TN 24 (11-09)
RS 01505.004 Retirement System Coverage Groups
Citations: Soc. Sec. Act, Sec. 218 (d)
A. Introduction to retirement system coverage
For purposes of coverage under a Section 218 Agreement a retirement system is defined as a pension, annuity, retirement or similar fund or system established by a state or political subdivision. The system need not be created by the legislature of the state, nor does it have to be a plan under which the benefits are guaranteed by the state constitution. A retirement system can include a group annuity policy purchased by the state or political subdivision from a private insurance company.
B. Rules for retirement system coverage
A retirement system coverage group consists of positions under a retirement system. Coverage can be extended to a retirement system coverage group only after a referendum has been held among the eligible members of the retirement system. The following explains in more detail how coverage is elected, applied, and who is considered eligible.
1. Types of retirement systems
For a retirement system to be covered under a Section 218 Agreement, it does not need to meet minimum benefit levels. Only if a state or political subdivision is considering a retirement system as an alternative to mandatory Social Security does it need to meet the minimum standards as required by the IRS in Section 3121(b)(7)(F) of the IRC (qualifying public retirement system).
State and local laws determine if a position is under a retirement system. A referendum of all eligible employees must be held. There are two ways; a retirement position can be brought under coverage:
All Interstate Instrumentalities
SL 30001.321, What a Retirement System Is for Majority Vote Referendum Purposes
SL 30001.322, Providing Coverage for Majority Vote Retirement System
SL 30001.323, Majority Vote Referendum Process (Section 218(d)(4))
SL 30001.324, Composition of Majority Vote Retirement System
SL 30001.330, Divided Vote Referendum Authority (Section 218(d)(6))
SL 30001.331, What a Retirement System Is for Divided Vote Referendum Purposes
SL 30001.332, Providing Coverage for Divided Vote Retirement System
SL 30001.333, Divided Vote Referendum Process (Section 218(d)(7))
SL 30001.334, Composition of Divided Vote Retirement System
2. Ineligibles of a retirement system
An ineligible is an employee who performs services in a position under a retirement system but who is personally ineligible for membership in that system because of a personal disqualification, e.g., age, length of service, number of hours worked, or date of hiring. (Another employee who has no such personal disqualification from membership who occupies the same position would be eligible for membership in that retirement system.)
For purposes of extending coverage, the individual must meet the definition of ineligible at a critical time point. These are:
Employee must be an ineligible on September 1, 1954, or, if later, the date the agreement is made applicable to the employee’s coverage group or the date the employee first occupied the position under the retirement system. Therefore, an employee who had an option to join the retirement system on September 1, 1954, or if later, the date the employee first occupied the position, would not be considered an ineligible, even though such option expired before a referendum is held.
For divided vote retirement systems, an employee is an ineligible for coverage purposes if the employee is ineligible for retirement system membership as of August 1, 1956, or, if later, the date the employee first occupied his or her position.
An employee of an interstate instrumentality is an ineligible if the employee has such status as of August 30, 1957, or, if later, the date the employee first occupied his or her position.
3. Optionals of a retirement system
For the purposes of coverage in a divided vote system, an optional is an individual who had an option to join the retirement system on August 1, 1956 or later. With respect to an interstate instrumentality, an optional is an individual who had an option to join the retirement system on August 30, 1957, or, if later, the first day he or she occupied a position under the system. Optionals are deemed members of the retirement system where coverage was extended after December 31, 1959. These individuals have the same status for coverage purposes as actual members (i.e., they get an individual choice for coverage in the referendum). New optionals are covered as new members. An optional who voted against coverage will not be automatically covered if he later becomes a member of the retirement system. Where the retirement system coverage group was covered under the agreement prior to January 1, 1960, and did not include the optionals, the state could have given them an opportunity for coverage under the transfer procedures prior to January 1, 1970.
In a majority vote, all employees not previously covered and who are in positions under the retirement system on the date of execution of the modification or the date designated to control who will have retroactive coverage under that modification (the "applicable" date in accordance with Section 218(e)(2) of the Act) will be covered by the modification. This includes all current members, regardless of how they voted in the referendum, including optionals.
4. Employees in positions under more than one retirement system
A position is under more than one retirement system if an employee in the position can become a member of more than one retirement system.