Identification Number:
SL 40001 TN 10
Intended Audience:See Transmittal Sheet
Originating Office:ORDP OISP
Title:Agreements and Modifications
Type:POMS Transmittals
Program:All Programs
Link To Reference:
 

PROGRAM OPERATIONS MANUAL SYSTEM
Part SL – State and Local Coverage Handbook
Chapter 400 – Agreements and Modifications
Subchapter 01 – Agreements and Modifications
Transmittal No. 10, 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 40001.415 Changing Provisions of the Agreement

  • We changed the title of the section from “Changing Provisions of Original Agreement” to “Changing Provisions of the Agreement.”

  • We reformatted the titles of the subsections from all CAPS to sentence case and changed some capitalization throughout.

  • In subsection B, we changed the title of the subsection from “Modifying the original Agreement” to “Modifying the Agreement.”

  • We edited the language in subsection B for active voice and clarity.

  • In subsection C, we removed the word “original” before “Agreement” in the first paragraph and change the word “amendment” to “Modification,” to be consistent with the Section 218 process.

 

SL 40001.420 Modifications to the Agreement

  • We changed the title from “Modifications to the Original Agreement” to “Modifications to the Agreement”

  • We changed the title of subsection A to “Purpose of Modifications.”

  • We changed the title of subsection B to “Preparing Modifications.”

  • We amended the text of the second bullet to subsection B.1 to clarify what to do in the rare circumstance of the sample language being inadequate from the exhibits for Agreements and removed a subsequent bullet regarding requesting assistance from the regional office.

  • We added a third bullet to subsection B.1 to note that the EIN should be provided for each entity.

  • We added a fourth bullet to subsection B.1 to clarify that the State should clearly define what the “Retirement System” is when preparing a modification to prevent future issues arising out of confusion about who exactly the State intended to cover with the modification. This was suggested by Regional and HQ OGCs.

  • We removed “original” prior to “Agreement” in the bullet for listing all optional exclusions in subsection B.1.

  • We edited additional language in subsection B.1 for clarity.

  • In subsection B.2, we deleted RO and used regional office and we edited the information in the second bullet for clarity.

  • In subsection C, we edited the language for clarity and to remove duplicative information that already appeared in subsection B.

  • In subsection D, we edited the language for clarity and added a cross-reference to the SL 40001.435 regarding the Designated Date for Retroactivity Purposes. We added a Step 6 to reflect what to do after OGC review and provide appropriate SL cross-references.

  • In subsection E, we edited the subsection titles and edited language for clarity, consistency, and active voice.

  • We expanded the section by adding two more subsections.

  • The content that is now in subsection F contains information that was formerly in SL 40001.425. We rephrased this information for clarity and active voice. We also added a note to address if a State was contemplating withdrawal that it should contact SSA as soon as possible. We are archiving SL 40001.425. Information previously found in subsection F is now in subsection H.

  • The content that is now in subsection G contains information that was formerly in SL 40001.430. We rephrased this information for clarity and active voice. We are archiving SL 40001.430. Information previously found in subsection G is now in subsection I.

  • The content that is now in subsection H was edited for clarity and active voice. We also added a step after executing the modification to include scanning and saving a copy of the Modification packet for Agency records.

  • We amended the title of and the language throughout subsection J for active voice and clarity. Based on regional comments, we substantially revised the subsection to account for circumstances where FICA taxes had already been paid for the retroactive coverage, address when closing agreements were needed versus when they were not based upon evidence furnished by the State regarding FICA tax payments, revised the modification language for when a closing agreement was needed, provided modification language for when a closing agreement was not needed due to FICA taxes already being paid, and clarifying and cross-referencing the rules for error modifications. We updated the IRS contact information to no longer reflect the FLSG, as HQ OGC indicated that entity no longer exists and referred questions to the IRS closing agreement coordinator via fax. A new subsection 2 was added, and information in the prior subsection 2 was moved to subsection 3, information in prior subsection 3 was moved to subsection 4, and information in prior subsection 4 was moved to subsection 5.

  • We removed the reference to FSLG, as HQ OGC indicated that it no longer existed as an entity. Rather, we referred questions to the IRS closing agreement coordinator and fax number, as requested by the IRS.

SL 40001.425 Desk Guide to Modifications and Dissolutions

  • We folded the content that was formerly in this section under SL 40001.415C and changed the title for this section to “Desk Guide to Modifications and Dissolutions” and this section now contains the information that was formerly in SL 15005.020.

  • • We deleted subsection A, because it was a list of links/preview of content for the subsections below that was not needed.

  • Under subsection A (formerly subsection B), we changed the title to “Guidance for Modifications” and we removed a reference to the SLCH and replaced it with a reference to the SL POMS. We rephrased the text throughout for clarity, consistency, and added updated cross-references.

  • In subsection A.1, we condensed the text and cited back to the prior list of relevant law, publications, and other resources in SL 10001.130C.

  • Under subsection A.7, we changed the title to “Controlling date for entitlement to retroactive coverage (218(e)(2) date)” for clarity. We added an “EXCEPTION” note to indicate what occurs with the controlling date in error modifications.

  • Under subsection A.9, the titles of the subparts were edited and additional text was added to clarify the steps that should be taken, and content was updated for relevancy and active voice. We moved information regarding identification Modifications as an “EXCEPTION” note.

  • Under subsection A.10, we amended the title for clarity, reformatted the list for active voice and clarity, and updated the citation for minor corrections to SL 40001.420E.

  • Under subsection A.11, we clarified the actions to be taken and reformatted the text for active voice.

  • Under subsection A.13, we rephrased the information for clarity.

  • We renamed subsection B (formerly subsection C) to “Guidance for Error Modifications.” We added a cross-reference to the Error Modification language and reformatted and reorganized the information within the section for clarity.

  • We renamed subsection C (formerly subsection D) to “Guidance for processing Modifications that require a closing agreement” and adjusted the language for active voice and clarity. We corrected citations to appropriate cross-references.

  • We renamed subsection D (formerly subsection E) to “Guidance for dissolutions and evidence required.” We reorganized the subsection and added clarifying language and appropriate cross-references.

 

SL 40001.430 Disapproval of Modification

We archived this section and folded the content into newly created subsection D under SL 40001.415.

 

SL 40001.450 Modifications to Correct Errors in a State’s 218 Agreement or a Prior Modification

  • We amended the title to the section for clarify and to eliminate confusion. SSA uses “Error modifications” to talk about a specific type of modification, but POMS uses the term here when talking about a different topic.

  • We added an introduction to make clear when in the process the errors were being corrected and to include an appropriate cross-reference.

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

  • We added citation to the Soc. Sec. Act, Sec. 218 (b)(5) at the beginning of the section.

  • We amended the title to subsection A as well as added additional language for clarity.

  • We amended the title and the text of subsection B for clarity.

  • We expanded the section by creating subsection C and folding information that was formerly in SL 40001.470.

  • We expanded the section by creating subsection D and folding in information that was formerly in SL 40001.455. We amended the title and language in second paragraph for clarity.

  • We expanded the section by creating subsection E and folding in information that was formerly in SL 40001.460. We amended the title and language for clarity.

 

SL 40001.455 Error Modification to Delete Political Entities Which Did Not Exist or Have Employees

We archived this section and folded the content into newly created subsection C under SL 40001.450.

 

SL 40001.460 Error Modification to Delete Nongovernmental Entity

We archived this section and folded the content into newly created subsection D under SL 40001.450.

 

SL 40001.465 Modifications to Correct Erroneous Reports and Payments

  • We amended the title of the section from “Modifications to Correct Errors” to “Modifications to Correct Erroneous Reports and Payments” for clarity and to eliminate confusion.

  • We amended the title of subsection A.

  • We merged subsection A and B and clarified some of the language for simplicity.

  • Formerly subsection C is now subsection B. We amended the title for clarity.

  • Formerly subsection D is now subsection C. We updated language in C1 for clarity and active voice. We removed former section C2 and incorporated that information elsewhere within subsection C. We updated C2 to include the information formerly in Section C5 and revised the text for active voice and clarity. We updated the language in C3 to add introductory text. We updated language in C4 for clarity, added a reference to RS 02201.008, and added an “IMPORTANT” note regarding the Modification effective date and a cross-reference to the relevant SL POMS section. We updated subsection C5 (formerly subsection C6) to reflect changes elsewhere within the SL POMS updates and to remove duplicative information to keep formatting consistent.

  • We updated subsection D, third paragraph by clarifying the language that in order to execute the error modification, SSA must establish that no refund has been received yet. This clarification has been confirmed by OGC on the staff level. We also amended language in bullet 5 for clarity.

 

SL 40001.470 Political Entity Erroneously Included in More than One Modification

We archived this section and folded the content into newly created NOTE under SL 40001.450B.

 

SL 40001.485 Legally Dissolved Entities

  • We amended the title for subsection “A” to remove reference to “inactive entity” along with the content in the subsection that has instructions for inactive entity to reflect the current up to date process regarding notification of “inactive” entities, which was brought to our attention by the State Administrators, ROs, and RCCs . This process is no longer necessary and serves no use, as SSA no longer collects FICA contributions. The original purpose for the inactive notification process was to advise SSA not to send pre-addressed reporting forms for entities with no employees. HQ OGC as well as IRS concurred on the staff level with these changes and have no issues.

  • We also amended additional language throughout the section, added additional details to demonstrate the practical process occurring consistent with regional and OGC feedback, added appropriate cross-references, and reformatted the section for clarity.

 

SL 40001.490 Agreement and Modification Exhibits

  • We amended the language in the introductory paragraph for clarity to include language that all of the exhibits should include a cover letter and mention whether or not there are employees in positions.

  • We combined Exhibits 21 and 22 into one document at Exhibit 21 and added a new Exhibit 22 to address erroneous dissolutions.

  • We updated Exhibits 27, 28, and 29 to be consistent with the revised closing agreement language in SL 40001.420J.4.a.

Conversion Table
Old POMS ReferenceNew POMS Reference
SL 40001.430SL 40001.415
SL 40001.455SL 40001.450
SL 40001.460SL 40001.450
SL 40001.470SL 40001.450

SL 40001.415 Changing Provisions of the Agreement

A. Need for changes

The State’s Agreement must reflect the Federal statutory requirements with respect to coverage. Legislative provisions enacted by Congress and implemented by the State may require Modifications to the Agreement to reflect changes in Federal and State laws.

B. Modifying the Agreement

A State may amend its Agreement by submitting a Modification. The Modification should contain the following introductory paragraph:

The Commissioner of Social Security and the State of ________, acting through its representative designated to administer its responsibilities under the Agreement of (date original Agreement executed), hereby accept the following amendments to said Agreement.

The introductory paragraph should be followed by the changes to be made in the Agreement.

C. Definition of coverage group

If a State's or interstate instrumentality's Section 218 Agreement does not include coverage of retirement system positions in the definition of a “coverage group,” a Modification to the Agreement is necessary before coverage can be extended to positions covered under a retirement system. The Modification should state:

Paragraph (4) of Part A of said Agreement (Definitions) is amended to read:

The term “coverage group” means a coverage group as defined in Section 218(b)(5) of the Social Security Act, and for the purpose of Section 218(c) of the Social Security Act only, the term “coverage group” shall also mean a coverage group as defined in Section 218(d)(4) of the Social Security Act.

SL 40001.420 Modifications to the Agreement

A. Purpose of Modifications

Modifications to the Agreement do the following:

  • Extend coverage to new coverage groups;

  • Identify new political subdivisions joining a public retirement system;

  • Correct errors in previous Modifications (for Error Modifications, see SL 40001.450 and for Modifications to Correct Errors, see SL 40001.465);

  • Implement changes in Federal or State law; and

  • Exclude services or positions previously covered (under very limited circumstances).

B. Preparing Modifications

1. When preparing a Modification, the State should:

  • Explain the purpose clearly;

  • Use sample language from the exhibits for Agreements and Modifications (see SL 40001.490). In rare cases where the sample language is inadequate for the specific situation, request assistance from the regional office Section 218 specialist (RO specialist);

  • Provide the Internal Revenue Service (IRS) issued Federal Employer Identification Number (EIN) for each entity;

  • Clearly define what the "Retirement System" is;

  • List all optional exclusions, including all statewide optional exclusions from the Agreement in each Modification;

  • Define with specificity the term "part-time position" in the Modification if the State is excluding part-time positions or classes of part-time positions; and

  • Add the county designation for precise identification if duplications of the name exist in the State for entities such as townships and school districts.

2. After preparing the Modification, the State should:

  • Request a preliminary review from the regional office if the Modification is complex or there is a question concerning the legality of any provision, and

  • Submit two original Modifications with the wet signature(s) of the authorized State official(s) to the regional office. The State should provide extra copies if it wants more than one signed copy.

NOTE: 

The official designated by the State or interstate instrumentality to handle the State's Section 218 Agreement negotiates with the regional office on all matters related to the Modifications. The designated official authorizes all Modifications to the Agreement and submits these to the regional office.

C. Forwarding additional information with a Modification

Provide additional information on a separate sheet. Additional information may be necessary, including the following:

  1. 1. 

    If the status of the entity is not apparent from the name, the State should include a reference to the statutory authority that established its status, and

  2. 2. 

    If a retirement system coverage group is included in a Modification, the Modification must have the certification of the governor or his or her designate.

D. Reviewing the Modification packet

Upon receipt of the Modification, the RO specialist takes the following steps to review the Modification:

Step 1: Verify that the Modification number is in sequential order and has never been used.

Step 2: Review the State's Agreement, Modifications, and any necessary associated documentation. Verify the coverage group represented does not conflict with existing coverage.

Step 3: Review the Modification packet for completeness, clarity, and accuracy. Consider the following:

  • Are there two copies with original signatures by the authorized state official?

  • Does the Modification, if it is for a retirement system coverage group, include the certification of referendum signed by the Governor or authorized official?

  • Does the Modification follow the exhibits in SL 40001.490?

  • Is the entity seeking coverage clearly identified?

  • Is each named entity either the State or the State's political subdivision (this is important to the review process as government agencies privatize and new entities form that possess both government and private business characteristics, e.g., charter schools)?

  • Is the date of the State's original Agreement correct?

  • Is the EIN documented?

  • Is the number of employees to be covered documented?

  • If the Modification excludes services, are the optional exclusions specified per SL 30001.357?

  • If applicable, does the designated date for retroactivity conform to Federal law? This date cannot be earlier than the postmarked date on the envelope from the State to the regional office or the receipt date in the regional office (see SL 40001.435, Designated Date for Retroactivity Purposes).

  • Does the effective date conform to Federal and State law? Normally, coverage cannot begin earlier than the last day of the sixth calendar year preceding the year in which the Social Security Administration (SSA) receives the Modification.

  • Is the Modification signed by the designated state official?

Step 4: Photocopy all Modification material, including the envelope.

Step 5: Request an Office of the General Counsel (OGC) review of the Modification.

Step 6: After OGC has provided its review, determine if any corrections are necessary (see SL 40001.420E). If no corrections are necessary, proceed to disapproval (SL 40001.420G) or execution (SL 40001.420H) of the Modification as the circumstances warrant (see SL 40001.420G-H).

E. Corrections before executing the Modification

1. Regional office obtains written authority for minor corrections

Ask the State to provide written authority to make minor corrections (misspellings, typos, etc.) as necessary before executing a Modification. Written authority can be in a letter, email, or fax, and must include the following information:

  • Name of the authorizing document;

  • Details of the change; and

  • Name, title, and contact information of the authorizing State official.

2. Regional office documents the verbal request for minor corrections

If the regional office receives a phone call from the State requesting a minor correction:

  • Use Form SSA-5002 (Report of Contact) to document the request, and

  • Ask the State to provide written authority to validate the correction.

Retain the State's written authority with the Modification and annotate the correction on the Modification:

  • Identify the authorizing document,

  • Show the name and title of the authorizing State official, and

  • Show the name of the person making the change and date of the change.

Example: The state administrator mistyped the entity name on a pending Modification as School District 12, when it should have been School District 13. The state administrator calls the RO specialist to report the mistake and asks that he or she correct the typo. The RO specialist should take the following actions:

  • Ask the state administrator to provide written authority (e.g., an email) requesting the correction;

  • Change "12" to "13" on the Modification;

  • Add a parenthetical, per the August 1, 2011, email from S. Smith, SSA; and

  • Sign and date the entry and attach the email with the Modification.

3. Regional office handles submitting major changes

Major changes may require the State to rewrite the Modification. If this is necessary, the date the first version of the Modification was submitted to the regional office establishes the date of its submittal (in other words, the original mailing or delivery date can be used as the date it is "mailed or delivered by other means to the Commissioner of Social Security" for the purposes of determining the appropriate effective date under Section 218(e)(1)-(2) of the Act).

NOTE: 

The regional office determines, within its discretion, whether a change is minor or major under these rules.

F. Withdrawal of the Modification

At any time before the Commissioner of Social Security executes a Modification, the State may withdraw the Modification by submitting a written request to the regional office. If a Modification is withdrawn, the regional office will return all copies of the unexecuted Modification to the State.

NOTE: 

Because coverage provided by a Modification cannot be terminated once executed by SSA (see Social Security Act (Act), Section 218(f)), if the State is contemplating withdrawal, it should contact SSA as soon as possible.

G. SSA disapproval of the Modification

The Commissioner will disapprove any Modification that fails to meet the requirements of Federal and State law. All copies will be returned to the State with an explanation for the disapproval.

H. Execution of the Modification

After OGC approval, the regional office specialist prepares a notification of approval letter and delivers the entire Modification packet to the regional commissioner or designated official.

If delivering to a designated official, the RO specialist should verify whether Modification approval has been delegated to that official. The regional commissioner or his or her authorized delegate must sign the approval letter and all original copies of the Modification.

The date of execution is the date SSA signed the Modification.

After executing the Modification, the regional office must:

  1. 1. 

    Date the approval letters and make copies;

  2. 2. 

    File an original signed Modification packet in a locked fire-proof file cabinet;

  3. 3. 

    Send the state administrator a notification of approval letter with an executed copy(s) of the Modification and, if any, a copy of the State's authorization for any changes;

  4. 4. 

    Fax a copy of the Modification to the IRS at 855-243-4014; and

  5. 5. 

    Scan and save a copy of the Modification packet for Agency records.

I. Effective date of coverage

Show the effective date of coverage in the Modification to extend coverage. The effective date identifies when coverage begins.

J. Closing agreements for Modifications requesting more than three tax years of retroactive coverage

When submitting a Social Security Modification or Hospital Insurance (HI)-only Agreement (SL 30001.395) to SSA for approval, a State or local government entity can specify an effective date as early as “the last day of the sixth calendar year preceding the year” the Modification is mailed or delivered to SSA under Section 218 (e)(1) of the Act..

NOTE: 

For HI-only Agreements, a State may not request retroactive coverage for periods before April 1, 1986. See SL 30001.395A.

The Internal Revenue Code (IRC) limit the IRS's authority to assess taxes to the three-year period after the taxpayer files the tax return for a particular year. Because Section 218 permits a State to request retroactive coverage for periods outside of the IRS assessment period, SSA must ensure that the employer has paid Federal Insurance Contribution Act (FICA) taxes that correspond to the entire retroactive period requested. The Modification generally must give the IRS the ability to collect taxes for the full retroactive period before approving the Modification.

Where a Modification requests retroactive coverage that exceeds three calendar years before the execution date of the Modification, determine whether taxes have been paid for any retroactive period predating those three years. Where the employer has not paid FICA for periods beyond three calendar years, do not approve the Modification unless the State includes within the Modification a promise that the employer will execute a closing agreement with the IRS.

NOTE: 

Generally, where the State submits a standard Modification requesting retroactive coverage, expect that the employer has not paid FICA for the retroactive period. Where the employer has already paid FICA in error for the retroactive period, the State may use an Error Modification (SL 40001.465) to legitimize retroactive coverage for the entire period of the error. However, it is within the State’s discretion to decide how to obtain retroactive coverage. Therefore, a State may choose to use a standard Modification with up to five years of retroactive coverage instead of an Error Modification. Where the State makes that choice, a closing agreement is not necessary because the IRS already collected the taxes for the retroactive period. Accordingly, the IRS does not require additional authority to assess additional taxes outside of the assessment period.

IMPORTANT: Error Modifications (see SL 40001.450B) never require a closing agreement. IRS already collected the taxes for the retroactive period. Accordingly, the IRS does not require additional authority to assess additional taxes outside of the assessment period.

1. Definition of a closing agreement

A closing agreement is a written agreement between a taxpayer and the IRS, which conclusively settles:

  • The tax liability of the taxpayer for a taxable year ending prior to the date of the agreement or

  • One or more issues affecting the taxpayer's tax liability.

Such an agreement is a conclusive determination for both the taxpayer and the IRS unless the taxpayer demonstrates fraud or misrepresentation as to a material fact (I.R.C. §721 ).

2. When is a closing agreement required?

If the employer has not paid FICA corresponding to any part of the retroactive period beyond three calendar years, a closing agreement is required to provide IRS with the authority to collect taxes for that period. SSA will not execute the Modification unless it contains language requiring a closing agreement (SL 40001.420J.4.a).

Additionally, where delays in execution of a Modification result in an effective date that predates the IRS’s authority to collect FICA taxes, a closing agreement is necessary to ensure that the IRS has sufficient authority to collect those taxes. This is true even though a closing agreement may not have been necessary at the time the State submitted the Modification to SSA for execution. If a closing agreement becomes necessary for this reason, SSA will inform the State of the need to amend the Modification to include the required closing agreement language (SL 40001.420J.4.a), and wait for an amended Modification before execution. In this case, the procedures relating to major corrections apply (SL 40001.420E.3).

Where the State (1) submits a standard Modification that includes more than three calendar years of retroactivity, and (2) asserts that an employer has already paid FICA for the entire retroactive period predating the IRS’s statute of limitation, the State must provide evidence to verify payment of FICA. If SSA receives satisfactory evidence to verify the payment of FICA, the regional Section 218 specialist (RO specialist) will obtain an Employer Query Report (ERQY) to confirm that SSA’s existing records reflect the past payment of FICA. If such evidence verifies payment of FICA, do not require the State to include closing agreement language, as described below (SL 40001.420J.4.a) to appear in the Modification; instead, the State should provide alternative explanatory language (SL 40001.420J.4.b). If the State is unable to provide satisfactory evidence to verify past payment of FICA, require the State to include the closing agreement language in the Modification.

3. Terms of the closing agreement

Where a closing agreement is required, SSA must execute the Modification before the closing agreement process begins. Without an executed Modification, no tax liability exists and the IRS cannot pursue a closing agreement. SSA's execution of the Modification creates the tax liability and obligates the entity to pay taxes correlating to the retroactive period.

Under a closing agreement, the entity agrees to:

  • A waiver of the statute of limitations for assessment;

  • An assessment in the amount of the tax to be paid; and

  • A promise to make full payment of taxes to the IRS.

Additionally, the closing agreement:

  • Informs the employer that the closing agreement, once executed, is final and conclusive;

  • Authorizes the IRS Commissioner to assess and collect taxes identified within the closing agreement; and

  • Constitutes a waiver by the employer of all defenses with regard to collection of the tax liability.

4. Required Modification language

a. For standard Modifications requesting retroactive coverage extending beyond three calendar years for which FICA has not already been paid

Where a closing agreement is required, SSA will only execute a Modification with a retroactive effective date beyond three years if the State includes the following required language in the Modification:

(State) ________ promises to ensure that any employer whose positions are included under this Modification will pay, to the Department of the Treasury, contributions equal to the sum of the taxes that would have been required from employers and employees under the Federal Insurance Contributions Act (FICA) as of the effective date of coverage specified above. (State) _______ also promises to ensure that any employer whose positions are included under this Modification will enter into a closing agreement with the Internal Revenue Service (IRS) to provide the IRS with authority to collect all retroactively due FICA contributions created by this Modification. (State) _______ will ensure that the State Administrator notifies SSA as soon as the closing agreement is executed.

(State’s) _______’s failure to ensure payment of retroactively due FICA contributions will invalidate retroactive coverage provided by this Modification for any period for which no FICA contributions are paid. Prospective coverage provided by this Modification will not be impaired by the State’s failure to ensure that retroactively due FICA is paid.

SSA will not approve the Modification unless the State agrees that it will ensure that any employer whose positions are included under this Modification will execute a closing agreement. The IRS will not begin the closing agreement process until SSA signs and executes the Modification.

For exhibits of closing agreement Modifications, see SL 40001.490H. For questions concerning the closing agreement process, send the IRS Closing Agreement Coordinator a fax at 855-243-4014.

b. For standard Modifications requesting retroactive coverage extending beyond three calendar years for which FICA has already been paid

Where the employer has already paid FICA for the requested retroactive period, the State should include the following statement within the Modification to explain that a closing agreement was not required by the circumstances:

(State) _________ certifies that a closing agreement is not required in order to obtain the requested retroactive coverage because corresponding FICA taxes have already been paid for the retroactive period. SSA has verified payment of FICA for the retroactive period based on satisfactory evidence submitted by the State.

c. For Error Modifications requesting retroactive coverage

Error Modifications are only available in cases where an employer paid FICA in error during a requested retroactive period (SL 40001.465). Accordingly, where the State requests an Error Modification and where SSA has verified that an Error Modification is appropriate, SSA does not require the explanatory language above (SL 40001.420J.b) to appear in the Modification. Instead, the State should submit a Modification following the Error Modification format (SL 40001.490F, Exhibits 20a, 20b, 20c), which includes separate explanation and historical context.

5. Exhibit of closing agreement

View the IRS-approved Closing Agreement on Final Determination of Tax Liability and Covering Specific Matters:

SL 40001.425 Desk Guide to Modifications and Dissolutions

This section contains general reminders based on common errors in submitting Modifications and dissolutions. It is not a substitute for existing legal authorities. This section does not cover all situations that may arise.

A. Guidance for Modifications

The Social Security Administration (SSA) provides sample Modification language for a variety of Modification types (see Agreement and Modification Exhibits, SL 40001.490).

1. The relevant law

For information on the relevant law, publications, and other resources for administering Section 218 policies, see SL 10001.130C.

2. Agreement and Modification Exhibits

Compare the submitted Modification to the example language in the Agreement and Modification Exhibits, SL 40001.490. Confirm that the State included any mandatory language in the Modification. For example, if closing agreement language is required by the nature of the Modification, ensure that the language appears in the Modification.

3. Status of the entity

Confirm that the entity is a political subdivision (see 42 U.S.C. § 418(b)(2); 20 C.F.R. § 404.1202 for definitions). For information on political subdivisions, see SL 30001.311BSL 30001.311C. The State should include a reference to the statutory authority that established the political subdivision's status. The State can provide this information on a separate sheet or include it within the Modification.

4. Federal Employer Identification Number (EIN)

Confirm that the Modification includes the EIN for the entity seeking coverage.

5. Termination of a prior coverage Agreement

Before 1983, SSA allowed the termination of coverage Agreements; SSA no longer allows termination of a coverage Agreement.

If a Modification concerns an entity that previously had a coverage Agreement that was later terminated, confirm that the Modification includes the following information per SL 40001.440:

  • A statement that the group’s coverage was previously terminated;

  • Effective date of the termination;

  • Previously assigned EIN; and

  • Modification number of the Agreement that was terminated.

6. Effective date of coverage (218(e)(1) date)

Confirm that the effective date of coverage is not earlier than the last day of the sixth calendar year preceding the year in which the State mails or delivers by other means the Modification to SSA. For example, if the mailing or delivery date was December 26, 2007, the effective date of coverage for this Modification cannot be earlier than the last day of the sixth calendar year preceding 2007, which would be December 31, 2001. For additional information on the effective date of coverage, see 20 C.F.R. § 404.1215(d) and SL 30001.375.

7. Controlling date for entitlement to retroactive coverage (218(e)(2) date)

Confirm that the controlling date, if specified by the State, is not earlier than the date the State mails or otherwise delivers the Modification to SSA. For additional information on the controlling date, see 20 C.F.R. § 404.1215(b) Controlling date for retroactive coverage and SL 30001.375 Effective Dates of Coverage.

EXCEPTION: In cases where the State submits an Error Modification to obtain retroactive coverage for erroneous contributions, the date of the error is the controlling date.

8. Optional exclusions

Check for optional exclusions contained in the Modification that are permitted by Federal and State laws (see SL 30001.357 Optional Exclusions). Make sure the descriptions of the optional exclusions conform to Federal law. If the State excludes part-time positions, the definition of part-time positions should be included in the Modification (see SL 40001.420B.1).

9. Certificate of referendum requirements for retirement system coverage groups

a. Confirm any required referendums occurred

Confirm that the State conducted any required referendums (see SL 30001.320D; SL 30001.321; SL 30001.305; SL 30001.320; SL 30001.334).

b. Confirm inclusion of any required certifications of referendum

Confirm that the Modification, if it involves a retirement-system coverage group, includes the required certifications of referendums. See also:

c. Confirm that a certification of referendum specifies whether the referendum was majority-vote or divided-vote

If the State held a majority-vote referendum, confirm that the certification of referendum specifically references 218(d)(3).

If the State held a divided-vote referendum, confirm that the certification of referendum specifically references 218(d)(7).

NOTE: 

For sample language for the certifications for majority-vote and divided-vote referendums, see Exhibits 8 and 11 in SL 40001.490.

d. Confirm that the Modification complies with the two-year time limit

Confirm that any Modification involving a retirement system coverage group falls within two years of the corresponding favorable referendum. SSA may not execute a Modification after this two-year period. For referendum time limitations, see SL 30001.323E and SL 30001.331G.

e. Confirm the State complied with the one-year waiting period, where applicable

If there has been an unfavorable referendum, confirm that the State waited at least one year before holding another referendum for the same intended coverage group. For referendum time limitations, see SL 30001.323E and SL 30001.331G.

EXCEPTION: Do not disapprove identification Modifications based on a State's failure to comply with referendum, certification of referendum, and referendum time limitations rules and procedures. Identification Modifications are used to identify political subdivisions that join a retirement system after the State has extended coverage to all employees of the participating retirement system. Where a retirement system for purposes of the referendum retains its identity as a single retirement system, all employees whose positions are brought under the retirement system after the Agreement was made applicable to that retirement system are covered without the need for another referendum. SSA provides a sample identification Modification in Exhibit 6 of SL 40001.490. For Composition of a Majority-Vote Retirement System, see SL 30001.324.

10. Name discrepancies and misspellings

  • Check for and correct any discrepancies between the name associated with the assigned EIN and the name listed in the Modification;

  • Check for and correct any misspellings in the name listed in the Modification, the accompanying certificate of referendum, or on any resolution or supporting documents provided; and

  • Check for and correct any discrepancies between the name listed in the Modification, the name in the certificate of referendum, and the name on any resolution or supporting documents provided.

Name discrepancies and misspellings may be corrected by using the procedures for minor corrections (see SL 40001.420E).

11. Required signatures

Confirm that the authorized State official(s) signed the Modification. When confirming that the required signatures are present, check to see if the State requires more than one signature. If the required signatures are not present, return the Modification to the State for the proper signatures.

If the State wants to add a signing official's name to the list of authorized officials, the State should send a written request with the information to the regional office Section 218 specialist (RO specialist).

12. Modification copies

Confirm that the State submitted at least two original Modifications with the wet signatures of the authorized State official(s). For information on the State’s responsibilities when preparing a Modification, see SL 40001.420B.1.

13. Coverage history

If the State's Agreement previously covered the entity being covered in the Modification but that coverage was terminated, the RO specialist prepares and provides information with the relevant coverage history for the entity to the Regional Office of the General Counsel (see SL 40001.440 for coverage of a previously terminated group).

This information may include:

  • A statement regarding entity’s termination history;

  • The effective date of termination; and

  • Any previously assigned employer identification number (69-number) and Modification number that were terminated.

B. Guidance for Error Modifications

For sample Error Modification language, see SL 40001.490, Exhibit 20.

1. Effective date

Confirm that the effective date specified in the Error Modification is the first day of the first period (quarter or year) for which the entity first filed erroneous wage reports. For Modification of an Agreement to correct errors, see 20 C.F.R. § 404.1216(b); SL 40001.465.

Use the Employer Query Report (ERQY) to confirm the date on which Social Security first reported and processed wages.

Use the Detailed Earnings Report (DEQY) to confirm the date on which erroneous payments began.

2. No IRS refund

Confirm that the State or political subdivision did not receive a refund from IRS for the erroneous contributions. The State should include language in the Modification acknowledging no refund was received by the entity and must provide a written statement from the entity verifying that it received no refund.

3. Certification of Referendum

Confirm that the State has provided a certification of referendum if the Modification involves a retirement system group.

C. Guidance for processing Modifications that require a closing agreement

1. Closing agreement

Confirm whether the Modification seeks retroactive coverage. If the State requests retroactive coverage and that retroactivity will extend beyond IRS’s three-year statute of limitations on assessments, confirm that the Modification includes the required closing agreement language. However, if the State has provided evidence verifying FICA was paid for the entire retroactive period predating IRS’s statute of limitation and the RO specialist confirmed the past payment of FICA is reflected in SSA’s existing records, no closing agreement is needed (see SL 40001.420J.2).

For more information on closing agreements, see SL 40001.420J.

2. Referral to IRS

If SSA approves the Modification, the RO specialist should:

  • Contact the IRS closing agreement coordinator, via fax at 855-243-4014, to begin the closing agreement process (see SL 40001.420H.4) and

  • Notify the state administrator that the closing agreement process has begun with the IRS so the state administrator can assist the entity with following through on their obligation to enter into a closing agreement with the IRS.

D. Guidance for dissolutions and evidence required

Dissolution means that the entity no longer legally exists. Because it no longer legally exists, the Agreement is no longer valid as it relates to this entity. The State must provide SSA with (1) a notification that the dissolution occurred and (2) evidence proving that the entity dissolved as a matter of law. The evidence requirements are in SL 40001.485.

A sample notification of legal dissolution is located in SL 40001.490, Exhibit 21.

1. The notification of legal dissolution

Confirm that the State's notification of dissolution includes the following:

  • The name of the dissolved political subdivision;

  • The EIN assigned to this entity;

  • The relevant Modification Agreements that extended coverage to this entity;

  • The date of dissolution; and

  • The legal basis for dissolution.

Confirm that the State has submitted a separate notice of dissolution for each dissolved entity.

2. Evidence proving the entity dissolved as a matter of law

Obtain evidence from the State proving that the dissolution occurred as a matter of law. Where possible, the State should provide primary evidence of the dissolution. In cases where primary evidence of the dissolution is insufficient or unavailable, the State should provide additional secondary evidence of the dissolution.

a. Primary evidence of dissolution

The State must submit a copy of any legal authority causing the dissolution. For example:

  • A copy of a city ordinance;

  • A copy of an authorized official’s order which effectuated the dissolution; or

  • A copy of the results of an election authorizing the dissolution.

If a legislative body authorized the dissolution, the State must submit proof that it carried out the legislative authorization, such as a reference to the legislative authorization or a copy of the legislation.

If the legislative authorization did not itself dissolve the entity, the State must submit a copy of the administrative or other order that dissolved the entity. If the official of the State or political subdivision, with whom the State files orders of dissolution, executed a statement of the fact of dissolution, the statement is acceptable as evidence of dissolution.

b. Secondary evidence of dissolution

Examples of secondary evidence include:

  • The entity’s governing board’s meeting minutes authorizing dissolution along with a published article or other evidence confirming dissolution or

  • A combination of documents of significant probity which enable the current official of the State or political subdivision with whom orders of dissolution are filed to make a determination as to whether or not the entity is legally dissolved.

SL 40001.450 Modifications to Correct Errors in a State’s 218 Agreement or Prior Modification

The rules contained in this section apply when a State is correcting errors contained in an Agreement or Modification that the State and Social Security Administration (SSA) have already executed. Because the Agreement or Modification is already in force, SSA requires formal documentation to process the correction. These rules are not applicable to pending Modifications, which the State may correct less formally before execution (see SL 40001.420E).

A. Modifications to correct minor clerical or typographical errors

A minor clerical or typographical error made in an Agreement or Modification that does not affect the coverage may be corrected without submission of an additional Modification. The designated State official must submit a written and signed request clearly identifying the error and requesting its correction.

SSA considers a minor clerical error to be any error involving the submission or attachment of incorrect documents. For example, a minor clerical error occurs where the State erroneously attaches the wrong certification of referendum to a Modification. The written request for correction should include any document that should have been filed.

SSA considers a minor typographical error to be one where it is apparent that the document contains typed mistakes that are clearly not consistent with the intent or purpose of the document submitted. One such example would be where a State’s clear intent was to cover School District No. 12, but the Modification submitted accidentally indicated School District No. 13. In the case of a minor typographical error, the written request for correction should provide evidence showing that the error was not consistent with the intent or purpose of the document.

B. Modifications to correct errors affecting the scope of coverage

If an error relates to the extent of the coverage or the effective date of coverage, the State must submit a new Modification in order to correct the error. The new Modification must clearly explain the nature of the error and request its correction. The State must provide evidence that establishes an error actually occurred. Acceptable evidence may include a copy of the intrastate Agreement of coverage between the State and the political entity, minutes of meetings documenting intended coverage, or statements by appropriate officials clarifying the intended coverage at the time coverage was requested. The entity's wage reporting practices and contribution history must be consistent with the purported intended coverage.

Generally, an error in an Agreement or Modification which can be corrected by a subsequent Modification results from a situation where all individuals or agencies concerned took every action they believed necessary to effectuate the coverage desired, but because of the error failed to accomplish the objective.

Corrections are not limited to errors made by the State itself as an error on the part of a political subdivision may also be corrected.

C. Modifications to remove entities already covered by the State’s Agreement

If a State submits a Modification that extends coverage to a political subdivision that it has already covered by an earlier Modification, the State must correct the error. A new Modification is not required to correct the error. Instead, the designated State official must submit a written and signed request to the regional office for the deletion of the reference to the political subdivision in the later Modification. The written request should identify the earlier Modification that extended coverage to the political subdivision in the first instance.

D. Modifications to delete political entities which did not exist or have employees

A political entity which was listed in an Agreement or Modification, but was not in existence at the time of execution, or on the designated date, or did not have any employees to whom the Agreement could be made applicable, must be removed from the Agreement.

The State must submit a Modification to remove the entity from the Agreement or prior Modification. The Modification must clearly explain the nature of the error and request its correction. The State must provide evidence documenting the error along with the Modification.

E. Modifications to delete a nongovernmental entity

If the State listed a nongovernmental entity as a political subdivision in an Agreement or Modification, the State must submit a Modification to remove the entity from its Section 218 Agreement. The State should include with the Modification evidence to establish the error. The evidence provided should include a reference to the statutory or other authority under which the entity was created and any other evidence establishing its status.

SL 40001.465 Modifications to Correct Erroneous Reports and Payments

A. Overview

An error occurs when a State or local government entity begins withholding and reporting wages for employees for whom there is no basis for coverage.

A State or political subdivision may have made reports and payments for Social Security coverage of its employees to the Internal Revenue Service (IRS), under the Federal Insurance Contributions Act (FICA), in the mistaken belief that such action was sufficient to provide coverage for its employees. Reporting may be erroneous for Section 218 purposes even if, at the time of the error, the employee is eligible to receive provisional coverage under the Section 210 mandatory rules. The nature of the error depends on the entity’s belief and intent, which may be inferred from the circumstances.

Where the employer made payments with the intent to cover employees and in a good faith belief that the payments were sufficient to establish that coverage, the State may correct the error in order to preserve coverage for the period during which the error occurred. The State is not required to correct the error.

To correct the error, the State may provide retroactive coverage through either an Error Modification or a regular Section 218(e)(3) Modification. Alternatively, if the State does not wish to correct the error, it may still pursue a standard Modification with the standard retroactivity options (see SL 30001.375).

If the error involves a retirement system position, the State must comply with the referendum procedures before executing an Error Modification or a Section 218(e)(3) Modification. If no position was under a retirement system at the time the error was made, the coverage group would be covered as an absolute coverage group under Section 218(b)(5) of the Act and a referendum would not be necessary.

The State’s options to correct the error are described below.

B. Error Modifications to correct the error back to the date it first occurred

An Error Modification provides coverage as of the date the error first occurred. The effective date is the first day of the first period (quarter or year) for which the employer made erroneous reports and payments.

It is important to note that use of an Error Modification sometimes results in a substantial contribution liability for the State or political subdivision. This occurs when the error exists over a long period, and there were employees of the entity who were not reported to IRS. For this reason, a Modification that utilizes the provision of Section 218(e)(3) of the Act is sometimes preferable to using the Error Modification.

The Error Modification should list the entity, show the services covered, identify optional exclusions, indicate the Federal Employer Identification Number (EIN) under which the erroneous reports were filed, and provide for coverage to begin on the first day of the period for which reports were first erroneously made to IRS. If the date of the erroneous posting is unknown, the State should ask SSA to verify the date by obtaining an Employer Query Report (ERQY) or, if that is not available, a Detailed Earnings Report (DEQY) for the individual who has been employed the longest. This should be done before submitting the Modification. SSA will use the information provided by these documents as evidence of the error.

In order to execute the Error Modification, SSA must establish that the entity is a political subdivision, that erroneous reports were filed with IRS, and that no refund has been received. Therefore, the Modification should include a reference to the statutory authority under which the organization was created or provide other evidence establishing its status.

NOTE: 

Some 501(c)(3) entities that qualify as political subdivisions for Section 218 purposes made payments to IRS due to erroneous notification by IRS that coverage is mandatory under the provisions of the 1983 Amendments (see SL 30001.311C). If the entity decides it wants to preserve the coverage, an Error Modification is appropriate.

C. Section 218(e)(3) Modification to correct the error

1. Section 218(e)(3) Modifications

Section 218(e)(3) permits a State, under a regular Modification that provides retroactive coverage to current employees, to expand that retroactive coverage to former employees for whom the employer made erroneous contributions. A Section 218(e)(3) Modification includes an "add on" provision that the State may use in conjunction with the standard Modification language. The Section 218(e)(3) "add on" language deems former employees for whom the employer paid erroneous contributions to be part of the coverage group created by the Modification even though those former employees are not employees on the controlling date of the Modification (see SL 30001.375B-C).

When submitting a Section 218(e)(3) Modification to preserve the coverage of former employees, the State must designate a controlling date (SL 30001.375B) and specify that former employees are deemed to be employees on that date, thereby giving those former employees whatever retroactive coverage is provided to the current employees.

Former employees for whom the employer did not pay erroneous contributions or who received a refund do not obtain coverage through the 218(e)(3) Modification.

2. When a Section 218(e)(3) Modification cannot be used

A State may not use a Section 218(e)(3) Modification where State law prohibits retroactive coverage under the State's Agreement.

The State may not include the Section 218(e)(3) option in a Modification, unless the following conditions are met:

  • The employer paid contributions to the IRS in error and

  • Neither the employer nor the affected employees received a refund of those contributions.

A State may not include Section 218(e)(3) retroactive coverage in cases where the State chooses to use the divided-vote procedures for a referendum because the former employees to be covered through the Section 218(e)(3) Modification would be precluded from participating in the referendum. Accordingly, if the State wishes to include retroactive coverage under Section 218(e)(3), it must conduct a majority vote referendum.

3. Section 218(e)(3) language to be included in the Modification

The State may add the following language to a standard Modification in order to expand coverage to former employees for whom the employer paid erroneous contributions. The State should select the language based on whether the coverage group included in the Modification is an absolute coverage group or a retirement system coverage group.

  • Absolute coverage group

    Included in the additional coverage group(s) (as defined in Section 218(b)(5) of the Act), are the services performed by individuals formerly employed by (name of entity) for whom contributions were timely paid to the Secretary of the Treasury and for which no refund has been made. (Name of entity) previously reported the contributions of these individuals in error using Federal Employer Identification Number ___________.

  • Retirement system coverage group

    Included in the additional coverage group (as defined in Section 218(d)(4) of the Act), are the services performed by individuals as employees of (name of entity) and as members of the (name of the retirement system) for whom contributions were timely paid to the Secretary of the Treasury and for which no refund has been made. (Name of entity) previously reported the contributions of these individuals in error using Federal Employer Identification Number____________.

4. Choosing an effective date for a Section 218(e)(3) Modification

Any effective date consistent with Federal and State law may be used. The statute of limitations period for correcting earnings records is three years, three months, and 15 days after the end of the calendar year in which the wages were paid (see Section 205(c)(1)(B) of the Social Security Act (Act) or RS 02201.001). The Act prohibits SSA from deleting an individual’s earnings for a specific year beyond this point, unless an exception applies (see RS 02201.008).

IMPORTANT: The Modification effective date (SL 30001.375A.1) chosen has implications for current, future, and former employees. The State should consider a Modification effective date that includes at least one period barred to refund under the IRS time limits to ensure that:

  • The erroneously reported earnings of former and current employees would be protected;

  • Those current employees from whom Social Security contributions were not withheld would be liable only for Social Security contributions on wages paid for periods open to correction under the statute of limitations and would get Social Security credit from those periods forward;

  • All future employees would be covered for Social Security; and

  • All former employees who were not reported would not be covered.

If the effective date chosen is within the statute of limitations period on earnings record corrections, it could cause a gap in coverage or require a recalculation of benefits depending on the particular facts involved and the rules of administrative finality (see RS 00605.580).

5. Error Modification versus 218(e)(3) Modification comparison chart

Error Modification 218(e)(3) Modification

1. Effective date—date erroneous reporting began.

1. Effective date—first period barred to refund under IRS statutes for which a refund has not been made.

2. Covered employees—all previous and current employees who are part of the coverage group.

2. Covered employees—all previous and current employees for whom the employer paid erroneous contributions are deemed to be part of the coverage group on the effective date. Those current employees of the coverage group for whom the employer did not pay erroneous contributions are also covered. There is no coverage for former employees for whom the employer made no erroneous contributions.

3. No additional wage reports are needed for any barred period if the State certifies in writing that the contributions are paid.

3. Same

4. Statement required that refund from IRS was not made for any period open to correction.

4. Same

5. The State should ask SSA to verify the period of erroneous reporting by obtaining an Employer Query Report (ERQY) or, if not available, obtain a Detailed Earnings Report (DEQY) for the individual who has been employed the longest.

5. The State should ask SSA to verify the erroneous reporting for any period barred to correction by obtaining an Employer Query Report (ERQY) or, if not available, obtain a Detailed Earnings Report (DEQY) for those employees whose payments for Social Security coverage were reported for any period barred to correction.

6. Modification must show reference to the appropriate section of the Act for the type of coverage wanted—218(b)(5) for absolute coverage, 218(d)(4) for majority vote retirement system coverage, or 218(d)(6) for divided vote retirement system coverage.

6. Modification must show reference to appropriate section of the Act for the type of coverage wanted—218(b)(5) for absolute coverage or 218(d)(4) for majority vote retirement system coverage. Divided vote retirement system referendum is not permitted with a 218(e)(3) Modification.

7. Any optional exclusions the State chooses should be shown in the Modification.

7. Same

8. Reference to statutory authority creating the entity should be shown in the Modification or other evidence should be provided establishing its status.

8. Same

9. EIN used for erroneous reports to IRS should be included in the Modification.

9. Same

10. Retirement system coverage can be obtained through either a majority vote referendum or, in those states where permitted, a divided vote referendum.

10. Retirement system coverage only can be obtained through a majority vote referendum.

SL 40001.485 Legally Dissolved Entities

A. Overview

When a political subdivision legally dissolves, the State must submit to the Social Security Administration (SSA) a notice of legal dissolution to delete the dissolved entity from the State’s Agreement.

The State should take prompt action to notify SSA of the dissolution when it occurs. If a State failed to notify SSA of a past dissolution, it should do so as soon as it discovers that it failed to notify SSA. The State should send the regional office a notice of legal dissolution and provide legal documentation with the notice of legal dissolution.

The regional office Section 218 specialist (RO specialist) will work with the Regional Office of the General Counsel (OGC) to evaluate the evidence submitted in order to confirm that the entity legally dissolved and whether the dissolution affects the scope of coverage under the Agreement.

NOTE: 

The RO specialist may ask the State to provide additional supporting evidence or documentation if the documentation already provided was insufficient.

If OGC does not provide legal clearance for the dissolution, the RO specialist will notify the State that the evidence submitted does not confirm legal dissolution.

If OGC provides legal clearance for the dissolution, the RO specialist will:

  1. 1. 

    Notify the State that the dissolution has been approved and processed by completing and mailing the template SSA reply (see SL 40001.490, Exhibit 21) to the State,

  2. 2. 

    Append the notice of dissolution and SSA's reply to any Modification or Identification Modification relating to the dissolved entity; and

  3. 3. 

    Fax a copy of the notice of dissolution and SSA's reply affirming that the entity was legally dissolved to the IRS at 855-243-4014.

B. Evidence of legal dissolution

The State must submit legally sufficient evidence to establish the fact of dissolution. The evidence must establish that the entity is not merely inactive or dormant, but that it no longer exists.

1. Primary evidence of dissolution

  1. a. 

    If the dissolution occurred as the result of a legal authority, evidence of the dissolution may be in the form of a copy of the legal authority under which the dissolution occurred. This may include:

    • A copy of a city ordinance;

    • A copy of the order of an authorized official which effectuated the dissolution; or

    • A copy of the results of an election that authorized the dissolution.

  2. b. 

    Where the dissolution resulted from the authorization of a legislative body (for example, State Legislature, County Council, City Council, etc.), acceptable evidence would be proof that the legislative authorization had been carried out with either:

    • A copy of the legislation or

    • A reference (e.g., law review, Bar journal, legal periodical, legislative history journal, legal or legislative website, etc.) to the legislative authorization.

  3. c. 

    If the legislative authorization by itself did not dissolve the entity, a copy of the administrative or other order is required. A statement of the fact that the dissolution was executed by the official of the State or political subdivision with whom orders of dissolution are filed is acceptable as evidence of dissolution.

2. Secondary evidence of dissolution

If primary evidentiary records and documentation have been lost or destroyed, other evidence is required to support a determination that the entity dissolved. Examples of other evidence include:

  • Meeting minutes of the entity’s governing board (e.g., school board, fire district board, precinct board, water district board, public service commission, etc.) authorizing dissolution, in tandem with a published article or other evidence confirming dissolution and

  • A combination of documents of significant probity which enable the current official of the State or political subdivision with whom orders of dissolution are filed to make a determination as to whether or not the entity is legally dissolved.

Examples of acceptable documents submitted in combination for the current State or local government official’s dissolution determination are:

  • A signed statement or certified letter from an authorized State or local government official or school district superintendent declaring that the entity no longer exists;

  • Meeting minutes of the entity’s governing board authorizing the entity’s dissolution;

  • An SSA earnings report query (ERQY) showing that the entity stopped reporting W-2s in the year of the alleged dissolution;

  • Information about the entity’s dissolution obtained from a State or local government’s website; and

  • A signed statement from the Public Service Commission that a district is no longer on its database.

C. Erroneous dissolution of a political entity   

If the State discovers that a dissolution action was erroneous because an entity had not legally dissolved, the State should notify SSA as soon as possible and provide supporting evidence (see SL 40001.490, Exhibit 22). The RO specialist will work with OGC to evaluate the evidence and determine whether the dissolution was erroneous.

NOTE: 

The RO specialist may ask the State to provide additional supporting evidence or documentation if the documentation already provided was insufficient.

If SSA cannot confirm that the dissolution was erroneous, the RO specialist will notify the State that the evidence submitted does not confirm erroneous dissolution.

If SSA confirms that the dissolution was erroneous, the RO specialist will:

  1. 1. 

    Prepare a notice specifying that SSA is invalidating any prior action to terminate coverage for the dissolved entity and send it to the regional commissioner for his or her signature (see SL 40001.490, Exhibit 22);

  2. 2. 

    Fax the signed notice to the IRS at 855-243-4014 and mail it to the State; and

  3. 3. 

    Append the notice to the prior notice of dissolution in SSA records.

SL 40001.490 Agreement and Modification Exhibits

The following exhibits are those most commonly used by the States. States should follow the suggested formats and language as closely as possible. States should also include cover letters with all of the submitted Modifications and indicate where appropriate whether or not there are employees in the position. Some exhibits include an explanation concerning its use. The State should contact the Regional Office for assistance with complex or unusual coverage scenarios.

A. Original Agreement

  • Exhibit 1: Original Agreement for interstate instrumentality

B. Absolute coverage group

  • Exhibit 2: Modification to extend coverage to Section 218(b)(5) coverage

  • Exhibit 3: Modification to extend Section 218(b)(5) coverage to individuals ineligible for membership in retirement system

C. Absolute and retirement system group coverage

  • Exhibit 4: Modification to extend coverage to absolute coverage group and retirement system group of the same entity

D. Retirement system coverage group for majority vote

  • Exhibit 5: Modification for Section 218(d)(4) retirement system coverage

  • Exhibit 6: Modification to identify an additional political entity joining a retirement system when one referendum held for entire retirement system

  • Exhibit 7: Modification to identify additional political entity joining a retirement system when separate referendums held in separate retirement systems

  • Exhibit 8: Certification of regular referendum under Section 218(d)(3)

E. Retirement system coverage group for divided vote

  • Exhibit 9: Modification for Section 218(d)(6) retirement system coverage

  • Exhibit 10: Modification for Section 218(d)(6) retirement system coverage for individuals ineligible for membership

  • Exhibit 11: Certification of divided vote referendum (Section 218(d)(7))

  • Exhibit 12: Combined certification of divided vote referendum (Section 218(d)(7))

  • Exhibit 13: Modification to extend coverage for members of a divided retirement system who did not initially elect coverage (second chance) (Section 218(d)(7))

F. Special Modifications and notifications

  • Exhibit 14: Modification to extend coverage to police officer and firefighter positions covered under a retirement system

  • Exhibit 15: Modification to change effective date of coverage

  • Exhibit 16: Modification to cover services previously excluded

  • Exhibit 17: Modification to cover positions under a retirement system optionally excluded

  • Exhibit 18: Modification to exclude election workers on statewide basis

  • Exhibit 19: Modification to correct error in the effective date

  • Exhibit 20a: Error Modification (absolute coverage group)

  • Exhibit 20b: Error Modification (majority vote retirement system group)

  • Exhibit 20c: Error Modification (divided vote retirement system group)

  • Exhibit 21: Notification of an entity legally dissolved and SSA reply

  • Exhibit 22: Notification entity erroneously dissolved and SSA reply

  • Exhibit 23: Modification to extend coverage to an entity where coverage was previously terminated

  • Exhibit 24: Notification of a new government component to be included under Modification No. __________

G. Medicare Modifications

  • Exhibit 25: Modification to extend Medicare HI-only coverage (majority vote)

  • Exhibit 26: Modification to extend Medicare HI-only coverage (divided vote)

H. Closing agreement Modifications

  • Exhibit 27: Modification for retroactive Section 218 (b)(5) coverage requiring a closing agreement (absolute coverage group)

  • Exhibit 28: Modification for retroactive Section 218 (d)(4) retirement system coverage requiring a closing agreement (majority vote)

  • Exhibit 29: Modification for retroactive Section 218 (d)(6) retirement system coverage requiring a closing agreement (divided vote)

I. Miscellaneous Modification situations

Exhibit 30: Amending Section 218 Agreement language to permit coverage for police officer and firefighter positions under retirement systems


SL 40001 TN 10 - Agreements and Modifications - 1/29/2020