The Attorney General of Texas
December 22, 1978
JOHN L. HILL
Attorney General
Honorable Joseph N. Murphy, Jr. Opinion No. H- 1203
Executive Director
Employees Retirement System Re: Whether the state or a
of Texas political subdivision may estab-
P. 0. Box 12337, Capitol Station lish a special program to make
Austin, Texas 78711 payments to an employee on
account of sickness.
Deer Mr. Murphy:
You ask: “May the State or any of its political subdivisions establish a
special, separate, program to make payments to an employee on account of
sickness, such payments not being e continuation of wages?” Your question
pertains to the relationship of sick pay to “wages” as that term is used in the
Social Security Act and as it has been interpreted by the Secretary of the
Department of Health, Education, and Welfare. The inclusion or exclusion of
amounts paid public employees as “wages” determines the contribution to be
made by public employers end employees, and the rate of benefits to be
received ,by the employee.
The Social Security Act defines wages of public employees to exclude
sick pay as follows:
[Tlhe term “wages” means remuneration paid . . . for
employment . . . except that . . . such term shall not
include -
. . . .
fb) The amount of any payment . . . made to . . . en
employee . . . under a plan or system established by an
employer which makes provision for his employees
generally . . . on account of . . . sickness or accident
disability. . . .
42 U.S.C. S 409.
The Secretary of Health, Education, and Welfare has interpreted this
exclusion as follows:
P- 5129
Honorable Joseph N. Murphy, Jr. - Page 2 (H-1303)
[Playments made by a governmental entity to en employee
on sick leave are excluded from “wages” only if there is
legal authority for the employer to make payments specif-
ically on account of sickness es distinguished from
authorization to merely continue salary payments during
periods of absence due to illness.
SSR 72-56 (19721. (Compere the Commissioners of Internal Revenue’s Rev. Rul.
65-275 (19651, applicable to exclusion of sick pay in