TN 16 (06-04)

A. POLICY — FILING DATE

Form 4029 must be filed on or before the due date for the first taxable year ending on or after 12/31/67 in which the individual has SEI.

B. POLICY — EFFECTIVE DATE

The effective date of the exemption begins with the first taxable year all requirements in RS 01802.271 and RS 01802.272 are met.

C. POLICY — TERMINATION OF EXEMPTION

There is no provision in the IRC for revoking an exemption; however, the IRC provides that the exemption ceases to be effective beginning with the year in which the individual and/or his/her religious group no longer meet the requirements. Further, when the individual files for a religious exemption/waiver he/she agrees to notify the IRS in writing within 60 days if a cessation event occurs.

Accordingly, section 202(v) (3) of the Act provides that the waiver provision ceases to be applicable with regard to the non payment of benefits and other payments payable under Title II and Part A of Title XVIII to the extent of an individual's wages and or SEI for and after the calendar year in which the requirements of sections 1402(g) or 3127 of the IRC are not met.

NOTE: Earnings posted prior to the approved exemption and during the effective period of the exemption cannot be used to determine insured status/eligibility to benefits. Only the earnings posted for and after the effective date of the cessation event can be used to determine insured status/eligibility to benefits.

D. POLICY -- CONSTRUCTIVE NOTIFICATION

When an individual files for a religious exemption/waiver (i.e., Form 4029) he/she agrees to notify the IRS in writing within 60 days if a cessation event occurs.

However, a substantial number of applications for benefits are filed by individuals with approved religious exemptions/waivers in effect, who allege a cessation event occurred but never officially notified the IRS in writing of the cessation event. Most of the applicants allege that he/she believed or was advised by their accountant that the filing of the tax return and payment of the required SECA (Self-Employment Income Contributions Act) and/or FICA (Federal Insurance Contributions Act) taxes nullified the approved exemption. Therefore, there was no need to notify the IRS in writing of the cessation event. Further, the filing of the required tax returns reporting self-employment income and/or wages after the alleged cessation event occurs results in the individual being insured for social security coverage purposes.

Therefore, effective immediately, individuals with an approved religious exemption/waiver in effect who

• file a claim for benefits,

• allege that a cessation event occurred but

• failed to notify the IRS of the cessation event,

• resumed the filing of his/her tax returns after the cessation event occurred, and

• acquired insured status based on the earnings (wages and/or self-employment income) posted for and subsequent to the effective date of the cessation event

should be paid benefits if the individual's work history and relevant evidence of record supports the individual's allegations regarding the alleged cessation event. Further, prepare a special determination to document the file and mail or fax a copy to the Social Security Administration, Security Records Center, ATTN: Religious Exemption Unit, P.O.Box 7, Boyers, PA 16020. The fax number is 724-794-6597.

Also place a copy of the determination in NDRED.

Note the following examples:

EXAMPLE 1

Constructive Notification - Break in Earnings

• NH files rib application 12/30/98

• “Q” indicator is present on the Numident (NOTE: the “Q” indicator is not present in all cases but a 4029 is present in the Correspondence File).

• Form 4029 approved 12/15/66 by the IRS.

• NH alleges that he left the Old Order Amish sect in 1972.

• No letter of revocation in file.

• NH was told by his accountant that the filing of his tax returns and/or payment of the required SECA (Self-Employment Contributions Act) or FICA (Federal Insurance Contributions Act) taxes would nullify the approved religious exemption/waiver.

  NOTE: For social security coverage purposes SSA is concerned with the “timely filing” of a tax return and not the payment of taxes. Therefore, if the earnings are posted to the earnings record it is assumed that the tax returns were timely filed. Therefore, the NH resumed the filing of his tax returns in 1973.

• NH's earnings record shows no earnings 1966-1971

• Self-Employment earnings shown 1972 to 2002.

• Therefore, it is determined that the evidence of record supports the NH's allegation that he left the Old Order Amish sect in 1972 and resumed the filing of his income tax returns and reporting of his self-employment earnings. Accordingly, a cessation event took place in 1972 which nullified the NH's approved religious exemption/waiver and the NH's eligibility to entitlement/benefits should be determined based on earnings posted to the earnings record effective with the year the cessation event occurs (i.e., 1972) and all years thereafter.

  NOTE: Earnings posted prior to the approved 4029 exemption/waiver period and during the exempt period cannot be used to determine insured status or for computation purposes.

EXAMPLE 2

Constructive Notification - No break in earnings or Letter/Allegation of Revocation

• NH files rib application 8/27/03.

• “Q” indicator on Numident.

• Form 4029 approved 3/82.

• No letter of revocation in file and no allegation of a cessation event

• No break in earnings record after approval of Form 4029.

• Earnings record shows all wage postings 1982 – 2002 except for tax year 1998 where SEI is posted.

• Obviously the NH did not understand the full ramifications of the approved 4029 religious exemption/waiver since he continued to file his income tax returns and earn substantial wages 1982 to 2002. It is conceivable that the NH believed that the exemption only applied to his SEI and that he could continue to work and earn wages. The Form 4029 does not distinguish between a request for an exemption from the payment of SECA or FICA taxes. Accordingly, it must be concluded that the cessation event occurred when the NH continued to report earnings after the approved exemption became effective or that the NH concluded that he was exempt from the payment of SECA taxes and could continue to earn wages. Therefore, social security benefits could be paid based on earnings posted for tax year 1982 and after.

EXAMPLE 3

Constructive Notification – No break in earnings – Allegation of Revocation in File

• NH files for rib 12/4/02

• Social Security Statement sent 8/14/02

• “Q” indicator present on Numident

• Claim for rib benefits denied 2/2/03(approved exemption/waiver in effect)

• Form 4029 approved by IRS 5/26/67

• NH alleges working for the same employer since 11/68. NH's earnings record confirms the NH's allegation.

• Form 2031(Revocation of Exemption From Self-Employment Tax For Use by Ministers, Members of the Religious Orders and Christian Science Practitioners) filed 6/18/02 in error by NH. There is no form to request revocation of an approved Form 4029; ergo, NH's frequently file the Form 2031 in error. In some instances the Form 2031 is accepted and approved by IRS. Conversely, in some situations the form is returned to the NH and a letter requesting revocation is requested. Further, the NH believed that the filing of the Form 2031 was sufficient to revoke his approved Form 4029. It is safe to conclude that the NH did not know that he filed the wrong form and that if he filed a proper request for revocation of an approved Form 4029 that the approved request would only be effective prospectively. Nevertheless, in this case scenario, the filing of the Form 2031 is a moot issue since constructive notification of a revocation could be found based on the NHs' allegation that he worked for the same employer since 1968 and the continuous reporting/posting of wages since 1968 as alleged. Therefore, the cessation event occurred in 1968.

EXAMPLE 4

No Constructive Notification

• NH's files a rib claim in 1/4/91

• “Q” indicator on record for NH

• NH has an approved 4029 dated 3/4/67 in Correspondence File

• IRS approved NH's request for revocation with an effective date of 10/5/95

• No allegation of an earlier cessation event

• No break in earnings effective with tax year 4029 approved (3/67) or after

• Application denied because NH is not insured based on earnings posted 1995 and after

NOTE: Contact OISP/OEPIP through your RO support staff or PC OA staff if there are any questions regarding a potential finding of “constructive notification”.

E. SPECIAL PROCESSING CONSIDERATIONS FOR CLAIMS INVOLVING “CONSTRUCTIVE NOTIFICATION”

1. Reopening of Previously Denied Claims

The rules of administrative finality provide that an initial determination can be reopened within one year for any reason. Therefore, if an application for benefits was previously denied due the existence of an approved exemption/waiver, a new application is filed and “constructive notification of a revocation” applies, the previously denied application could be reopened if the finding of “constructive notification of a revocation” is made within one year of the date of notice of the initial denial determination for that application. However, if a finding of constructive notification is not found within one year of the date of the notice for the initial denial determination the first application for benefits could not be reopened

2. Delayed Retirement Credits (DRC???s)

When processing cases involving “constructive notification of a revocation” the effective date for applying DRC's could occur prior to the effective date of the cessation event. However, in these cases the individual's actual potential entitlement to benefits is limited to the tax year in which the cessation/revocation is effective. Therefore, DRC's should be determined effective with the tax year in which the approved exemption/waiver is effective; i.e., revoked/terminated. See RS 00615.690 and RS 00615.692.

3. Notices

A special dictated notice is required and should explain that the payment of benefits is based on a finding of constructive notification of a revocation/cessation event. Further, that the individual's eligibility to benefits is based on earnings posted effective for the tax year that the alleged cessation event took place and all posted earnings after the effective date of revocation/cessation.

NOTE: Earnings posted for the year in which the exemption/waiver was approved and all prior posted earnings cannot be used to determine eligibility to benefits and/or benefit amount.

4. Medicare Entitlement – “Equitable Relief”

Equitable Relief cannot be provided merely because of a hardship or because of “good cause” for failure to enroll. There must be some erroneous action or inaction by the Federal Government that is prejudicial to the rights of the individual. The failure for an individual to be entitled to Medicare timely due to a subsequent finding of constructive notification of a revocation is not a sufficient basis to grant equitable relief.

5. Spouse or Widow(er) Claims

Frequently, an individual's spouse or widow(er) will also file a claim for benefits. In these situations it is important to check for the

• Existence of a “Q” indicator for the spouse or widow(er)

• An allegation of a cessation event by the spouse or widow(er)

• He or she failed to notify the IRS of the cessation event

If the above requirements are met and the spouse or widow(er) is not insured on his or her respective earnings record, benefits should be paid to the spouse or widow(er) based on the number-holders earnings record.

NOTE: In some instances the spouse or widow(er) has an approved exemption/waiver and never revoked the approval exemption/waiver. The respective earnings record shows that the spouse or widow(er) never worked and reported any earnings (i.e., there are no earnings posted to the earnings record) or there are minimal earnings posted. SSA policy would permit the payment of the spouse or widow(er) benefits in these situations.