SL 30001.316 Composition of an Absolute Coverage Group
The following employee groupings constitute an absolute coverage group:
State employees performing services in connection with a nonproprietary (governmental) function;
State employees performing services in connection with a single proprietary function;
Employees of a political subdivision performing services in connection with the nonproprietary (governmental) function;
Employees of a political subdivision performing services in connection with a single proprietary function;
Civilian employees of a State’s National Guard units;
Individuals employed under an agreement between a State and the U.S. Department of Agriculture as agricultural products inspectors; and
Non-certificated school district employees of specified States (applicable to actions taken before 1962)
A. POLITICAL SUBDIVISION
A political subdivision is a separate legal entity of a State that has governmental powers and functions. It also includes an instrumentality wholly owned by a State, or one or more political subdivisions of a State, or of a State and one or more of its political subdivisions. An instrumentality is organized to carry on some function of government for the State or political subdivision. It is an independent legal entity, with power to hire, supervise, and discharge its own employees, and generally to sue and be sued in its own name, to contract, to hold and convey real and personal property.
A “political subdivision” ordinarily includes counties, cities, townships, villages, schools, sanitation, utility, irrigation, drainage and flood-control districts, and similar governmental entities.
SSA is in accord with IRS Revenue Rulings 57-128 and 65-26. These rulings provide that the following factors, among others, are considered in determining the status of an organization:
whether there are any private interests involved, or whether the States or political subdivisions involved have the powers and interests of an owner;
whether control and supervision of the organization is vested in public authority or authorities;
if express or implied statutory or other authority is necessary for the creation and/or use of such an instrumentality and whether such authority exists; and
the degree of financial autonomy and the source of its operating expenses.
Generally, SSA considers provisions of State law when determining whether an organization is a separate and distinct political subdivision for coverage purposes. While political subdivisions are generally identified in State law as bodies "corporate and politic," this is not universally true. Libraries and hospitals are illustrative of organizations whose status is often not apparent from either title or statute. They may be integral parts of a political subdivision such as a city or county, instrumentalities of a State or political subdivision and therefore separate political subdivisions, or they may be private nonprofit organizations.
B. POLITICAL SUBDIVISION UNDER SECTION 501(c)(3) OF IRC
Section 102 of P.L. 98-21 (1983 Social Security Amendments), changed provisions of the law concerning employment for organizations exempt from income tax under Section 501(c)(3) of the Internal Revenue Code (IRC), including nonprofit charitable, religious and educational groups.
While the status of an entity should usually be clear, there may be instances where SSA may request a State Attorney General opinion concerning whether an entity constitutes a political subdivision under the laws of that State. In addition, it may be necessary to coordinate some issues with the Internal Revenue Service, with respect to FICA taxation.
Some private 501(c)(3) organizations have employees who are allowed to become members of some State or political subdivision retirement systems. The services performed by these private 501(c)(3) employees are covered on the same basis as that of other employees of private 501(c)(3) organizations. Such private 501(c)(3) employees are not considered State or political subdivision employees for Social Security coverage purposes.
NOTE: Many private nonprofit schools, colleges, hospitals, and libraries are 501(c)(3) organizations. Some 501(c)(3) organizations are also State or political subdivision entities, or integral parts of State or political subdivision entities. For Social Security coverage purposes, section 102 of P.L. 98-21 does not apply to these State or political subdivision entities. Therefore, if a State or political subdivision entity is the type described in section 501(c)(3), coverage can only be obtained (1) under the provisions of section 218 of the Social Security Act; or (2) in accordance with the mandatory Social Security coverage provision beginning July 2, 1991; or (3) under the mandatory Medicare-only coverage provision beginning April 1, 1986.
C. NONPROPRIETARY AND PROPRIETARY FUNCTIONS
A proprietary function is a business function. A State or political entity exercises a proprietary function when it engages in a business similar to one a private enterprise would engage in for profit. For example, the operation of parking garage by a city is a proprietary function.
Nonproprietary (governmental) functions of a State or political subdivision are the traditional functions of government, i.e., legislative, executive, and judicial, as well as the control and prevention of crime, regulation of the conduct of citizens for the general welfare, and providing for the public safety. For example, the operation of schools or institutions of higher learning by State or political subdivisions is a governmental function.
The distinction between a nonproprietary and a proprietary function is not always readily apparent. The provisions of State law govern in determining whether a function is governmental or proprietary. What may be a proprietary function under the laws of one State may not be classified as such in another.
D. CIVILIAN EMPLOYEES OF THE NATIONAL GUARD
Civilian employees of State national guard units employed under Title 32, U.S.C. Section 709 and paid by the Department of Defense were deemed State employees effective January 1, 1951. Many States provided coverage for the services of such individuals as a separate absolute coverage group. If the individuals were in positions under a retirement system, coverage was extended as a part of the retirement system coverage group which included other State employees in positions under the same retirement system.
Effective January 1, 1969, all national guard technicians are covered under the Civil Service Retirement System (CSRS) as a Federal employee (Public Law 90-486, National Guard Technicians Act of 1968). Social Security coverage for national guard technicians’ services under a State’s Agreement was terminated effective December 31, 1968.
E. AGRICULTURAL INSPECTORS
Effective January 1, 1955, individuals employed pursuant to an agreement entered into under Title 7, U.S. Code 1624 or Title 7, U.S. Code 499n between a State and the U.S. Department of Agriculture to perform services as inspectors of agricultural products may be deemed by the State to be State employees and a separate absolute coverage group. Agricultural inspectors whose positions are under a retirement system may be covered only as members of a retirement system coverage group.