TN 2 (02-08)

A. Documentation Which May Be Used in Determining the Status of a Predecessor-Successor Situation

1. Copies of the ordinances, resolutions, or other enactments (e.g. notice of dissolution) of each predecessor entity which bear upon the terms and conditions for accomplishing the consolidation, annexation, or transition.

2. Copies of the charter and bylaws or other enactments of the successor entity which deal with the relationship between it and the merged entities regarding the assumption of obligations incurred by the predecessor entities, with special reference to any materials governing the retirement rights of the employees of each predecessor entity and the retirement rights of the successor entity employees.

3. Copies of the ordinances or resolutions by which each predecessor entity established its retirement system(s).

4. Copies of the successor entity’s ordinances establishing its retirement system(s).

It may be helpful to view how the determination process was applied in the following situation.

B. Example – The City of Cloverdale Retirement System

The Village of Cloverdale employees were members of the Village of Cloverdale Retirement System. Employee positions covered under the retirement system were also covered for Social Security. The Village of Cloverdale was subsequently consolidated with the Township of Thornton (both entities dissolved) to create the City of Cloverdale. Upon its creation, the employees of the City of Cloverdale were covered by the City of Cloverdale Retirement System. There was some concern whether the City of Cloverdale Retirement System was a new retirement system or merely a continuation of the former Village of Cloverdale Retirement System.

The Social Security Administration’s policy is that if the village retirement system was abolished and the city system was an entirely new retirement system, then Social Security coverage could only be effectuated by a coverage referendum. If, on the other hand, the city retirement system was, in reality, a modification and continuation of the village retirement system and not a new system, then no new referendum would be necessary to provide the employees of the city with Social Security coverage even if the consolidation resulted in new positions being added to the village retirement system.

To arrive at a decision, the documentation listed in SL 60001.682A was requested and reviewed. As a result, it was determined that the City of Cloverdale Retirement System was not a continuation of the former Village of Cloverdale Retirement System. Thus, the City of Cloverdale would have to hold a referendum in order to cover the retirement system positions under Social Security.

C. Obtaining a State Attorney General’s Opinion

Some situations may not neatly fit into one of the four predecessor-successor categories, and the legal status of the resultant entity may not be clear from all the documentation obtained. The Social Security Administration views the question of whether a political subdivision has been dissolved and a new one created as a question of State law. Bearing this in mind, it may be necessary to obtain the State Attorney General’s opinion on the legal status of the entities involved in a predecessor-successor situation.

Although the State Attorney General’s opinion will be given due weight, the Social Security Administration is permitted, but not required, to defer to the opinion of a State Attorney General in making its final determination in these matters.

If the State Attorney General is unable or unwilling to render an opinion on the legal status of the entities involved in a predecessor-successor situation, the issue should be referred to the Social Security Regional Office General Counsel for resolution.

D. Predecessor-Successor Examples

1. Consolidation

Example 1:

The City of Maplesville School System covered non-retirement system positions for Social Security via Modification No. 27 and covered its State Teacher Retirement System (STRS) positions for Social Security via Modification No. 427. STRS obtains Social Security coverage on an entity-by-entity deemed retirement system basis.

The Oak County School System covered both its STRS employees and its non- retirement system positions for Social Security via Modification No. 231.

Some years later, an act was approved by a local referendum providing for the consolidation of the two school systems into a “single county-wide system” to be called the “Deciduous School System.” The act also stated that the new school system shall “constitute a political subdivision of the State” and that each of the former school systems “shall cease to be a political subdivision of the State.” The State Attorney General issued an opinion affirming the consolidation of the Maplesville and Oak County School Systems. The Social Security Administration concurred with the State Attorney General’s opinion. Notices of Dissolution were filed for The City of Maplesville and Oak County School Systems.

Effective January 1, 1992, the Deciduous School System became operational. The non-retirement system positions in the former school systems continue to be non-retirement system positions in the new school system. Membership in STRS for employee positions in the two former school systems was carried over to the same positions in the new school system.

How is the Social Security coverage for the non-retirement system positions affected by the consolidation?

Because the Maplesville and Oak County School Systems ceased to exist and were dissolved, their Section 218 coverage modifications for non-retirement system positions would no longer be in effect. The non-retirement system positions of the new entity, the Deciduous School System, would either be covered for Social Security under the mandatory Social Security provisions, or else Social Security coverage could be extended to them as an absolute coverage group by a modification to the State’s Section 218 Agreement.

How is the Social Security coverage for the STRS positions affected by the consolidation?

Because the Maplesville and Oak County School Systems ceased to exist and were dissolved, their Section 218 coverage modifications for STRS positions would no longer be in effect. If a political subdivision is dissolved and replaced by a new political subdivision, the deemed retirement system for the dissolved entity does not continue with respect to the newly created entity. Since Social Security coverage for the STRS positions in the Maplesville and Oak County School Systems was extended on a deemed retirement system (entity-by-entity) basis, then Social Security coverage for the STRS positions of the new entity – the Deciduous School System – can only be effectuated based on the results of a coverage referendum.

Example 2:

The Township of Cedar Grove covered non-retirement system positions for Social Security via Modification No. 27. Cedar Grove’s retirement system positions were under the Public Employee Retirement System (PERS). Social Security coverage had been extended to PERS system-wide as a single retirement system under Modification 163 following a favorable majority vote referendum.

The Village of Rosedale had no positions under a retirement system, but covered all its employees for Social Security as an absolute coverage group via Modification 112.

Following the passage of ordinances and resolutions in both Cedar Grove and Rosedale, the two entities dissolved on January 1, 1995 and consolidated to become the City of Cedardale. The Cedardale Charter stated that all assets and territory which belonged to the predecessor entities “shall be a body corporate with the official name and title of “City of Cedardale.” The powers granted to the city are broader than those granted to either the village or the township.

With the establishment of the City of Cedardale, all employee positions were placed under PERS.

How is the Social Security coverage of the City of Cedardale’s employees affected by the consolidation?

Because Cedar Grove and Rosedale ceased to exist and were dissolved, their Section 218 coverage modifications would no longer be in effect and notices of dissolution would have to be submitted to Social Security. However, upon its establishment, the City of Cedardale covered all its employee positions under PERS, and since PERS had obtained Social Security coverage as a single retirement system (system-wide), all entities joining PERS are covered automatically for Social Security, and a coverage referendum is not necessary for the City of Cedardale. An identification modification (SL 40001.490, Exhibit 6) is all that is necessary.

In effect, all former employees of the two predecessor entities now working for the City of Cedardale would retain their Social Security coverage.

2. Annexation

The Village of Broadmoor obtained Social Security coverage for its non-retirement system employee positions via Modification 68. The remainder of the village employee positions was under the Broadmoor Unified Retirement Plan and not covered for Social Security.

The City of Fayette covers all its employee positions under the Public Employees Retirement Fund (PERF). Entities covered by PERF can obtain Social Security on a deemed retirement system (entity-by-entity) basis via coverage referendums. The City of Fayette has not held a coverage referendum, and, thus, its employee positions are not covered for Social Security.

Following the passage of ordinances and resolutions by the governments of Broadmoor and Fayette, the Village of Broadmoor dissolved on January 1, 2002, and its assets and territory were formally annexed by the City of Fayette. A notice of Broadmoor’s dissolution was submitted to the Social Security Administration. All former Broadmoor employee positions were carried over by Fayette and placed under PERF coverage.

How was the Social Security coverage of the former Broadmoor non-retirement system employees affected by the annexation?

Since the Village of Broadmoor dissolved and ceased to exist, its Section 218 coverage modification for the non-retirement system positions would no longer be in effect. Generally, when one entity ceases to exist and the positions and functions are moved to another entity, employees of the dissolved entity become employees of the entity that continues in existence. Their coverage status depends on the conditions of coverage for the entity which continues to exist. In this case, the Social Security coverage of Broadmoor’s non-retirement system employees would end effective with the date of annexation by the City of Fayette when they become employees of the City of Fayette and are covered under PERF. If the City of Fayette wished to obtain Social Security coverage for its employees, a coverage referendum and modification would be necessary.

3. Hybrid Consolidation – The Metropolitan Government of Nashville and Davidson County (Tennessee)

The City of Nashville first covered its employees for Social Security under Modification 4 to the State’s Section 218 Agreement effective January 1, 1952. Davidson County first covered its employees for Social Security under Modification 30 effective April 1, 1955.

The governments of the City of Nashville and of Davidson County agreed to consolidate effective April 1, 1963, but this would not be a true consolidation. As of April 1, 1963, the City of Nashville dissolved, and its Section 218 coverage modification terminated. With its dissolution, the City of Nashville turned over all its governmental powers, functions and workforce to a new entity to be called the Metropolitan Government of Nashville and Davidson County (Metro Government). Although the Davidson County Government turned over most of its governmental powers, functions and workforce to the Metro Government, it did retain some of its powers, functions and workforce and did not dissolve or terminate its Section 218 coverage modification. Although a mere shell of its former self, the Davidson County Government continues to exist as an entity separate from the Metro Government.

A hybrid consolidation created the Metro Government effective April 1, 1963. Social Security coverage was extended to its employees effective April 1, 1963 via Modification 194 to the State’s Section 218 Agreement.

4. Miscellaneous Transition

Social Security coverage was extended effective January 1, 1958 via Modification 76 to The Village of Rockatuck’s non-retirement system positions as well as those positions covered by the Municipal Employees’ Retirement System (MERS), except police officers and firefighters. MERS was a deemed retirement system (Social Security coverage on an entity by entity basis). Effective February 13, 1970, the Village of Rockatuck was legally dissolved, and on the same date, the City of Rockatuck was incorporated. As part of the transition, all City of Rockatuck positions were placed under MERS.

Despite the dissolution of the Village of Rockatuck, the Social Security Administration questioned whether the result of the change from Village to Incorporated City was merely a change in form, but not in substance, of the juristic entity. If the transition from Village to Incorporated City were merely a change in form, then the Administration’s stance would be that the same employee positions continued to exist and that a new referendum to extend Social Security coverage to them would not be necessary. If, on the other hand, the old juristic entity was actually terminated and a new one created, the positions involved would be new positions, and a coverage referendum of the City employees in positions covered by MERS would have to be held before Social Security coverage could be extended to them.

The Social Security Administration advised that the opinion of the State Attorney General should be obtained concerning the effect of the dissolution of the Village of Rockatuck and the incorporation (on the same date) of the City of Rockatuck.

The State Attorney General opined that the dissolution of the Village and simultaneous incorporation of the City was just a change in form, and, thus, the Social Security coverage of the MERS positions would carry over from the Village of Rockatuck to the City of Rockatuck. The Social Security Administration accepted the State Attorney General’s opinion. As a result, a coverage referendum of the City of Rockatuck’s MERS employees was not necessary. All the City of Rockatuck’s MERS positions, except police and firefighters, were covered for Social Security from the date of incorporation.