A Section 218 Agreement is a voluntary agreement between the State and the Social Security Administration (SSA) to provide Social Security and Medicare Hospital Insurance (HI) or Medicare HI-only coverage for State and local government employees - authorized by Section 218 of the Social Security Act.
Currently, all 50 states have a Section 218 Agreement with the Social Security Administration.
What's interesting about Section 218 Agreements is that they cover positions, not individuals. If the position is covered for Social Security and Medicare under a Section 218 Agreement, then any employee filling that position is subject to Social Security and Medicare taxes. Employees covered under a Section 218 Agreement have the same coverage and benefit rights as employees in the private sector.
According to the Social Security Administration:
Public employees are brought under a Section 218 Agreement in groups known as coverage groups. There are two basic coverage groups: absolute coverage groups and retirement system coverage groups. An absolute coverage group is composed of employees whose positions are not covered under a public retirement system. A retirement system coverage group is composed of employees whose positions are covered under a public retirement system.
Basically, this law represents an assurance that participation in the Social Security program is a viable part of employee benefit packages that are available to public employees. Each state has a Section 218 Agreement with the Social Security Administration, and it is still in effect.
Congress made significant legislative changes to the Social Security Act and the Internal Revenue Code in both 1986 and 1991. They mandated Social Security and Medicare coverage for certain public employees. These changes have significantly increased the responsibilities of state and local government employers.
Learn more about Section 218 Agreements from the SSA website here.