Understanding Medicare Qualified Government Wages
- Government workers may be taxed differently for Medicare than private sector employees. Learn about Medicare qualified government wages and how they're taxed.
Because many federal, state and local government employees are eligible for benefits under a separate retirement system, they're taxed differently for Medicare than private sector workers. These workers, who are referred to as Medicare qualified government employees, typically must pay Medicare taxes even if they don't qualify for other Social Security benefits. To determine whether you fall into this category and what it means for your paycheck, it can be helpful to understand Medicare qualified government wages and the rules that govern them.
What Are Medicare Qualified Government Employees?
Medicare qualified government employees, or MQGEs are government employees working in a local, state or federal sector, who accepted employment or were rehired after March 31, 1986, with some exclusions. These workers are typically eligible for benefits through the Federal Employees Retirement System, which employees must pay into via payroll deductions. The MQGE classification is used to determine an individual’s eligibility for mandatory Medicare Part A coverage, and may affect how they're taxed.
What Does It Mean to Be a Medicare Qualified Government Employee?
Coverage in Part A, Medicare’s hospitalization component, is mandatory for MQGEs who turn 65 or are otherwise eligible to begin receiving benefits. Accordingly, these employees are subject to Medicare taxes during their working years. However, because MQGEs don’t receive other Social Security benefits, such as disability insurance, they’re typically taxed at FICA’s Medicare-only rate and don't have to pay Social Security taxes. Some state and local government employees may be covered under Section 218 agreements, voluntary arrangements in which states provide eligible retirees with Medicare Part A coverage.
Do MQGEs Pay Premiums for Medicare Coverage?
Whether an MQGE must pay a monthly premium for Medicare coverage depends on how long they’ve worked in a qualifying position. MQGEs who’ve served in a qualifying position for at least 40 calendar quarters, or 10 years of regular employment, don’t have to pay monthly premiums for Original Medicare Part A. Qualifying employees who’ve worked between 30 and 40 quarters must pay a partial premium for benefits, while individuals who’ve worked fewer than 30 quarters must pay the full premium. MQGEs who wish to enroll in general medical benefits through Part B or a Part D prescription drug plan must pay the program's standard monthly premiums for these components.
Can Government Employees Hired Prior to April 1, 1986 Be Considered MQGEs?
No. Regardless of their position, any worker hired prior to April 1, 1986 isn’t considered an MQGE. However, these employees may qualify for Medicare through a Section 218 agreement between their state and the Social Security Administration. Available benefits may depend on whether an individual qualifies for a public retirement system, such as FERS.
What Occupations Don't Fall Under the Guidelines for Medicare Qualified Government Wages?
Government workers don't qualify as MQGEs if they fall into one of the following categories:
- Temporary employees such as emergency relief workers
- Inmates performing work for pay during incarceration
- Institutionalized or hospitalized patients hired to perform services by their facility of residence
- Students hired by the universities they attend
- Election workers receiving an annual salary of less than $1,500
- Non-resident aliens who have certain types of visas
How Can You Tell If You’re Receiving Medicare Qualified Government Wages?
If you're eligible to receive benefits through the Federal Employees Retirement System, you're probably an MQGE earning qualified wages. Workers who've been employed in both federal and public sector jobs, can determine if they're receiving Medicare qualified government wages by examining their pay stubs to see how many quarters they paid Medicare taxes. If you’re still unsure whether you’re earning Medicare qualified government wages, ask your employer, who can provide additional information.
When Are Government Workers Exempt From the Mandatory Medicare Tax?
Government workers may be exempt from the mandatory Medicare tax if they meet the following criteria:
- The worker belongs to a qualifying public retirement system, such as FERS.
- The worker was employed on or before March 31, 1986.
- The worker didn’t take the position to avoid paying a Medicare tax.
- Employment has been continuous since on or before March 31, 1986.
Where Can You Get Additional Information About Medicare Qualified Government Wages?
If you want to find out more about Medicare qualified government wages and how they may affect your taxes, contact a state Social Security administrator. You can find your local administrator by visiting the National Conference of State Social Security Administrators.