Complying with New-Hire Reporting Requirements

Overview

This toolkit covers the employer new-hire and rehire reporting requirements of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) including an overview of the PRWORA, the business case for compliance, and what types of employers and employees are covered, as well as enforcement of the reporting requirements. This toolkit also provides employers with information on state-specific new-hire reporting requirements when they differ from the federal regulations.

Background

The PRWORA is federal legislation that is implemented jointly by federal and state agencies. The new-hire reporting requirements in the PRWORA have two related goals: first, to assist individuals entitled to payments under child support orders in speedily and efficiently obtaining such payments through wage garnishments, wage assignments and the like, and second, to help detect and prevent fraud in government benefits payments.

The PRWORA requires all employers to report seven data elements to a designated state agency:

• Employee name.
• Employee address.
• Employee Social Security number (SSN).
• Employee date of hire or rehire (the date a new or rehired employee first performs services for pay).
• Employer name.
• Employer address.
• Federal employer identification number (FEIN).

Such new-hire reporting helps child support agencies issue income withholding orders quickly. The Office of Child Support Enforcement (OCSE) and state agencies match new-hire reports against child support records to locate parents who owe child support. The matching process is especially helpful in cases in which a parent and child live in different states. See New Hire Reporting.

On December 8, 2010, President Barack Obama signed into law the Claims Resolution Act (Public Law 111-291), which, among other things, made changes to Section 453A of the Social Security Act by adding the requirement that employers report to the State Directory of New Hires (SDNH) the date that an employee first performs services for pay. The reform, effective June 8, 2011, is aimed at reducing the number of overpayments to individuals receiving unemployment benefits.

The law also added the "newly hired employee" definition to the Social Security Act, effective April 21, 2012: The term "newly hired employee" means an employee who has not previously been employed by the employer, or who was previously employed by the employer but has been separated from such prior employment for at least 60 consecutive days.

State Requirements

States may require reporting of other data points, and many of them do. To lessen the burden on employers with employees in multiple states, a Multistate Employer Registry is available, which allows an employer to report all its new hires in any state where it has employees.

On the federal OCSE website, employers can access the State New Hire Reporting Contacts and Program information matrix for state-specific requirements, including:

• Contact information.
• Reporting time frame and frequency.
• Data elements (mandatory and optional).
• Method of transmission.
• Whether the state requires reporting of independent contractors.

How States Use New-Hire Data

Wage withholding orders are the primary method used to enforce child support payments from noncompliant parents. In those cases, child support payments are automatically deducted from a noncustodial parent's paycheck. The Social Services Amendments of 1974 created Title IV-D of the Social Security Act, which created the Federal Parent Locator Service (FPLS) to track down noncompliant parents. The national location system is operated by the OCSE and assists states in locating noncustodial parents, putative fathers and custodial parties through two databases:

• National Directory of New Hires (NDNH), a central repository of employment data, unemployment insurance claimant data and quarterly wage data from state directories of new hires, state workforce agencies and federal agencies.
• Federal Case Registry (FCR), a national database that contains information on individuals in child support cases and child support orders.

There are two types of child support orders and cases: IV-D and non-IV-D. The term "IV-D" refers to the section of the Social Security Act that established and regulates the program.

• IV-D: A case managed by a state or county child support agency. The child support agency receives Temporary Assistance for Needy Families (TANF) cases automatically. Anyone may apply for services.
• Non-IV-D: A child support order handled by a private attorney, the parents, or other parties who are not working for a state or county or tribal child support agency.

The FPLS works in two ways to support state IV-D child support operations in identifying home and work addresses and sources of income and assets. First, using a process known as proactive matching, the FPLS compares data from the NDNH to data in the FCR. When there is a match, the FPLS automatically provides new-hire, quarterly wage or unemployment claimant information on custodial and noncustodial parents to any state with a related child support case. The state child support agency uses this information to establish or modify a child support order or to enforce (through income withholding) an existing order.

Second, at the request of a state child support agency's state parent locator service, the FPLS will search external federal agency databases in an attempt to locate noncustodial parents or their assets to establish or enforce a child support order. The FPLS has access to external locator sources, such as the Internal Revenue Service (IRS), Social Security Administration (SSA), U.S. Department of Veterans Affairs (VA), U.S. Department of Defense (DOD) and the Federal Bureau of Investigation (FBI).

A major focus of the PRWORA is the legal responsibility of parents to support their children. It contains work requirements for custodial parents receiving public assistance and increases the effectiveness of the child support program by including new-hire reporting programs in each state. The federal government attributes tens of millions of dollars in collections to the use of new-hire data.

Prior to the PRWORA, child support agencies had to rely on external government agency databases or data in the FCR to locate noncustodial parents. In addition, wage-withholding orders did not immediately follow obligors as they moved from one job to another. Child support enforcement agencies would not find out about job changes until six months later, through automated earnings information.

To more quickly locate noncompliant parents and to reduce the amount of time that lapses between the start of a job and the placement of a wage withholding order, the PRWORA mandated that states establish comprehensive directories of new hires. Employers are required to report data on a new hire within 20 days of remuneration for work performed.

States match new-hire reports against their child support records to locate parents, to establish a child support wage-withholding order or to enforce an existing order. In addition to matching within a state, states transmit the new-hire reports to the NDNH.

The U.S. Department of Health and Human Services (HHS) estimates that more than 30 percent of child support cases involve parents who do not live in the same state as their children. By matching this new-hire data with child support case participant information at the national level, the OCSE assists states in locating parents who are living in other states.

State agencies operating employment security (unemployment insurance) and workers' compensation programs also access the timelier new-hire information to detect and prevent erroneous benefits payments. In addition, each state can conduct matches between its own new-hire database and that of other state programs to prevent unlawful or erroneous receipt of public assistance, including welfare, food stamps and Medicaid payments.

Business Case

A benefit to employers of the PRWORA is the reduction and prevention of fraudulent unemployment and workers' compensation payments. Timely receipt of new-hire data allows each state to cross-match these data against its active workers' compensation and unemployment insurance claimant files either to stop or recover erroneous payments. States have saved millions of dollars of erroneous unemployment insurance payments because of these cross-matches.

Although the reporting process is an additional obligation above the requirement to have an employee complete a W-4 tax form, most employers participating in state-established programs report "no" cost impact or a "minor" cost impact on their operations, according to the HHS. To ease the process, states are working closely with employers, offering them a variety of reporting methods, such as fax, e-mail, phone and website transmissions.

Any burden the additional reporting may impose on employers should be offset by the reward in helping states track down lawful child support payments owed to custodial parents.

The real beneficiaries are, of course, the millions of children whose lives are made more secure because their parents are paying child support through income withholding. The new-hire reporting program is essential to this effort and, together with income withholding, has resulted in tens of millions of increased support dollars for children.

Covered Employers

Federal law states that an "employer" for new-hire reporting purposes is the same as for federal income tax purposes (as defined by Section 3401(d) of the Internal Revenue Code of 1986) and includes any governmental entity or labor organization. At a minimum, in any case in which an employer is required to have an employee complete a Form W-4, the employer must meet the new-hire reporting requirements. See New Hire Reporting—Answers to Employer Questions.

Temporary Employment Agencies

If a temporary employment agency is paying wages to an individual, it must submit a new-hire report. The individual needs to be reported only once, except when there is a break in service from the agency of 60 days or more or in a situation that would require a new Form W-4. If the agency simply refers individuals for employment and does not pay wages, then new-hire reports are not necessary. However, the employer that actually hires and pays the individual, whether on a part- or full-time basis, will be required to report the new-hire information.

Labor Organizations and Hiring Halls

Labor organizations and hiring halls must report their own employees, that is, individuals who work directly for the labor organization or hiring hall. As with a temporary employment agency, if the labor organization or hiring hall simply refers individuals for employment, a new-hire report does not need to be filed.

Federal Agencies

All federal agencies must report new hires.

Covered Workers

The law defines a "newly hired employee" as an employee fitting one of the following descriptions:

• Has not previously been employed by the employer.
• Was previously employed by the employer but has been separated from such prior employment for at least 60 consecutive days.

Employees Returning to Work

If the employee returning to work is required to complete a new Form W-4, employers should report the individual as a new hire to the SDNH. If, however, the returning employee has not been formally terminated or removed from payroll records, there is no need to report that individual as a new hire.  

Employees Who Quit Before a Report is Due

What if a newly hired individual quits before the new-hire report is due? Because the employer/employee relationship existed and wages were earned, a new-hire report must be submitted. Even though the employment period was short, the reported information may be the key to locating a noncustodial parent.

Independent Contractors

Some states require the reporting of independent contractors even though federal law does not.

See State/Employer Contact and Program Information Matrix.

When to Report

Federal law mandates that new hires be reported within 20 days of the date of hire. The "date of hire" is the day an individual first performs services for wages.

If an employer is sending new-hire reports by magnetic tape or electronically, the employer must make two monthly transmissions not less than 12 days or more than 16 days apart.

States are given the option of establishing reporting time frames that may be shorter than 20 days. Employers must adhere to the reporting time frame of the state to which they report. Employers should check with their state new-hire contact to learn their state's filing deadline and other requirements that may differ from federal law.

What to Report

As mentioned previously, each new-hire report must contain the following seven data elements.

• Employee name.
• Employee address.
• Employee Social Security number (SSN).
• Employee date of hire or rehire (the date a new or rehired employee first performs services for pay).
• Employer name.
• Employer address.
• Federal employer identification number (FEIN).

Payroll professionals will recognize that the seven PRWORA data elements are identical to those collected on the federal Form W-4, required from all new employees to add them to the firm's payroll roster. Accordingly, many employers send copies of the Form W-4 as their official new-hire report.

Although most states require only these seven data elements, some states require or request additional data. Employers should check with their states for reporting requirements.  

The OCSE website provides a convenient map containing links to the websites of child support agencies in all U.S. states and territories.

If the worksite address is different from the payroll address, employers should report both the relevant worksite and the payroll address. The worksite address provides a location resource, whereas the payroll address is used for sending an income withholding order. If an employer can provide only one address, then the employer should report the address where it wants an income withholding order to be sent.

It is strongly recommended that the address for the payroll office for the newly hired employee also be reported if it is different from the FEIN address.

See the State New Hire Reporting Contacts and Program Information matrix for state-specific requirements.

The SSNs on all new-hire reports sent to the NDNH are verified by the SSA. Unverified SSNs are not posted to the NDNH. Before submitting a new-hire report, employers may wish to check the SSN/name combinations for accuracy. SSNs and names may be verified online by using the Social Security Number Verification Service.

How to Report

Reports must be made either on a copy of the Form W-4 or, at the employer's option, on an equivalent form developed by the employer. Some states have created an alternate form for reporting, but its use is optional for federal purposes. New-hire reports should be sent to the SDNH in the state where the employee works. Federal employers report new-hire data directly to the NDNH.

For employer convenience, many states accept input through the following media:

• Mail
• Fax
• Interactive telephone systems
• E-mail
• State websites
• Other electronic or magnetic media

An employer's state new-hire contact can provide instructions on where and how to send new-hire information.

If an employer is sending new-hire reports by magnetic tape or electronically, the employer must make two monthly transmissions not less than 12 days or more than 16 days apart. Employers should contact the state where they submit their new-hire reports for information about required data elements, timing of reports and technical information regarding electronic reporting.

All state data are transmitted over secure and dedicated lines to the NDNH. Federal law also requires that the HHS establish and implement safeguards to protect the integrity and security of information in the NDNH, and to restrict access to and use of the information to authorized persons and for authorized purposes.

Multistate Employers

Multistate employers have two reporting options: They may report newly hired employees to the state in which each employee works, or they may report all newly hired employees to one state where they have employees working. See Multistate Employer Registry.

If the employer chooses to report to one state, then its new-hire reports must be submitted by magnetic tape or electronically. The multistate employer must also notify the Secretary of HHS, in writing, of the state it has chosen. Employers may register online or mail, fax or e-mail their notifications to:

U.S. Department of Health and Human Services
Office of Child Support Enforcement
Multistate Employer Registration
P. O. Box 509
Randallstown, MD 21133
(410) 277-9325 (fax)
MSEdb@acf.hhs.gov

The NDNH maintains a list of multistate employers and their designated reporting locations.

Enforcement

The federal OCSE provides states with a quarterly report containing information on employers that may not have reported all new hires as required. Using the quarterly report, states may send notices to employers that appear to be noncompliant in reporting their new hires. Aside from providing information on legal requirements, the notice may also provide information on how to comply with new-hire reporting laws so that employers may avoid future notices.

States also have the option of imposing civil monetary penalties for noncompliance, and many of them do. Federal law mandates that if a state chooses to impose a penalty on employers for failure to report, the fine may not exceed $25 per newly hired employee. If there is a conspiracy between the employer and employee not to report, then that penalty may not exceed $500 per newly hired employee. Accordingly, employers should not collude with workers who are seeking to avoid child support orders. States may also impose nonmonetary civil penalties under state law for noncompliance. Criminal penalties also apply in egregious cases.

Communications

Communications about new-hire reporting will usually be limited to informing the worker that the employer is required by law to collect certain information and report it to certain agencies. Workers who are sensitive about disclosing personal information—especially if they are trying to evade child support orders—may need an explanation of the goals of the PRWORA and the employer's duty to file accurate reports. Security and privacy of new-hire data are important issues for all those involved in this nationwide program. Federal law requires all states to establish safeguards for confidential information handled by the state agency.

Technology

Many commercial payroll software applications have programs for reporting new hires and rehires. Most federal agencies submit information directly—or indirectly through their servicing payroll agencies—using a highly secure, commercial data transfer software product that allows state and federal agencies to send and receive large amounts of data from mainframe to mainframe. The remaining agencies use Government to Government Services Online (GSO), a secured website application. Federal agencies select their submission option by contacting the OCSE data transmission team.