What Groups Are Exempt From Social Security?
Key Takeaway:
- Religious groups are exempt from Social Security: Certain religious groups, such as the Amish and some Mennonites, are exempt from paying Social Security taxes based on their religious beliefs and practices.
- Federal government employees have a different retirement plan: Federal employees, including those working for the military, have their own retirement plan and are not covered by Social Security.
- State and local government employees have varying exemptions: State and local government employees may have different exemptions from Social Security depending on their job classification and state laws.
- Railroad workers have their own retirement system: Railroad workers have their own retirement system, separate from Social Security, called the Railroad Retirement Board.
- Non-resident aliens may be exempt from Social Security: Non-resident aliens may be exempt from paying into Social Security if they meet certain criteria based on their visa status.
- Self-employed individuals before 1990 had a different system: Self-employed individuals who started their businesses before 1990 were not required to pay into Social Security initially, but may have become eligible later if they continued to operate their business.
Confused about who is exempt from Social Security taxes? You’re not alone! Knowing which groups are excluded can save you time and money. In this article, we’ll uncover the various rules and regulations around Social Security taxes.
Groups exempt from Social Security
Groups that don’t have to pay Social Security? Check out the ‘Groups exempt from Social Security’ section. It has sub-sections like Religious groups, Federal government employees, State and Local government employees, Railroad workers, Non-resident aliens, and Self-employed individuals before 1990. Get to know which ones are exempt!
Image credits: retiregenz.com by Harry Jones
Religious groups
Certain religious communities enjoy Social Security exemption based on their religious beliefs. This exemption is granted as per the provisions of the law.
These religious groups have different practices and principles, which prohibit participation in government systems and programs. These groups do not believe in insurances or state-run social welfare programs and prefer to provide mutual aid within their own community.
The Amish, Mennonites, and Hutterites are notable religious groups that are exempted. These groups’ members must apply for an exemption from the government when they turn eighteen years old. They get an exclusion in situations like medical insurance and Social Security.
It is understood that these exemptions make it difficult for children who leave their religious communities to go out on their own without any safety net. Thus, while acknowledging these exceptions to some close-knit societies, people need also to weigh the drawbacks of such exemptions and ensure necessary precautions to safeguard individuals’ interests outside of these communities.
“Why worry about social security when you’ve got a government job? It’s like having a built-in retirement plan…or at least until the next budget cut.”
Federal government employees
Individuals employed by the federal government fall under a category exempt from Social Security contributions. This group includes individuals working in various state agencies, such as Congress and the Executive Branch. Being exempt means that no Social Security taxes are deducted from their paychecks. Federal employees do not contribute to nor collect benefits from Social Security, instead, they are eligible for a pension system called the Federal Employees Retirement System.
It is essential to note that although these employees do not take part in Social Security, they still pay into Medicare and have the option of enrolling in the Thrift Savings Plan to prepare for retirement.
Why worry about social security when you’ve got job security working for the government?
State and Local government employees
Certain employees belonging to the state and local government are exempt from Social Security. These workers may include civil servants, public safety officers, teachers, elected officials, and members of the judiciary system.
State and local employees who are members of a government pension plan may be eligible for Social Security’s Windfall Elimination Provision or Government Pension Offset. This provision aims to ensure that people who receive both Social Security benefits and a government pension do not receive total benefits greater than what they would get if they were covered by Social Security alone.
It is important to note that some states have their own retirement systems rather than relying on Social Security. In these cases, retirement benefits will be provided through the state’s own plans and not through the federal program.
According to the Social Security Administration, as of December 2020, around 7.5 million state and local government workers do not participate in Social Security.
Looks like someone’s been training their whole life for a career in railroad work – congratulations, you’re exempt from social security!
Railroad workers
Railroad employees are a distinguished group of people who are not required to participate in the Social Security system due to their unique pension system. The Railroad Retirement Act of 1974 established a separate retirement and disability program for these workers, which offers benefits based on their length of service and earnings history. This is different from the Social Security system, where benefits are based on lifetime earnings. Additionally, many railroad workers have also been exempt from Medicare since 1983 due to the same pension plan.
Interestingly, railroad workers were the first group of Americans who had a retirement system that provided for income replacement following retirement. This system was established in response to a massive strike by railroad employees in the late 1800s, which brought the country’s railroads to a halt. President Theodore Roosevelt intervened by creating the first version of a retirement program for these workers in 1906, which would later be expanded and reformed over time into today’s Railroad Retirement Board.
Why worry about social security when you’re not even a resident on this planet?
Non-resident aliens
Individuals who are not residents of the United States are exempt from certain social security taxes. These people are called non-resident aliens. They include foreign students who maintain F, J, M and Q visas, professors and teachers coming to US institutions temporarily from abroad under a J or Q visa, and other non-immigrant workers such as H-1B visa holders. Non-resident aliens’ income derived from their work in the US, however, are not exempt from federal income tax withholding.
Nonetheless, non-resident aliens still have to pay taxes that apply to everyone in the US such as sales Tax, property Tax and other Federal Taxes (like excise tax). Additionally they must also file an Income Tax Return Form 1040NR or Form 1040NR-EZ. Because Social Security is primarily designed for American citizens and legal residents working in the United States for a specific period of time; this exemption gives them an added financial benefit during their stay.
Looks like being self-employed before 1990 was a real game of Social Security exemption roulette.
Self-employed individuals before 1990
Individuals who ran their own businesses before 1990 were exempt from Social Security contributions. This applied to those who were classified as self-employed under the tax code. While this exemption has since been removed, those who became self-employed after that period may still be eligible for certain tax advantages.
The issue of Social Security exemptions applies to multiple groups, including religious organizations, certain government employees, and nonprofit groups. However, in this context, we are specifically discussing the exemption that applied to self-employed individuals before 1990. It is important to note that while these business owners did not have to pay into the system during this time, they also did not accrue any benefits as a result.
It’s worth mentioning that changes made to Social Security laws can significantly affect different segments of the population. In this case, despite the exemption benefiting specific groups at the time, it was ultimately deemed unsustainable and was therefore revised.
Five Facts About Groups Exempt From Social Security:
- ✅ Some government employees, such as those working for state or local governments, may be exempt from paying Social Security taxes. (Source: Social Security Administration)
- ✅ Certain religious groups, such as members of the Amish and Mennonite communities, may be exempt from paying Social Security taxes. (Source: Investopedia)
- ✅ Nonresident aliens may be exempt from paying Social Security taxes if they meet certain requirements. (Source: Internal Revenue Service)
- ✅ Railroad workers may be exempt from paying Social Security taxes and instead pay into a separate Railroad Retirement system. (Source: Social Security Administration)
- ✅ Individuals receiving certain government benefits, such as workers’ compensation or a government pension based on work not covered by Social Security, may be exempt from paying Social Security taxes. (Source: Social Security Administration)
FAQs about What Groups Are Exempt From Social Security?
What groups are exempt from social security?
There are several groups of individuals who are exempt from paying Social Security taxes. These include:
1. Government employees:
Federal government employees who were hired before January 1, 1984, are exempt from paying Social Security taxes. Instead, they contribute to a separate pension system called the Civil Service Retirement System (CSRS).
2. Railroad workers:
Railroad workers are exempt from paying Social Security taxes and instead contribute to the Railroad Retirement System (RRS).
3. Religious groups:
Members of certain religious groups who oppose receiving Social Security benefits are exempt from paying Social Security taxes. These groups include the Amish, Mennonites, and Hutterites, among others.
4. Nonresident aliens:
Nonresident aliens who are in the United States on a temporary visa are exempt from paying Social Security taxes. However, they may need to pay payroll taxes for other programs like Medicare.
5. Students:
Students who work for a school, college, or university where they are also enrolled are exempt from paying Social Security taxes.
6. Self-employed individuals:
Self-employed individuals who earn less than a certain threshold are exempt from paying Social Security taxes. In 2021, the threshold is $400.
