20 CFR 404.1201

SSR 68-77

Where an employee of the State voted "yes" in a referendum preparatory to the State's execution of a modification to cover that portion of divided retirement system composed of members who desired coverage, the State cannot change the employee's vote to "no" and remove him from that portion because of his failure to pay his share of the contributions subsequent to execution of the modification.

X, an employee of the State of Rhode Island, a State permitted to provide coverage for services of employees in positions under a retirement system on the basis of individual members' desire for coverage, had voted "yes" in a coverage referendum conducted by the State on February 24, 1958, in connection with its agreement under section 218 of the Social Security Act with the Secretary of Health, Education, and Welfare.

In the referendum, a condition precedent to coverage under the modification to the State's agreement, executed April 3, 1958, the "yes" vote by X was a vote to have his position included in the "deemed" retirement system coverage group composed of members of the State's Employees Retirement System who desired coverage, effective January 1, 1956. By an administrative ruling the State required all employees who voted for coverage to pay to the State their share of the contributions due for the retroactive periods on or before June 30, 1958. Those who failed to make payment by the prescribed date were deemed by the State to have voted "no" and were included by the State in the group not desiring coverage. X failed to make the required payment to the State for the retroactive period and was deemed by the State to be in the group not desiring coverage, notwithstanding his affirmative vote for coverage.

This has raised the question whether the State could, subsequent to execution of the modification covering the deemed separate retirement system composed of those who voted "yes," deem X's vote to have been "no" (i.e., drop him from the "yes" group and include him in the "no" group) because of the failure of the employee to meet a condition subsequent established by the State.

As provided by section 218(d)(3) of the Act, a State may cover under its agreement persons in positions under retirement systems provided a referendum is held and the result of such referendum is favorable. Under section 218(d)(6)(C), certain States may likewise cover those employees in positions under a retirement system who desire coverage. Under section 218(f)(2), such coverage, where retroactive (as here), is effective with respect to those who are members of the coverage group on the specified date which must be earlier than the date of execution of the modification. And once the coverage has been extended, it can be terminated only as to the entire coverage group in accordance with section 218(g).

The State may, by administrative rule, allow employees to change their vote after the referendum and prior to the date the modification is executed on behalf of the Secretary. Also, during the same interim period the State may, if it wishes, deny employees the opportunity to change their vote. Once the modification is executed, however, the composition of the coverage group is established. The law does not provide that an individual who elects coverage may withdraw his election after the date of execution of the modification extending coverage nor is there a provision under which it may be withdrawn for him.

The State is responsible for payment of contributions under section 218 of the Social Security Act, and it is not disputed that the State, mindful of its financial obligation, has at its disposal sovereign powers to enforce collection of debts due it from its employees. The State may not, however, do so by terminating the employee's right -- or its obligations -- under Federal law without the authority of that law.

It is accordingly held that once coverage has been extended to a coverage group, such coverage can be terminated by the State only as to the entire coverage group and not as to any individual member thereof, in accordance with section 218(g) of the Social Security Act.

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