20 CFR 404.1226 and 404.1255(a)
The State of South Carolina timely requested review under Section 218(s) of the Social Security Act, as amended, of an interest assessment dated September 18, 1974, for $828.57. The Secretary of Health, Education and Welfare has delegated to the Commissioner of Social Security authority to make reviews and findings and to give notices of his decisions as required by section 218(s). The interest was assessed on contributions paid by the State after the due date prescribed by Social Security Regulations No. 4, Section 404.1255(a) on wages paid in the last quarter of 1973 to employees of Spartanburg City Schools (Schools). The State requested review based on the position that the Schools timely submitted to the State the required wage reports and contribution returns and paid the contributions owed before the due date prescribed by the State and, therefore, should not be charged interest on these contributions.
The facts establish that the Schools filed the required wage reports and contribution returns with the State and paid the contributions to the State on February 1, 1974. The State deposited the contributions in the State's Social Security Trust Account on that same date. However, the State returned the wage report to the Schools on February 4, 1974, for correction of an error. The report was resubmitted on February 6, 1974, but returned again for another correction on February 8, 1974. The corrected report was resubmitted to the State on February 14, 1974. The State prepared the voucher for contributions due on wages paid in the last quarter of 1973 to the Schools' employees on February 18, 1974, and that voucher was validated by the Federal Reserve Bank on March 6, 1974, 19 days past the due date prescribed by the Regulations, i.e., February 15, 1974.
Pursuant to section 404.1255(a) of Regulations No. 4, the State was required to pay on or before February 15, 1974, the contributions due on wages paid in the last quarter of 1973 or interest must be charged pursuant to Section 218(j) of the Social Security Act, as amended, and section 404.1226 of Regulations No. 4. The State's liability for the assessed interest can be removed, under section 404.1255(a) of the regulations, only if "good cause" can be found to extend the February 15, 1974, due date to March 6, 1974, the date on which the State paid the contributions.
A determination as to whether or not "good cause" exists is based on the facts in the individual situation. Generally, good cause exists only where the State is unable to submit timely reports and/or returns, or make payment, due to unusual circumstances or situations over which it has no control, which are of an emergency nature and cannot be expected to repeat themselves, which cannot reasonably be anticipated, or for which substitute processes are not feasible.
Based on the facts, the State could have timely filed the wage reports and contribution returns and paid the contributions owed on or before February 15, 1974, since it had received the reports and payments from the Schools on February 1, 1974. States are instructed to timely file reports and pay contributions that are due even if they know there are errors in such reports. The errors can be corrected by the State filing an adjusted wage report later or the Social Security Administration will discover the error when it is auditing the reports and advise the State accordingly. In addition, States are instructed that if they find it necessary to withhold the filing of wage reports, they should request an extension of filing time and deposit any contributions received from political subdivisions in a Federal Reserve Bank under the estimated contribution payment procedures which are set forth in Section 565.1 of the Handbook for State Social Security Administrators, a copy of which is given to all States. If States follow the above procedures, they will not normally incur liability for interest because of late contribution payments.
The State's contention that the Schools should not be charged interest on the late contribution payments since the Schools timely submitted to the State the required wage reports and contribution returns and paid the contributions owed is without merit. The section 218 agreement is between the State and the Secretary. Matters involving a State's section 218 agreement vis-a-vis one of its political subdivisions are to be resolved between the State and the political subdivision.
The Commissioner found on review that the State could have timely paid the contributions owed under normal procedures with which the State should have been familiar. A finding of "good cause" to extend the contribution payment due date past February 15, 1974, was not justified based on the facts. Therefore, the Commissioner affirmed the $828.57 interest charge, as assessed.
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