This case involves an assessment issued by the Commissioner of Social Security against the State of Minnesota for unpaid social security contributions attributable to stipends paid to medical residents enrolled in the graduate medical education program at the University of Minnesota during 1985 and 1986. Following the issuance of the assessment, the State initiated an action seeking a redеtermination of liability. The district court 2 granted summary judgment in favor of the State. We affirm.
I.
The inception of the social security system can be traced to the adoption of the Social Security Act of 1935, 49 Stat. 620, as amended, 42 U.S.C. § 301 et seq. (1982 & Supp. II 1984). 3 At that time, there was some ques *744 tion as to whether it would be constitutionally permissible for Congress to compel the states and their political subdivisions to participate in the system. For this reason, the Act initially excluded state emрloyees from the scope of its coverage. See 42- U.S.C. § 410(a)(7). In 1950, however, Congress enacted section 418, which allows states and their political subdivisions to voluntarily participate in the system by executing an agreement with the Commissioner. See 42 U.S.C. § 418(a)(1). 4 If a state enters into a section 418 agreement, covered employees and then-employing agencies become subject to thе payment of social security contributions and, in return, the employees earn credit toward social security old age and disability benefits.
To a certain extent, states have the ability to define the contours of their section 418 agreements. For example, states may designate particular groups of employees for coverage. However, the provisiоns of the agreement may not be “inconsistent with the provisions of’ section 418. See 42 U.S.C. § 418(a)(1). In addition, section 418 provides for certain coverage exclusions, some of which are mandatory and some of which are optional. Among the optional exclusions is an exclusion for “any agricultural labor, or service performed by a student, designated by the State.” See 42 U.S.C. § 418(c)(5). Section 418 also provides that agreements may be modified at any time to extend coverage to additional groups of state employees. See 42 U.S.C. § 418(e)(4).
Minnesota executed a section 418 agreement in 1955. See Administrative Record (A.R.) at 1. Initially, this agreement applied to only a few limited coverage groups. Shortly following the initial agreement, a number of subsequent modifications were executed in order to extend coverage to various other groups. In 1958, the State executed a modification adding “[sjervices performed by individuals as employees” of the, University of Minnesota “as an additional coverage group.” A.R. at 13. This modification listed several exclusions, one of which, consistent with section 418(e)(5), excluded “[ajny service performed by a student.” A.R. at 13.
For more than thirty years after execution of the 1958 modification, the University did not withhold social security contributions from stipends paid to medical residents at its teaching hospital; nor did it pay the employer’s share of contributions. This practice was consistent with the University’s belief that medical residents .were not included in the coverage group identified by the 1958 modification. In 1989, the Social Security Administration (SSA) initiated an investigation of the treatment of. medical residents under the State’s section 418 agreement. On September 13,1990, the SSA issued a formal notice of statutory assessment asserting that the State was liable for unpaid social security contributions totaling nearly $8 million and that such contributions were attributable to stipends paid to medical residents during the years 1985 and 1986. The State sought review of this assessment on administrative appeal, and the assessment was affirmed without modification on December 8, 1993.
The State then filed a civil action in district court pursuant to 42 U.S.C. § 418(t), 5 seeking a redetermination of the assessment. Both the State .and the Commissioner filed motions for summary judgment. In addition, each party stipulated that the correct amount of the assessment, if valid, was approximately $4.7 million. 6 The district court granted the State’s motion for summary judgment and overturned the assessment. In doing so, the court relied upon alternative grounds. First, it held that the medical residents were not “employees” of the University within the meaning of the 1958 modification. Second, it *745 concluded that, even if the residents were employees under the terms of the modification, they were excluded from coverage- under the modification’s student exclusion. The Commissioner now appeals.
II.
We review a grant of summary judgment
de novo,
applying the same standard as that employed by the district court.
See Rose-Maston v. NME Hospitals, Inc.,
Generally, an administrative agency has considerable discretion in carrying out the mandates of statutes it is entrusted to administer.
See Mausolf v. Babbitt,
The State, noting that section 418(t) provided for a “redetermination” of the assessment, urges us to disregard this deferential standard in favor of a more рrobing review. Whatever the merits of this argument, we conclude that the Commissioner’s decision to uphold the assessment finds no support in law or fact and consequently fails to survive even the most deferential standard of review.
A.
The first of the district court’s alternative holdings was that the residents were not “employees” of the University as that term is used in the 1958 modification. The court reasonеd that the 1958 modification was a contract and that its terms must be interpreted by giving effect to the intent of the parties. The court further concluded that uneontroverted evidence demonstrated that when the parties executed the modification, they did not intend to extend coverage to the medical residents 7 and that this intent was controlling regardless of post-1958 case lаw holding that medical residents are employees. 8
The Commissioner does not seriously dispute the district court’s conclusion that the parties did not contemplate extending coverage to residents when they executed the 1958 modification. Rather, he contends that the modification is not contractual in nature and that the parties’ intent in 1958 is irrelevant. In support of this proposition, the Commissioner relies on the Supreme Court’s decision in
Bowen v. Public Agencies Opposed to Soc. Sec. Entrapment,
The Supreme Court rejected this argument, concluding that amended section 418(g) did not constitute a taking of property within the meaning of the Fifth Amendment.
See id.
at 55-56,
The Court concluded that because Congress had expressly reserved the power to amend section 418, it also retained .concurrent power to affect the terms of agreements entered into pursuant to that section.
See id.
at 53-54,
The Court further held that any “contractual right” created by the agreement’s termination clause did not rise to the level of “property” under the Fifth Amendment.
See id.
at 55,
Relying on
Bowen,
the Commissioner argues that section 418 agreements are not contracts at all but are instead merely written evidence that a state has exercised its statutory option to participate in the social security program. We reject this interpretаtion. Although
Bowen
holds that section 418 agreements are subject to modification by Congress, it does not broadly dismiss such agreements as non-contractual.- To the contrary, the Court’s decision is replete with references to “contractual arrangements.” Indeed, the backdrop against which the Court examined California’s assertions was that “contracts should be construed, if possible, to avoid’foreclosing exercise of sovereign authority.”
Id. ■
at 52-53,
The Commissioner argues that because
Bowen
concluded that California’s section 418 agreement did not confer a Fifth Amendment property interest, the underlying agreement cannot be considered a contract. This argument distorts the Court’s analysis, which merely recognized that some contractual rights are not necessarily property interests within the meaning of the Fifth Amendment. In pаrticular, contractual terms subject to modification by Congress do not rise to the level of a Fifth Amendment property interest.
See Bowen, 4ni
*747
U.S. at 51-52,
Nevertheless, the Commissioner insists that the definition of “employee” has been construed since 1958 to include medical residents and that this definition should control regardless of the parties’ original intent and understanding. As the district court pointed out, however, the meaning of section 418 agreements cannot be altered “through ruling by the the [sic] SSA or through subsequent ease law developments regarding the employment status of medical residents.” Memorandum Opinion & Order at 12. The power to alter the terms of section 418 agreements lies exclusively with Congress. Because Congress has not chosen to alter or amend the meaning of the State’s 1958 modification, the parties’ intent is controlling.
See Enos v. Key Pharmaceuticals, Inc.,
B.
The district court held, alternatively, that even if medical residents were considered “employees” under the terms of the 1958 modification, the residents are excluded from coverage under the agreement’s student exclusion. As noted above, the student exclusion is authorized by section 418(c)(5), which provides that “[s]ueh agrеement shall, if the State requests it, exclude (in the case of any coverage group) any agricultural labor, or service performed by a student, designated by the State.” 42 U.S.C. § 418(c)(5). Section 418(c)(5) also cross-references the Act’s general student exclusion, section 410(a)(10), which applies to service performed in the employ of a school, college, or university “if such sеrvice is performed by a student who is enrolled and regularly attending classes at such school, college, or university.” 42 U.S.C. § 410(a)(10).
In arguing that the residents do not 'qualify for the student exclusion, the Commissioner relies principally upon
Rockswold v. United States,
In the present case, however, we focus not on the nature of the payments made to the residents but on the nature of the residents’ relationship with the University. The regulation implementing the student exclusion provides: “Whether you are a student for purposes of this section depends on your relationship with your employer. If your main purpose is pursuing a course of study rather than earning a livelihood, we consider you to be a student and your work is not considered employment.” See 20 C.F.R. § 404.1028(c). Thus, if the residents’ participation in the University’s residency program is primarily educational, the residents should be considered students. If their purpose is to earn a living, hоwever, they do not fit within the definition of the student exclusion.
The fact that payments received by the residents constitute taxable income does not mean that the primary purpose of their relationship with the University is not educational. We recognized as much in
Rockswold,
despite our ultimate conclusion' that the stipends paid to the residents represented a
quid pro quo
for services rendеred. Specifically, we noted that the University’s residency program “is designed to educate and train physicians so that they can pursue careers in
*748
academic medicine and medical research.”
Id.
at 167;
see also Parr,
Finally, the Commissioner urges us to defer to Social Security Ruling 78-3, which states that “the Social Security Administration has always held that resident physicians are not students.” SSR 78-3. Social Security Rulings, although entitled to deference, are not binding or conclusive.
Newton v. Chater,
The judgment is affirmed.
Notes
. The Honorable Ann D. Montgomery, United States District Judge for the District of Minnesota.
.In order to reflect the Act as it existed during the years 1985 and 1986, all statutory references are to the 1982 United States Code.
. Under section 418, agreements were initially executed between the states and the Department of Health, Education, and Welfare. This department was subsequently supplanted by the Department of Health and Human Services, which was in turn succeeded by the Social Security Administration.
. This section was repealed in 1986, see P.L. 99-509, § 9002(c)(1). It permitted states to seek judicial review of an SSA assessment by filing "a civil aсtion for a redetermination of the correctness of the assessment of the amount due.”
.Apparently, the original assessment of nearly $8 million was based on estimated information rather than the University’s payroll records.
. This determination is supported by a number of factors. First, the 1958 modification expressly stated that it was intended to cover 225 employees. In the fall of 1958, there wеre 422 medical residents enrolled at the University of Minnesota. Second, minutes from a meeting of the Board of Regents indicate that the modification was intended to cover certain faculty positions only. Third, an Internal Revenue Service Ruling issued prior to the modification indicated that stipends paid to medical residents were excluded from wages because such stipends were paid primarily to further the residents' education and training. See Rev. Rui. 57-560 (1957). Finally, the University had consistently treated the residents’ stipends as excluded from coverage for more than thirty years.
. For example, since 1958, various courts have concluded that, for federal income tax purposes, medical residents are considered employees.
See, e.g., Rocksworld v. United States,
. The Commissioner contends thаt the stipends, which ranged from $20,000 to $28,000 per year, constituted "an amount far above what one would ordinarily think of as a scholarship.” Appellant’s Brief at 30. This argument misstates the issue. The question is not whether stipends paid to the residents were scholarships — indeed. the Stale concedes that they were not. Rather, the question -is whether the residents were students within the meaning, of the student exclusion. This question depends not on the nature of the stipends but on the nature of the residents' relationship with the University.