(Previously Published as PPS-61)
PURPOSE: To establish a new policy regarding coverage of services by members of religious orders who work outside of the orders for third parties.
CITATIONS (AUTHORITY): Section 210(a)(8)(A) of the Social Security Act; Regulations no. 4, section 404.1023(e).
PERTINENT HISTORY: Under section 210(a)(8)(A) of the Social Security Act, services performed by a member of a religious order "in the Exercise of duties required by such order" are excluded form the definition of employment. Members whose services are excluded under these provisions, and who are under a vow of poverty, can be covered as deemed employees of the order, provided the order files an irrevocable election of coverage for all its members. Members who are not under a vow of poverty are deemed to be conducting a trade or business in the performance of such duties for Social Security purposes.
Originally, the Social Security Administration (SSA) took the view that any services performed by a member of a religious order were excluded from the definition of employment so long as they were performed at the direction of the order, no matter for whom they were performed. The result was that services performed outside the order were not covered regardless of the secular nature of the services. At the time this policy was implemented, it was contemplated that the member, in performing the services, would be acting as an agent of, and would be under the direct control of, the order in the performance of those services. However, experience has indicated that services are often performed by a member in an employment relationship with a third party. Once such an employer-employee relationship is established, the order relinquishes control over the service performed to the extent that the member is an employee of the third party. The fact that the services re performed by a member of a religious order should be of no more significance than if the services were performed by any other employee, where the work is done in a secular milieu, both with respect to the services covered for Social Security purposes and the collection of contributions.
The determination of liability for Social Security contributions with respect to wages paid by State and local governmental entities is within the jurisdiction of SSA. Since some number of members of religious orders perform services as employees of State and local governments; e.g., schools and hospitals, this revision of SSA's policy will impact on the contribution liability resulting from employment in the State and local sector. This policy does not single out public employees and employers or place them at any tax disadvantage vis-a-vis private employers, since the Internal Revenue Service has ruled that wages paid for similar services in private employment are subject to Federal Insurance Contributions Act taxes. See Revenue Rulings 76-323 and 77-290.
POLICY STATEMENT: A member of a religious order who works outside the order in an employment relationship with a third party is an employee of the third party and not an agent of the order, and such services performed in a secular setting are not excluded from the definition of employment under section 210(a)(8)(A) of the Act. However, when a member is directed to perform services for another agency of the supervising church, or an associated institution, the member will be considered to be employed as an agent of the order.
EFFECTIVE DATE: This policy will be given full retrospective effect for coverage purposes, subject to the applicable statute of limitations in section 205(c) of the Social Security Act, except that it will be effective January 1, 1982, with respect to contribution liability under section 218 of the Social Security Act.
CROSS-REFERENCE: Claims Manual 1367.
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