I was recently aske
d to write a memorandum answering the question of whether medical residents are students for purposes of the Family Education Rights and Privacy Act (FERPA). FERPA protects the release of a student’s education records without the consent of the student. Under FERPA, the definition of student is broadly defined. However, the Director of the Office of Family Compliance has ruled that medical residents are not students under FERPA because they are employees who have completed their education. During the course of my research, I discovered that this issue was at the forefront in tax law as well and determined that courts addressing the issue of whether a medical resident qualifies for the student exception to FICA taxes may provide reasoning which would be helpful in advocating for a favorable interpretation of FERPA for medical residents.
There is currently a split among the Circuits regarding the FICA student exemption. The Eleventh and Second Circuits have opined that the FICA student exemption applies to medical residents because whether the exemption applies is a question of fact which requires the use of a facts and circumstances analysis to determine whether a particular resident qualifies for the student exemption. See U.S. v. Mt. Sinai Med. Ctr., 486 F.3d 1248 (11th Cir. 2007); U.S. v. Mem’l Sloan-Kettering Cancer Ctr., 563 F.3d 19 (2d Cir. 2009). However, the Eighth Circuit has held that medical residents do not qualify for the FICA student exemption because under the amended Regulations, students who work more than forty hours per week are full-time employees and therefore expressly fail to meet the statutory definition of student. See Mayo Found. v. U.S., 568 F.3d 675 (8th Cir. 2009).
Although medical residents are paid, Congress has intended for students wages to be exempt from FICA taxes. Why should medical residents not be considered as students for purposes of the FICA student exemption?
The Accreditation Counsel for Graduate Medical Education (ACGME) has stated that a medical residency program consists of work and education components. For example, a medical resident at the University of Florida cannot advance in his or her residency program without meeting the program’s educational requirements each term. Therefore, a resident’s advancement in the residency program and subsequent licensing as a doctor hinges on his or her abilities as a student. Graduate assistants who work for a professor and receive compensation in addition to receiving an education are exempt from FICA taxes. However, a medical resident, who is enrolled in a university based residency program and receives continuing education, may not be exempt.
In regards to FICA taxes, Congress has spoken by providing a student exemption to FICA and medical residents who are required to meet academic benchmarks in order to advance in a residency program should be considered students for purposes of FICA.
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