POLICY INFORMATION QUESTION

ACTION TRANSMITTAL

OCSE-AT-98-06

March 2, 1998

TO: STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS

SUBJECT: Policy Questions and Responses regarding the National Directory of New Hires and the State Directory of New Hires under the provisions of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996

BACKGROUND: The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) requires each State to develop a State Directory of New Hires that meets Federal requirements by either October 1, 1997, or October 1, 1998, depending upon whether a State had a new hire reporting law in effect before August 22, 1996. The law required the Department of Health and Human Services to develop a National Directory of New Hires by October 1, 1997. The National Directory of New Hires was able to accept new hire reports and quarterly wage and claim data from every State Directory of New Hires by October 1, 1997. The Office of Child Support Enforcement (OCSE) previously published OCSE-AT-97-04, on March 12, 1997, to address State questions regarding the interpretation of PRWORA's provisions for the State Directory of New Hires and the National Directory of New Hires. Since that time, OCSE has received numerous additional questions from States and individuals. The purpose of this Action Transmittal (AT) is to inform States and other interested individuals and organizations of OCSE's policy responses to the questions received regarding the new hire provisions in PRWORA.

ATTACHMENT: Series of questions and answers regarding the New Hire provisions under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.

INQUIRIES: Office of Child Support Enforcement, Department of Health and Human Services, 370 L'Enfant Promenade, S.W., Washington, D.C. 20447, Attention: Director, Policy and Planning Division.

______________________

David Gray Ross

Commissioner

Office of Child Support

Enforcement

NEW HIRE REPORTING^⁽¹⁾

^{QUESTIONS AND ANSWERS}

^{I. GENERALLY}

^{Q1: What is the "date of hire" considered to be?}

^{A1: The "date of hire" is considered to be the first day services are performed for wages by an individual.}

^{Q2: May a State unemployment insurance (UI) agency accept direct income withholding requests to collect aginst UI benefits from other States' IV-D agencies?}

^{A2: Yes, if the State UI agency is encompassed by the definition of "employer" within section 501 of the Uniform Interstate Family Support Act (UIFSA) as enacted by the receiving state. Section 501, et.seq., UIFSA, allows income withholding orders to be sent directly to "the person or entity defined as the obligor's employer under [the income withholding laws of the State]...". Therefore, if the receiving State UI agency is defined as such an employer and is required under the law of its State to comply with income withholding notices issued against beneficiaries, an interstate income withholding notice may be sent to the UI agency.}

^{Q3: What is the effective date for States to conduct a match between their State Directory of New Hires (SDNH) and their State Case Registry (SCR)?}

^{A3: For States that were required to meet the October 1, 1997 deadline for having an SDNH, the effective date of the requirement to match with the SCR is May 1, 1998, pursuant to Section 453A(f)(1) of the Social Security Act (the Act). However, States which have both an SDNH and an SCR in operation are encouraged to begin matching as soon as possible, in order to obtain the benefits such matching will provide sooner. For States that have until October 1, 1998 to implement the SDNH provisions of PRWORA, the matches must take place as soon as their SDNH is operational, but in no case shall it be later than October 1, 1998.}

^{Q4: If a State has no new hire transmissions for a day, how should the State let the National Directory of New Hires (NDNH) know? Should the State send notice of no data or should the absence of a transmission indicate no data? Would the lack of a transmission be interpreted by the NDNH as an error?}

^{A4: New Hire data must be furnished to the NDNH within three (3) business days after the new hire data is entered into the SDNH, pursuant to section 453A(g)(2)(A) of the Act. States are not required under the Act to take action if they have no information to report.}

^{III. REPORTING REQUIREMENTS}

^{Q5: Where and how do employers send the information?}

^{A5: New Hire reports should be sent to the SDNH in the State where the employee works or, in the case of a multistate employer, to the State which the employer has designated. Federal law identifies three methods for submitting New Hire information: first class mail, magnetic tapes, or electronically. For employer convenience, States may offer additional options such as fax and Internet transmissions. Employers should receive information from their State with instructions on where and how to send the New Hire information. (Federal employers must report New Hire data directly to the NDNH.)}

^{Q6: If an employee has a foreign address, but the employer does not keep this information in its database, is it acceptable to not provide this information?}

^{A6: No. Section 453A(b)(1)(A) identifies the data elements that must be supplied in a new hire report as employee's name, address and social security number, and employer's name, address and FEIN. Employers must provide all required information. If the minimum information to enter the record onto the FPLS is not received, the record will be rejected.}

^{Q7: An employer has two (2) payroll offices, one in Oklahoma City and a smaller one in New York City, both of which have the same Federal Employer Identification Number (FEIN). Can both submit new hire reports? Should they both submit?}

^{A7: Federal law gives multistate employers two options for reporting new hire data. The information may be reported to the State in which the employee works or the employer may opt to report all newly hired employees to a single State in which the employer has employees. Whether both offices should submit is a decision for the employer to make.}

^{Q8: Is there a list of the job classes that should be excluded from reporting?}

^{A8: The definitions of "employer" and "employee" are contained in section 453A(a)(2) of the Act. Under these definitions, Federal law does not require employers to report the hiring of independent contractors or subcontractors. However, some states may require independent contractors to report new hires. States will contact employers about specific reporting requirements. Similarly, if no legal relationship of employer and employee exists within the meaning of Chapter 24 of the Internal Revenue Code, Federal law does not require placement agencies or temporary agencies to report. Labor organizations are not required to report members simply as a result of membership status. Pursuant to section 453A(a)(2)(A)(ii), Federal or state agency employees performing intelligence or counterintelligence functions do not have to be reported if the agency head has determined reporting could endanger the safety of the employee or compromise an ongoing investigation or intelligence mission. See OCSE-AT-97-04, Part II for additional information.}

^{Q9: What are acceptable means by which an employer can report magnetically or electronically, as used in section 453A of the Act?}

^{A9: There are several acceptable means by which an employer can report magnetically or electronically. Employers should check with each State to which they report to determine what the State is capable of accepting.}

^{The following are among the options:}

^{1. The SDNH establishes and disseminates an Internet E-mail address that allows an employer to submit data either by creating and sending e-mail or by scanning and sending a W-4 or equivalent form.}

^{2. The SDNH creates an interactive World Wide Web site that prompts an employer to key in W-4 data and then submit the data.}

^{3. An employer sends the SDNH a floppy disk that contains the data.}

^{4. An employer sends the SDNH a magnetic tape that contains the data.}

^{5. An employer sends the SDNH a cartridge cassette tape that contains the data.}

^{More information on magnetic or electronic reporting can be found in the NDNH Guide for Data Submission.}

^{Q10: Should the employee's W-2 State EIN be reported?}

^{A10: The Federal EIN is required under section 453A(b)(1)(A). However, the NDNH data specifications include a field on the W-4 input record for a State EIN. If a State reports the State EIN, this information will be stored in the NDNH.}

^{Q11: If an employer is reorganizing and merges under a new FEIN, will it be required to file new hire information on the employees acquired as a result of the merger under the new FEIN?}

^{A11: No. It is not necessary for the employer to file new hire reports on all employees acquired through a merger. The new FEIN information will be picked up by the FPLS when the employer makes its next quarterly wage report.}

^{Q12: The law refers to Chapter 24 of the IRS Code. Withholding for income tax purposes is not required for domestic and agricultural workers until a certain monetary threshold is met. Does this mean that a new hire report is not required until the monetary threshold is met?}

^{A12: No. The employee/employer relationship is the determining factor in the requirement to report an individual for new hire purposes, not whether the threshold for income tax withholding has been met. Section 453A(a)(2)(A)(i) of the Act defines an "employee" as an individual who is an employee within the meaning of Chapter 24 of the Internal Revenue Code of 1986 (IRC).}

^{Chapter 24 of the IRC and the regulations promulgated thereunder define an "employee" as every individual performing services if the relationship between the individual and the person for whom the services are performed is the legal relationship of an employer and employee (see IRC section 3401(c) and 26 CFR 31.3401(c)-1). Generally, the legal relationship of employer and employee exists when the person for whom the services are performed has the right to control and direct the individual who performs the services not only as to the result to be accomplished but also as to the details and means by which that result is to be accomplished. It is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he or she has the right to do so.}

^{Q13: Do federal agencies and instrumentalities still need to report new hires to the States as well?}

^{A13: No. Section 453A(b)(1)(C) of the Act states that Federal government employers SHALL comply with the reporting requirements by reporting directly to the National Directory of New Hires (NDNH).}

^{Q14: Must an employer report an individual who is an alien working in the US?}

^{A14: Yes, if the alien meets the definition of an "employee." (See A14 above.)}

^{Q15: Must an employer report a newly hired individual who is a foreign national if the employee is working in the foreign nation for an employer based in the US? If so, where should such an employee be reported?}

^{A15: Section 453A(b)(1)(A) requires an employer to report new hire information on an employee to the State Directory of New Hire of the State in which the employee is working. If the employee is a foreign national working in a foreign nation, or if the employee was hired and is working in the foreign nation, the employee does not need to be reported. However, a newly hired employee who is merely on temporary assignment to a post or office outside of the U.S. would need to be reported to the State in which he or she will be working upon return from the temporary assignment. For cases involving other circumstances, the employer should look to the State law of the State in which the employee was hired or to which the employer reports as a multistate employer to determine whether the employee must be reported and if so, the appropriate location for reporting.}

^{Q16: Are employers on Native American reservations and lands subject to the new hire reporting requirements?}

^{A16: No, unless the tribe has accepted the jurisdiction of the State for this purpose. There are several ways this can be accomplished. For example, a tribe can enter into an agreement with the State for the cooperative delivery of child support enforcement services, including reporting new hires to the SDNH. Under PRWORA, a tribe can operate its own IV-D system pursuant to section 455(f) of the Act. (However, to date no regulations for direct funding of tribes have been promulgated, and no tribes operate independent systems.)}

^{Q17: According to OCSE-AT-97-04, issued March 12, 1997, Federal law does not require entities to report the hiring of independent contractors. If a State has nevertheless enacted a law requiring employers to report not only newly hired employees but also independent contractors, must a multistate employer that has employees and independent contractors in that State report the independent contractors to the State even if the employer had designated another State to which it will report its newly hired employees?}

^{A17: No. A multistate employer that has employees in two or more States and that designates one State in which the employer has one or more employees to which the employer will transmit new hire reports magnetically or electronically is bound by the new hire reporting requirements of the State to which the employer chooses to report. Thus, if an employer has employees in State A and State B and chooses to designate State A as the State to which the employer will transmit the reports, the employer is bound by the requirements of State A. The employer is not required to report independent contractors to State B if State A does not require such reporting, even if State B has gone beyond the Federal law to require the reporting of independent contractors.}

^{Q18: Can a State require a multistate employer to report to them even though that employer has chosen to do their reporting to another State?}

^{A18: Once an employer has designated itself as a multistate employer and notified the Secretary of DHHS of the State to which it chooses to report pursuant to Section 453A(b) of the Act, other States can not require the employer to report to them for child support enforcement purposes. However, Federal law does not prohibit a State from passing a law requiring employers to report new hires for a purpose other than child support, i.e. unemployment compensation.}

^{Q19: Are college or university employers required to report students who may be on a work/study program at the university? What about international students on the same program?}

^{A19: Employers must report anyone who meets the definition of an employee within the meaning of Chapter 24 of the Internal Revenue Code of 1986.}

^{Q20: Should new hire information be reported on a person who has just been hired, but who is going through training or in their probationary period? If an employee returns to work following a break in service, are they considered a newly hired employee?}

^{A20: Yes. If a person has been hired or rehired and a legal employee/employer relationship exists (see A14, above), a report must be filed. The probationary nature of the employment, or the fact that the employee was previously employed by the same company, and rehired, does not negate the need to report.}

^{IV. PENALTIES}

^{Q21: Are there penalties for employers who do not report New Hires?}

^{A21: States have the option of imposing civil monetary penalties for noncompliance. Section 453A(d) of the Act provides 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, the penalty may not exceed $500 per newly-hired employee. States may also impose non-monetary civil penalties under State law for noncompliance.}

^{Q22: What are the penalties for unauthorized use of new hire data?}

^{A22: The penalties against individuals for unauthorized use of new hire data are dependent upon State law and policy. Section 454(26) of the Act requires that the State IV-D plan have safeguards for confidential information. Section 454A(d) provides that the State must have an information integrity and security plan in place for its automated system, which must lay out penalties up to and including dismissal for improper handling of information. If the State does not have these in place, it risks disapproval of its State plan and loss of all Federal IV-D funding.}

^{V. MULTISTATE EMPLOYERS}

^{Q23: If a multistate employer exercises the option to report to one State, how should the employer notify the Secretary of Health and Human Services which State the employer designates for reporting?}

^{A23: Multistate employers must notify the Secretary of Health and Human Services in writing as to which State the employer designates for the purpose of sending new hire reports.}

^{This can be accomplished by mailing notification to:}

^{Department of Health and Human Services}

^{Office of Child Support Enforcement}

^{Multistate Employer Registration}

^{Box 509}

^{Randallstown, MD 21133}

^{The notification should include the employer's name, address, Federal Employer Identification Number, and phone number, as well as the State to which the employer will report, other States in which the employer does business and a corporate point of contact. If the company will be reporting new hires on behalf of its subsidiaries which operate under different names and FEINs, the notification should also list the names, FEINs and States in which the subsidiaries have employees working.}

^{OCSE has received approval from the Office of Management and Budget, under the Paperwork Reduction Act, to publish and distribute an optional form which may be used by multistate employers to make their reports to the Secretary. The form can be found in OCSE-AT-97-16, or can be downloaded from OCSE's website at: /programs/cse.}

^{Q24: May a multistate employer who meets the statutory criteria and chooses to exercise the one-State reporting option designate a State that has until October 1, 1998 to meet the requirements of PRWORA?}

^{A24: A State can not be designated for multistate reporting until the State is actually ready to begin accepting multistate reports. If an employer wishes to designate a State that has until October 1, 1998, to comply with the new PRWORA requirements, and that State will not be ready to accept multistate reports until that time, the employer must either continue to report to several states, or designate another single State that is prepared to accept the multistate reports. The employer can change the designation later to the desired State, once the State is prepared to accept multistate reports.}

^{Q25: If a multistate employer with employees in State A and State B designates State B as the State to which the employer will transmit new hire reports for child support purposes, may State A still require the employer to report newly hired employees to State A's Directory of New Hires until October 1, 1998?}

^{A25: No. However, a multistate employer with employees in State A is bound by the new hire reporting requirements of State A and must report newly hired employees to the Directory of New Hires of State A unless and until the multistate employer notifies the Secretary in writing of a designation and begins to transmit its new hire reports magnetically or electronically to State B, pursuant to Section 453A(b) of the Act.}

^{Q26: May the parent company of four subsidiary companies in various States report to one designated State for all subsidiary companies under one report?}

^{A26: If the parent company of the subsidiary company's employees meets the legal definition of employer/employee, then the parent company, as a multistate employer, may choose to report the subsidiaries' employees for purposes of new hire reporting to one designated State, after notifying the Secretary of DHHS.}

^{Employers electing to report their subsidiaries under one report should be aware that the address submitted in the report is the address to which income withholding notices will be sent. There is an optional data element allowing a second address to be reported for income withholding purposes. If the employer does not provide this second address, all income withholdings will be sent to the employer address (the W-4 address).}

^{Q27: If a multistate employer designates a State to which it will transmit reports and that State currently has a reporting requirement that is narrower in scope than the Federal requirement (for example, only employers having a certain number of employees or employers within certain Standard Industrial Classifications must report new hires), will the multistate employer be exempt from reporting its employees to the designated State if the employer does not meet the State's classification of employers who must report newly hired employees?}

^{A27: No. If a multistate employer exercises the option to report to one State pursuant to Section 453A(1)(B), the employer must report all of its employees. By giving multistate employers the option of designating one State to which they will transmit reports, §453A(b)(1)(B) is designed to give employers the flexibility to adopt a reporting mechanism that may be more convenient for them. However, by enacting legislation requiring all employers nationwide to report new hires, Congress made it clear that their intention was to have uniform reporting by employers. The law includes an extension of an additional year (to October 1, 1998) for those States which already had a new hire reporting requirement. This extension is designed to allow those States adequate time to change their laws and procedures to comply with federal requirements, not to enable employers to avoid their responsibilities for an additional year. Congressional intent would be compromised by an interpretation that effectively exempts from the new hire reporting requirement a multistate employer which chooses to designate a State that currently has a new hire law inapplicable to the employer. (See Q26, above.)}

^{Q28: What constitutes separate employer status for designation of a multistate employer? Can a company that "belongs" to another company with which they share an FEIN choose to report as a multistate employer even if the rest of the "family" of companies does not?}

^{A28: A single decision as to whether companies within the same "family" of companies which share an FEIN should report individually or together should be made. Regardless of whether the company chooses to report all together or separately, the company must ensure that all new employees are reported, and avoid duplication. In addition, the report made on any employee must be specific enough for the child support agency to identify where the employee is working, in order to facilitate locating an individual.}

^{Q29: When may multistate employers begin reporting to one State?}

^{A29: Multistate employers had the option to begin reporting to one State as of October 1, 1997 (the effective date for new hire reporting under Section 453A(a)), except where the State the employer wished to designate was not able to accept multistate reports. In such a case, reporting shall begin on the date that the State they wish to designate becomes able to accept multistate reports. Prior to beginning to report to only one State, a multistate employer must notify the Secretary of Health and Human Services of its choice. (See Q25, above.)}

^{Q30: Can a State require a multistate employer to notify the State as to which State the employer has chosen to report to?}

^{A30: No. Section 453A(b)(1)(B) only requires the employer to notify the Secretary. However, OCSE sends a monthly list of multistate employers and where they report to the States.}

^{VII. ACCESS}

^{Q31: Can a SESA have access to SDNH information in its own and other States?}

^{A31: Yes. Section 453A(h)(3) provides that "State agencies operating employment security...programs shall have access to information reported by employers pursuant to subsection (b) [employer information] for the purposes of administering such programs."}

^{Q32: Can the State grant on-line access to the SDNH to the clerks of court?}

^{A32: States may establish policies and procedures for utilizing SDNH data for IV-D cases. Clerks of court under cooperative agreement with the IV-D agency to provide services to IV-D cases could be permitted access to SDNH data for IV-D program purposes only.}

^{Q33: Can noncustodial parents (NCPs) get locate information from the FPLS for purposes of enforcing custody or visitation orders? If so, what is the procedure?}

^{A33: No. Although FPLS information is available under section 463 of the Act for the purposes of enforcing custody or visitation orders, the only parties authorized to receive this information for these purposes are agents or attorneys of a State with the authority or duty to enforce such orders, or a court with the authority to issue such an order. NCPs have no direct access to FPLS information for these purposes.}

^{Q34: Will the IV-D agency be required to send out a disclosure notice to employers to let them know the uses of the information they are providing?}

^{A34: There is no federal requirement to this effect, although there may be State laws which require it.}

^{Q35: May new hire information be used by the workers' compensation program?}

^{A35: Section 453A(h)(3) of the Act provides that "State agencies operating employment security and workers' compensation programs shall have access to information reported by employers pursuant to subsection (b) for the purposes of administering such programs."}

^{Thus, the statute clearly provides for workers' compensation State agencies to use the State new hire information. Workers' compensation agencies would obtain access to the employer-reported information from the SDNH.}

^{Q36: May a State IV-D agency provide its State Employment Security Agency (SESA) with access to data derived from matches conducted by the NDNH?}

^{A36: No. There is no authority for the State IV-D agency to redisclose this information for any non IV-D purpose.}

^{Q37: Section 453(b) of the Act states that there shall be no disclosure "if disclosure of such information would contravene the national policy or security interest of the United States." Can this provision be interpreted to mean even if a Federal agency sends data on an employee to the NDNH, it is possible data would not be disclosed if the disclosure of the information could be harmful to the employee?}

^{A37: Information will not be disclosed which would contravene the national policy or security interest of the United States. The Act does not provide that disclosure would be prohibited for any other reason, unless there is evidence of domestic violence or child abuse and disclosure would have been harmful to the custodial parent or the child of such parent.}

^{Q38: Can a State IV-A agency have access to the SDNH data of another State?}

^{A38: Yes. Section 453A(h)(2) of the Act allows such access for purposes of eligibility verification.}

^{IX. COSTS/FFP}

^{Q39: If a multistate employer with a large number of employees chooses to designate one State to which the employer will report and that State anticipates that its SDNH will incur considerable expenses to accommodate a substantial number of new hire reports, will an enhanced rate of FFP be available to the State?}

^{A39: No. Enhanced FFP is not available to a State that anticipates that its SDNH will incur considerable expenses to accommodate a substantial volume of new hire reports from multistate employers.}

^{In accordance with OCSE-AT-96-10, the availability of an enhanced rate of FFP for new hire reporting purposes is limited to the following: costs incurred by States for changes to their Statewide automated systems when the State chooses to make its SDNH an integrated part of its automated system; and costs associated with the development of a necessary interface between the automated system and an outside organization in which the State may decide to locate its SDNH.}

^{For more information, please see OCSE-AT-96-10, issued December 23, 1996, and OCSE-AT-97-04, issued March 12, 1997.}

^{Q40: May a State assess a charge against multistate employers in other States who choose to report all their new hires to the State's SDNH?}

^{A40: No. There is no legal authority for a State to charge employers for complying with their reporting obligations.}

^{Q41: Is FFP available to a State for expenditures incurred in making payments to employers for submitting new hire reports to the SDNH?}

^{A41: As required under §453(k)(2) of the Act, the Secretary may reimburse SDNHs for costs in furnishing required new hire information to the Secretary in an amount which the Secretary determines to be reasonable payment. However, the statute explicitly provides that the "...rates shall not include payment for the costs of obtaining, compiling, or maintaining the information." Therefore, FFP is not available for costs incurred by States for paying employers to submit new hire reports, based on our interpretation that such payments would be for obtaining the information.}

1. ^{1 The provisions relating to State Directories of New Hires are contained primarily in section 313 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), Pub. L. No. 104-193. Section 313 added a new section 453A to the Social Security Act (the Act), 42 U.S.C. 653A. The provisions relating to the National Directory of New Hires are contained primarily in section 316 of PRWORA, which amended section 453 of the Act, 42 U.S.C. 653. Unless otherwise specified, references or citations are to the provisions of the Social Security Act.}