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The Reality of Social Security Opt-Out

I've written a lot about my desire to opt-out of the Social Security system. I haven't written about the people who legally can, or already have. That's right — my favorite "reform" option already exists! The catch is that I'm not eligible.

But some people are. These people can fill out IRS form 4029 (PDF), the "Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits". Who is eligible? Members of a "recognized religious group" provided that:

  • It is conscientiously opposed to accepting benefits of any private or public insurance that makes payments in the event of death, disability, old age, or retirement; makes payments for the costs of medical care; or provides services for medical care (including social security and Medicare benefits).
  • It has provided a reasonable level of living for its dependent members.
  • It has existed continuously since December 31, 1950.

You must be (1) a member of a religious group that (2) is ideologically opposed to insurance and (3) takes care of its dependent members and (4) isn't new.

Thus, I'm blocked from setting up a sham religion for the sole purpose of opting out of Social Security. It wouldn't work anyway; I'm in no way opposed to insurance and I have no desire at all to be part of a semi-socialist "dependent members" group.

It's curious that the opt-out provision is for religions that are opposed to insurance. Instead of, for example, an opposition to stealing. My opposition to Social Security has nothing whatever to do with insurance. And Social Security isn't insurance anyway, as the government's own brief in Fleming v. Nestor explains:

The OASI [Old-Age and Survivors Insurance] program is in no sense a federally-administered 'insurance program' under which each worker pays premiums over the years and acquires at retirement an indefeasible right to receive for life a fixed monthly benefit, irrespective of the conditions which Congress has chosen to impose from time to time.

While the Act uses the term 'insurance,' the true nature of the program is to be determined from its actual incidents.

I think Social Security should be voluntary. You shouldn't even have to give a reason for opting out — although I can give an earful to anyone willing to listen.

IRS form 4361 is similar in nature but only applies to ministerial earnings, rather than being a complete and total opt-out like 4029. I know someone (in meatspace) who was formerly a minister and used 4361. He later opted back in to Social Security by filing IRS form 2031, but this option is no longer available — it was a limited-time offer and had to be done by 2002.

Federal government employees were not covered by Social Security until 1984. People hired since then have been under Social Security, but those already employed before 1984 were allowed to remain outside the system if they chose to. This change in 1984 applied to members of Congress, too.

The status of state government employees varies. Fifteen states (that list only has fourteen, I think the missing one is Colorado), or portions of those states, have alternate public pension plans for their state employees. Beginning in 1991, the only way a state/local government employee can be exempt from Social Security is if they're covered by a different public pension plan.

The most famous local government opting out of Social Security is that of Galveston county in Texas. President Bush went to Galveston in April to talk about Social Security reform, and talked with people in that alternate plan. The loophole that allowed municipal governments — not individuals, I stress — was closed in 1983. No more state/local governments will be able to set up their own systems. This Heritage Foundation research piece contains some concrete examples of groups who have opted out. (Scroll way down to "Some US workers Already Participate in Successful Private Pension Plans".)

For people in the private sector, the religious exception is all I've found. I don't qualify for it. And I don't want to become a state employee just to avoid Social Security. (Plus, I'd have to leave Oregon to do it.)

Tiny Island