BASIC (12-03)

A retirement system coverage group consists of positions under a retirement system. Coverage can be extended to a retirement system coverage group only after a referendum has been held among the members of the retirement system.

The retirement system coverage group is not a permanent grouping. It exists only for referendum and coverage purposes and is not a separate group for reporting purposes. Once coverage has been obtained, the retirement system coverage group becomes for reporting purposes part of one of the absolute coverage groups described in 20 CFR, Chapter III, §404.1205(b). Also see 20 CFR, Chapter III, §404.1206(b) and SL 30001.302.

A. DEFINITION OF RETIREMENT SYSTEM FOR SECTION 218 PURPOSES

For Section 218 purposes, a retirement system is a pension, annuity, retirement or similar fund or system established by a State or political subdivision. The plan is considered established by the entity if there is any payment of public funds toward the cost of the plan or the plan is established under the entity's authority. The system need not have been created by the legislature of the State or the political subdivision, nor does it have to be a plan under which the benefits are guaranteed by State constitution. A retirement system can include a group annuity policy purchased by a State or political subdivision from a private insurance company to provide retirement benefits for its employees. A retirement system is established if State law requires retirement system protection for employees on a mandatory basis. (This is true whether or not the employing entity has actually implemented the law.)

B. LEGISLATIVE AUTHORITY FOR RETIREMENT SYSTEM COVERAGE

The 1954 amendments authorized coverage for employees in positions under a retirement system effective January 1, 1955 and prescribed the mechanics for accomplishing such coverage. Congress included the following statement of policy in the Federal law (section 218(d)(2)):

“It is hereby declared to be the policy of the Congress in enacting the succeeding paragraphs of this subsection that the protection afforded employees in positions covered by a retirement system on the date an agreement under this section is made applicable to service performed in such positions, or receiving periodic benefits under such retirement system at such time, will not be impaired as a result of making the agreement so applicable or as a result of legislative enactment in anticipation thereof.”

Most State legislatures included a similar policy statement in the State enabling legislation.

Note: In general, coverage for positions under a retirement system was not possible until January 1, 1955. Special Federal legislation did permit retirement system coverage for employees in positions under the Wisconsin Retirement Fund, employees in positions under the Arizona Teacher Retirement System, and employees in certain Utah educational institutions.

There was also another method by which some State and local subdivisions obtained Social Security coverage for their retirement system employees prior to 1955. In the early 1950's, shortly after the enactment of Section 218 and prior to the enactment of the 1954 amendments, various State and local government entities were interested in obtaining Social Security coverage for employees covered by existing retirement systems despite the provisions of 218(d) which did not permit such coverage. SSA was soon faced with proposals for liquidating retirement systems in order to circumvent Section 218(d) and then make Social Security coverage possible for those employees formerly under the liquidated systems.

The matter was presented to the Commissioner of Social Security, and in January 1951 the Commissioner established the Administration's policy that if a State or political subdivision had fully liquidated its retirement system and provision had been legally made for the settlement of previously accrued rights by means of refund of contributions, purchase of annuities, or statutory segregation of accumulated equities then SSA would consider the State or political subdivision to no longer have a retirement system. The former retirement system employees would then be eligible for Social Security coverage as an absolute coverage group via a Section 218 Agreement.

Once Social Security coverage had been obtained, the State or political subdivision could then establish a new retirement system as a supplement to Social Security without any effect on the Social Security coverage already afforded by the Section 218 Agreement. The process was approved by the Comptroller General of the United States in Opinion B-107602 dated January 23, 1952.

A number of State and local political subdivisions (most notably the Commonwealth of Virginia, the State of Oregon via Modification 20, and the State of Wyoming via Modification 4) liquidated their public employee retirement systems, obtained Social Security coverage for their former retirement system employees, and subsequently established a new retirement system for the employees to supplement the Social Security coverage.

C. WHEN POSITIONS ARE CONSIDERED UNDER A RETIREMENT SYSTEM

Whether a position is under a retirement system is not determined by whether the incumbent is a member of the system, personally ineligible to join the system or whether he has or had an option to join the retirement system. A position is under a retirement system if any individual who occupies the position may become a member of the retirement system by virtue of his occupancy of the position. See SL 30001.380 for newly created or reclassified positions.

Example: A hospital, formerly operated by the State as an integral part of the State government, is now operated by a hospital authority, an instrumentality established for this purpose and legally separate from the State government. The State Employees Retirement System (SERS) covers only positions of State employees. Employees, formerly employed by the State who became employees of the hospital authority on the date of its establishment are allowed to retain membership in SERS. Newly hired employees may not become members.

It is possible for any position to be occupied by a former State employee who retained membership in SERS. All employees of the hospital authority therefore occupy positions under SERS even though the employees themselves may not be members of SERS (either newly hired employees or existing employees who did not elect to retain SERS membership).