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
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.