BASIC (12-03)

The effective date of coverage is the date specified by the State in the agreement or modification for coverage to begin. A different effective date may be specified for each coverage group listed in the agreement or modification.

When additional services are covered, the effective date of coverage cannot be earlier than the date specified for the coverage group to which they are being added. The effective date of coverage for employees choosing coverage under the "second chance procedure" must be the same date as the retirement system coverage group.

An earlier effective date can be established for a coverage group already covered under an agreement. The extent of the additional retroactivity is governed by the provisions of Federal and State laws. For example, a modification mailed to SSA in 2004 to provide an earlier effective date for a coverage group already included under the State's agreement can be effective no earlier than January 1, 1999. The effective date of coverage may not be changed to a later date, except to correct an error.

A. DATE OF RETROACTIVE COVERAGE

1. Beginning April 7, 1986

Beginning April 7, 1986, the effective date of coverage is based on the date the agreement or modification is mailed or delivered by other means to SSA. (Public Law 99-272). (Before this date, it was based on the date the modification was executed.)

Section 218(e)(1) of the Act provides that the effective date may not be earlier than the last day of the sixth calendar year preceding the year in which the agreement or modification is mailed or delivered by other means to SSA.

This ensures a timely effective date for modifications, without regard to the time gap between the time the modification was received by SSA and the time that it was executed by SSA. Before April 7, 1986, one year of retroactive coverage could be lost if a modification was mailed by a State to SSA in one year, but was not executed by SSA until the following year. This often happened where the modification was mailed to SSA in November or December.

2. January 1, 1961 through April 6, 1986

The effective date could be as early as the first day of the fifth calendar year before the year the modification was executed by SSA.

Example: A modification was mailed to SSA in late November 1983 and received by SSA in December 1983. The modification was executed by SSA in January 1984. Under the law in effect during January 1, 1961 through April 6, 1986, retroactive coverage was limited to January 1, 1979.

3. Agreements Executed Before 1961

• Executed before 1954: retroactive coverage possible to 1/1/1951

• Executed during 1954: retroactive coverage possible to 1/1/1954

• Executed during 1955, 1956 or 1956: retroactive coverage possible to 1/1/1955

• Executed during 1958, 1959 or 1960: retroactive coverage possible to January 1956

Modifications for coverage of absolute coverage groups of civilian employees of State national guard units could be retroactive to January 1, 1951, if executed prior to January 1, 1956. After 1955, the rules above apply.

Coverage of individuals ineligible for membership in a retirement system and coverage of the coverage group of agricultural inspectors could not begin earlier than January 1, 1955.

Coverage of individuals in positions removed from coverage under a retirement system by action started prior to September 1, 1954, could not begin earlier than January 1, 1955, and the modification had to be executed prior to 1958.

Coverage of services in positions under a retirement system could not begin before 1955. After 1954 the rules above are applicable.

B. DATE CONTROLS WHO IS ENTITLED TO RETROACTIIVE COVERAGE

Section 218(e)(2) of the Act provides that a State may designate in agreements and modifications executed after August 28, 1958, a date to control for purposes of who is entitled to retroactive coverage (as distinguished from the effective date of retroactivity). The date designated by the State cannot be earlier than the date the agreement or modification is mailed or otherwise delivered to SSA. If no date is designated, the date the agreement or modification is executed by SSA controls.

For error modifications, the date of the error is the date that controls who is entitled to retroactive coverage. If the error involves erroneous reporting to IRS, the effective date of coverage is the first day of the first period for which the erroneous reports were made to IRS, if State law permits.

C. EMPLOYEES COVERED FOR THE RETROACTIVE PERIOD

1. Current Employees

Only employees who are members of the coverage group and in an employment relationship with the entity being covered on the date which controls retroactive coverage are covered for any retroactive period of coverage. Such an employee would be covered as follows:

• Absolute coverage group – Employee obtains coverage for that part of the retroactive period in which the employee worked and received wages.

• Retirement system coverage group (majority or divided vote) – Employee obtains coverage for that part of the retroactive period in which the employee worked and received wages in a position under the system.

• Ineligibles – Employee obtains coverage for that part of the retroactive period in which the employee worked and received wages in a position under the retirement system not earlier than the date of employee’s first ineligibility.

2. Employment Relationship Terminated

If an employment relationship was terminated by death, retirement, or otherwise, during the interval between the effective date of coverage and the date which controls who is covered for the retroactive period, there is no coverage for the retroactive period. However, see SL 30001.375 D. for preserving retroactive coverage under section 218 for former employees where reports were erroneously made to IRS or to SSA without coverage under a section 218 agreement.

3. Employees Terminated and Rehired

Services performed by an individual whose employment relationship was terminated before the date which controls who is covered for the retroactive period, but who was rehired before that date is covered retroactively. Services of an individual whose employment relationship terminated prior to that date but who was rehired after that date would not be covered retroactively; coverage would be prospective from the date of the rehiring.

4. Change of Employers

If an employee changed employers during the retroactive period but the employee occupies a position in the same retirement system coverage group on the date that controls retroactive coverage, the employee is covered for the retroactive period. This is true even though there is a break in the continuity of the employee’s employment provided the employee is in an employment relationship on the controlling date.

D. RETROACTIVITY FOR FORMER EMPLOYEES (SECTION 218(e)(3))

Ordinarily only those individuals who are in an employment relationship on the date designated in a modification, or if none is designated, the date of execution of the modification, can be covered for this retroactive period. Where employees who were part of the coverage group were erroneously reported to IRS or SSA, coverage for their services may be preserved although they are not currently in an employment relationship.

Under certain conditions, the State may use an error modification which provides coverage as of the date on which the error occurred. Another way to preserve coverage for former employees is to include those employees who had been part of the coverage group, and whose earnings were erroneously reported as a part of the coverage group, provided no tax refund has been obtained. The State may, by deeming former employees to be part of the coverage group on the date designated to control retroactivity, give them whatever retroactive coverage is provided current employees.

E. DEEMING A RETIREMENT SYSTEM TO EXIST FOR EFFECTIVE DATE PURPOSES

Generally, there can be only one effective date of coverage for a coverage group. However, if a retirement system covers the positions of employees of the State and one or more political subdivisions or the employees of two or more political subdivisions, the State may if the retirement system is not divided into deemed retirement systems:

• Choose a single coverage effective date for all members of the coverage group; or

• Choose a different coverage effective date for any one of any combination of the political subdivisions; or

• Choose a different coverage effective date for the State or for the State and any one or more of the political subdivisions.

These choices are available for agreements and modifications entered into on or after September 13, 1960.

When there are different coverage effective dates, an employee will receive retroactive coverage only for his services with the entity which employs him on the date that controls retroactivity and then only to the extent retroactive coverage is provided for the employees of that entity. The State may, however, provide additional retroactive coverage for employees who work at different times for more than one of the employers included in the coverage group.

This provision applies only to effective dates. In other respects there is no change in the retirement system coverage group. One referendum must be held for the entire system. Coverage is extended to all employees in positions under the system. The optional exclusions taken and the date designated to control retroactive coverage are applicable to the entire coverage group. Employees whose positions are brought under the retirement system after the agreement is made applicable to the retirement system coverage group are automatically covered.

F. ADDITIONAL RETROACTIVITY BY TACKING

1. General

It is possible for a State to provide an employee with additional retroactive coverage by "tacking" onto the employee’s coverage, services the employee performed in the retroactive period for entities which are not a part of the employee’s coverage group. Tacking requires the State to agree in writing to treat all employees similarly situated in the same way.

Tacking is permitted only if the services to be tacked are for entities covered under the agreement or for entities whose coverage was terminated because of dissolution. If a divided vote retirement system is involved, the employee has a choice as to whether he/she wants his/her services tacked. This is the only situation where the individual may exercise a choice in tacking.

2. Tacking Procedure and Agreement

The State tacking agreement must be in writing. The following tacking agreement example may be adapted to fit specific tacking situations.

State of _______________ Tacking Agreement

It is hereby agreed that any employee whose services were covered during a retroactive period by Modification No. ____ shall receive credit for any employment which would have been covered had he/she not changed employers, provided he/she was in an employment relationship with an employer listed in Modification No. ___________ on __________ (the date designated pursuant to Section 218(e)(2) of the Act in Modification No. __________).

______________________________________________

(Signature of Authorized State Official and Date)

3. Modification and Reporting Information

List the current entity to which coverage is to be tacked in the modification providing coverage. If the services to be tacked are for an entity which was covered before its dissolution or consolidation, the wages for the retroactive period should be reported under the name and EIN of the entity which actually paid the wages.

The State should attach to the modification a list showing the name and address of the entity no longer in existence, and the period during which the dissolved entity had employees now employed by the current entity.