STATE ENABLING
LEGISLATION
BY MARYANN MOTZA, PhD, COLORADO STATE SOCIAL SECURITY ADMINISTRATOR
NCSSSA ANNUAL CONFERENCE, NEW ORLEANS, LOUISIANA
JULY 29, 2014
WHAT IS “ENABLING LEGISLATION?”
In the early 1950’s state enabling legislation (or “statute” or “act”) was
adopted by each of the states and territories eligible to enter into Section
218 Agreements under federal law (Section 218, U.S. Social Security
Act).
• Provided consent by the state (on behalf of itself and/or its political
subdivisions) to enter into the voluntary coverage agreements and pay
the concomitant contributions (tax).
Black’s Law Dictionary definition of “enabling statute” (or “enabling act”):
“A law that permits what was previously prohibited or that creates new
powers; esp. a congressional statute conferring powers on an executive
agency to carry out various delegated acts.” Source: Blacks’ Law Dictionary (7th
2
ed.), St. Paul, MN: West Group 1999.
UNDER THE U.S. FEDERAL SYSTEM OF GOVERNMENT,
WHEN DO FEDERAL VERSUS STATE LAWS APPLY?
Federalism and Section 218
As a republic, the United States is a federalist form of government in which sovereignty is
divided between a central authority and member state authorities.
This understanding of sovereignty and federalism was the reason that Congress did not
include state and local government employers and employees in the original Social Security
Act of 1935. To overcome this problem, Section 218 of the Social Security Act was enacted
that allowed the states and their political subdivisions, through their states, to enter into
voluntary agreements with the federal government (SSA) to provide coverage and benefits
to their employees.
So, why is Social Security and Medicare coverage different for state and local government
employers/ employees than for those in the private sector?
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• The answer is: federalism as embodied in the 10th Amendment to the U.S. Constitution.
HIERARCHY OF LAWS IN THE U.S.
Federal Statutes
State Constitution
Federal Court
Decisions
Federal Regulations
State Statutes
State Court
Decisions
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U.S.
Constitution
WHICH FEDERAL AGENCY OR DEPARTMENT HAS
SUPREMACY?
None.
Each agency has independent jurisdiction to implement
and enforce the laws within its authority as defined by
federal statute.
For example:
 Social Security coverage and benefits are within the
purview of the Social Security Administration
 Tax collection, including FICA, is within the jurisdiction
of the Internal Revenue Service.
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Answer:
HIERARCHY OF COURT RULINGS
The hierarchy depends on the issue to be decided.
U.S. Constitution and federal law issues are governed by the federal court
system: U.S. Supreme Court, then the Circuit Court of Appeals, then the
district or special jurisdiction courts, such as a tax court and lastly, the
administrative ruling by the executive agency.
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The State Supreme Court has final authority over state law matters, even
when the core issue involves a federal statute such as Section 218. For
example, whether a political subdivision was created or dissolved is a matter
of state law and the questions of fact and law are properly decided by the
state courts, with the State Supreme Court being the final arbiter.
STATE GOVERNMENT
 Each state has its own constitution based on its unique history, needs, philosophy, and geography. A state's
constitution is similar to that of the national Constitution; however, the laws made in individual states
cannot conflict with the national Constitution or national laws. The national Constitution is "the supreme law
of the land.“
 Just like that of the national government, each state's constitution separates power among the three
branches -- legislative, judicial, and executive. In addition, in most states, the legislative branch contains
two houses. (In Nebraska, the state legislature only has one house). Instead of a president, each state
elects a governor.
 National government and state government are two types of government, but there are also local
governments. Most Americans live under the national government, a state government, and several local
governments. Local governments within each state are often divided into five categories:
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 County
 Town and Township
 Municipality
 Special District
 School District
 Details on the number, types, and authority of governments within each state is available from the U.S.
Census Bureau at: www2.census.gov/govs/cog/2012isd.pdf.
STATE CONTROL OF POLITICAL SUBDIVISIONS
Municipal corporations are political subdivisions of
the state, created as convenient agencies for
exercising such of the governmental powers of the
state as may be entrusted to them.
All this may be done, conditionally or
unconditionally, with or without the consent of
the citizens, or even against their protest.
The number, nature, and duration of the powers
conferred upon these corporations and the territory
over which they shall be exercised rests in the
absolute discretion of the state.
In all these respects the state is supreme, and
its legislative body, conforming its action to
the state Constitution, may do as it will,
unrestrained by any provision of the
Constitution of the United States.
Hunter v. City of Pittsburgh, 207 U.S. 161, 28
S.Ct. 40, 52 L.Ed 151 (1907).
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The state, therefore, at its pleasure, may modify or
withdraw all such powers, may take without
compensation such property, hold it itself, or vest it
in other agencies, expand or contract the territorial
area, unite the whole or a part of it with another
municipality, repeal the charter and destroy the
corporation.
FEDERAL OR STATE LAW (FOR SECTION 218 PURPOSES)
Federal law governs determinations involving coverage of state and local government employees while
the interpretation or application of state laws are resolved by the authorized legal officers of the state
(e.g., State Attorney General) in accordance with applicable state and local laws, regulations and the
state court decisions.
Federal law applies to the following:
State law applies to the following:
Who is an officer of a state or political subdivision?
Is an entity a political subdivision?
What is the identity of the employer?
What is the legal status of a new entity?
Are earnings wages?
Is a function governmental or proprietary?
What are emergency services?
What are student services?
Is a position under a retirement system?
Which employees are eligible for membership in a
retirement system?
Who is an employee for purposes of retirement
system participation?
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Does an employer-employee relationship exist?
WHAT SHOULD BE THE AIM OF THE
STATE ENABLING ACT?
 Ensure compliance with federal law
 Move from “Accounting” to “Compliance” matters (since
1987 – or whenever your state reconciled its accounts
with the U.S. Social Security Administration for pre-1987
contributions)
 Implement federal law within each state according to the
needs and desires of that state and its citizens
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 Identify the state department or agency that is responsible
for ensuring compliance with Section 218 of the U.S.
Social Security Act
Office Location
Number of States
Percent of States
Admin./Budget/Finance
Office
8
15.40%
Auditor Office
2
2.85%
Comptroller Office
Labor or Employment
Security
5
9.60%
4
7.70%
Human Resources or Services
2
3.85%
State Retirement System
23
44.20%
Treasurer's Office
8
15.40%
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STATUTORY LOCATION OF STATE SOCIAL
SECURITY ADMINISTRATOR’S OFFICES
STATUTORY LOCATION OF STATE SOCIAL
SECURITY ADMINISTRATOR’S OFFICES
15.4%
15.8%
3.85%
9.6%
Admin./Budget/Finance Office
Auditor Office
Comptroller Office
Labor or Employment Security
Human Resources or Services
44.2%
State Retirement System
3.85%
Treasurer's Office
12
7.7%
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SECTION 218 IS LIKE A LAYER CAKE –
HUH??!!
COMPARISON: LAYER CAKE AND SECTION 218
The top layer is the state’s Master Section 218 Agreement that is entered into with
the Social Security Administration (or its predecessor department), Modifications to
the Master Agreement, and the various Plan and Agreements applicable to each
employer that entered into an agreement
The frosting between the top and middle layers are state statutes, rules, regulations,
policies, and practices that apply the federal Section 218 Agreement to their state
and local governments, based on the unique features of that state’s enabling
legislation and public pension system laws.
The middle layer is the state’s enabling legislation, act, or statute, which
implemented the federal Act, based on the preferences of the people of that state.
The frosting between the middle and bottom layers are other federal statutes, rules,
regulations, policies, and practices that apply to the federal Section 218 Agreements.
The bottom layer is the base – the U.S. Social Security Act. Everything else is
supported by, and built upon, that layer.
The Section
218 “cake”
consists of
52 separate
“slices” that
are each
unique, to
some degree,
yet share
similarities to
the other 51
“slices.”
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The frosting on the outside of the Section 218 “cake” consists of all of the
interpretive information that has been applied to a particular state’s Section 218
Agreement and coverage decisions AND your state’s public pension laws. Sources
include: State Social Security Administrator advisories and/or rulings, State
Attorney General’s Office, various offices and officials of the U.S. Social Security
Administration, and federal and/or state court decisions.
COMPARISON: LAYER CAKE AND SECTION 218 (CONT.)
Each slice of the Section 218 “cake” i.e., each state and each employer
within that state, requires the State Social Security Administrator (as well
as the U.S. Social Security Administration and Internal Revenue Service)
to look for the facts and circumstances and which laws, regulations,
policies, and guidelines apply to EACH SITUATION AND POSITION.
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 For example, if your state enabling legislation does not permit you to
conduct referendum election for police and fire officials – even though
federal law has permitted it in every state since August 15, 1994 -YOU CANNOT LEGALLY CONDUCT SUCH AN ELECTION (until your
state laws grant you that authority)!
HAVE STATE LAWS KEPT UP WITH
FEDERAL CHANGES?
Review your state enabling act to determine if there are provisions for:
•
•
•
•
Coverage of police and firefighters
Elimination of the ability of entities to withdraw from Section 218
Mandatory Medicare and Social Security
Direct collection and filing provisions for payment of FICA taxes to the IRS (rather
than the State Social Security Administrator prior to 1987)
• Referenda for the election of coverage (including Medicare-only)
NOTE: Colorado’s State Administrator has attempted repeatedly to update its enabling
legislation since 1994 – never happened. It ultimately is the decision of the elected
officials (members of the General Assembly and Governor) on what, if any, changes are
made to such laws.
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If not changed, some provisions are o.k. without being changed -WHY?
WHAT IF FEDERAL LAW CHANGED & THE
STATE ENABLING STATUTE DID NOT?
ANSWER: It depends!
If provisions within a state enabling statute have been superseded by changes
in federal law, those provisions are now invalid, so the state statute does not
need to be changed (even though it’s a good idea to do so). For example:
•
•
Originally Social Security (and, later, Medicare) contributions were paid to the
State Social Security Administrator’s Office who then, in turn, transmitted the
funds owed to the U.S. Treasury. That was changed, effective January 1, 1987;
since that time FICA taxes are sent directly to the U.S. Treasury by public
employers, with the IRS becoming responsible for their collection.
Originally Section 218 Agreements could be terminated in whole or in part if the
proper notice procedures was followed. That was changed effective April 20,
1983. Since that time, once a Section 218 Agreement is entered into It cannot be
terminated unless the governmental entity is legally dissolved.
AND
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•
WHAT IF FEDERAL LAW CHANGED & THE STATE
ENABLING STATUTE DID NOT? (CONTD.)
• If federal law changed to permit coverage
of groups previously prohibited, and your
state desires to extend Social Security
(and/or Medicare-only coverage) to
previously prohibited groups, the state’s
enabling legislation MUST BE CHANGED
BEFORE THE SECTION 218
AGREEMENT CAN BE MODIFIED to
grant such coverage. For example:
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• Extension of coverage to police and
firefighters.
Beginning August 16, 1994, all states
were allowed to extend Section 218
Social Security and Medicare or
Medicare-only coverage to police
officer and firefighter positions
covered under a retirement system
through a referendum procedure
conducted by the state. (Prior to that
date, only 23 states, and all interstate
instrumentalities, were specifically
authorized by Congress to do so.)
Alabama
Maryland
South Carolina
California
Mississippi
South Dakota
Florida
Montana
Tennessee
Georgia
New York
Texas
Hawaii
North Carolina
Vermont
Idaho
North Dakota
Virginia
Kansas
Oregon
Washington
Maine
Puerto Rico
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POLICE OFFICERS AND FIREFIGHTERS
SECTION 218 OF THE U.S. SOCIAL SECURITY ACT MAY
PROVIDE FOR SPECIAL CIRCUMSTANCES FOR YOUR STATE
For example:
 Any retirement system of the State of Florida, Georgia, Minnesota, North Dakota, Pennsylvania,
Washington, or Hawaii which covers positions of employees of such State who are compensated in
whole or in part from grants made to such State under title III.
 Wisconsin Retirement Fund -- (i)(1) Notwithstanding paragraph (1) of subsection (d), the agreement
with the State of Wisconsin may, subject to the provisions of this subsection, be modified so as to apply
to service performed by employees in positions covered by the Wisconsin retirement fund or any
successor system.
 Certain Employees of the State of Utah -- (k) Notwithstanding the provisions of subsection (d), the
agreement with the State of Utah entered into pursuant to this section may be modified pursuant to
subsection (c)(4) so as to apply to services performed for any of the following, the employees
performing services for each of which shall constitute a separate coverage group: Weber Junior
College, Carbon Junior College, Dixie Junior College, Central Utah Vocational School, Salt Lake Area
Vocational School, Center for the Adult Blind, Union High School (Roosevelt, Utah), Utah High School
Activities Association, State Industrial School, State Training School, State Board of Education, and
Utah School Employees Retirement Board.
 KEY: Federal statutory authority MUST BE ACCOMPANIED BY COMPARBLE STATE AUTHORITY!
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 States authorized to “divide” their retirements systems for referendum elections purposes: Alaska,
California, Connecticut, Florida, Georgia, Hawaii, Illinois, Kentucky, Louisiana, Massachusetts,
Minnesota, Nevada, New Jersey, New Mexico, New York, North Dakota, Pennsylvania, Rhode Island,
Tennessee, Texas, Vermont, Washington, and Wisconsin.
OTHER STATE LAWS ARE ALSO
IMPORTANT!
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• Don’t ignore your state’s pension laws! Even more
important, make sure you monitor proposed state legislation
each session and warn legislators against changes they
want to make that would conflict with federal laws and your
state’s Section 218 coverage!
• The warnings won’t always work (e.g., Louisiana’s politicians
ignored their State Administrator’s Office’s warnings about
the Cash Balance plan a couple of years ago!), BUT, AT
LEAST, THEY TRIED!!
ALTERNATIVE APPROACHES BY STATES TO
ENACTING SECTION 218 (SEE HANDOUT)
• Compare and contrast contents and Section 218
coverage authorized by different states.
• Key phrases to look for, such as: “covered”
employment definition and the declaration of
policy vis-à-vis the extension of coverage wanted
by the state.
• How widespread does the state want Social
Security coverage?
Appendix II of the GAO report of 2010 reflects each state’s wishes in that regard.
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•
Example
Number
1
State Enabling
Legislation for:
Michigan
2
Ohio
3
Vermont
4
Oregon
5
Colorado
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ANSWER KEY TO EXAMPLES
CONCLUSION
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Go forth and “sample” your
enabling legislation, but don’t forget
the other components of the
Section 218 “cake” and to
recommend changes in the “recipe”
(i.e., contents of your enabling
legislation), if necessary and
appropriate!