TN 7 (12-05)
SL 90005.504 December 14, 2005 Action Items
A. December 14, 2005 Action Items
(These changes were made for language clarification. There were no policy changes.)
1. SL 30001.315 - Absolute Coverage Group (Section 218(b)(5))
Language changed to read:
An absolute coverage group includes all positions not under the retirement system either:
Under certain circumstances, ineligibles (persons in positions under a retirement system but personally disqualified from membership) may be covered as part of the absolute coverage group. See SL 30001.340 for a discussion of retirement system ineligibles.
The absolute coverage group does not include positions mandatorily or optionally excluded from coverage under a Section 218 agreement.
The State does not need the consent of the affected employees to establish an absolute coverage group.
Once an absolute coverage group obtains coverage by a Section 218 Agreement or modification, the absolute coverage positions remain covered even if they later are brought under a retirement system.
2. SL 30001.320B. Note - Retirement System Coverage Group (Section 218(d))
Added the following paragraphs:
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 State or political subdivision could then establish a new retirement system as a supplement to Social Security without any effect on the Social Security coverage already afforded by the Section 218 Agreement. The process was approved by the Comptroller General of the United States in Opinion B-107602 dated January 23, 1952.
A number of State and local political subdivisions (most notably the Commonwealth of Virginia, the State of Oregon via Modification 20, and the State of Wyoming via Modification 4) liquidated their public employee retirement systems, obtained Social Security coverage for their former retirement system employees, and subsequently established a new retirement system for the employees to supplement the Social Security coverage.
3. SL 30001.323C. – Majority Vote Referendum Process (Section 218(d)(4))
Changed the last paragraph, last sentence to read:
An employee does not lose eligibility to vote when absent from work because of illness, summer vacation or leave of absence (e.g., teachers on summer vacation, members of the National Guard or reservists of the U.S. military and naval services who are called up for active duty) if the employment relationship continues.
Bullet 4 (Transportation services) at the end of line and before the semi-colon added the following parenthetical:
(see SL 30001.365)
Bullet 5, added a reference to the end the parenthetical to read as follows:
(e.g., non-resident aliens with F-1, J-1, M-1, and Q-1 visas – (See RS 01901.740)).
Second paragraph, changed last two sentences to:
The election worker threshold amount for calendar years 2000 and 2001 was $1,100; for the calendar years 2002 through 2005 the election worker threshold amount was $1,200. For calendar year beginning January 1, 2006, the threshold amount is $1,300 a calendar year.
6. SL 30001.375A.2. - Effective Dates of Coverage
Changed title to:
January 1, 1961 through April 6, 1986
Changed the SLCH reference in the 2nd sentence from “SLCH 450” to:
“SL 30001.375 D.”
8. SL 30001.375D. - Effective Dates of Coverage
In the first sentence change the phrase “can covered” to
“can be covered”.
9. SL 40001.465A.-B. - Modifications to Correct Errors
Subsection A. and B. revised to:
A State or political subdivision may have made reports and payments for Social Security coverage of its employees to the Internal Revenue Service, under the Federal Insurance Contributions Act, in the mistaken belief that such action provided coverage for the employees.
B. ERRONEOUS REPORTS WITHOUT COVERAGE
A political subdivision without a Section 218 agreement may be reporting Social Security for employees who are members of the public retirement system. Or, an entity without a Section 218 Agreement or a retirement system for its employees has been withholding and reporting Social Security since before 1990.
To correct erroneous reporting, the State may provide coverage through an error modification or a regular Section 218(e)(3) modification. If the error involves a retirement system, the State must comply with the referendum procedures before executing an error modification or a Section 218(e)(3) modification. If the retirement system was not in existence at the time the error was made, the coverage group would be covered as an absolute coverage group under Section 218(b)(5) of the Act and a referendum would not be necessary.
Subsection C., revised first paragraph of C.
C. ERROR MODIFICATION
An error modification provides coverage as of the date the error first occurred. The effective date is the first day of the first period (quarter or year) for which the erroneous reports were filed, but no earlier than the date the entity came into existence. Use of an error modification sometimes results in a substantial tax liability for the State or political subdivision. This occurs when the error exists over a long period, and there were employees of the entity who were not reported to IRS. For this reason, a modification that utilizes the provision of Section 218(e)(3) of the Act is sometimes preferable to using the error modification.
10. SL 40001.480 - Termination of Section 218 Agreements
First sentence changed “218(g)” to “218(f)”.
Totally revised to the following:
Whether an individual is an “employee” under the common law rules or Federal statutory definition is determined in accordance with the provisions of the Social Security Act and the applicable regulations. Under the Social Security Act, the term “employee” includes:
An officer of a State or political subdivision. (Section 218(b)(3))
Any individual who, under the common law rules applicable in determining an employer-employee relationship, has the status of an employee. (Section 210(j)(2))
For purposes of coverage under Section 218 Agreements and the mandatory coverage provisions, the individual performing services must be an employee of the State or local government entity.
State law provisions are used to determine whether an individual is an officer of a State or political subdivision and, therefore, an employee. Review the State statutes to determine whether they establish enough control for the individual to be classified as an employee. Statutes may state that a specific position is that of a public official, in which case there is likely to be a right to control sufficient to make the individual an employee. (A notary public and a juror perform the functions of a public office but are not public officers.)
Removed last sentence of first paragraph.
At the end of the section added:
Reference: Social Security Ruling 72-36
Placed the following sentence at the end of the first paragraph:
Volunteer firefighters are generally considered employees of the fire departments or fire districts for which they perform their services.
14. SL 60001.670 - Cooperative State-Local Government Employment
Rewrote the third bullet to the following:
If the organization is not a separate political subdivision, it may be an entity created by a joint venture of two or more political subdivisions in which none of those political subdivisions has been designated as the employer. Generally, in such situations, all the participating political subdivisions are considered joint employers. The coverage of services performed by an employee under the State’s Section 218 Agreement is then dependent upon the extent to which each of the joint employers has provided coverage for its employees under the Agreement. Each employer which has covered its positions under a Section 218 Agreement is liable for reporting its pro rata share of the employee’s wages. Each employer must report up to the taxable maximum.