Subtitle II: FSM Social
Security
Chapter 6: General
Provisions
§ 601. Short title.
§ 602. Declaration of policy.
§ 603. Definitions.
§ 604. Susceptibility of benefits, contributions, and funds to legal process or assignment.
§ 605. Violations — Penalties and interest — Attorney’s fees and costs.
§ 606. Accounts, budget, and costs of administration.
§ 607. Lien for taxes.
This subtitle is known and may be cited as the “Federated States of Micronesia Social Security Act.”
Source: PL 2-74 § 101.
Cross-reference: The statutory provisions on the TT Social Security Act are found in subtitle I of this title.
Editor’s note: Although most of the provisions of the TT Social Security Act have been repealed by implication by the FSM Social Security Act codified in this subtitle, the provisions of the Trust Territory Social Security Act are retained in this title since 53 FSMC 1109 provides for saving of certain of its provisions for certain purposes.
The purpose of this subtitle is to effect economy and efficiency in the fields of government and business by providing a means whereby employees may be ensured a measure of security in their old age and given an opportunity for leisure without hardship and complete loss of income, and, further, to provide survivors’ insurance for wage earners and their dependents.
Source: PL 2-74 § 102.
Case annotations: The FSM social security program’s purpose is to provide a means whereby employees may be ensured a measure of financial security in their old age and be given an opportunity for leisure without hardship and complete loss of income, and, further, to provide survivors’ insurance for wage earners and their dependents. 53 FSMC 602. The program is funded by joint contributions from employers and employees. FSM Social Security Admin. v. Weilbacher, 7 FSM Intrm. 137, 141 (Pon. 1995).
In this chapter, unless the context otherwise requires, the following definitions shall be applicable:
(1) “Became disabled” means the first month in which an individual is under a disability and is both fully and currently insured.
(2) “Board” means the Federated States of Micronesia Social Security Board provided for by section 701 of this subtitle.
(3) “Child or spouse” means that an applicant is the child or spouse of an individual if the court of the State in which the individual was domiciled at the time of his death has or would find the applicant to be the individual’s child or spouse in determining the devolution of intestate personal property.
(4) “Contributions” means the tax imposed upon income of covered employees and the tax imposed upon employers on account of wages paid to a covered employee.
(5) “Disability” means inability to engage in any substantial gainful employment by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.
(6) “Earning test” means that an individual who receives a retirement, disability, or survivor benefit and who works in covered or noncovered employment shall have his quarterly benefit reduced by one dollar for each two dollars earned in a quarter, except there shall be no reduction for the first $300 earned in a quarter. The reduction shall be applied in one of the subsequent two quarters immediately after the quarter in which the earnings were made, or as soon as possible thereafter.
(7) “Employee” means:
(a) any officer of a corporation; or
(b) any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee; or
(c) any self-employed person who has at least one employee for whom he is required to report in a given quarter; or
(d) any self-employed person who had more than $10,000 of annual gross revenue in the preceding calendar year.
(8) “Employment” means any service by an employee for an employer incorporated or doing business within the Federated States of Micronesia employing him, irrespective of where such employment is performed, except family employment.
(9) “Family employment” means employment of a worker by a member of the household, a parent or a son or daughter except that the worker may apply to the Board for a determination that such employment is bona fide covered employment subject to this subtitle.
(10) “Insured status” can mean any of the following:
(a) “Currently insured individual” means any individual who has had not less than eight quarters of coverage during the 13-quarter period ending with:
(i) the quarter in which he died; or
(ii) the quarter in which he became entitled to old age insurance benefits; or
(iii) the quarter in which he became disabled, whichever first occurs.
(b) “Fully insured individual” means any individual who has not less than one quarter of coverage for each year beginning after June 30, 1968, or for each year after attaining the age of 21, whichever is later, and up to but excluding the year in which he attained retirement age, became disabled, or died, whichever first occurred, except that in no case shall an individual be a fully insured individual unless he has at least 12 quarters of coverage.
(11) “Quarter” and “calendar quarter” mean a period of three calendar months ending on March 31st, June 30th, September 30th, or December 31st. “Quarter of coverage” means a quarter in which the individual has been paid $50 or more in wages in employment subject to this subtitle.
(12) “Wages” means remuneration paid subject to the provisions of this subtitle, including the cash value of all remuneration paid in any medium other than cash and remuneration accruing to a self-employed person. Remuneration accruing to a self-employed person shall be deemed to be twice the amount paid to the highest paid employee reported by the self-employed person in a quarter, $3,000 maximum per quarter. Remuneration accruing to a self-employed person who has no covered employees shall, for each quarter of a year, be deemed to be 2.5 percent of the gross revenue of the business for the previous calendar year, subject to $3,000 maximum. Remuneration paid for any service which is more or less than a whole dollar shall, as may be prescribed by regulations, be computed to the nearest dollar. Wages shall not include:
(a) that part of remuneration in excess of $3,000 paid in a quarterly reporting period by one employer;
(b) any payment on account of sickness or accident disability, or medical or hospitalization expenses made by an employer to or on behalf of an employee;
(c) any payment made to or on behalf of an employee or to the employee’s beneficiary from a trust or annuity;
(d) remuneration paid in any medium other than cash to an employee for service not in the course of the employer’s trade or business or for domestic service in a private home of an employer;
(e) remuneration paid for casual or intermittent labor not performed in the course of the employer’s trade or business when such employment does not exceed employment in more than one week in each calendar month of each quarterly reporting period; and
(f) remuneration from family employment subject to the provisions of this subtitle.
Source: PL 2-74 § 103; PL 5-120 § 1; PL 7-118 § 1.
Editor’s note: Amendments to this section made by PL 7-118 § 1 became effective July 1, 1993 pursuant to PL 7-118 § 3.
The benefits, the employee and employer contributions, and the securities in the several funds from all taxes presently or hereinafter levied shall not be subject to execution, attachment, or garnishment and shall be nonassignable except as specifically provided in this subtitle.
Source: PL 2-74 § 104.
(1) Any person who knowingly makes any false statement or who falsifies any report to or record of the Federated States of Micronesia Social Security System in an attempt to defraud the system is guilty of a misdemeanor and upon conviction thereof shall be imprisoned for a period of not more than one year, or fined not more than $2,000 or both.
(2) Any person who willfully fails to report wages paid or pay contributions required thereon is guilty of a misdemeanor and, in addition to any other penalty prescribed by law, such a person shall also pay penalties not in excess of 100 percent of the tax due plus interest to the Board as it by regulation shall require.
(3) Any covered employer who fails to submit the quarterly report and pay the social security tax within 10 days after the end of the quarter shall be considered delinquent. The Board or its authorized representatives shall be vested with the authority to levy a penalty of not more than $1,000 on delinquent employers.
(4) If any tax or penalty imposed by this subtitle is not paid on or before the date prescribed for such payment, there shall be collected, in addition to such tax and penalty, interest on the unpaid balance of the tax principal at the rate of 12 percent per annum from its due date until the date it is paid. In the event that any tax, interest, or penalty due under this subtitle is referred to an attorney or trial counselor for collection, whether or not suit is brought for the collection thereof, the taxpayer shall additionally be liable for reasonable attorney’s or trial counselor’s fees and costs of collection, including court costs.
Source: PL 2-74 § 105; PL 5-120 § 2, modified.
Case annotations: A taxpayer who owes social security taxes to the government as employer contributions under the FSM Social Security Act is liable for reasonable attorney’s fees if the tax delinquency is referred to an attorney for collection; however, the court may exercise discretion in determining the reasonableness of the fees assessed in light of the particular circumstances of the case. FSM Social Sec. Admin. v. Mallarme, 6 FSM Intrm. 230, 232 (Pon. 1993).
Among the factors which the court may consider in determining the amount of attorney’s fees recoverable in an action brought under 53 FSMC 605 is the nature of the violation, the degree of cooperation by the taxpayer, and the extent to which the Social Security Administration prevails on its claims. FSM Social Sec. Admin. v. Mallarme, 6 FSM Intrm. 230, 232-33 (Pon. 1993).
(1) At such time as the Social Security Board may prescribe, the Social Security Administrator shall submit to the Board on forms and in the manner prescribed by the Board a detailed estimate of the budget for the next ensuing fiscal year for the proper conduct of the Social Security System. The Social Security Administrator shall submit to the Board:
(a) the audited accounts of the income and expenditure and the balance in the Social Security Retirement Fund for the last completed fiscal year;
(b) a statement showing the estimated income and expenditure for the fiscal year in progress, together with such summaries, schedules, and supporting data as may be deemed necessary;
(c) a statement showing the estimated balance of the Social Security Retirement Fund at the close of the fiscal year in progress; and
(d) a budget showing the estimated income and expenditure for the next ensuing fiscal year.
(2) For the next ensuing fiscal year, the estimated costs of administration including salaries and wages, purchase of office supplies, operational expenses, and the maintenance of branch offices shall not exceed an expenditure maximum equal to 11 percent of the estimated income for that year from contributions and interest and dividend income on investments less investment expenses. The audited accounts and the budget for the ensuing fiscal year shall be approved by the Board and submitted to the President and the Congress of the Federated States of Micronesia. Should the estimated costs of administration exceed the expenditure maximum, legislative approval of the budgeted administration expenses is required.
Source: PL 2-74 § 106; PL 5-120 § 3.
All taxes, including penalties and interest accrued thereon, imposed or authorized under this subtitle shall be a lien upon any property of the employer, having priority over all other claims and liens including liens for other taxes, and may be collected by levy upon such property in the same manner as the levy of an execution.
Source: PL 5-120 § 4.