TN 8 (01-20)

SL 30001.334 Composition of Divided-Vote Retirement System Coverage Groups (Section 218(d)(6))

Retirement system coverage groups established through a divided-vote process are defined in Section 218(d)(6), and, therefore, may occasionally be referred to as "(d)(6)" coverage groups.

For coverage purposes, treat a retirement system coverage group established by divided vote no different than a retirement system coverage group established by majority vote. The primary difference between the two is the composition of the coverage group, as described below.

A position which is occupied by a member who chooses coverage ceases to be covered if it becomes occupied by a member of the “No” group. Thus, where a member of the retirement system in the “No” group transfers to a position formerly occupied by a member of the “Yes” group, he or she carries his or her “No” vote with him or her. Similarly, if a member of the “Yes” group transfers to a position formerly occupied by a member of the “No” group, his or her coverage continues.

After the referendum, the retirement system composed of those members who chose coverage may be included under the Agreement as a retirement system coverage group. Because the retirement system consists only of those members who chose coverage, it includes:

  • All employees who voted for coverage and who are members (actual and after December 31, 1959, deemed members) on the date of execution of the Modification or the date designated to control who will be covered retroactively, in accordance with Section 218(e)(2) of the Social Security Act (Act);

  • All employees who become members of the retirement system in the future, which includes individuals who were ineligible to become members of the retirement system (see SL 30001.340) but who later acquire membership by a change in the qualifying factors and who have not already been covered for Social Security; and

  • All members of the retirement system group who initially declined coverage, who subsequently join the covered group pursuant to the second chance procedure (see SL 30001.335).

In order to determine whether services are covered or can be covered, determine what constitutes the retirement system, whether the positions in question are under that system, and the status of the individuals in those positions.

A. Ineligibles

Ineligibles, other than ineligible police officers and firefighters, can be covered as part of, or as an addition to, the retirement system coverage group if the State takes appropriate action (see SL 30001.340 for a discussion of ineligibles).

B. Optionals

For purposes of coverage under divided-vote procedures, an optional is an individual who had an option to join the retirement system on August 1, 1956, or if later, the date he or she first occupied a position under the system. 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.

Federal law deems optionals to be members of the retirement system where coverage is 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 or she later becomes a member of the retirement system.

Where a retirement system coverage group was covered under an Agreement prior to January 1, 1960, and did not include optionals, that State could have given them an opportunity for coverage under the transfer procedures prior to January 1, 1970 (for a short period prior to January 1, 1960, States had a choice as to whether to treat optionals as members when extending coverage).

C. Members who elect coverage

Members who elect coverage are part of the deemed retirement system composed of positions of members who voted “yes” for coverage. They remain covered as long as they continue to be members of the retirement system or as long as they continue to occupy any position that is part of the retirement system coverage group. They cannot elect individually to terminate their coverage (see SL 30001.380, Continuation of Coverage Rules).

Example: Employees occupying part-time positions were included as part of the retirement system coverage group. Later, legislation was enacted to remove these positions from the retirement system. In a divided retirement system, the incumbents under the continuation of coverage policy would remain under Social Security. However, any new employees occupying part-time positions would not, because they could not be members of the retirement system.

D. Members who do not elect coverage

These individuals are members of a separate deemed retirement system which is composed primarily of the positions of those members who did not elect coverage. They can be covered if they elect to transfer to the covered group or after a favorable majority referendum is held among the members of their retirement system.

E. Members denied a choice

If, at the time of the division of a retirement system, the State or political subdivision erroneously denies or fails to give a member an opportunity to vote, the State must give the employee a subsequent choice.

In addition, if an employee can conclusively establish that erroneous information furnished by the State influenced his or her election, the employee may request that the State rescind his or her election and allow him or her to revise his or her choice.

F. New members

Generally, an individual who becomes an employee and a member of the retirement system after coverage is extended to the retirement system coverage group is a "new" member. A member of the retirement system who leaves his or her employment before the State extends coverage to the retirement system coverage group is a "new" member on his or her return to employment. The employee is then compulsorily covered as a part of the retirement system coverage group.

1. Break in service of member who did not elect coverage

The State determines whether a member who has a break in service after coverage was extended to the retirement system coverage group is considered a new member upon return to employment. The State’s decision depends upon the provisions of the particular retirement system involved and on State law. If the State considers an individual to be a new member of the retirement system upon return to employment, the employee is compulsorily covered. If the State considers an individual to have retained membership in the retirement system during a break in service, the employee is not considered a new member upon return to employment and retains his or her "no" vote—provided the entire retirement system to which the employee belongs was covered as a single retirement system coverage group. If the retirement system was divided into deemed systems, an individual who returns to work for the same deemed system after a break in service retains his or her "no" vote if the employee is not considered a new member of the deemed system under State law. This is a change of position effective July 15, 1976. However, an individual who returns to work for a different deemed system is covered compulsorily as a new member even though the employee previously voted against coverage.

The State's decision on whether an individual is considered a new member under State law must be applied consistently to all similarly situated individuals.

Example 1: A referendum was held among all the eligible members of the Municipal Employees Retirement System (MERS), a statewide system covering all municipal employees. A was an employee of City X and voted against Social Security coverage. After the coverage was extended to the retirement system coverage group, A terminated his employment with City X and entered private employment. Under the rules of MERS, A retained his membership in MERS. Two years later, City X reemployed A. The State holds that he is not a new member of MERS. A is not a new member for purposes of coverage. He retains his initial choice of "No" coverage.

Example 2: A referendum was held among all the eligible members of MERS, a statewide system covering all municipal employees. A was an employee of City X and voted against coverage. After coverage was extended to the retirement system coverage group, A terminated his employment with City X and entered private employment. A withdrew his contributions from the retirement system. Two years later, City X reemployed A. The State holds that he is a new member of MERS. A is a new member for purposes of coverage and is covered compulsorily.

Example 3: MERS is a statewide system that covers all municipal employees. For coverage purposes, the State deemed a separate retirement system to exist with respect to each political subdivision participating in the retirement system. Cities X, Y, and Z held referendums and coverage was provided for the retirement system coverage groups. A was an employee of City X and voted against coverage. After coverage was extended, he terminated his employment with City X and entered private employment. He retained his membership in MERS. Two years later, City X reemployed A. The State holds that he is not a new member of the deemed retirement system. A is not a new member for purposes of coverage and retains his "no" vote. If, however, he was a new member of the deemed system, he would have been covered compulsorily even though he had previously voted against coverage.

Example 4: MERS is a statewide system that covers all municipal employees. For coverage purposes, the State deemed a separate retirement system to exist with respect to each political subdivision participating in the retirement system. Cities X, Y, and Z held referendums and coverage was provided for the retirement system coverage groups. A was an employee of City X and voted against coverage. After coverage was extended, he terminated his employment with City X and entered private employment. He retained his membership in MERS. Two years later, City Y hired A. He is covered compulsorily as a new member, since he did not return to work as a member of the same deemed retirement system in which he had voted against coverage.

2. Change in employment

If the retirement system for purposes of the divided-vote referendum was not the entire system, a member of a deemed retirement system who transfers to another deemed system is a "new" member and is compulsorily covered. However, if the transfer resulted from action taken by the political subdivision on or after September 13, 1960, and the two deemed systems are part of the same basic system, the member is not considered a new member and may carry his or her "no" vote with him or her (this provision applies also in California to transfers prior to September 13, 1960). If the transfer was to a newly created political subdivision (e.g., two school districts consolidated to form a new district) which is not automatically covered as part of a deemed retirement system, a referendum must be held to obtain coverage.

If a member of a deemed retirement system transfers to a position under a retirement system that has not been covered, a referendum must be held before he or she can be covered.

G. Employees hired after a retirement system divided but before the Modification is executed

The State may give an employee the opportunity to choose coverage if the employee became a member of the retirement system after the divided-vote referendum and before the State and the Social Security Administration executed the corresponding Modification. Federal law neither precludes the State from offering these employees a choice up to the date the Modification is executed nor requires the State to provide these employees a choice. If the State does not provide a choice to them, the Modification will cover these employees. The State is, however, required to give the same opportunity to all similarly situated employees. For purposes of the Modification, the State may not offer a choice to some employees and deny other employees the same choice.


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SL 30001.334 - Composition of Divided-Vote Retirement System Coverage Groups (Section 218(d)(6)) - 01/29/2020
Batch run: 02/04/2020
Rev:01/29/2020