No impact on CMU College of Medicine from Supreme Court ruling
Despite the unanimous Supreme Court ruling mandating that medical schools must pay for their residents’ social security taxes, Central Michigan University will not be affected.
On Jan. 11 the U.S. Supreme Court ruled full-time medical residents in training are employees, not students; therefore, they are subject to Social Security and Medicare taxes.
"The [Treasury] Department reasonably sought to distinguish between workers who study and students who work," Chief Justice John G. Roberts Jr. wrote in the opinion. "Focusing on the hours spent working and those spent in studies is a sensible way to accomplish that goal. The Department thus has drawn a distinction between education and service, not between classroom instruction and hands-on training."
This national cost is estimated at $700 million a year, according to a report by the Chronicle of Higher Education.
Dean of the College of Medicine Ernest Yoder said this ruling will have no impact on CMU and the College of Medicine for the foreseeable future.
“This ruling applies to entities which receive CMS (Center for Medicare/Medicaid Services) funding to support physician residency training programs (Graduate Medical Education),” he said.
This ruling puts an end to a lengthy debate on whether or not medical colleges have to pay the employer's part of the taxes for their medical residents.
“These are hospitals or consortia which include hospitals providing graduate medical education,” Yoder said. “It is unlikely to affect CMU even when we partner with hospitals offering graduate medical education.”
Prior to 2005, medical colleges were not required to pay these taxes (FICA), for residents, despite many of them working over 40 hours per week. The response from the medical colleges was that this work was intertwined with the residents’ education. In 2005, the IRS created rules that disregarded the exception for students, such as these residents, who are practically full-time employees.
Yoder said this court case has been in the works for more than 10 years. He said it retains the "status quo" concerning FICA withholding.
"The Supreme Court decision does not affect residency programs greatly, because most residents and institutions already were paying the taxes," said Trustee Sam Kottamasu.
