Effective Dates: 12/10/2003 - Present Previous | Next

TN 10 (01-20)

SL 40001.425 Desk Guide to Modifications and Dissolutions

This section contains general reminders based on common errors in submitting Modifications and dissolutions. It is not a substitute for existing legal authorities. This section does not cover all situations that may arise.

A. Guidance for Modifications

The Social Security Administration (SSA) provides sample Modification language for a variety of Modification types (see Agreement and Modification Exhibits, SL 40001.490).

1. The relevant law

For information on the relevant law, publications, and other resources for administering Section 218 policies, see SL 10001.130C.

2. Agreement and Modification Exhibits

Compare the submitted Modification to the example language in the Agreement and Modification Exhibits, SL 40001.490. Confirm that the State included any mandatory language in the Modification. For example, if closing agreement language is required by the nature of the Modification, ensure that the language appears in the Modification.

3. Status of the entity

Confirm that the entity is a political subdivision (see 42 U.S.C. § 418(b)(2); 20 C.F.R. § 404.1202 for definitions). For information on political subdivisions, see SL 30001.311B – SL 30001.311C. The State should include a reference to the statutory authority that established the political subdivision's status. The State can provide this information on a separate sheet or include it within the Modification.

4. Federal Employer Identification Number (EIN)

Confirm that the Modification includes the EIN for the entity seeking coverage.

5. Termination of a prior coverage Agreement

Before 1983, SSA allowed the termination of coverage Agreements; SSA no longer allows termination of a coverage Agreement.

If a Modification concerns an entity that previously had a coverage Agreement that was later terminated, confirm that the Modification includes the following information per SL 40001.440:

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    A statement that the group’s coverage was previously terminated;

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    Effective date of the termination;

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    Previously assigned EIN; and

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    Modification number of the Agreement that was terminated.

6. Effective date of coverage (218(e)(1) date)

Confirm that the effective date of coverage is not earlier than the last day of the sixth calendar year preceding the year in which the State mails or delivers by other means the Modification to SSA. For example, if the mailing or delivery date was December 26, 2007, the effective date of coverage for this Modification cannot be earlier than the last day of the sixth calendar year preceding 2007, which would be December 31, 2001. For additional information on the effective date of coverage, see 20 C.F.R. § 404.1215(d) and SL 30001.375.

7. Controlling date for entitlement to retroactive coverage (218(e)(2) date)

Confirm that the controlling date, if specified by the State, is not earlier than the date the State mails or otherwise delivers the Modification to SSA. For additional information on the controlling date, see 20 C.F.R. § 404.1215(b) Controlling date for retroactive coverage and SL 30001.375 Effective Dates of Coverage.

EXCEPTION: In cases where the State submits an Error Modification to obtain retroactive coverage for erroneous contributions, the date of the error is the controlling date.

8. Optional exclusions

Check for optional exclusions contained in the Modification that are permitted by Federal and State laws (see SL 30001.357 Optional Exclusions). Make sure the descriptions of the optional exclusions conform to Federal law. If the State excludes part-time positions, the definition of part-time positions should be included in the Modification (see SL 40001.420B.1).

9. Certificate of referendum requirements for retirement system coverage groups

a. Confirm any required referendums occurred

Confirm that the State conducted any required referendums (see SL 30001.320D; SL 30001.321; SL 30001.305; SL 30001.320; SL 30001.334).

b. Confirm inclusion of any required certifications of referendum

Confirm that the Modification, if it involves a retirement-system coverage group, includes the required certifications of referendums. See also:

c. Confirm that a certification of referendum specifies whether the referendum was majority-vote or divided-vote

If the State held a majority-vote referendum, confirm that the certification of referendum specifically references 218(d)(3).

If the State held a divided-vote referendum, confirm that the certification of referendum specifically references 218(d)(7).

NOTE: 

For sample language for the certifications for majority-vote and divided-vote referendums, see Exhibits 8 and 11 in SL 40001.490.

d. Confirm that the Modification complies with the two-year time limit

Confirm that any Modification involving a retirement system coverage group falls within two years of the corresponding favorable referendum. SSA may not execute a Modification after this two-year period. For referendum time limitations, see SL 30001.323E and SL 30001.331G.

e. Confirm the State complied with the one-year waiting period, where applicable

If there has been an unfavorable referendum, confirm that the State waited at least one year before holding another referendum for the same intended coverage group. For referendum time limitations, see SL 30001.323E and SL 30001.331G.

EXCEPTION: Do not disapprove identification Modifications based on a State's failure to comply with referendum, certification of referendum, and referendum time limitations rules and procedures. Identification Modifications are used to identify political subdivisions that join a retirement system after the State has extended coverage to all employees of the participating retirement system. Where a retirement system for purposes of the referendum retains its identity as a single retirement system, all employees whose positions are brought under the retirement system after the Agreement was made applicable to that retirement system are covered without the need for another referendum. SSA provides a sample identification Modification in Exhibit 6 of SL 40001.490. For Composition of a Majority-Vote Retirement System, see SL 30001.324.

10. Name discrepancies and misspellings

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    Check for and correct any discrepancies between the name associated with the assigned EIN and the name listed in the Modification;

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    Check for and correct any misspellings in the name listed in the Modification, the accompanying certificate of referendum, or on any resolution or supporting documents provided; and

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    Check for and correct any discrepancies between the name listed in the Modification, the name in the certificate of referendum, and the name on any resolution or supporting documents provided.

Name discrepancies and misspellings may be corrected by using the procedures for minor corrections (see SL 40001.420E).

11. Required signatures

Confirm that the authorized State official(s) signed the Modification. When confirming that the required signatures are present, check to see if the State requires more than one signature. If the required signatures are not present, return the Modification to the State for the proper signatures.

If the State wants to add a signing official's name to the list of authorized officials, the State should send a written request with the information to the regional office Section 218 specialist (RO specialist).

12. Modification copies

Confirm that the State submitted at least two original Modifications with the wet signatures of the authorized State official(s). For information on the State’s responsibilities when preparing a Modification, see SL 40001.420B.1.

13. Coverage history

If the State's Agreement previously covered the entity being covered in the Modification but that coverage was terminated, the RO specialist prepares and provides information with the relevant coverage history for the entity to the Regional Office of the General Counsel (see SL 40001.440 for coverage of a previously terminated group).

This information may include:

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    A statement regarding entity’s termination history;

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    The effective date of termination; and

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    Any previously assigned employer identification number (69-number) and Modification number that were terminated.

B. Guidance for Error Modifications

For sample Error Modification language, see SL 40001.490, Exhibit 20.

1. Effective date

Confirm that the effective date specified in the Error Modification is the first day of the first period (quarter or year) for which the entity first filed erroneous wage reports. For Modification of an Agreement to correct errors, see 20 C.F.R. § 404.1216(b); SL 40001.465.

Use the Employer Query Report (ERQY) to confirm the date on which Social Security first reported and processed wages.

Use the Detailed Earnings Report (DEQY) to confirm the date on which erroneous payments began.

2. No IRS refund

Confirm that the State or political subdivision did not receive a refund from IRS for the erroneous contributions. The State should include language in the Modification acknowledging no refund was received by the entity and must provide a written statement from the entity verifying that it received no refund.

3. Certification of Referendum

Confirm that the State has provided a certification of referendum if the Modification involves a retirement system group.

C. Guidance for processing Modifications that require a closing agreement

1. Closing agreement

Confirm whether the Modification seeks retroactive coverage. If the State requests retroactive coverage and that retroactivity will extend beyond IRS’s three-year statute of limitations on assessments, confirm that the Modification includes the required closing agreement language. However, if the State has provided evidence verifying FICA was paid for the entire retroactive period predating IRS’s statute of limitation and the RO specialist confirmed the past payment of FICA is reflected in SSA’s existing records, no closing agreement is needed (see SL 40001.420J.2).

For more information on closing agreements, see SL 40001.420J.

2. Referral to IRS

If SSA approves the Modification, the RO specialist should:

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    Contact the IRS closing agreement coordinator, via fax at 855-243-4014, to begin the closing agreement process (see SL 40001.420H.4) and

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    Notify the state administrator that the closing agreement process has begun with the IRS so the state administrator can assist the entity with following through on their obligation to enter into a closing agreement with the IRS.

D. Guidance for dissolutions and evidence required

Dissolution means that the entity no longer legally exists. Because it no longer legally exists, the Agreement is no longer valid as it relates to this entity. The State must provide SSA with (1) a notification that the dissolution occurred and (2) evidence proving that the entity dissolved as a matter of law. The evidence requirements are in SL 40001.485.

A sample notification of legal dissolution is located in SL 40001.490, Exhibit 21.

1. The notification of legal dissolution

Confirm that the State's notification of dissolution includes the following:

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    The name of the dissolved political subdivision;

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    The EIN assigned to this entity;

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    The relevant Modification Agreements that extended coverage to this entity;

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    The date of dissolution; and

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    The legal basis for dissolution.

Confirm that the State has submitted a separate notice of dissolution for each dissolved entity.

2. Evidence proving the entity dissolved as a matter of law

Obtain evidence from the State proving that the dissolution occurred as a matter of law. Where possible, the State should provide primary evidence of the dissolution. In cases where primary evidence of the dissolution is insufficient or unavailable, the State should provide additional secondary evidence of the dissolution.

a. Primary evidence of dissolution

The State must submit a copy of any legal authority causing the dissolution. For example:

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    A copy of a city ordinance;

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    A copy of an authorized official’s order which effectuated the dissolution; or

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    A copy of the results of an election authorizing the dissolution.

If a legislative body authorized the dissolution, the State must submit proof that it carried out the legislative authorization, such as a reference to the legislative authorization or a copy of the legislation.

If the legislative authorization did not itself dissolve the entity, the State must submit a copy of the administrative or other order that dissolved the entity. If the official of the State or political subdivision, with whom the State files orders of dissolution, executed a statement of the fact of dissolution, the statement is acceptable as evidence of dissolution.

b. Secondary evidence of dissolution

Examples of secondary evidence include:

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    The entity’s governing board’s meeting minutes authorizing dissolution along with a published article or other evidence confirming dissolution or

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    A combination of documents of significant probity which enable the current official of the State or political subdivision with whom orders of dissolution are filed to make a determination as to whether or not the entity is legally dissolved.

To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/1940001425
SL 40001.425 - Desk Guide to Modifications and Dissolutions - 12/10/2003
Batch run: 01/29/2020
Rev:12/10/2003