20 CFR 404.1027(b)
(THIS RULING MODIFIES SSR 72-56)
1. Hospital District X in the State of Y has established a sick leave plan for its employees. Under the plan employees acquire one day of sick leave for each month of service. Sick leave may be used only in the event of the employee's illness or accident disability. Employees may be required, at the hospital district's option, to submit a doctor's statement to justify any use of sick leave. The hospital district's accounting department maintains records of both sick leave used and expenses in connection with this use. These records are kept separate from the other uses and expenses, such as regular salary payments and vacation leave.
The hospital district was created under a provision of State law which gives it the power to do any and all things necessary to operate the hospital. This power includes the right to levy taxes, to employ personnel, to fix their compensation, to make expenditures for its employment overhead, and to adopt rules and regulations necessary for the hospital's operation. No other provision of State law or the State constitution restricts the hospital district's authority to pay "on account of sickness." Accordingly, payments made under the hospital district's sick leave plan are excluded from wages under section 209(b) of the Act. The hospital district has the legal authority to pay "on account of sickness," and the creation of a sick leave plan with separate accounting for sick leave use and expenditures is evidence that this authority has been exercised.
2. City A in the State of B has established a sick leave plan for its employees. Under the plan employees acquire 4 hours of sick leave each 2-week pay period. Sick leave for absences of more than 5 work days may not be granted without a doctor's statement on the reason for the absence. The city's governing body has passed an ordinance declaring the city's policy that payments to employees absent from work on sick leave are intended as payments "on account of sickness" and not as a continuation of salary. The attorney general of State B has issued an opinion holding that, while the State doe snot have the legal authority to pay State employees "on account of sickness" from its regular salary account from funds appropriated for salary purposes, there is no such restriction applicable under State law to its political subdivisions.
Accordingly, the payments to the employees of City A absent on sick leave are excluded from wages under section 209(b) of the Social Security Act as payments "on account of sickness." The opinion of the attorney general of State B plus the local ordinance adopted by the governing body of City A establish that the city has the legal authority to pay "on account of sickness," and the ordinance and creation of the sick leave plan are evidence that this authority has been exercised.
3. Village C in the State of B does not have a sick leave plan. Employees are generally paid only for the time they actually work. Employee D is injured in an automobile accident on May 30 and is hospitalized until October 1. Employee D continues to recuperate at home thereafter and returns to work on February 10. Because of employee D's long and faithful service, on June 15, the governing body of Village C passes a resolution to set up a special fund to continue payments to employee D in amounts equal to his regular salary. The payments made from this fund prior to December 1 are not excluded from wages as payments on account of sickness. Although Village C has the legal authority to pay on account of sickness, as indicated by the State attorney general's opinion, and has exercised this authority by its resolution of June 15, the absence of a sick leave plan means that only payments made more than 6 months after the last month employee D worked are excluded from wages as payments on account of sickness. The payments on and after December 1 are excluded under section 209(d) of the Act.
This ruling modifies SSR 72-56 by clarifying its application to sick leave payments made to State and local government employees covered under a section 218 Federal-State agreement.
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