OASI ‑-OFFICES & OFFICERS ‑- TEACHERS' RETIREMENT SYSTEM ‑- FAILURE TO REMIT OASI CONTRIBUTIONS ON THE DATE REQUIRED BY STATE REGULATIONS RESULTS IN AN INTEREST PENALTY -- STATE DEPARTMENTS' LIABILITY FOR INTEREST ON DELINQUENT OASI CONTRIBUTION.
The state auditor may properly honor a voucher submitted by a state department for interest on a delinquent OASI contribution.
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July 3, 1958
Honorable Cliff Yelle
Olympia, Washington Cite as: AGO 57-58 No. 209
You have requested an opinion from this office on a question which we paraphrase as follows:
May the state auditor properly honor a voucher submitted by a state department for interest on a delinquent OASI contribution?
We answer your question in the affirmative.
We understand that a part of the payment is due for delinquent contributions governing state employees who are members of the state employees' retirement system and part is due for delinquent contributions covering state employees who are members of the teachers' retirement system.
The enabling statute (chapter 41.48 RCW) clearly contemplates that interest may be collected under the terms of the act. RCW 41.48.060 (1) creates an OASI contribution fund and requires that there shall be deposited in the fund [[Orig. Op. Page 2]] ". . . contributions, interest, and penalties collected under RCW 41.48.040 and 41.48.050; . . ." RCW 41.48.060 (3) provides that:
"(3) From the OASI contribution fund the custodian of the fund shall pay to the secretary of the treasury such amount and at such time or times as may be directed by the governor in accordance with any agreement entered into under RCW 41.48.030 and the social security act."
The social security act provides:
"(1) that the State will pay to the Secretary of the Treasury, at such time or times as the Secretary of Health, Education, and Welfare may by regulations prescribe, amounts equivalent to the sum of the taxes which would be imposed by sections 1400 and 1410 of Title 26 if the services of employees covered by the agreement constituted employment as defined in section 1426 of Title 26; and
"(2) that the State will comply with such regulations relating to payments and reports as the Secretary of Health, Education, and Welfare may prescribe to carry out the purposes of this section." (42 U.S.C.A. § 418, p. 368)
Pursuant to the above provisions the Secretary of Health, Education, and Welfare has adopted and promulgated rules and regulations specifying the dates on which reports and contributions must be made by the state.
The social security act further provides that interest shall be charged for payments not made when due. The provision reads 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 due until paid, and the Secretary of Health, Education, and Welfare 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 any other provision of this chapter. . . ." (42 U.S.C.A. § 418, p. 370)
From the foregoing statutes it is readily apparent that the State of Washington may be assessed interest on contributions when such contributions are not paid to the Secretary of the Treasury on the dates required by the rules and [[Orig. Op. Page 3]] regulations of the Secretary of Health, Education, and Welfare. The only fund available for payment of such interest is the OASI contribution fund. If payment from that fund is not made, the federal government may deduct the amount of interest due from any funds allocated to the state from the federal government. Due to the nature of the OASI contribution fund, the state cannot make its contribution to the Secretary of the Treasury unless and until the state departments and other political subdivisions file their reports and pay their contributions to the OASI fund.
The question then becomes whether or not the interest charged against the state may be assessed and collected by the state from the state department or other political subdivision whose failure to make its report and contribution in the time provided caused the delay in the state's payment and caused interest to be assessed against the state.
RCW 41.48.050 (3) (a) authorizes the governor to carry out the state's obligation under 42 USCA § 418 (e) and (j) in the following language:
"Each political subdivision as to which a plan has been approved under this section shall pay into the contribution fund, with respect to wages (as defined in RCW 41.48.020), at such time or times as the governor may by regulation prescribe, contributions in the amounts and at the rates specified in the applicable agreement entered into by the governor under RCW 41.48.030."
While a state department is not a "political subdivision" in the strict legal sense, the statutes governing OASI expressly define the term as including ". . . an instrumentality of the state, . . ." RCW 41.48.020.
Pursuant to the duty imposed on the governor by the above provision and in accordance with RCW 41.48.090, the commissioner of the employment security department, acting under the authority delegated to him by the governor, has adopted and promulgated the following regulations setting out the dates reports are to be made and the penalties to be paid for failure to make a contribution on the date specified.
"Contributions and reports covering the same shall become due and be payable quarterly and shall reach the Employment Security Department, P.O. Box 367, Olympia, Washington, not later than the twentieth (20th) day of the month following the end of the calendar quarter for which such contributions have accrued. Payments received subsequent to such twentieth [[Orig. Op. Page 4]] (20th) day shall be subject to a declaration of delinquency and an added interest charge at the rate of one‑half of one per centum based on the amount of contributions found delinquent for each month or part thereof until paid. Each quarterly payment shall include contributions accrued upon all wages paid under this act during such quarter." (Emphasis supplied)
The general enabling act (chapter 41.48 RCW) further provides a method of recovering interest if it is not voluntarily paid. RCW 41.48.050 (4) reads as follows:
"Delinquent payments due under paragraph (a) of subsection (3) may, with interest at the rate of six percent per annum, be recovered by action in a court of competent jurisdiction against the political subdivision liable therefor or may, at the request of the governor, be deducted from any other moneys payable to such subdivision by any department or agency of the state."
The only statutory provision which lends support to the theory that a state department is not subject to the payment of interest is contained in the acts relating to OASI for members of the state retirement system (chapter 41.41 RCW) and for members of the teachers' retirement system (chapter 41.33 RCW). The common provision reads as follows:
"If any political subdivision other than that comprising the state, its agencies, instrumentalities and institutions of higher learning fails to remit as provided herein employer contributions or employee contributions, or any part of either, such delinquent contributions may be recovered with interest at the rate of six percent per annum by action in a court of competent jurisdiction against the political subdivision; or such delinquent contributions may at the request of the governor be deducted from any moneys payable to such subdivision by the state." (RCW 41.41.020 (9) and RCW 41.33.020 (8))
We do not interpret the exclusionary language of the above provision as indicating that the state is not subject to assessment of interest for delinquent payments. As previously noted, that provision itself is not the basis for the collection of interest; it merely provides the means by which an assessment for interest can be collected if not voluntarily paid. The obvious purpose of [[Orig. Op. Page 5]] excluding the departments of the state from the provision allowing collection by court proceeding is that the state need not sue itself to recover an interest assessment, while such a procedure may be necessary against a political subdivision having a separate and independent existence. The legislature could justifiably presume that a court action would not be necessary to collect interest from one of the departments of the state.
We conclude, therefore, that:
(1) The federal government may legally assess and collect interest against the State of Washington for failure to pay OASI contributions on the dates required by the regulations of the Secretary of Health, Education, and Welfare;
(2) Our statutes and the regulations adopted pursuant thereto authorize the assessment and collection of interest when a department of the state fails to remit contributions on the date required by state regulations; and
(3) That a state department should voluntarily pay such interest and a voucher for the same may properly be honored by the state auditor.
We trust this information will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
ELVIN J. VANDEBERG
Assistant Attorney General