Skip Ribbon Commands
Skip to main content

 Email  Share  Print

Supreme Court Rules Medical Schools Must Pay Social Security Taxes for Residents

January 13, 2011

 

The U.S. Supreme Court on Tuesday ruled unanimously that medical schools must treat residents as employees rather than students and therefore these students are not exempted from paying Social Security and Medicare taxes.

Mayo Foundation for Medical Education and Research v. United States was on appeal from the U.S. Court of Appeals for the Eighth Circuit, which ruled in June 2009 that the University of Minnesota, the Mayo Foundation for Medical Education and Research and the medical residents of both institutions must pay the Federal Insurance Contributions Act (FICA) tax on their stipends. ACE and a coalition of higher education and medical groups submitted a brief to the Supreme Court in August in support of Mayo and the University of Minnesota.

Colleges and universities generally do not have to pay FICA taxes for students who work on campus. Federal law provides a specific exemption for students who work for their institution if they are enrolled and regularly attending classes at that institution.

In 2004, after four federal appeals courts upheld the student exception for medical residents, the Treasury Department issued new regulations declaring medical residents to be employees rather than students and mandated that they and their institutions pay the FICA tax.

“The Supreme Court ruling in the Mayo case will have significant—and very expensive—ramifications for all teaching hospitals and universities,” said Ada Meloy, ACE’s general counsel. “It’s unfortunate that the Court did not accept arguments presented by Mayo and the university that we supported in our amicus brief.”

In a statement, Theodore B. Olson, counsel for the university and the Mayo Clinic, said, “As the Court itself acknowledged, medical residents are engaged in a formal and structured educational program that is an indispensable component of their medical training. The Treasury Department's regulation overlooks the important educational pursuits in which residents are engaged."

As University of Minnesota officials told Inside Higher Ed, because the university has been paying the taxes in accordance with the Treasury rules since 2005, “a ruling in Mayo’s favor would have netted $24 million in estimated refunds for residents.” Medical schools and universities around the country would have garnered an estimated more than $1 billion if the Supreme Court had overturned the lower court’s decision.

Also see:

Mayo Foundation for Medical Education and Research v. United States
SCOTUSBlog

Medical Schools Must Pay Social Security Taxes for Residents, Supreme Court Rules
The Chronicle of Higher Education (Jan. 11, 2011)

High Court Rules Medical Residents Must Pay FICA Taxes
The Minneapolis Star Tribune (free reg. req) (Jan. 12, 2011)

Court Rules on Debtors and Doctors in Training
The New York Times (free reg. req.) (Jan. 11, 2011)

Other ACE News

  • Health Care Reform

    June 27, 2017

    Capitol building with tree branches

    ACE, Higher Education Groups Urge Senate to Fix Problems With Health Care Bill

    In a letter to Senate leaders, ACE and 18 other higher education associations raised serious concerns about the Better Care Reconciliation Act of 2017, the Senate bill to “repeal and replace” the Affordable Care Act.

  • June 27, 2017

    Today's Headlines

    HEADLINES: Today's Top Higher Education News

    The Washington Post and The Chronicle of Higher Education are among those covering the impact on higher education of the Supreme Court’s decision to partially reinstate President Trump’s travel ban and hear the case in October. Inside Higher Ed...

  • Institutional Capacity

    June 26, 2017

    Fellows

    Applications Now Being Accepted for ACE Fellows Program Class of 2018-19

    For five decades, the ACE Fellows Program has strengthened institutions in American higher education by identifying and preparing nearly 1,900 faculty, staff and administrators for senior positions in college and university leadership.

  • Budget and Appropriations

    June 26, 2017

    Hearing

    NIH Director Testifies on Budget Request for FY 2018

    National Institutes of Health Director Francis S. Collins testified June 22 before the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies on his agency’s FY 2018 budget, which the White House is...

  • College and University Partnerships

    June 21, 2017

    Person using mouse and laptop

    Register Now for ACE Webinar on the Power of Apprenticeship Programs

    A free July 13 ACE webinar will explore the potential of work-based earn-and-learn models that offer pathways to postsecondary credentials and careers with family-sustaining wages.

 

 Related Content