Identification Number:
SL 30001 TN 8
Intended Audience:See Transmittal Sheet
Originating Office:ORDP OISP
Title:Coverage Under Section 218 Agreements
Type:POMS Transmittals
Program:All Programs
Link To Reference:
 

PROGRAM OPERATIONS MANUAL SYSTEM
Part SL – State and Local Coverage Handbook
Chapter 300 – Coverage Under Section 218 Agreements
Subchapter 01 – Coverage Under Section 218 Agreements
Transmittal No. 8, 01/29/2020

Audience

Originating Component

OISP

Effective Date

Upon Receipt

Background

We are streamlining policy for clarity, merging sections, and archiving duplicate information. We are also amending the format in several of the sections, standardizing citations and abbreviations, and creating new policy to expand on existing sections for better understanding of content.

Summary of Changes

SL 30001.301 Section 218 Agreements

  • We corrected a typographical error in the citation to the Act.

  • We expanded the section by creating subsections A, B, and C by merging this section with SL 20001.210, SL 20001.230, SL 20001.240, SL 20001.250, SL 20001.260, and SL 20001.270. We rephrased some of the content for clarity.

  • In the introductory paragraph, we changed the word “most” to “many” referring to the number of State and local government employees covered for Social Security and Medicare. We added Social Security in front of "Act".

  • Newly created subsection A contains information that is originally found in SL 20001.230. We added a note with a cross reference to SL 30001.305 on interstate instrumentalities.

  • Newly created subsection B contains information that was formerly in SL 20001.210. We changed the wording to active voice where possible and included the entity/person that would be performing actions to make the instructions more clear.

  • Newly created subsection C contains information that was formerly in SL 20001.240. We condensed the section by deleting repetitive information and rephrased some content for clarity.

  • Newly created subsection D contains information that was formerly in SL 20001.250. We amended the title and added a sentence in first paragraph for clarity. We added a note to define the close of a calendar day.

SL 30001.303 Basic Section 218 Coverage Concepts

  • We renamed the section to “Basic Section 218 Coverage Concepts” from “Basic Section 218 Concepts” for logical purposes.

  • We grouped the content formerly formatted in bullets into categories and created subsections for those categories. We also moved some of the content within the subsections around for clarity purposes.

  • We folded information that was formerly in RS 01505.001 C throughout the section and will archive RS 01505.001.

  • We folded information that was formerly in SL 30001.310 into newly created subsection C and archived section SL 30001.310. We amended the title to the subsection C for clarity. We added cross-references to subsection C for SL 30001.315 for absolute coverage groups and SL 30001.320 for retirement system coverage groups. We generalized the bullet point concerning exceptions and provided cross references.

  • We folded information that was formerly in SL 30001.355 into newly created subsection D and added reference for detail to sections SL 30001.356 and SL 30001.357. We corrected the text to include “or are optionally” excluded, which had previously been removed in a prior POMS revision but needed to be included for accuracy.

SL 30001.305 Interstate Instrumentalities

  • We expanded on subsection A and pulled some of the language from SL 30001.316 and SL 60001.682 for clarity purposes. We added clarifying language regarding interstate instrumentalities to better define what actions they could take as to Section 218 coverage.

  • . We reformatted subsection B to parallel the form and citations utilized in SL 30001.320D.

  • We changed the name to subsection C to include “interstate” before instrumentality to keep phrasing consistent. We changed the term “delineated” to “named” for simplicity purposes. We made the same update within the body of that subsection.

  • We changed the name to subsection D to include “interstate” before instrumentality to keep phrasing consistent. We made the same update within the body of that subsection. We amended instructions in subsection D as it relates to the referendum procedures and Regional Office responsibilities for clarity.

  • We created subsection E for completeness on the process on interstate instrumentalities and added reference to SL 40001.485. We added “interstate” before instrumentality in the body of that subsection for consistency.

  • We created subsection F for additional “references” for informational purposes.

SL 30001.310 Section 218 Coverage Groups

We archived this section and folded the information into newly created subsection SL 30001.303C.

SL 30001.311 General Concepts of Coverage Group Composition

  • This is a newly created section.

  • Information contains content that was formerly found in SL 30001.316 A, B, C, D, and E; the general definition of a coverage group from SL 30001.316 with a cross-reference to 30001.311.D; and the first four bulleted examples of coverage groups from SL 30001.315A.

  • We added “(governmental)” after nonpropriety for consistency purposes within the section.

  • We added a note in subsection A to note that coverage groups could be absolute or retirement system coverage groups and provide cross-references to applicable POMS sections.

  • We added additional information at the end of subsection D based on HQ OGC’s suggestion concerning “Nonproprietary and proprietary functions” to provide extra detail consistent with Section 218(b)(5) of the Act.

  • We added additional explanatory text to clarify how Section 501(c)(3) entities function in relation to the concept of State and local coverage consistent with HQ OGC’s suggestions.

  • Under new subsection E. 1, paragraph 2, additional detail was added concerning the ability of National Guard members being able to elect to remain under an employee retirement system of a State or Commonwealth of Puerto Rico in narrow circumstances as outlined in the National Guard Technicians Act of 1968.

  • Under new subsection E.3, we added additional information to clarify that additional Congressional actions allowed special authority for States to cover certain positions and cross-referenced SL 30001.370.

SL 30001.315 Absolute Coverage Group (Section 218(b)(5))

  • We reformatted the section by adding Subsections.

  • Subsection A contains information that was originally in the POMS. We reformatted sentence structure for clarity and parallel phrasing. We also added a citation reference for clarity in the introduction. We added a note for clarity that, while Section 218(b)(5) provides a general definition for coverage groups, absolute coverage groups are occasionally referred to as “(b)(5)” coverage groups. We changed one reference from a NOTE to a parenthetical citation at the end of the second paragraph.

  • Newly created subsection B contains information that was previously in SL 30001.380 A1, as the content fits in clearer under the composition of coverage rules rather than continuation of coverage rules. We added an introductory sentence addressing positions within an absolute coverage group at the time it was brought under the Agreement for clarity before talking about what occurred after the absolute coverage group was brought under the Agreement. We streamlined the text and removed extraneous information that did not help clarify the overall point of the subsection.

SL 30001.316 Composition of an Absolute Coverage Group

We archived this section and folded information into SL 30001.315 B, and SL 30001.311 A, B, C, D, and E.

SL 30001.320 Retirement System Coverage Group

  • We amended the title by removing the reference to the Act and added citation to the Act at the beginning of the Section.

  • We added introductory information addressing retirement system coverage groups in general and by adding a note distinguishing scenarios where groups that may have pension plans may or may not be within a retirement system coverage group. Finally, we added references to other SL POMS sections dealing with retirement system coverage groups.

  • We reformatted all of the subsections titles to sentence case from all CAPS for format consistency throughout all of the POMS.

  • Added a note under subsection A regarding divided retirement system fund and changed wording in a few sentences for clarity, such as providing specific citation of the Act.

  • In subsection A, we clarified terminology to make “mandatory” specific to mandatory coverage and used “compulsory” instead.

  • We shortened the NOTE in subsection B to remove unnecessary information.

  • In subsection C, we rephrased the information in the last paragraph for readability and clarity.

  • We amended some of the language in subsection C for clarity and grammar correction.

  • We moved the content formerly found in the introduction paragraph to newly created subsection D, added 1st sentence at the beginning of the subsection and deleted second paragraph for clarity. We did not include the sentence regarding retirement system coverage groups in general—that information was addressed in the introductory paragraph of this section. We also rephrased some of the language to accurately reflect subsequent sections of the POMS to more clearly define the terms noted.

SL 30001.321 What a Retirement System Is for Purposes of a Referendum

  • We amended the title by removing the reference to “majority vote” as information contained within the section applies to any referendum, not just majority vote. We generalized the title.

  • We expanded the introductory paragraph of the section by folding content formerly found in SL 30001.322 and archived SL 30001.322 ans aded Social Security in front of Amendments. We also added second sentence and removed the last portion of the paragraph for clarity. We edited the phrasing slightly within the paragraph for clarity to indicate the State’s authorization to extend coverage flows through the Act.

  • We reformatted titles for subsection A and B to sentence case from all CAPS and changed a few words for clarity.

  • We amended the title to subsection A for clarity purposes. We expanded subsection A by adding a second bullet clarifying that a distinct fund can constitute a retirement system for referendum purposes based on the definition of “retirement system” contained in Section 218(b)(4) of the Act. We also added two more references to the NOTE section as we expanded material in SL 30001.345 into SL 30001.346, and SL 30001.347. We also reformatted some of the bullets for clarity purposes and added content as separate NOTES to the bullets for easier readability and rephrased the beginning of each bullet for clarification. We also removed the last bullet and implemented it into the previous two bullets as the content belonged there.

  • In subsection B, we rephrased the information for clarity purposes to include active voice where possible and parallel phrasing. We also added a cross-reference to the optional exclusions POMS (SL 30001.357).

SL 30001.322 Providing Coverage for Majority Vote Retirement System

We archived this section and folded it into the introductory paragraph in SL 30001.321.

SL 30001.323 Majority-Vote Referendums

  • We amended the title by removing the citation to the Act as it fits better with the next section and hyphenated “Majority-Vote.”

  • We amended the introductory paragraph for clarity and streamlining purposes by adding a second sentence and moving third sentence into a NOTE. Within the note, we added cross-references to additional POMS sections.

  • In subsection A, we reworded the phrasing to be in active voice where possible.

  • We deleted subsection E as we make the same point above twice and it is duplicate information.

  • We reformatted subsection F to now to be subsection E. We revised the order of the words in the introductory sentence for clarity. We used a numbered list instead of bullets, as we indicate there are “two limitations” that apply to a referendum. We clarified second bullet by taking out the term “unfavorable” as the one-year time limitation does not only apply to unfavorable referendums. We also rephrased the wording in the second bullet from the first referendum being “null and void” to discussing legal sufficiency for clarity purposes.

SL 30001.324 Composition of Majority Vote Retirement System Coverage Groups (Section 218(d)(4))

  • We amended the title by adding a hyphen in “Majority-Vote” and adding “Coverage Groups” with a citation to the Act at the end.

  • We amended the subsections titles by changing all CAPS to sentence case for format consistency.

  • We added the following to the introductory language: “Retirement system coverage groups established through a majority-vote process are defined in Section 218(d)(4), and, therefore, may occasionally be referred to as “(d)(4)” coverage groups” for clarity.

  • In subsection A, we added cross-references to the definitions of ineligibles and optionals and rephrased information for clarity.

  • We expanded subsection B by adding numerical number 3 and 4 by folding in content previously under 30001.380 B1 and B2 as the content makes more sense and clearer under composition of majority vote rather than continuation of coverage. We rephrased some of the content for clarity.

  • In subsection B3, “position” was made plural and the pronouns were changed to be consistent.

  • We changed the title to subsection C from “Other employees” to “Previously excluded employees” for clarity.

SL 30001.330 Divided Vote Referendum Authority (Section 218(d)(6))

We archived this section and folded it into SL 30001.331.

SL 30001.331 Divided-Vote Referendums

  • We amended the title for consistency and clarity purposes.

  • We reformatted and expanded the section by folding in content throughout the section that was formerly in SL 30001.330, SL 30001.332, and SL 30001.333.

  • Newly created subsection A contains revised information that was originally in this section and information formerly found in SL 30001.330.

  • Subsection B was rephrased for active voice and clarity.

  • We rephrased some of the content for clarity and streamlining purposes, including changing the discussion of “null and void” to a legal sufficiency discussion under subsection G, similar to the change in SL 30001.323E.

SL 30001.332 Providing Coverage for Divided Vote Retirement System

We archived this section and folded into SL 30001.331C for streamlining purposes.

SL 30001.333 Divided Vote Referendum Process (Section 218(d)(7))

We archived this section and folded the content throughout SL 30001.331 for streamlining purposes.

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

  • We amended the title by hyphenating “Divided-Vote” and adding “Coverage Groups” and a citation to the Act for clarity and consistency purposes.

  • We added introductory paragraph language for elaboration and clarity purposes. Introduction section includes content that was formerly in SL 30001.380 C as the content made more sense and fit better under the composition of divided vote rather than continuation of coverage.

  • In subsection F1, “compulsorily” was substituted for “mandatorily” to avoid confusion with mandatory coverage under Section 210(a)(7)(F).

  • In subsection G, we amended the title, and rewrote the subsection on employees hired after a retirement system divided but before the execution of a modification with the assistance of HQ OGC, for clarity purposes and to outline what would occur in the event the State chose not to offer the opportunity to choose coverage to all employees so situated.

SL 30001.345 Police Officer Positions

We amended the title, as we reorganized and rephrased the content to make clear the distinction between police officer positions and firefighters and created two new sections to move some of the content into SL 30001.346 and SL 30001.347 for clarity purposes. We worked with HQ OGC to clarify some of the language concerning determining whether a position constitutes a police officer position.

SL 30001.346 Firefighter Positions

  • This is a newly created section. Content moved from SL 30001.345 to make clear the distinction between police officers and firefighters for clarity purposes.

  • We expanded the section by folding in additional content formerly in SL 60001.655 into the. We are archiving section SL 60001.655.

  • We worked with HQ OGC to clarify some of the language concerning determining whether a position constitutes a firefighter position.

SL 30001.347 Providing Coverage for Police Officers and Firefighters

This is a newly created subsection. We moved material from SL 30001.345. We broke up the content and elaborated on some of information for clarity purposes.

SL 30001.355 Required and Optional Exclusions

We archived this section and folded into SL 30001.303D.

SL 30001.358 Temporary Emergency Worker Exclusion

  • We reformatted and expanded the section.

  • We substituted “required to be excluded” for “excluded mandatorily” when discussing FICA tax withholding so that mandatorily is only used in reference to mandatory coverage.

  • We created subsection A, which contains the same information that was previously found in this section.

  • We expanded the section by creating subsection B and folding the content formerly found in SL 015005.010. We rephrased a sentence within subsection B for clarity. We also corrected grammar throughout the “temporary emergency worker exclusion-resource guide,” and updated language on page 15 under second question of the FAQ regarding on-call and volunteer firefighter for clarity.

SL 30001.375 Effective Dates of Coverage

  • We added a citation to the Act at the beginning of the section.

  • We reformatted titles for the subsections from all CAPS to sentence case.

  • We rephrased text within the introduction of the section for active voice and clarity.

  • We amended the title for subsection A and amended the language throughout the subsection for clarity.

  • We wrote out the dates included in subsection A.3 for consistency with dates listed elsewhere in this section. We corrected one date in the third bullet that originated from a prior typographical error, consistent with the public law from which it originated.

  • We amended the title for subsection B and amended the language throughout the subsection for clarity. These edits included an additional explanation of retroactive coverage and the controlling date.

  • We removed title for subsection C and made the content as part of subsection B as it fits more naturally as a continuation of the “B” section. We also amended some of the language for clarity.

  • We removed title for subsection D and made the content as part of subsection B as it fits more naturally as a continuation of the “B” section. We also amended some of the language for clarity.

  • Subsection E is now Subsection C as we merged formerly subsection C and D with B. We amended the title for clarity.

  • Subsection F is now subsection D as merged we merged formerly subsection C and D with B.

SL 30001.380 Continuation of Coverage Rules

  • We added citation to the Act at the beginning of the section.

  • We reformatted the titles for all subsections from all CAPs to sentence case.

  • We moved content that was formerly in subsection A1 to SL 30001.315 C as the content fits better under composition of absolute coverage.

  • We moved content that was formerly in subsection B1 and B2 to SL 30001.324 B3 and B4 as the content fits better under composition of majority vote.

  • We moved part of the content that was formerly in subsection C to SL 30001.334 introductory paragraph as the content fits better under composition of divide vote and rephrased the language for clarity.

  • Within the introduction to this section, additional explanation was included regarding the prohibition to terminating existing coverage by the State’s Section 218 Agreement. Further, an “important” note was added to address continuation of coverage rules.

  • Under subsections A and C, sentence structure was edited for active voice and clarity.

  • Under subsection D, we moved the factor 3 conditions into subsection D.3.a-b, instead of under each individual example to keep the rules together and reduce repetition. We added a citation to SL 50001.510A when referencing the continuing employment exception. We corrected additional citations to be consistent with the POMS changes and to match the Public Law citation format throughout the SL POMS sections.

SL 30001.385 Termination of Coverage

  • We reformatted the titles for all subsections from all CAPS to sentence case.

  • We also reformatted the subsections and moved content around as we added new language for clarity dealing with effective termination as the result of a dissolution.

  • We rephrased the introductory text of the section for active voice and clarity.

SL 30001.387 Continuation or Effective Termination of Coverage as a Result of Predecessor-Successor Situations

This is a newly created section. We merged and relocated content formerly found in SL 60001.680, .681, and .682 as they are more appropriate to the 30001 POMS (dealing with coverage) than the 60001 POMS (dealing with employment). We amended the language throughout the section and reformatted the section for clarity and consistency purposes.

SL 30001.390 Entity No Longer in Existence or Inactivated

We archived this section as it contains duplicate information that is already in SL 40001.485.

SL 30001.395 Voluntary Medicare Hospital Insurance Only Coverage for Pre-1986 Hires

  • We renamed the section to “Voluntary Medicare Hospital Insurance Coverage for Pre-1986 Hires” from “Medicare HI-Only Coverage for Pre-1986 Hires.”

  • We added citation to the Act and the relevant Public Law Section at the beginning of the section.

  • We defined the term and added “HI-only” throughout the section for clarity.

  • We amended the introductory material for active voice and clarity.

  • We amended title to subsection A for clarity and added some language from RS 01505.025 to add value to the content for clarity. We rephrased the content to active voice when possible.

  • We rephrased the note at the end of the section for clarity purposes.

SL 30001.396 Rehired Annuitant Coverage under Section 218

This is a newly created section. We are archiving SL 50010.580, as this newly created SL 30001.396 section incorporates that information. We are streamlining policy to archive portions of RS 01505 as it contains overlapping and duplicate information and keep majority of State and Local Material in the SL sections. We rephrased the content for active voice, formatting, and clarity.

SL 30001.397 Special Considerations for Rehired Annuitants—Ineligibles

This is a newly created section. We are archiving SL 50010.580 as this newly created SL 30001.396 section incorporates that information. We are streamlining policy to archive portions of RS 01505 as it contains overlapping and duplicate information and keep majority of State and Local Material in the SL sections. We edited language for active voice and clarity. We corrected the cross-reference for considering the applicability of mandatory Social Security to SL 30001.396, consistent with the changes to the SL POMS. We added a note cross-referencing retirement system ineligibles in SL 30001.340.

SL 30001.398 Coverage of the Louisiana State Employees' Retirement System (LASERS) and the Teachers' Retirement System of Louisiana (TRSL)—Ineligibles and Rehired Annuitants

  • This is a newly created section. We are archiving RS DAL01505.004, as this newly created SL 30001.398 section incorporates that information. We are streamlining policy to archive portions of RS 01505 as it contains overlapping and duplicate information and keep majority of State and Local Material in the SL sections.

  • We reformatted subsection titles from all CAPS to sentence case.

  • We updated the POMS reference citation to SL 500: Mandatory Coverage from the RS references in subsection B2.

  • We updated the POMS reference citation to SL 50001.510, which contains information that was formerly in RS 01505.025.

  • We created a new subsection C. References for proper format and moved the reference from the top of section from formerly RS 01505.004 policy to the following references in SL POMS sections – SL 30001.320, SL 30001.324, SL 30001.340, SL 30001.334.

Conversion Table
Old POMS ReferenceNew POMS Reference
SL 30001.310SL 30001.303
SL 30001.316SL 30001.311
SL 30001.322SL 30001.321
SL 30001.330SL 30001.331
SL 30001.332SL 30001.331
SL 30001.333SL 30001.331
SL 30001.355SL 30001.303
SL 30001.390Archived

SL 30001.301 Section 218 Agreements

Many State and local government employees are covered for Social Security and Medicare through a Section 218 Agreement between the State and the Social Security Administration (SSA). Under Section 218 of the Social Security Act, (Act) a State may ask the Commissioner of Social Security to enter into an Agreement to extend Social Security and Medicare or Medicare-only coverage to employees of the State and its political subdivisions.

A. Parties to the Agreement

A Section 218 Agreement is an Agreement between the State and SSA. The State enters into an Agreement with SSA on behalf of each political subdivision within the State that wishes to extend Social Security Coverage to its employees. SSA cannot enter into an Agreement with a political subdivision. The Section 218 Agreement is a legal document, which incorporates the provisions, definitions, and conditions for coverage consistent with Federal and State laws.

NOTE: 

Refer to SL 30001.305 for information on interstate instrumentalities.

B. Determinations regarding Section 218 Agreements

SSA makes final determinations regarding federal laws that govern State Section 218 Agreements. These determinations may be based on decisions regarding certain specific issues to which either Federal or State law is applied. Where State law may have a bearing on the issue, SSA or the state administrator may request that the state administrator obtain an opinion from the State's attorney general (or other legal officer, as appropriate), if no such opinion already exists. SSA will give due weight in making the final determination.

C. Negotiations between the State and the political entity

Negotiations between a State and its political subdivisions in connection with potential coverage under the State’s Agreement are an intrastate matter. SSA does not have a stake in those decisions and will not participate in that process. Ultimately, it is within the State’s discretion to determine for whom, whether, and when to extend Section 218 coverage, subject to the requirements of the Act. Once the State decides to expand the scope of coverage under its Section 218 Agreement on behalf of a political subdivision, SSA will work with the State to effectuate that desired coverage.

D. Periods of limitation

Federal law and regulations provide a period within which an action is required for a number of situations (e.g., the date on which a Modification must be delivered). SSA considers the period of limitation to end at the close of the calendar day established by the underlying rule. If the period ends on a Saturday, Sunday, legal holiday, or any other Federal non-work day, action taken on the next Federal business day will be deemed to be within the time limitation.

NOTE SSA considers the close of the calendar day to occur at 12:00 am as determined by the State’s time zone, and in accordance with the relevant State’s rules relating to daylight saving time.

SL 30001.303 Basic Section 218 Coverage Concepts

A. General rules for establishing coverage under a Section 218 Agreement

  • The Social Security Administration (SSA) administers the Social Security and Medicare coverage provisions under Sections 218 and 210 of the Act.

  • Each State's original Agreement incorporates the basic provisions, definitions, and conditions for coverage under the Agreement.

  • Coverage under a Section 218 Agreement is voluntary. The State must initiate voluntary coverage under Section 218 and must designate at least one official to act on the State's behalf in administering the State's Section 218 Agreement. Section 218 Agreements become legally binding and cannot be terminated after the State and SSA have executed the Agreement.

  • A Section 218 Agreement provides retirement, survivors, disability, and hospital insurance (HI) coverage for those groups of State and local government employees stipulated in the Agreement. A State can also provide Medicare HI-only coverage for certain individuals.

  • Employees in positions covered under a Section 218 Agreement have the same coverage and benefit rights as employees mandatorily covered for Social Security and Medicare.

  • If there is no voluntary coverage under a Section 218 Agreement, you must consider whether mandatory coverage under Section 210 applies.

B. State-specific rules for coverage under Section 218

The extent of coverage under a Section 218 Agreement varies from State to State. Therefore, it is important to know who the employer is, to identify the position, and to recognize key State and local coverage dates when determining coverage for an employee. The State must have authority under its own State law to enter into a Section 218 Agreement and to expand coverage through Modifications to that Agreement. The types and extent of coverage that a State may provide under its Agreement must be consistent with the authority given to the State by both Federal and State laws.

C. Coverage groups

  • Section 218 Agreements and Modifications generally do not cover individuals. They cover the services performed within positions by employees, e.g., teachers or bus drivers.

  • Coverage is extended to a group of positions, collectively known as a “coverage group.” The State decides which positions to cover and the effective date of coverage, subject to Federal and State laws. To have a coverage group, actual employees must occupy the intended coverage group’s positions. There are two types of employee groupings for coverage purposes:

    • Absolute coverage groups (Section 218(b)(5); SL 30001.315), composed of positions not under a retirement system and

    • Retirement system coverage groups (Section 218(d); SL 30001.320), composed of positions under a retirement system.

  • There are exceptions to the general rule that Agreements and Modifications cover positions, and not individuals (see, e.g., SL 30001.334; SL 30001.395; SL 50001.501; SL 50001.510).

D. Required and optional exclusions

Certain services are required to be excluded from Section 218 coverage. Some services, however, may either be excluded or covered under the State's Section 218 Agreement at the State’s option (see SL 30001.356 and SL 30001.357 for details).

When an absolute or retirement system coverage group is covered under an Agreement, the services of all employees who are members of the coverage group are covered unless they are required to be or are optionally excluded from coverage under the State’s Agreement.

SL 30001.305 Interstate Instrumentalities

A.  Interstate instrumentality for Section 218 coverage

Two or more States may organize an interstate instrumentality to carry out one or more governmental functions for those States. An interstate instrumentality is an independent legal entity with power to hire, supervise, and discharge its own employees, and generally to sue and be sued in its own name, to contract, and to hold and convey real and personal property.

An interstate instrumentality is treated as a State for Section 218 coverage purposes.

Interstate instrumentalities may enter into and modify their own Section 218 Agreements, but only if given legal authority to do so by the laws of their participating States. A State may provide this authority either through general legislation applicable to all interstate instrumentalities in which the State participates, or through the State’s enabling legislation that creates the specific interstate instrumentality seeking coverage. If the laws of any single participating State would prevent the interstate instrumentality from entering into a Section 218 Agreement, then the entity lacks authority to enter into a Section 218 Agreement.

The Social Security Administration (SSA) views the question of whether State law permits an interstate instrumentality to enter into a Section 218 Agreement as a question of State law. If a State’s laws do not expressly authorize the interstate instrumentality to enter into a Section 218 Agreement, it may be necessary to obtain a State attorney general opinion clarifying the entity's authority. If the State attorney general is unable or unwilling to provide an opinion, SSA must independently assess the entity’s authority under that State’s laws. Likewise, if the interstate instrumentality involves many participating States and it is impractical to obtain State attorney general opinions from each State whose laws do not expressly authorize the interstate instrumentality to enter into a Section 218 Agreement, SSA may independently assess the entity’s authority under those States’ laws. SSA will consider whether the interstate instrumentality has general authority to enter into contracts and to hire and discharge employees.

Once an interstate instrumentality obtains Social Security coverage through a Section 218 Agreement, coverage under the Agreement continues even if additional States begin participating in the interstate instrumentality. A State’s revocation of an interstate instrumentality’s authority to enter into an Agreement does not terminate the interstate instrumentality’s existing and validly established Agreement for coverage.

NOTE: 

The consent of Congress is required for the creation of some interstate instrumentalities.

B.   Interstate instrumentality and retirement system coverage groups

An interstate instrumentality may extend coverage to absolute and retirement system coverage groups. All policies relating to coverage for States equally apply to interstate instrumentalities. A State retirement system that covers employees of an interstate instrumentality is considered a retirement system established by the interstate instrumentality. As with any retirement system coverage group, coverage can be extended only after a referendum has been held for members of the retirement system (see SL 30001.323; SL 30001.331). Interstate instrumentalities may bring the retirement system positions under coverage through either a majority-vote process (Section 218(d)(4); SL 30001.323; SL 30001.324) or a divided-vote process (Section 218(d)(6); SL 30001.331; SL 30001.334). The referendum provides an opportunity to vote for or against coverage to all eligible employees (see SL 30001.323C-D; SL 30001.331D-E) of the retirement system (SL 30001.321).

C. Certifying the referendum for an interstate instrumentality

The interstate instrumentality must meet all required conditions for holding a referendum for its employees, and a designated official must certify the referendum (see SL 30001.323 and SL 30001.331 for the required referendum conditions). The designated official(s) may be named in the enabling act, statutes, or other authorities (e.g., from the Board of Directors or the Chairman). All interstate instrumentalities can provide coverage for police officers and firefighters in positions covered under a retirement system.

D. Educating and notifying interstate instrumentality employees on referendum procedures

Since there is no specific State Administrator to educate the interstate instrumentality's employees on the referendum procedures, the regional office Section 218 specialist (RO specialist), upon the interstate instrumentality's request, may assist the interstate instrumentality's chief executive officer to ensure a proper referendum is held. The interstate instrumentality should reach out to the RO specialist in which the interstate instrumentality's principal office is located when requesting such assistance and provide a point of contact. To contact the regional office, refer to the SSA Regional Office State and Local Coverage Specialists. The regional office retains the discretion to determine the level of assistance to provide on a case-by-case basis.

E. Dissolution of the interstate instrumentality

Where an interstate instrumentality legally dissolves and no longer exists, coverage under its Agreement effectively ends. The interstate instrumentality should notify the regional office of the dissolution as it occurs and provide SSA with documentary evidence of the dissolution. SSA will annotate its records to reflect the effective termination of the Agreement. For details on what evidence to provide for legal dissolution, please see SL 40001.485C.

F. References

 

SL 30001.311 General Concepts of Coverage Group Composition

A. Coverage groups

Coverage groups are defined in Section 218(b)(5). Generally speaking, a coverage group is a grouping of positions that are all engaged in either (1) nonproprietary (governmental) functions, or (2) a single proprietary function (see SL 30001.311.D).

The following employee groupings would constitute a coverage group:

  • State employees performing services in connection with a nonproprietary (governmental) function;

  • State employees performing services in connection with a single proprietary function;

  • Employees of a political subdivision performing services in connection with the nonproprietary (governmental) function; and

  • Employees of a political subdivision performing services in connection with a single proprietary function.

NOTE: 

Coverage groups may be absolute coverage groups or retirement system coverage groups. For a detailed explanation of the difference between absolute and retirement system coverage groups, refer to SL 30001.315 and SL 30001.320.

B. Nonproprietary and proprietary functions

A coverage group includes services performed in connection with either (1) nonproprietary (governmental) functions or (2) a single proprietary function. If an individual position involves the performance of services in connection with (1) multiple proprietary functions or (2) both proprietary and nonproprietary functions, then the position is only included under one coverage group, and the State’s Agreement should specify how to determine which coverage group applies.

A proprietary function is a business function. A State or political entity exercises a proprietary function when it engages in a business similar to one a private enterprise would engage in for profit. For example, the operation of parking garage by a city is a proprietary function.

Nonproprietary (governmental) functions of a State or political subdivision are the traditional functions of government, i.e., legislative, executive, and judicial functions. Governmental functions include activities such as controlling and preventing crime, regulating the conduct of citizens for the general welfare, and providing for the public safety. Likewise, the operation of schools or institutions of higher learning by State or political subdivisions is a governmental function.

The distinction between a nonproprietary and a proprietary function is not always readily apparent. The provisions of State law govern in determining whether a function is governmental or proprietary. What may be a proprietary function under the laws of one State may not be classified as such in another.

C. Political subdivision

A political subdivision:

  1. 1. 

    Is a separate legal entity of a State;

  2. 2. 

    Has governmental powers and functions; and

  3. 3. 

    Is an independent legal entity with the power to:

    • Hire, supervise, and discharge its own employees;

    • Sue and be sued (generally) in its own name;

    • Contract; and

    • Hold and convey real and personal property.

A “political subdivision” ordinarily includes counties, cities, townships, villages, schools, sanitation, utility, irrigation, drainage and flood-control districts, and similar governmental entities.

When evaluating whether an entity is a political subdivision, the Social Security Administration's (SSA) policy applies a factor-based analysis. SSA applies a similar analysis to the one described in the Internal Revenue Service (IRS) Revenue Rulings 57-128 and 65-26. These rulings provide that the following factors, among others, should be considered:

  • Whether there are any private interests involved, or whether the States or political subdivisions involved have the powers and interests of an owner;

  • Whether control and supervision of the organization is vested in public authority or authorities;

  • If express statutory, implied statutory, or other authority is necessary to create and/or use such an instrumentality and whether such authority exists; and

  • The degree of financial autonomy and the source of its operating expenses.

Generally, SSA considers provisions of State law when determining whether an organization is a separate and distinct political subdivision for coverage purposes. State law generally identifies political subdivisions as bodies “corporate and politic,” but exceptions exist. Libraries and hospitals are illustrative of organizations whose status is often not apparent from either title or statute. They may be integral parts of a political subdivision such as a city or county (not separate political subdivisions), instrumentalities of a State or political subdivision (separate political subdivisions), or they may be private nonprofit organizations (not separate political subdivisions).

While the status of an entity or an organization should usually be clear, there may be instances were SSA may request that the State obtain a State attorney general opinion addressing whether an entity or organization constitutes a political subdivision under State law. SSA gives a State attorney general opinion due weight in making Section 218 Agreement determinations (see SL 30001.301B).

“Instrumentality” and “integral part” are concepts that are closely related to political subdivisions. Understanding these additional concepts is important to understanding whether something can be considered a separate legal entity for the purposes of Section 218 coverage:

1. Instrumentality

An instrumentality is a political subdivision that is wholly owned by:

  • A State;

  • One or more political subdivisions of a State, or

  • A State and one or more of its political subdivisions.

An instrumentality is organized to carry on some function of government for the State or political subdivision. It is an independent legal entity with powers, for example, to sue and be sued in its own name, to contract, and to hold and convey property.

Accordingly, instrumentalities constitute a specific class of political subdivision, and, as such, a State may cover an instrumentality as a political subdivision in its Agreement.

2. Integral Part

An integral part (which may also be referred to as a component or department) is not a separate legal entity from the political subdivision of which it is a part and receives whatever coverage the political subdivision or State has.

Some integral parts may have their own payroll, bookkeeping, tax reporting system, employer identification number, etc., but they are not separate legal entities that require (or are entitled to) their own separate Section 218 Agreements.

Example: A city has executed a Section 218 Agreement that covers all services performed by city employees for Social Security purposes. The city subsequently creates a recreation board to oversee the city’s recreational facilities. However, the recreation board is a department of the city and does not qualify as a separate political subdivision under State statute. The recreation board has a separate payroll system from the city, applies for and receives a Federal Employer Identification Number (EIN), withholds the appropriate employment taxes, and reports such taxes and wages to SSA and IRS. The recreation board, as an integral part of the city (not a separate legal entity from the city), is covered by the city’s Section 218 Agreement.

D. Political subdivision under Section 501(c)(3) of the Internal Revenue Code (IRC)

Section 102 of Public Law 98-21 (Social Security Amendments of 1983), which became effective January 1, 1984, changed provisions of the law concerning employment for organizations exempt from income tax under Section 501(c)(3) of the IRC, including nonprofit charitable, religious, and educational groups.

Section 501(c)(3) entities frequently occupy a similar role to political subdivisions, although they are not actually political subdivisions. Therefore, it is important to evaluate a 501(c)(3) entity to determine if it is public or private to resolve the Social Security coverage implications:

  • Evaluate the entity to determine if it meets the definition for a political subdivision (see SL 30001.311C) and

  • If the entity is a political subdivision of the State, ignore the entity's 501(c)(3) status for purposes of determining Social Security coverage implications.

Many private nonprofit schools, colleges, hospitals, and libraries are 501(c)(3) organizations but are not political subdivisions despite performing similar functions. If the entity is not a political subdivision of the State, the State's Section 218 options are inapplicable to the entity. Notably, some private 501(c)(3) organizations have employees who are allowed to become members of some State or political subdivision retirement systems. Accordingly, do not rely on employee membership in a public retirement system when evaluating 501(c)(3) entities, as it may not be determinative. The governing standard is whether the entity qualifies as a political subdivision. The services performed by private 501(c)(3) employees are mandatorily covered. Such private 501(c)(3) employees are not considered State or political subdivision employees for Social Security coverage purposes.

Conversely, some 501(c)(3) organizations are public entities, and thus subject to coverage rules applicable to a State's political subdivisions. Political subdivisions that are also 501(c)(3) entities can only obtain coverage (1) under the provisions of Section 218 of the Social Security Act (Act); (2) in accordance with the mandatory Social Security coverage provision beginning July 2, 1991; or (3) under the mandatory Medicare-only coverage provision beginning April 1, 1986. Status as a 501(c)(3) entity does not exempt a State's public entities from the normal rules for establishing coverage under Section 218.

SSA may request a State attorney general opinion concerning whether an entity constitutes a political subdivision under the laws of that State. In addition, it may be necessary to coordinate some issues with IRS, with respect to Federal Insurance Contributions Act (FICA) taxation.

NOTE: 

If any nongovernmental entities were erroneously listed in a Section 218 Agreement, the State should submit a Modification to remove them from the Agreement (see SL 40001.450E).

E. Special coverage groups

1. Civilian employees of the National Guard

Civilian employees of State National Guard units employed under Title 32, U.S. Code Section 709 and paid by the Department of Defense were deemed State employees effective January 1, 1951. Many States provided coverage for the services of such individuals as a separate absolute coverage group. If the individuals were in positions under a retirement system, coverage was extended as a part of the retirement system coverage group that included other State employees in positions under the same retirement system.

Effective January 1, 1969, all new National Guard technicians are covered under the Civil Service Retirement System (CSRS) as a Federal employee (Public Law 90-486, National Guard Technicians Act of 1968). National Guard technicians employed as of the effective date (or within 30 days following reemployment if, under specific circumstances, they were reemployed within 60 days of the effective date) had the opportunity to elect to remain under an employee retirement system of, or plan sponsored by, a State or the Commonwealth of Puerto Rico, so long as the State or Commonwealth of Puerto Rico consented to the election. Individuals who elected to remain constitute a separate special coverage group within the State’s Section 218 Agreement, as specified in Section 218(b)(5). Otherwise, Social Security coverage for National Guard technicians’ services under a State’s Agreement was terminated effective December 31, 1968.

2. Agricultural inspectors

Effective January 1, 1955, individuals employed pursuant to an Agreement entered into under Title 7, U.S. Code 1624 or Title 7, U.S. Code 499n between a State and the U.S. Department of Agriculture to perform services as inspectors of agricultural products may be deemed by the State to be State employees and a separate absolute coverage group. Agricultural inspectors whose positions are under a retirement system may be covered only as members of a retirement system coverage group.

3. Special State-specific coverage groups

As authorized by various congressional actions, many States obtained special authority to cover certain positions as a coverage group at different points in time. See SL 30001.370 for special State provisions.

SL 30001.315 Absolute Coverage Groups (Section 218(b)(5))

A. Definition of absolute coverage groups for Section 218 purposes

An absolute coverage group includes all positions not covered by a retirement system either on September 1, 1954, on the applicable date of the State's Agreement, or Modification to the State's Agreement (see Section 218(e)(2) of the Social Security Act (Act), Effective Dates of Coverage SL 30001.375B, and Designated Date for Retroactivity Purposes SL 40001.435).

NOTE: 

Although Section 218(b)(5) provides a general definition applicable to all coverage groups, absolute coverage groups are occasionally referred to as "(b)(5)" coverage groups.

The State does not need the consent of the affected employees to establish an absolute coverage group. An absolute coverage group does not include positions that are required to be or are optionally excluded from coverage under a Section 218 Agreement. 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).

Once an absolute coverage group obtains coverage by a Section 218 Agreement or Modification, the absolute coverage positions remain covered even if a retirement system later covers those positions.

B. Composition of absolute coverage groups

The Agreement covers all positions existing within the absolute coverage group at the time the State expanded coverage to the group. The Agreement also covers positions that are newly created or reclassified if those positions would have been a part of the absolute coverage group had they existed when the State extended coverage to the group.

SL 30001.320 Retirement System Coverage Group

A retirement system coverage group is a grouping that covers positions that are also covered under a retirement system or public pension. For the coverage group to be a retirement system coverage group, a retirement system or public pension must have covered the positions at the time the coverage group was created.

NOTE: 

The mere fact that a coverage group covers positions that are under a retirement system or public pension plan does not necessarily make a coverage group a retirement system coverage group, as absolute coverage group positions may later be brought under a retirement system.

We apply different rules to retirement system coverage groups than we do to absolute coverage groups, as explained in the following sections (see POMS SL 30001.321 through SL 30001.334 and SL 30001.340 through SL 30001.350).

A. Definition of retirement system for Section 218 purposes

Section 218(d)(4) of the Social Security Act (Act) defines a retirement system as 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 and need not 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 compulsory basis (this is true regardless of whether the employing entity has actually implemented the law).

NOTE: 

Any distinct tier or plan within a retirement system that qualifies as an independent fund (i.e., stock or sum of money, portion of revenue) that is set apart for the particular purpose or specified payments of retirement, pension, or annuities may be treated as a separate retirement system for purposes of coverage based on the definition of “retirement system” contained within Section 218(b)(4). However, if the funds for the tier or plan are comingled with funds for any of the other plans, it cannot be considered a separate retirement system for purposes of establishing coverage.

B. Legislative authority for retirement system coverage

The 1954 Social Security 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.”

State legislation must authorize the State to cover retirement system positions.

NOTE: 

A few States established coverage for retirement system positions before 1955 by receiving specific authority to do so, or by liquidating their retirement systems in order to establish absolute coverage groups and then creating new replacement retirement systems.

C. When positions are considered under a retirement system

The Social Security Administration (SSA) determines whether a position is under a retirement system by looking at the employees in that position. .A position is under a retirement system if any one individual who occupies the position may become a member of the retirement system by virtue of his or her occupancy of the position (see SL 30001.380 for newly created or reclassified positions).

Example: A hospital, formerly operated by the State as an integral part of the State government, is now operated by a hospital authority, an instrumentality established for this purpose and legally separate from the State government. The State Employees Retirement System (SERS) covers only positions of State employees. Employees, formerly employed by the State who became employees of the hospital authority on the date of its establishment are allowed to retain membership in SERS. Newly hired employees may not become members.

It is possible for a former State employee who retained membership in SERS to occupy hospital positions. As a result, all employees of the hospital authority therefore occupy positions under SERS even though the employees themselves may not be members of SERS (either newly hired employees or existing employees who did not elect to retain SERS membership).

D. Procedure

A State may voluntarily cover a retirement system coverage group under its Section 218 Agreement without regard to the qualifications of the system. A State may extend coverage to a retirement system coverage group only after it holds a referendum (see SL 30001.323; SL 30001.331).

The State may bring the retirement system positions under coverage through either a majority vote process, which is allowed for all States (see SL 30001.323; SL 30001.324), or a divided vote process, which is allowed for specific states only (see SL 30001.331; SL 30001.334). The referendum provides an opportunity to vote for or against coverage to all eligible employees (see SL 30001.323C-D; SL 30001.331D-E) of the retirement system (see SL 30001.321).

SL 30001.321 What a Retirement System Is for Purposes of a Referendum

When the 1954 Social Security Amendments authorized the coverage of employees in positions under a retirement system, it prescribed the mechanics for accomplishing this coverage. The State must have authority under State law and the State Section 218 Agreement to extend coverage to employees in positions under a retirement system. Additionally, the Act authorizes the States to extend coverage to positions under a retirement system after giving the employees an opportunity to vote to determine whether their services should be covered. Federal law gives the State some flexibility to designate the scope of the retirement system for purposes of the referendum.

A. Designating a retirement system

If a retirement system covers the positions of employees of the State and positions of employees of one or more political subdivisions, or, alternatively, the employees of more than one political subdivision, the State has the following choices as to what may constitute the retirement system for purposes of the referendum:

  • The entire system;

  • A distinct structured tier or plan within the retirement system that (1) has its own fund or sum of money set apart for the particular purpose of retirement, pensions, or annuities of that tier or plan and (2) that is not comingled with the assets of another tier or plan;

  • Positions under the retirement system filled by employees of the State;

  • Positions under the retirement system filled by employees of a specific political subdivision;

  • Positions under the retirement system filled by employees of any combination of the State or one or more political subdivisions;

  • Positions under the retirement system filled by employees of each institution of higher learning, which includes junior colleges and teachers' colleges; and

    NOTE: 

    Institutions of higher learning that are not political subdivisions and that do not in themselves comprise the entire retirement system, cannot be combined for purposes of the referendum. If a State elects to hold separate referendums for such institutions, a separate referendum must be held for each. Institutions of higher learning that are separate political subdivisions may be combined with other political subdivisions and/or with the State.

    A retirement system that covers the positions of employees of a single political subdivision can only be further divided to treat employees of each institution of higher learning as separate retirement systems for referendum purposes. A retirement system that covers only the positions of employees of a State can be subdivided further to treat employees of each institution of higher learning as separate retirement systems; it cannot be subdivided to provide coverage for employees of different departments of the State.

  • Positions under the retirement system filled by the employees of a hospital that is an integral part of a political subdivision, two or more political subdivisions, or the employees of two or more hospitals each of which is an integral part of the same political subdivision.

    NOTE: 

    The term "hospital" is used in the ordinary sense and refers to any institution organized and operated for the reception and medical or surgical care of the sick, injured, aged, and infirm. If there are two or more hospitals that are integral parts of the same political subdivision(s), a separate referendum may be held for each or, in contrast to institutions of higher learning, the hospitals may be combined for a referendum.

    A retirement system that covers the positions of employees of a single political subdivision can only be further divided to treat employees of hospitals as separate retirement systems for referendum purposes.

NOTE: 

The State has additional options for police and firefighter positions under a retirement system (see SL 30001.345; SL 30001.346; SL 30001.347).

B. Separate retirement systems required

If the State optionally excluded a class of positions from the retirement system coverage group (see SL 30001.357) (or optionally excluded a class of positions from an absolute coverage group that subsequently came under a retirement system) and the State later wishes to cover those positions, then the positions constitute a separate retirement system for referendum purposes. If the State optionally excluded "all classes" of the position involved, then "all classes" of the position constitute the retirement system for referendum purposes.

Example: The State excluded all classes of part-time positions under a retirement system from coverage under its Section 218 Agreement. If the State later decides to cover these positions under its Agreement, all classes of part-time positions under the retirement system would be treated as a separate retirement system for referendum purposes.

A State may not combine multiple distinct retirement systems for the purpose of conducting a referendum. For example, the State could not hold a single referendum to expand coverage to positions under a State retirement system and a political subdivision retirement system that is not a part of the State system.

SL 30001.323 Majority-Vote Referendums

All States are authorized under Section 218(d)(3) of the Social Security Act (Act) to conduct majority-vote referendums for coverage. The State holds a referendum among all eligible members of the retirement system designated by the State for purposes of that referendum (see SL 30001.321). If a majority of the eligible members of that retirement system votes in favor of coverage, the State may then submit a Modification to its Agreement to extend coverage to that group.

NOTE: 

The State is authorized to extend coverage only where the vote tally represents a majority of all eligible members of the retirement system (see SL 30001.323C; SL 30001.323D). The State's authority is not based merely on a majority of votes actually cast.

A. Referendum conditions

While the referendum itself is a State matter, Federal law requires certain minimum conditions be met. The Governor or an official designated by him or her must certify that the referendum met certain conditions listed below. The Governor's delegation of his or her certification responsibility may be general or specific, continuing or limited. The certification must specify that:

  • The vote was held by secret written ballot (Federal law does not prescribe the ballot format or the voting mechanics);

  • The opportunity to vote was given and limited to the eligible employees;

  • The employees were given notice of the vote at least 90 days before the vote is to be held (Federal law does not prescribe the form of notice);

  • The vote was supervised by the Governor or by a named designee of the Governor; and

  • A majority of the eligible employees of the retirement system voted for coverage.

B. Certification form requirements

One certification is required for each referendum held in a retirement system (e.g., if one referendum was held by a retirement system covering a number of political subdivisions, only one certification should be submitted). If a State held separate referendums for the employees of any one or more political subdivisions, institutions of higher learning, or hospitals as separate retirement systems, a certification is required for each referendum held (a combined certification for each referendum may be shown on one form). The certification should identify the precise retirement system covered by the certification.

C. Employees eligible to vote

To be eligible to vote in a referendum an employee must be:

  • A member of the retirement system at the time the referendum is held and

  • In a position under the retirement system, i.e., be in an employment relationship (as distinguished from actually performing services) both at the time the notice of the referendum is given and at the time the referendum is held.

Generally, an employee is a member of a retirement system if the employee’s personal relationship to the system qualifies the employee for benefits under the system or for additional benefits if the employee is already qualified. 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.

D. Employees not eligible to vote

Employees who are not eligible to vote are those:

  • Who are already covered under the State's Section 218 Agreement (e.g., a member of an absolute coverage group whose position is now being brought under a retirement system);

  • Who are not members of the retirement system;

  • Who are excluded from coverage by the required or optional exclusions;

  • Who are members of the retirement system but are not State or local government employees (e.g., cooperative extension agents of the Department of Agriculture are not eligible for coverage under an Agreement); and

  • Who are hired after the date the 90-day notice is given and before the date the referendum is held.

E. Referendum time limitations

Two time limitations apply to a referendum:

  1. 1. 

    The Agreement or Modification to extend coverage must be executed within two years of the date of the referendum and

  2. 2. 

    Another referendum cannot be held among the employees of the same retirement system group for at least one year after a previous referendum. This prohibition does not apply where a failure to satisfy one of the referendum conditions (see SL 30001.323A) precluded the first referendum from being legally sufficient to support a valid Modification.

The one-year time limitation between referendums in Section 218(d)(3) of the Act applies only to a referendum for the same type of coverage for the same retirement system group. This limitation prevents immediate or repetitive referendums.

Example: A retirement system group held an unsuccessful referendum for Social Security coverage on September 1, 2003. That same retirement system can hold a referendum for Medicare Hospital Insurance (HI)-only coverage on January 3, 2004.

SL 30001.324 Composition of Majority-Vote Retirement System Coverage Groups (Section 218(d)(4))

Retirement system coverage groups established through a majority-vote process are defined in Section 218(d)(4), and, therefore, may occasionally be referred to as "(d)(4)" coverage groups.

A. Current employees

The coverage group includes all employees not previously covered who are in positions under the retirement system on the date of execution of the Modification or the date designated to control who will have retroactive coverage under that Modification (the "applicable" date in accordance with Section 218(e)(2) of the Social Security Act (Act)). This includes all current members, regardless of how they voted in the referendum, the ineligibles (see SL 30001.334A), and the optionals (see SL 30001.334B). The coverage group does not include positions that are required to be or are optionally excluded.

B. Future employees

The coverage group will include all employees in positions brought under the retirement system in the future. The “retirement system” means the grouping that constituted the retirement system for the referendum. It means the actual or entire retirement system only if the entire system was voted as a single retirement system in a referendum.

1. Retirement system deemed a single retirement system

If a retirement system, for referendum purposes, retained its identity as a single retirement system, then the Agreement covers all employees whose positions are brought under the retirement system after the Agreement is made applicable to that system. Coverage is automatic as of the date the positions are brought under the system and only an identification Modification should be submitted by the State to the Social Security Administration (SSA).

Example: A State conducted a referendum for a State retirement system, which covered State and political subdivisions employees, as a single retirement system. After a favorable referendum, coverage was extended to the retirement system coverage group composed of all employees in positions covered by the system. Subsequently, a new political subdivision was created and joined the retirement system. Since the retirement system retained its identity as a single retirement system, the employees of the new entity are members of the retirement system coverage group, and automatically covered under the Agreement. It is also possible to have automatic coverage for a deemed retirement system if the Modification clearly indicates that the deemed system will include future participants.

2. Retirement system deemed separate retirement systems

If a retirement system is divided into separate deemed retirement systems for referendum purposes, the coverage status of a new member in the retirement system depends on the composition of the deemed systems. If the deemed retirement system is fixed in its composition, i.e., as to the precise entities it includes, additional newly created political entities may be covered only upon compliance with the referendum procedures.

Example: Cities A, B and C, which participate in the State retirement system, were deemed separate retirement systems for referendum purposes. After coverage was extended to these cities, City D joined the retirement system. Employees of City D may be covered only after a favorable referendum is held.

3. Newly created or reclassified positions

If newly created or reclassified positions would have been part of the retirement system coverage group if they had existed when that group was covered, they are considered part of that coverage group. 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.

4. 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 that are reclassified as police officer or firefighter positions cease to be covered under the State’s Agreement until the State elects to cover them as provided by Section 218(l) of the Act.

C. Previously excluded employees

The coverage group will also include all employees who are in positions that were excluded from coverage because they were under a retirement system when coverage was extended to their absolute coverage group, but whose positions were subsequently removed from the system. The employees in these positions are part of the retirement system coverage group. Employees whose positions were removed from coverage under the retirement system by action taken by a State or political subdivision before September 1, 1954, could be covered as an absolute coverage group.

 

SL 30001.331 Divided-Vote Referendums

A. Divided-vote referendum authority (Section 218(d)(6))

Section 218(d)(6)(C) of the Social Security Act (Act) authorizes 23 States and all interstate instrumentalities to divide a retirement system established by a State, a political subdivision of such State, or an interstate instrumentality after a referendum based on whether the employees in positions under that system desire Social Security coverage. The State holds a referendum among all members of the retirement system designated by the State for purposes of that referendum (see SL 30001.321).

The States authorized to use the divided-vote process (including the enactment date of amendments that permitted this coverage) are:

  • Alaska (7-20-65);

  • California (8-30-57);

  • Connecticut (8-30-57);

  • Florida (8-1-56);

  • Georgia (8-1-56);

  • Hawaii (8-1-56);

  • Illinois (1-2-68);

  • Kentucky (3-2-04);

  • Louisiana (3-2-04);

  • Massachusetts (8-27-58);

  • Minnesota (8-30-57);

  • Nevada (7-23-64);

  • New Jersey (12-20-77);

  • New Mexico (6-30-61);

  • New York (8-1-56);

  • North Dakota (8-1-56);

  • Pennsylvania (8-1-56);

  • Rhode Island (8-30-57);

  • Tennessee (8-1-56);

  • Texas (9-13-60);

  • Vermont (8-27-58);

  • Washington (8-1-56); and

  • Wisconsin (8-1-56).

NOTE: 

These States and interstate instrumentalities may cover employees in retirement system positions on a majority-vote basis, if they prefer.

B. Referendum conditions

While the referendum itself is a State matter, Federal law requires certain minimum conditions be met. The Governor or an official designated by him or her must certify that the referendum met certain conditions listed below. The Governor's delegation of his or her certification responsibility may be general or specific, continuing or limited. The certification must specify that:

  • The vote was held by written ballot (Federal law does not prescribe the ballot format or the voting mechanics);

  • The opportunity to vote was given and limited to the eligible employees;

  • The employees were given notice of the vote at least 90 days before the vote is to be held (Federal law does not prescribe the form of notice);

  • The vote was supervised by the Governor or by a named designee of the Governor; and

  • The retirement system was divided into two deemed retirement systems, one composed of positions of members of the system who voted for coverage and the other composed of the remaining positions under the retirement system (see SL 30001.331F).

C. Certification form requirements

One certification is required for each referendum held in a retirement system (e.g., if one referendum was held by a retirement system covering a number of political subdivisions, only one certification should be submitted). If a State held separate referendums for the employees of any one or more political subdivisions, institutions of higher learning or hospitals as separate retirement systems, a certification is required for each referendum held (a combined certification for each referendum may be shown on one form). The certification should identify the precise retirement system covered by the certification.

D. Employees eligible to vote

To be eligible to vote in a referendum an employee must be:

  • A member of the retirement system at the time the referendum is held and

  • In a position under the retirement system, i.e., be in an employment relationship (as distinguished from actually performing services) both at the time the notice of the referendum is given and at the time the referendum is held.

After December 31, 1959, employees who are in positions that make them eligible to join the retirement system but have not yet exercised their option to do so are considered members of the retirement system and participate in the referendum.

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.

E. Employees not eligible to vote

Employees who are not eligible to vote are those:

  • Who are already covered under the Agreement (e.g., a member of an absolute coverage group whose position is now being brought under a retirement system);

  • Who are not members of the retirement system;

  • Who are excluded from coverage by the required or optional exclusions;

  • Who are members of the retirement system but are not State or local government employees (e.g., cooperative extension agents of the Department of Agriculture, are not eligible for coverage under an Agreement); and

  • Who are hired after the date the 90-day notice is given and before the date the referendum is held.

F. Dividing the retirement system into separate "deemed" retirement systems following the referendum

Following the referendum, the State must divide the retirement system designated for purposes of the referendum into the following two separate “deemed” retirement systems:

  • A deemed retirement system consisting of the members of the system who voted to be covered in the referendum and

  • A deemed retirement system consisting of the members who did not vote to be covered in the referendum.

The State is authorized to extend coverage under its Section 218 Agreement to only the deemed retirement system comprised of those who elected coverage.

G. Referendum time limitations

Two time limitations apply to a referendum:

  • The Agreement or Modification to extend coverage must be executed within two years of the date of the referendum and

  • Another referendum cannot be held among the employees of the same retirement system group for at least one year after a previous referendum. This prohibition does not apply where a failure to satisfy one of the referendum conditions (see SL 30001.323A) precluded the first referendum from being legally sufficient to support a valid Modification.

The one-year time limitation between referendums in Section 218(d)(3) of the Act applies only when there is a subsequent referendum within that period for the same type of coverage for the same retirement system group. It was designed to prevent immediate or repetitive referendums for the same type of voluntary coverage for the same retirement system group.

Example: A retirement system group held an unsuccessful referendum for Social Security coverage on September 1, 2003. That same retirement system can hold a referendum for Medicare Hospital Insurance (HI)-only coverage on January 3, 2004.

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 Sate and the Social Security Administration executed of 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.

SL 30001.345 Police Officer Positions

A. General

The Social Security Administration (SSA) defines police officer positions as those that are charged primarily with one or more of the following characteristic functions:

  • Maintaining order;

  • Preventing and detecting crimes; and

  • Enforcing laws.

SSA will determine if a position constitutes a police officer position for purposes of coverage under a State's Section 218 Agreement. In evaluating whether a position is a police officer position, SSA looks at how State statutes or court decisions characterize the position. If SSA determines that State statutes and court decisions clearly and completely resolve its determination, then SSA will base its determination on those sources. If the issue is not clearly and completely resolved, SSA will consider the following additional factors, in order of importance:

  • The degree to which any one or more of the three main characteristic functions constitute the primary duties of the position, as described in the position description;

  • How many of the three main characteristic functions identified above are performed in the position as described in the position description;

  • Any guidance from the State’s attorney general about how the State views the position; and

  • Whether the position exists within a regularly organized police department.

In order to facilitate SSA’s determination in particular cases, the State Administrator should provide SSA, as soon as practicable following SSA’s request, the position descriptions for all positions in question as well as any other relevant information or evidence know to the State Administrator. The State may choose to submit to SSA an interpretation by the State’s attorney general on the whether a position is a police officer position. SSA will give due weight to a State attorney general’s determination as part of its overall analysis, but is not bound by that determination. Where the State attorney general is unable or unwilling to provide SSA with a determination, SSA will proceed to make its own determination without the attorney general’s input.

NOTE: 

If the State wishes to submit a determination from its attorney general, the State should do so in a timely manner. Failure to do so may result in SSA proceeding to make its determination without the attorney general’s input.

Generally, SSA will not find a position to be a police officer position solely because the services performed are connected with police officers or police departments.

If SSA determines that a position does not engage in at least one of the characteristic functions identified above, SSA will generally conclude that the position is not a police officer position, regardless of the position’s characterization in State statutes or court decisions.

Positions including game wardens, foresters, forest patrollers, crime investigator supervisors, police department stenographers, sheriffs, and highway patrollers may or may not qualify as police officer positions, depending on the particular facts and circumstances involved.

B. Police officers versus emergency workers

Police officers are not considered emergency workers under the Social Security and Medicare exception for emergency workers defined in Section 210(a)(7)(F)(iii) of the Social Security Act (Act). The emergency worker exclusion applies only to services of an employee that was hired because of an unforeseen emergency to do work in connection with that emergency on a temporary basis (e.g., individual hired to provide emergency assistance in disasters, such as a forest fire, volcano eruption, severe ice storm, earthquake, and flood).

Police officers who are on call and work regularly but on an intermittent basis only do not qualify for the emergency exclusion under Section 218(c)(6) of the Act, even if their work involves situations that may be considered emergencies. This exclusion applies only to services of an employee who was hired because of an unforeseen emergency to do work in connection with that emergency on a temporary basis.

SL 30001.346 Firefighter Positions

A. General

The Social Security Administration (SSA) defines firefighter positions as those that are charged primarily with preventing or suppressing fires.

SSA will determine if a position constitutes a firefighter position for purposes of coverage under a State’s Section 218 Agreement. In evaluating whether a position is a firefighter position, SSA looks at how State statutes or court decisions characterize the position. If SSA determines that State statutes and court decisions clearly and completely resolve its determination, then SSA will base its determination on those sources. If the issue is not clearly and completely resolved, SSA will consider the following additional factors, in order of importance:

  • Whether the primary functions of the position as described in the position description include preventing or suppressing fires;

  • Any guidance from the State’s attorney general about how the State views the position; and

  • Whether the position exists within a regularly organized fire department or fire district.

In order to facilitate SSA’s determination in particular cases, the State Administrator should provide SSA, as soon as practicable at SSA’s request, the position descriptions for all positions in question as well as any other relevant information or evidence know to the State Administrator.

The State may choose to submit to SSA an interpretation by the State’s attorney general on the whether a position is a firefighter position. SSA will give due weight to a State attorney general’s determination as part of its overall analysis, but is not bound by that determination. Where the State attorney general is unable or unwilling to provide SSA with a determination, SSA will proceed to make its own determination without the attorney general’s input.

NOTE: 

If the State wishes to submit a determination from its attorney general, the State should do so in a timely manner. Failure to do so may result in SSA proceeding to make its determination without the attorney general’s input.

A position is not a firefighter position solely because the services performed are connected with firefighters, fire departments, or fire districts. If SSA determines that the position does not primarily involve preventing or suppressing fires, SSA will generally conclude that the position is not a firefighter position, regardless of the position’s characterization in State statutes or court decisions.

B. Firefighters versus emergency workers

Firefighters are not considered emergency workers under the Social Security and Medicare exception for emergency workers defined in Section 210(a)(7)(F)(iii) of the Social Security Act (Act). The emergency worker exclusion applies only to services of an employee that was hired because of an unforeseen emergency to do work in connection with that emergency on a temporary basis (e.g., individual hired to battle a major forest fire or to provide emergency assistance in other similar disasters such as volcano eruption, severe ice storm, earthquake, and flood).

Firefighters who are on call and work regularly but on an intermittent basis only do not qualify for the emergency exclusion under Section 218(c)(6) of the Act, even if their work involves situations that may be considered emergencies. This exclusion applies only to services of an employee who was hired because of an unforeseen emergency to do work in connection with that emergency on a temporary basis.

C. Volunteer firefighters

Any worker who receives compensation for services performed subject to the will and control of an employer is a common law employee (see RS 02101.020). If the worker is a common law employee (see RS 02101.020), the amounts paid, whether in cash or some other form, are subject to Federal Insurance Contributions Act (FICA) withholding, unless an exclusion applies. It does not matter whether the workers are called “volunteers.” Accordingly, volunteer firefighters generally are considered employees of the fire departments or fire districts for which they perform their services. Unless circumstances dictate otherwise, SSA will treat volunteer firefighters the same as other firefighters for purposes of coverage.

While volunteer firefighters may not receive wages, they may receive remuneration intended to reimburse them for expenses. Expense reimbursements (whether cash, in-kind benefits, or tax exemptions) paid to firefighters must be made under an accountable plan. According to Internal Revenue Code (IRC) Section 62(c), an accountable plan must:

  • Require firefighters to substantiate actual business expenses;

  • Allow no reimbursements for unsubstantiated expenses; and

  • Require that any amounts received that exceed substantiated expenses be returned with a reasonable period.

Any amounts paid for reimbursement that do not meet these conditions are considered made under a non-accountable plan and are treated as wages. Therefore, a per diem amount that does not reimburse actual, documented expenses is subject to Social Security and Medicare. It does not matter whether the amount is paid as reimbursements, a per diem, or under a point system.

SL 30001.347 Providing Coverage for Police Officers and Firefighters

A State may cover police officer and firefighter positions as a part of an absolute coverage group or as a retirement system coverage group.

A. Covering police officer and firefighter positions as part of an absolute coverage group

1. General rule

If police officer and/or firefighter positions were not covered by a retirement system at the time an entity obtained Social Security coverage under the State's Section 218 Agreement for all positions not covered by a retirement system, the police officer and firefighter positions are covered. Coverage obtained under a Section 218 Agreement continues even if these positions later come under a retirement system.

Employees in police officer or firefighter positions who are retirement system ineligibles cannot be covered as a part of, or as an addition to, the absolute coverage group.

NOTE: 

See SL 30001.370 for special Federal legislation authorizing Oklahoma to cover certain ineligibles in police positions.

Notwithstanding the above rule, Social Security regulations provide that if State law requires a State or political subdivision to have a retirement system, a retirement system is considered to be established even where no action has actually been taken to establish the system as required by law (see 20 C.F.R. § 404.1206). Therefore, where such laws have been enacted, the police officer and firefighter positions are considered covered by a retirement system, and those positions would not become covered as part of an absolute coverage group regardless of whether an entity actually established a retirement system in accordance with State law.

2. Historical option to remove police officer or firefighter positions from a retirement system for purposes of obtaining absolute coverage

a. Police officers

Before August 16, 1994, a State lacking specific authority to cover police officer positions under a retirement system could remove those positions from the retirement system at any time before expanding coverage to an absolute coverage group in order to cover those positions as part of the absolute coverage group.

For States authorized to cover police officer positions by statute before August 16, 1994 (SL 30001.347.B.3), police officer positions under a retirement system could be covered under the State's Section 218 Agreement only through the referendum procedures, including coverage for Medicare. The option to dissolve a retirement system or remove police officer positions from a retirement system in order provide coverage as part of the absolute coverage group was not available to these States.

b. Firefighters

Before January 2, 1968, a State lacking specific statutory authority to cover firefighter positions under a retirement system could remove those positions from the retirement system at any time before expanding coverage to an absolute coverage group in order to cover those positions as part of the absolute coverage group.

Beginning January 2, 1968, all States were authorized to cover firefighter positions that are under a retirement system through referendum procedures. The option to dissolve a retirement system or remove firefighter positions from a retirement system in order to provide coverage for firefighters as part of the absolute coverage group was no longer available.

B. Covering police officer and firefighter positions as a retirement system coverage group

1. Current law—coverage options for police officer and firefighter positions after August 15, 1994

After August 15, 1994, all States were authorized to provide coverage for police officer and firefighter positions under a retirement system. A coverage group for police officer and firefighter positions established through a majority-vote referendum consists of all current and future employees in positions under the retirement system in which the referendum was held, including ineligibles. Those States and all interstate instrumentalities authorized to use divided-vote referendum procedures may do so for police officer and firefighter positions. If the divided-vote procedure is used, the retirement system coverage group consists of all members who chose coverage and future members except that “ineligibles” may not be covered as a part of such a group.

Notwithstanding Federal authorization to cover police officer and firefighter positions under a retirement system, State law must also authorize the State to cover those positions under the State’s Section 218 Agreement. The State must first review State statutes and its enabling act to see if existing language prohibits extending Social Security coverage under the Section 218 Agreement to police officer and firefighter positions under a retirement system. If this language exists, the State must remove it, which usually requires action by the State legislature. Once the legislature passes corrective legislation, or if there is no prohibitive language to correct, then the State must modify the language of the State’s Section 218 Agreement to permit coverage of police officer and firefighter positions already covered by a retirement system (see template in SL 40001.490, Exhibit 30). After all of these actions have been taken, the State may begin holding referendums and extending coverage to those positions.

Before holding the referendum, the State must decide what the retirement system will be for referendum and coverage purposes. In addition to the State’s option to designate a retirement system for purposes of a referendum (SL 30001.321A), the State has additional choices for covering police officers and firefighters. The state may designate the following groups as the designated retirement system:

  • The police positions only;

  • The firefighter positions only; or

  • The positions of police officers and firefighters.

2. Historical coverage options for firefighter positions under a retirement system only—all states January 2, 1968 through August 15, 1994

Beginning January 2, 1968, all States were authorized to extend coverage to employees in firefighter positions under a retirement system provided the Governor (or a State official designated by the Governor) certified to the Social Security Administration (SSA) that extending Social Security coverage would improve the overall benefit protection of these employees. The firefighter positions had to be treated as a separate retirement system for purposes of the referendum and coverage, and the State was required to use majority-vote procedures regardless of whether it was authorized to use divided-vote procedures generally.

Following the referendum, the State was required to submit the Governor’s certification (specified above) alongside the Modification for coverage.

3. Historical coverage options for police officer and firefighter positions under a retirement system—specific states prior to 1994

In addition to the general authority to cover firefighters noted above, 23 States were specifically authorized to cover both police officer and firefighter positions under a retirement system by statute. States that specifically were authorized to expand coverage to these positions, as listed below, were also permitted to use divided-vote procedures if authorized to do so by law (see SL 30001.331). The following States were authorized to expand coverage as of the date shown:

  • Alabama (8/30/57);

  • California (9/16/59);

  • Florida (8/1/56);

  • Georgia (8/30/57);

  • Hawaii (8/30/57);

  • Idaho (10/30/72);

  • Kansas (9/16/59);

  • Maine (10/24/62);

  • Maryland (8/30/57);

  • Mississippi (12/20/77);

  • Montana (12/31/74);

  • New York (8/30/57);

  • North Carolina (8/1/56);

  • North Dakota (9/16/59);

  • Oregon (8/1/56);

  • Puerto Rico (1/2/68);

  • South Carolina (8/1/56);

  • South Dakota (8/1/56);

  • Tennessee (8/30/57);

  • Texas (7/2/64);

  • Vermont (9/16/59);

  • Virginia (9/13/60);

  • Washington (8/28/58); and

  • Interstate Instrumentalities (8/28/58).

SL 30001.358 Temporary Emergency Worker Exclusion

A. General policy

The Senate Finance Committee, in a report based on the Social Security Amendments of 1967, stated that effective January 1, 1968, services performed by an individual temporarily hired to serve as an employee on the basis that a condition of emergency exists are required to be excluded from Federal Insurance Contributions Act (FICA) tax withholding. Such emergencies can be, but are not necessarily limited to, fire, storm, snow, earthquake, flood, volcanic eruption, or other similar condition of significant disaster or peril to life or property.

Eligibility for FICA exemption under the temporary emergency worker exclusion is contingent upon several key factors:

  1. 1. 

    There must be an employee-employer relationship;

  2. 2. 

    The employment relationship must be established on a temporary basis; and

  3. 3. 

    Employment must be in case of fire, storm, snow, volcano, earthquake, flood, or similar emergency.

In addition to the nature of the employment being based on an emergency, the position itself must be of an emergency nature (i.e., life saving or life protecting services).

The temporary emergency worker exclusion is referenced in Sections 210(a)(7)(F) and 218(c)(6)(E) of the Social Security Act (Act) and Section 3121(b)(7)(F)(iii) of the Internal Revenue Code (IRC).

B. Temporary Emergency Worker Resource guide

The Temporary Emergency Worker Exclusion Resource Guide provides additional information on the background, purpose, and application of the exclusion.

The purpose of the guide is to examine the temporary emergency worker exclusion from FICA tax withholding by providing general information on the laws and regulations that pertain to the exclusion as well as detailing the possible situations in which a temporary emergency worker may exist. The information found in this guide does not account for every possible situation, but is what State and local governments most commonly encounter. Therefore, all information along with all questions and answers are provided for general information only.

 

SL 30001.375 Effective Dates of Coverage

The effective date of coverage is the date specified by the State in the Agreement or Modification for coverage to begin. A different effective date may be specified for each coverage group listed in the Agreement or Modification. When additional services are covered, the effective date of coverage cannot be earlier than the date specified for the coverage group that includes those added services.

The effective date of coverage for employees choosing coverage under the "second chance procedure" (see SL 30001.335) must be the same date as the effective date for the retirement system coverage group that includes those added services.

An earlier effective date can be established for a coverage group already covered under an Agreement. As discussed in the following subsections, provisions of Federal and State laws govern the extent of additional retroactivity.

NOTE: 

The effective date of coverage may not be changed to a later date, except to correct an error.

A. The effective date for purposes of establishing a period of retroactive coverage

1. Beginning April 7, 1986

Section 218(e)(1) of the Act permits a State to elect a retroactive effective date. Beginning April 7, 1986, the date the Agreement or Modification is mailed or delivered by other means to the Social Security Administration (SSA) is used as a basis to calculate the effective date.

Section 218(e)(1) provides that the effective date may not be earlier than the last day of the sixth calendar year preceding the year in which the Agreement or Modification is mailed or delivered by other means to SSA. Because coverage begins the day after the effective date, Section 218(e)(1) authorizes five full calendar years of retroactive coverage—beginning on January 1—preceding the year in which the Agreement or Modification is mailed or delivered, regardless of what day of the year that mailing or delivery occurs.

This rule also provides the State with certainty about the effective date for a Modification, without regard to any gap in time between the date SSA received the Modification and the date that SSA executed the Modification.

2. January 1, 1961 through April 6, 1986

Before April 7, 1986, the State could choose five years of retroactive coverage, but the calculation of the effective date was based on the date that SSA executed the Agreement or Modification.

This rule created the possibility that a State could lose one year of retroactive coverage if a Modification was mailed by a State to SSA in one year, but was not executed by SSA until the following year. This often happened where the Modification was mailed to SSA in November or December.

3. Agreements executed before 1961

 Generally, the following retroactive coverage dates were available based on the execution date of the Agreement or Modification:

  • Executed before 1954: retroactive coverage possible to January 1, 1951;

  • Executed during 1954: retroactive coverage possible to January 1, 1954;

  • Executed during 1955, 1956 or 1957: retroactive coverage possible to January 1, 1955; or

  • Executed during 1958, 1959 or 1960: retroactive coverage possible to January 1956

NOTE: 

Coverage of services in positions under a retirement system could not begin before 1955. After 1954, the rules above are applicable

Notwithstanding the general rules, the following special rules applied to particular types of positions:

  • National Guard units—Modifications for coverage of absolute coverage groups of civilian employees of State National Guard units could be retroactive to January 1, 1951, if executed prior to January 1, 1956, but after 1955, the rules above apply;

  • Retirement system ineligibles—coverage of individuals ineligible for membership in a retirement system could not begin earlier than January 1, 1955;

  • Agricultural inspectors—coverage of agricultural inspectors could not begin earlier than January 1, 1955; and

  • Positions removed from coverage under a retirement system—coverage of individuals in positions removed from coverage under a retirement system by an action started prior to September 1, 1954, could not begin earlier than January 1, 1955, and the Modification had to be executed prior to 1958.

B. The controlling date for purposes of establishing who is entitled to retroactive coverage

For Agreements or Modifications executed after August 28, 1958, Section 218(e)(2) of the Act permits a State to designate a controlling date for purposes of establishing who is entitled to retroactive coverage. Retroactive coverage will apply to those individuals employed on the controlling date. The controlling date is distinct from the effective date, which determines the date on which retroactive coverage begins. The controlling date cannot be earlier than the date the Agreement or Modification is mailed or otherwise delivered to SSA. If the State does not designate a controlling date, then it becomes the date SSA executes the Agreement or Modification.

For Error Modifications (see SL 40001.450), the date of the error is the date that controls who is entitled to retroactive coverage. If the error involves erroneous reporting to the Internal Revenue Service (IRS), the effective date of coverage is the first day of the first period for which the erroneous reports were made to IRS, if State law permits that determination.

1. Current employees

Only employees who are members of the coverage group and in an employment relationship with the covered entity on the controlling date are covered for any retroactive period. Such an employee would be covered as follows:

  • Absolute coverage group—employee obtains coverage for that part of the retroactive period in which the employee worked and received wages;

  • Retirement system coverage group (majority-vote or divided-vote)—employee obtains coverage for that part of the retroactive period in which the employee worked and received wages in a position under the system; and

  • Ineligibles—employee obtains coverage for that part of the retroactive period in which the employee worked and received wages in a position under the retirement system, but it cannot be earlier than the date of employee’s first ineligibility.

2. Terminated, retired, or deceased employees

Services performed by an individual whose employment relationship was terminated by death, retirement, or otherwise, during the interval between the effective date of coverage and the controlling date are not covered for the retroactive period.

NOTE: 

Notwithstanding this rule, see SL 30001.375D for preserving retroactive coverage under Section 218 for former employees where reports were erroneously made to IRS or to SSA without coverage under a Section 218 Agreement.

3. Employees terminated and rehired

Services performed by an individual whose employment relationship was terminated before the controlling date, but who was rehired before that date, are retroactively covered.

Services of an individual whose employment relationship terminated before the controlling date, but who was rehired after that date, are not retroactively covered. Coverage would begin on the date the individual was rehired.

4. Employees who change employers under the same retirement system

Services performed by an employee who changed employers during the retroactive period but the employee occupies a position in the same retirement system coverage group under the new employer on the controlling date are covered for the retroactive period. This is true even though there is a break in the continuity of the employee’s employment, provided the employee is in an employment relationship on the controlling date.

5. Former employees

Ordinarily only those individuals who are in an employment relationship on the controlling date receive coverage for the retroactive period. However, where employees who were part of a coverage group for whom there were past erroneous reports to IRS or SSA, coverage for their services may be preserved although they are not currently in an employment relationship.

Under certain conditions, the State may use an error Modification to provide coverage as of the date on which the error occurred. Another way to preserve coverage for former employees is to include those employees who had been part of the coverage group and whose earnings had been erroneously reported as a part of the coverage group, provided no tax refund had been obtained. The State may, by deeming former employees to be part of the coverage group on the controlling date, give them whatever retroactive coverage is provided to current employees.

C. Designating separate retirement systems to establish different effective dates

Generally, there can be only one effective date of coverage for a coverage group. However, if a retirement system covers the positions of employees of the State and one or more political subdivisions or the employees of two or more political subdivisions, the State may take one of the following actions it has not designated different retirement systems for purposes of the referendum:

  • Choose a single effective date for all members of the coverage group;

  • Choose a different effective date for any one or any combination of the political subdivisions; or

  • Choose a different effective date for the State or for the State and any one or more of the political subdivisions.

These choices are available for Agreements and Modifications entered into on or after September 13, 1960.

When there are different effective dates, an employee will receive retroactive coverage only for his or her services with the entity that employs him or her on the date that controls retroactivity and only to the extent the Agreement provides retroactive coverage for the employees of that entity. The State may provide additional retroactive coverage for employees who work at different times for more than one of the employers included in the coverage group.

This provision applies only to effective dates. In other respects, there is no change in the retirement system coverage group. One referendum must be held for the entire system. The Modification extends coverage to all employees in positions under the system. The optional exclusions taken and the date designated to control retroactive coverage apply to the entire coverage group. Employees whose positions are brought under the retirement system after the Modification are automatically covered.

D. Additional retroactivity by tacking

1. General

It is possible for a State to provide an employee with additional retroactive coverage by "tacking" services onto the employee’s coverage that the employee performed in the retroactive period for entities that are not a part of the employee’s coverage group. Tacking requires the State to agree in writing to treat all similarly situated employees the same way.

We only permit tacking if the services to be tacked are for entities covered under the Agreement or for entities whose coverage was terminated because of dissolution. If a divided-vote retirement system is involved, the employee has a choice as to whether he or she wants his or her services tacked. This is the only situation where the individual may exercise a choice in tacking.

2. Tacking procedure and Agreement

The State tacking Agreement must be in writing. The following tacking Agreement example may be adapted to fit specific tacking situations:

State of _______________ Tacking Agreement

It is hereby agreed that any employee whose services were covered during a retroactive period by Modification No. ____ shall receive credit for any employment that would have been covered had he or she not changed employers, provided he or she was in an employment relationship with an employer listed in Modification No. ___________ on __________ (the date designated pursuant to Section 218(e)(2) of the Act in Modification No. __________).

______________________________________________

(Signature of Authorized State Official and Date)

3. Modification and reporting information

List the current entity to which coverage is to be tacked in the Modification providing coverage. If the services to be tacked are for an entity that was covered before its dissolution or consolidation, the wages for the retroactive period should be reported under the name and the Federal Employer Identification Number (EIN) of the entity that actually paid the wages.

The State should attach to the Modification a list showing the name and address of the entity no longer in existence, and the period during which the dissolved entity had employees now employed by the current entity.

SL 30001.380 Continuation of Coverage Rules

Section 218(f) of the Social Security Act (Act) prohibits a State from terminating existing coverage provided by the State's Section 218 Agreement on or after April 20, 1983. Generally, once the State's Agreement provides coverage to a position, that position continues to be covered unless an event occurs that results in the effective termination of the coverage (see SL 30001.387).

IMPORTANT: 

These continuation of coverage rules deal with ongoing coverage of positions under the State's Agreement, and not with individual employees' coverage status. SSA generally looks at an employee's position when determining if that employee receives Social Security coverage. Section 218(f) does not prohibit an individual employee from losing coverage based on personal factors, such as a change in employment from a covered position to a non-covered position.

A. Continuation of coverage—absolute coverage group

If an absolute coverage group covers services performed in a position, coverage continues even if the position subsequently comes under a retirement system. This rule includes police officer and firefighter positions that come under a retirement system after the State obtains coverage with an absolute coverage group.

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

A position covered as part of a retirement system coverage group continues to be covered even if:

  1. 1. 

    The position is later covered under additional retirement systems;

  2. 2. 

    The position is later removed from coverage under a retirement system; or

  3. 3. 

    The retirement system is abolished with respect to the positions.

C. Continuation of coverage—divided—vote retirement system

In addition to the general rules for majority vote retirement system coverage groups noted above, where a State uses divided-vote procedures to establish the retirement system coverage, a position continues to be covered unless it is removed from the retirement system and is no longer occupied by a member who chose coverage or by a new member.

D. Applying the continuing employment exception and continuation of coverage provisions—Medicare Hospital Insurance (HI)-only divided-referendum scenarios

The proper application of the continuing employment exception (SL 50001.510A) and the continuation of coverage rules can cause some confusion when dealing with the Medicare HI-only divided-vote referendum of a State employee who transfers between agencies and entities within the State government system. The same holds true for the Medicare HI-only divided-vote referendum of a political subdivision employee who transfers between agencies and entities of the same political subdivision.

In order to determine correctly whether a State or local government employee carries his or her 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. 1. 

    Was the individual a bona fide employee and performing regular and substantial services for the State or political subdivision employer before April 1, 1986?

  2. 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?

    1. a. 

      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. 3. 

    Is the continuing employment exception applicable, which exempts the individual from the mandatory Medicare provisions (SL 50001.510)? This requires the State to determine whether the following two conditions are met:

    1. a. 

      Was the employee transferring from one State employer to another employer of the same State and

    2. b. 

      Did the transfer not result in terminating the overall employment relationship with the State (it could not be terminated after March 31, 1986 (P.L. 99-272, Section 13205; SL 50001.510))?

  4. 4. 

    Is there continuation of coverage (SL 30001.380)?

The scenarios below deal with employees who voted in Medicare HI-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 April 1, 1986. 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 based upon the conditions noted above. Scenario 1, as presented, does fulfill Part a; but it is unclear whether it would fulfill Part 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 no t terminate the overall employment relationship with the State, then Part 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 SSA looks 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 based upon the conditions noted above. Scenario 2, as presented, does fulfill Part a; but it is unclear whether it would fulfill Part 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 Part 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 SSA looks 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. Because 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 Ms. Taylor carry her vote?

Since Factor 1 is fulfilled, one needs to determine whether the continuing employment exception (Factor 3) applies based upon the conditions noted above. Scenario 3, as presented, does fulfill Part a; but it is unclear whether it would fulfill Part 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 Part 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 SSA looks 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 or 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. The transferee would be placed in the “yes” group (provided a coverage referendum has been held) regardless of how he or 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.

It had 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. Thus, 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 was 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 Mr. Merrill carry his vote?

Scenario 4 actually resembles Scenario 2. As in Scenario 2, SSA first must consider whether the continuing employment exception (Factor 3) applies based upon the conditions noted above. Scenario 4, as presented, does fulfill Part a; but it is unclear whether it would fulfill Part 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 Part 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 SSA looks 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 or her vote?

In Scenario 5, one must first consider whether the continuing employment exception (Factor 3) applies based upon the conditions noted above. 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. Because the continuing employment exception would not be met, the employee would be considered a “new hire” and mandatory Medicare would apply in the new position (SL 50001.510).

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 or her vote?

No, the employee would not carry his or her vote. As in Scenario 5, the employment relationship with the government employer terminated after March 31, 1986. SL 50001.510 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 for whom he or she is now working. 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 or she now works has Social Security coverage based on a Section 218 Agreement.

SL 30001.385 Termination of Coverage

A. Prohibition on voluntary termination of coverage

Current law prohibits a State, an interstate instrumentality, or the Social Security Administration (SSA) from terminating existing coverage, in whole or in part, under a Section 218 Agreement.

B. Effective termination of coverage caused by a dissolution of a covered entity

If a political subdivision legally dissolves, positions under that entity cease to exist (see 20 C.F.R. § 404.1219). If the State covered the political subdivision individually (as opposed to covering it through a system-wide referendum), the dissolution of the political subdivision will result in effective termination of coverage, notwithstanding the statutory prohibition on termination of coverage (see SL 30001.385A). In the absence of positions, there are no employees to comprise a coverage group and the political subdivision’s legal dissolution precludes the possibility of future employees. Accordingly, the political subdivision’s legal dissolution effectively terminates coverage where it causes the coverage group to be permanently empty.

NOTE: 

For more information on the State Administrator’s obligation to report a dissolution and corresponding evidentiary standards, see SL 40001.485.

C. Historical voluntary termination of coverage (before April 20, 1983)

 Before the April 20, 1983 enactment of the Social Security Amendments of 1983 (Public Law 98-21), a State could have terminated its Agreement either in whole or for one or more absolute coverage groups. Either the State or the Secretary of Health and Human Services could have initiated the termination. Once an Agreement was terminated for a coverage group, coverage could not be provided again for that group.

1. Termination by the State

The State could terminate the Agreement in whole or in part by giving at least two years advance notice in writing to SSA. The coverage must have been in effect at least five years before SSA receipt of the notice. This meant five years actual coverage from the effective date of the first coverage and not five years from the date of execution of the Modification that provided the coverage. The two-year period ran from the date the notice was mailed or delivered to SSA and not the date of receipt.

The termination could have applied to any absolute coverage group. For example, coverage for a proprietary function coverage group could have been terminated without terminating coverage for the governmental function coverage group. This could have been done even though the coverage groups were not separately identified when the coverage was provided. A retirement system coverage group was not a coverage group for termination purposes.

2. Termination by the Secretary

The Secretary could have terminated an Agreement, in whole or in part, if the State failed to comply or was no longer legally able to comply with the Agreement. The State must have been given reasonable notice and opportunity for a hearing. The termination action must have been taken within two years of the notice of the intent to terminate unless the State was again in compliance with the terms of the Agreement. Termination by the Secretary was generally limited to cases in which an entity had ceased to exist.

SL 30001.387 Continuation or Effective Termination of Coverage as a Result of Predecessor-Successor Situations

A. Effective termination of coverage caused by dissolution or predecessor-successor situations

Various transitions or changes to a State’s entities may result in the legal dissolution or other significant legal status changes that have a bearing on coverage established under the State’s Section 218 Agreement. SSA refers to these transitions or changes as “predecessor-successor situations.” Whether coverage ceases or continues due to these predecessor-successor situations depends on the nature of the legal changes to the underlying entities.

B. Determining the effect of a predecessor-successor situation on the State’s political subdivisions

SSA is responsible for determining the effect of a predecessor-successor situation on existing coverage under the State’s Section 218 Agreement.

The type of predecessor-successor situation will establish the impact on existing coverage and, in some cases, any steps the State will need to take to preserve desired coverage going forward. SSA must evaluate the entity and its positions that exist after the transition to determine whether the positions are covered under the terms of the State’s Section 218 Agreement. In order to evaluate all positions existing after the transition, SSA must determine (1) which, if any, political subdivisions legally dissolved; (2) which, if any, political subdivisions persist despite the transition; (3) if any new political subdivisions are created; and (4) whether changes to an existing entity fundamentally change the nature of that entity in a way that affects coverage. SSA will consider the following factors when evaluating these issues:

1. Primary evidence

When making its determination, SSA will consider evidence that directly demonstrates the nature of legal changes to the entities involved as a matter of law; SSA refers to this evidence as “primary evidence” of legal status changes. SSA may be able to make all necessary determinations relating to the predecessor-successor situation solely based on the available primary evidence. The State Administrator should submit as much of this documentation as is practicably available in a timely manner.

  • Direct evidence of a dissolution—SSA will consider any evidence specifically documenting the dissolution of one or more of the entities involved, such as the evidence described in SL 40001.485C.

  • Direct evidence of the creation of a new political subdivision—SSA will consider any evidence legally documenting the creation of a new entity, such as a charter, bylaws, articles of incorporation, or certificates of incorporation. These documents are particularly useful when they describe the relationship between the entities involved, including the assumption of obligations or any materials governing the retirement rights of the employees.

  • Relevant provisions of State law—SSA will consider any provision of State law that authorizes legal status changes to the relevant entities. SSA will rule out specific predecessor-successor situations for which State law provides no legal authority (i.e. prohibitions on annexation).

  • Legislative actions related to the political subdivisions involved—SSA will consider any contemporaneous legislative action relevant to the legal changes at issue. Examples of relevant legislative actions include statutes, ordinances, resolutions, or other enactments that bear upon the terms and conditions of the legal changes at issue.

  • Legal documentation relating to retirement systems—SSA will consider ordinances or resolutions by a relevant entity relating to establishing its retirement system(s).

  • State court decisions—SSA will consider any relevant State court decisions that the State identifies, or about which SSA is aware. A relevant State court decision is one that addresses either provisions of State law relevant to the legal changes at issue, the specific legal changes under consideration, or the legal effect of closely analogous cases.

  • State attorney general opinions—SSA will consider opinions by a State’s attorney general on the nature of the legal changes at issue.

NOTE: 

The State may choose to submit to SSA a determination by the State’s attorney general on the effect of the predecessor-successor situation. Alternatively, SSA may request that the state administrator obtain input from the State attorney general. SSA will give due weight to a State attorney general’s determination as part of its overall analysis, but is not bound by that determination. Where the State attorney general is unable or unwilling to provide SSA with a determination, or where a determination is not provided in a reasonably timely manner, SSA will proceed to make its own determination without the attorney general’s input.

2. Secondary Evidence

In cases where primary evidence is not available or is insufficient to support a complete determination, SSA will consider additional factors in order to infer and ascertain the legal effect of changes to an entity; SSA refers to these additional factors as “secondary evidence” of legal status changes. SSA will consider the secondary evidence in conjunction with any available primary evidence of legal status changes. The State Administrator should provide all relevant evidence to SSA in a timely manner.

  • Changes in functions—SSA will consider changes to an entity’s functions, responsibilities, or purpose. Because political subdivisions and instrumentalities are defined, in part, by their governmental functions, the addition, subtraction, or a complete change in an entity’s functions may indicate the presence of a legally distinct entity. Significant changes in functions tend to support the inference that a legal change to an entity’s status has occurred.

  • Changes in powers—SSA will consider changes to an entity’s powers, including the power to hire employees, supervise employees, discharge employees, sue and be sued, enter into contracts, hold property, convey property, and transfer assets and liabilities. Significant changes to an entity’s powers tend to support an inference that a legal change to an entity’s status has occurred.

  • Changes in control—SSA will consider a change in the control and supervision of the entity, such as a change from control by one government authority to another, or a change from public control to private control of the entity. Changes in control tend to support an inference that a significant legal change to an entity’s status has occurred.

  • Changes to financial autonomy—SSA will consider changes in financial autonomy, including changes to the source and control of an entity’s operating expenses. Relevant facts may include changes to an entity’s payment or sources of salaries, insurance, employee benefits, and expenses. Changes to Employer Identification Numbers may indicate the presence of different or additional entities. Depending on the nature of the change, it may support the inference that a legal change to an entity’s status has occurred.

  • Changes in form—SSA will consider changes to an entity’s form, including changes in operational processes and operational structure. Because an entity may undertake organizational changes in form for reasons unrelated to a legal status change, SSA generally considers a change in form, by itself, to be weak evidence of a legal status change.

  • Changes in name—SSA will consider changes to an entity’s name. Because an entity may change its name for reasons unrelated to a legal status change, SSA generally considers a change in name, by itself, to be weak evidence of a legal status change.

C. Types of predecessor-successor situations and their implications on coverage

Some of the more common predecessor-successor situations involve consolidation, annexation, or hybrid consolidation of two or more entities, as defined below. SSA refers to additional predecessor-successor situations that do not neatly fit within those categories as “miscellaneous transitions.”

1. Consolidations

A consolidation occurs when two or more political subdivisions each dissolve and a new and legally distinct political subdivision is created. Because consolidation follows the legal dissolution of the two or more political subdivisions, Social Security coverage effectively terminates for any of the consolidating political subdivisions previously covered under the State’s Section 218 Agreement.

Because the consolidation creates a new political subdivision not yet specifically covered by the State’s Section 218 Agreement, it is usually necessary for the State to submit a notice of dissolution as to the old political subdivisions and a new Modification to cover the positions if the State intends to preserve coverage for the employees moving from the dissolved entities into the consolidated entity or to extend coverage to new employees. Where the positions under the new entity are covered by a retirement system, referendum procedures must be used.

The exception to this rule is that the State will not need to take additional steps to extend coverage if positions under the new entity are retirement system positions within a retirement system that has received system-wide coverage under a Section 218 coverage Modification. Under those circumstances, the State must submit an identification Modification (SL 40001.490, Exhibit 6) to inform SSA that the new entity’s positions are to be included under the retirement system’s existing Section 218 coverage Modification.

NOTE: 

If positions under the new entity are not retirement system positions, then mandatory Social Security will apply to those positions until either the State chooses to cover those positions as an absolute coverage group or the positions are brought under a qualified retirement system.

Example: The Township of Cedar Grove covered non-retirement system positions for Social Security via Modification No. 27 (as an absolute coverage group). Cedar Grove’s retirement system positions were under the Public Employee Retirement System (PERS). Social Security coverage had been extended to PERS system-wide as a single retirement system under Modification 163 following a favorable majority vote referendum.

The Village of Rosedale had no positions under a retirement system, but covered all its employees for Social Security as an absolute coverage group via Modification 112.

Following the passage of ordinances and resolutions in both Cedar Grove and Rosedale, the two entities dissolved on January 1, 1995 and consolidated to become the City of Cedardale. The Cedardale Charter stated that all assets and territory that belonged to the predecessor entities “shall be a body corporate with the official name and title of ‘City of Cedardale.’” The powers granted to the city are broader than those granted to either the village or the township.

With the establishment of the City of Cedardale, all employee positions were placed under PERS.

2. Annexations

An annexation occurs when one political subdivision legally dissolves (the annexed political subdivision) and becomes part of a separate existing political subdivision (the annexing political subdivision). The legal dissolution of the annexed political subdivision terminates coverage previously extended to that political subdivision’s positions. Following an annexation, any existing coverage for employees in positions under the annexing entity is unaffected. The coverage status of the annexed employees will depend on whether the annexing political subdivision is covered under the State’s Agreement, and what positions within that political subdivision are covered by the State’s Section 218 Agreement.

NOTE: 

With the legal dissolution of the entity or entities being annexed, the State must submit notice(s) of dissolution to remove them from the State’s Section 218 Agreement.

If the annexation results in a name change for the continuing entity, a notice should be submitted to the Social Security regional office concerning the name change (SL 40001.475).

Example: The Village of Broadmoor obtained Social Security coverage for its non-retirement system employee positions via Modification No. 68. The remainder of the village employee positions was under the Broadmoor Unified Retirement Plan and not covered for Social Security.

The City of Fayette covers all its employee positions under the Public Employees Retirement Fund (PERF). Entities covered by PERF can obtain Social Security on a deemed retirement system (entity-by-entity) basis via coverage referendums. The City of Fayette has not held a coverage referendum, and, thus, its employee positions are not covered for Social Security.

Following the passage of ordinances and resolutions by the governments of Broadmoor and Fayette, the Village of Broadmoor dissolved on January 1, 2002, and its assets and territory were formally annexed by the City of Fayette. A notice of Broadmoor’s dissolution was submitted to SSA. All former Broadmoor employee positions were carried over by Fayette and placed under PERF coverage.

3. Hybrid consolidations

A hybrid consolidation is a consolidation in which one of the consolidating political subdivisions turns over some of its functions to the newly formed political subdivision but retains other functions. Because at least one political subdivision retains some of its functions, it does not legally dissolve.

Following a hybrid consolidation, the rules applicable to standard consolidations apply to positions under any dissolved entity, and positions under any newly formed entity (see SL 30001.387C.1). Coverage continues without complication for positions that remain under any original political subdivision that retained some of its functions and did not dissolve.

Example: The City of Nashville first covered its employees for Social Security under Modification No. 4 to the State’s Section 218 Agreement effective January 1, 1952. Davidson County first covered its employees for Social Security under Modification No. 30 effective April 1, 1955.

The governments of the City of Nashville and of Davidson County agreed to consolidate effective April 1, 1963, but this would not be a true consolidation. As of April 1, 1963, the City of Nashville dissolved, and its Section 218 coverage Modification No. 4 terminated. With its dissolution, the City of Nashville turned over all its governmental powers, functions, and workforce to a new entity to be called the Metropolitan Government of Nashville and Davidson County (Metro Government). Although the Davidson County Government turned over most of its governmental powers, functions, and workforce to the Metro Government, it did retain some of its powers, functions, and workforce and did not dissolve or terminate its Section 218 coverage Modification. Although a mere shell of its former self, the Davidson County Government continues to exist as an entity separate from the Metro Government.

A hybrid consolidation created the Metro Government effective April 1, 1963. Social Security coverage was extended to its employees effective April 1, 1963, via Modification No. 194 to the State’s Section 218 Agreement.

4. Miscellaneous Transitions

It is possible that additional entity status changes could affect existing coverage under the State’s Section 218 Agreement. These types of changes would have to be evaluated on a case-by-case basis to determine the impact on existing coverage and the steps necessary to effectuate the State’s intent with regard to coverage going forward (see SL 30001.387B).

Examples of miscellaneous transitions include, but are not limited to, the following:

  • An integral part of a political subdivision transitioning into a separate and legally distinct political subdivision.

  • Division of a single political subdivision into multiple legally distinct political subdivisions, in which case SSA would have to determine if the original political subdivision dissolved or continued as one of the subdivided entities, in addition to the coverage status of the resulting entities.

Example: Social Security coverage was extended effective January 1, 1958, via Modification 76 to The Village of Rockatuck’s non-retirement system positions as well as those positions covered by the Municipal Employees’ Retirement System (MERS), except police officers and firefighters. MERS was a deemed retirement system (Social Security coverage on an entity-by-entity basis). Effective February 13, 1970, the Village of Rockatuck was legally dissolved, and on the same date, the City of Rockatuck was incorporated. As part of the transition, all City of Rockatuck positions were placed under MERS.

Despite the dissolution of the Village of Rockatuck, SSA questioned whether the result of the change from Village to Incorporated City was merely a change in form, but not in substance, of the juristic entity. If the transition from Village to Incorporated City were merely a change in form, then the Administration’s stance would be that the same employee positions continued to exist and that a new referendum to extend Social Security coverage to them would not be necessary. If, on the other hand, the old juristic entity was actually terminated and a new one created, the positions involved would be new positions, and a coverage referendum of the City employees in positions covered by MERS would have to be held before Social Security coverage could be extended to them.

SSA recommended (or requested) the State to seek the opinion of the State attorney general concerning the legal status effect of the dissolution of the Village of Rockatuck and the incorporation (on the same date) of the City of Rockatuck.

The State attorney general opined that the dissolution of the Village and simultaneous incorporation of the City was just a change in form, and, thus, the Social Security coverage of the MERS positions under Modification No. 76 would carry over from the Village of Rockatuck to the City of Rockatuck. SSA gave due weight to the State attorney general’s opinion in making the coverage determination and determined that a new coverage referendum and Modification for the City of Rockatuck’s MERS employees was not necessary. All the City of Rockatuck’s MERS positions, except police and firefighters, were covered for Social Security from the date of incorporation under the existing Modification No. 76.

SL 30001.395 Voluntary Medicare Hospital Insurance Coverage for Pre-1986 Hires

CITATIONS:

Social Security Act, Section 218(n); Public Law 99-272, § 13205

States may execute a Section 218 Agreement with the Social Security Administration (SSA) to provide Medicare Hospital Insurance (HI) coverage for employees who are not covered by Social Security. These Agreements extend HI coverage voluntarily to employees whose positions are not covered by a Section 218 Agreement, and who do not participate in a qualified retirement system. SSA generally refers to Modifications for voluntary Medicare coverage as "HI-only Agreements." HI-only Agreements are part of a State's Section 218 Agreement.

The purpose of a HI-only Agreement is generally to provide HI coverage to non-covered employees who cannot obtain Medicare coverage because they were hired before April 1, 1986, and have been in continuous employment since that time (see SL 50001.510).

A. Coverage

States may obtain Medicare HI-only coverage for State and local government employees who were hired before April 1, 1986, and are not covered mandatorily for Medicare. Most employees of State and local governments hired on or after April 1, 1986, are covered mandatorily for Medicare as described in POMS SL 50001.510. There is no provision for granting retroactive HI wage credits for State or local government employment prior to 1986. Medicare HI-only coverage under a Section 218 Agreement cannot begin before April 1, 1986.

B. Referendum rules

The same referendum and Modification rules for Social Security and Medicare coverage under Section 218 apply to HI-only Agreements. For example, if the State is authorized to conduct a divided-vote retirement system referendum, the State may use the divided- vote procedure to provide HI coverage.

If a State or local government employee is covered mandatorily for Medicare when a referendum is conducted for a HI-only Agreement for other employees of the same employing entity, the employee is not eligible to vote in the referendum.

The required exclusions from Medicare coverage (see SL 50001.510B) also apply to HI-only Agreements. The State may elect Section 218 optional exclusions (see SL 30001.357).

NOTE: 

Medicare HI-only Agreements extend HI coverage to the individual employees and not the position. Medicare coverage is otherwise mandatory for all employees hired on or after April 1, 1986, regardless of their positions.

SL 30001.396 Rehired Annuitant Coverage under Section 218

A. How SSA treats rehired annuitants under Section 218

Under certain circumstances, a retired State or local employee who becomes a rehired annuitant may be excepted from paying mandatory Social Security under Section 210. Notwithstanding potential exception from Section 210, if the rehired annuitant returns to work in a position covered for Social Security under the State’s Section 218 Agreement, his or her services generally will be covered for Social Security.

For a rehired annuitant, Section 218 Agreements always take precedence over the Section 210 mandatory Social Security rules; therefore, where Section 218 covers a rehired annuitant’s position, the issue of mandatory coverage under Section 210 need not be considered. Always consider Section 218 coverage first, as described in the following sections.

NOTE: 

The following sections focus on whether a rehired annuitant falls within voluntary coverage under a State’s Section 218 Agreement, and not on whether the rehired annuitant is excepted from mandatory coverage. Therefore, for purposes of the following sections, assume that the rehired annuitant is rehired into a position that is covered under a Section 218 Agreement.

B. Definition of a Rehired Annuitant

Under the Social Security Administration's (SSA) rules, a rehired annuitant is a retiree of a State, political subdivision, or instrumentality who:

  • Participated in a retirement system;

  • Is rehired by his or her former employer or another employer that participates in the same retirement system that the individual’s pension is coming from; and

  • Either is receiving a retirement benefit from the retirement system or has reached retirement age under the retirement system.

If these criteria are not met, then the individual is not a rehired annuitant, and should be treated like any other newly hired employee for Section 218 purposes.

C. Section 218 Coverage Analysis for Rehired Annuitants

SSA performs the following analysis to determine the coverage status for rehired annuitants who are rehired into a Section 218 covered position. For additional detail on each step of the analysis, see SL 30001.396D.

IMPORTANT: 

The following analysis evaluates the Section 218 Social Security coverage-status of a rehired retiree when he or she is rehired into a Section 218 covered position. Therefore, this analysis assumes that the State’s Section 218 Agreement covers the position into which the individual is hired.

NOTE: 

Any employee hired or rehired on or after April 1, 1986, is mandatorily covered for Medicare (SL 50001.501 and SL 50001.510), unless an exclusion applies. The analysis below considers Social Security coverage status only, not Medicare.

1. Is the individual a rehired annuitant (see SL 30001.396B)?

  • If YES, continue to Step 2.

  • If NO, STOP. The individual is covered under the State’s Section 218 Agreement as a new hire.

2. Is the individual rehired into an absolute coverage group position?

  • If YES, STOP. The individual is covered under the State’s Section 218 Agreement.

  • If NO, proceed to Step 3.

3. Is the individual rehired into a Section 218 covered majority-vote or divided-vote retirement system coverage group position?

  • If rehired into a majority-vote retirement system coverage group position, continue to Step 4.

  • If rehired into a divided-vote retirement system coverage group position, skip to Step 5.

4. Is the individual allowed to rejoin the Section 218 covered majority-vote retirement system?

  • If YES, STOP. The individual is covered under the State’s Section 218 Agreement.

  • If NO, STOP. The individual is a retirement system ineligible. Because retirement system ineligibles are always included within the majority-vote retirement system coverage group, the individual will be covered under the State’s Section 218 Agreement unless the position falls within a required or optional exclusion from the State’s Section 218 Agreement. If the position is not excluded, then the individual will be covered under the State’s Section 218 Agreement (see SL 30001.397 and SL 30001.340D).

5. Is the individual allowed to rejoin the Section 218 covered divided-vote retirement system coverage group position?

  • If YES, continue to Step 6.

  • If NO, STOP. The individual is a retirement system ineligible. Because a State has the option to include ineligibles in a divided-vote retirement system coverage group, coverage will depend on whether the State included the ineligibles within the coverage group, unless the position falls within a required or optional exclusion from the State’s Section 218 Agreement. If the position is not excluded and the State opted to include the ineligibles within the coverage group, the individual will be covered under the State’s Section 218 Agreement (see SL 30001.397, SL 30001.334A, and SL 30001.340E).

  • If the State has not extended coverage to ineligibles within the divided-vote retirement system coverage group, it will be necessary to determine if mandatory coverage applies under Section 210 and IRS rules, and if the special rules for rehired annuitants exempts the individual from any applicable mandatory coverage.

6. How did the individual vote in the divided-vote referendum during prior employment?

  • If the individual voted “YES” or was hired in his or her pre-retirement employment after the divided-vote referendum occurred, STOP. The individual is covered under the State’s Section 218 Agreement.

  • If the individual voted “NO” in the referendum, proceed to Step 7.

7. Determine if the individual retains his or her “NO” vote by figuring out if the individual retains membership in the retirement system from his or her pre-retirement employment. This determination involves two steps:

a. Is the individual a “new member” of the retirement system under State law and/or the retirement system’s rules (generally, the State determines the answer to this question, as discussed in SL 30001.334F.1)?

  • If YES, STOP. The individual does not retain his or her “NO” vote, and is considered a “new member” of the deemed retirement system coverage group. As such, the individual is covered under the State’s Section 218 Agreement.

  • If NO, continue to Step 7b.

b. Does the individual retain his or her “NO” vote (SSA determines the answer to this question)?

  • If one of the following three conditions are met, then the individual retains his or her “NO” vote and is not covered under the State's Agreement:

    1. 1. 

      The individual is returning to work for the same employer; or

    2. 2. 

      The individual is rehired by a different employer in the same Section 218 deemed retirement system coverage group as the former employer (see SL 30001.324B.2 for an explanation of deemed retirement system coverage groups), or

    3. 3. 

      The individual is rehired by a different employer, but the retirement system in question obtained Social Security coverage on a system-wide single retirement system coverage group basis (see SL 30001.324B.1 for an explanation of single retirement system coverage groups). An individual who retains his or her “NO” vote is NOT covered for Social Security under the State’s Section 218 Agreement. In the absence of voluntary coverage under Section 218, it will be necessary to determine if mandatory coverage applies under Section 210 and Internal Revenue Service (IRS) rules, and if the special rules for rehired annuitants exempts the individual from any applicable mandatory coverage.

  • If none of the above conditions is met, then the individual does not retain his or her “NO” vote. The individual is a “new member” of the deemed retirement system coverage group. As such, the individual is covered under the State’s Section 218 Agreement.

D. Rehired annuitants and covered positions

1. Rehired annuitants and absolute coverage positions

Where a rehired employee, regardless of whether that employee qualifies as a rehired annuitant, fills an absolute coverage position under the State’s Section 218 Agreement, the State's Agreement will cover that employee unless the position falls within a required or optional exclusion from the State’s Section 218 Agreement.

An absolute coverage position is an employee position that was not covered by a retirement system at the time the State extended coverage to the position. If a position was covered for Social Security as an absolute coverage position under the State’s Section 218 Agreement, it will always be an absolute coverage position and maintain its Section 218 coverage, even if it is later put under a retirement system (SL 30001.380A).

NOTE: 

When determining the Social Security coverage status of a particular position, review the coverage history of that position. What currently appears to be a position under a non-Social Security covered retirement system may actually be covered for Social Security under the State’s Section 218 Agreement as an absolute coverage position.

2. Rehired annuitants and majority-vote retirement system coverage positions

Where the rehired annuitant was rehired into a majority-vote retirement system coverage position (see Section 218(d)(4) and SL 30001.324), either:

  • The rehired annuitant will be allowed to join or rejoin the Section 218 covered retirement system or

  • The retirement system rules will not permit the annuitant to join or rejoin the retirement system (retirement system ineligible).

If the rehired annuitant can join or rejoin a Section 218 covered retirement system, the State's Agreement will cover that rehired annuitant unless the position falls within a required or optional exclusion from the State’s Section 218 Agreement.

If the rehired annuitant is a “retirement system ineligible” of a majority-vote retirement system coverage group, he or she will have Social Security coverage unless his or her position falls within a required or optional exclusion from the State’s Section 218 Agreement. Remember that ineligibles are always included within a majority-vote retirement system coverage group following a successful referendum (see SL 30001.340D).

NOTE: 

For rehired annuitants, a retirement system ineligible situation often happens when the retirement system does not allow the rehired annuitant to join or rejoin the retirement system in his or her current position. For a more detailed discussion of retirement system ineligibles, see SL 30001.340. Always keep in mind the retirement system ineligible possibility whenever dealing with rehired annuitant situations.

3. Rehired annuitants and divided-vote retirement system coverage groups

Where the rehired annuitant was rehired into a divided-vote retirement system coverage position (see Section 218(d)(6) and SL 30001.334), the rehired annuitant’s coverage status will depend on one of several scenarios:

  • The rehired annuitant is not allowed to join the retirement system (retirement system ineligible);

  • The rehired annuitant rejoins the retirement system and his or her retirement system membership continues from previous employment, or

  • The rehired annuitant is treated as a new member of the retirement system.

Often a rehired annuitant may not be allowed to rejoin the retirement system in his or her current position because he or she already receives a pension from that retirement system or is entitled to such a pension. When a rehired annuitant works under a position covered by a retirement system but is prohibited from rejoining the retirement system, he or she becomes a retirement system ineligible.

For divided-vote retirement system coverage groups, the State has the option to include ineligibles in either deemed retirement system for purposes of coverage (see SL 30001.334A and SL 30001.340E). An ineligible rehired annuitant will not be covered under the State’s Section 218 Agreement if the State did not opt to include coverage for ineligibles. Where the State includes coverage for retirement system ineligibles, the rehired annuitant will have Social Security coverage unless his or her position falls within a required or optional exclusion from the State’s Section 218 Agreement.

Where the rehired annuitant is not a retirement system ineligible, Section 218 coverage status depends upon whether the rehired annuitant rejoins the retirement system or becomes a new member of the system upon being rehired (see SL 30001.334F for more information on “new members”). Where the rehired annuitant is considered a new member of the retirement system, the State's Agreement will cover him or her unless the position falls within a required or optional exclusion from the State’s Section 218 Agreement.

NOTE: 

This issue comes into play most often when SSA is dealing with a rehired annuitant who voted “No” (against Social Security Coverage) in a divided-vote referendum during his or her pre-retirement employment in a position covered by the same retirement system that covers the current position. Where the rehired annuitant is a “new” member of the retirement system, the rehired annuitant will not retain his or her “No” vote when being rehired into the new retirement system position. He or she will be placed in the “Yes” group and will be covered for Social Security under the State’s Section 218 Agreement unless the position falls within a required or optional exclusion from the State’s Section 218 Agreement.

As noted in SL 30001.334F.1, the State generally determines whether a retirement system member who has a break in service after Social Security coverage was extended to the retirement system coverage group is considered a new member upon return to employment covered by that same retirement system. The State’s decision depends upon the provisions of the particular retirement system involved and on State law.

If the State determines that the rehired annuitant’s retirement system membership continues—that he or she is not a new member—despite the break in service, then SSA must determine if the rehired annuitant retains his or her “No” vote. The rehired annuitant retains his or her “No” vote if one of the following conditions are present:

  • The rehired annuitant returns to the same employer, or

  • The rehired annuitant is working for a different employer in the same Section 218 deemed retirement system coverage group as the former employer (see SL 30001.324B.2 for deemed retirement system coverage group explanation), or

  • The rehired annuitant is working for a different employer, but the retirement system in question obtained Social Security coverage on a system-wide single retirement system coverage group basis (see SL 30001.324B.1 for single retirement system coverage group explanation).

A rehired annuitant that retains his or her “No” vote is not covered for Social Security under the State’s Section 218 Agreement. In the absence of voluntary coverage under Section 218, it will be necessary to determine of mandatory coverage applies under Section 210 and IRS rules, and whether the special rules for rehired annuitants exempts the rehired annuitant from mandatory coverage.

If the current employer is in a different Section 218 deemed retirement system coverage group from the pre-retirement employer, SSA would determine the rehired annuitant for Section 218 coverage purposes to be a new member of that particular deemed retirement system coverage group. The rehired annuitant does not retain his or her “No” vote, and is covered along with all other new hires following a divided-vote referendum (SL 30001.334). The State's Agreement will cover him or her unless the position falls within a required or optional exclusion from the State’s Section 218 Agreement. This would apply despite the fact that the rehired annuitant’s retirement system membership remained continuous from pre-retirement employment through current employment.

NOTE: 

There will be cases where the rehired annuitant was part of the “Yes” group in his or her pre-retirement employment and is rehired into a position covered under the same retirement system and under the State’s Section 218 Agreement. In those situations, the rehired annuitant will go into the “Yes” group of the current employer’s Section 218 coverage group and have Social Security coverage, whether the State determines their membership in the retirement system to be continuous or not.

There may be situations where the rehired annuitant is rehired into a position that is covered under a different retirement system than the one his or her pension is coming from, and the position is also covered for Social Security under the State’s Section 218 Agreement following a divided-vote referendum. When this occurs, the rehired annuitant is truly a new member of the retirement system and will have Social Security coverage as part of the “Yes” group unless the position falls within a required or optional exclusion from the State’s Section 218 Agreement.

SL 30001.397 Special Considerations for Rehired Annuitants—Ineligibles

A. Retirement System Ineligibles

A retirement system ineligible is an employee who performs services in a position under a retirement system but who is personally ineligible for membership in that system because of a personal disqualification (e.g., age, length of service, number of hours worked, or date of hiring). One reason that an individual may be disqualified from retirement system membership is that he or she is already receiving or entitled to a pension from the retirement system. SSA determines whether a rehired annuitant is a retirement system ineligible.

In order for a State's Section 218 Agreement to cover retirement system ineligibles, there must be language in the State’s Section 218 Agreement (either in the original Agreement or by a subsequent Modification) which permits the extension of Social Security coverage to retirement system ineligibles.

NOTE: 

A handful of States never amended their Section 218 Agreements to permit Section 218 coverage of retirement system ineligibles. Within those States, retirement system ineligibles are not covered under Section 218, and no additional analysis is required. Consider the applicability of the mandatory Social Security under Section 210 and Internal Revenue Service (IRS) rules instead (see SL 30001.396).

Where the State’s Section 218 Agreement permits coverage of retirement system ineligibles, further consideration is needed to determine the rehired annuitant’s Section 218 coverage status. Ask whether the rehired annuitant’s employer, upon rehire, has Section 218 coverage that extends such coverage to ineligibles of the retirement system, including ineligibles in the position into which the rehired annuitant is rehired.

NOTE: 

For a general discussion of retirement system ineligibles, see SL 30001.340.

B. Ineligibles covered under Section 218

There are three ways that a rehired annuitant who is ineligible to join the retirement system covering his or her current position can still be covered for Social Security under Section 218 (refer to SL 30001.340):

1. The rehired annuitant is currently in a position under a retirement system not covered by Social Security, but the State provides coverage for ineligibles by “piggy backing” them onto an absolute coverage group.

A State may extend coverage to ineligibles where a retirement system otherwise does not want additional coverage under Social Security. To do so, the State uses a Section 218 Modification to “piggy back” the ineligibles of that retirement system onto an existing absolute coverage group (see SL 30001.340C). A number of States across the country obtained Social Security coverage for retirement system ineligibles this way prior to the advent of mandatory Social Security.

If the State has covered ineligibles of a particular retirement system through such a Modification, then the ineligible rehired annuitant who is in a position under that retirement system would be covered for Social Security, unless there is an applicable required or optional exclusion (SL 30001.356; SL 30001.357). The rehired annuitant will have to pay Federal Insurance Contributions Act (FICA) taxes.

If the entity does not have Section 218 coverage for ineligibles of the retirement system, it will be necessary to determine of mandatory coverage applies under Section 210 and IRS rules.

2. The rehired annuitant is currently in a position under a majority-vote retirement system group that has Section 218 coverage, but is ineligible to join that retirement system.

Majority-vote retirement system coverage groups include coverage for all “ineligibles” (see SL 30001.324 and SL 30001.340D). A rehired annuitant is covered for Social Security under Section 218 even if he or she is ineligible to join or rejoin the retirement system in his or her current position, unless the position falls within a required or optional exclusion (SL 30001.356; SL 30001.357).

3. The rehired annuitant is currently in a position under a divided-vote retirement system coverage group that has Section 218 coverage, but the rehired annuitant is ineligible to join.

Unlike in majority-vote retirement system situations, Section 218 coverage is not automatic for ineligibles of a divided-vote retirement system group (see SL 30001.334A and SL 30001.340E). The State may extend Section 218 coverage to those ineligibles at the time of the relevant Modification by either:

  • Including all ineligibles as part of the “yes” group in the retirement system group’s Section 218 coverage Modification—this is called covering the ineligibles “as part of the retirement system coverage group” (see SL 30001.340E.2) or

  • Including the services of the ineligibles after the divided-vote retirement system group has already been brought under the State’s Section 218 Agreement through an earlier Modification—this is called covering the ineligibles “as an addition to the retirement system coverage group.” This must be done by a separate Modification (see SL 30001.340E.1).

However, the State may choose not to include ineligibles in the divided-vote retirement system coverage group. In this case, if ineligibles are not otherwise “piggy backed” onto the government entity’s Section 218 absolute coverage group through a proper Modification (see SL 30001.340C, SL 30001.396C.5), then the State's Agreement will not cover the ineligible rehired annuitants. In the absence of voluntary coverage under Section 218, it will be necessary to determine if mandatory coverage applies under Section 210 and IRS rules.

SL 30001.398 Coverage of the Louisiana State Employees' Retirement System (LASERS) and the Teachers' Retirement System of Louisiana (TRSL)—Ineligibles and Rehired Annuitants

See RS 01505.004, Retirement System Coverage Groups

A. Coverage—ineligibles

Services performed by employees of the State of Louisiana who are personally ineligible (e.g., do not meet the age requirements) for membership in a retirement system are covered under the voluntary provisions of Section 218 of the Social Security Act (Act). Coverage as an ineligible ceases if the employee later becomes eligible for membership in a retirement system.

LASERS and TRSL are not covered retirement systems for full Social Security coverage under Section 218 of the Act.

B. Coverage—rehired annuitants

Retired members of LASERS and TRSL who are rehired subsequently have the option of repaying the retirement benefits received and again becoming members of these retirement systems. Thus, rehired annuitants are not personally ineligible for membership in these systems.

1. Full voluntary Social Security coverage excluded under Section 218 of the Act

Because the rehired annuitants of these retirement systems have the option (whether or not they exercise this option) of rejoining these retirement systems, their services are not covered under the provisions of Section 218 of the Act for full Social Security coverage.

2. Mandatory Social Security coverage under Section 210 of the Act

The services of rehired annuitants of LASERS and TRSL will not be subject to the mandatory coverage provisions of the Act if they meet the requirements of the related Department of Treasury regulations for exception to the provisions (see SL 50001.000, Mandatory Coverage).

3. Medicare Qualified Government Employment (MQGE)

If the annuitants are rehired after March 31, 1986 and do not meet one of the exceptions listed in SL 50001.510, their services are mandatorily covered for Medicare.

NOTE: 

The Internal Revenue Service (IRS) has ruled in Revenue Ruling 86-88 that substitute teachers who teach on an “as-needed” basis are not performing regular services. Therefore, they do not meet IRS continuing employment exception, even if hired before April 1, 1986.

C. References


SL 30001 TN 8 - Coverage Under Section 218 Agreements - 1/29/2020