FEDERAL SOCIAL SECURITY ACT -- OLD-AGE AND SURVIVORS INSURANCE PROVISIONS -- COVERAGE OF OFFICIALS AND EMPLOYEES OF THE STATE AND ITS VARIOUS MUNICIPAL CORPORATIONS AND POLITICAL SUBDIVISIONS
Amendments to the Old-Age and Survivors Insurance provisions of the Federal Social Security Act make coverage available to officials and employees of the various states and to municipal corporations and political subdivisions of such states. Coverage can be effected only on the application of a state and requires an agreement under which the state undertakes the collection and guarantees payments. Officials and employees already covered by public retirement systems are not eligible for coverage. The State of Washington has no agency designated to effect an agreement with the Federal Social Security Administration and the Governor of the State does not in the absence of statute have power to make such an agreement.
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November 22, 1950
Honorable Arthur B. Langlie
Governor of the State of Washington
Olympia, Washington Cite as: AGO 49-51 No. 392
We have your letter of November 3, 1950, in which, with reference to the Old-Age and Survivors Insurance provisions of the Federal Social Security Act, as recently amended, you ask the following questions:
1. Under the provisions of chapter 205, Laws of 1941, can a single state agency legally enter into such agreements on behalf of cities and political subdivisions of the state.
2. If a single state agency can enter into such agreements does the Governor have the legal authority to designate such a single state agency.
[[Orig. Op. Page 2]]
3. If the state can enter such agreements on behalf of political subdivisions what would be the legal and financial responsibilities of the state government.
The conclusions reached may be summarized as follows:
1. No state official or agency is designated on Chapter 205, Laws of 1941 to deal with and consummate an agreement in connection with the application of the Old-Age and Survivors Insurance provisions of the Federal Social Security Act, as amended, to employees of the State of Washington and its various municipal corporations and political subdivisions.
2. There being no single state official or agency designated under Chapter 205, Laws of 1941, or with sufficient authority under the law to consummate an agreement in connection with state officials and employees and the officials and employees of the various municipal corporations and political subdivisions of the State of Washington as contemplated by the applicable sections of Public Law 734, 81st Congress, the Governor of this state does not have the authority under the same to designate such a single agency.
3. In the event that the State of Washington should enter into an agreement with the Federal Social Security Administration to extend the benefits of the Old-Age and Survivors Insurance provisions of the Federal Social Security Act to officials and employees of the State of Washington and of its various municipal corporations and political subdivisions, it would appear that legislation would be necessary to permit the state to act as guarantor of the necessary payments and in addition depending upon the form of agreement the state may be obligated to make collections and keep records.
The 3 questions you ask directly concern the Old-Age and Survivors Insurance provisions of the Federal Social Security Act as amended by Public Law 734 of the 81st Congress and the effect of the same on the State of Washington considering the fact the said state has in existence Chapter 205, Laws of 1941 (Rem. Supp. 41, Sec. 9998-57-61).
[[Orig. Op. Page 3]]
Section 1 of the state statute in question clearly discloses the intent of the 1941 session of the state legislature to apply the benefits of the Old-Age and Survivors Insurance provisions of the Federal Social Security Act to all eligible officials and employees of the State of Washington, the counties, cities and towns of the said state and the officials and employees of any municipal corporation or political subdivision of the state which levies taxes and employs and pays salaries.
The section in question contains a very broad and general statement in connection with public employees within the State of Washington and it cannot be denied that the legislative intent was to cover every such eligible employee with Social Security benefits whenever the Federal Law was extended to afford such coverage. Further, Section 5 of the act fixes an effective date and designates the second month following the month when the Federal Act becomes applicable to state officials and employees as of the date upon which the state statute shall become effective.
Section 2 of the State Act in question reads as follows:
"Any and all officials and boards having charge of the preparation of payrolls and payment of salaries and wages to such eligible officials and employees are hereby authorized and directed to make payroll and salary and wage deductions and to handle and dispose of the same as required by such Federal Act; and any official or board being authorized to disburse funds respectively for the office, department or division of the state, county, city or town, or other municipal corporation or political subdivision in which any such eligible official or employee is employed is authorized to pay and disburse out of any funds available for the operation and maintenance of such office, department or division such sums and dispose of and handle the same in such manner as is required and necessary to make payments and benefits of said Federal act available to such eligible officials and employees." (Rem. Supp. 1941, Sec. 9998-58)
[[Orig. Op. Page 4]]
It is clear from a reading of this Section that the legislature had before it the Social Security Act existing in 1941. Apparently it was presumed that whenever the benefits of the Old-Age and Survivors Insurance feature of the Social Security Act was made available to public officials and employees, the same would be made available on the same basis as it was then available to employees of private business. Hence, the board in connection with municipal corporations and political subdivisions or the responsible authority in connection with state departments or divisions of government was granted the authority to make payroll deductions and also authorized to use available funds to make the employer's contributions under the Social Security Act. The only broadening statement upon which we might fasten is that wording:
"* * * and handle the same in such manner as is required and necessary to make payments and benefits of said Federal act available to such eligible officials and employees."
The 1941 session of the state legislature was apparently zealous in its intention to protect existing pension systems and in Section 3 of the act used the following language:
"Nothing contained in this act shall deprive any person of benefits under any existing pension system, nor repeal, amend, modify or supersede any law, charter amendment or ordinance establishing or pertaining to an existing pension system. (Rem. Supp. 45, Sec. 9998-59)."
It is interesting to note at this point that the number of pension systems effecting public employees in this state has increased materially in number since 1941 and prior to the effective date of the act in question as outlined above. Further, not alone has the number of pension systems increased, but the coverage afforded thereby is now virtually all-encompassing if not in present practice at least in availability.
At this point it is well to consider some, at least, of the provisions of Section 218 of the Federal Social Security Act as amended by Public Law 734 of the 81st Congress. In paragraph 1 of the section we find
[[Orig. Op. Page 5]]
"(a) (1) The administrator shall, at the request of any State, enter into an agreement with such State for the purpose of extending the insurance system established by this title to services performed by individuals as employees of such State or any political subdivision thereof. Each such agreement shall contain such provisions, not inconsistent with the provisions of this section, as the State may request."
In connection with the agreement mentioned at the outset, in Paragraph (e) of the section in question we find the following:
"(e) Each agreement under this section shall provide ‑
"(1) that the State will pay to the Secretary of the Treasury, at such time or times as the Administrator may by regulations prescribe, amounts equivalent to the sum of the taxes which would be imposed by sections 1400 and 1410 of the Internal Revenue Code if the services of employees covered by the agreement constituted employment as defined in section 1426 of such code; and in section (d)
"(d) that the State will comply with such regulations relating to payments and reports as the Administrator may prescribe to carry out the purposes of this section."
and finally, section (j) contains responsibility and penalty provisions as follows:
"(j) In case any State does not make, at the time or times due, the payments provided for under an agreement pursuant to this section, there shall be added, as part of the amounts due, interest at the rate of 6 per centum per annum from the date [[Orig. Op. Page 6]] due until paid, and the Administrator may, in his discretion, deduct such amounts plus interest from any amounts certified by him to the Secretary of the Treasury for payment to such State under such other provision of this Act. Amounts so deducted shall be deemed to have been paid to the State under such other provision of this Act. Amounts equal to the amounts deducted under this subsection are hereby appropriated to the Trust Fund."
A reading of these paragraphs indicates quite clearly that the administrator for the Social Security Administration will extend coverage only where requested by a state and will enter into an agreement only with a state. Further, under the agreement apparently the state must undertake the responsibility of collecting from employees and making payments for pension benefits. Finally, the state must become the guarantor of the payments provided for and will be subject to an interest penalty in the event payments are not made. Also, in case of a default, the amount so in default may be deducted from sums payable to the state under other provisions of the Social Security Act which sums are at present being the support of other state departments and services.
The above analysis leads us inevitably to the conclusion that Chapter 205, Laws of 1941, did not contemplate any such provisions as are found in the applicable amendments to the Federal Social Security Act. Even the broadest interpretation which could be adopted for the purpose of accomplishing the expressed legislative intent could hardly provide a state agency with the powers required to contract on behalf of the various instrumentalities of the State and to not alone assume responsibility for collections, but to actually lend the credit of the state under the guarantee provided for in the Federal Act.
In consequence of the situation as outlined above, the answer to your first question which reads
"1. Under the provisions of Chapter 205, Laws of 1941, can a single state agency legally enter into such agreements on behalf of cities and political subdivisions of the state."
[[Orig. Op. Page 7]]
must be in the negative. The answer just provided would appear to make it unnecessary to reply to your queries 2 and 3 as the same are contingent upon an affirmative answer to question 1. Due to the importance of the subject, however, and its far reaching effect some consideration will be given to these questions rather than to dispose of them as immaterial after the first query has been answered in the negative.
Your second question reads
"2. If a single state agency can enter into such agreements does the Governor have the legal authority to designate such a single state agency."
As outlined above we find no official or state agency designated by Chapter 205, Laws of 1941 and in the absence of such designation we can find no power in the Governor to appoint any such agency and grant to it power to assume obligations not alone on behalf of the employees of the state, but also on behalf of its various municipalities and political subdivisions. Such power could only come from the state legislature and may well involve a constitutional question as the credit of the State of Washington is involved.
The third question is posed in the following language:
"3. If the state can enter such agreements on behalf of political subdivisions what would be the legal and financial responsibilities of the state government."
Considering the intent expressed by our legislature it would appear that though the 1941 session was unaware of what form future enabling legislation would take, it could well be that the coming session would wish to consider the matter and make appropriate provisions. For this reason, the fact that the state must enter into an agreement and " * * * comply with such regulations relating to payments and reports as the administrator may prescribe to carry out the purposes of this section" and the further fact that paragraph (j) as quoted above contains an obligation and a penalty as well as a deduction feature which may jeopardize other funds should be given serious consideration. In this connection it might well be that it would be necessary to not alone designate an agency of the state to act in connection with Social [[Orig. Op. Page 8]] Security benefits, but an appropriation for the support of such work would no doubt be needed. Further, the effect of defaults upon other funds is a contingency for which provision should be made.
Though perhaps to discuss the other provisions of Section 218 would be to labor the point and enter into features not germane to the present discussion the following language found in paragraph (d) of the aforementioned Section 218 is important enough to warrant mention. This section reads as follows:
"(d) No agreement with any State may be made applicable (either in the original agreement or by any modification thereof) to any service performed by employees as members of any coverage group in positions covered by a retirement system on the date such agreement is made applicable to such coverage group."
and in connection with the same, Section (f) quoted below comes into focus:
"(f) 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, but in no case prior to January 1, 1951, and in no case (other than in the case of an agreement or modification agreed to prior to January 1, 1953) prior to the first day of the calendar year in which such agreement or modification, as the case may be, is agreed to by the Administrator and the State."
Apparently the scope of coverage granted by the Federal Act would be much smaller as to number of employees covered than might be originally supposed as public employees in this state are at present participating in a number of pension systems. In addition, it is our opinion that the Old-Age and Survivors Insurance provisions of the Federal Social Security Act are not applicable to public officials and employees until January 1, 1951. This fact considered in connection with paragraph 5 of Chapter 205, Laws of 1941, set forth above indicates that in any event coverage could not be effected until approximately March 1, 1951. This being after the date upon which the 1951 session of our state legislature meets leads us to the conclusion that though no state agency was designated in Chapter 205, Laws of 1941, to consummate an agreement [[Orig. Op. Page 9]] with the administrator of the Federal Social Security Act for coverage of public employees, the matter being of importance might well be within the province of the State Legislative Council as amendatory legislation could only be accomplished after the entire pension system situation in the state had been considered. In addition, the type of agreement evolved by the Federal Social Security Administration under the powers granted to it by the amendment to the act under which it operates would have to be taken into consideration.
Very truly yours,
DANIEL L. SULLIVAN, JR.
Assistant Attorney General