Source: http://www.socialsecurity.gov/OP_Home/rulings/oasi/43/SSR76-22-oasi-43.html
Timestamp: 2015-08-05 04:23:52
Document Index: 390198966

Matched Legal Cases: ['§ 418', '§ 5', '§ 3121', '§ 409', '§ 3101', '§ 418', '§ 418', '§ 3121', '§ 401', '§ 418', '§ 3121', '§ 3121', '§ 418', '§ 418', '§ 3121', '§ 418', '§ 418', '§ 409', '§ 409', '§ 418', '§ 418', '§ 3121', '§ 409', '§ 3121', '§ 3121', '§ 3121', '§ 8']

Old Age and Survivor's Insurance SSR 76-22c: SECTIONS 209(b) and 218(i) and (t) (42 U.S.C. 409(b) and 418(i) and (t)) STATE AND LOCAL COVERAGE -- NEW MEXICO -- UNIVERSITY OF NEW MEXICO -- WAGES
The facts are not in dispute. In accordance with 42 U.S.C. § 418 and §§ 5-7-1, et seq., N.M.S.A., 1953 Comp., the parties entered into an agreement for coverage of employees of the State and its political subdivisions, including the University of New Mexico, under the Social Security Act. The University entered into an agreement with the Public Employees Retirement Board, effective January 1, 1955. Since 1949, the University has had in effect a "plan" or system for determining payments to its employees who are absent from work because of sickness or accident disability. The amount of payments to each employee under the plan are recorded and separately stated on the University's books and records as "sick pay" and are made from a regular salary account.
The Social Security Act, at least insofar as it applies to private employers and their employees, is administered by the Internal Revenue Service (collecting funds from employers and employees) and the Department of Health, Education and Welfare (paying benefits). Both the rate of tax to be paid, and the rate of benefit to be received are keyed to "wages" earned by the employee. The term "wages" used in this computation is defined under both the "IRS status" (26 U.S.C. § 3121) and under the "HEW statutes" (42 U.S.C. § 409). Both statutes provide that "wages" shall not include "payments made to an employee under a plan on account of sickness." [1]
While State employees are not covered by the Federal Insurance Contributions Act,[2] 26 U.S.C. § 3101 et seq., the States are permitted to contract with HEW to establish analogous programs under 42 U.S.C. § 418. Of importance to the instant dispute, 42 U.S.C. § 418(e)(1) provides:
In summary, the State contends that the above interpretation made by the Social Security Administration is both irrelevant and unauthorized; that while "wages" are defined under both §§ 3121 and 409, the latter definition is relevant only for the purposes of determining entitlement to benefits under § 401; that it is made clear by 42 U.S.C. § 418 -- (e)(1)(A) that an employer's liability for contributions (either a private or public employer) is to be determined solely under § 3121 of the I.R.C.; that the Secretary of HEW is not authorized to issue rulings under I.R.C. § 3121 and has, in fact, been directed under 42 U.S.C. § 418(i) to conform his regulations -- as to the requirements to be placed on the States -- to those of the Commissioner of Internal Revenue; and that to sustain the Secretary's interpretation would be to allow inconsistent tax policies to co-exist, discriminating between private and public employees when Congress clearly intended them to be treated equally and uniformly.
Unlike the bifurcated system in respect to private employers, however, the Secretary maintains that as to public employers, HEW is the sole administrator of the Act. Hence, while payments by the State under a § 418 plan are to be made at an "equivalent" rate to the taxes imposed on private employers under § 3121 this does not necessarily mean that HEW is bound by the definition of "wages" established in the private employment sector, nor that the IRS is the only agency empowered to interpret such term. HEW is the agency which assesses the States for payments due [§ 418(q)]. It is, furthermore, the agency possessing the experience and expertise in administering the statute. Its interpretation, according to the Secretary, should therefore be accorded due weight.
In further support of the contention that HEW is authorized to make the contested interpretation, the Secretary contends that: (a) the language of § 418(a) indicates that the definition of "wages" under § 409 does not exist merely for purposes of computing benefits to be paid; (b) that the legislative history of the 1958 amendment to § 409(i) indicates that Congress viewed the definitions of Sections 409 and 410 as being applicable in computing payments due under § 418(e), citing State of Montana v. United States, 489 F.2d 522 (9th Cir. 1973); and (c) that this 1958 amendment implicitly recognized the practice of HEW of including as "wages," continuation of salary during a State employee's absence from work because of sickness, citing Graves v. Gardner, 280 F.Supp. 666 (S.D.N.Y. 1968).
While we have been presented no cases directly in point with the challenge presented here, we think that under the Social Security Act the Secretary has been given the authority, albeit limited, to interpret "wages" in respect to contributions to be made by public employers. In addition to the arguments made by the Secretary in his brief, we find support for this conclusion in 42 U.S.C. § 418(i). As noted, supra, that section, entitled "Regulations" provides than any regulations made by the Secretary to "carry out the purposes" of Section 418 shall be designed to "make the requirements imposed on States . . . the same, so far as practicable, as those imposed on [private] employers. . ." It would seem clear from this language that where it is not "practicable," the Secretary may issue regulations as to the requirements to be placed upon the States which are not "the same" as those placed on private employers, i.e., the limitation here implies the power.
Having found the existence of authority in the Secretary, in limited situations, to make interpretations which may result in private and public employers not being treated the "same" insofar as their liability for contributions [is] concerned, we cannot hold, under the circumstances of this case, that the Secretary's decision that this was an instance where it was not "practicable" to conform his Regulation to those promulgated under § 3121, or to interpret wages differently for public employers, was not reasonable. Udall v. Tallman, 380 U.S. 1 (1965); Gardner v. Brian, 369 F.2d 443 (10th Cir. 1966).
The Secretary's "variant" interpretation was here predicated apparently upon a literal interpretation given to § 409(b), i.e., that to be excluded from "wages," sick leave payments must be paid solely on account of sickness. Such payments by a State -- as opposed to a mere continuation of wages during periods of absence due to illness -- would allegedly amount to an improper "donation" of State funds absent express legal authority for the State of appropriate funds for such use.[4] See, SSR 72-56, supra.
[1] 26 U.S.C. § 3121(a)(2)(B) provides, inter alia:
[2] Employment by a State is excluded from the definition of "employment" by 26 U.S.C. § 3121(b)(7).
[3] Rev Rul. 65-275(1965) simply held that payments for earned sick leave made to an employee for periods of absence from work on account of illness pursuant to a plan or system of the type described in § 3121(a)(2) of the F.I.C.A. are excluded from "wages" and are not subject to the taxes imposed under that Act.
[4] While the State categorizes HEW's concern in this regard as "absurd quibble" and an "erroneous notion." It does not specifically contend that under New Mexico law the State is empowered to make payments "solely on account of sickness." We also note that the New Mexico Attorney General's opinion dated February 15, 1971 (T.R. Vol. I, Exhibit D), is supportive of HEW's contention. On a question of state law, courts generally give careful consideration to, and regard as highly persuasive, an opinion to the State's Attorney General where there is no other State precedent directly in point. 7 Am. Jur. 2d, Attorney General § 8.