Why a substitute paycheck can put 7.5% into a retirement plan instead of Social Security, and whether you get it back when you stop subbing

If your pay stub shows a 7.5% retirement plan deduction and no Social Security, your employer is using a federal rule. A state or local government employer does not owe Social Security tax for an employee who is a qualified participant in its own retirement system. A defined contribution plan qualifies if at least 7.5% of pay goes into the employee's account, and all of it can come from you. A substitute job can count as part-time, seasonal or temporary under the IRS's definitions, and then the money has to be fully vested from the first day, which means it is yours. Getting it back when you stop subbing is a separate question. Federal rules let a plan hold the money until retirement age, so each plan decides whether you can withdraw it when you leave, how long you wait and what you give up.

Not every substitute has this deduction. Depending on the district, a sub may pay Social Security, join the state teachers' pension, or both. This post covers the federal rule, then what the retirement systems in four states say: Georgia, California, Pennsylvania and Texas. We read every page cited here on November 2, 2026. This is not tax or retirement advice. Your district's payroll or HR office knows which plan you are in, and the plan decides what you can withdraw.

What the 7.5% stands in for

Social Security tax is 6.2% of pay for the employee, and the employer pays another 6.2%. Medicare tax is 1.45% each. Before 1991, a state or local government job was generally outside Social Security unless a Section 218 Agreement between the state and the federal government covered it. Since July 2, 1991, state and local employees have been covered by Social Security and Medicare by law, unless they are qualified participants in a public retirement system or are covered under a Section 218 Agreement. The IRS's guide for public employers, Publication 963, also calls that kind of system a "FICA replacement plan."

Medicare is a separate line. State and local employees hired on or after April 1, 1986 are covered for Medicare by law unless the position is specifically excluded. So a sub hired since then normally sees a Medicare deduction next to the plan deduction.

How common this is depends on the state. Publication 963 says that in Alaska, California, Colorado, Louisiana, Massachusetts, Ohio, Nevada and Texas, less than half of state and local government employees are covered by Social Security. It also says most uncovered local government employees are police officers, firefighters and teachers.

The federal rule behind the 7.5%

Under Treasury Regulation 31.3121(b)(7)-2, a defined contribution plan meets the minimum if the allocations to your account are at least 7.5% of your pay for the period, not counting earnings. Publication 963 says contributions from both the employer and the employee can count toward the 7.5%, and a plan funded only by employee contributions also meets it. An IRS letter released in 2001 was written about part-time employees, and it put the answer directly: a state or local defined contribution plan "may be completely funded through employee contributions equal to 7.5% of the employee's compensation."

The account also has to be credited with earnings at a reasonable rate, or held in a separate trust and credited with what the trust actually earns. Whether a rate is reasonable is judged after administrative expenses are taken out.

Why the money is yours from the first day

The rule sets a stricter test for three kinds of workers, and a substitute job can fall into one of them. Publication 963 defines them this way:

• Part-time: normally works 20 hours or less per week.
• Seasonal: normally works full-time for less than five months a year.
• Temporary: works under a contractual arrangement expected to last two years or less.

For these employees, a plan replaces Social Security only if the benefit is fully vested from the first day of employment. If it is not, Publication 963 says, the employee "is subject to mandatory Social Security and Medicare tax until the employee becomes fully vested." For a defined contribution plan, the test is met if you have the right to a single payment of at least 7.5% of the pay you earned while covered, plus interest, when you leave the job.

Vested does not mean paid out the day you leave. The IRS letter says a payment counts as available on leaving "if it is available when an employee retires or reaches normal retirement age after separation from service. Thus, there is no requirement that the distribution occur at the time the employee separates from service." The federal rule makes the money yours. The plan sets when you can take it out.

What four states' plans say about getting it back

The 7.5% plan is one setup among several. These four show how far apart the answers can be.

Georgia. The Employees' Retirement System of Georgia runs the Georgia Defined Contribution Plan for temporary, seasonal and part-time employees of Georgia's state departments, institutions, boards and commissions, the State Board of Education and the Board of Regents of the University System of Georgia. It is a state plan, not a school district's, but its handbook spells out the refund rules clearly. Members contribute 7.5% of gross salary, and the employer does not contribute. ERS says "Members of GDCP are only covered for Medicare. There is no Social Security coverage." When you leave, you can apply for a refund of your contributions and interest. Taking it means you forfeit all future benefits from those contributions.

California. CalSTRS runs a Cash Balance Benefit Program for part-time and temporary educators, and each district decides formally whether to offer it. Generally, the employee and the employer each contribute 4% of gross salary, 8% together, which is more than the federal 7.5% minimum. CalSTRS says the program "can be an alternative to the CalSTRS Defined Benefit Program, Social Security and other retirement plans." When you leave, you can apply for a lump sum of your contributions, your employer's contributions and interest. It is "payable after six consecutive months following the date of termination of employment," and if you perform creditable service in those six months, the application is canceled. After one is paid, you cannot apply for another for five years.

Pennsylvania. Here the question is when a substitute joins the state pension. The Public School Employees' Retirement System (PSERS) says part-time per diem employees qualify for membership by working at least 80 days in a school year, and part-time hourly employees by working at least 500 hours. Until you qualify, your employer may either withhold defined benefit contributions from the first day or wait. If contributions were withheld and you did not qualify by the end of the school year, PSERS refunds them automatically.

Texas. The Teacher Retirement System's rules define a substitute as "a person who serves on a temporary basis in the place of a current employee." Under 34 Texas Administrative Code 25.4, substitutes in otherwise eligible positions may qualify for membership if they "serve for at least 90 days in one school year and purchase the service credit." That means having the days and salary verified and paying the actuarial cost, so under this rule, credit for substitute days is bought afterward. Whether Social Security or a plan comes out of a Texas sub's pay depends on the district.

If you are retired and subbing

Publication 963 gives an example about a retired teacher who subs. A teacher retires from a district that was in a statewide teachers' retirement system and had no Section 218 Agreement, starts drawing benefits, and "later becomes a substitute teacher in another school district that participates in the same statewide system." That substitute is a rehired annuitant: not subject to mandatory Social Security tax, but subject to Medicare tax. How much a retiree can earn while subbing is a separate rule, set by each state's system. Our posts on CalSTRS's earnings limit and on the limits in Oklahoma and Illinois cover three of them.

Taxes on a refund

CalSTRS says its lump sum may be eligible to roll over into an IRA or another plan that accepts rollovers. If you take cash instead, IRS Tax Topic 558 describes a 10% additional tax on certain early distributions taken before age 59½. It lists exceptions, including distributions made after you left your employer after reaching age 55. It also says a state or local government 457 plan isn't a qualified retirement plan for this tax. Which rules apply depends on the plan's type and your age. The plan's refund form explains its withholding, and a tax professional can say what it means for you.

How to tell which one you have

• Read the pay stub. Look for a Social Security line (it may say OASDI, for Old-Age, Survivors and Disability Insurance), a Medicare line and a retirement plan line.
• Check your W-2. Box 4 is "Social security tax withheld." Box 6 is "Medicare tax withheld." If box 6 has an amount and box 4 does not, no Social Security tax was withheld from that job.
• Ask payroll five things. The plan's name and who runs it, whether you can withdraw when you leave or only at retirement age, how long you wait, whether a refund gives up service credit or employer money, and what fees apply.
• Ask the plan. Its own rules decide what you can take out.
• For coverage questions, Publication 963 sends employers to their State Social Security Administrator, listed at ncsssa.org.

What we can't tell you

• Which plan your district uses. We don't name districts, and the answer is in your district's payroll records.
• Whether to take a refund. A refund can give up future benefits or service credit, and the tax result depends on your age and the plan.
• Other states' rules. Ohio, Illinois and other states have their own systems and their own refund rules. STRS Ohio's pages would not load for us on November 2. Your state retirement system's own site is the source.
• What uncovered work means for a future Social Security benefit. The Social Security Administration answers that, and its pages would not load for us on November 2.
• Changes after November 2, 2026. Plans change their rules. Check the date on any page you rely on.

Learn more: app.getsubhero.com

Plans start at $6.99/month. Works with Frontline Absence Management.