A consolidation occurs when two or more political subdivisions each dissolve and a
new and legally distinct political subdivision is created. Because consolidation follows
the legal dissolution of the two or more political subdivisions, Social Security coverage
effectively terminates for any of the consolidating political subdivisions previously
covered under the State’s Section 218 Agreement.
Because the consolidation creates a new political subdivision not yet specifically
covered by the State’s Section 218 Agreement, it is usually necessary for the State
to submit a notice of dissolution as to the old political subdivisions and a new Modification
to cover the positions if the State intends to preserve coverage for the employees
moving from the dissolved entities into the consolidated entity or to extend coverage
to new employees. Where the positions under the new entity are covered by a retirement
system, referendum procedures must be used.
The exception to this rule is that the State will not need to take additional steps
to extend coverage if positions under the new entity are retirement system positions
within a retirement system that has received system-wide coverage under a Section
218 coverage Modification. Under those circumstances, the State must submit an identification
Modification (SL 40001.490, Exhibit 6) to inform SSA that the new entity’s positions are to be included under
the retirement system’s existing Section 218 coverage Modification.
If positions under the new entity are not retirement system positions, then mandatory
Social Security will apply to those positions until either the State chooses to cover
those positions as an absolute coverage group or the positions are brought under a
qualified retirement system.
Example: The Township of Cedar Grove covered non-retirement system positions for Social Security
via Modification No. 27 (as an absolute coverage group). Cedar Grove’s retirement
system positions were under the Public Employee Retirement System (PERS). Social Security
coverage had been extended to PERS system-wide as a single retirement system under
Modification 163 following a favorable majority vote referendum.
The Village of Rosedale had no positions under a retirement system, but covered all
its employees for Social Security as an absolute coverage group via Modification 112.
Following the passage of ordinances and resolutions in both Cedar Grove and Rosedale,
the two entities dissolved on January 1, 1995 and consolidated to become the City
of Cedardale. The Cedardale Charter stated that all assets and territory that belonged
to the predecessor entities “shall be a body corporate with the official name and
title of ‘City of Cedardale.’” The powers granted to the city are broader than those
granted to either the village or the township.
With the establishment of the City of Cedardale, all employee positions were placed
under PERS.