How to Apply the Continuation of Coverage Provisions


The following course addresses the concept of continuation of coverage. The general rule is, once coverage is provided for State and local government employees, it generally continues unless an event occurs which results in a termination of the coverage. When reviewing the course, consider that the course content approaches continuation of coverage primarily from an absolute coverage group perspective; therefore, unless specifically noted otherwise, assume the question applies to absolute coverage groups.

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    1. What is Continuation of Coverage?
    2. There are two types of employee groupings for coverage purposes; does continuation of coverage apply to both types?
    3. What are the basic rules to continuation of coverage?
    4. Breaking the rules.
    5. What is an example of coverage continuing?
    6. Does coverage always continue?
    7. What is an example of coverage not continuing?
    8. Is there another example that depicts coverage not continuing?
    9. What about newly created or reclassified positions?
    10. What does it mean to consider a position—as if it had existed at the time of the modification?
    11. If a position did not exist when the Section 218 Agreement came into effect, what do I do?
    12. What is an example of applying the above concept "if it had existed at the time of the modification?"
    13. You mention the applicable date of the Agreement. How do I identify this?
    14. Let's run through an actual scenario—from start to finish.

1.  What is Continuation of Coverage?

Continuation of coverage is the concept that once Social Security coverage is obtained through a Section 218 Agreement or modification, it continues indefinitely. Of course, there are certain instances where coverage can end; however, such occurrences are the exceptions, not the rule.  (Question # 3 takes a look at the basic rules regarding continuation of coverage).

2.  There are two types of employee groupings for coverage purposes; does continuation of coverage apply to both types?

Continuation of coverage applies to both absolute and retirement system coverage groups.
The coverage of State and local government employees continues as follows.

      • Absolute coverage group. Generally, the services of an employee covered as a part of an absolute coverage group (see §404.1205) continue to be covered indefinitely. A position covered as a part of an absolute coverage group continues to be covered even if the position later comes under a retirement system. This includes policemen's and firemen's positions which are covered with an absolute coverage group. See SL 30001.315: Absolute Coverage Group (Section 218(b)(5)).
      • Retirement system coverage group. Generally, the services of employees in positions covered as a part of a majority vote retirement system coverage group continue to be covered indefinitely. For a divided vote retirement system coverage group made up of members who chose coverage, a position continues to be covered until it is removed from the retirement system and is no longer occupied by a member who chose coverage or by a new member of the system. See SL 30001.320: Retirement System Coverage Group (Section 218(d)).

Social Security coverage is not terminated because the positions are later covered under additional retirement systems or removed from coverage under a retirement system, or because the retirement system is abolished with respect to the positions. However, if the retirement system has been abolished, newly created or reclassified positions or positions in a newly created political subdivision cannot be covered as a part of the retirement system coverage group. If the retirement system is not abolished, a newly created or reclassified position is a part of the coverage group if the position would have been a part of the group had it existed on the applicable date of the modification that extended Social Security coverage to the retirement system coverage group.

3.  What are the basic rules to continuation of coverage?

 

    • Absolute coverage group: If services performed in a position are covered as part of an absolute coverage group, coverage continues if the position subsequently comes under a retirement system. This includes police and firefighter positions, which, after coverage is obtained with an absolute coverage group, come under a retirement system.
    • Majority vote retirement system: Services in all positions under a retirement system, including positions brought under the system in the future, are compulsorily covered under the state's agreement (except for excluded positions and services), if the system is the entire system (i.e., one referendum was conducted to cover the entire system), rather than deemed separate retirement systems for coverage purposes. Coverage will continue even though the positions are later removed from under the retirement system, the system is abolished, or the positions are placed under an additional retirement system.  A deemed retirement system coverage group is treated as if it were a retirement system unto itself.  Services in all positions within a deemed retirement system coverage group, including positions brought under the system in the future, are compulsorily covered under the state's agreement.  Social Security coverage will continue even though the positions are later removed from under the deemed retirement system coverage group, the deemed retirement system is abolished, or the positions are placed under an additional retirement system.
    • Divided vote retirement system: The continuation of coverage rules for the majority-vote retirement system applies, except only new members of the system are automatically covered. In addition, a position which is occupied by a member who chooses coverage ceases to be covered if it becomes occupied by a member of the group who voted “No” to coverage. Thus, where a member of the retirement system in the "No" group transfers to a position formerly occupied by a member who voted “Yes” to coverage, the member carries his "No" vote with him. Similarly, if a member of the "Yes" group transfers to a position formerly occupied by a member of the "No" group, his coverage continues. If the retirement system is later abolished or positions are removed from coverage under it, the "Yes" group continues to be covered but new employees occupying positions which were formerly under the system would not be covered because they would not be new members of the system.

4.  Breaking the rules.

By now, you have heard the golden rule of Section 218 Coverage, “Agreements and modifications cover positions, not individuals.” However, every rule has an exception, and continuation of coverage is no exception to the rule.

What is the exception? Continuation of coverage requires you to distinguish between the individual employee and the actual covered position.

What does this mean? It means that in order to accurately determine the application of proper coverage, you need to know more than whether an agreement or modification exists and whether or not a position has been covered. You also need to know the circumstances surrounding the individual. For instance, has an employee moved from one government employer to another, switched retirement systems, participated in a divided vote referendum, or been rehired. Any of these circumstances could potentially affect an individual’s coverage.

5.  What is an example of coverage continuing?

You are a state administrator and you have been contacted by a political subdivision. You are told that a city in your state has created a public pension system, and that all city employees will be eligible members. The caller wants to know whether they can terminate paying Social Security on these employees.

Upon investigation, you discover that the employees of the city (which will call the City of Mars for purposes of this example) are covered through a modification for Social Security. The modification covered all service in positions for the City of Mars as an absolute coverage group, or non-retirement system group. You recognize this because the modification states, “This modification extends coverage to employees in positions not covered by a retirement system,” and then lists several political subdivisions—one being the City of Mars. You also verify with the City and the public retirement systems in the State that the positions had not been previously covered by a retirement system—prior to the effective date of the Modification.

What happens to the employee’s Social Security coverage?
The employees of the City of Mars continue to be covered for Social Security despite the fact that they are now under a retirement system.

Note: Coming under a retirement system at a later time is not an “event” which results in a cessation of Social Security coverage.

6.  Does coverage always continue?

No. Once Social Security coverage is provided for State and local government employees, it generally continues unless an “event” occurs which results in a termination of the coverage. Thus, coverage does not always continue.

The two primary causes for exception are:

      • Entity dissolves, and
      • Change in employer

7.  What is an example of coverage not continuing?

Using the example from Question # 5, one of the employees from the City of Mars decides to resign from Mars to accept a position with the neighboring City of Jupiter. Jupiter is covered by the same public retirement system; however, unlike Mars, Jupiter does not have a Section 218 Agreement.

Therefore, the employee’s Social Security coverage ceases as of the date he resigns from the City of Mars.

8.  Is there another example that depicts coverage not continuing?

Using a similar Mars and Jupiter example (as seen in Question # 5), assume that both cities participate in the same public retirement system. However, instead of the employee resigning from the City of Mars and going to work for Jupiter—the two cities consolidate to form one city, Saturn. In this example both Mars and Jupiter have separate modifications extending Section 218 coverage to the employees participating in the public retirement system. Because of this consolidation, Mars and Jupiter will both be dissolving.

Once Mars and Jupiter dissolve, the employees will no longer be employed in positions covered for Social Security because there has been a change of employer to Saturn. Thus, Saturn must obtain coverage for its employees through a modification to the State’s 218 Agreement following a favorable coverage referendum.

9.  What about newly created or reclassified positions?

For absolute coverage groups, positions created or reclassified after the absolute coverage group is brought under the agreement are covered as a part of the group, if the newly created or reclassified positions would have been a part of the group had they existed when the absolute coverage group was covered (applicable date).

Note: When dealing with newly created positions, your inquiry should be, “what was the situation on the ground” at the time the modification was made applicable.” See next question for more explanation.

See SL 30001.380: Continuation of Coverage Rules

10.  What does it mean to consider a position—as if it had existed at the time of the modification?

This is the process of comparing newly created positions with the characteristics of those positions covered by the modification at the time that modification came into effect (applicable date).

For instance: A modification from 1955 extended coverage to the school district positions principal and vice principal; however, as a result of an expanding curriculum, new technologies and the development of new programs, the school later employed the services of deputy principals to manage the school’s specific departmental areas. Thus, it would suffice to say that had the deputy principal position existed in 1955, it too would have been covered along with the principal and vice principal position. 

To make a similar determination, ask the following questions:

  • What was the existing non-covered retirement system situation for the entity as of the applicable date of the absolute coverage group’s modification?
  • What positions, if any, were covered by, or considered to be covered by, that non-covered retirement system at the time the modification was made applicable? 
  • Would the newly created or reclassified position have been under a retirement system had it existed at that time?
  • Were laws or State statutes in place mandating certain positions to be covered under a non-Social Security covered retirement system at that time?

11.  If a position did not exist when the Section 218 Agreement came into effect, what do I do?

Once the absolute coverage group has been brought under the Section 218 agreement, positions created or reclassified after that are covered as a part of the group if the newly created or reclassified positions would have been a part of the absolute coverage group had they existed when the absolute coverage group was covered (applicable date).

An individual in a new or reclassified position is not covered with the absolute coverage group if the position would have been under a non-covered retirement system if the position had been in existence on the date the agreement was made applicable (Section 218(e)(2)) to the absolute coverage group.

12.  What is an example of applying the above concept “if it had existed at the time of the modification?”

The City of Venus was created and incorporated in 1968.  The State subsequently submitted and SSA approved Modification #323 on March 1, 1969. Since no City of Venus employee positions were covered by a retirement system at that time, the modification extended Social Security coverage effective January 1, 1969 to services in employee positions of the City of Venus as an absolute coverage group.

Beginning January 1, 1970, the City of Venus Employees Retirement System (VERS) covered all employees of the City of Venus.  Although the City had employed security officers since its inception in 1968, the City of Venus Police Department wasn’t formed until 1980, at which time the City created police officer positions.  The police positions were covered by VERS from the onset.

Is the City of Venus’ Social Security coverage (under Modification #323) applicable to the police officer positions in the City of Venus Police Department?

First, ask; If the City of Venus police officer positions had existed on March 1, 1969, the applicable date of Modification #323, would they have been under a retirement system? Also, were there any State laws or statutes in existence on March 1, 1969, which would have mandated the police officer positions to be under a retirement system?

  • If YES, Modification # 323 would not apply to the City of Venus police officer positions, and the officers would not be required to pay into Social Security.
  • If NO, then the services in these positions would be covered for Social Security as part of the absolute coverage group.

There were no City of Venus employee positions covered under a retirement system on March 1, 1969. Also, a review of State laws and statutes in existence on March 1, 1969, indicated that police officer positions were not mandated to be covered under a retirement system. One could conclude that had the City of Venus police officer positions existed on March 1, 1969 they would not have been covered by a retirement system. Thus, the police officer positions are covered for Social Security under Modification #323 as absolute coverage positions.

13.  You mention the applicable date of the Agreement.  How do I identify this?

The applicable date of an agreement or modification is the date which controls who is entitled to retroactive coverage.

  • For agreements or modifications executed before August 29, 1958, the applicable date is the execution date of the agreement or modification. 
  • For agreements or modifications executed August 29, 1958 or later, the applicable date cannot be earlier than the date the modification or agreement is mailed or otherwise delivered to SSA. If no date is designated, the date of execution of the agreement or modification is the applicable date. (Section 218(e)(2))
  • If the execution date precedes the effective date (no retroactive coverage), the effective date is the applicable date.

For instance, if the applicable date of the entity’s modification was January 10, 1962, then the question becomes, “Were any of the entity’s positions under  a non-covered retirement system as of January 10, 1962?”

If entity had positions covered under the retirement system, would the newly created position have fallen under that retirement system had the position existed on January 10, 1962?  If the answer is “yes”, the newly created position would be considered a non-covered retirement system position and not an absolute coverage group position.  If the answer is “no”, then the position would be covered for Social Security with the absolute coverage group.

See SL 30001.375: Effective Dates of Coverage and SL 30001.380: Continuation of Coverage Rules.

14.  Let’s run through an actual scenario—from start to finish.

The Melville Township Fire Department was founded as a volunteer fire department in 1947.  The volunteer fire department was established as an integral part of the Melville Township government.

On January 21, 1957, Modification #58 was executed to cover for Social Security all employee positions of Melville Township not under a retirement system.

On February 14, 1982, the volunteer fire department became the Melville Township Fire Department; five full time paid firefighters were hired on that date and were immediately placed under the State’s 1935 Firemen’s Pension fund.

The Firefighters Argument: The firefighters currently employed with the Melville Township Fire Department now come forward and make the case that they are erroneously paying into Social Security.  They note that when the position of full-time paid firefighter was created, it was a position covered by a retirement system.  They further assert that positions covered by a retirement system are excluded from Social Security coverage. 

Review the policy:

  • An absolute coverage group includes all positions not under the retirement system either: on September 1, 1954 or on the applicable date of the agreement or modification (Section 218(e)(2) of the Social Security Act).
  • Absolute coverage positions remain covered even if they are later brought under a retirement system.  See SL 30001.315: Absolute Coverage Group (Section 218(b)(5)).
  • Positions created or reclassified after the absolute coverage group was brought under the agreement are covered as a part of the group if the newly created or reclassified positions would have been a part of the group had they existed when the absolute coverage group was covered.  See SL 30001.380: Continuation of Coverage Rules.

 
Therefore, the question becomes, what was “the situation on the ground” with respect to retirement system coverage for Melville Township employee positions as of January 21, 1957, the execution date of Modification #58.

Questions to ask:

  • Were any of the township’s employee positions under a retirement system?  If so, which employee positions and under what retirement system were they covered?
  • Would the firefighters have been covered under a retirement system on January 21, 1957, if the position of full-time firefighter existed back then?
  • Did the State have any statutes on the books in January 1957, that mandatorily compelled firefighters to be covered by a retirement system?
  • Did the State have a statute on the books in January 1957, that required that a firemen’s pension fund and board of trustees be created in every city of the state having a certain population?
  • Did Melville Township pass any resolution prior to January 21, 1957, providing that any future hired full-time firefighter would be considered to be under the 1935 Firemen’s Pension Fund?

Analyze the situation:
Melville Township did not pass a resolution prior to January 21, 1957 providing that future hired full-time firefighters were to be covered by the 1935 Firemen’s Pension Fund.

In 1957, the State in which Melville Township is located had a statute on the books which read: “A firemen’s pension fund and a board of trustees of the firemen’s pension fund are hereby created in every city in this state having a population of 114,500 or more according to the last United States census and which maintains a regularly organized and paid fire department.”  Former State Compiled Statutes 17-5-1-8.  Notably, this statute was recodified at 5 SCS 2-46/2.
In January 1957, Melville Township only had a population of approximately 10,000 people.
The only employees of Melville Township who were under a retirement system in 1957 were the police officers who were covered by the 1928 Police Pension Fund

The Determination:
Although the full-time firefighter position did not exist on January 21, 1957, the date that Modification #58 was executed (the applicable date), there was no State statute or other law in place which would have mandated the firefighter  position in Melville Township being placed  under a retirement system.  The governmental entity of the Township volunteer fire department had been in existence since 1947, and no action had been taken to give its members retirement system coverage. 

Thus, it was determined that the full-time firefighters of Melville Township should be covered for Social Security as part of the absolute coverage group under Modification #58.