A rehired annuitant is a retiree who is hired by his or her employer or another employer that participates in the same retirement system as the former employer. This includes a former participant in a state retirement system who has previously retired and who is either (1) currently receiving retirement benefits or (2) has reached normal retirement age.

A rehired annuitant either draws a retirement benefit from that retirement system, or has reached retirement age under the retirement system.

Rehired annuitants are excluded from mandatory social security coverage under FICA. However, all retirees hired after March 31, 1986, are covered for Medicare.

Employees Covered by a Section 218 Agreement

An individual in a position covered by a section 218 agreement providing for full coverage is subject to social security tax under the terms of the 218 agreement. The 218 agreement takes precedence over the state-retirement-system rules that would exclude the position from social security. For example, if a teacher who was covered under a state retirement system retired and was rehired as a bus driver, a position covered by a 218 agreement, the individual is subject to social security tax under the terms of the 218 agreement.

The regulations provide that a rehired annuitant is deemed to be a qualified participant in the retirement system without regard to whether he or she continues to accrue a benefit or whether the distribution of benefits under the retirement system has been suspended pending cessation of services.

In this case, contributions do not have to be made to the state retirement system on the retired annuitant's behalf, and the employee is not subject to social security tax. Medicare tax applies because the employee terminated the employment relationship after March 31, 1986, and no longer qualifies for the continuing employment exception.

Example. A teacher who is not of retirement age retires from service due to a permanent disability. She was a member of the state teachers' retirement system and begins receiving annuity payments from the system. In 2007 she returns to work for the same school district as a part-time tutor. The school district has no 218 agreement, and the position is not covered by a state retirement plan. The teacher is a rehired annuitant and is not subject to social security tax. Because she was rehired after March 31, 1986, her wages are subject to Medicare tax.

Example. An employee of a school district was covered under the state employees' retirement system. The individual retired in 2003, began receiving a pension and was subsequently hired by a school district covered by mandatory social security. This individual is not a rehired annuitant, and is subject to social security and Medicare tax.