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

  • July 28, 2016

    Today's Headlines

    HEADLINES: Today's Top Higher Education News

    NPR interviews author and higher education finance expert Sandy Baum, who makes the case that the student loan crisis is overblown and says the focus should be on the small percentage of borrowers who are really struggling. Inside Higher Ed reports...

  • Diversity in Leadership

    July 27, 2016

    ACPS 2016-17

    American College President Study: ACE Needs Your Expertise

    The survey is the oldest, most comprehensive and in-depth source of information about the college presidency and the leadership pipeline in higher education. Make sure your institution's president is included.

  • Innovative Practices

    July 27, 2016

    Deconstructing CBE

    Competency-Based Education: Rising Interest, Gradual Implementation

    A survey of leaders at 251 colleges and universities active or interested in competency-based education reveals that even while interest in CBE is rising, implementation of CBE courses and programs remain gradual.

  • Institutional Effectiveness

    July 25, 2016

    People walking

    ACE Blog Series on Data Offers Campus Leaders Ideas to Spur Institutional Change

    ​A recent three-part blog series on ACE’s Higher Education Today blog looks at financial data issues in higher education and offers insights for leaders looking to improve the way they use data in everyday decision-making.

  • Higher Education Act

    July 25, 2016

    White House

    Department of Education Proposes Rules on Oversight of Online Courses

    ​The Department of Education today published proposed regulations on state authorization requirements for postsecondary distance education, outlining how colleges and universities that offer online education programs to students in other states...

 

 Related Content