,700~~
~~6.9%~~
~~Puerto Rico~~
~~173,600~~
~~151,700~~
~~87.3%~~
~~21,900~~
~~12.6%~~
~~Rhode Island~~
~~49,800~~
~~43,400~~
~~87.1%~~
~~6,400~~
~~12.8%~~
~~South Carolina~~
~~298,900~~
~~279,000~~
~~93.3%~~
~~19,900~~
~~6.6%~~
~~South Dakota~~
~~81,200~~
~~75,700~~
~~93.2%~~
~~5,500~~
~~6.7%~~
~~Tennessee~~
~~460,500~~
~~424,800~~
~~92.2%~~
~~35,700~~
~~7.7%~~
~~Texas~~
~~1,984,200~~
~~934,200~~
~~47.0%~~
~~1,050,000~~
~~52.9%~~
~~Utah~~
~~266,700~~
~~239,100~~
~~89.6%~~
~~27,600~~
~~10.3%~~
~~Vermont~~
~~40,600~~
~~39,700~~
~~97.7%~~
~~900~~
~~2.2%~~
~~Virginia~~
~~671,600~~
~~627,100~~
~~93.3%~~
~~44,500~~
~~6.6%~~
~~Washington~~
~~521,900~~
~~483,600~~
~~92.6%~~
~~38,300~~
~~7.3%~~
~~West Virginia~~
~~109,700~~
~~102,600~~
~~93.5%~~
~~7,100~~
~~6.4%~~
~~Wisconsin~~
~~407,900~~
~~366,400~~
~~89.8%~~
~~41,500~~
~~10.1%~~
~~Wyoming~~
~~77,000~~
~~71,100~~
~~92.3%~~
~~5,900~~
~~7.6%~~
~~Othera~~
~~7,500~~
~~800~~
~~10.6%~~
~~6,700~~
~~89.3%~~
~~Total~~
~~21,858,300~~
~~15,942,500~~
~~72.9%~~
~~5,915,800~~
~~27.0%~~
~~Congressional Research Service~~

13

~~Social Security Coverage of State and Local Government Employees~~

Source: Data from the Social Security Administration obtained by CRS in February 2024.
Notes: Percentages may not sum to 100% due to rounding.
~~a. Includes people employed by American Samoa, Guam, Northern Mariana Islands, and U.S. Virgin Islands.~~
~~Mandatory Coverage Proposals~~
District of Columbia

81,900

66,400

.0%

15,500

.9%

Florida

1,121,800

992,900

.5%

128,900

.4%

Georgia

663,100

475,000

.6%

188,100

.3%

Hawaii

106,500

82,500

.4%

24,000

.5%

Idaho

153,200

146,500

.6%

6,700

.3%

Illinois

924,700

509,500

.0%

415,200

.9%

Indiana

484,900

432,200

.1%

52,700

.8%

Iowa

298,900

270,900

.6%

28,000

.3%

Kansas

293,700

272,200

.6%

21,500

.3%

Kentucky

351,200

261,500

.4%

89,700

.5%

Louisiana

282,900

76,200

.9%

206,700

.0%

Maine

97,800

53,900

.1%

43,900

.8%

Maryland

526,900

495,600

.0%

31,300

.9%

Massachusetts

515,400

15,200

.9%

500,200

.0%

Michigan

643,000

569,900

.6%

73,100

.3%

Minnesota

468,600

436,600

.1%

32,000

.8%

Mississippi

245,700

228,800

.1%

16,900

.8%

Missouri

445,300

339,800

.3%

105,500

.6%

Montana

96,600

87,900

.9%

8,700

.0%

Nebraska

151,700

145,600

.9%

6,100

.0%

Nevada

167,400

21,000

.5%

146,400

.4%

New Hampshire

98,600

87,000

.2%

11,600

.7%

New Jersey

643,400

584,600

.8%

58,800

.1%

New Mexico

202,100

181,800

.9%

20,300

.0%

New York

1,727,400

1,654,800

.7%

72,600

.2%

North Carolina

658,400

610,900

.7%

47,500

.2%

North Dakota

82,300

73,900

.7%

8,400

.2%

Ohio

800,500

19,800

.4%

780,700

.5%

Oklahoma

249,900

238,000

.2%

11,900

.7%

Oregon

278,900

270,800

.0%

8,100

.9%

Pennsylvania

703,500

654,100

.9%

49,400

.0%

Puerto Rico

175,900

172,800

.2%

3,100

.7%

Rhode Island

49,300

43,500

.2%

5,800

.7%

South Carolina

304,900

283,200

.8%

21,700

.1%

South Dakota

84,800

78,900

.0%

5,900

.9%

Tennessee

477,600

435,300

.1%

42,300

.8%

Texas

2,095,600

987,300

.1%

1,108,300

.8%

Utah

285,300

256,800

.0%

28,500

.9%

Vermont

42,400

(X)

Virginia

704,100

657,300

.3%

46,800

.6%

Washington

552,600

509,800

.2%

42,800

.7%

West Virginia

112,700

104,400

.6%

8,300

.3%

Wisconsin

426,300

373,700

.6%

52,600

.3%

Wyoming

77,800

72,700

.4%

5,100

.5%

Other^a

9,100

(X)

Total

22,923,400

16,658,900

.6%

6,264,500

.3%

Source: Data from the Social Security Administration obtained by CRS in February 2026.

Notes: Percentages may not sum to 100% due to rounding. An (X) indicates that the value has been suppressed to prevent data disclosure.

a. Includes people employed by American Samoa, Guam, Northern Mariana Islands, and U.S. Virgin Islands. Mandatory Coverage Proposals Over the years, there have been proposals to make Social Security coverage mandatory for newly Over the years, there have been proposals to make Social Security coverage mandatory for newly
hired state and local government employees. Generally, such proposals are consistent with actions hired state and local government employees. Generally, such proposals are consistent with actions
taken by Congress to expand Social Security (and Medicare) coverage. As outlined above, in taken by Congress to expand Social Security (and Medicare) coverage. As outlined above, in
1983, Congress mandated Social Security coverage for newly hired 1983, Congress mandated Social Security coverage for newly hired federal employees, and employees, and
Congress prohibited states from terminating coverage for state and local government employees Congress prohibited states from terminating coverage for state and local government employees
once it had been elected. In 1986, Congress mandated Medicare coverage for newly hired state once it had been elected. In 1986, Congress mandated Medicare coverage for newly hired state
and local government employees. In 1990, Congress mandated Social Security coverage for most and local government employees. In 1990, Congress mandated Social Security coverage for most
state and local government employees who are not covered under public retirement systems.state and local government employees who are not covered under public retirement systems.
Mandatory Social Security coverage for newly hired state and local government employees has Mandatory Social Security coverage for newly hired state and local government employees has
been proposed in a variety of contexts, ranging from the recommendations of presidential been proposed in a variety of contexts, ranging from the recommendations of presidential
commissions to legislation introduced by Members of Congress. In 2010, for example, President commissions to legislation introduced by Members of Congress. In 2010, for example, President
Barack Obama established the National Commission on Fiscal Responsibility and Reform.Barack Obama established the National Commission on Fiscal Responsibility and Reform.5559 The The
commission (also known as the commission (also known as the “"Fiscal CommissionFiscal Commission”" or the or the “"Simpson-Bowles CommissionSimpson-Bowles Commission”
" after co-chairs Alan Simpson and Erskine Bowles) was directed to make recommendations to after co-chairs Alan Simpson and Erskine Bowles) was directed to make recommendations to
improve the nationimprove the nation’'s fiscal outlook. In its final report, the commission included a number of s fiscal outlook. In its final report, the commission included a number of
recommendations that would have had a direct effect on Social Security tax revenues and recommendations that would have had a direct effect on Social Security tax revenues and
benefits. Among other provisions, the commission recommended that newly hired state and local benefits. Among other provisions, the commission recommended that newly hired state and local
government employees be covered under the Social Security system. The commission noted that, government employees be covered under the Social Security system. The commission noted that,
as states face prolonged fiscal challenges and an aging workforce, maintaining separate as states face prolonged fiscal challenges and an aging workforce, maintaining separate
retirement systems outside of Social Security could pose risks for plan sponsors and participants. retirement systems outside of Social Security could pose risks for plan sponsors and participants.
In the commissionIn the commission’'s view, mandatory Social Security coverage could mitigate these risks, as well s view, mandatory Social Security coverage could mitigate these risks, as well
as a potential future bailout risk for the federal government.as a potential future bailout risk for the federal government.56
60 In another example, Senator Bob Corker and Senator Lamar Alexander introduced the Fiscal In another example, Senator Bob Corker and Senator Lamar Alexander introduced the Fiscal
Sustainability Act of 2013 (S. 11Sustainability Act of 2013 (S. 11, 113^th~~, 113th~~ Congress). Among other provisions, the legislation would Congress). Among other provisions, the legislation would
have made Social Security coverage mandatory for newly hired state and local government have made Social Security coverage mandatory for newly hired state and local government
employees starting in 2021. There was no congressional action on the measure.employees starting in 2021. There was no congressional action on the measure.
Issues Surrounding Mandatory Coverage
Proposals to mandate Social Security coverage for newly hired state and local government Proposals to mandate Social Security coverage for newly hired state and local government
employees have been part of the Social Security policy debate for years. Such proposals draw employees have been part of the Social Security policy debate for years. Such proposals draw
strong support and opposition from stakeholders. There are a number of issues to consider with strong support and opposition from stakeholders. There are a number of issues to consider with
respect to mandatory coverage for newly hired state and local government employees. This respect to mandatory coverage for newly hired state and local government employees. This
section highlights some of the major issues:section highlights some of the major issues:
• projected effect on the Social Security trust funds;projected effect on the Social Security trust funds;
•

projected effect on federal revenues;

comparability of noncovered pensions and Social Security benefits;

Social Security benefits for individuals with noncovered earnings;

~~projected effect on federal revenues;~~

~~55 Executive Order 13531, “National Commission on Fiscal Responsibility and Reform,” 75 Federal Register 7927,~~
~~February 18, 2010, https://www.federalregister.gov/documents/2010/02/23/2010-3725/national-commission-on-fiscal-~~
~~responsibility-and-reform.~~
~~56 The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, December 1, 2010,~~
~~p. 52, https://www.ssa.gov/history/reports/ObamaFiscal/TheMomentofTruth12_1_2010.pdf.~~
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~~• comparability of noncovered pensions and Social Security benefits;~~
~~• Social Security Windfall Elimination Provision (WEP) and Government Pension~~
~~Offset (GPO);~~
~~• special considerations for certain occupational groups (such as police officers and~~
~~firefighters);~~
• special considerations for certain occupational groups (such as police officers and firefighters); Social Security protections for workers and family members (disability insurance Social Security protections for workers and family members (disability insurance
protection, portability, benefits for dependents and survivors, cost-of-living protection, portability, benefits for dependents and survivors, cost-of-living
adjustments (COLAs), progressive benefit formula); andadjustments (COLAs), progressive benefit formula); and
• effect on state and local plans (administrative and cost issues, funding status of effect on state and local plans (administrative and cost issues, funding status of
state and local plans).state and local plans).
Projected Effect on the Social Security Trust Funds
Under current law, the Social Security system is facing a projected funding shortfall. The Social Under current law, the Social Security system is facing a projected funding shortfall. The Social
Security trust funds are projected to be unable to pay full scheduled benefits in a timely manner in Security trust funds are projected to be unable to pay full scheduled benefits in a timely manner in
less than two decades. In its less than two decades. In its ~~2023~~2025 Annual Report, the Social Security Board of Trustees projects Annual Report, the Social Security Board of Trustees projects
that, based on its intermediate assumptions, program costs will exceed income by about that, based on its intermediate assumptions, program costs will exceed income by about 2628% on % on
average over the next 75-year period.average over the next 75-year period.57
61 When considering Social Security policy changes, lawmakers take into account many factors, When considering Social Security policy changes, lawmakers take into account many factors,
including the proposalincluding the proposal’'s projected effect on the Social Security trust funds. SSAs projected effect on the Social Security trust funds. SSA’'s Office of the s Office of the
Chief Actuary (OCACT) projects that mandatory Social Security coverage for newly hired state Chief Actuary (OCACT) projects that mandatory Social Security coverage for newly hired state
and local government employees would have a net positive effect on the Social Security trust and local government employees would have a net positive effect on the Social Security trust
funds on average over the next 75-year period. OCACT projects that the policy change would funds on average over the next 75-year period. OCACT projects that the policy change would
close 4% of the systemclose 4% of the system’'s projected long-range funding shortfall (based on the intermediate s projected long-range funding shortfall (based on the intermediate
assumptions of the assumptions of the ~~2023~~2025 Trustees Report). Trustees Report).58
62 Projected Effect on Federal Revenues
Social Security operates with a trust fund financing mechanism. As required by law, the Social Social Security operates with a trust fund financing mechanism. As required by law, the Social
Security payroll taxes paid by covered workers and their employers are (1) Security payroll taxes paid by covered workers and their employers are (1) deposited into the into the
General Fund of the U.S. Treasury, where they are available for spending on general government General Fund of the U.S. Treasury, where they are available for spending on general government
operations, and (2) operations, and (2) credited to the Social Security trust funds in the form of special-issue U.S. to the Social Security trust funds in the form of special-issue U.S.
Treasury securities. The holdings of the Social Security trust funds represent the amount of Treasury securities. The holdings of the Social Security trust funds represent the amount of
money the U.S. Treasurymoney the U.S. Treasury’'s General Fund owes to the Social Security trust funds. There is no s General Fund owes to the Social Security trust funds. There is no
separate pool of cash set aside for Social Security purposes.separate pool of cash set aside for Social Security purposes.59
63 Work that is not covered by Social Security represents foregone payroll tax revenues to the Work that is not covered by Social Security represents foregone payroll tax revenues to the
federal government. A Congressional Budget Office (CBO) report on options for reducing federal federal government. A Congressional Budget Office (CBO) report on options for reducing federal
budget deficits includes the option of making Social Security coverage mandatory for state and budget deficits includes the option of making Social Security coverage mandatory for state and
local government employees hired after December 31, local government employees hired after December 31, ~~2022~~2024. Revenue estimates for this option show that it would generate $148.8 billion in revenues over 10 years (FY2025-FY2034).⁶⁴ This ~~. Revenue estimates for this option~~

57 ~~The 2023 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal~~
~~Disability Insurance Trust Funds, March 31, 2023, https://www.ssa.gov/oact/TR/2023/index.html. See Table IV.B5~~
~~(page 72) for the projected difference between the summarized income rate and summarized cost rate for OASDI under~~
~~the intermediate assumptions for the period 2023-2097. For more information on the projected financial outlook for the~~
~~Social Security program, see CRS In Focus IF10522, Social Security’s Funding Shortfall.~~
~~58 OCACT, Proposed Provision F1: Starting in 2024, Cover Newly Hired State and Local Government Employees,~~
~~https://www.ssa.gov/OACT/solvency/provisions/charts/chart_run186.html.~~
~~59 For more information, see CRS In Focus IF10564, Social Security Trust Fund Investment Practices.~~
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~~show that it would generate $131.5 billion in revenues over 10 years (FY2023-FY2032).60 This~~
option would have little effect on Social Security spending in the short-term because most state option would have little effect on Social Security spending in the short-term because most state
and local government employees who would be hired during this period would not begin and local government employees who would be hired during this period would not begin
receiving benefits for many years. Therefore, the estimates do not include any effects on outlays. receiving benefits for many years. Therefore, the estimates do not include any effects on outlays.
However, beyond the 10-year window, an increase in Social Security spending would partly However, beyond the 10-year window, an increase in Social Security spending would partly
offset the additional revenues generated by newly covered state and local government employees.offset the additional revenues generated by newly covered state and local government employees.
Comparability of Noncovered Pensions and Social Security
To qualify as an alternative to Social Security, public retirement systems must provide To qualify as an alternative to Social Security, public retirement systems must provide
noncovered workers with a minimum level of benefits. In general, they must provide retirement noncovered workers with a minimum level of benefits. In general, they must provide retirement
benefits that are comparable to Social Security retirement benefits. To help plans determine if benefits that are comparable to Social Security retirement benefits. To help plans determine if
they are in compliance with the minimum standards needed to qualify as an alternative to Social they are in compliance with the minimum standards needed to qualify as an alternative to Social
Security, the IRS has established safe harbor provisions (design parameters) for defined benefit Security, the IRS has established safe harbor provisions (design parameters) for defined benefit
plans and defined contribution plans. Safe harbor designs are outlined in IRS Employment Tax plans and defined contribution plans. Safe harbor designs are outlined in IRS Employment Tax
Regulations and IRS Revenue Procedure 91-40.Regulations and IRS Revenue Procedure 91-40.61
~~A recent~~65 A 2021 study by the Center for Retirement Research at Boston College (CRR) looked at whether study by the Center for Retirement Research at Boston College (CRR) looked at whether
state and local pension plans currently satisfy these standards, given that many public pensions state and local pension plans currently satisfy these standards, given that many public pensions
have grown less generous in recent years and a few plans could exhaust their assets.have grown less generous in recent years and a few plans could exhaust their assets.6266 The CRR The CRR
researchers used Social Security coverage data from surveys of plan administrators and benefit researchers used Social Security coverage data from surveys of plan administrators and benefit
data from plan actuarial valuation reports. Based on the 12 states in the sample, the CRR study data from plan actuarial valuation reports. Based on the 12 states in the sample, the CRR study
found that virtually all plans satisfy the safe harbor requirements and that participation in a safe found that virtually all plans satisfy the safe harbor requirements and that participation in a safe
harbor plan produces about the same level of benefits at age 67 as Social Security.harbor plan produces about the same level of benefits at age 67 as Social Security.63
67 The CRR researchers also compared the value of The CRR researchers also compared the value of lifetime benefits. They looked at whether state benefits. They looked at whether state
and local pension plans for noncovered employees provide Social Security–equivalent resources and local pension plans for noncovered employees provide Social Security–equivalent resources
throughout retirement, given differences in public pensions and Social Security that affect throughout retirement, given differences in public pensions and Social Security that affect
lifetime retirement resources. For example, the CRR researchers point out that state and local lifetime retirement resources. For example, the CRR researchers point out that state and local
plans often set long vesting plans often set long vesting ~~periods64~~periods⁶⁸ and are increasingly unlikely to grant full COLAs after and are increasingly unlikely to grant full COLAs after
retirement. On the other hand, they allow members to collect full benefits at much younger ages retirement. On the other hand, they allow members to collect full benefits at much younger ages
than Social Security.than Social Security.65
69 Accounting for those differences, the CRR study found that Accounting for those differences, the CRR study found that “"a significant portion of noncovered a significant portion of noncovered
state and local plans fall short of Social Security for some of their members, with the extent of the state and local plans fall short of Social Security for some of their members, with the extent of the
shortfall depending on workersshortfall depending on workers’' characteristics and specific benefit plan designs. Moreover, underfunding and the possibility of a few plans exhausting their trust fund assets reinforce the findings regarding benefit generosity."⁷⁰ At the same time, the study acknowledges that Social Security also faces projected funding shortfalls, which can complicate comparisons of benefit generosity. With respect to ensuring Social Security–equivalent protections for all state and local government employees, the CRR researchers note that one option would be to update the safe harbor requirements for defined benefit plans to specify "reasonable" vesting periods and provide full COLAs. Another option would be to bring all state and local government employees into the Social Security system.⁷¹ Social Security Benefits for Individuals with Noncovered Earnings

The current-law Social Security benefit formula may provide unintended overgenerous benefits to individuals who had earnings from jobs not covered under Social Security. Workers with limited Social Security-covered earnings but substantial noncovered earnings usually (1) qualify for a pension based on noncovered earnings (also known as a noncovered pension) and (2) appear to be low earners or dependents (e.g., spouses or widow[er]s) under the Social Security system. (Noncovered earnings are shown as zeros in Social Security-covered earnings records.) Because the Social Security benefit formula is progressive, it can provide likely unintended overgenerous benefits to many workers who have substantial noncovered earnings.

In the past, the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) were two separate provisions that intended to approximately remove these "overgenerous" benefits to beneficiaries who were also entitled to a noncovered pension. That is, the provisions were designed to place Social Security beneficiaries who had some noncovered earnings in approximately the same position they would have been in had all their earnings been covered by the program. Beginning in January 2024, the WEP and GPO reductions are no longer applied to Social Security benefits.⁷² Approximately two-thirds of WEP and GPO cases involved former state and local government employees.⁷³ Mandatory Social Security coverage for newly hired state and local government employees would eventually eliminate these benefit advantages.

Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)

The Social Security program used to include two provisions that affected beneficiaries who received pensions from work that was not covered by Social Security: the WEP and GPO ~~characteristics and specific benefit plan designs. Moreover,~~

~~60 CBO, Options for Reducing the Deficit: 2023 to 2032, Volume II: Smaller Reductions, December 2022,~~
~~https://www.cbo.gov/budget-options/58700.~~
~~61 See Section 31.3121(b)(7)-2(e) of the IRS Employment Tax Regulations at https://www.ecfr.gov/current/title-26/~~
~~chapter-I/subchapter-C/part-31/subpart-B/subject-group-ECFR996050e2e4c4937/section-31.3121(b)(7)-2#p-~~
~~31.3121(b)(7)-2(e). See IRS Revenue Procedure 91-40 at https://www.ssa.gov/slge/revenue_procedure_91-40.htm. For~~
~~example, IRS Revenue Procedure 91-40 outlines a set of safe harbor formulas for defined benefit retirement systems.~~
~~Benefits calculated under one of these formulas are deemed to meet the minimum retirement benefit requirement. In~~
~~addition, procedures are set out by which an employer may determine whether retirement benefits calculated under~~
~~other formulas meet the minimum retirement benefit requirement of the regulations with respect to an employee.~~
~~62 Laura D. Quinby, Jean-Pierre Aubry, and Alicia H. Munnell, “Do Public Workers Without Social Security Get~~
~~Comparable Benefits?,” CRR, April 2021, https://crr.bc.edu/briefs/do-public-workers-without-social-security-get-~~
~~comparable-benefits/. The analysis and findings discussed in this CRR brief are in relation to new hires in defined~~
~~benefit plans. Most state and local government employees are covered by traditional defined benefit plans.~~
~~63 Quinby, Aubry, and Munnell, “Do Public Workers Without Social Security Get Comparable Benefits?,” p. 2.~~
~~64 A vesting period is the minimum period an employee is required to work to be eligible for a future retirement benefit.~~
~~65 Quinby, Aubry, and Munnell, “Do Public Workers Without Social Security Get Comparable Benefits?,” p. 4.~~
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~~underfunding and the possibility of a few plans exhausting their trust fund assets reinforce the~~
~~findings regarding benefit generosity.”66 At the same time, the study acknowledges that Social~~
~~Security also faces projected funding shortfalls, which can complicate comparisons of benefit~~
~~generosity. With respect to ensuring Social Security–equivalent protections for all state and local~~
~~government employees, the CRR researchers note that one option would be to update the safe~~
~~harbor requirements for defined benefit plans to specify “reasonable” vesting periods and provide~~
~~full COLAs. Another option would be to bring all state and local government employees into the~~
~~Social Security system.67~~
~~Windfall Elimination Provision and Government Pension Offset~~
~~The Social Security program includes two provisions that affect beneficiaries who receive~~
~~pensions from work that was not covered by Social Security: the Windfall Elimination Provision~~
~~(WEP) and the Government Pension Offset (GPO)~~. These provisions were enacted by Congress . These provisions were enacted by Congress
to address equity issues created by the exclusion of to address equity issues created by the exclusion of workers from Social Security coverage (e.g., some state and local government employeessome state and local government employees
~~from Social Security coverage~~). The WEP, which was enacted in 1983, . The WEP, which was enacted in 1983, ~~affects~~affected the Social Security the Social Security
benefits that a person benefits that a person ~~receives~~received based on his or her own work record (as a retired or disabled based on his or her own work record (as a retired or disabled
worker) as well as the benefits paid to his or her eligible family members. The GPO, which was worker) as well as the benefits paid to his or her eligible family members. The GPO, which was
enacted in 1977 and modified in 1983, enacted in 1977 and modified in 1983, ~~affects~~affected the Social Security benefits that a person the Social Security benefits that a person ~~receives~~
received as the spouse or surviving spouse of a Social Securityas the spouse or surviving spouse of a Social Security–-covered worker.⁷⁴ The Social Security Fairness Act of 2023 (SSFA, P.L. 118-273), signed into law on January 5, 2025, repealed both provisions for monthly benefits payable after December 2023.

From 1984 to 2023, the WEP reduced Social Security benefits of certain retired or disabled workers (and their family members) who were also entitled to pension benefits based on earnings from noncovered jobs (including certain foreign pensions). The Social Security benefit formula is intended to help workers who spend their careers in low-paying jobs by providing them with relatively higher benefits in relation to their career-average earnings in covered employment than the benefits for workers with high career-average earnings. However, the formula could not differentiate between those who worked in low-paid jobs throughout their careers and other workers who appeared to have been low paid because they worked many years in jobs not covered by Social Security. The WEP was aimed to remove this windfall that these latter beneficiaries would otherwise have received from Social Security.

From 1977 to 2023, the GPO adjusted the Social Security spousal or widow(er) benefits of most people who also received federal, state, or local government pensions based on earnings not covered by Social Security. The GPO was intended to replicate the dual entitlement rule for beneficiaries whose entire careers were covered by the program~~covered worker.68~~
~~Windfall Elimination Provision (WEP)~~
~~The WEP affects people who have worked in both covered and noncovered employment. If a~~
~~person is receiving a pension from noncovered employment, his or her Social Security benefits~~
~~are subject to reduction under the WEP if he or she has fewer than 30 years of substantial~~
~~earnings in covered employment.69 Under the WEP, the worker’s Social Security benefits are~~
~~computed using an alternative benefit formula (the “windfall formula”) rather than the regular~~
~~benefit formula. The windfall formula results in a lower initial monthly benefit. The amount of~~
~~the reduction in the initial monthly benefit is limited to one-half the monthly amount of the~~
~~worker’s noncovered pension.~~
~~The regular benefit formula has a progressive structure intended to help workers with long careers~~
~~in covered employment at lower wages. That is, compared to higher earners, lower-wage workers~~
~~receive initial monthly benefits that replace a larger percentage of their career-average earnings.70~~

~~66 Quinby, Aubry, and Munnell, “Do Public Workers Without Social Security Get Comparable Benefits?,” p. 4. CRR~~
~~published another two related studies thereafter. One study found that medium-tenure workers (6 to 20 years of tenure)~~
~~who spent the early part of their career in noncovered government employment were at most risk, representing about~~
~~16% of noncovered public workers (or between 750,000 to 1 million annually). See Jean-Pierre Aubry et al., “What~~
~~Share of Noncovered Public Employees Will Earn Benefits that Fall Short of Social Security?,” CRR, April 2022,~~
~~https://crr.bc.edu/wp-content/uploads/2022/04/wp_2022-4.pdf. The other study using four different datasets found that~~
~~around one-third of noncovered workers fell into the medium-tenure group. See Jean-Pierre Aubry et al., “How Many~~
~~Public Workers Without Social Security Could Fall Short?,” CRR, April 2022, https://crr.bc.edu/wp-content/uploads/~~
~~2022/03/SLP82.pdf.~~
~~67 Quinby, Aubry, and Munnell, “Do Public Workers Without Social Security Get Comparable Benefits?,” p. 5.~~
~~68 The WEP was enacted as part of the Social Security Amendments of 1983 (P.L. 98-21). The GPO was enacted as~~
~~part of the Social Security Amendments of 1977 (P.L. 95-216) and modified as part of the Social Security Amendments~~
~~of 1983 (P.L. 98-21).~~
~~69 The reduction under the WEP is phased out for workers with between 21 and 30 years of substantial earnings in~~
~~covered employment. Workers with 30 or more years of substantial earnings in covered employment are exempt from~~
~~the WEP.~~
~~70 For more information, see CRS In Focus IF11747, Social Security: Benefit Calculation Overview.~~
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~~The windfall formula is designed to remove an unintended advantage that the regular benefit~~
~~formula would otherwise provide to workers with less than a full career in covered employment~~
~~(sometimes at higher wages) because they also worked in noncovered employment and receive a~~
~~pension based on noncovered work. In December 2023, about 2.1 million Social Security~~
~~beneficiaries (about 3% of all beneficiaries) were affected by the WEP.71~~
~~Government Pension Offset (GPO)~~
~~The GPO affects people who have worked in noncovered government employment and also~~
~~qualify for Social Security benefits as the spouse or surviving spouse of a Social Security–~~
~~covered worker. If a person is receiving a government pension from noncovered employment, his~~
~~or her Social Security spousal or widow(er) benefits are subject to reduction under the GPO. The~~
~~person’s Social Security spousal or widow(er) benefits are reduced by an amount equal to two-~~
~~thirds of his or her noncovered pension (a two-thirds offset). Depending on the relative amounts~~
~~of the two benefits, the Social Security spousal or widow(er) benefits may be reduced to zero. In~~
~~December 2023, 745,679 Social Security beneficiaries (about 1% of all beneficiaries) were~~
~~affected by the GPO.72~~
~~The GPO is intended to replicate the Social Security dual entitlement rule, which affects people~~
~~who have worked in covered employment and also qualify for Social Security benefits as the~~
~~spouse or surviving spouse of a Social Security–covered worker. Under the dual entitlement rule,~~
~~the person’~~. Under the dual entitlement rule, a person's Social Security spousal or widow(er) s Social Security spousal or widow(er) ~~benefits are~~benefit is reduced by the reduced by the ~~full~~ amount of his amount of his
or her own Social Security or her own Social Security retired- or disabled-worker benefit (i.e., ~~worker benefits (a 100% offset). Depending on the relative amounts of~~
~~the two benefits, the Social Security spousal or widow(er) benefits may be reduced to zero.~~
~~Issues Related to the WEP and the GPO~~
~~Approximately two-thirds of WEP and GPO cases involve former state and local government~~
~~employees.73 A person who is applying for benefits, or a person who is already receiving benefits,~~
~~must inform SSA that he or she is receiving a pension from noncovered employment and the~~
~~amount of the pension so that the WEP and the GPO can be applied to the Social Security benefit~~
~~computation. (One or both provisions may apply depending on the circumstances.) SSA must~~
~~generally rely on self-reported data to administer the WEP and the GPO for state and local~~
~~government employees, which can make enforcement of the provisions difficult and can result in~~
~~overpayments.74 In addition, inconsistent reporting by individuals can raise equity issues. If~~
~~individuals do not accurately report their noncovered pension information to SSA, they may~~
~~receive higher Social Security benefits than they are due under current law. A recent study found~~
~~that the number of state and local government employees in jobs not covered by Social Security~~
~~increased from 4.2 million in the 1994-1998 period to 4.7 million in the 2014-2018 period. This~~
~~trend suggests an increase in SSA workloads in the future to administer the WEP and the GPO.75~~

~~71 For more information on the WEP, see CRS In Focus IF10203,~~ ~~Social Security: The Windfall Elimination Provision~~
~~(WEP) and the Government Pension Offset (GPO)~~.
~~72 For more information on the GPO, see CRS In Focus IF10203,~~ ~~Social Security: The Windfall Elimination Provision~~
~~(WEP) and the Government Pension Offset (GPO)~~.
~~73 Glenn R. Springstead, “The Social Security Windfall Elimination Provision: Issues and Replacement Alternatives,”~~
Social Security Bulletin, vol. 79, no. 3 (August 2019), pp. 1-19, https://www.ssa.gov/policy/docs/ssb/v79n3/.
~~74 SSA has a data matching agreement with the U.S. Office of Personnel Management to use CSRS data for purposes of~~
~~administering the WEP and the GPO for affected federal employees.~~
~~75 Patrick Purcell, “Trends in Noncovered Employment and Earnings Among Employees of State and Local~~
~~(continued...)~~
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~~Social Security Coverage of State and Local Government Employees~~

~~In addition, critics point out that these provisions are not well understood by the people who are~~
~~affected by them.76 They further point out that affected individuals consider~~a 100% offset). The GPO reduced certain individuals' Social Security spousal or widow(er) benefits by two-thirds of their noncovered government pensions (i.e., a 67% offset). The GPO was designed to place spouses and widow(er)s who received noncovered government pensions in approximately the same position as spouses and widow(er)s whose entire careers were covered by Social Security. Supporters of the WEP and GPO said that the provisions were reasonable means to prevent overgenerous benefits to certain people due to their noncovered employment. However, critics pointed out that these provisions were not well understood. They argued that many people affected by the provisions were unprepared for smaller Social Security benefits than they had expected in making retirement plans. They further pointed out that affected individuals considered the provisions to be the provisions to be
unfair and somewhat arbitrary with respect to how the benefit reductions unfair and somewhat arbitrary with respect to how the benefit reductions ~~are~~were computed. computed.
~~Lawmakers regularly introduce legislation that would~~Before the passage of the SSFA, lawmakers regularly introduced legislation to repeal or modify these provisions.⁷⁵ ~~repeal or modify these provisions.~~
~~Mandatory Social Security coverage for newly hired state and local government employees would~~
~~eventually eliminate the need for the WEP and GPO provisions.~~
Special Considerations for Certain Occupational Groups
Under the Social Security program, reduced retirement benefits are first payable at age 62. Full Under the Social Security program, reduced retirement benefits are first payable at age 62. Full
(unreduced) retirement benefits are first payable at the full retirement age (age 67 for most (unreduced) retirement benefits are first payable at the full retirement age (age 67 for most
current workers). In addition, Social Security retirement benefits are computed using the workercurrent workers). In addition, Social Security retirement benefits are computed using the worker’s
's highest 35 years of wage-indexed earnings in covered employment. If a worker has fewer than 35 highest 35 years of wage-indexed earnings in covered employment. If a worker has fewer than 35
years in covered employment, zero earnings are counted in the benefit computation for the years in covered employment, zero earnings are counted in the benefit computation for the
~~“missing”~~"missing" years, resulting in lower years, resulting in lower ~~initial~~base monthly benefits. monthly benefits.77
76 Unlike Social Security, some public pension plans have eligibility rules and other design features Unlike Social Security, some public pension plans have eligibility rules and other design features
that are tailored to workers in certain occupations—such as police officers and firefighters—to that are tailored to workers in certain occupations—such as police officers and firefighters—to
reflect the circumstances of those occupations, including rigorous physical demands and higher reflect the circumstances of those occupations, including rigorous physical demands and higher
disability rates. Public pension plans for police officers and firefighters, for example, typically disability rates. Public pension plans for police officers and firefighters, for example, typically
provide full pension benefits at younger ages and with fewer years of service compared to other provide full pension benefits at younger ages and with fewer years of service compared to other
public pension plans and Social Security.public pension plans and Social Security.
Critics of mandatory coverage for newly hired state and local government employees maintain Critics of mandatory coverage for newly hired state and local government employees maintain
that such differences could present challenges with respect to integrating public pensions with that such differences could present challenges with respect to integrating public pensions with
Social Security. They point out that, while Social Security may provide enhanced benefit Social Security. They point out that, while Social Security may provide enhanced benefit
protections for some state and local government employees, certain groups may be better off in protections for some state and local government employees, certain groups may be better off in
separate retirement systems (i.e., outside of Social Security).separate retirement systems (i.e., outside of Social Security).
This view was reflected in the 1950s when Congress extended voluntary coverage to state and This view was reflected in the 1950s when Congress extended voluntary coverage to state and
local government employees already covered under retirement systems as part of the Social local government employees already covered under retirement systems as part of the Social
Security Amendments of 1954 (P.L. 83-761). In 1954, police officers and firefighters covered Security Amendments of 1954 (P.L. 83-761). In 1954, police officers and firefighters covered
under retirement systems were explicitly excluded from voluntary Social Security coverage at the under retirement systems were explicitly excluded from voluntary Social Security coverage at the
request of various police and firefighter organizations throughout the country. The 1954 Senate request of various police and firefighter organizations throughout the country. The 1954 Senate
report on the legislation states:report on the legislation states:
The bill continues the present exclusion of policemen and firemen who are covered by a The bill continues the present exclusion of policemen and firemen who are covered by a
State or local retirement system. Policemen and firemen, because of the special demands State or local retirement system. Policemen and firemen, because of the special demands
made by their work, usually have special provisions in their retirement systems (retirement made by their work, usually have special provisions in their retirement systems (retirement
at age 50 or 55, for example) and most of them believe that it would be unwise to attempt at age 50 or 55, for example) and most of them believe that it would be unwise to attempt
to coordinate these provisions with the provisions of the old-age and survivors insurance to coordinate these provisions with the provisions of the old-age and survivors insurance
~~system.78~~

~~Governments, 1994 to 2018,” SSA Briefing Paper No. 2021-01, August 2021, https://www.ssa.gov/policy/docs/~~
~~briefing-papers/bp2021-01.html.~~
~~76 The Social Security Protection Act of 2004 (P.L. 108-203) requires state and local government employers to disclose~~
~~the effect of the WEP and the GPO to employees hired on or after January 1, 2005, in jobs that are not covered by~~
~~Social Security (see Section 419(c) of P.L. 108-203). The law requires newly hired employees to sign a statement~~
~~acknowledging that they are aware of a possible reduction in their future Social Security benefit entitlement. For more~~
~~information, see SSA, State and Local Government Employers—Information, https://www.ssa.gov/slge/.~~
~~77 For more information, see CRS Report R42035, Social Security Primer.~~
~~78 U.S. Congress, Senate Committee on Finance, Social Security Amendments of 1954, report to accompany H.R. 9366,~~
~~83rd Cong., 2nd sess., July 27, 1954, S. Rept. 1987, p. 6.~~
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system.⁷⁷ Similarly, during House floor debate on the legislation, Representative Jere Cooper addressed a Similarly, during House floor debate on the legislation, Representative Jere Cooper addressed a
question about why police officers and firefighters were excluded from voluntary Social Security question about why police officers and firefighters were excluded from voluntary Social Security
coverage by the House Ways and Means Committee. Representative Cooper replied:coverage by the House Ways and Means Committee. Representative Cooper replied:
The firemen and policemen requested to be left out.... The very nature of their employment The firemen and policemen requested to be left out.... The very nature of their employment
is such that they do not continue as firemen and policemen until they are 65 in many cases is such that they do not continue as firemen and policemen until they are 65 in many cases
and in many instances it was pointed out that they have retirement systems of their own and in many instances it was pointed out that they have retirement systems of their own
which they prefer and they requested to be left out.which they prefer and they requested to be left out.79
78 With respect to occupational groups that may require special considerations, the integration of With respect to occupational groups that may require special considerations, the integration of
newly hired newly hired federal employees into Social Security in the 1980s can provide a relevant example. employees into Social Security in the 1980s can provide a relevant example.
FERS Accommodations for Certain Occupational Groups
The Federal EmployeesThe Federal Employees’' Retirement System (FERS) can serve as an example of how to integrate Retirement System (FERS) can serve as an example of how to integrate
an existing public pension plan tailored to workers in certain occupations with Social Security, an existing public pension plan tailored to workers in certain occupations with Social Security,
given differences in eligibility requirements (such as retirement age and years of service) and given differences in eligibility requirements (such as retirement age and years of service) and
other plan features.other plan features.
In 1983, Congress mandated Social Security coverage for federal employees hired January 1, In 1983, Congress mandated Social Security coverage for federal employees hired January 1,
1984, or later. At the time, federal employees were covered under CSRS, which does not have a 1984, or later. At the time, federal employees were covered under CSRS, which does not have a
Social Security component. FERS was created as a separate retirement system for federal Social Security component. FERS was created as a separate retirement system for federal
employees hired in 1984 or later, and it includes Social Security as one of three components: the employees hired in 1984 or later, and it includes Social Security as one of three components: the
FERS basic retirement annuity and the FERS supplement; Social Security; and the Thrift Savings FERS basic retirement annuity and the FERS supplement; Social Security; and the Thrift Savings
Plan.Plan.80
79 Under FERS, certain categories of workers—including federal law enforcement officers, federal Under FERS, certain categories of workers—including federal law enforcement officers, federal
firefighters, and air traffic controllers—are permitted to retire earlier and accrue pension benefits firefighters, and air traffic controllers—are permitted to retire earlier and accrue pension benefits
at higher rates than regular civilian federal employees.at higher rates than regular civilian federal employees.8180 Law enforcement personnel, for Law enforcement personnel, for
example, can retire at age 50 with 20 years of service or at any age with 25 years of service.example, can retire at age 50 with 20 years of service or at any age with 25 years of service.82
81 FERS also provides a temporary supplemental benefit (the FERS supplement) for workers who FERS also provides a temporary supplemental benefit (the FERS supplement) for workers who
retire from federal service before age 62 (i.e., before they become eligible for permanently retire from federal service before age 62 (i.e., before they become eligible for permanently
reduced Social Security retirement benefits). The FERS supplement is available to regular reduced Social Security retirement benefits). The FERS supplement is available to regular
civilian federal employees who retire at (1) age 55 or older with 30 or more years of service, or civilian federal employees who retire at (1) age 55 or older with 30 or more years of service, or
(2) age 60 with 20 or more years of service. Workers in certain occupational groups are eligible (2) age 60 with 20 or more years of service. Workers in certain occupational groups are eligible
for the supplement at earlier ages. The supplement is available to federal law enforcement for the supplement at earlier ages. The supplement is available to federal law enforcement
officers, federal firefighters, and air traffic controllers who retire at age 50 or older with 20 or officers, federal firefighters, and air traffic controllers who retire at age 50 or older with 20 or
more years of service. The FERS supplement is equal to the workermore years of service. The FERS supplement is equal to the worker’'s estimated Social Security s estimated Social Security
benefit based on his or her federal government employment. It is payable only up to age 62, benefit based on his or her federal government employment. It is payable only up to age 62,
regardless of whether the person claims Social Security benefits.regardless of whether the person claims Social Security benefits.83
82 The accommodations under FERS for federal employees in certain occupational groups can The accommodations under FERS for federal employees in certain occupational groups can
provide an provide an example of how state and local pension plans tailored to certain occupational groups of how state and local pension plans tailored to certain occupational groups
could be integrated with Social Security. For any given coverage group, the effect on participants could be integrated with Social Security. For any given coverage group, the effect on participants

~~79 House debate, Congressional Record, vol. 100, part 6 (June 1, 1954), p. 7433.~~
~~80 For more information, see CRS Report 98-810, Federal Employees’ Retirement System: Benefits and Financing.~~
~~81 CSRS also incorporates special rules for certain categories of workers, including federal law enforcement personnel.~~
~~82 Law enforcement personnel are subject to mandatory retirement at age 57 or as soon as 20 years of service have been~~
~~completed after age 57. See 5 U.S.C. §8335(b) for CSRS and 5 U.S.C. §8425(b) for FERS.~~
~~83 For more information on special rules that apply to federal law enforcement officers, federal firefighters, and air~~
~~traffic controllers under CSRS and FERS, see CRS Report R42631,~~ ~~Retirement Benefits for Federal Law Enforcement~~
~~Personnel~~.
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would depend on the design features of the new or modified plan that incorporates a Social would depend on the design features of the new or modified plan that incorporates a Social
Security component relative to the design features of the existing plan.Security component relative to the design features of the existing plan.
Protections for Workers and Family Members
Mandatory Social Security coverage for newly hired state and local government employees could Mandatory Social Security coverage for newly hired state and local government employees could
simplify retirement planning and benefit coordination for workers who divide their careers simplify retirement planning and benefit coordination for workers who divide their careers
between covered and noncovered employment. In addition, it would prevent gaps in Social between covered and noncovered employment. In addition, it would prevent gaps in Social
Security or pension coverage, resulting in better retirement, survivor, and disability insurance Security or pension coverage, resulting in better retirement, survivor, and disability insurance
protections for workers who move between covered and noncovered positions. The following protections for workers who move between covered and noncovered positions. The following
sections highlight some of the protections provided by Social Security for workers and family sections highlight some of the protections provided by Social Security for workers and family
members that are generally not available under state and local pension plans.members that are generally not available under state and local pension plans.
Disability Insurance Protection
Workers who move between jobs covered by Social Security and noncovered positions can Workers who move between jobs covered by Social Security and noncovered positions can
experience gaps in disability protection. To be eligible for Social Security disability benefits, experience gaps in disability protection. To be eligible for Social Security disability benefits,
among other requirements, a worker must meet a among other requirements, a worker must meet a duration work test (to show a sufficient (to show a sufficient
connection to covered employment for fully insured status) and a connection to covered employment for fully insured status) and a recent work test (to show a (to show a
recent connection to covered employment). Under both tests, the requirements vary depending on recent connection to covered employment). Under both tests, the requirements vary depending on
the workerthe worker’'s age.s age.8483 Under the duration work test, for example, workers who become disabled at Under the duration work test, for example, workers who become disabled at
age 42 or later generally need five years or more of covered employment. Under the recent work age 42 or later generally need five years or more of covered employment. Under the recent work
test, for example, workers aged 31 or older must generally have worked in covered employment test, for example, workers aged 31 or older must generally have worked in covered employment
for at least five years in the 10-year period immediately before becoming disabled.for at least five years in the 10-year period immediately before becoming disabled.
When a young worker leaves covered employment and moves to a noncovered state or local When a young worker leaves covered employment and moves to a noncovered state or local
government position, his or her insured status under Social Security may lapse. It may take five government position, his or her insured status under Social Security may lapse. It may take five
years or more to become insured under the public pension plan, resulting in a period with no years or more to become insured under the public pension plan, resulting in a period with no
disability insurance protection. Similarly, when a worker leaves a noncovered state or local disability insurance protection. Similarly, when a worker leaves a noncovered state or local
government position and moves to a job covered by Social Security, he or she may have to wait government position and moves to a job covered by Social Security, he or she may have to wait
five years or more before gaining insured status under the Social Security program.five years or more before gaining insured status under the Social Security program.85
84 Portability
Most jobs in the United States are covered by Social Security. When a worker moves from one Most jobs in the United States are covered by Social Security. When a worker moves from one
covered job to another, he or she continues (1) to accrue Social Security quarters of coverage covered job to another, he or she continues (1) to accrue Social Security quarters of coverage
needed to gain insured status under the program and (2) to build upon an earnings record that needed to gain insured status under the program and (2) to build upon an earnings record that
determines the amount of future benefits. The portability of Social Security allows workers to determines the amount of future benefits. The portability of Social Security allows workers to
maintain coverage under the system as they switch jobs throughout their careers. In addition, a maintain coverage under the system as they switch jobs throughout their careers. In addition, a
~~worker’~~worker's earnings (up to age 60) are indexed to wage growth as part of the benefit computation s earnings (up to age 60) are indexed to wage growth as part of the benefit computation
process. Indexing past earnings to wage growth allows Social Security benefits to reflect the process. Indexing past earnings to wage growth allows Social Security benefits to reflect the
general rise in the standard of living that occurred during the persongeneral rise in the standard of living that occurred during the person’'s working years.s working years.
By contrast, the portability of state and local defined benefit plans is usually limited to positions By contrast, the portability of state and local defined benefit plans is usually limited to positions
within the same public pension system. Benefits are generally based on some measure of final within the same public pension system. Benefits are generally based on some measure of final
salary and years of service. A worker who changes jobs frequently may not stay in a state or local salary and years of service. A worker who changes jobs frequently may not stay in a state or local
government position long enough to become vested in the pension plan. For workers who do stay government position long enough to become vested in the pension plan. For workers who do stay
long enough to qualify for benefits in the future, benefits are generally based on the workerlong enough to qualify for benefits in the future, benefits are generally based on the worker’s

~~84 SSA, Number of Credits Needed for Disability Benefits, https://www.ssa.gov/benefits/retirement/planner/~~
~~credits.html#h3. For more information, see CRS In Focus IF10506, Social Security Disability Insurance (SSDI).~~
~~85 Munnell, Aubry, and Belbase, “The Impact of Mandatory Coverage on State and Local Budgets,” pp. 7-8.~~
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's earnings when he or she left the job. Many plans do not index earnings as part of the benefit earnings when he or she left the job. Many plans do not index earnings as part of the benefit
computation process (i.e., earnings are counted at face value). This can result in substantially computation process (i.e., earnings are counted at face value). This can result in substantially
lower benefits for a worker who leaves the job years before claiming benefits.lower benefits for a worker who leaves the job years before claiming benefits.86
85 Benefits for Dependents and Survivors
Generally, Social Security provides better benefit protections for the workerGenerally, Social Security provides better benefit protections for the worker’'s dependents and s dependents and
survivors (including children and spouses) compared to state and local pension plans. For survivors (including children and spouses) compared to state and local pension plans. For
example, Social Security provides a spousal benefit equal to 50% of the workerexample, Social Security provides a spousal benefit equal to 50% of the worker’'s basic monthly s basic monthly
benefit (the workerbenefit (the worker’'s PIA), subject to adjustment based on the spouses PIA), subject to adjustment based on the spouse’'s age when claiming s age when claiming
benefits and other applicable factors. Spousal benefits are payable to the workerbenefits and other applicable factors. Spousal benefits are payable to the worker’'s current spouse s current spouse
and to any former (divorced) spouses who meet the eligibility requirements. Benefits paid to and to any former (divorced) spouses who meet the eligibility requirements. Benefits paid to
current and/or former spouses do not affect the workercurrent and/or former spouses do not affect the worker’'s monthly benefit amount. In addition, s monthly benefit amount. In addition,
Social Security provides a widow(er) benefit equal to 100% of the deceased workerSocial Security provides a widow(er) benefit equal to 100% of the deceased worker’'s PIA, s PIA,
subject to any applicable adjustments. Widow(er) benefits are payable to the deceased workersubject to any applicable adjustments. Widow(er) benefits are payable to the deceased worker’s
's surviving spouse and to any former surviving spouses who meet the eligibility requirements.surviving spouse and to any former surviving spouses who meet the eligibility requirements.87
86 State and local pension plans generally do not provide comparable benefits for dependents and State and local pension plans generally do not provide comparable benefits for dependents and
survivors. For example, most state and local pension plans do not provide benefits for the spouse survivors. For example, most state and local pension plans do not provide benefits for the spouse
of a retired worker while the worker is alive. In addition, most plans provide only modest benefits of a retired worker while the worker is alive. In addition, most plans provide only modest benefits
to a surviving spouse when the worker dies before retirement (such as a refund of the workerto a surviving spouse when the worker dies before retirement (such as a refund of the worker’s
's contributions or a lump sum, whichever is greater). When the worker dies after retirement, contributions or a lump sum, whichever is greater). When the worker dies after retirement,
benefits are provided for a surviving spouse only if the worker chooses a joint-and-survivor benefits are provided for a surviving spouse only if the worker chooses a joint-and-survivor
annuity option. A joint-and-survivor annuity is payable for the lifetime of the worker or the annuity option. A joint-and-survivor annuity is payable for the lifetime of the worker or the
~~worker’~~worker's spouse, whichever is longer. Generally, the worker accepts lower payments under this s spouse, whichever is longer. Generally, the worker accepts lower payments under this
option because payments continue for a longer period.option because payments continue for a longer period.88
87 Cost-of-Living Adjustments (COLAs)
Generally, Social Security provides better inflation protection compared to state and local pension Generally, Social Security provides better inflation protection compared to state and local pension
plans. Social Security provides an automatic, annual COLA based on the change in prices plans. Social Security provides an automatic, annual COLA based on the change in prices
measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
COLAs are based on a formula specified in the Social Security Act and are not subject to a cap. COLAs are based on a formula specified in the Social Security Act and are not subject to a cap.
Automatic annual COLAs help Social Security benefits maintain their purchasing power over Automatic annual COLAs help Social Security benefits maintain their purchasing power over
time.time.89
88 State and local pension plans generally provide some cost-of-living adjustments, and plans that State and local pension plans generally provide some cost-of-living adjustments, and plans that
operate outside of the Social Security system tend to have greater inflation protection. In some operate outside of the Social Security system tend to have greater inflation protection. In some
~~cases, however, COLAs may be provided on an ad hoc basis or they may be subject to a cap.90~~

~~86 Munnell, Aubry, and Belbase, “The Impact of Mandatory Coverage on State and Local Budgets,” p. 8.~~
~~87 For more information on Social Security benefits for the worker’s dependents and survivors, including basic~~
~~eligibility requirements, see Table 3 (Social Security Benefits for the Worker’s Family Members) in CRS Report~~
~~R42035, Social Security Primer.~~
~~88 Munnell, Aubry, and Belbase, “The Impact of Mandatory Coverage on State and Local Budgets,” p. 8.~~
~~89 For more information, see CRS Report 94-803, Social Security: Cost-of-Living Adjustments.~~
~~90 Munnell, Aubry, and Belbase, “The Impact of Mandatory Coverage on State and Local Budgets,” pp. 8-9. There is~~
~~wide variation in the design of COLA provisions in state and local pension plans. For more information, including a~~
~~description of COLA provisions in selected state retirement plans, see National Association of State Retirement~~
~~Administrators, “Cost-of-Living Adjustments,” June 2021, https://www.nasra.org/files/Issue%20Briefs/~~
~~NASRACOLA%20Brief.pdf.~~
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cases, however, COLAs may be provided on an ad hoc basis or they may be subject to a cap.⁸⁹
Progressive Benefit Formula
The Social Security benefit formula has a progressive structure in which lower-wage workers The Social Security benefit formula has a progressive structure in which lower-wage workers
receive a higher receive a higher replacement rate from Social Security compared to higher-wage workers, from Social Security compared to higher-wage workers,
meaning that their initial monthly Social Security benefits replace a higher percentage of their meaning that their initial monthly Social Security benefits replace a higher percentage of their
pre-retirement earnings. For higher-wage workers, initial monthly Social Security benefits replace pre-retirement earnings. For higher-wage workers, initial monthly Social Security benefits replace
a lower percentage of their pre-retirement earnings. With its progressive benefit structure, Social a lower percentage of their pre-retirement earnings. With its progressive benefit structure, Social
Security redistributes income from workers with higher career-average earnings to workers with Security redistributes income from workers with higher career-average earnings to workers with
lower career-average earnings.lower career-average earnings.91
90 Most state and local government employees are covered by traditional defined benefit plans. Most state and local government employees are covered by traditional defined benefit plans.
Under defined benefit plans, an employeeUnder defined benefit plans, an employee’'s benefits are based on a formula that generally takes s benefits are based on a formula that generally takes
into account the employeeinto account the employee’'s salary, years of service, and an accrual rate (benefit multiplier). s salary, years of service, and an accrual rate (benefit multiplier).
While the specific benefit formula will vary by plan, the benefit formula in traditional defined While the specific benefit formula will vary by plan, the benefit formula in traditional defined
benefit plans does not have redistributive features.benefit plans does not have redistributive features.
An individualAn individual’'s earning level could be considered an additional factor in the degree to which s earning level could be considered an additional factor in the degree to which
mandatory Social Security coverage could provide enhanced benefit protections for noncovered mandatory Social Security coverage could provide enhanced benefit protections for noncovered
workers and their family members. With its progressive benefit structure, Social Security could workers and their family members. With its progressive benefit structure, Social Security could
be particularly advantageous for noncovered workers with lower earnings.be particularly advantageous for noncovered workers with lower earnings.
Net Effect on Total Benefits
Mandatory Social Security coverage for newly hired state and local government employees could Mandatory Social Security coverage for newly hired state and local government employees could
improve protections for workers and their family members. Specific outcomes would depend on a improve protections for workers and their family members. Specific outcomes would depend on a
variety of factors, including how state and local governments would modify existing public variety of factors, including how state and local governments would modify existing public
pension plans in response to the mandate. For example, state and local governments could reduce pension plans in response to the mandate. For example, state and local governments could reduce
some pension benefits that are currently available under state and local plans to keep overall some pension benefits that are currently available under state and local plans to keep overall
pension costs down. Workers could also be required to pay higher contributions under a new or pension costs down. Workers could also be required to pay higher contributions under a new or
modified plan that incorporates a Social Security component. In addition, Congress could enact modified plan that incorporates a Social Security component. In addition, Congress could enact
changes to Social Securitychanges to Social Security’'s contribution and benefit structure to address the systems contribution and benefit structure to address the system’'s projected s projected
funding shortfall and other policy objectives. Such changes could result in higher payroll taxes funding shortfall and other policy objectives. Such changes could result in higher payroll taxes
and lower benefits for Social Security–covered workers compared to current law. The net effect and lower benefits for Social Security–covered workers compared to current law. The net effect
on a workeron a worker’'s total benefits would depend on a variety of factors, many of which remain to be s total benefits would depend on a variety of factors, many of which remain to be
determined, and specific outcomes would vary across state and local plans depending on the determined, and specific outcomes would vary across state and local plans depending on the
response of plan sponsors.response of plan sponsors.
Effect on State and Local Plans
Most state and local governments offer a traditional defined benefit plan for their employees.Most state and local governments offer a traditional defined benefit plan for their employees.⁹¹ If If
Congress were to mandate Social Security coverage for newly hired state and local government Congress were to mandate Social Security coverage for newly hired state and local government
employees, it is not clear how plan sponsors would respond to the mandate. For example, state employees, it is not clear how plan sponsors would respond to the mandate. For example, state
and local governments could move away from defined benefit plans toward defined contribution and local governments could move away from defined benefit plans toward defined contribution
plans, thereby shifting the financial risk from the employer to the employee.plans, thereby shifting the financial risk from the employer to the employee.9292 When newly hired When newly hired
federal employees were mandatorily covered by Social Security in the 1980s, the federal federal employees were mandatorily covered by Social Security in the 1980s, the federal
government closed the existing federal retirement system (CSRS, a defined benefit plan) to new government closed the existing federal retirement system (CSRS, a defined benefit plan) to new

~~91 For more information, see CRS In Focus IF11747, Social Security: Benefit Calculation Overview.~~
~~92 Defined benefit plans guarantee a monthly benefit in retirement for life. In defined contribution plans, employees use~~
~~the funds in their accounts as a source of income in retirement. Defined contribution plans do not provide guarantees of~~
~~lifetime income unless participants purchase an annuity. In any case, these plans do not guarantee a certain level of~~
~~account assets or monthly annuity payable from the account.~~
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participants and created a new federal retirement system (FERS) that has both defined benefit and participants and created a new federal retirement system (FERS) that has both defined benefit and
defined contribution components. FERS has three elements: (1) the FERS basic retirement defined contribution components. FERS has three elements: (1) the FERS basic retirement
annuity and the FERS supplement; (2) Social Security; and (3) the Thrift Savings Plan.annuity and the FERS supplement; (2) Social Security; and (3) the Thrift Savings Plan.
If Congress were to mandate Social Security coverage for newly hired state and local government If Congress were to mandate Social Security coverage for newly hired state and local government
employees, the basic options for state and local governments would include (1) maintaining the employees, the basic options for state and local governments would include (1) maintaining the
current pension structure for newly hired employees, (2) providing a different (presumably lower) current pension structure for newly hired employees, (2) providing a different (presumably lower)
benefit structure for newly hired employees within an existing pension plan, (3) closing the benefit structure for newly hired employees within an existing pension plan, (3) closing the
existing pension plan to new participants (making it a existing pension plan to new participants (making it a “"closed systemclosed system”") and creating a new ) and creating a new
pension plan for newly hired employees with a different (presumably lower) benefit structure, and pension plan for newly hired employees with a different (presumably lower) benefit structure, and
(4) eliminating pension benefits (apart from Social Security) for newly hired employees.(4) eliminating pension benefits (apart from Social Security) for newly hired employees.
State and local governments would have to decide what pension benefits to offer newly hired State and local governments would have to decide what pension benefits to offer newly hired
employees who would be covered by Social Security. Generally, some of the changes that states employees who would be covered by Social Security. Generally, some of the changes that states
and localities might consider include changes to the defined benefit formula (such as counting and localities might consider include changes to the defined benefit formula (such as counting
more years in the calculation of the workermore years in the calculation of the worker’'s final average salary and lowering the accrual rate), s final average salary and lowering the accrual rate),
altering early retirement benefits, creating defined contribution plans, or creating hybrid plans altering early retirement benefits, creating defined contribution plans, or creating hybrid plans
that offer a combination of defined benefit and defined contribution pension benefits. The amount that offer a combination of defined benefit and defined contribution pension benefits. The amount
of contributions that employers and employees would be required to pay under the new of contributions that employers and employees would be required to pay under the new
arrangements would have to be determined. It could take several years to determine and fully arrangements would have to be determined. It could take several years to determine and fully
implement the changes.implement the changes.
“"Closed System”" Option
The The “"closed systemclosed system”" option referenced above—closing the existing pension plan to new option referenced above—closing the existing pension plan to new
participants (i.e., contributors) and creating a new pension plan for newly hired employees—may participants (i.e., contributors) and creating a new pension plan for newly hired employees—may
raise funding concerns for the existing pension plan. The resulting decrease in contributions could raise funding concerns for the existing pension plan. The resulting decrease in contributions could
add financial strain to pension systems that are currently underfunded and do not have sufficient add financial strain to pension systems that are currently underfunded and do not have sufficient
assets on hand. For example, a plan that is underfunded and ceases to have new participants will assets on hand. For example, a plan that is underfunded and ceases to have new participants will
find that plan assets will have been used up and that some benefits for some participants do not find that plan assets will have been used up and that some benefits for some participants do not
have a funding source. Sponsors of pension plans that are not fully funded would have to have a funding source. Sponsors of pension plans that are not fully funded would have to
eventually make up for the funding shortfalls that exist within their plans.eventually make up for the funding shortfalls that exist within their plans.
Potential sources of funding to make up for shortfalls include state or local general revenues, Potential sources of funding to make up for shortfalls include state or local general revenues,
increased contributions from current employees, and greater returns on pension plan investments. increased contributions from current employees, and greater returns on pension plan investments.
Currently, many states and localities are facing revenue shortfalls and may be reluctant to set Currently, many states and localities are facing revenue shortfalls and may be reluctant to set
aside funds to cover pension benefits payable several years in the future. It may be difficult or aside funds to cover pension benefits payable several years in the future. It may be difficult or
impossible to require increased employee contributions from current employees. Pension plan impossible to require increased employee contributions from current employees. Pension plan
sponsors may be tempted to increase the riskiness of their investments to capture market gains. sponsors may be tempted to increase the riskiness of their investments to capture market gains.
However, in the event of a market downturn, riskier pension fund investments would lose value, However, in the event of a market downturn, riskier pension fund investments would lose value,
worsening the situation.worsening the situation.
As an example from the federal government, CSRS is a closed system, and FERS is open to new As an example from the federal government, CSRS is a closed system, and FERS is open to new
participants. FERS annuities are fully funded by the sum of employee and employer contributions participants. FERS annuities are fully funded by the sum of employee and employer contributions
and interest earned by the Treasury bonds held by the Civil Service Retirement and Disability and interest earned by the Treasury bonds held by the Civil Service Retirement and Disability
Fund (CSRDF). The federal government makes supplemental payments into the CSRDF on Fund (CSRDF). The federal government makes supplemental payments into the CSRDF on
behalf of employees covered by CSRS, because employee and agency contributions and interest behalf of employees covered by CSRS, because employee and agency contributions and interest
earnings do not meet the full cost of the benefits earned by employees covered by that system.earnings do not meet the full cost of the benefits earned by employees covered by that system.⁹³ Administrative and Cost Issues 93

~~93 For more information, see CRS Report RL30023,~~ ~~Federal Employees’ Retirement System: Budget and Trust Fund~~
~~Issues~~.
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~~Administrative and Cost Issues~~
State and local governments would have to negotiate with employee representatives and State and local governments would have to negotiate with employee representatives and
legislatures on the redesign of existing retirement systems in response to a Social Security legislatures on the redesign of existing retirement systems in response to a Social Security
coverage mandate. When Congress mandated Social Security coverage for newly hired federal coverage mandate. When Congress mandated Social Security coverage for newly hired federal
employees in the 1980s, it took three years to establish a new federal retirement system (FERS) employees in the 1980s, it took three years to establish a new federal retirement system (FERS)
for affected employees.for affected employees.9494 The General Accounting Office (now the Government Accountability The General Accounting Office (now the Government Accountability
Office) has suggested that four years might be required to complete negotiations among employee Office) has suggested that four years might be required to complete negotiations among employee
representatives and legislatures on adapting existing plans to Social Security coverage.representatives and legislatures on adapting existing plans to Social Security coverage.⁹⁵ 95
Some argue that a Social Security coverage mandate would impose ongoing administrative Some argue that a Social Security coverage mandate would impose ongoing administrative
burdens and costs on state and local governments. For example, state and local governments burdens and costs on state and local governments. For example, state and local governments
would potentially have to administer existing retirement systems that operate outside of Social would potentially have to administer existing retirement systems that operate outside of Social
Security alongside new retirement systems for employees required to participate in the program. Security alongside new retirement systems for employees required to participate in the program.
For example, when Social Security coverage was mandated for federal employees hired in 1984 For example, when Social Security coverage was mandated for federal employees hired in 1984
or later, Congress created a new retirement system (FERS). The federal government administers or later, Congress created a new retirement system (FERS). The federal government administers
the existing retirement system (CSRS) and the related CSRS offset program alongside FERS. The the existing retirement system (CSRS) and the related CSRS offset program alongside FERS. The
federal government will continue to operate CSRS and the CSRS offset program until the death federal government will continue to operate CSRS and the CSRS offset program until the death
of the last worker or survivor covered under the program, which the U.S. Office of Personnel of the last worker or survivor covered under the program, which the U.S. Office of Personnel
Management estimates will occur around 2090.Management estimates will occur around 2090.⁹⁶ 96
The congressional mandate to make Social Security coverage mandatory for newly hired The congressional mandate to make Social Security coverage mandatory for newly hired federal
employees affected one major pension system. By comparison, a coverage mandate for newly employees affected one major pension system. By comparison, a coverage mandate for newly
hired state and local government employees could affect many public pension plans within a hired state and local government employees could affect many public pension plans within a
state. The number of public pension plans in a state can vary considerably, as does the extent of state. The number of public pension plans in a state can vary considerably, as does the extent of
Social Security coverage among state and local government employees under current law. Among Social Security coverage among state and local government employees under current law. Among
the states, the share of state and local government employees the states, the share of state and local government employees with Social Security coverage Social Security coverage
ranged from ranged from 32% to 98% in % to 98% in ~~2021~~2023. In 27 states. In 27 states and Puerto Rico, 90.0% or more of state and local government , 90.0% or more of state and local government
employees had Social Security coverage. In eight states, fewer than 50.0% of state and local employees had Social Security coverage. In eight states, fewer than 50.0% of state and local
government employees had Social Security coverage. In some states, a coverage mandate could government employees had Social Security coverage. In some states, a coverage mandate could
affect many public pension plans with different plan sponsors and different plan features.affect many public pension plans with different plan sponsors and different plan features.
In addition, state and local governments could experience higher costs associated with employer In addition, state and local governments could experience higher costs associated with employer
contributions under the new pension plans integrated with Social Security. Overall costs to state contributions under the new pension plans integrated with Social Security. Overall costs to state
and local governments and their employees could increase, decrease, or remain the same and local governments and their employees could increase, decrease, or remain the same
depending on the type of pension benefit structure states and localities adopt in response to depending on the type of pension benefit structure states and localities adopt in response to
mandatory participation in Social Security. Factors affecting potential costs include the 6.2% mandatory participation in Social Security. Factors affecting potential costs include the 6.2%
Social Security payroll tax that employers and employees would each be required to pay (for a Social Security payroll tax that employers and employees would each be required to pay (for a
combined 12.4% Social Security payroll tax) and the amount of other employer and employee combined 12.4% Social Security payroll tax) and the amount of other employer and employee
contributions required under the plans.contributions required under the plans.
One study on the impact of mandatory Social Security coverage on state and local budgets points One study on the impact of mandatory Social Security coverage on state and local budgets points
out that cost is the main reason public employers and employees oppose mandatory coverage. out that cost is the main reason public employers and employees oppose mandatory coverage.
The study states:The study states:
While virtually all recent proposals to extend coverage apply only to new hires, opponents While virtually all recent proposals to extend coverage apply only to new hires, opponents
recognize that once the transition is complete state and local governments would face the recognize that once the transition is complete state and local governments would face the

~~94 Congress enacted the mandatory coverage provision in April 1983, effective for federal employees hired January 1,~~
~~1984, or later. Congress enacted the Federal Employees’ Retirement System Act of 1986 (P.L. 99-335) in June 1986.~~
~~95 GAO, Social Security: Implications of Extending Mandatory Coverage to State and Local Employees, GAO/HEHS~~
~~98-196, August 1998, http://www.gao.gov/archive/1998/he98196.pdf.~~
~~96 For more information, see CRS Report 98-810, Federal Employees’ Retirement System: Benefits and Financing.~~
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full impact of the cost. Lost in the fervor is the notion that any increase in ultimate cost of full impact of the cost. Lost in the fervor is the notion that any increase in ultimate cost of
~~the combined Social Security/public pension system depends crucially on how plan~~
the combined Social Security/public pension system depends crucially on how plan sponsors respond to the introduction of Social Security.sponsors respond to the introduction of Social Security.⁹⁷97
Funding Status of State and Local Plans
Many state and local government employers and employees oppose mandatory Social Security Many state and local government employers and employees oppose mandatory Social Security
coverage based on concerns that mandatory coverage could increase pension system costs coverage based on concerns that mandatory coverage could increase pension system costs
significantly at a time when many state and local pension systems are underfunded. When a plan significantly at a time when many state and local pension systems are underfunded. When a plan
is underfunded, the value of the planis underfunded, the value of the plan’'s assets is less than accrued pension liabilities for current s assets is less than accrued pension liabilities for current
workers and retirees. Recent analysis by CRR on the current funded status of public pension plans workers and retirees. Recent analysis by CRR on the current funded status of public pension plans
found that the aggregate actuarial funded ratio increased by 2 percentage points from 73% in found that the aggregate actuarial funded ratio increased by 2 percentage points from 73% in
FY2020 to 75% in FY2021 (based on their projections). The aggregate actuarial funded ratio is FY2020 to 75% in FY2021 (based on their projections). The aggregate actuarial funded ratio is
the aggregate ratio of assets to liabilities for all public pension plans analyzed in the study. the aggregate ratio of assets to liabilities for all public pension plans analyzed in the study.
Despite the projected improvement, the CRR researchers point out that the funded ratio in 2021 is Despite the projected improvement, the CRR researchers point out that the funded ratio in 2021 is
still about 1 percentage point below levels reported more than a decade ago in 2010.still about 1 percentage point below levels reported more than a decade ago in 2010.98
98 In 2024, the Federal Reserve published data on the funding status and funded ratios for state and local defined benefit pension plans from 2002 to 2022. In 2022, funded ratios varied widely by state, ranging from 34% in New Jersey to 99% in Wisconsin. Overall, the aggregate funded ratio was about 62% in 2022—approximately five percentage points lower than in 2007, the year before the Great Recession began.⁹⁹ Another recent study on state and local government pension plans describes the funding status of Another recent study on state and local government pension plans describes the funding status of
state and local plans as follows:state and local plans as follows:
~~Before 2001, nearly all public-sector pension plans were fully funded, according to the~~
~~Governmental Accounting Standards Board (GASB). Specifically, nearly all plans were~~
~~projected to have sufficient assets to cover plan liabilities, assuming an 8~~ Before 2001, nearly all public-sector pension plans were fully funded, according to the Governmental Accounting Standards Board (GASB). Specifically, nearly all plans were projected to have sufficient assets to cover plan liabilities, assuming an 8 percent percent
investment return. By 2013, however, almost every plan reported significant underfunding. investment return. By 2013, however, almost every plan reported significant underfunding.
~~Two key factors drove the underfunding. The first affected the economy as a whole:~~
~~financial crises occurred in 2001 and from 2007 to 2009, with the latter~~ Two key factors drove the underfunding. The first affected the economy as a whole: financial crises occurred in 2001 and from 2007 to 2009, with the latter especially especially
~~significant. The second factor was intrinsic to the plans themselves:~~ significant. The second factor was intrinsic to the plans themselves: insufficient insufficient
contributions and overly optimistic actuarial assumptions.contributions and overly optimistic actuarial assumptions.99
100 The study looked at recent pension reforms aimed at reducing pension costs. It focused on The study looked at recent pension reforms aimed at reducing pension costs. It focused on
traditional defined benefit pensions in 14 states that employ a majority of noncovered state and traditional defined benefit pensions in 14 states that employ a majority of noncovered state and
local government employees. Specifically, the study looked at three design parameters commonly local government employees. Specifically, the study looked at three design parameters commonly
featured in pension reforms in recent years: the vesting period, the period used to calculate the featured in pension reforms in recent years: the vesting period, the period used to calculate the
~~worker’~~worker's final average salary (the FAS period), and the accrual rate (benefit multiplier). The study s final average salary (the FAS period), and the accrual rate (benefit multiplier). The study
found that as states have sought to reduce pension expenses, they have (1) tightened eligibility found that as states have sought to reduce pension expenses, they have (1) tightened eligibility
requirements by increasing vesting periods and (2) lowered benefits by increasing the FAS period requirements by increasing vesting periods and (2) lowered benefits by increasing the FAS period
and reducing the accrual rate used in the benefit formula. In addition, it found that the changes and reducing the accrual rate used in the benefit formula. In addition, it found that the changes
did not affect all categories of state and local government employees equally. For example, did not affect all categories of state and local government employees equally. For example,
changes in the FAS period affected public safety workers and general government employees at changes in the FAS period affected public safety workers and general government employees at
the local level more than teachers.the local level more than teachers.~~100~~
101 In the context of state and local plan underfunding, mandatory Social Security coverage for newly In the context of state and local plan underfunding, mandatory Social Security coverage for newly
hired state and local government employees could be viewed unfavorably on the basis that it hired state and local government employees could be viewed unfavorably on the basis that it
would place added administrative and cost burdens on state and local governments and their would place added administrative and cost burdens on state and local governments and their
employees. Alternatively, as noted by the 2010 Fiscal Commission, it could be viewed as a way to employees. Alternatively, as noted by the 2010 Fiscal Commission, it could be viewed as a way to

~~97 Munnell, Aubry, and Belbase, “The Impact of Mandatory Coverage on State and Local Budgets,” p. 9.~~
~~98 Jean-Pierre Aubry and Kevin Wandrei, “2021 Update: Public Plan Funding Improves as Workforce Declines,” CRR,~~
~~June 2021, https://crr.bc.edu/briefs/2021-update-public-plan-funding-improves-as-workforce-declines/.~~
~~99 Glenn R. Springstead, “Vesting Requirements and Key Benefit-Formula Features of State and Local Government~~
~~Pension Plans,” Social Security Bulletin, vol. 81, no. 1 (February 2021), p. 5, https://www.ssa.gov/policy/docs/ssb/~~
~~v81n1/index.html.~~
~~100 Springstead, “Vesting Requirements and Key Benefit-Formula Features,” p. 21.~~
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mitigate risks for plan sponsors and employees. The commission further noted that it could mitigate risks for plan sponsors and employees. The commission further noted that it could
mitigate potential future bailout risks for the federal government.mitigate potential future bailout risks for the federal government.~~101~~
102 From the workerFrom the worker’'s perspective, mandatory Social Security coverage could be viewed as providing s perspective, mandatory Social Security coverage could be viewed as providing
an added level of benefit protection for people whose future noncovered pensions may be at risk. an added level of benefit protection for people whose future noncovered pensions may be at risk.
Unlike private-sector employers, state and local pension plans do not participate in a pension Unlike private-sector employers, state and local pension plans do not participate in a pension
insurance system. Most private-sector employers participate in the Pension Benefit Guaranty insurance system. Most private-sector employers participate in the Pension Benefit Guaranty
Corporation (PBGC), which is a government-run insurance company that pays pension benefits to Corporation (PBGC), which is a government-run insurance company that pays pension benefits to
retirees in bankrupt private-sector pension plans.retirees in bankrupt private-sector pension plans.~~102~~103 State and local pension plans cannot transfer State and local pension plans cannot transfer
pension plan liabilities to a PBGC-like entity if they cannot pay benefits. Unlike private-sector pension plan liabilities to a PBGC-like entity if they cannot pay benefits. Unlike private-sector
employers, however, state and local governments can raise taxes or reduce spending in other employers, however, state and local governments can raise taxes or reduce spending in other
areas to fund state and local pensions.areas to fund state and local pensions.
Overall Impact on State and Local Plans
If Congress were to mandate Social Security coverage for newly hired state and local government If Congress were to mandate Social Security coverage for newly hired state and local government
employees, the overall impact on state and local plans would depend on a variety of factors, many employees, the overall impact on state and local plans would depend on a variety of factors, many
of which remain to be determined. For example, the specific design features of a new or modified of which remain to be determined. For example, the specific design features of a new or modified
pension plan with a Social Security component would affect costs. In addition, any future pension plan with a Social Security component would affect costs. In addition, any future
increases in Social Security payroll taxes enacted by Congress to address the systemincreases in Social Security payroll taxes enacted by Congress to address the system’'s projected s projected
funding shortfall would be a factor. The impact of mandatory Social Security coverage on state funding shortfall would be a factor. The impact of mandatory Social Security coverage on state
and local plans would vary depending on how plan sponsors would respond to the mandate.and local plans would vary depending on how plan sponsors would respond to the mandate.
Key Points (Part II): Recap
Proposals to mandate Social Security coverage for newly hired state and local government employees are generally Proposals to mandate Social Security coverage for newly hired state and local government employees are generally
consistent with actions taken by Congress over the years to expand coverage. Some states would be more consistent with actions taken by Congress over the years to expand coverage. Some states would be more
affected than others, as affected than others, as ~~only~~ three states accounted for almost half of all noncovered state and local government three states accounted for almost half of all noncovered state and local government
employees. Arguments on both sides of the debate include:employees. Arguments on both sides of the debate include:
•
Supporters maintain that mandatory coverage would prevent gaps in Social Security or pension coverage, Supporters maintain that mandatory coverage would prevent gaps in Social Security or pension coverage,
resulting in better retirement, survivor, and disability insurance protections for workers who move between resulting in better retirement, survivor, and disability insurance protections for workers who move between
covered and noncovered positions. In addition, compared to state and local pension plans in general, Social covered and noncovered positions. In addition, compared to state and local pension plans in general, Social
Security has features that are advantageous for the worker and eligible family members, such as better Security has features that are advantageous for the worker and eligible family members, such as better
inflation protection, disability benefits, benefits for dependents and survivors, and a progressive benefit inflation protection, disability benefits, benefits for dependents and survivors, and a progressive benefit
formula. Benefit protections provided by Social Security could be particularly important for noncovered formula. Benefit protections provided by Social Security could be particularly important for noncovered
workers in states and localities with underfunded pension plans and whose future pensions may be at risk.workers in states and localities with underfunded pension plans and whose future pensions may be at risk.
•
Opponents maintain that mandatory coverage could pose administrative and cost burdens on state and local Opponents maintain that mandatory coverage could pose administrative and cost burdens on state and local
governments and their employees at a time when many state and local pension systems are underfunded. governments and their employees at a time when many state and local pension systems are underfunded.
~~Moreover,~~They say it could it could also threaten or undermine existing retirement systems, particularly those tailored to workers threaten or undermine existing retirement systems, particularly those tailored to workers
in certain occupations. For example, public pension plans for police officers and firefighters typically provide in certain occupations. For example, public pension plans for police officers and firefighters typically provide
~~ful~~ full pension benefits at younger ages and with fewer years of service compared to other public pension plans pension benefits at younger ages and with fewer years of service compared to other public pension plans
and Social Security. In addition, plan sponsors could shift away from defined benefit plans toward defined and Social Security. In addition, plan sponsors could shift away from defined benefit plans toward defined
contribution plans, thereby shifting risk from the employer to the employee.contribution plans, thereby shifting risk from the employer to the employee.
The overall impact on state and local plans and the net effect on total benefits would vary across plans and across The overall impact on state and local plans and the net effect on total benefits would vary across plans and across
individuals depending on a variety of factors, such as how state and local governments would respond to a individuals depending on a variety of factors, such as how state and local governments would respond to a
coverage mandate and any future legislative changes to Social Security.coverage mandate and any future legislative changes to Social Security.

~~101 The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, p. 52.~~
~~102 For more information, see CRS In Focus IF10492,~~ ~~An Overview of the Pension Benefit Guaranty Corporation~~
~~(PBGC)~~.
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~~Conclusion~~
Conclusion Over the years, Congress has expanded Social Security coverage to include most workers in the Over the years, Congress has expanded Social Security coverage to include most workers in the
United States, creating a nearly universal system. Unlike most employers, state and local United States, creating a nearly universal system. Unlike most employers, state and local
governments are not required to participate in Social Security if they offer public retirement governments are not required to participate in Social Security if they offer public retirement
systems that meet certain requirements. For these workers, Social Security coverage is an option, systems that meet certain requirements. For these workers, Social Security coverage is an option,
not a requirement. While a majority of state and local government employees participate in Social not a requirement. While a majority of state and local government employees participate in Social
Security (73% in Security (73% in ~~2021~~2023), a sizable segment of these workers are not covered by Social Security ), a sizable segment of these workers are not covered by Social Security
through their government employment (27% in through their government employment (27% in ~~2021~~2023). Proposals to mandate coverage for newly ). Proposals to mandate coverage for newly
hired state and local government employees have been part of the Social Security policy debate hired state and local government employees have been part of the Social Security policy debate
for years. There is strong support and opposition to such proposals for a variety of reasons.for years. There is strong support and opposition to such proposals for a variety of reasons.
For some, mandatory coverage of newly hired state and local government employees is a question For some, mandatory coverage of newly hired state and local government employees is a question
of equity—in their view, noncovered state and local government employees should participate in of equity—in their view, noncovered state and local government employees should participate in
Social Security given the programSocial Security given the program’'s role in keeping members of society out of poverty and the s role in keeping members of society out of poverty and the
~~system’~~system's legacy costs. Some supporters argue that mandatory coverage would improve the s legacy costs. Some supporters argue that mandatory coverage would improve the
financial status of the Social Security trust funds, have a net positive effect on federal revenues, financial status of the Social Security trust funds, have a net positive effect on federal revenues,
and provide better benefit protections for workers and their family members. The benefit and provide better benefit protections for workers and their family members. The benefit
protections provided by Social Security could be particularly important for noncovered workers protections provided by Social Security could be particularly important for noncovered workers
in states and localities with underfunded pension plans and whose future pensions may be at risk.in states and localities with underfunded pension plans and whose future pensions may be at risk.
Opponents of mandatory coverage for newly hired state and local government employees Opponents of mandatory coverage for newly hired state and local government employees
maintain that it could pose administrative and cost burdens on state and local governments at a maintain that it could pose administrative and cost burdens on state and local governments at a
time when many state and local pension plans face funding issues. They maintain that a Social time when many state and local pension plans face funding issues. They maintain that a Social
Security coverage mandate could threaten or undermine existing retirement systems, particularly Security coverage mandate could threaten or undermine existing retirement systems, particularly
those that are tailored to workers in certain occupations such as police officers and firefighters.those that are tailored to workers in certain occupations such as police officers and firefighters.
The overall impact on state and local plans and the net effect on total benefits would vary across The overall impact on state and local plans and the net effect on total benefits would vary across
plans and across individuals, depending on how state and local governments would respond to a plans and across individuals, depending on how state and local governments would respond to a
coverage mandate and the relative differences between existing plans and new or modified plans coverage mandate and the relative differences between existing plans and new or modified plans
incorporating Social Security, among other factors. Any future legislative changes to Social incorporating Social Security, among other factors. Any future legislative changes to Social
Security payroll taxes and benefits would also be a factor.Security payroll taxes and benefits would also be a factor.
Every state has a mix of state and local government employees with and without Social Security Every state has a mix of state and local government employees with and without Social Security
coverage, so every state would be affected by a Social Security coverage mandate. Some states coverage, so every state would be affected by a Social Security coverage mandate. Some states
would be affected to a larger degree than others given the variation in coverage rates among the would be affected to a larger degree than others given the variation in coverage rates among the
states under current law. In states under current law. In ~~2021~~2023, the share of state and local government employees , the share of state and local government employees with Social Social
Security coverage ranged from Security coverage ranged from 32% to 98% among the states. Overall, eight states accounted for % to 98% among the states. Overall, eight states accounted for
~~over~~ three-fourths (three-fourths (7675%) of noncovered state and local government employees, and three states %) of noncovered state and local government employees, and three states
accounted for almost half (49%) of noncovered state and local government employees.accounted for almost half (49%) of noncovered state and local government employees.
Additional Resources
The following resources are available on the website of the Social Security Administration:The following resources are available on the website of the Social Security Administration:
• State and Local Government Employers—~~Information~~
Informationhttps://www.ssa.gov/slge/index.htmhttps://www.ssa.gov/slge/index.htm
• Introduction to State and Local Coverage Handbook in the Program Operations in the Program Operations
Manual SystemManual System
https://secure.ssa.gov/apps10/poms.nsf/lnx/1910000000https://secure.ssa.gov/apps10/poms.nsf/lnx/1910000000
The following resources are available on the website of the Internal Revenue Service:The following resources are available on the website of the Internal Revenue Service:
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~~Social Security Coverage of State and Local Government Employees~~

• State and Local Government Employees Social Security and Medicare Coverage
~~https://www.irs.gov/government-entities/federal-state-local-governments/state-~~
~~and-local-government-employees-social-security-and-medicare-coverage~~
• IRS Publication 963, Federal-State Reference Guide
~~https://www.irs.gov/pub/irs-pdf/p963.pdf~~

~~Author Information~~

~~Zhe Li~~

~~Analyst in Social Policy~~

~~Acknowledgments~~
~~The original report was authored by former CRS Specialist Dawn Nuschler.~~

~~Disclaimer~~
~~This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan~~
~~shared staff to congressional committees and Members of Congress. It operates solely at the behest of and~~
~~under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other~~
~~than public understanding of information that has been provided by CRS to Members of Congress in~~
~~connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not~~
~~subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in~~
~~its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or~~
~~material from a third party, you may need to obtain the permission of the copyright holder if you wish to~~
~~copy or otherwise use copyrighted material.~~

~~Congressional Research Service~~
~~R46961 · VERSION 4 · UPDATED~~
29
State and Local Government Employees Social Security and Medicare Coveragehttps://www.irs.gov/government-entities/federal-state-local-governments/state-and-local-government-employees-social-security-and-medicare-coverage IRS Publication 963, Federal-State Reference Guidehttps://www.irs.gov/pub/irs-pdf/p963.pdf

The original report was authored by former CRS Specialist Dawn Nuschler.

Footnotes

Generally, mandatory coverage proposals affect newly hired state and local government employees, not current employees. Therefore, this report focuses on the mandatory coverage issue with respect to new hires.

It is the option of the state to hold a referendum on coverage among eligible employees covered by a retirement system.

Social Security Administration (SSA), Monthly Statistical Snapshot, February 2026, Table 2, https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/index.html.

Social Security coverage is tied to positions, not to individuals.

SSA, "Quarter of Coverage," https://www.ssa.gov/oact/cola/QC.html.

For more information, see CRS Report R42035, Social Security Primer.

SSA, Office of the Chief Actuary (OCACT), Fact Sheet on the Old-Age, Survivors, and Disability Insurance Program, February 9, 2026, https://www.ssa.gov/oact/FACTS/index.html.

William J. Nelson Jr., "Employment Covered Under the Social Security Program, 1935-84," Social Security Bulletin, vol. 48, no. 4 (April 1985), Table 2, p. 34, https://www.ssa.gov/policy/docs/ssb/v48n4/v48n4p33.pdf.

The term United States is defined as the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the territories of Guam and American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands.

10.

See Internal Revenue Service (IRS), Social Security Tax Consequences of Working Abroad, https://www.irs.gov/individuals/international-taxpayers/social-security-tax-consequences-of-working-abroad.

11.

For more information on the definition of employment for Social Security purposes, see (1) Section 210 of the Social Security Act [42 U.S.C. §410]; (2) Title 20, Part 404, of the Code of Federal Regulations, Subpart K; and (3) SSA's Program Operations Manual System [POMS], Coverage and Exceptions.

12.

For more information, see CRS Report 98-810, Federal Employees' Retirement System: Benefits and Financing.

13.

Data from SSA obtained by CRS in February 2026.

14.

For more information, see CRS In Focus IF11824, Social Security: Who Is Covered Under the Program?

15.

For more information, see CRS Report R47341, Income for the Population Ages 65 and Older: Evidence from the Health Retirement Study (HRS).

16.

For example, Social Security lessens the reliance on need-based programs such as Supplemental Security Income (SSI), which is funded with federal general revenues. SSI provides monthly cash payments to aged, blind, or disabled individuals who have limited income and resources. For more information, see CRS In Focus IF10482, Supplemental Security Income (SSI).

17.

See Dean R. Leimer, "The Legacy Debt Associated with Past Social Security Transfers," Social Security Bulletin, vol. 76, no. 3 (2016).

18. Alicia H. Munnell, Jean-Pierre Aubry, and Anek Belbase, "The Impact of Mandatory Coverage on State and Local Budgets," Center for Retirement Research at Boston College, CRR WP 2014-9, May 2014, pp. 6-7, available at https://crr.bc.edu/the-impact-of-mandatory-coverage-on-state-and-local-budgets/. 19.

To qualify as an alternative to Social Security, the public retirement system must provide a minimum level of benefits. In general, it must provide a retirement benefit that is comparable to Social Security.

20.

Data from SSA obtained by CRS in February 2026.

21.

As noted in SSA's POMS, "Ultimately, it is within the state's discretion to determine for whom, whether, and when to extend Section 218 coverage, subject to the requirements of the [Social Security] Act" (POMS, Section SL 30001.301, Section 218 Agreements, Paragraph C, https://secure.ssa.gov/apps10/poms.nsf/lnx/1930001301#c).

22.

Under Section 210(a) of the Social Security Act (42 U.S.C. §410(a)), certain categories of employees are not subject to mandatory Social Security coverage, including state and local government employees who fall within these categories. For example, services performed by individuals hired to be relieved from unemployment are not subject to mandatory Social Security coverage. For more information, see IRS Publication 963, Federal-State Reference Guide, Revised July 2020, Chapter 5: Social Security and Medicare Coverage, pp. 44-45, https://www.irs.gov/pub/irs-pdf/p963.pdf.

23.

Medicare payroll taxes generally apply to all wages (not limited by the taxable maximum) of all state and local government employees hired or re-hired after March 31, 1986, unless specifically excluded under Section 210(p) of the Social Security Act (42 U.S.C. §410(p)). This requirement was mandated by the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (P.L. 99-272). See IRS Publication 963, pp. 49-50.

24.

A traditional defined benefit formula would be: annual benefit = an accrual rate X the number of years of service X the average of the worker's final years of salary. The accrual rate is a percentage factor typically ranging from 2% to 3% in most traditional defined benefit plans.

25.

For data on how pension plan access and participation rates compare among public- and private-sector employees, see CRS In Focus IF13185, Worker Participation in Employer-Sponsored Pensions in 2025.

26.

IRS Publication 963, Chapter 6: Social Security and Public Retirement Systems. See also (1) Section 31.3121(b)(7)-2(e) of the IRS Employment Tax Regulations, https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-31/subpart-B/subject-group-ECFR996050e2e4c4937/section-31.3121(b)(7)-2#p-31.3121(b)(7)-2(e); and (2) IRS Revenue Procedure 91-40, which sets forth rules related to the minimum retirement benefit requirement prescribed under Section 31.3121(b)(7)-2 of the IRS Employment Tax Regulations. IRS Revenue Procedure 91-40 is included as an appendix in IRS Publication 963, and it is available at https://www.ssa.gov/slge/revenue_procedure_91-40.htm.

27.

In the Social Security program, the worker's PIA is the benefit payable at full retirement age (FRA), before any applicable adjustments are taken into account.

28.

The Social Security FRA is the age at which full (unreduced) Social Security retirement benefits are first payable. The FRA ranges from 65 to 67, depending on the worker's year of birth. Workers born in 1960 or later have an FRA of 67. Retirement benefits are payable as early as age 62, but benefits claimed between age 62 and the FRA are permanently reduced to take into account "early retirement."

29.

See Section 31.3121(b)(7)-2(e)(2) of the IRS Employment Tax Regulations at https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-31/subpart-B/subject-group-ECFR996050e2e4c4937/section-31.3121(b)(7)-2#p-31.3121(b)(7)-2(e)(2).

30.

IRS Publication 963, p. 54.

31.

Section 218 Agreements are governed by Section 218 of the Social Security Act (42 U.S.C. §418) and the Code of Federal Regulations (20 C.F.R. §§404.1200-404.1219). See also SSA's POMS beginning with the section "Introduction to State and Local Coverage Handbook" at https://secure.ssa.gov/apps10/poms.nsf/lnx/1910000000.

32.

The term state includes the 50 states, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands. It also includes interstate instrumentalities. An interstate instrumentality is an independent legal entity organized by two or more states to carry out one or more governmental functions, such as police power, taxing power, and/or power of eminent domain. For example, the New Jersey–New York Port Authority is an interstate instrumentality. Approximately 60 interstate instrumentalities have Section 218 Agreements with SSA (IRS Publication 963, p. 1).

33.

See the discussion below regarding divided vote referendums/divided retirement systems authorized in certain states.

34.

A list of state Social Security administrators is available at http://www.ncsssa.org/statessadminmenu.html. For information on SSA contacts regarding Section 218 Agreements, see "SSA Regional Office State and Local Coverage Specialists" at https://www.ssa.gov/slge/specialists.htm.

35.

See SSA, "State Social Security Administrator," https://www.ssa.gov/slge/state_ssa.htm. For information on the management of Section 218 Agreements, see U.S. Government Accountability Office (GAO), Social Security Administration: Management Oversight Needed to Ensure Accurate Treatment of State and Local Government Employees, GAO-10-936, September 2010, http://www.gao.gov/new.items/d10938.pdf.

36.

For key dates in the history of coverage for state and local government employees, see also IRS Publication 963, p. 2.

37.

For state and local government employee coverage data for 1951-1981, see Bert Kestenbaum, "State and Local Government Employees Covered Under Social Security, 1977-81," Social Security Bulletin, vol. 45, no. 12 (December 1982), https://www.ssa.gov/policy/docs/ssb/v45n12/v45n12p11.pdf.

38.

Those who oppose mandatory Social Security coverage for newly hired state and local government employees sometimes argue that it would raise constitutional issues and might be challenged in court. In 1998, the General Accounting Office (now the Government Accountability Office) wrote, "we believe that mandatory coverage is likely to be upheld under current U.S. Supreme Court decisions." See GAO, Social Security: Implications of Extending Mandatory Coverage to State and Local Employees, GAO/HEHS-98-196, August 1998, pp. 19-20, http://www.gao.gov/archive/1998/he98196.pdf. A discussion of any potential legal issues associated with mandatory coverage for newly hired state and local government employees is beyond the scope of this CRS report.

39.

Coverage was extended to the U.S. Virgin Islands on an automatic basis. Puerto Rico had to elect coverage. The 1950 amendments permitted coverage to be extended to Puerto Rico provided the governor of Puerto Rico certified to the President of the United States that the legislature of Puerto Rico resolved (via concurrent resolution) to elect the extension. Social Security coverage became effective in Puerto Rico and the U.S. Virgin Islands on January 1, 1951.

40.

Social Security Act Amendments of 1950, P.L. 81-734, §106 (Coverage of State and Local Employees).

41.

Wilbur J. Cohen, Robert M. Ball, and Robert J. Myers, "Social Security Act Amendments of 1954: A Summary and Legislative History," Social Security Bulletin, vol. 17, no. 9 (September 1954), p. 4, at https://www.ssa.gov/policy/docs/ssb/v17n9/index.html.

42.

In a majority vote referendum, a majority of all the eligible employees covered by the retirement system (not a majority of the eligible employees casting votes) must vote in favor of coverage.

43.

Social Security Amendments of 1954, P.L. 83-761, §101(h) (Employees Covered by State or Local Retirement Systems).

44.

James E. Marquis, "Old-Age and Survivors Insurance: Coverage Under the 1954 Amendments," Social Security Bulletin, vol. 18, no. 1 (January 1955), p. 7, https://www.ssa.gov/policy/docs/ssb/v18n1/index.html.

45.

Social Security Amendments of 1956, P.L. 84-880, §104(e) (Certain State and Local Employees).

46.

Most recently, Kentucky and Louisiana were added to the list of states authorized to operate divided retirement systems as part of the Social Security Protection Act of 2004 (P.L. 108-203, §416). The 23 states authorized to hold divided vote referendums are listed in Section 218(d)(6)(C) of the Social Security Act (42 U.S.C. §418(d)(6)(C)). In addition, under Section 218(g)(2) of the Social Security Act (42 U.S.C. §418(g)(2)), all interstate instrumentalities may divide a retirement system based on whether the employees in positions under that system want coverage.

47.

Social Security Amendments of 1956, P.L. 84-880, §104(g) (Policemen and Firemen in the States of Florida, North Carolina, Oregon, South Carolina, and South Dakota).

48.

At the time, SSA was part of the U.S. Department of Health and Human Services. The Social Security Independence and Program Improvements Act of 1994 (P.L. 103-296) established SSA as an independent agency.

49.

U.S. Congress, House Committee on Ways and Means, Social Security Act Amendments of 1983, report to accompany H.R. 1900, 98^th Cong., 1^st sess., March 4, 1983, H. Rept. 98-25, Part 1, p. 18.

50.

Social Security Amendments of 1983, P.L. 98-21, §103 (Duration of Agreements for Coverage of State and Local Employees).

51.

The State of California challenged the 1983 law prohibiting the termination of coverage on the basis that it deprived states of contractual rights without just compensation, thus violating the Fifth Amendment of the Constitution. The U.S. Supreme Court rejected California's arguments and, on June 19, 1986, ruled that the provision was constitutional under the authority of Congress to provide for the general welfare. Bowen v. Pub. Agencies Opposed to Social Security Entrapments, 477 U.S. 41 (1986).

52.

U.S. Congress, House Committee on Ways and Means, Social Security Act Amendments of 1983, report to accompany H.R. 1900, 98^th Cong., 1^st sess., March 4, 1983, H. Rept. 98-25, Part 1, pp. 18-19.

53.

Students employed by educational institutions operated by state or local governments may be covered by Social Security under the terms of a state's Section 218 Agreement with SSA.

54.

Omnibus Budget Reconciliation Act of 1990, P.L. 101-508, §11332 (Coverage of Certain State and Local Employees Under Social Security).

55.

These workers did not have Social Security coverage based on their state and local government employment. In some cases, they may have Social Security coverage based on other employment, or they may have a family connection to a Social Security–covered worker that makes them potentially eligible for Social Security spousal benefits, for example.

56.

IRS Publication 963, p. 1.

57.

In 2023, about 1.7% of government employees in Puerto Rico were not covered by Social Security. The Social Security coverage data are suppressed for Vermont in 2023 to prevent data disclosure. In 2021, about 2.5% of state and local government employees in Vermont did not participate in the Social Security system.

58.

Vermont is included in the states that have more than 90.0% of state and local government employees had Social Security coverage.

59.

Executive Order 13531, "National Commission on Fiscal Responsibility and Reform," 75 Federal Register 7927, February 18, 2010, https://www.federalregister.gov/documents/2010/02/23/2010-3725/national-commission-on-fiscal-responsibility-and-reform.

60.

The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, December 1, 2010, p. 52, https://www.ssa.gov/history/reports/ObamaFiscal/TheMomentofTruth12_1_2010.pdf.

61.

The 2025 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, June18, 2025, https://www.ssa.gov/OACT/TR/2025/index.html. See Table IV.B5 (page 75) for the projected difference between the summarized income rate and summarized cost rate for OASDI under the intermediate assumptions for the period 2025-2099. For more information on the projected financial outlook for the Social Security program, see CRS In Focus IF10522, Social Security's Funding Shortfall.

62.

OCACT, Proposed Provision F1: Starting in 2026, Cover Newly Hired State and Local Government Employees, https://www.ssa.gov/OACT/solvency/provisions/charts/chart_run444.html.

63.

For more information, see CRS In Focus IF10564, Social Security Trust Fund Investment Practices.

64.

CBO, Options for Reducing the Deficit: 2025 to 2034, December 2024, https://www.cbo.gov/system/files/2024-12/60557-budget-options.pdf.

65.

See Section 31.3121(b)(7)-2(e) of the IRS Employment Tax Regulations at https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-31/subpart-B/subject-group-ECFR996050e2e4c4937/section-31.3121(b)(7)-2#p-31.3121(b)(7)-2(e). See IRS Revenue Procedure 91-40 at https://www.ssa.gov/slge/revenue_procedure_91-40.htm. For example, IRS Revenue Procedure 91-40 outlines a set of safe harbor formulas for defined benefit retirement systems. Benefits calculated under one of these formulas are deemed to meet the minimum retirement benefit requirement. In addition, procedures are set out by which an employer may determine whether retirement benefits calculated under other formulas meet the minimum retirement benefit requirement of the regulations with respect to an employee.

66. Laura D. Quinby, Jean-Pierre Aubry, and Alicia H. Munnell, "Do Public Workers Without Social Security Get Comparable Benefits?," CRR, April 2021, https://crr.bc.edu/briefs/do-public-workers-without-social-security-get-comparable-benefits/. The analysis and findings discussed in this CRR brief are in relation to new hires in defined benefit plans. Most state and local government employees are covered by traditional defined benefit plans. 67.

Quinby, Aubry, and Munnell, "Do Public Workers Without Social Security Get Comparable Benefits?," p. 2.

68.

A vesting period is the minimum period an employee is required to work to be eligible for a future retirement benefit.

69.

Quinby, Aubry, and Munnell, "Do Public Workers Without Social Security Get Comparable Benefits?," p. 4.

70.

Quinby, Aubry, and Munnell, "Do Public Workers Without Social Security Get Comparable Benefits?," p. 4. CRR published another two related studies thereafter. One study found that medium-tenure workers (6 to 20 years of tenure) who spent the early part of their career in noncovered government employment were at most risk, representing about 16% of noncovered public workers (or between 750,000 to 1 million annually). See Jean-Pierre Aubry et al., "What Share of Noncovered Public Employees Will Earn Benefits that Fall Short of Social Security?," CRR, April 2022, https://crr.bc.edu/wp-content/uploads/2022/04/wp_2022-4.pdf. The other study using four different datasets found that around one-third of noncovered workers fell into the medium-tenure group. See Jean-Pierre Aubry et al., "How Many Public Workers Without Social Security Could Fall Short?," CRR, April 2022, https://crr.bc.edu/wp-content/uploads/2022/03/SLP82.pdf.

71.

Quinby, Aubry, and Munnell, "Do Public Workers Without Social Security Get Comparable Benefits?," p. 5.

72.

See CRS In Focus IF12890, The Social Security Fairness Act of 2023.

73. The remaining one-third of WEP and GPO cases were mainly for federal civilian employees who were first hired before 1984. See Glenn R. Springstead, "The Social Security Windfall Elimination Provision: Issues and Replacement Alternatives," Social Security Bulletin, vol. 79, no. 3 (August 2019), pp. 1-19, https://www.ssa.gov/policy/docs/ssb/v79n3/. 74.

The WEP was enacted as part of the Social Security Amendments of 1983 (P.L. 98-21). The GPO was enacted as part of the Social Security Amendments of 1977 (P.L. 95-216) and modified as part of the Social Security Amendments of 1983 (P.L. 98-21).

75.

See CRS Insight IN12451, The Social Security Fairness Act of 2023 (H.R. 82): Background for Congress.

76.

For more information, see CRS Report R42035, Social Security Primer.

77.

U.S. Congress, Senate Committee on Finance, Social Security Amendments of 1954, report to accompany H.R. 9366, 83^rd Cong., 2^nd sess., July 27, 1954, S. Rept. 1987, p. 6.

78.

House debate, Congressional Record, vol. 100, part 6 (June 1, 1954), p. 7433.

79.

For more information, see CRS Report 98-810, Federal Employees' Retirement System: Benefits and Financing.

80.

CSRS also incorporates special rules for certain categories of workers, including federal law enforcement personnel.

81.

Law enforcement personnel are subject to mandatory retirement at age 57 or as soon as 20 years of service have been completed after age 57. See 5 U.S.C. §8335(b) for CSRS and 5 U.S.C. §8425(b) for FERS.

82.

For more information on special rules that apply to federal law enforcement officers, federal firefighters, and air traffic controllers under CSRS and FERS, see CRS Report R42631, Retirement Benefits for Federal Law Enforcement Personnel.

83.

SSA, Number of Credits Needed for Disability Benefits, https://www.ssa.gov/benefits/retirement/planner/credits.html#h3. For more information, see CRS In Focus IF10506, Social Security Disability Insurance (SSDI).

84.

Munnell, Aubry, and Belbase, "The Impact of Mandatory Coverage on State and Local Budgets," pp. 7-8.

85.

Munnell, Aubry, and Belbase, "The Impact of Mandatory Coverage on State and Local Budgets," p. 8.

86.

For more information on Social Security benefits for the worker's dependents and survivors, including basic eligibility requirements, see Table 3 (Social Security Benefits for the Worker's Family Members) in CRS Report R42035, Social Security Primer.

87.

Munnell, Aubry, and Belbase, "The Impact of Mandatory Coverage on State and Local Budgets," p. 8.

88.

For more information, see CRS Report 94-803, Social Security: Cost-of-Living Adjustments.

89.

Munnell, Aubry, and Belbase, "The Impact of Mandatory Coverage on State and Local Budgets," pp. 8-9. There is wide variation in the design of COLA provisions in state and local pension plans. For more information, including a description of COLA provisions in selected state retirement plans, see National Association of State Retirement Administrators, "Cost-of-Living Adjustments," June 2021, https://www.nasra.org/files/Issue%20Briefs/NASRACOLA%20Brief.pdf.

90.

For more information, see CRS In Focus IF11747, Social Security: Benefit Calculation Overview.

91. See Board of Governors of the Federal Reserve System, "State and Local Pension Funding Status and Ratios by State, 2002 – 2022," December 20, 2024, https://www.federalreserve.gov/releases/z1/dataviz/pension/comparative_view/line_chart/. 92.

Defined benefit plans guarantee a monthly benefit in retirement for life. In defined contribution plans, employees use the funds in their accounts as a source of income in retirement. Defined contribution plans do not provide guarantees of lifetime income unless participants purchase an annuity. In any case, these plans do not guarantee a certain level of account assets or monthly annuity payable from the account.

93.

For more information, see CRS Report RL30023, Federal Employees' Retirement System: Budget and Trust Fund Issues.

94.

Congress enacted the mandatory coverage provision in April 1983, effective for federal employees hired January 1, 1984, or later. Congress enacted the Federal Employees' Retirement System Act of 1986 (P.L. 99-335) in June 1986.

95.

GAO, Social Security: Implications of Extending Mandatory Coverage to State and Local Employees, GAO/HEHS 98-196, August 1998, http://www.gao.gov/archive/1998/he98196.pdf.

96.

For more information, see CRS Report 98-810, Federal Employees' Retirement System: Benefits and Financing.

97.

Munnell, Aubry, and Belbase, "The Impact of Mandatory Coverage on State and Local Budgets," p. 9.

98. Jean-Pierre Aubry and Kevin Wandrei, "2021 Update: Public Plan Funding Improves as Workforce Declines," CRR, June 2021, https://crr.bc.edu/briefs/2021-update-public-plan-funding-improves-as-workforce-declines/. 99. Board of Governors of the Federal Reserve System, "State and Local Pension Funding Status and Ratios by State, 2002 – 2022," December 20, 2024, https://www.federalreserve.gov/releases/z1/dataviz/pension/comparative_view/line_chart/. 100.

Glenn R. Springstead, "Vesting Requirements and Key Benefit-Formula Features of State and Local Government Pension Plans," Social Security Bulletin, vol. 81, no. 1 (February 2021), p. 5, https://www.ssa.gov/policy/docs/ssb/v81n1/index.html.

101.

Springstead, "Vesting Requirements and Key Benefit-Formula Features," p. 21.

102.

The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, p. 52.

103.

For more information, see CRS In Focus IF10492, An Overview of the Pension Benefit Guaranty Corporation (PBGC).

Social Security Coverage of State and Local Government Employees

Changes from March 19, 2024 to April 8, 2026

Contents

Figures

Tables

Summary

Introduction

Footnotes