BASIC (12-03)

SL 30001.320 Retirement System Coverage Group (Section 218(d))

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 members of the retirement system.

The retirement system coverage group is not a permanent grouping. It exists only for referendum and coverage purposes and is not a separate group for reporting purposes. Once coverage has been obtained, the retirement system coverage group becomes for reporting purposes part of one of the absolute coverage groups described in 20 CFR, Chapter III, §404.1205(b). Also see 20 CFR, Chapter III, §404.1206(b) and SL 30001.302.

A. DEFINITION OF RETIREMENT SYSTEM FOR SECTION 218 PURPOSES

For Section 218 purposes, a retirement system is a pension, annuity, retirement or similar fund or system established by a State or political subdivision. The plan is considered established by the entity if there is any payment of public funds toward the cost of the plan or the plan is established under the entity's authority. The system need not have been created by the legislature of the State or the political subdivision, nor does it have to be a plan under which the benefits are guaranteed by State constitution. A retirement system can include a group annuity policy purchased by a State or political subdivision from a private insurance company to provide retirement benefits for its employees. A retirement system is established if State law requires retirement system protection for employees on a mandatory basis. (This is true whether or not the employing entity has actually implemented the law.)

B. LEGISLATIVE AUTHORITY FOR RETIREMENT SYSTEM COVERAGE

The 1954 amendments authorized coverage for employees in positions under a retirement system effective January 1, 1955 and prescribed the mechanics for accomplishing such coverage. Congress included the following statement of policy in the Federal law (section 218(d)(2)):

“It is hereby declared to be the policy of the Congress in enacting the succeeding paragraphs of this subsection that the protection afforded employees in positions covered by a retirement system on the date an agreement under this section is made applicable to service performed in such positions, or receiving periodic benefits under such retirement system at such time, will not be impaired as a result of making the agreement so applicable or as a result of legislative enactment in anticipation thereof.”

Most State legislatures included a similar policy statement in the State enabling legislation.

Note: In general, coverage for positions under a retirement system was not possible until January 1, 1955. Special Federal legislation did permit retirement system coverage for employees in positions under the Wisconsin Retirement Fund, employees in positions under the Arizona Teacher Retirement System, and employees in certain Utah educational institutions.

There was also another method by which some State and local subdivisions obtained Social Security coverage for their retirement system employees prior to 1955. In the early 1950's, shortly after the enactment of Section 218 and prior to the enactment of the 1954 amendments, various State and local government entities were interested in obtaining Social Security coverage for employees covered by existing retirement systems despite the provisions of 218(d) which did not permit such coverage. SSA was soon faced with proposals for liquidating retirement systems in order to circumvent Section 218(d) and then make Social Security coverage possible for those employees formerly under the liquidated systems.

The matter was presented to the Commissioner of Social Security, and in January 1951 the Commissioner established the Administration's policy that if a State or political subdivision had fully liquidated its retirement system and provision had been legally made for the settlement of previously accrued rights by means of refund of contributions, purchase of annuities, or statutory segregation of accumulated equities then SSA would consider the State or political subdivision to no longer have a retirement system. The former retirement system employees would then be eligible for Social Security coverage as an absolute coverage group via a Section 218 Agreement.

Once Social Security coverage had been obtained, the