(a) General. Under section 218(d)(6)(C) of the Act certain States and under section 218(g)(2) of the Act all interstate instrumentalities may divide a retirement system based on whether the employees in positions under that system want coverage. The States having this authority are Alaska, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Kentucky, Louisiana, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Dakota, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Washington, and Wisconsin.

(b) Divided retirement system coverage group. A divided retirement system coverage group is a grouping under a retirement system of positions of members of the system who voted for coverage and positions of individuals who become members of the system (the “yes” group), and positions of members of the system who did not elect coverage (the “no” group) and ineligible employees (see § 404.1208). For purposes of this section for groups covered after 1959, the term “member” also includes individuals who have an option to become members of the retirement system but have not done so. The position of a member in the “no” group can be covered if, within two years after the agreement or modification extending coverage to the “yes” group is executed, the State provides an opportunity to transfer the position to the covered “yes” group and the individual occupying the position makes a written request for the transfer. The members of the “no” group can also be covered if, by referendum, a majority of them vote for coverage. If the majority votes for coverage, all positions of the members of the “no” group become covered. There is no further subdivision of the “no” group into those who voted for and those who voted against coverage. If the State requests, the ineligibles in the “no” group may become part of the “yes” group and have their services covered.

(c) Referendum procedures. To divide a retirement system, the State must conduct a referendum among the system's employees. If the system is to be divided, the governor or an individual named by him must certify to the Secretary that:

(1) The referendum was held by written ballot on the question of whether members of a retirement system wish coverage under an agreement;

(2) All members of the retirement system at the time the vote was held had the opportunity to vote;

(3) All members of the system on the date the notice of the referendum was issued were given at least 90 days' notice regarding the referendum;

(4) The referendum was conducted under the supervision of the governor or agency or person designated by him; and

(5) The retirement system was divided into two parts, one composed of positions of members of the system who voted for coverage and the other composed of the remaining positions under the retirement system.