SSR 73-57: SECTION 218(s) (42 U.S.C. 418(s)). -- STATE AND LOCAL COVERAGE -- COMMISSIONER'S RULING ON STATE'S REQUEST FOR REVIEW -- CALIFORNIA -- CITY OF SANTA ROSA EMPLOYEES
20 CFR 404.1252
SSR 73-57
- The Commissioner affirmed the denial of a request by State of California for refund of social security contributions made pursuant to its section 218 coverage agreement under Social Security Act on wages paid to employees of City of Santa Rosa in first quarter of 1971 for services performed in 1970. Held, although coverage agreement was terminated effective December 31, 1970, for such employees, State liability remained for wage reports and contribution payments for wages earned in 1970 but paid in a later quarter.
The State of California timely requested a review under Section 218(s) of the Social Security Act, as amended, of the Administration's denial of a request for refund of the social security contributions paid. This denial was based on the Administration's determination that the wages shown on the City of Santa Rosa's report for the first quarter of 1971 were paid for services covered under the agreement and that the related contributions were due and payable. The State denies liability for wage reports or contribution payments for wages paid in a later quarter since social security coverage terminated effective December 31, 1970.
The facts in this matter establish that social security coverage terminated effective December 31, 1970, for the employees of the City of Santa Rosa. Upon advice of the Administration the State of California, under protest, reported wages paid to employees of the City of Santa Rosa in the March 1971 calendar quarter for services performed in 1970 and paid the related contributions of $9,810.97. A subsequent request for refund of the $9,810.97 was denied based on the Administration's determination that the wages paid in the first quarter of 1971 were for services performed in 1970 and covered under the section 218 agreement. The State disagrees with the Administration's determination and the denial of the request for refund.
The California section 218 coverage agreement, provides that the State will pay at the times prescribed in the Social Security Act, the appropriate contributions due on wages paid for covered services; and that the State will comply with the regulations prescribed by the Administration to carry out the purpose of section 218.
The pertinent provisions of the Social Security Act, as amended, are:
- Section 209:
- . . . the term 'wages' means . . . remuneration . . . for employment . . .
- Section 210(a):
-
The term 'employment' means . . . any service . . . performed . . . by an
employee for the person employing him . . . except that . . . such term
shall not include --
* * * * * * *
- (7) Service performed in the employ of a State, or any political subdivision thereof . . . except that this paragraph shall not apply in the case of --
- (A) service included under an agreement under section 218 . . . .
- Section 218(e)(1):
- Each agreement under this section shall provide --
- (B) that the State will comply with such regulations relating to payments and reports as the Secretary of Health, Education, and Welfare may prescribe . . . .
- Section 218(g)(1):
- Upon giving at least two years' advance notice in writing to the Secretary of Health, Education, and Welfare, a State may terminate, effective at the end of a calendar quarter specified in the notice, its agreement with the Secretary either --
- (A) in its entirety . . . or
- (B) with respect to any coverage group designated by the State, but only if the agreement has been in effect with respect to such coverage group for not less than five years prior to the receipt of such notice.
Subpart M of the Social Security Regulations No. 4, in pertinent part, provides as follows:
- Section 404.1252 Final Reports. --
- (a). Termination of Agreement. -- . . . The last report on Form OAR-S3 for each coverage group included in an agreement of any State whose agreement has been terminated shall be marked 'final report.' Such report shall be filed by the State . . . for the calendar quarter during which the final payment of wages subject to the agreement is made for services in employment performed by an individual as an employee in a coverage group, and shall plainly show the period covered and also the date of the last payment of wages . . . .
- (b) Partial Termination of Agreement. - - If an agreement is not terminated in its entirety, but is terminated only with respect to one or more coverage groups, the last wage report on Form OAR-S3 for each such coverage group shall be marked 'final report' . . . . Such report shall be filed in the manner, at the time, and for the period as set forth in paragraph (a) of this section.
It is the State's position that the City of Santa Rosa was officially removed from the social security program effective December 31, 1970. The State's responsibility for wage reporting and contribution payments for city employees ceased on December 31, 1970.
It is the position of the Social Security Administration that a State is liable for contributions with respect to wages paid for services performed in employment covered by the State's social security coverage agreement. The date the wages are paid for covered services is not a factor.
The agreement between the State and the Secretary provided for coverage of services for the City of Santa Rosa effective April 1, 1951. In retrospect, the State was not required to report wages and was not liable for contribution for services performed before April 1, 1951, as such services were not performed under the agreement. Conversely, the wages paid after termination of coverage for services performed under the 218 agreement must be reported and the State is liable for the related contributions. The effect of the termination was merely to exclude from social security coverage services performed for the city after the calendar quarter ending December 31, 1970, the date of termination.
There are no provisions in the California Federal-State coverage agreement, the law or implementing regulations that would permit elimination of the State's liability for contributions with respect to wages paid for services performed during the period of coverage, even though the wages paid for such services are not paid until after employment or coverage terminates.
The Commissioner found on review pursuant to the State's request that the State was responsible for filing reports and paying contributions on wages paid to employees of the City of Santa Rosa in the first quarter of 1971 for services performed in 1970. On the basis of this finding the request for refund was properly denied.