TN 1 (08-07)

PR 01905.022 Maine

A. PR 07-182 Determining Whether Penobscot Valley Hospital Was A Public Entity Between 1967 and 2001.

DATE: July 26, 2007

1. SYLLABUS

This opinion addresses whether Penobscot Valley Hospital (PVH) 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 PVH employees. The Maine Supreme Judicial Court looked at the burdens, duties, and functions of the PVH and concluded that it was functioning as a public entity beginning at its formation in 1967 through 2001, when it became a private, non-governmental employer. 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 pension.

2. OPINION

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.

BACKGROUND

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.

DISCUSSION

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 legislativ