Kentucky Section 218 Agreement
A Kentucky Section 218 Agreement: What You Need to Know
Section 218 of the Social Security Act allows states and their political subdivisions to participate in the Social Security program. Political subdivisions such as counties, cities, and school districts can opt-in to the Social Security program by entering into a Section 218 Agreement with the state.
Kentucky is one of the states that allow political subdivisions to enter into a Section 218 Agreement. If you are a government employer in Kentucky, understanding how a Section 218 Agreement works is crucial. Here is everything you need to know about a Kentucky Section 218 Agreement.
What is a Section 218 Agreement?
A Section 218 Agreement is a contract between a state and a political subdivision that allows the political subdivision’s employees to participate in the Social Security program. The Social Security program provides retirement, survivor, and disability benefits for eligible workers and their families.
To enter into a Section 218 Agreement, the political subdivision must first obtain the permission of the state. Once the state approves, the political subdivision must notify all affected employees of the agreement’s terms and obtain written consent from them.
What are the benefits of a Section 218 Agreement?
Participation in the Social Security program provides several benefits for government employees. These benefits include retirement, survivor, and disability benefits. Additionally, Social Security contributions are matched by the employer, which helps to increase the employee’s retirement benefits.
For employers, participating in the Social Security program can help attract and retain qualified employees. It also provides a level of financial security for employees and their families.
What are the requirements for a Kentucky Section 218 Agreement?
To enter into a Section 218 Agreement in Kentucky, a political subdivision must meet the following requirements:
1. The political subdivision must not have a retirement system of its own that covers all its employees.
2. The political subdivision must have at least one employee who is covered by Social Security.
3. The political subdivision must notify all affected employees of the agreement’s terms and obtain their written consent.
How does a Kentucky Section 218 Agreement affect payroll?
Once a Kentucky Section 218 Agreement is in place, payroll deductions for Social Security taxes must be made for all covered employees. Social Security taxes are calculated as a percentage of the employee’s wages, up to a maximum amount each year.
Employers must also contribute an equal amount to the Social Security program for each covered employee. These contributions are tax-deductible for the employer.
In conclusion, a Kentucky Section 218 Agreement is an important decision for any political subdivision that does not have its own retirement system and has at least one employee covered by Social Security. By participating in the Social Security program, employees can enjoy retirement, survivor, and disability benefits, while employers can attract and retain qualified employees and provide financial security for their families.