How to Navigate the Modification Process, and Who is Involved
This course is a step-by-step instructional guide to the modification process, and provides an in-depth look at who is involved in the process and what their responsibilities are. State administrators and SSA staffs in the RO, OGC, and HQ all have a role in the modification process.
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A modification amends a Section 218 Agreement to extend Social Security and Medicare coverage to new groups of employees, identifies new political subdivisions joining a public retirement system, corrects errors in previous modifications, implements changes in Federal or State law and, under very limited circumstances, excludes services or positions previously covered.
Modifications are often referred to as 218’s, or 218 Agreements. Although, it should simply be understood that each State has only one “original” Section 218 Agreement—most likely created between 1951 and 1956, and any service subsequently covered after the effective date of the original agreement, is covered by a uniquely numbered modification to that Agreement.
2. Who is involved in the modification process?
State Administrator
The State Social Security Administrator acts for the State with respect to its responsibilities for maintaining and administering the provisions of Section 218 of the Social Security Act—including submitting all modifications to SSA for approval. For a complete list of current state administrators, refer to State Social Security Administrators.
SSA Regional Office (RO)
The RO provides leadership and technical direction in administering the State and local coverage program within the region, consistent with established policy. Within the RO, the following people have routine responsibility for State and local coverage activities:
- State and Local Specialist, and
- Regional Chief Counsel
For a complete list of RO specialists, refer to SSA Regional Office State and Local Coverage Specialists.
SSA Central Office (HQ)
SSA Office of Income Security Programs (OISP), Office of Earnings, Enumeration & Medicare Policy (OEEMP), State and Local Coverage Team is primarily responsible for administering the State and local coverage program under the Act. Organizationally, OISP is located under the Deputy Commissioner for Retirement and Disability Policy. OISP plans, develops, evaluates, and issues operational policies and procedures concerning coverage and wage questions related to Sections 210 and 218 of the Social Security Act.
SSA Office of Public Service and Operations Support (OPSOS) provides operational, programmatic and administrative support to DCO (Operations) management in its Regional Offices, Field Offices, Tele-service Centers, Program Service Centers, Central Operations and Headquarters staff components.
3. Roles and responsibilities of those associated with the modification process:
State Administrator
The State Administrator is responsible for preparing Section 218 modifications to include additional coverage groups, correct errors in other modifications, identify additional political subdivisions that join a covered retirement system, and obtain Medicare coverage for public employees whose employment relationship with a public employer has been continuous since March 31, 1986. These processes may include conducting referenda for Social Security and Medicare coverage for services performed by employees in positions under a public retirement system. For a complete list of responsibilities, refer to SL 10001.130: State Social Security Administrator Responsibilities.
SSA RO State and Local Specialist
The RO provides leadership and technical direction in administering the State and local coverage program within the region, including all aspects of interpreting, reviewing, processing and executing Section 218 Agreements and modifications. After the modification is executed, the RO will send the State Administrator a notification of approval letter with an executed copy(s) of the modification. The RO also maintains files of original agreements and modifications. For a complete list of responsibilities, refer to SL 10001.140: SSA Program Administration
SSA Regional Commissioner
The Regional Commissioner, or delegated official, is the authority for signing the approval letter and all original copies of the modification.
SSA Regional Counsel
The Regional Chief Counsel’s office reviews Section 218 Agreements and modifications and legal dissolutions for legal form and substance and provides legal opinions, advice and legal clearance.
SSA HQ
OISP, as SSA’s lead component for the State and local coverage program, is responsible for planning, developing, evaluating, and issuing operational policies and procedures concerning coverage and wage questions related to Section 218 of the Social Security Act. OPSOS is responsible for the operational delivery of public service and the overall effectiveness and efficiency of DCO component; thus, OPSOS provides leadership to the RO state and local specialists. For a complete list of responsibilities, refer to SL 10001.140: SSA Program Administration.
4. The Modification Process: Who does what and what do they do?
Important, please read before proceeding with this course: The focus of this training course is solely on the process of completing a modification. While this course attempts a comprehensive approach to the modification process, there are special circumstances involving unique professions and entities that are not entirely accounted for; thus, the State and Local Coverage Handbook and the SSA Regional Office State and Local Coverage Specialists should always be consulted if questions exist. Furthermore, there are necessary actions that must take place prior to completing the modification—some such examples are the 90 day advanced notification and the referendum ballot process.
Step I. The State Administrator selects the appropriate modification type from the modification exhibit section in the Handbook.
For your convenience, we have created sample modifications for the various circumstances commonly found in modification situations. These sample modification are exhibited in SL 40001.490: Agreement and Modification Exhibits. Whether you choose to use an exhibit that reflects your situation, which we recommend, or choose to use your own template, please note that all modifications should be introduced with the following sentence. “The Commissioner of Social Security and the State of ________, acting through its representative designated to administer its responsibilities under the agreement of (date original agreement executed), hereby accept the following amendments to said agreement.”
When selecting a modification type, it is critical that you review the complete list of modifications and select the one that correctly reflects the coverage group. For instance, there are unique modifications that range in type from extending coverage to absolute and retirement system groups under majority vote or divided vote referendums to modifications that extend coverage to special professions such as election workers or police officers. Be sure that you review all possible modification exhibits, and, if you should need assistance in selecting a modification type, consult your Social Security RO or the PSSO in your state.
Step II. The State Administrator completes the Modification “form” and submits to SSA.
See below steps for completing the modification form and process. The required fields will vary depending on the modification type.
Step 1. Using the appropriate modification exhibit, the State Administrator assigns a modification number to the form. The modification number is sequential, and should follow the State’s modification number immediately preceding. Verify that the number has not been used before.
Step 2. Document the name of the entity, the entity’s address and the employer identification number (EIN) of the entity.
Step 3. If the modification covers services performed by members of a public retirement system then document the name of the retirement system. In some circumstances, a modification may provide coverage to multiple retirement systems. In this case, each retirement system should be individually documented, although they can both be documented on the same modification form.
Step 4. Document the effective date of coverage. The effective date of coverage is the date specified by the State for coverage to begin. Section 218(e)(1) of the Act provides that the effective date may not be earlier than the last day of the sixth calendar year preceding the year in which the agreement or modification is mailed or delivered by other means to SSA. A different effective date may be specified for each coverage group listed in the agreement or modification.
Important: The Internal Revenue Code limits the statute period of assessment and collection of taxes to the three-year period after the tax return for a particular year was filed. This IRS rule can come into conflict with SSA’s Section 218 effective date of retroactivity when a state or local government seeks a retroactive modification to a Section 218 agreement covering a five-year period. Generally, the earliest two years for tax collection would be barred from assessment. Thus, SSA can only process and approve any modification to a Section 218 Agreement requesting a period of coverage in excess of the three years beyond the statute period for FICA tax collection if the taxpayer agrees that it will execute a closing agreement with the IRS. See SL 40001.420: Modifications to the Original Agreement for more information on closing agreements.
In some circumstances, it is possible that the effective date will differ from what is stated above. These unique circumstances may include, but are not limited to modifications to correct errors, coverage under Section 218(e)(3) and for various historical years prior to 1986. Refer to SL 30001.375: Effective Dates of Coverage for a list of these years as well as for more information on effective dates.
Step 5. Document services excluded from the modification. Both optional and mandatory exclusions may exist; however, it is only necessary to identify the optional exclusions in the modification. The State may take these optional exclusions for absolute and retirement system coverage groups. It may also exercise these exclusions on a statewide basis or selectively by coverage groups. If optional exclusions were provided for on a statewide basis in the State’s original 218 Agreement, they may or may not be repeated in each modification; however, including the information will aid in interpreting the document and is highly recommended.
The optional exclusions include: (For a detailed description of the services below, refer to SL 30001.357: Optional Exclusions)
- Agricultural labor, but only those services that would be excluded if performed for a private employer;
- Elective positions;
- Election workers and election officials whose pay in a calendar year is less than the amount mandated by law, unless Section 218 agreement covers election workers;
- Positions compensated solely by fees that are subject to SECA (Self-Employment Contributions Act), unless Section 218 Agreement covers these services;
- Part-time positions;
- Students enrolled and regularly attending classes at the school, college or university where they are working.
Beginning July 2, 1991, services optionally excluded from coverage under a Section 218 Agreement may be covered for mandatory Social Security unless the employee is a member of a public retirement system or the services are excluded from mandatory coverage. Thus, optional exclusions not taken when the coverage group is brought under the agreement are covered.
Step 6. Document the date the modification is approved and have the State’s designated official sign the modification. SSA regulation 20 CFR 404.1204 requires each State to designate at least one State official to act for the State in administering that State's Section 218 Agreement.
Step 7. Mail the modification to SSA. States do not need to submit modifications to SSA in draft form. In other words, pending approval from SSA, the packet submitted by the State is final. However, if the modification is complex or there are questions concerning the legality of any provision of the modification, the State may request a preliminary review of the modification from the RO to ensure the modification accomplishes its purpose. When mailing the modification packet to the RO respective to your State, be sure and include the following documents:
- Two original modifications with the pen and ink signature(s) of the authorized State official(s). If the State wants more than one signed copy, it should provide the extra copies.
- Two original certification of referendums with the pen and ink signature(s) of the Governor or authorized State official(s)
Note:The certification is only required when a retirement system coverage group is included in a modification. - Any additional evidence or supporting documents. For example, include evidence that substantiates that entity identified in the modification is an integral part of the State as a new political subdivision, or part of an existing political subdivision. The evidence may be in the form of a copy of the legal authority under which the government component was established. This could be a copy of a city ordinance or a copy of the order of an authorized official which effectuated the establishment of the government component. Where legislative authority is involved, either a reference to it or a copy of the legislation should be provided along with proof that this authority has been exercised. For more information on the specific requirements of each modification by type, refer to SL 40001.000: Agreements and Modifications.
Note: Once submitted to SSA, the State may withdraw the modification by written request at any time prior to its execution by the Commissioner of Social Security. If a modification is withdrawn, the RO will return all copies of the unexecuted modification to the State. However, once executed, no coverage agreement may be terminated, either in its entirety or with respect to any coverage group. This applies not only to voluntary terminations, but also to involuntary terminations for failure to comply with the agreement.
Step III. The RO reviews the modification and approves (or denies) coverage
Important: SSA decisions are FINAL. A modification must meet the requirements of Federal and State laws. If it does not, the State must either withdraw the modification or the Commissioner will disapprove the modification and all copies will be returned to the State with an explanation for the disapproval. The State can resubmit the modification to SSA, using a different modification number, at any point thereafter, as long as it falls within the two-year period following the referendum.
Step 1. The RO specialist verifies that the modification number is in sequential order and never used before.
Step 2. The RO specialist reviews their collection of modifications, the summaries of agreements and the State’s agreement and verifies that the coverage group represented in the modification does not conflict with existing coverage.
Step 3. The RO specialist reviews the modification packet for completeness, clarity and accuracy. Consider the following:
Completeness
- Are there two copies with original signatures by the authorized state official?
- Does the modification (if it is for a retirement system coverage group) include the certification of referendum signed by the Governor or authorized official?
- Does the modification follow the models or exhibits in SL 40001.490?
- Is the modification number correct and never used before?
- Is the entity clearly named?
- Is the named entity a legal entity (This is important to the review process as government agencies privatize and new entities form that possess both government and private business characteristics, i.e., charter schools)?
- Is the date of the state’s original agreement correct?
- Is the EIN documented?
- Are the number of employees to be covered documented?
- If the modification excludes services, are optional exclusions specified per SL 30001.357?
- Does the date controlling who is covered, also referred to as the Section 218(e)(2) date, conform to Federal law. This date cannot be earlier than the date of the postmark on the envelope from the state to the RO or the receipt date in the RO.
- Does the effective date conform to Federal and state law? Normally, coverage cannot begin earlier than the last day of the sixth calendar year preceding the year in which SSA receives the modification.
- Is the modification signed by the designated state official?
Step 4. The RO specialist photocopies all modification material, including the envelope.
Step 5. The RO specialist requests an Office of the General Council (OGC) legal review of the modification. The RO specialist should follow-up with OGC in 30 days if a response has not been received.
Step 6. Upon OGC approval, the RO specialist prepares a notification of approval letter and hand delivers the entire modification packet to the Regional Commissioner, or designated official. If necessary, check with your Regional Commissioner to verify whether modification approval has been delegated to the Assistant Regional Commissioner. The Regional Commissioner must sign the approval letter and all original copies of the modification.
Step 7. After final approval by the Regional Commissioner, the RO specialist will date the approval letters and make copies. The RO must file an ORIGINAL signed modification packet in a locked fire-proof file cabinet and send complete packets to:
- The State Administrator (the State receives the other signed ORIGINAL)
- IRS (receives photocopied packet) via fax at 855-243-4014