Rescinded 1984

SSR 68-35: Section 218(s).—State and Local Coverage— Commissioner's Ruling on State's Request for Review—New Jersey—Status of Hudson County Retirement System "Ineligibles"

CFR 404.1270-404.1274

SSR 68-35

Pursuant to the State's request for review under section 218(s) of the Social Security Act, the Commissioner affirmed an assessment made on the basis that social security coverage of employees of Hudson County who were ineligible for participation in the county employees' pension fund continued after such employees became eligible for membership therein on January 1, 1960.

The State of New Jersey timely requested a review pursuant to section 218(s) of the Administration's assessment of contributions due. The Secretary of Health, Education, and Welfare has delegated to the Commissioner of Social Security authority to make reviews and findings and to give notice of his findings as required by section 218(s). The assessment made was based on a determination that the coverage of services of "ineligibles" for membership in the Hudson County Employees' Pension Fund, a retirement system, continued after such "ineligibles" became eligible on January 1, 1960, for membership in the Fund.

The 1950 amendments to the Social Security Act provided for social security coverage of services of employees of States and the political subdivisions thereof by means of agreements between the States and the Secretary of Health, Education, and Welfare. These amendments specifically excluded from coverage services in positions which were under a retirement system at the time coverage was provided.

The 1954 amendments removed the Federal restriction against coverage of services of employees in positions under a retirement system and provided for coverage of retirement system "ineligibles." They further provided, at the option of the State at the time coverage is provided, that coverage would or would not continue in the event an ineligible later became eligible for membership in a retirement system.

The State of New Jersey in 1955 enacted legislation to provide for coverage of services of employees in positions under a retirement system, including ineligibles. The legislation also provided for and required that the coverage of ineligibles was to continue if they later became eligible for retirement system membership. The New Jersey section 218 coverage agreement was amended by Modification NO. 8, to authorize, effective January 1, 1955, coverage of services of retirement system ineligibles and to provide coverage for services of employees of Hudson County as members of the absolute coverage groups (employees in positions not under a retirement system).

Services of retirement system ineligibles employed by Hudson County were covered effective January 1, 1955, by Modification No. 14 executed December 29, 1955, as an addition to the coverage already provided the absolute coverage groups of the county. That modification also specifically provided that the coverage of the ineligibles would continue in the event they later became eligible for membership in the retirement system.

Under State legislation enacted in 1959, certain ineligibles were given the opportunity of becoming members of the Hudson County Employees' Pension Fund, effective January 1, 1960. As a result, the Hudson County officials did not report wages paid after December 31, 1959, of any former ineligible who had become a member of the Fund. In 1962, the Social Security Administration became aware of the county's failure to report wages paid the former ineligibles and on numerous occasions thereafter unsuccessfully attempted to convince the State to comply with the terms of the coverage agreement.

When it became evident that there was a firm difference in the positions of the State and the Administration which could not be resolved by negotiation, the Administration, on December 6, 1966, issued the State an assessment of contributions due on the unreported wages paid during the period January 1, 1960, through September 30, 1966 (the statutory time elimination for assessment had been extended by agreement). This assessment was computed based on the best evidence available to the Administration as to the extent of the unreported wages paid each year. The State audited the county payroll records, filed appropriate adjustment reports, and paid the contributions due thereon. After audit of the adjustment reports, the Administration's assessment was revised downward to reflect the exact contribution amount due established by the State's adjustment report and the Administration's records.

There is no disagreement as to these facts. It is the State's view, however, that since these "ineligibles" were in positions under a retirement system, coverage of their services was precluded.

The Commissioner found, on review pursuant to the State's request, that the evidence in file established that the services of the retirement system "ineligibles" of Hudson County were properly covered and that such coverage continued after they became eligible for membership in the retirement system. On the basis of this finding, the Commissioner affirmed the revised assessment.

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