Certified Payroll Professional Practice Exam

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What does a Section 218 Agreement provide in terms of state or local government employees?

  1. Social Security tax withholding

  2. Retirement benefits

  3. Unemployment compensation coverage

  4. Exemption from Social Security taxes

The correct answer is: Unemployment compensation coverage

A Section 218 Agreement provides coverage for state and local government employees under the Social Security system. This means that employees covered by a Section 218 Agreement have Social Security tax withholding, ensuring that they contribute to the Social Security program. While retirement benefits are related to Social Security, they are not specifically addressed by a Section 218 Agreement. Exemption from Social Security taxes is inaccurate because, as mentioned, a Section 218 Agreement ensures Social Security tax withholding for covered employees. Unemployment compensation coverage, on the other hand, is a separate benefit not directly provided by a Section 218 Agreement.

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