First, let s take a look at a modification and see if you can provide me with some answers. Turn to Handout number one in the packet for this

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1 Good afternoon everyone, those of us who must deal with Section 218 coverage issues which is just about everybody in this room have to always keep certain dates and their specific functions in mind. When it comes to an agreement or modification, of course, you all have a good idea what the term effective date means. However, are you quite so knowledgeable about the meaning and purpose of the just as important terms of designated date or applicable date? When you see the term controlling date, do you know what that refers to? My presentation s goal is to discuss these various dates, their particular significance and the roles they play in extending Section 218 coverage. Your failure to know and properly utilize these dates in your agreements and modifications could jeopardize the Social Security coverage for many people. First, let s take a look at a modification and see if you can provide me with some answers. Turn to Handout number one in the packet for this presentation. 1

2 We are looking at Modification 449. The sample modifications we will be looking at during this presentation are all actual modifications. Some of you may recognize your handiwork. Now, take a few moments to look over Modification 449 and get your bearings. Now then, I m going to call on various members of the audience to answer a few questions about this modification. So stop texting and put away your cell phones, cause I may call upon you at any moment to read something or answer a question. All right, Audience Member1 1, does this modification have a designateddate date, if so what is the designated date? NO Does it have a controlling date for retroactive coverage? Yes Do you know what it is? September 5, 2012 Audience Member 2, what is the applicable date of this modification? September 5, 2012 When I have asked some of you in the past what the designated date or applicable date or the controlling date of a particular modification is, you have often given me the effective date. Although the designated date, applicable date or controlling date can, on rare occasions, be the same day as the effective date, they are not the same thing and do not serve the same function as the effective date. You must know the purpose of each of the dates and how they are used in dealing with Section 218 coverage. 2

3 So let s start with the one you are most familiar with, the effective date. Put most simply, the effective date of coverage is the date specified by the State in the agreement or modification for coverage to begin. The principal i references for the effective dt date are Section 218(e)(1) of the Social Security Act In the Code of Federal Regulations, 20 CFR (e) for Agreements and 20 CFR (d) for Modifications In the State and Local Coverage Handbook (SLCH) it s SL introductory paragraph and SL (a). Now let s take a look at Section 218(e)(1). Audience Member 4, would you please read Section 218(e)(1) from Handout 2? You might just discoverthe effective date is really not the day you think it is. 3

4 Any agreement or modification of an agreement under this section shall be effective with respect to services performed after an effective date specified in such agreement or modification; except that such date may not be earlier than the last day of the sixth calendar year preceding the year in which such agreement or modification, as the case may be, is mailed or delivered by other means to the Commissioner of Social Security. Thanks for reading that for us. Now, folks, what does it say there about when coverage begins. Does itactuallybeginon the effective date? No!!! According to Section 218(e)(1), coverage begins after the effective date. So, if you put the effective date June 1 on a modification, that means coverage should actually begin June 2. Why did they do that? I don t know. Maybe it s a valid subject of a research paper; one I m certainly not going to do. In an agreement or regular modification, situations where taxes have not yet been reported and paid, how far back can coverage go? The last day of the sixth year When we talk about going back that far, I think some people may falsely assume that a retroactive effective date can be within the three year statute of limitations period or else if it goes beyond that, that effective date must be the last day of the sixth year before the year the agreement or mod is mailed or delivered to SSA. That s wrong; the retro effective date can be any date within that time span 7 months and 2 days; 2 years and 6 days; 3 years, 8 months and 17 days; 4 years, 1 month and 10 days; etc. 4

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6 We find the discussion of a Section 218 modification s effective date in 20 CFR (d). Audience Member 7, please read it for us: Effective date. Generally, a modification must specify an effective date of coverage. However, the effective date cannot be earlier than the last day of the sixth calendar year preceding the year in which the modification is mailed or delivered by other means to the Commissioner. The modification is effective after the effective date. 6

7 When we talk about the extent of retroactivity of an effective date ( you know the last day of the sixth year before the year the mod is mailed or delivered to SSA), for mods and agreements filed April 7, 1986 or later the extent of retroactivity is based on the date the mod or agreement is mailed or delivered to SSA. For mods and agreements mailed or delivered to SSA prior to April 7, 1986, the extent of retroactivity was based on the date the modification or agreement was actually executed by SSA (the date SSA signed off on the agreement or mod). Basing the extent of retroactivity on the execution date, sometimes caused the loss of one year s retroactivity if the State mailed the modification or agreement in one year (e.g. November 30, 1983) and SSA did not execute it until the next year (e.g. January 23, 1984). From January 1, 1961 through April 6, 1986, the Social Security Act allowed coverage to be made effective as early as the first day of the fifth calendar year before the year the modification or agreement was executed by SSA. (See SL A2). If you want to know what went on before 1961, then I recommend you read SL A3. Now, let s explore designated/controlling dates. 7

8 To do so, let s look at Section 218(e)(2). ()() Audience Member 8, will you read Section 218(e)(2) for us. Read it slowly as if you were trying to make us all understand what it says, observe the commas and other forms of punctuation. In the case of service performed by members of any coverage group (A) to which an agreement under this section is made applicable, and (B) with respect to which the agreement, or modification thereof making the agreement so applicable, specifies an effective date earlier than the date of execution of such agreement and such modification, respectively, the agreement shall, if so requested by the State, be applicable to such services (tothe the extent the agreement was not already applicable) performed before such date of execution and after such effective date by any individual as a member of such coverage group if he is such a member on a date, specified by the State, which is earlier than such date of execution, except that in no case may the date so specified be earlier than the date such agreement or such modification, as the case may be, is mailed, or delivered by other means, to the Commissioner of Social Security. I know you all totally understand what that says. 8

9 In the Code of Federal Regulations 20 CFR (b) we find a clearer definition of the designated/controlling date. Audience Member 9, would you please read (b) for us? Controlling date for retroactive coverage. A State may specify in the modification a date to make all individuals in the coverage group who were in an employment relationship on that date eligible for retroactive coverage. This date is known as the controlling date for retroactivecoverage coverage. It can be no earlierthanthe the date the modification is mailed or otherwise delivered to the Commissioner nor can it be later than the date the modification is signed by the Commissioner. If the State does not designate a controlling date, the date the modification is signed by the Commissioner is the controlling date. The terms designated date and controlling date are intertwined. The controlling date controls which employees will be entitled to retroactive coverage under the agreement or modification, but when the State designates in the Agreement or modification what the controlling date will be, we call it the designated date. In fact the template language used to establish that date in SL and in the modification exhibits in SL uses the word designates. When we are dealing with standard modifications that are extending retroactive coverage, the designated /controlling date determines which employees will get the retroactive coverage. However, error mods where taxes were already paid in error are handled differently. 9

10 Let s take a look at what the State and Local Coverage Handbook says about the designated/controlling date. Audience Member 10, would you read the first paragraph from SL B? 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. The designated date provision mentioned just now resulted from the 1958 SSA Amendments. For Agreements and modifications executed by SSA before August 29, 1958, there was only the controlling date, which was the date the Agreement or modification was executed by SSA. The execution date is the date the Agreement or modification is signed by the Commissioner of SSA or his/her designee. Thus, in order to be entitled to any retroactive coverage under a specific Agreement or standard mod extending 218 coverage to a coverage group, the employee has to be a member of that coverage group on the designated/controlling date of that specific Agreement or modification. That means that just because you were in the coverage group during the retro period, if you are not a member of the coverage group on the designated/controlling date you won t get any 218 coverage for the retro period. 10

11 SL C1 says: 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. That means, in standard modification situations, in order to get retroactive coverage as part of an entity s absolute coverage group, you have to be in an employment relationship with that entity and be in an absolute coverage position on the designated/controlling date. If you don t meet those two requirements, too bad; you lose. In order to obtain any retroactive coverage as part of an entity s retirement system coverage group, you have to be in an employment relationship with that entity and be a member of that retirement system coverage group in a position under that retirement system on the designated/controlling date. Otherwise, you lose. Where a retirement system ineligible will get retroactive coverage, it will be based on employment with the entity and receiving wages in a position under the retirement system, but not earlier than the date of the employee s first ineligibility to join the retirement system. 11

12 Audience Member 11, please read SL C2: 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. That, folks, is why it is so important that you put a designated date within the body of the standard modifications you are submitting to SSA. When you put that designated date in, you are insuring the widest numberof employees will obtain Section 218 coverage. I cannot stress this enough. Now, I m not talking about error modifications where taxes were already erroneously reported and paid to IRS and SSA. I m talking about those regular modifications where retroactive coverage is involved. This requirement that retroactivity be limited in standard modifications to only those entity employees who are in an employment relationship on the controlling date, where did this requirement originate? From the Commissioner Minutes of January 15,1951: employees terminated by death, retirement or otherwise during the interval between the effective date of the retroactive agreement and the date the agreement is signed cannot be included. Also H.R. Report No. 1698, 83 rd Congress: Thus, service performed by individuals who die, retire or otherwise leave the employ of the State or political subdivision prior to the date of execution of an agreement or modification would not be covered for retroactive periods. 12

13 Now, what about the people who worked for the employer during the retroactive period and then terminated their employment relationship with the employer during the retroactive period, but were rehired by that employer before the designated/controlling date,how are they treated? Or what about those people who worked for the employer during the retroactive period and then terminated their employment during the retroactive period, but were rehired by that employer after the designated/controlling date, how are those people treated? Audience Member 12, please read SL C3 for us: 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. In other words, if you have strayed away from the fold, but come back on or before the barn door closes on the designated/controlling date, your work for the retro period will be covered. If you come back after that, your work for the retro period will not be covered. 13

14 Some of you out there who have never put designated dates on your modifications may be wondering, how do you establish a designated date on a modification; is there set language that is used? To answer those questions let s turn to SL in the State and Local Coverage Handbook. Audience Member 13, please read the first paragraph. That s stuff you should be familiar with by now, right? Now paragraph 2, provides the phrasing needed for the designated date. Audience Member 14, please read paragraph 2 clearly and distinctly. There you have it, that s the designated date template language. What do you do if you have multiple groups in your modification? Let s find out when Audience Member 15, reads paragraph 3. That s rather self explanatory, don t you think? Now, scrutinize paragraph 4 as Audience Member 16 reads it. Well what do you know, the State has to explain either in the body of the modification or in the covering transmittal letter why they are not indicating a designated date. Well, regional office specialists have you ever seen that come across your desks? I haven t. So, if the State fails to provide that information, the RO should ask for the State to provide it. This rule has been in the SLCH since at least the late 1960 s. 14

15 Now we come to the Note in SL Audience Member 17, please read that for us. Prospective effective date modifications are rather rare, but they do occur. The reason that a designated date is not required is that in prospective effective date modifications the effective date becomes the controlling date. That s all well and good if SSA executes the modification before the effective date. What happens when SSA is not able to execute the modification until several months after the prospective effective date? What happens to the individual s Section 218 coverage if their employment with the entity ends between the prospective effective date and the execution date? And there is no designated date? Lets take a look back at Mod

16 So, Audience Member 18, when did the State sign off on Mod 449? December 15, That was also the date the State mailed the mod to SSA. When the State mailed it in, was the effective date prospective or was it retroactive? Prospective, January 1, 2011 (a little over two weeks away). Based on the note in , a designated date should not be added. But Audience Member 19, when did SSA execute this modification? September 5, 2012 (over 20 months later). The once prospective effective date of January1 1, 2011 is now a retroactive effective date. Thus, what is the controlling date for retroactive coverage, Audience Member 19? September 5, 2012 Now then, Audience Member 20, if I was employed by the entity in an absolute coverage position on January 1, 2011 but terminated my employment with the entity on June 15, Am I covered by Mod 449? No. Why? You retired before the controlling date of September 5, Although not covered by Mod 449, I would have had to pay into mandatory Social Security during my employment period, unless an exclusion to mandatory Social Security applied to my position. If the State had put a designated date on Mod 449 that preceded my retirement date, would I have been covered by Mod 449? Yes. 16

17 Now, let s pretend that Mod 449 had not been an absolute coverage mod, but, instead, a Mod covering the entity s employee positions that were covered by PERS, a qualifying, Social Security equivalent retirement system. I, as a PERS member, actually voted for 218 Coverage in the referendum. I was an employee of the entity in a position covered by PERS, and a member of PERS on the date the State signed off and mailed the modification to SSA as well as on the January 1, 2011 effective date. However, I retired June 15, 2012, and SSA executed Mod 449 on September 5, Audience Member 21, tell me, am I going to have Section 218 coverage and get Social Securityquartersof coverage for the period from January 1, 2011 through June 15, 2012 when I worked for the employer in a position under PERS? NO. But I even voted for the coverage in the referendum, and now your telling me I m not going to get any Social Security coverage? You re not getting Section 218 coverage. Why, Audience Member 21? Because you were not employed by the entity and in a position under PERS on the controlling date September 5, 2012 when Mod 449 was executed by SSA. Now, if the State had included designated date language in Mod 449 making the prospective effective date of January 1, 2011 as the designated date. That person would have been covered for Social Security. So, my suggestion is: when preparing a mod that has a prospective effective date that s only a few weeks or months in the future, add the designated date language using the effective date as designated date, just as a safeguard. If mod happens to be executed by SSA before the effective date, the effective date automatically becomes the controlling date anyway, what s to lose? 17

18 Well, what about error mods? Audience Member 22, please read from SL B, 2 nd paragraph: 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. Thank you. SL D states : Under certain conditions, the State may use an error modification which provides coverage as of the date on which the error occurred. SL 30001,375D also states: 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. Thus, when we are dealing with an error modification that is the result of erroneous reporting to IRS or SSA which is the bulk of the error modifications we deal with the date the error began is the effective date and serves as controlling date for retroactive coverage. One of the few times the effective date and the controlling date occur on the same day. A designated date is not necessary. Now, let s take a look at Modification

19 Take a look at both pages of Mod 907 in your handouts. What kind of modification is it, Audience Member 23? Error Modification, the kind where the employer erroneously filed wage reports and made contribution returns to IRS and SSA without Section 218 coverage in place. Do you see something in the text of this modification, that does not need to be there? It does absolutely nothing, it has no application in this case. What is it Audience Member 23? The designated date language. Why does the designated date language not apply here? Because with error modifications involving erroneous reporting, the date of the error is the controlling date for retroactive coverage. There is no need for a designated date. Now, does anyone have any questions about designated dates or controlling dates? With designated dates and controlling dates out of the way, let me ask you this question. What happens to designated dates and controlling dates after the Agreement or modification is approved and executed by SSA? Well, once that Agreement or modification is executed by SSA, those designated dates and controlling dates become give me a drum roll you all.they become. 19

20 Applicable Dates!!!! Concerning the retroactivity of Agreements and standard modifications, SSA s Office of General Counsel discussed in its opinion of July 1, 1965, that an agreement or modification is considered to be made applicable to a coverage group on the date it is executed or on the date designated by the State pursuant to Section 218(e)(2) (formerly Section 218 (f)(2))of the Act, not on its retroactive effective date. Remember, once the Agreement or modification is executed by SSA, the controlling date or designated date, if the State has designated one, for that Agreement or modification becomes the APPLICABLE DATE. Or to take an analogy from Nature, the caterpillar enshrouds itself in a chrysalis to burst forth after its gestation as a butterfly, so, too, do the controlling date and designated date take a new form asthe applicable date once the Agreementor modification is executed by SSA. Also remember, when you hear or see the phrase the date coverage was extended, that means the applicable date not the effective date because the act of extending coverage, no matter how retroactive, did not occur until the applicable date. 20

21 When looking through Section 218 of the Act, or the State and Local Coverage Handbook, or even archival correspondence and decisions, you will come across phrases something like this, retroactive coverage can be provided only for those employees who are members of the coverage group and in an employment relationship with the entity being covered on the date the agreement is made applicable to the coverage group. When you see the phrase on the date the agreement or modification is made applicable to the coverage group, they are talking about the applicable date. They are not referring to the effective date. Let s take a look at a couple of examples from the State and Local Coverage Handbook. 21

22 Audience Member 24, would you please read from SL , first paragraph, through the second bullet: An absolute coverage group includes all positions not under the retirement system either: on September 1, 1954 or on the applicable date (Section 218(e)(2) of the Act) of the agreement or modification Notice it mentioned the applicable date there. Now let s take a look at Mod 770. It is in the in the Handout packet. 22

23 Everyone, take a good look at Mod 770 it is an absolute coverage modification (see the Section 218(b)(5) reference). Scrutinize the dates on the modification. Audience Member 25, what is the effective date? September 1, 2012 Is there a designated date? Yes What is the designated date? April 1, 2013 Audience Member26 26, what is the controlling date for retroactivecoverage? coverage? April 1, 2013 What is the execution date of Mod 770? April 22, What is the applicable date of the Modification 770? April 1, 2013 Audience Member 27, would a PF Charter School employee who was in an absolute coverage position on the effective date of September 1, 2012, but whose position became covered under a retirement system on April 15, 2013 be covered under this modification? Yes Why? Because on the applicable date of April 1, 2013, the position was still an absolute coverage position. Does the position remain covered by this modification once the position is brought under the retirement system on April 15, 2013? Yes Why? Once the position is covered as an absolute coverage position, it will remain covered as an absolute coverage position even if it is subsequently brought under a retirement system. 23

24 Everyone, continue to look at Mod 770. Audience Member 28, remember the effective date is September 1, What if the PF Charter School employee s position had been brought under the retirement system on March 1, Would the employee s position be covered under Mod 770? NO. Why? Because on the applicable date April 1, 2013, the position was covered under a retirement system. The designated date becomes the applicable date once the modification is executed. Audience Member 29, let s say that a PF Charter School employee position was covered under a retirement system on the applicable date of April 1, 2013 and, thus, not covered by Mod 770. Several years later, the retirement system goes out of business and is liquidated. That employee s position a that point is no longer covered by a retirement system. Does that now make that position an absolute coverage position and covered by Mod 770? NO. Why? Because it was a retirement system position on the applicable date of Mod 770. The applicable date is an important factor in other coverage situations, not just absolute coverage situations. Let s take a very quick look at some of the situations where the applicabledate playsanimportantrole. an role. 24

25 I said earlier that the designated date provisions originated with the 1958 Social Security Amendments. Well, the 1958 Amendments also introduced Section 218(d)(8), new procedure for extending Section 218 coverage to employee positions covered under more than one retirement system, in those situations where Section 218 coverage was being extended to positions under at least one of the retirement systems involved for services performed after Please note the role the applicable date plays. Audience Member 30, would you read paragraph 3 of SL : This provision applies as of the applicable date of coverage (the Section 218(e)(2) date) in the agreement/modification for the retirement system coverage group, or the date that a position under a non covered retirement system is brought under a covered retirement system, whichever is later. It applies only to individuals whose positions are under a retirement system on the pertinent date. Employees hired after the applicable date are not excluded from coverage under Section 218(d)(8) of the Act solely by virtue of membership in a non covered retirement system. This basically means that where an employee is in a position covered by more than one retirement system and is a member of the retirement system group not covered by Social Security on the applicable date of the 218 mod, he will not be covered for Social Security. However, those employees hired after the applicable date of the 218 mod will be covered for Social Securityeven even if they join the non covered retirement system. 25

26 I would like to end my presentation today discussing what is one of the most important areas where the applicable date plays a role Continuation of Coverage. Whether Section 218 coverage is established for a newly created position or continues when a position is reclassified is primarily dependent upon the applicable date (not the effective date) that Section 218 coverage was extended to a particular coverage group. Audience Member 31, please read from SL A1, first paragraph: Positions created or reclassified after the absolute coverage group was brought under the agreement are covered as a part of the group if they would have been a part of it had they existed when the group was covered. For example, an individual in a new or reclassified position is not covered with the absolute coverage group if the position would have been under a non covered retirement system if the position had been in existence on the date the agreement was made applicable (Section 218(e)(2)) to the absolute coverage group. In other words, whether a newly created or reclassified position is to be covered for Section 218 Social Security as part of the absolute coverage group, depends upon whether it would have been a part of the absolute coverage had it existed on the applicable date the absolute coverage group was covered under Section 218. This hypothetical situation determines the position s coverage status, despite the fact the newly created or reclassified position is covered by a retirement system. 26

27 SL B deals with the continuation of coverage of positions in a majority vote retirement system coverage group. SL C deals with the continuation of coverage of positions in a divided vote retirement system coverage group. A newly created or reclassified position is covered for Section 218 as part of a majority vote retirement system coverage group, if that position would have been a part of that majority vote retirement system group, if had existed at the time the majority vote retirement system group was covered (the applicable date) underthe Section 218 Agreement. The same holds true for newly created and reclassified positions in a divided vote retirement system coverage group. 27

28 We ve come to the end of the presentation. The sun is setting over Bora Bora as the palms wave their message of Aloha. Seriously, folks, if you take nothing else away from this presentation, please recognize the interplay, the roles, and significance of controlling dates, designated dates, and applicable dates. And realize that the effective date is not necessarily the most important date in determining whether a State or local government employee position is covered under the State s Section 218 Agreement. Thank You. 28