SSR 77-16: SECTION 218(d)(4) and 218(s) (42 U.S.C. 418(d)(4) and 418(s)) STATE AND LOCAL COVERAGE -- COMMISSIONER'S RULING ON STATE'S REQUEST FOR REVIEW -- EFFECTIVE DATE OF COVERAGE -- OHIO
20 CFR 404.1220, 404.1222 and 404.1270
SSR 77-16
- The State of Ohio entered into an agreement with the Department of Health, Education, and Welfare pursuant to section 218 of the Social Security Act to extend Social Security coverage to the employees of the City of Cincinnati working at the University of Cincinnati in positions covered by the teachers' retirement system. Subsequently, wages of new employees entering on duty at the University of Cincinnati whose positions were under the retirement system were not being reported for Social Security purposes until they elected one of the options available under the teachers' retirement system, at times a six month process. Held, Social Security contributions are due beginning with the first date an employee occupies a position covered by the teachers' retirement system regardless of whether he or she is or is not a member of the system.
The State of Ohio timely requested review under section 218(s) of the Act of a contribution assessment. The assessment related to contributions due on wages paid to employees of the city of Cincinnati, working at the University of Cincinnati in positions covered by the Teachers' Insurance and Annuity Association of America in the period from January 1, 1970, through April 30, 1975.
The State of Ohio timely requested review under section 218(s) of the Act of a contribution assessment in the amount of $1,243,569.60. The assessment related to contributions due on wages paid to employees of the city of Cincinnati, Employer Identification No. 69-031002, working at the University of Cincinnati in positions covered by the Teachers' Insurance and Annuity Association of America in the period from January 1, 1970, through April 30, 1975.
On December 20, 1962, the State of Ohio and the Secretary of Health, Education, and Welfare entered into an agreement under section 218 of the Act to extend Social Security coverage to employees of the city of Cincinnati as members of a coverage group (as defined in section 218(d)(4) of the Act) of the Teachers' Insurance and Annuity Association of America effective February 1, 1962. In March 1974 it was discovered during a joint Social Security Administration-State onsite review of the Ohio coverage agreement that new employees at the University whose positions were under the TIAA were not being reported for Social Security purposes until they elected one of the options available under this system. In some cases this was as much as 6 months after they began work. The State was informed by the Social Security Administration that new employees are covered under the State's agreement beginning with the first date they occupy positions under the TIAA and that Social Security deductions should begin immediately. The State believes, however, that coverage does not begin until the employee actually becomes a member of the TIAA. Despite this disagreement on the coverage issue, the University began immediate deductions from new employees' pay checks effective May 1, 1975. It did not correct past reports, however, due to numerous problems which would be involved in attempting to make these corrections. The State has indicated that its understanding as to the extent of the coverage provided under its agreement was based on information furnished by Social Security Administration personnel.
Based on its determination that contributions are due beginning with the first date an employee occupies a position covered by the TIAA, the Social Security Administration issued an assessment of contributions due on unreported wages in the period from January 1, 1970, through April 30, 1975. The amount of the assessment represented an estimate of contributions due, since exact information was not available to the Social Security Administration.
The Commissioner found on review that on the basis of the evidence submitted, the Social Security Administration was correct in determining that Social Security contributions are due beginning with the first date an employee occupies a position covered by the TIAA without regard to whether the employee is actually a member of this system.
Section 218(d)(4) of the Act, relating to retirement system coverage groups, defines as a separate coverage group all employees in positions which were covered by the same retirement system on the date the State's agreement was made applicable to such system, all employees in positions which were covered by such system after such date, and all employees in positions which were covered by such system before such date and who had not previously obtained coverage. (For purposes of obtaining coverage under a State's agreement where a retirement system covers employees of more than one employing entity, the system may be divided so as to provide coverage for each employing entity separately.) Section 218(c)(2) states that in case of each coverage group to which the agreement applies, the agreement must include all services other than services which may be excluded at the State's option under section 218(c)(3) and (5) and services which must be excluded under section 218(c)(6). Since the retirement system coverage group is defined in terms of positions covered by a retirement system, it must include all employees whose positions are under the system being covered whether or not such employees are actually members of the system.
In a letter to the State dated February 21, 1962, the Social Security Administration pointed out that the coverage being considered would apply to all positions covered by the TIAA and that this coverage could include individuals who do not personally meet the TIAA membership requirements. In May 1962, the University sent to the Social Security Administration copies of amendments to the University's bylaws and regulations providing that "for those individuals occupying positions covered by the Teachers' Insurance Annuity and Association of America, the University will contribute to the Old-Age and Survivors Insurance such annual sum as may, from time to time, be required by the Federal Social Security Act." Moreover, the certification by the Governor of the results of the referendum required by section 218(d)(3) states that the vote was taken on the question of whether services of employees in positions covered by the TIAA should be included under the State's agreement. These documents show that the State was on notice that the coverage provided under the agreement applied to all employees in positions under the TIAA and was not limited to members of the system.
The State may submit additional evidence to establish the exact amount of contributions due. If the additional evidence establishes that the amount of contributions due is less than the amount of the assessment, the amount will be reduced. In the absence of additional evidence, the amount of the assessment will remain unchanged.