Which Workers Don't Pay Into Social Security and Medicare

Not every worker in the United States pays Social Security and Medicare taxes. Certain groups are exempt — meaning their paychecks are not subject to these withholdings. The most common exemption applies to certain religious groups that have formal objections to receiving government benefits. Federal employees hired before 1984, railroad workers under a separate system, and some state and local government workers also fall outside the standard withholding rules.

Understanding whether you are exempt matters because it affects what you pay now and what you can receive later. If you are exempt from paying in, you generally cannot draw Social Security or Medicare benefits when you retire or become disabled. This is a permanent trade-off, not a temporary deferral.

Key Takeaways

  • Members of certain religious groups with formal objections to government benefits can be exempt from Social Security and Medicare withholding through IRS Form 4029.
  • Federal employees hired before 1984 are covered by the Civil Service Retirement System instead of Social Security, though they may pay Medicare tax.
  • Railroad workers contribute to the Railroad Retirement Board system rather than Social Security, though the two systems coordinate.
  • Some state and local government employees are covered by their own pension systems and do not pay Social Security tax, though rules vary by employer and hire date.
  • Exemption from withholding means you cannot receive Social Security or Medicare benefits based on that work, so the decision should be made carefully.

Religious Group Exemptions and Form 4029

The most straightforward exemption is for members of recognized religious sects that oppose accepting public insurance benefits. These groups must have existed continuously since before 1950 and have a documented history of providing for their own members' needs. The Amish and certain Mennonite communities are the most well-known examples, but other groups also may have access to.

To claim this exemption, a member must file IRS Form 4029 (process for Exemption From Self-Employment Tax for Use by Members of Certain Religious Groups). The form must be filed before the first date you would otherwise owe self-employment tax. If you are self-employed, you file it with your tax return. If you are an employee, your employer files it on your behalf.

Once approved, the exemption is permanent for that individual. However, if you later leave the religious group or become ineligible, you must notify the IRS. You cannot retroactively claim benefits for years you were exempt.

Federal Employees and the Civil Service Retirement System

Federal employees hired before January 1, 1984, are covered by the Civil Service Retirement System (CSRS) instead of Social Security. These workers do not pay Social Security tax on their federal salary. They pay into CSRS instead, which provides a pension based on years of service and salary history.

CSRS employees may still pay Medicare tax, depending on when they were hired and their current status. The rules changed over time, so your specific situation depends on your hire date and whether you have worked in both CSRS and Social Security-covered positions.

Federal employees hired on or after January 1, 1984, are covered by the Federal Employees Retirement System (FERS) and do pay Social Security and Medicare taxes like other workers. If you moved from CSRS to FERS during your career, you may have credits in both systems.

Railroad Workers and the Railroad Retirement Board

Railroad workers employed by railroads covered under the Railroad Retirement Act do not pay standard Social Security tax. Instead, they and their employers contribute to the Railroad Retirement Board (RRB) system. This system is separate from Social Security but is coordinated with it.

Railroad workers pay a higher payroll tax rate than Social Security workers, but they receive benefits through the RRB rather than Social Security. The RRB provides retirement, disability, and survivor benefits. If a railroad worker has also worked in Social Security-covered employment, credits from both systems may be combined for benefit purposes, though the calculation is complex.

Railroad workers should contact the RRB directly — not the Social Security Administration — to check their earnings record and understand their benefits. The RRB maintains its own records separate from Social Security.

State and Local Government Workers With Pension Systems

Some state and local government employees are not covered by Social Security because their employer has its own pension system. These workers do not pay Social Security tax on their government salary. Instead, they contribute to their employer's retirement plan.

The rules vary significantly by state and by employer. Some government workers are covered by Social Security, some are not, and some have a choice. A worker hired by a city might be exempt, while a worker hired by the same city in a different year might be covered. Your paycheck stub should show whether Social Security tax is being withheld.

If you work for a state or local government and do not see Social Security tax on your stub, contact your human resources or payroll department to confirm your coverage status. This matters because it affects your future benefits and whether you are building credits toward Social Security retirement.

What Exemption Means for Your Benefits

Being exempt from Social Security and Medicare withholding is not a benefit — it is an exclusion. You do not pay in, and you do not receive benefits based on that work. This applies to retirement benefits, disability benefits, and survivor benefits for your family.

If you have worked in both exempt and non-exempt positions during your lifetime, you may have Social Security credits from the non-exempt work. Those credits can still result in a benefit, but it will be based only on the work where you paid in.

Some workers with government pensions that are not based on Social Security contributions face a Government Pension Offset or Windfall Elimination Provision if they also have Social Security credits from other work. These rules reduce the Social Security benefit to account for the government pension. Understanding how these rules explore to your situation requires reviewing your specific work history.

Checking Your Own Exemption Status

Your paycheck stub is the first place to look. If you see "Social Security" and "Medicare" tax withheld, you are covered by those programs. If you see neither, you may be exempt, or you may be in a special category.

You can also create an account on ssa.gov and view your Social Security earnings record. If you have no earnings record, or if it shows no credits for years you worked, that suggests you were exempt during those years. The record will show the years and amounts of any earnings credited to your account.

If you are unsure of your status, contact the Social Security Administration at 1-800-772-1213 or visit your local Social Security office. Have your Social Security number and recent pay stubs ready. For railroad workers, contact the Railroad Retirement Board at 1-877-772-5772 instead.

Frequently Asked Questions

Can I change my mind about a religious exemption after I have already filed Form 4029?

No. Once you are approved for exemption, you cannot retroactively undo it or claim benefits for the years you were exempt. If you leave the religious group, you must notify the IRS, and you will be subject to Social Security and Medicare tax going forward — but you cannot reclaim credits for past years.

If I worked for a government employer without Social Security coverage, can I still get any Social Security benefit?

Yes, if you also worked in Social Security-covered employment at any point. Your benefit will be based only on the work where you paid Social Security tax. However, the Government Pension Offset or Windfall Elimination Provision may reduce what you receive, depending on your situation.

Do railroad workers pay Medicare tax?

Yes. Railroad workers pay a higher Medicare tax rate than other workers (2.9% instead of 1.45% for employees), and their employers match it. They are covered by Medicare at age 65, just like other workers, even though they are not covered by Social Security.

How do I know if my state or local government job is covered by Social Security?

Check your paycheck stub for Social Security and Medicare withholding. If both appear, you are covered. If neither appears, ask your payroll or human resources department directly. They can tell you which retirement system covers your position and whether you are building Social Security credits.

What happens to my Medicare if I was exempt from Social Security withholding?

It depends on your situation. Federal CSRS employees may have Medicare coverage. Railroad workers are covered by Medicare. Religious group members who are exempt from both Social Security and Medicare withholding are not covered by Medicare and must arrange their own health insurance. Contact your specific agency or the RRB to understand your Medicare status.