SSR 73-55: SECTIONS 218(e)(1), 218(j) and 218(s) (42 U.S.C. 418(e)(1), 418(j) and 418(s)). -- STATE AND LOCAL COVERAGE -- COMMISSIONER'S RULING ON STATE'S REQUEST FOR REVIEW -- NEW JERSEY -- ASSESSMENT OF INTEREST CHARGES FOR FAILURE TO TIMELY PAY CONTRIBUTIONS DUE IN COVERED WAGES
20 CFR 404.1225, 404.1255, 404.1260, 404.1261
SSR 73-55
- Pursuant to State's request for review under section 218(s) of Social Security Act, the Commissioner affirmed an assessment of interest charges resulting from the State of New Jersey's failure to timely pay the contribution assessed the wages paid to blind workers employed in workshops conducted under the auspices of the New Jersey Commission for the blind. The State sought cancellation of the interest charges, contending that extenuating circumstances delayed determination of the employment status of these blind workers under New Jersey's section 218 agreement. Held, the State did not adjust the underpayment of contributions as prescribed by regulations, and, while regulations allow for extension of time for filing quarterly wage reports and contribution returns upon a showing of "good cause," there is no provision permitting such extension with respect to adjustment reports and payment of assessed contributions.
The State of New Jersey timely requested a review pursuant to section 218(s) of the Administration's assessment of interest charges. The assessment was made due to the State's failure to pay the contributions due on an underreporting of wages within the time prescribed by the regulations. The State's position was that the interest assessment should be waived because of the extenuating circumstances which were involved in determining the status of blind workers in workshops conducted under the auspices of the New Jersey Commission for the Blind.
The facts are that the State of New Jersey requested the Administration's views concerning whether the services performed by blind workers for the New Jersey Commission for the Blind constituted employment and, if so, whether the services would be mandatorily excluded from coverage under the Federal-State agreement as "work to relieve from unemployment." The wages paid the blind workers had not been included in the State's quarterly wage reports. When it became apparent the statute of limitations for assessment for the year 1962 would expire on April 15, 1966, an agreement to extend the statutory time period for 1962 was solicited from the State. On April 15, 1966, the Administration was advised that the State did not desire to enter into such an agreement.
A notice of assessment was issued to the State on April 15, 1966, with respect to wages paid the blind workers in 1962 based upon the Administration's determination that the blind workers performing services for the New Jersey Commission for the Blind were employees of the Commission for the Blind which in turn was an integral part of the State of New Jersey; that such employment did not constitute "work to relieve from unemployment" within the meaning of section 218(c)(6)(A) of the Act; and that the services of the blind workers were covered under the State's section 218 agreement. The State was advised that it would remain liable for the assessment of contributions due, together with any interest which might accrue before payment is made. The State requested review of the assessment in a letter dated July 12, 1966, contending that the blind workers were not employees of the State Commission for the Blind. In October 1969, the State expressed agreement with the Administration's position regarding the blind workers' services for the Commission for the Blind and paid the Administration on December 15, 1969. Since the payment was not made on or before the due date of May 15, 1966, the Administration on October 2, 1970, issued a letter of assessment of interest charges to the State in the amount of $2,472.87. The State then requested review of the interest assessment by a letter dated December 29, 1970.
The New Jersey section 218 coverage agreement, entered into on December 30, 1952, provides that the State will pay, at the time prescribed in the Social Security Act, the appropriate contributions due on wages paid for covered services; that the State will comply with the regulations prescribed by the Administration to carry out the purpose of section 218; and that failure to make payment when due will cause interest at the rate of 6 percent per annum from the date due until paid to be added as part of the amounts due. Subsections 218(e)(1) and 218(j) of the Social Security Act, as amended, and Sections 43:22-3 of the New Jersey Statutes, Annotated, provide the Federal and the State authority, respectively, regarding the above-described conditions of the New Jersey section 218 coverage agreement.
Social Security Regulations No. 4 provide in pertinent part as follows:
- Section 404.1225 Rate of Interest
- If the contribution is not paid to the Federal Reserve Bank, or branch thereof, when due and is not adjusted under section 404.1261, interest accrues at the rate of 6 percent per annum.
- Section 404.1255 Place and Time for Filing Contribution Returns and Wage Reports
- (a) . . . the contribution return and wage report for any . . . calendar quarter shall be filed on or before the fifteenth day of the second month following the calendar quarter for which it is made . . . . Provided, however, that the Secretary, for good cause shown, may, upon application by a State, allow such further time as he may deem proper for the filing of contribution returns and wage reports for the periods for which they are made.
- Section 404.1260 Adjustments in General
- Errors in the payment of contributions must be adjusted in certain cases without interest. Not all corrections of erroneous payments of contributions, however, constitute adjustments within the meaning of the regulations in this subpart. The various situations under which such adjustments shall be made are set forth in section 404.1261 . . . .
- Section 404.1261 Adjustment of the Underpayments of Contributions
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(a) Method of Making Adjustment
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- (2) If an underpayment of contributions is due to an underreporting of or a failure to report one or more employees on form OAR-S3:
- (ii) Where the underreporting or failure to report has been ascertained by the Social Security Administration, a notification of underpayment on Form OAR-S9 (Audit Statement) and Form OAR-S30 (Federal Determination of Error in State's Wage Reports) shall be forwarded to the State, and the State may cause an adjustment of the underpayment by returning to the Social Security Administration, within 30 days from the date of the notification, a copy of the Form OAR-S9 together with Form OAR-S30 and a copy of the Form OAR-S1 prepared in accordance with the instructions contained therein. . . . (Form OAR-S1 is the contribution return.)
There is no disagreement as to the facts. It is the State's position, however, that the interest charges should be canceled because extenuating circumstances were involved in determining the employee status of blind workers who perform services inn workshops conducted under the auspices of the New Jersey State Commission for the Blind. The Commissioner found, on review pursuant to the State's request, that the evidence in file established that this underpayment of contributions was not adjusted in accord with the provisions of section 404.1261(a)(2)(ii) of the regulations. Although Section 404.1225(a) of the regulations allows for extension of the filing date for quarterly wage reports and contribution returns beyond the established month and 15-day period after the end of a calendar quarter upon a showing of "good cause," it does not allow for such an extension with respect to adjustment reports and payment. Pursuant to section 404.1225 interest must be charged from the original due date on any underpayment of contributions ascertained by the Administration unless such underpayments is adjusted pursuant to section 404.1261(a)(2)(ii) of the regulations, that section requiring the payment to be made within 30 days of the notification to the State of the underpayment by the Administration, and that there is no regulatory or administrative provision for granting an extension of this 30-day period for any reason. On the basis of these findings, the Commissioner affirmed the interest assessment.