To amend the Internal Revenue Code of 1986 to clarify that employees of a political subdivision of a State shall not lose their exemption from the hospital insurance tax by reason of the consolidation of the subdivision with the State.

Amends the Internal Revenue Code to prohibit an employee of a political subdivision of a State from being treated as having terminated such employee's employment relationship with such subdivision by reason of the abolition of such subdivision if, as a result of such abolition (or other consolidation), such employee becomes an employee of the State and continues to hold the same or substantially the same position with the State.