Mandatory Medicare: New Hire vs. New Member of a Retirement System
A "new hire" for mandatory Medicare purposes is an employee who is a member of a retirement system and who is hired or rehired by a State or local government entity after March 31, 1986. The IRS determines who is a "new hire" for purposes of mandatory Medicare.**
Generally, a new member is an individual who becomes an employee and a member of the retirement system after Social Security coverage is extended to the retirement system coverage group by way of a Section 218 Agreement." Whether an individual is considered a new member of a retirement system upon his/her return to work after a service break is based upon the retirement system rules.
IRS can determine an individual is a "new hire" for mandatory Medicare purposes while at the same time the State determines the individual is not a "new member" of a retirement system (RS). These types of situations are common when rehired annuitants are involved but can also be an issue for an employee who is not an annuitant.
A teacher retires from County A in May 1998 after 30 years of teaching. She begins receiving benefits as an annuitant of the State Teachers Retirement System (STRS). There is a shortage of qualified teachers in this County so in September 2000 she is rehired as a teacher by the same County under special provision of the STRS (new hire). She still receives her full pension. The STRS does not consider her a "new member" of the STRS under the STRS guidelines. However, she is a "new hire" under the mandatory Medicare provisions (due to the break in the employment relationship) and is subject to mandatory Medicare although STRS does not consider her a "new member" under the retirement system rules of the State.
Also, in either of the above two examples, if the new hire enters a position that is covered for Social Security under a Section 218 Agreement, mandatory Medicare is not an issue because the position is covered for both Social Security and Medicare under the agreement.
The term "new hire" is also commonly used to describe any employee who is newly hired by an employer.
**An employee, hired
before 3/31/86, who transfers from one State agency to another agency
of the same State without a termination of the overall employment relationship,
is not a "new hire" for mandatory Medicare purposes. Likewise,
a political subdivision employee, hired before 3/31/86, who transfers
from one job to another within the same political subdivision without
a termination of the overall employment relationship, is not a "new
hire" for mandatory Medicare purposes.