EMPLOYER STATUS DETERMINATION

Systec Data Management, Inc.

Credibility of Service --

This is the determination of the Railroad Retirement Board concerning the status

of Systec Data Management, Inc. (Systec) as an employer under the Railroad

Retirement Act (45 U.S.C. §231 et sea.) (RRA) and the Railroad Unemployment

Insurance Act (45 U.S.C. §351 et seq.) (RUIA). This decision will also address

the claim for service to Systec

during the period from February 1968 until June 1970.

Systec was a wholly-owned subsidiary of Data Sys-Tance, Inc., which in turn

was owned by Kansas City Southern Industries, the parent company of the

Kansas City Southern Railway Company (BA No. 1806) (KCS). Systec was

incorporated in 1967 and liquidated in 1 977. It provided computer services to

rail and nonrail companies. On June 8, 1977, the Internal Revenue Service

(IRS) issued a Technical Advice Memorandum involving the years 1973 and 

1 974 in which it held that Systec was an employer for purposes of the Railroad

Retirement Tax Act (26 U.S.C. §3201, et seq.) (RRTA) because it was a

railroad-owned company that performed a service in connection with the

transportation of property by railroad. The IRS held, however, that only 1 5 of

Systec's 50 computer programmers provided service to the railroad and that

only the compensation paid to those 1 5 employees should be subject to RRTA

taxes. The IRS Memorandum did not identify those 15 employees.

A copy of the IRS Memorandum was provided to the RRB by letter dated

February 7, 1995, from^^^^^l^^^^^flof Kansas City Southern Industries,

Inc. in connection with a claim made with the RRB by

March 1994 for creditable railroad service for time worked at Systec from

February 1 968 to June 1970. Mr. also provided with his letter a list

of nine employees and their social security numbers whom he stated worked for

Systec during the years 1968 through 1976. He did not indicate, however,

whether those nine employees were among the 1 5 employees for whom the IRS

assessed RRTA taxes. He did include Mr. on that list.

Records of the Board's Bureau of Research and Employment Accounts conflict

with the list provided by Mr. because those records indicate that Mr.

^^^■was credited with 12 months of railroad service for each year from

1971 through 1 976. In addition, Mr.^^^^^l also provided information which

conflicts with Mr. list; in a letter to the agency dated March 14,

BCD 1996-69
Systec Data Management, Inc.

1994, Mr. indicated that he had worked for Systec only from

February 1968 until June 1970.

The Board finds that the question of the employer status of Systec is moot for

the reasons set out below. Systec went out of business in 1977, almost 18

years prior to the time that a copy of the IRS Memorandum was provided to the

Board in 1995. This case therefore differs from the cases of Trans-Mark

Services, Inc. and Servitron, Inc., which also involved KCS. In Legal Opinion

L-76-381, issued July 20, 1 976, the Board's General Counsel found that service

by employees of those two companies, each formed in 1969, should be

considered to be creditable employee service under the RRA. The time gap

which exists in this case was not present in those cases. Furthermore, even if

the Board were to decide simply to adopt the holding in the 1977 IRS

Memorandum, the four-year statute of limitations under section 9 of the RRA 

for reporting creditable service and compensation to the Board has expired.

Since there is no evidence which definitely identifies the 1 5 Systec employees

found by the IRS to have performed creditable railroad service, there is no basis

to reopen the Board's records to give credit for time worked for Systec. See

Pawelczak v. United States. 931 F.2d 108 (D.C. Cir. 1991). The Board

therefore also denies Mr. claim for creditable railroad service for the

time that he claimed he worked for Systec from February 1968 until June 1970.