Chapter 14: Addendum

COVID-19: information for DRS employers

This page provides updates for DRS employers related to the COVID-19 pandemic. Please note that any official guidance on retirement reporting or other requirements will be posted as a Notice to Employers. Also, information for DRS customers is posted in DRS’ response to COVID-19

Update July 1, 2020 – Employer notice

The following Employer Notice has been posted:

Update April 1, 2020 – Employer notices

The following Employer Notices have been posted:

DRS has received several retirement reporting questions from employers related to COVID-19, including questions about whether DRS will allow an extension of reporting deadlines if an employer’s operations are closed as a response to the outbreak.

We appreciate your questions and concerns, and we are committed to doing all we reasonably can to lessen the impact of retirement-related requirements during these difficult times.

While DRS can waive interest and late reporting penalties in certain cases, the law relating to contributions is not something DRS has the administrative authority to change.

DRS will follow up with an Employer Notice once we have more information on how to handle these matters. In the meantime, if you know you will be closed or will be unable to report/pay contributions for a particular payroll, please contact the DRS Employer Support Services team.

Thank you for your continued patience as we work through the best way to support our members and employers during this extraordinary event.

Update March 17, 2020 – DRS closed to in-person services

To safeguard our customers and team members, the Department of Retirement Systems is now closed to in-person visits and onsite services at the agency’s building in Tumwater. Online services and phone/email contacts are still available, and we continue to process retirement applications and benefit payments as normal.

Details are available on the DRS website. We ask that you share this information with your employees.

Thank you for your assistance. It is greatly appreciated.

Update March 18, 2020 – questions regarding furloughs/layoffs/return to work

These are extenuating times, where our state’s emergency planning response to the COVID-19 outbreak is changing by the day. DRS has received several retirement reporting questions from employers about how furlough/layoffs may impact pension benefits and 2008 ERF return to work restrictions.  We are working with the state Office of Financial Management on what next steps would be best to alleviate negative impact to pension benefits and retiree working restrictions.  Thank you for your continued patience.  We will follow up with an Employer Notice once we have more information on how to handle these.

Update April 1, 2020 – Employer notices

The following Employer Notices have been posted:

Update April 21, 2020 – CARES act items

We have posted information about two CARES Act-related items that might impact certain DRS customers:

  • Requesting a coronavirus-related distribution and this withdrawal is no longer available
  • Waiver of required minimum distributions

GASB Standards and FAQ

GASB standards

In June 2012, the Governmental Accounting Standards Board (GASB) issued new standards for pension accounting and reporting — standards that significantly changed the way state and local governments calculated and reported the costs and obligations associated with providing pension benefits for their employees.

The implementation of the standards occurred in two phases. Statement 67, which addresses financial reporting for pension plans, became effective for financial statements for fiscal years beginning after June 15, 2013.  The Department of Retirement Systems implemented the standard for its fiscal year ending June 30, 2014.

Statement 68 established accounting and financial reporting requirements for government employers that prepare GAAP-compliant financial statements. Statement 68 became effective for fiscal years beginning after June 15, 2014.

Included in Statement 68 is the requirement that employers recognize their proportionate share of any unfunded pension obligation (also called the “net pension liability”) as a balance sheet liability in their financial statements. In addition, employers are required to recognize certain pension expenses immediately rather than extending them over a period of time.

The standards are especially complex here in Washington given the number of pension plans administered by the state and the large number of employers participating in each plan. With that in mind, DRS has compiled resources to assist employers with these reporting requirements.

We encourage you to review these resources and to discuss the reporting requirements with your auditors.

GASB frequently asked questions

1. As a DRS employer, what are the main GASB Statement 68 requirements for my organization?

GASB Statement 68 significantly changed pension accounting and financial reporting for governments by separating pension accounting methodology from pension funding methodology.

GASB Statement 68:

  • Requires employers to report their proportionate shares of a net pension liability or asset in their financial statements
  • Changed the amount employers report as pension expense and deferred inflows and outflows in their financial statements
  • Changed note disclosures and required supplementary information based on accounting measures

2. Who is affected by GASB statements?

DRS-administered pension plans and participating employers who prepare financial statements in accordance with Generally Accepted Accounting Principles (GAAP) are impacted.

3. How do the GASB statements impact DRS-covered employers?

The standards state that employers participating in cost-sharing, multiple-employer plans must report a net pension liability and expense equal to their proportionate shares of any collective net pension liability and expense in their financial statements.

4. What cost-sharing, multiple-employer plans does DRS administer?

  • All plans in the Public Employees’ Retirement System (PERS)
  • All plans in the Teachers’ Retirement System (TRS)
  • All plans in the School Employees’ Retirement System (SERS)
  • All plans in the Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF)
  • All plans in the Public Safety Employees’ Retirement System (PSERS)

5. Who provides employers with their allocation of the net pension liability (NPL)?

DRS has published allocation percentages in the DRS Participating Employer Financial Information (PEFI) annual report for each of the employers participating in the DRS-administered plans; however, an AICPA white paper states that the employers and the employer auditors have a responsibility to verify and recalculate amounts specific to the applicable employer.

6. What is the basis used for calculating the employers’ proportionate share?

Except for LEOFF plan 1, DRS calculates the proportionate shares using employer contribution transmittals DRS received and processed within the department’s fiscal year ended June 30. 

Processed transmittal summaries are available for employers through the Employer Reporting Application (ERA) under Processes\Reports\Processed Transmittal Summary to assist employers in confirming the contributions used in determining their employer allocation of the NPL for each plan DRS administers. Employers and their auditors are encouraged to use this information to help meet the financial reporting requirements of GASB 68. Instructions for accessing the processed transmittal summaries and FAQs for understanding the employer and nonemployer allocation schedules are included in the ERA Contribution Reconciliation

 LEOFF plan 1 allocations are based on the total historical employer contributions to LEOFF Plan 1 (1971-2000) and LEOFF Plan 1 retirement benefit payments during the department’s fiscal year ended June 30.

7. Where can I find the NPL of the plans my organization participates in?

The Washington Office of the State Actuary (OSA) calculates a collective net pension liability (NPL) for each of the plans DRS administers. The NPL of each plan is reported in the notes to the plan financial statements in the DRS Annual Comprehensive Financial Report (ACFR), the required supplementary information of the DRS ACFR and the notes following the employer and non-employer allocation schedules within the DRS PEFI.

8. What information does DRS provide employers for GASB 68 financial reporting requirements?

Each year, DRS produces an Annual Comprehensive Financial Report (ACFR) and a Participating Employer Financial Information (PEFI) publication for the most recent fiscal year ending June 30. These reports are posted on the DRS website no later than Nov. 1. The DRS ACFR includes note disclosures and Required Supplementary Information (RSI) at the plan level. The PEFI includes employer and non-employer allocation schedules, the schedules of collective pension amounts, amortization schedules, and additional notes. The plan-level schedules in the PEFI are displayed in dollars. Before 2018, schedules were displayed in thousands.

Processed transmittal summaries are available for employers through the Employer Reporting Application (ERA) under Processes\Reports\Processed Transmittal Summary to assist employers in confirming the contributions used in determining their employer allocation of the NPL for each plan DRS administers. Employers and their auditors are encouraged to use this information to help meet the financial reporting requirements of GASB 68. Instructions for accessing the processed transmittal summaries and FAQs for understanding the employer and non-employer allocation schedules are included in the ERA Contribution Reconciliation

9. Are the schedules DRS provides to employers audited in the DRS PEFI?

Yes. DRS contracted with its ACFR auditors, CliftonLarsonAllen, to express a written opinion on the schedule of employer and non-employer allocations and the schedule of collective pension amounts for each DRS-administered multiple-employer, cost-sharing retirement plan.

Unaudited schedules of employer and non-employer allocation schedules in excel format are available upon request.

10. Does DRS provide examples of journal entries and note disclosures employers need to meet the financial reporting requirements of GASB 68?

No. Even though DRS does provide plan information and audited allocation percentages for employers, detailed accounting instructions should come, as always, from the State Auditor’s Office (for local governments), the state Office of Financial Management (for state agencies) and the Office of Superintendent of Public Instruction (for school districts).

11. What is census data? Will my organization be selected for census data testing?

Census data refers to retirement system members’ information, including birth date, gender, date of hire, years of service, compensation and date of termination. Census data is used in the actuarial valuation that determines net pension liability. 

An AICPA whitepaper has provided guidance regarding plan management’s responsibility for the completeness and accuracy of census data. Annual testing of the census data is performed to confirm the completeness and accuracy of the data. Testing of the census data is currently being performed by CliftonLarsonAllen (CLA), DRS’ external auditors. CLA has audited the DRS ACFR since 2012. CLA has also been the auditor for the PEFI since the first report was published. The PEFI provides employers with information necessary to meet GASB 68 reporting requirements.

Employers who are selected by CLA to participate in the annual census data audit will be contacted by DRS Financial Reporting in late fall of each year they are selected. 

12. Where can I find supporting audited information at the plan level?

ACFR and PEFI publications for the most recent fiscal year ending June 30 are posted on the DRS website by Nov. 1 of each year. The DRS ACFR includes note disclosures and Required Supplementary Information (RSI) at the plan level. The PEFI includes employer and non-employer allocation schedules, the schedules of collective pension amounts, amortization schedules and additional notes. Employers and their auditors are encouraged to use this information to help meet the financial reporting requirements of GASB 68.

Prior years ACFRs and PEFIs are available online through the Washington State Library – WA Secretary of State.

As a participating employer of a DRS administered plan, DRS’ external auditors may select your organization to participate in the annual audit of the ACFR and PEFI. If selected, your organization will be contacted by DRS Financial Reporting with a request to provide information directly to DRS’ external auditors.

If you have any questions or comments, please contact DRS Employer Support Services by emailing drs.employersupport@drs.wa.gov or calling 360-664-7200 (in the Olympia area) or 800-547-6657.

DRS Education & Outreach can help

The DRS Education & Outreach (E&O) team increases awareness of retirement benefits and promotes retirement education for your employees. The team presents complex retirement information in an easy-to-understand manner, answers questions and helps your employees better understand their retirement benefits and options. We offer educational presentations on retirement system benefits and the Deferred Compensation Program (DCP). In addition to group presentations, we offer 15 to 20 minute sessions with individual employees. Typical topics include:

  • How to use online services (online account access).
  • When can employees retire?
  • Plan choice questions.
  • How the DCP savings program can help employees prepare for retirement.

We also share information at events such as benefit fairs, new employee orientations, staff meetings and conferences.

Webinars

We offer a variety of live webinars. Most webinars include a 30-minute presentation followed by a 15-minute question-and-answer session.

Nearing retirement seminars

We host retirement seminars around the state. Designed for employees who are near retirement, these seminars present information about Social Security, Medicare, retiree health insurance options and VEBA. Seminars also include important steps to prepare and apply for retirement.

Additional information

Our team will partner with you to promote retirement planning for your employees. To find out how to join DCP, schedule on-site education for your employees or communicate with your E&O team representative, see the state map or call DRS at 360-664-7005 or 800-547-6657, Option 1, ext. 47005.

More employee resources:

Employees working as substitutes in school districts & educational service districts

How to report on the transmittal report effective with the 2004-2005 fiscal/school year

Report compensation for each employee. Report days with System/Plan T1 or type code 80. Report hours for all other examples where indicated. See the chart below to determine the system, plan, type code, and if contributions are reported.

EmployeeService for youSystem/planType codeReport contributions
TRS Plan 1 MemberSubstitute teachingT080No
Substitute teaching + less than full-time contractT171Yes
Substitute teaching + full-time contractT171Yes
Full-time contract onlyT171Yes
Less than full-time contract onlyT171Yes
Substitute teaching + Classified eligible positionT171Yes
Substitute teaching + Classified ineligible positionT171Yes
Substitute teaching + Classified substituteT080No
Classified substituteT080No
TRS Plan 1 Former (withdrawn) MemberSubstitute teachingT080No
Substitute teaching + less than full-time contractT080No
Substitute teaching + full-time contractT171Yes
Full-time contract onlyT171Yes
Less than full-time contract onlyT080No
Classified ineligible positionE039No
Substitute teaching + Classified eligible position 1E2 or E332Yes
Substitute teaching + Classified ineligible positionT080No
Substitute teaching + Classified substituteT080No
Classified substituteE039No

1 ESD’s use type code 30.
2 The TRS eligible or ineligible position must be a contracted position.
3 If you know the employee does not work for any other employer, substitute reporting is optional.
4 If combined hours meet eligibility criteria. Otherwise, report type code 79 on TRS report.
5 If combined hours meet eligibility criteria. Otherwise, report type code 39 on SERS report
6 ESD’s use type code 08.

TRS – Employees working as substitutes in school districts & educational service districts

How to Report on the Transmittal Report Effective with the 2004-2005 Fiscal/School Year: Report compensation for each employee. Report days with System/Plan T1 or type code 80. Report hours for all other examples where indicated. See the chart below to determine the system, plan, type code, and if contributions are reported.

EmployeeService for you
System/planType codeReport contributions
TRS Plan 2 or TRS Plan 3 MemberSubstitute teachingT079No
Substitute teaching + teaching ineligible position2T079No
Substitute teaching + teaching eligible position2T2 or T371Yes
Teaching eligible position2T2 or T371Yes
Teaching ineligible position2,3T079No
Two teaching ineligible position2,4T2 or T371Yes
Teaching ineligible position + Classified ineligible positions2,4T2 or T371Yes
Substitute teaching + Classified eligible positionE2 or E332Yes
Substitute teaching + Classified ineligible positionT079No
Substitute teaching + Classified substituteT079No
Classified substituteE039No

1ESD’s use type code 30.
2The TRS eligible or ineligible position must be a contracted position.
3If you know the employee does not work for any other employer, substitute reporting is optional
4If combined hours meet eligibility criteria. Otherwise, report type code 79 on TRS report.
5If combined hours meet eligibility criteria. Otherwise, report type code 39 on SERS report.
6ESD’s use type code 08.

SERS – Employees working as substitutes in school districts & educational service districts

How to Report on the Transmittal Report Effective with the 2004-2005 Fiscal/School Year: Report compensation for each employee. Report days with System/Plan T1 or type code 80. Report hours for all other examples where indicated. See the chart below to determine the system, plan, type code, and if contributions are reported.

EmployeeService for youSystem/planType codeReport contributions
SERS Plan 2 or SERS Plan 3 cont’dClassified substituteE039No
Classified substitute + Classified ineligible positionE039No
Classified substitute + Classified eligible positionE2 or E332Yes
Classified eligible positionE2 or E332Yes
Classified ineligible positionE039No
Two Classified ineligible positions 1,5E2 or E332Yes
Classified ineligible position + teaching ineligible position1,2,5E2 or E332Yes
Substitute teaching + Classified eligible positionE2 or E332Yes
Substitute teaching + Classified ineligible positionT079No
Substitute teaching + Classified substituteT079No
Substitute teachingT079No
PERS Plan 1Substitute teaching + Classified eligible positionP118Yes
Substitute teaching + Classified ineligible positionT079No

1ESD’s use type code 30.
2The TRS eligible or ineligible position must be a contracted position.
3If you know the employee does not work for any other employer, substitute reporting is optional.
4If combined hours meet eligibility criteria. Otherwise, report type code 79 on TRS report.
5If combined hours meet eligibility criteria. Otherwise, report type code 39 on SERS report.
6ESD’s use type code 08.

Substitutes – the six most common reporting errors

Here are the most common reporting problems that school district and ESD employers are encountering when reporting substitutes beginning with the 2004-2005 school year.

Wrong type code

There are new type codes for reporting substitutes. The most common problem that employers are encountering is using the wrong type code when reporting a substitute. DRS provides a chart for determining which type code to use when reporting a substitute who is not a retiree.

Reporting retirees as substitutes

The only type codes that you can use for reporting a retiree who returns to work are 97, 98, or 99. Do not use the substitute codes for reporting retirees. Refer to this chart for which type code to use when reporting a retiree working as a substitute.

Substitute to active member within the same month

How to report an employee who began employment as a substitute and then became an active member within the same month:

  • If earnings were reported in error as a substitute, back out the compensation and hours/days using the substitute type code.
  • Report an end date for the substitute service.
  • Let the data process. If you are using WBET, the data will process overnight.
  • Next, report the begin date for the active service time using active member type codes.
  • Report all compensation, contributions, and hours/days for the active member for the entire month using active member type codes. You will need to determine if the compensation, contributions, hours/days can be reported via WBET or if you will need to report this information via your own payroll system.

Substitute to active member in a new month

How to report an employee who began employment as a substitute, then on the first of the following month became an active member:

  • Report an end date for the substitute service.
  • Let the data process. If you are using WBET, the data will process overnight.
  • Next, report the begin date for the active service time using active member type codes.
  • Report all compensation, contributions, and hours/days for the active member using active member type codes. You will need to determine if the compensation, contributions, hours/days can be reported via WBET, or if you will need to report this information via your own payroll system.

Substitute to active member, but no substitute end date transmitted

What to do if a begin date for the active service was transmitted, but an end date for the substitute service was never transmitted: While it is strongly recommended that employers transmit the end date for the substitute service, DRS now has an edit in place that will automatically insert an end date for the substitute service that is one day prior to the begin date transmitted for the active service. However, any compensation and hours/days reported in error as a substitute will need to be backed out and re-reported as an active member. This type of back out must be done manually at DRS. Contact ESS for assistance.

Active member to substitute within the same month

An employee working as an active member, for example in November, becomes a substitute mid-month:

  • Report all compensation, contributions, and hours/days for the entire month of November with active member type codes.
  • Report the end date for the active member as the last day of the month–in this case as November 30th.
  • Let the data process. If you are using WBET to transmit the data, it will process overnight.
  • Report a begin date of December 1 for the substitute service. Because the employee was working as an active member through part of the month, all service is reported as active. Begin transmitting only compensation and hours/days for the substitute service beginning December 1 with the substitute type codes using the substitute chart.

Judicial Benefit Multiplier information

The Judges Benefit Multiplier (JBM) Program creates a new option for justices and judges to increase the benefit multiplier used in their retirement benefit calculation.  Those who are members of PERS prior to 2007 may choose to participate. New justices and judges who choose to enter PERS membership on or after January 1, 2007 are mandated to participate.

Justices and judges with prior PERS service

Beginning January 1, 2007 through December 31, 2007 members of the Public Employees’ Retirement System (PERS) serving as justices or judges may make a one-time irrevocable election to join the JBM Program, and terminate JRA membership if applicable.

Justices and judges with no prior PERS service

Justices and judges who choose to enter PERS membership beginning January 1, 2007 are mandated into PERS Plan 2 and the JBM Program.

Justices and judges currently contributing to JRA

Judicial members who do not elect to join the JBM program can continue contributing to JRA. New judicial members cannot contribute to JRA.

JBM Contribution Rates

Refer members to the Judicial Benefit Multiplier member information for answers about eligibility and impacts to retirement benefits.

What forms do I need to enroll a judge or justice into the JBM program?

Select from the categories below:

New employee – prior participation in JBM

Retirement Status Form

Beneficiary Designation Form

Member Information Form (If the employee is a PERS Plan 3)

New employee – new member of PERS

Retirement Status Form

Beneficiary Designation Form

What are the reporting requirements for JBM?

To report JBM data correctly, you will need to update your payroll and business processes. Refer to the following reporting requirements:

Employer handbook updates

Although PERS JBM changes have been added throughout the Handbook, here are the major updates:

DRS email 06-023

Additional JBM Information & Update to Technical Reporting Requirements

DRS email 06-021

Technical Specifications for Judicial Benefit Multiplier Program

JBM legislation

For more information, refer to the Revised Code of Washington (RCW):

JRA: 2.14.115

TRS: 41.32.58141.32.58441.32.587

PERS: 41.40.12441.40.12741.40.40441.40.40841.40.76041.40.76341.40.76741.40.77041.40.87041.40.87341.40.87741.40.880

Actuarial funding of state retirement systems: 41.45.20041.45.203

OASI Social Security for public employers

Old Age and Survivors Insurance (OASI) program

Social Security and public employees

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

In 1951, Section 218 of the Act authorized states to voluntarily elect Social Security coverage for public employees. These Federal-State Agreements, often referred to as Section 218 Agreements, were entered into with the Social Security Administration. The governor of each state assigns an agency to administer its Section 218 Agreement. DRS is the current State Social Security Administrator.

Today, most public employees who are members of a qualifying retirement system cannot participate in Social Security through their public employment unless their retirement system group is covered by a Section 218 Agreement. Contact your employer if you have questions about your Social Security coverage. Employers can contact DRS at drs.oasi@drs.wa.gov with questions about an agency’s Social Security coverage status.

DRS is the state Social Security administrator

Effective July 1, 2009, the Department of Retirement Systems (DRS) became the State Social Security Administrator of the Old Age and Survivors Insurance (OASI) Program. DRS is responsible for administering the voluntary provisions of Social Security and Medicare coverage for public employers in the state of Washington. Voluntary coverage is also known as Section 218 coverage (pursuant to Section 218 of the Social Security Act). DRS is the liaison between public employers, the Social Security Administration (SSA) and the Internal Revenue Service (IRS) for coverage-related issues and questions.

History of Washington’s Social Security and Medicare coverage for public employees

History of Washington’s Social Security and Medicare Coverage for Public Employees.

Each time coverage for a new group of employees is added to Washington’s Section 218 Agreement, a modification to the Agreement is submitted to the Social Security Administration for approval.

Effective dateDescription
July 31, 1951Original Section 218 Agreement entered into between Washington and the Federal government. Social security coverage (also referred to as “absolute coverage”) is extended to all non-retirement system members of all state agencies.
Coverage also extends to political subdivisions that voluntarily enter into an agreement with the state.
Elected officials were excluded from coverage.
June 11, 1953Agreement amended: the term ‘employee’ to include an officer of the state or of a political subdivision (elected officials), except officials compensated on a fee basis (for example, a notary public).
January 1, 1955States could extend OASI coverage to retirement system members (with exception of police officers and fire fighters). Washington chose to do so. Modification No. 61.
January 1, 1955Washington State University extended coverage to members of TIAA and Aetna plans. Modification No. 74.
January 1, 1955University of Washington extended coverage for members of TIAA and Aetna plans. Modification No. 81.
January 1, 1956All TRS members employed by state agencies, school districts and institutions of higher education were covered. Modification No. 141.
July 1, 1957All PERS members employed by state agencies and institutions of higher education (school districts were not included) were covered. Modification No. 156.
August 28, 1958Police and fire fighter positions covered by a retirement system can obtain coverage through a referendum election process, and are considered separate coverage group. Washington opted to allow this via Modification No. 222.
July 1, 1966Employees covered for Social Security under a Section 218 Agreement are automatically covered for Medicare.
April 20, 1983Section 218 agreements cannot be terminated unless the entity is legally dissolved.
April 1, 1986Medicare-only coverage is mandatory for all employees hired on or after this date, unless specifically excluded by law.
July 2, 1991Mandatory Social Security and Medicare coverage extended to most state and local government employees, unless they are (1) members of a retirement system, or (2) covered under a 218 agreement.
January 1, 1997Election officials/workers. Wage limit set for exclusion of services by election officials and election workers. The excludable limit will be adjusted in future years by the Commissioner of Social Security. No further modification of the agreement is necessary. Modification No. 807. Amends ALL existing Modifications.
Election workers paid less than $1,500 in a calendar year beginning January 1, 2009 are excluded from FICA taxes.
July 1, 2000Student services performed in the employ of a school, college, or university on or after this date are excluded from coverage on a statewide basis. Modification No. 808
March 2, 2004SSA Form 1945 required to be given to public employees by the employer to advise that their earnings are not covered by Social Security.
June 12, 2008HB2510 authorized the divided referendum process for obtaining Medicare-only coverage for certain employees of political subdivisions hired before April 1, 1986.
July 1, 2009Department of Retirement Systems (DRS) became the State Social Security Administrator, replacing the Employment Security Department (ESD).

Social Security and Medicare for police officers and fire fighters

Social Security and Medicare for Police Officers and Fire Fighters

  • Before 1959—if a police officer or fire fighter position was enrolled in a retirement system it was mandatorily excluded from social security coverage.
  • January 1, 1959—social security coverage could be acquired for police officer or fire fighter positions covered by a retirement system through a majority vote referendum election process.
  • April 1, 1986—most employees, including police officers and fire fighters, hired on or after this date are mandatorily covered for Medicare.
  • March 1, 1970—Law Enforcement Officers’ and Fire Fighters’ (LEOFF) retirement system established. Many police officer and fire fighter positions were mandated into LEOFF.
  • July 2, 1991—most state and local government employees became subject to mandatory social security and Medicare coverage, unless they were members of a qualified retirement system.
  • Before LEOFF, a fire fighter was mandated into the Fireman’s Relief and Pension Fund if the entity had two or more paid fire fighter positions.
  • If a police officer or fire fighter position was not enrolled in a retirement system at the time coverage was acquired for the regular employees of the organization, the coverage of the regular employees extended to police officer or fire fighter positions also (for example, if all non-retirement system positions obtained social security coverage, then so did the police officer or fire fighter positions).
  • If a police officer or fire fighter position did not exist at the time coverage was acquired for the other employees, coverage for the police officer or fire fighter position depended upon the situation that existed at the time the position was created.
  • If, at the time of creation, a police officer or fire fighter position was enrolled in a retirement system, coverage of other employees did not automatically extend to the police officer or fire fighter position. Coverage could only be acquired through a referendum election process.
  • In each case, the exact circumstances that existed at the time the police officer or fire fighter position was created must be determined.
  • Police officer or fire fighter positions are considered enrolled in a retirement system if enrollment had been actually required or if enrollment was mandated by law. If mandated, it does not matter that the organization might not have taken the necessary actions to enroll the police officer or fire fighter positions in the system, the police officer or fire fighter positions are considered in a retirement system.
  • 2008—HB 2510 passed. Medicare-only coverage can be acquired via a divided vote referendum for employees who were hired before April 1, 1986 and have been in continuous employment through the date of the referendum.

Divided referendum for Medicare-only

The 2008 Washington State Legislature passed a law that allows local governments to request a divided referendum in which employees can vote to participate in Medicare. It only affects employees who:

  • Do not currently pay Medicare taxes;
  • Were hired before April 1, 1986; and
  • Have been in continuous employment through the date of the referendum.

Annual invoice information

As the State Social Security Administrator, DRS is required by RCW 41.48.065 to bill participating employers for the cost of administering the program.

What is a participating employer?

A state or local government agency that is covered for voluntary Social Security under Washington’s Section 218 Agreement.

How is the annual invoice calculated?

The invoice amount is calculated using a formula based on several factors:

  • The number of OASI-covered agencies (1,294 for 2022)
  • Each participating employer’s total Social Security wage amount for the prior tax year (TY 2021)
  • The total budget amount of the OASI program ($169,164 for fiscal year 2021/2022)
  • A minimum invoice amount of $25

Glossary of Section 218 terms

Absolute Coverage Group/Non Retirement System Coverage Group – A permanent grouping of employees. For example, all the employees of a city or town. It is a coverage group for coverage purposes; the term also refers to groups of employees whose positions are not under a retirement system. Such groups are also referred to as Section 218(b)(5) coverage groups.

Application/Agreement – The contract between the State of Washington and the political subdivision to provide Social Security coverage for state and political subdivision employees under Section 218 of the Social Security Act.

Coverage Groups – Groupings by which employees must be covered under an agreement (absolute coverage group or retirement system coverage group).

Divided-vote Referendum for Medicare-only – Employees hired before 4/1/1986 and continuously employed by the same employer may vote to participate in Medicare. The employees who vote in favor will be covered. The employees who vote against will not be covered.

Employee – For purposes of a federal-state agreement, “employee” is defined in Sections 210(j) and 218(b)(3) of the Social Security Act. It includes elected officials of a state or political subdivision and volunteer fire fighters.

Form 1945 – A statement concerning jobs covered by a retirement system, but not covered by Social Security. State and local government employers are required to provide this form to employees hired on or after January 1, 2005 to advise that the position the employee works in is not covered by Social Security.

Majority-vote referendum – An election process in which members of a retirement system group vote for or against participating in Social Security. If a majority of the eligible members of the retirement system vote in favor of coverage, the state may then submit a modification to its agreement under Section 218 to extend coverage to that group.

Modification – An amendment to the written agreement between the state and the Social Security Administration to make the original agreement applicable to the services of employees not previously covered by Social Security, or to modify the original agreement in some other respect.

OASI – Old Age and Survivors Insurance. Also known as Social Security and Medicare.

Optional Exclusion – Those services that the federal law gives the state the option to include or exclude from coverage under the agreement. The political subdivision may request exclusion of the following services:

  • All classes of elective positions
  • All classes of part-time positions
  • Positions compensated solely by fees received directly from the public
  • Agricultural labor, to the extent permitted by federal law
  • By a student as permitted by federal law

Qualifying public retirement system – A pension annuity, retirement or similar fund or system established by a state or political subdivision that can be considered a replacement for Social Security. Section 31.3121(b)(7)-2 of the Employment Tax Regulations and IRS Revenue Procedure 91-40 explain the requirements for a public retirement system to qualify as a Social Security replacement.

Retirement system – A pension annuity, retirement or similar fund or system established by a state or political subdivision.

Retirement system coverage group – A grouping of employees in positions under a retirement system for Section 218 coverage purposes.

Section 218 agreement – The written agreement between the state and the Social Security Administration to provide Social Security coverage for state and political subdivision employees under Section 218 of the Social Security Act.

For more information about Social Security and Medicare coverage for public employees, contact the State Social Security Administrator at DRS:

Email: drs.oasi@drs.wa.gov

Phone: DRS OASI Program line at 360-664-7165

Additional resources and information

IRS Section 218 Frequently Asked Questions

IRS Federal-State Reference Guide (Publication 963)

IRS Toolkits for Federal, State and Local Governments

IRS Video Portal for Government Employers

Social Security Information for State and Local Government Employers

Social Security Information for Government Employees

Social Security and Medicare coverage for police officer and fire fighter positions in Washington

  • Before 1959—if a police officer or fire fighter position was enrolled in a retirement system it was mandatorily excluded from social security coverage.
  • January 1, 1959—social security coverage could be acquired for police officer or fire fighter positions covered by a retirement system through a majority vote referendum election process.
  • April 1, 1986—most employees, including police officers and fire fighters, hired on or after this date are mandatorily covered for Medicare.
  • March 1, 1970—Law Enforcement Officers’ and Fire Fighters’ (LEOFF) retirement system established. Many police officer and fire fighter positions were mandated into LEOFF.
  • July 2, 1991—most state and local government employees became subject to mandatory social security and Medicare coverage, unless they were members of a qualified retirement system.
  • Before LEOFF, a fire fighter was mandated into the Fireman’s Relief and Pension Fund if the entity had two or more paid fire fighter positions.
  • If a police officer or fire fighter position was not enrolled in a retirement system at the time coverage was acquired for the regular employees of the organization, the coverage of the regular employees extended to police officer or fire fighter positions also (for example, if all non-retirement system positions obtained social security coverage, then so did the police officer or fire fighter positions).
  • If a police officer or fire fighter position did not exist at the time coverage was acquired for the other employees, coverage for the police officer or fire fighter position depended upon the situation that existed at the time the position was created.
  • If, at the time of creation, a police officer or fire fighter position was enrolled in a retirement system, coverage of other employees did not automatically extend to the police officer or fire fighter position. Coverage could only be acquired through a referendum election process.
  • In each case, the exact circumstances that existed at the time the police officer or fire fighter position was created must be determined.
  • Police officer or fire fighter positions are considered enrolled in a retirement system if enrollment had been actually required or if enrollment was mandated by law. If mandated, it does not matter that the organization might not have taken the necessary actions to enroll the police officer or fire fighter positions in the system, the police officer or fire fighter positions are considered in a retirement system.
  • 2008—HB 2510 passed. Medicare-only coverage can be acquired via a divided vote referendum for employees who were hired before April 1, 1986 and have been in continuous employment through the date of the referendum.

For more information about Social Security and Medicare coverage for public employees, contact the State Social Security Administrator at DRS:

Email: drs.oasi@drs.wa.gov

Phone: DRS OASI Program line at 360-664-7165

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