Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO:
KRS
61.5991,
61.510,
61.543,
61.552,
61.645,
61.675,
61.685
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
61.645(9)(e) requires the
Board of Trustees of the Kentucky Retirement Systems to promulgate all
administrative regulations necessary or proper in order to carry out the
provisions of KRS
16.505 to
16.652 and
61.510 to
61.705, and to conform to
federal statutes and regulations.
KRS
61.5991 requires certain employers that
participate in the Kentucky Employees Retirement System to report information
to the Kentucky Public Pensions Authority on some persons providing services
for the participating employer as an independent contractor, a leased employee,
or via any other similar employment arrangement. This administrative regulation
establishes quasi-governmental employer reports on independent contractors and
leased employees.
Section 1.
Definitions.
(1) "Complete" means all required
sections of a form are filled out, the form has been fully executed by an
agency head, appointing authority, or authorized designee (such as the
reporting official), and all supporting documentation required by the form is
included with the form.
(2) "Core
services independent contractor" means a person, either personally or through a
company or other legal entity, who provides services for a quasi-governmental
employer as an independent contractor, other than as a non-core services
independent contractor.
(3) "Core
services leased employee" means a person who provides services for a
quasi-governmental employer as a leased employee through a staffing company,
other than as a non-core services independent contractor.
(4) "Direct employment" means employees
reported by the quasi-governmental employer in accordance with
KRS
61.675 and
105 KAR 1:140.
(5) "Employee" is defined by
KRS
61.510(5).
(6) "File" means a form has been received at
the retirement office by mail, fax, secure email, or in-person delivery or via
Employer Self Service on the Web site maintained by the agency (if
available).
(7) "Fiscal year" is
defined by KRS
61.510(19).
(8) "KPPA" means the administrative staff of
the Kentucky Public Pensions Authority.
(9) "Noncompliant" means the
quasi-governmental employer falsifies, fails to provide, or withholds all, or a
portion of, the required documentation or information within the time periods
prescribed by this administrative regulation.
(10) "Non-core services independent
contractor" is defined by
KRS
61.5991(9).
(11) "Other employment arrangement":
(a) Means any written agreement between a
quasi-governmental employer and a third party (including a person, company, or
other legal entity) for one (1) or more persons to provide services for the
quasi-governmental employer in exchange for the third party receiving monetary
compensation, remuneration, or profit; and
(b) Does not mean direct employment, any
written agreement for one (1) or more persons to provide services for a
quasi-governmental employer as a non-core services independent contractor, or
any written agreement for one (1) or more persons to provide services to a
quasi-governmental employer if the persons would not be in a regular full-time
position if the persons were directly employed by the quasi-governmental
employer.
(12) "Prior
fiscal year" means the fiscal year beginning July 1 that is immediately prior
to the fiscal year in which the KPPA provides the report to the state budget
director's office and the Legislative Research Commission required by
KRS
61.5991(3).
(13) "Quasi-governmental employer":
(a) Means an employer participating in the
Kentucky Employees Retirement System that is a local or district health
department governed by KRS Chapter 212, state-supported university or community
college, mental health/mental retardation board, domestic violence shelter,
rape crisis center, child advocacy center, or any other employer that is
eligible to voluntarily cease participation in the Kentucky Employees
Retirement System as provided by
KRS
61.522; and
(b) Does not include county attorneys, the
Council on State Governments (CSG), the Kentucky Educational Television (KET)
Foundation, Association of Commonwealth's Attorneys, the Kentucky High School
Athletic Association (KHSAA), the Municipal Power Association of Kentucky, the
Kentucky Office of Bar Admissions, the Nursing Home Ombudsman, the Kentucky
Association of Regional Programs (KARP), and the Kentucky Association of Sexual
Assault Programs.
(14)
"Regular full-time position" is defined by
KRS
61.510(21).)]
Section 2. Required Form for
Annual Reporting.
(1)
(a) For the fiscal year beginning July 1,
2021, quasi-governmental employers shall report all persons providing services
as core services independent contractors, core services leased employees, or
through any other employment arrangement by completing the Form 6756, Annual
Employer Certification of Non-Contributing Service Providers, and filing the
Form 6756 at the retirement office on or before May 2, 2022.
(b) Effective with the fiscal year beginning
July 1, 2022, and for each fiscal year thereafter, quasi-governmental employers
shall report all persons providing services as core services independent
contractors, core services leased employees, or through any other employment
arrangement by completing the Form 6756, Annual Employer Certification of
Non-Contributing Service Providers, and filing the Form 6756 at the retirement
office. For each fiscal year beginning on or after July 1, 2022, the Form 6756
shall be filed at the retirement office on or before April 15 of the fiscal
year in which the Form 6756 is required.
(c) If a quasi-governmental employer
contracts for any additional persons to provide services as core services
independent contractors, core services leased employees, or through any other
employment arrangement after the submission of a completed Form 6756, Annual
Employer Certification of Non-Contributing Service Providers, in accordance
with paragraph (a) or paragraph (b) of this subsection, but prior to the end of
the fiscal year, the quasi-governmental employer shall file at the retirement
office a completed supplemental Form 6756 reflecting only those persons not
previously reported on the initial Form 6756. The supplemental Form 6756 shall
be filed at the retirement office on or before June 30 of the fiscal year in
which the Form 6756 is required.
(2)
(a)
Persons exempted under Sections 5 and 6 of this administrative regulation shall
not be required to be listed on the Form 6756, Annual Employer Certification of
Non-Contributing Service Providers.
(b) Persons providing services as core
services independent contractors, core services leased employees, or through
any other employment arrangement who would not qualify as an employee in a
regular full-time position if directly employed by the quasi-governmental
employer shall not be listed on the Form 6756, Annual Employer Certification of
Non-Contributing Service Providers.
(c) Persons providing services as core
services independent contractors, core services leased employees, or through
any other employment arrangement who would be in a position reported to another
state-administered retirement system if directly employed by the
quasi-governmental employer shall not be listed on the Form 6756, Annual
Employer Certification of Non-Contributing Service Providers.
(d)
1.
Quasi-governmental employers may choose to report persons providing services as
a non-core services independent contractor on an initial or supplemental Form
6756, Annual Employer Certification of Non-Contributing Service
Providers.
2. All persons providing
services to a quasi-governmental employer as a non-core services independent
contractor who are included on an initial or supplemental Form 6756, Annual
Employer Certification of Non-Contributing Service Providers, shall be treated
in the same manner as all other persons listed on the Form 6756, including
determinations by the KPPA under Section 3 of this administrative
regulation.
(3)
(a) For the fiscal year beginning July 1,
2021, quasi-governmental employers that do not file at the retirement office a
completed Form 6756, Annual Employer Certification of Non-Contributing Service
Providers, on or before May 2, 2022 shall be reported as noncompliant to the
state budget director's office and the Legislative Research Commission in
accordance with KRS
61.5991(2)(c) and
61.5991(3)(d).
(b) For each fiscal year beginning on or
after July 1, 2022, quasi-governmental employers that do not file at the
retirement office a completed Form 6756, Annual Employer Certification of
Non-Contributing Service Providers, as required by subsection (1)(b) of this
section shall be reported as noncompliant to the state budget director's office
and the Legislative Research Commission in accordance with
KRS
61.5991(2)(c) and
61.5991(3)(d).
(4) If a quasi-governmental
employer files at the retirement office an initial or supplemental Form 6756,
Annual Employer Certification of Non-Contributing Service Providers, without
the documentation required by the Form 6756, the Form 6756 shall not be
complete and the quasi-governmental employer shall be noncompliant in
accordance with KRS
61.5991(2)(c) and
61.5991(3)(d)
unless a completed Form 6756 is later filed at the retirement office by the
appropriate deadline established in subsections (1), (2), and (5) of this
section.
(5)
(a) After receiving an initial or
supplemental Form 6756, Annual Employer Certification of Non-Contributing
Service Providers, the KPPA may notify the quasi-governmental employer that
additional information is required.
(b) If additional information is required by
the KPPA, the KPPA shall notify the quasi-governmental employer in writing to
the attention of the agency head, appointing authority, or authorized designee,
such as the reporting official, and shall include the following in its
notification:
1. A detailed description of the
additional information required; and
2. A deadline by which the additional
information required must be filed at the retirement office, which shall not be
less than fourteen (14) calendar days, but may be longer than fourteen (14)
calendar days.
(c) An
initial or supplemental Form 6756, Annual Employer Certification of
Non-Contributing Service Providers, shall not be considered complete until all
additional information requested by the KPPA is on file at the retirement
office.
(d) If a quasi-governmental
employer fails to provide the additional information to the KPPA by the
deadline listed in the notification described in paragraph (b) of this
subsection or by the deadline agreed upon by the KPPA and the
quasi-governmental employer, then the quasi-governmental employer shall be
reported as noncompliant to the state budget director's office and the
Legislative Research Commission in accordance with
KRS
61.5991(2)(c) and
61.5991(3)(d).
(6) During an audit of the quasi-governmental
employer conducted in accordance with
KRS
61.5991(2)(a) 2., 61.675,
and 61.685:
(a) If the KPPA discovers that a
quasi-governmental employer has failed to list all persons on a Form 6756,
Annual Employer Certification of Non-Contributing Service Providers, as
required by this administrative regulation, then the quasi-governmental
employer shall be reported as noncompliant to the state budget director's
office and the Legislative Research Commission in accordance with
KRS
61.5991(2)(c) and
61.5991(3)(d).
(b) If the KPPA discovers persons performing
services as an independent contractor or leased employee for quasi-governmental
employer in multiple part-time positions that, if combined, constitute a
"regular full-time position", then KPPA shall make a determination of employee
or independent contractor status in accordance with Section 3 of this
administrative regulation.
Section 3. Determination of Employee or
Independent Contractor.
(1) The KPPA shall
have the authority to determine which persons listed on initial and
supplemental Forms 6756, Annual Employer Certification of Non-Contributing
Service Providers, should be reported as employees in regular full-time
positions and which persons listed on the initial and supplemental Forms 6756,
Annual Employer Certification of Non-Contributing Service Providers, are
independent contractors.
(2) The
KPPA shall apply common law factors used by the Internal Revenue Service (IRS),
in accordance with IRS Publication 1779, to determine whether a person listed
on the initial and supplemental Forms 6756, Annual Employer Certification of
Non-Contributing Service Providers, is an employee of the quasi-governmental
employer or an independent contractor of the quasi-governmental
employer.
(3)
(a) If the KPPA determines that a person
listed on an initial or supplemental Form 6756, Annual Employer Certification
of Non-Contributing Service Providers, is an employee of the quasi-governmental
employer in a regular full-time position, then the quasi-governmental employer
shall remit all reports, records, contributions, and reimbursements for that
person as an employee in a regular full-time position in accordance with
KRS
61.675 and
105 KAR 1:140 effective the
calendar month after the KPPA has notified the quasi-governmental employer of
its determination in accordance with Section 4 of this administrative
regulation.
(b)
1. If the KPPA determines that a person
listed on an initial or supplemental Form 6756, Annual Employer Certification
of Non-Contributing Service Providers, is an employee of the quasi-governmental
employer in a regular full-time position, then the quasi-governmental employer
shall complete and file at the retirement office a Form 4225, Verification of
Past Employment, for that person for all periods during which the person was
providing services to the quasi-governmental employer.
2. If the KPPA determines that a person
listed on an initial or supplemental Form 6756, Annual Employer Certification
of Non-Contributing Service Providers, is an employee of the quasi-governmental
employer in a regular full-time position, then the quasi-governmental employer
also shall submit all relevant contracts and other documentation demonstrating
the relationship between the quasi-governmental employer and the person for all
periods during which the person was providing services to the
quasi-governmental employer.
(c)
1.
After reviewing the information from the quasi-governmental employer required
by paragraph (b) of this subsection, if the KPPA determines that the person was
an employee in a regular full-time position for previous periods that were not
reported by the quasi-governmental employer in accordance with
KRS
61.543,
KRS
61.675, and
105 KAR 1:140, then the person
shall be eligible to purchase omitted service in accordance with
KRS
61.552(2) for the periods of
their previous employment by the quasi-governmental employer in a regular
full-time position.
2. After
reviewing the information from the quasi-governmental employer required by
paragraph (b) of this subsection, if the KPPA determines that the person was an
employee in a regular full-time position for previous periods that were not
reported by the quasi-governmental employer in accordance with
KRS
61.543,
KRS
61.675, and
105 KAR 1:140, then the
quasi-governmental employer shall be responsible for payment of delinquent
omitted employer contributions in accordance with
KRS
61.552(2) and
61.675(3)(b)
for all periods of the person's previous employment by the quasi-governmental
employer in a regular full-time position.
Section 4. Notification to
Employers of Determination of Employment Relationship.
(1) For the fiscal year beginning July 1,
2021, and for each fiscal year thereafter, quasi-governmental employers shall
be notified by the KPPA of the determination of which persons should be
reported as employees in regular full-time positions no later than September 30
of the subsequent fiscal year.
(2)
(a) The KPPA shall notify the
quasi-governmental employer of the determination of which persons listed on an
initial or supplemental Form 6756, Annual Employer Certification of
Non-Contributing Service Providers, should be reported as employees in regular
full-time positions in one (1) notification letter.
(b) The notification shall be sent to the
agency head, appointing authority, or authorized designee, such as the
reporting official.
(c) The
notification shall include:
1. The name of
each person who should be reported as an employee in regular full-time position
in accordance with KRS 61.675 and
105 KAR 1:140;
2. A description of the contract or other
documents pursuant to which each person who should be reported as an employee
in a regular full-time position are providing or have provided services to the
quasi-governmental employer; and
3.
A statement that all other persons listed on the initial or supplemental Form
6756, Annual Employer Certification of Non-Contributing Service Providers,
should not be reported as employees in regular full-time positions.
Section 5.
Contracts for Professional Services That Have Not Historically Been Provided by
Employees.
(1) A quasi-governmental employer
shall not be required to report a person on the Form 6756, Annual Employer
Certification of Non-Contributing Service Providers, if:
(a) The person is providing professional
services as a core services independent contractor, core services leased
employee, or through any other employment arrangement that have not been
performed by direct employees of the quasi-governmental employer since January
1, 2000; and
(b) The professional
services have been performed or are being performed for the quasi-governmental
employer under a contract filed at the retirement office and determined by the
KPPA or the Kentucky Retirement Systems to represent services provided by an
independent contractor.
(2) Quasi-governmental employers may choose
to report a person on the Form 6756, Annual Employer Certification of
Non-Contributing Service Providers, even if the person is providing
professional services under a contract that have not historically been provided
by employees.
Section 6.
Original Contracts Entered Prior to January 1, 2021.
(1) A quasi-governmental employer shall not
be required to report a person on the Form 6756, Annual Employer Certification
of Non-Contributing Service Providers, if the person is providing services to
the quasi-governmental employer as a core services independent contractor, core
services leased employee, or through any other employment arrangement under an
original contract with the person or a company entered into prior to January 1,
2021, unless one of the exceptions in subsections (2), (3), or (4) of this
section applies.
(2) A
quasi-governmental employer shall report a person on the Form 6756, Annual
Employer Certification of Non-Contributing Service Providers, if the person is
providing services to the quasi-governmental employer as a core services
independent contractor, core services leased employee, or through any other
employment arrangement under an original contract with the person or a company
entered into prior to January 1, 2021 if the term of the original contract has
expired and the contract has been renewed or continued.
(3) A quasi-governmental employer shall
report a person on the Form 6756, Annual Employer Certification of
Non-Contributing Service Providers, if the person is providing services to the
quasi-governmental employer as a core services independent contractor, core
services leased employee, or through any other employment arrangement under an
original contract with the person or a company entered into prior to January 1,
2021 if the contract has been modified to encompass different
services.
(4) A quasi-governmental
employer shall report a person on the Form 6756, Annual Employer Certification
of Non-Contributing Service Providers, if the person is providing services to
the quasi-governmental employer as a core services independent contractor, core
services leased employee, or through any other employment arrangement under an
original contract with a company entered into prior to January 1, 2021 if the
person was not included in the original contract.
(5) Quasi-governmental employers may choose
to report a person on the Form 6756, Annual Employer Certification of
Non-Contributing Service Providers, even if the person is providing services to
the quasi-governmental employer as a core services independent contractor, core
services leased employee, or through any other employment arrangement under an
original contract with the person or a company entered into prior to January 1,
2021.
Section 7. Report
to the State Budget Director's Office and the Legislative Research Commission.
(1)
(a) To
determine the number of employees of the quasi-governmental employer reported
for the prior fiscal year in accordance with
KRS
61.5991(3)(a), the KPPA
shall add together all employees in regular full-time positions reported by the
quasi-governmental employer pursuant to
KRS
61.675 and
105 KAR 1:140 in the prior fiscal
year.
(b) Persons listed on an
initial or supplemental Form 6756, Annual Employer Certification of
Non-Contributing Service Providers, for the prior fiscal year who are
ultimately determined by the KPPA to be employees of the quasi-governmental
employer in regular full-time positions shall not be included in the number of
employees of the quasi-governmental employer for the prior fiscal year. These
persons may be included in the number of employees of the quasi-governmental
employer for a subsequent fiscal year if the person is reported by the
quasi-governmental employer in the subsequent fiscal year as an employee in a
regular full-time position in accordance with
KRS
61.675 and
105 KAR 1:140.
(2) To determine the number of
persons providing services to the quasi-governmental employer who were not
reported for the prior fiscal year in accordance with
KRS
61.5991(3)(b), the KPPA
shall use the total number of persons listed on initial and supplemental Forms
6756, Annual Employer Certification of Non-Contributing Service Providers, for
the prior fiscal year.
(3) The KPPA
shall report the following information for each quasi-governmental employer
determined to have falsified data or been noncompliant in accordance with
KRS
61.5991(3)(d):
(a) The name of the quasi-governmental
employer;
(b) A description of the
type of data falsified and the support the KPPA has for believing the data to
be falsified, if applicable; and
(c) A description of the nature of the
noncompliance, if applicable.
Section 8. Incorporation by Reference.
(1) The following material is incorporated by
reference:
(a) Form 6756, "Annual Employer
Certification of Non-Contributing Service Providers", September 2021;
(b) Internal Revenue Service Publication
1779, "Independent Contractor or Employee", March 2012; and
(c) Form 4225, "Verification of Past
Employment", April 2021.
(2) This material may be inspected, copied,
or obtained, subject to applicable copyright law, at the Kentucky Public
Pensions Authority, 1260 Louisville Road, Frankfort, Kentucky 40601, Monday
through Friday, 8:00 a.m. to 4:30 p.m. This material is also available on the
Kentucky Public Pensions Authority's Web site at kyret.ky.gov.
STATUTORY AUTHORITY:
KRS
61.5991(1)(c),
61.645(9)(e)