TN 3 (12-05)

SL 30001.380 Continuation of Coverage Rules

 

Once coverage is provided for State and local government employees, it generally continues unless an event occurs which results in a termination of the coverage. One such event could be a change in employer.

 

Example: School teacher is covered as an employee of school district A, a covered entity. He subsequently resigns to accept a position with school district B, a non-covered entity. His coverage for Social Security ceases as of the date he resigns from school district A.

 

A. CONTINUATION OF COVERAGE – ABSOLUTE COVERAGE GROUP

 

If services performed in a position are covered as part of an absolute coverage group, coverage continues if the position subsequently comes under a retirement system. This includes police and firefighter positions which, after coverage is obtained with an absolute coverage group, come under a retirement system.

 

1. Newly Created or Reclassified Positions

 

Positions created or reclassified after the absolute coverage group was brought under the agreement are covered as a part of the group if they would have been a part of it had they existed when the group was covered. For example, an individual in a new or reclassified position is not covered with the absolute coverage group if the position would have been under a non-covered retirement system if the position had been in existence on the date the agreement was made applicable (Section 218(e)(2)) to the absolute coverage group.

 

If, however, it were necessary to expand the scope of coverage under the retirement system by legislation, or a change in by-laws, charter, etc., in order to bring the new job under it, services in the new position would be covered under the agreement as a part of the absolute coverage group.

 

2. Ineligibles

 

The State specifies at the time coverage is provided for ineligibles whether coverage will continue or terminate if an ineligible later becomes eligible for membership in a retirement system.

 

B. CONTINUATION OF COVERAGE – MAJORITY VOTE RETIREMENT SYSTEM

 

Services in all positions under a retirement system, including positions brought under the system in the future, are compulsorily covered under the State's agreement (except for excluded positions and services), if the system is the entire system (i.e., one referendum was conducted to cover the entire system), rather than deemed separate retirement systems for coverage purposes. Coverage will continue even though the positions are later removed from under the retirement system, the system is abolished, or the positions are placed under an additional retirement system.

 

1. Police Officers and Firefighters

 

If there were no police officer or firefighter positions in existence at the time the referendum was held but such positions are later created and placed under the retirement system, employees in such positions are not compulsorily covered. Coverage must be provided through the referendum procedures under the provisions of Section 218(l) of the Act. Likewise, positions which are reclassified as police officer or firefighter positions cease to be covered under the State's agreement until such time as the State may elect to cover them as provided by Section 218(l) of the Act.

 

2. Newly Created or Reclassified Positions

 

A newly created or reclassified position under the retirement system is covered as a part of the coverage group if the position would have been a part of the group had the position been in existence at the time the retirement system coverage group was covered. If the retirement system is abolished, newly created or reclassified positions or positions in a newly created political subdivision cannot be covered as a part of the retirement system coverage group.

 

C. CONTINUATION OF COVERAGE – DIVIDED VOTE RETIREMENT SYSTEM

 

The continuation of coverage rules for the majority vote retirement system apply except only new members of the system are automatically covered. In addition, 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 carries his "No" vote with him. Similarly, if a member of the "Yes" group transfers to a position formerly occupied by a member of the "No" group, his coverage continues.

 

If the retirement system is later abolished or positions are removed from coverage under it, the "Yes" group continues to be covered but new employees occupying positions which were formerly under the system would not be covered because they would not be new members of the system.

D. APPLYING THE CONTINUING EMPLOYMENT EXCEPTION AND CONTINUATION OF COVERAGE PROVISIONS—MEDICARE ONLY DIVIDED REFERENDUM SCENARIOS

 

The proper application of the continuing employment exception and the continuation of coverage rules can cause some confusion when dealing with the Medicare (HI-only) divided referendum vote of a State employee who transfers between agencies and entities within the State government system. The same holds true for the divided Medicare (HI-only) referendum vote of a political subdivision employee who transfers between agencies and entities of the same political subdivision.

   

In order to correctly determine whether a State or local government employee carries his/her referendum vote when transferring between jobs, it is important to delineate a few factors and determine what role they play. The principal factors to consider are:

  

(1) Was the individual a bona fide employee and performing regular and substantial services for the State or political subdivision employer before 04/01/86?

  

(2) Was the transfer from one State employer to another State employer of the same State made without termination of the overall employment relationship with the State? For an individual who transferred from a political subdivision employer to another employer of the same political subdivision, was the transfer made without termination of the overall employment relationship with the political subdivision?

   

(3) Continuing employment exception, which exempts the individual from the mandatory Medicare provisions (SL 50001.520)

   

(4) Continuation of coverage (SL 30001.380)

   

The scenarios below deal with employees who voted in Medicare-only referendums. As far as employment for the original government employer is concerned, the individuals discussed in the scenarios will be considered employees who were hired and performing substantial services for the employer before 04/01/86. So, it will be presumed that in each of the scenarios below the answer to Factor 1 is “Yes.”

   

Scenario 1: Dawn Smith was an employee of a State agency (not an institution of higher learning) who voted for Medicare coverage in the referendum. She later transferred to a job in another State agency (not an institution of higher learning) but under the same retirement system as her former position. Does Ms. Smith carry her Medicare referendum vote?

   

In this case, since Factor 1 is fulfilled, one should then determine if the continuing employment exception (Factor 3) applies. According to the tenets of the continuing employment exception, an employee qualifies for the continuing employment exception when (a) transferring from one State employer to another employer of the same State and (b) the transfer did not result in the termination of the overall employment relationship with the State. Whether such a transfer between agencies of the same State causes a termination of the overall employment relationship must be determined by the State.

   

Scenario 1, as presented, does fulfill (a); but it is unclear whether it would fulfill (b).

   

If the transfer did terminate the overall employment relationship with the State, then the continuing employment relationship exemption would not apply, and Ms. Smith would be considered a “new hire” as far as the current State employer is concerned and would fall under the mandatory Medicare provisions.

   

If the transfer did not terminate the overall employment relationship with the State, then (b) would be fulfilled and the continuation of employment exception to mandatory Medicare would apply. In other words, Ms. Smith would not fall under the mandatory Medicare provisions.

   

If the employee has fulfilled the requirements for the continuing employment exception, then we look at the continuation of coverage aspects.

   

In Scenario 1, both former and current State agency employers are under the same retirement system, and since neither is an institution of higher learning, the retirement system employees of both agencies would also have received Medicare coverage via the same referendum (or same deemed retirement system) – see SL 30001.321. Thus, Ms. Smith would then carry her vote into the new position.

   

Scenario 2: Peter Bennett was an employee of a State agency who voted for Medicare coverage in the referendum. He later transferred to a job in another State agency but under a different retirement system from that of his former position. Does Mr. Bennett carry his Medicare referendum vote?

   

Since Factor 1 is fulfilled, one should then determine if the continuing employment exception (Factor 3) applies. According to the tenets of the continuing employment exception, an employee qualifies for the continuing employment exception when (a) transferring from one State employer to another employer of the same State and (b) the transfer did not result in the termination of the overall employment relationship with the State. Whether such a transfer between agencies of the same State causes a termination of the overall employment relationship must be determined by the State.

   

Scenario 2, as presented, does fulfill (a); but it is unclear whether it would fulfill (b).

   

If the transfer did terminate the overall employment relationship with the State, then the continuing employment relationship exemption would not apply, and Mr. Bennett would be considered a “new hire” as far as the current State employer is concerned and would fall under the mandatory Medicare provisions.

   

If the transfer did not terminate the overall employment relationship with the State, then (b) would be fulfilled and the continuation of employment exception to mandatory Medicare would apply. In other words, Mr. Bennett would not fall under the mandatory Medicare provisions.

   

If the employee has fulfilled the requirements for the continuing employment exception, then we look at the continuation of coverage aspects.

   

Although both former and current employers are government agencies of the same State, each agency has a different retirement system providing coverage for their respective employees. With his transfer to the current employer, Mr. Bennett is now under the jurisdiction and rules of the retirement system of the current employer; thus, his Medicare referendum vote in the retirement system of the former employer would not carry over to the new position. If Mr. Bennett meets the continuing employment exception, he would not have Medicare coverage unless the current employer’s retirement system is covered for Social Security by a Section 218 agreement or has provided Medicare-only coverage for pre-April 1, 1986 hires through a Medicare-only referendum.

   

Scenario 3: Linda Taylor was a retirement system covered employee of a State Institution of Higher Learning (State University) who voted for Medicare coverage in the referendum. The State University was covered for Medicare as a “deemed retirement system group” separate from the rest of the State government positions. Subsequently, Ms. Taylor moved to a non-State University position with a State Agency that was covered by the same retirement system. Employees in both positions are State employees. Since the State University was originally covered as a “deemed retirement system group” separate from the rest of the positions of the same retirement system, does the Ms. Taylor carry her vote?

   

Since Factor 1 is fulfilled, one needs to determine whether the continuing employment exception (Factor 3) applies. According to the tenets of the continuing employment exception, an employee qualifies for the continuing employment exception when (a) transferring from one State employer to another employer of the same State and (b) the transfer did not result in the termination of the overall employment relationship with the State. Whether such a transfer between agencies of the same State causes a termination of the overall employment relationship must be determined by the State.

   

Scenario 3, as presented, does fulfill (a); but it is unclear whether it would fulfill (b).

   

If the transfer did terminate the overall employment relationship, then the continuing employment relationship exemption would not apply, and Ms. Taylor would be considered a “new hire” as far as the current State employer is concerned and would fall under the mandatory Medicare provisions.

   

If the transfer did not terminate the overall employment relationship with the State, then (b) would be fulfilled and the continuation of employment exception to mandatory Medicare would apply. In other words, Ms. Taylor would not fall under the mandatory Medicare provisions.

   

If the employee has fulfilled the requirements for the continuing employment exception, then we look at the continuation of coverage aspects.

   

In Scenario 3, both former State University and current State Agency employers are under the same retirement system, but in this situation the State Institution of Higher Learning (State University) obtained Medicare coverage as a “deemed retirement system group” separate from the rest of the State government agencies covered by the same retirement system – Medicare coverage was obtained for the State University via a separate Medicare referendum from the rest of the State government – as permitted in SL 30001.321 and SL 30001.331.

   

At this point, one would need to refer to SL 30001.334F 2 (Change in Employment), which states:

   

If the retirement system which was divided 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…If a member of a deemed retirement system transfers to a position under a retirement system which has not been covered, a referendum must be held before he/she can be covered.

   

As the result of a coverage referendum (either divided or favorable majority), “new” members of the retirement system are compulsorily covered. In a divided referendum situation, a transferee whose former position was in another deemed retirement system would be treated as a “new” member of the retirement system in their current position with the State and placed in the “yes” group (provided a coverage referendum has been held) regardless of how he/she had voted in their previous position with the State. If the retirement system of the current employer has not yet obtained Medicare coverage for pre-April 1, 1986 hires, then the transferee would no longer have Medicare coverage.

   

Since it has been established that the retirement system positions at the State University were covered for Medicare as a “deemed retirement system” separate from the retirement system positions in the rest of the State government, Ms. Taylor would not carry her vote when transferring from a retirement system position at the State University to a retirement system position at another State government agency. In her current position with the State Agency, Ms. Taylor would either be given Medicare coverage if there has been a favorable majority or divided vote Medicare referendum for pre- April 1, 1986 hires of the State Agency retirement system; or she would lose Medicare coverage if the State Agency retirement system does not have Medicare coverage for pre-April 1, 1986 hires.

   

Scenario 4: Same as Scenario 3, both current and former employers are entities within the same State government, except each entity is covered by a different retirement system. Jeffrey Merrill was a retirement system covered employee of a State Institution of Higher Learning (State University) who voted for Medicare coverage in the referendum. The State University was covered for Medicare as a “deemed retirement system group” separate from the rest of the State government positions. Subsequently, Mr. Merrill moved to a non-State University position with a State Agency that was covered by a different retirement system. Employees in both positions are State employees. Does the Mr. Merrill carry his vote?

   

Scenario 4 actually resembles Scenario 2. As in Scenario 2, we first must consider whether the continuing employment exception applies. According to the tenets of the continuing employment exception, an employee qualifies for the continuing employment exception when (a) transferring from one State employer to another employer of the same State and (b) the transfer did not result in the termination of the overall employment relationship with the State. Whether such a transfer between agencies of the same State causes a termination of the overall employment relationship must be determined by the State.

   

Scenario 4, as presented, does fulfill (a); but it is unclear whether it would fulfill (b).

   

If the transfer did terminate the overall employment relationship, then the continuing employment relationship exemption would not apply, and Mr. Merrill would be considered a “new hire” as far as the current State employer is concerned and would fall under the mandatory Medicare provisions.

   

If the transfer did not terminate the overall employment relationship with the State, then (b) would be fulfilled and the continuation of employment exception to mandatory Medicare would apply. In other words, Mr. Merrill would not fall under the mandatory Medicare provisions.

   

If the employee has fulfilled the requirements for the continuing employment exception, then we look at the continuation of coverage aspects.

   

Although both the former employer (the State University) and the current employer (State Agency) are government agencies of the same State, each agency has a different retirement system providing coverage for their respective employees. With his transfer to the current employer, Mr. Merrill is now under the jurisdiction and rules of the retirement system of the current employer; thus, his Medicare referendum vote in the retirement system of the former employer would not carry over to the new position. If Mr. Merrill meets the continuing employment exception, he would not have Medicare coverage unless the current employer’s retirement system is covered for Social Security by a Section 218 agreement or has provided Medicare-only coverage for pre-April 1, 1986 hires through a Medicare-only referendum.

   

Scenario 5: An employee of the State moves to a political subdivision or vice versa; both former and current positions are covered by the same retirement system. Does the employee carry his/her vote?

   

In Scenario 5, one must first consider whether the continuing employment exception applies. One requirement of the continuing employment exception is that the employment relationship with the government employer has not terminated after 03/31/86 (P.L. 99-272, Section 13205). Scenario 5 presents the employee moving from State government employment to a political subdivision government position or vice versa. To move from State government employment to political subdivision employment (or vice versa) requires the termination of the employment relationship with the former employer, despite the fact that both the former and current job positions are covered by the same retirement system. The continuing employment exception would not be met; the employee would be considered a “new hire;” and, thus, mandatory Medicare would apply in the new position (SL 50001.520).

   

Scenario 6: An employee of the State moves to a political subdivision or vice versa; the former and current positions are covered by different retirement systems. Does the employee carry his/her vote?

   

No, the employee would not carry his/her vote. As in Scenario 5, the employment relationship with the government employer terminated after 03/31/86. SL 50001.520 expressly states that an employee who transfers from a State employer to a political subdivision employer (or vice versa) becomes a “new hire” of the governmental entity he/she is now working for. The continuing employment exception would not be met, and the employee would either be mandatorily covered for Medicare or compulsorily covered if the retirement system under which he/she now works has Social Security coverage based on a Section 218 agreement.


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SL 30001.380 - Continuation of Coverage Rules - 12/15/2005
Batch run: 12/15/2005
Rev:12/15/2005