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RULE §79.13Sick Pay Adjustments to Covered Wages

(a) Payments made to an employee, on account of sickness, by the state or a political subdivision of the state, which has an agreement with the state to cover its employees under the Federal Social Security Act as authorized by Texas Civil Statutes, Article 695g or Article 695h, may be excluded from wages covered by the Social Security Act under certain conditions.

  (1) The employing governmental entity must have legal authority to pay its employees on account of sickness. Legal authority is deemed to exist where there is no legal restriction on the entity's ability to pay on account of sickness.

  (2) Payment must be made under the entity's legal authority and according to an approved sick pay plan.

    (A) The plan must make provisions for employees generally or for employees generally and their dependents, or a class or classes of employees, or a class or classes of employees and their dependents.

    (B) "Class of employees" means a group of employees having one or more common characteristics; e.g., salaried, clerical employees in a particular division, or employees in a given wage classification.

    (C) The plan must have a definite basis for determining who is eligible to receive the payments. These standards may include length of service, salary, classification, or occupation. The eligibility requirements cannot be left to the discretion of the employer. Need, efficiency, or loyalty cannot be the only basis for eligibility.

    (D) The plan must have definite standards for determining the minimum duration of payments. A provision that payments will be made for the duration of the employee's illness or so long as the employment relationship continues is definite. The minimum period of payment cannot be left to the discretion of the employer. If the plan provides that the employer may, at the employer's discretion, make payments for a longer period than that specified in the plan, these discretionary payments will be deemed paid under the plan.

    (E) The plan must have a definite formula for determining the minimum amount to be paid each eligible employee. The minimum amount cannot be left to the discretion of the employer. However, if the plan provides that the employer may, at the employer's discretion, make payments in addition to the minimum specified, these payments will be deemed to be under the plan.

    (F) The employer must communicate the terms and conditions of the plan to all of the employees or the class affected. If communication is indirect or not in writing, it must be such that it would be reasonable to infer that employees knew of the plan's existence. A bulletin board notice or long and established practice, for example, would be enough.

  (3) Only payments made on account of sickness during the calendar years of 1979, 1980, and 1981 are excludable from covered wages.

(b) To receive adjustments to exclude payments on account of sickness from covered wages, a governmental entity must:

  (1) obtain approval of the ERS of all aspects of the governmental entity's sick pay plan. Submissions received at ERS' office after 5 p.m. on February 1, 1985, will not be considered.

  (2) file a report of adjustments (Form SSA 3964 or its successor) with ERS. All reports must be submitted in accordance with the federal Social Security Administration's requirements as to form and content. Reports of adjustments will not be considered if they are received at ERS' office after the later of:

    (A) 5 p.m. on March 1, 1985; or

    (B) 5 p.m. on the 10th working day after approval of the sick pay plan was issued by ERS.

  (3) provide documentation to support its reports of adjustments to covered wages of employees which show the dates, the periods of personal illness, and the applicable rate of pay. If an employee is eligible to receive sick pay for leave for a dependent's illness, the documentation must distinguish the sick pay for personal illness from sick pay for a dependent's illness. Only payments for an employee's personal illness are excludable from covered wages. An employee statement secured at the time the sick leave was taken may be used as evidence of personal illness; however, statements obtained long after the period when the leave was taken are not acceptable.

(c) Reports of adjustments that meet the conditions of this rule will be submitted to the Federal Social Security Administration for approval. When the Social Security Administration approves adjustments and authorizes the state to take credits for the adjustments, the entity submitting the approved adjustments will be notified that a corresponding credit may be taken by the entity. No credits will be approved for sick pay adjustments until authorized by the Social Security Administration.

(d) If the executive director of ERS determines that the Social Security Administration has relaxed or repealed any of the requirements contained in this rule, the executive director may make a corresponding change in the retirement system's requirements.

Source Note: The provisions of this §79.13 adopted to be effective April 18, 1984, 9 TexReg 1895; amended to be effective June 29, 2004, 29 TexReg 6120

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