This Memorandum is in response to your inquiry regarding whether Penobscot Valley
Hospital was a public employer from 1967 through 2001 such that the Windfall Elimination
Provisions and the Government Pension Offset Provision apply to the payment of Social
Security benefits to Penobscot Valley Hospital employees. As discussed below, it is
our opinion, based on our review of the relevant facts and applicable state and federal
law, that Penobscot Valley Hospital was a public entity between 1967 and 2001.
The record shows that Penobscot Valley Hospital ("PVH") was established in 1967 at
which time the legislature created Hospital Administrative Districts ("HAD") and PVH
became Hospital Administrative District #1 ("HAD #1"). Penobscot Valley Hospital contributed
to F.I.C.A. between 1967 and 1981. It appears, however, that PVH had never entered
into a 218 agreement. In 1981, PVH became aware of the error and opted to establish
a non covered pension, called the 457 plan, effective approximately a year prior.
Social Security refunded F.I.C.A. contributions to individuals retroactively back
to 1980. Coverage under the 457 plan was then terminated in 2002, after the hospital
converted to private, non-governmental employer status. See Me. P. & S.L. 2001, c. 31.
WEP") was enacted as part of the Social Security Administration Amendments of 1983
and affects Social Security benefits payable to state and local government employees.
The WEP is set out in section 215(a)(7) of the Social Security Act and eliminates
windfall benefits for retired and disabled workers who also receive a pension based
on non covered employment after 1985. The windfall elimination primarily affects people
who earned a pension from working for a government agency and also worked at other
jobs where they paid Social Security taxes long enough to qualify for retirement or
disability benefits. Thus, a modified benefit formula is used for calculating benefits
of the individual who receives a pension from non covered work. See 20 C.F.R. § 404.213;
POMS RS 000605.360.
The Government Pension Offset ("GPO"), set forth in section 202(k)(5) of the Social
Security Act, applies to a spouse's Social Security benefits if the spouse receives
a pension based upon his/her own government employment not covered under Social Security.
Thus, the GPO reduces the spouse's Social Security benefit if the spouse also receives
a government pension from non covered work. POMS GN 02608.100. By enacting the GPO provision, Congress intended to ensure that when determining
the amount of spousal benefit, government employees who do not pay Social Security
taxes would be treated in a similar manner to those who work in the private sector
and do pay Social Security taxes. See Government Pension Offset at http://www.ssa.gov/pubs/10007.html.
To establish whether the above provisions apply in the case at hand it is necessary
to determine whether PVH was indeed a public employer between the relevant years of
1967-2002. The Maine Supreme Judicial Court addressed this question in a case involving
Maine's Freedom of Access Act ("FOAA"). In Town of Burlington v.
Hospital Administrative District No. 1 769 A.2d 857 (Me. 2001), the Court reviewed relevant legislation to determine whether
HAD #1, which operated PVH, was a public agency or political subdivision to which
the FOAA would apply. The Court reviewed the relevant legislation and found that HAD
#1 was created by the legislature in 1967 by a private and special law, P. & S.L.
1967, ch. 58. Id. at 858. The law stated that the inhabitants of fourteen towns "are constituted and
confirmed a body politic and corporate . . . in order to provide for the health, welfare
and public benefit of the inhabitants of the district", and that "[t]he hospital district
shall maintain and operate a hospital or critical access system . . . and generally
provide for the health, welfare and public benefit of the inhabitants of the district."
Id. at 858 (quoting P. & S.L. 1999, ch. 84, § A-1, repealing
and replacing P. & S.L. 1967, ch. 58, § 1). Based on the "burdens and duties" granted to HAD #1
by the Maine legislature, the Court concluded that HAD #1 functioned as a political
subdivision. Id. at 862.
The Court also looked, however, to the functions of HAD #1 to determine whether it
was a public agency. Id. at 863. The Court found that HAD #1 provided healthcare, issued bonds under its legislative
authority, and had the power to tax. Id. Additionally, the towns in the district were responsible for the debts of HAD #1,
the assets would revert to the towns upon dissolution, and HAD #1 was controlled by
citizens elected from each town in the district. Id. The Court also found that HAD #1 was created by the legislature. Id. Based on these functions, the Court concluded that HAD #1 met the definition of a
political subdivision for purposes of FOAA. Id. Thus, the Maine Supreme Judicial Court and the legislature have clearly stated that
PVH, established under HAD #1, was functioning as a public entity beginning at its
formation in 1967 through 2001, when it became a private, non-governmental employer.
Based on the above discussion, we agree with your assessment and find that PVH was
a public employer from 1967 through 2001. Thus, WEP and GPO apply to individuals who
were employees of PVH during the years 1980 through 2001 as they paid into a non covered