[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21355]
[[Page Unknown]]
[Federal Register: August 30, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Social Security Administration
20 CFR Parts 404 and 422
RIN 0960-AD70
Wage Reports and Pension Information
AGENCY: Social Security Administration, HHS.
ACTION: Proposed rules.
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SUMMARY: We are proposing to update our rules on the need for and use
of employer identification numbers and on processing reports of wages
provided annually by employers to the Social Security Administration
(SSA). In addition, we are proposing to add to our rules the procedures
we have for maintaining and providing information we receive from
employers on deterred vested pension benefits.
DATES: Your comments will be considered if we receive them no later
than October 31, 1994.
ADDRESSES: Comments should be submitted in writing to the Commissioner
of Social Security, Department of Health and Human Services, P.O. Box
1585, Baltimore, MD 21235, sent by telefax to (410) 966-0869, or
delivered to the Office of Regulations, Social Security Administration,
3-B-1 Operations Building, 6401 Security Boulevard, Baltimore, MD
21235, between 8 a.m. and 4:30 p.m. on regular business days. Comments
received may be inspected during these same hours by making
arrangements with the contact person shown below.
FOR FURTHER INFORMATION CONTACT:
Jack Schanberger, Legal Assistant, 3-B-1 Operations Building, 6401
Security Boulevard, Baltimore, MD 21235, (410) 965-8471. The electronic
file of this document is available of the Federal Bulletin Board (FBB)
at 9:00 on the date of publication in the Federal Register. To download
the file, modem dial (202) 512-1387. The FBB instructions will explain
how to down load the file and the fee. This file is in WordPerfect and
will remain on the FBB during the comment period.
SUPPLEMENTARY INFORMATION:
Employer Identification Numbers
SSA maintains a record of the wages and self-employment income of
each individual. The record includes earnings covered under title II of
the Social Security Act (the Act), earnings covered under title XVIII
of the Act, and earnings not covered under the Act. The record is
identified by the individual's social security number. Wages posted to
an individual's record are based on wage reports submitted to SSA and
the Internal Revenue Service (IRS) by employers. IRS regulations at 26
CFR 31.6011(a)-1 require an employer to file employment tax returns
with IRS each year and IRS regulations at 26 CFR 31.6051-2 and 31.6091-
1(d) require an employer to file wage reports with SSA each year. These
requirements are also explained on wage reporting forms and in related
instructions issued by SSA and IRS. To help account for these returns
and reports, IRS assigns an employer identification number (EIN) to
every employer. However, SSA will assign a special identification
number to one or more political subdivisions of a State which submits a
modification to its coverage agreement with the Secretary of Health and
Human Services (HHS) under section 218 of the Act. These numbers are
assigned only for State bookkeeping purposes unless coverage is
extended to periods prior to 1987. Then, the special number will be
assigned and used for reporting the pre-1987 wages to SSA. The special
number will also be assigned to an interstate instrumentality if pre-
1987 coverage is obtained.
Annual Wage Reporting
Section 232 of the Act, 42 U.S.C. 432, was added by section 8 of
Public Law 94-202. Section 8 is cited as the ``Combined Old-Age,
Survivors, and Disability Insurance-Income Tax Reporting Amendments of
1975.'' Section 232 provides authority for the Secretary of the
Treasury and the Secretary of HHS to make available such documents that
are agreed upon as being necessary for processing information contained
in returns required by the Internal Revenue Code and by IRS
regulations. Under this authority and Pub. L. 94-455 and 95-216, SSA
and IRS have entered into an Agreement governing the manner in which
employer wage reports will be processed. Included in this process are
the wage reports which employers are required to file annually with
SSA. As required by IRS regulations at 26 CFR 301.6011-2, employers who
file 250 or more wage reports per year must file them on magnetic
media, unless the requirement is waived by IRS. These proposed
regulations reflect these requirements for filing annual wage reports
with SSA and explain how SSA will process the reports and reconcile
reporting errors with IRS, employees, and employers.
Incorrect Wage Reports
We are also proposing to consolidate Secs. 422.115 and 422.120 to
include in one section (proposed Sec. 422.120) our current procedures
for processing wage reports, submitted to us by employers, that do not
include a worker's social security number or include an incorrect name
or number. The existing regulations provide that we will first contact
the employer for the missing information or correction. However, in the
proposed regulation, we state our current procedure which is to attempt
to contact the employee first. Additionally, we provide that we may
return to the employer a wage report submittal if 90 percent or more of
the wage reports are unidentified or incorrectly identified. We also
explain in the proposed Sec. 422.120 that we will inform IRS of all
wage reports filed with SSA that do not include the required social
security numbers. IRS may then assess the employer a penalty for
erroneous report filing, pursuant to the authority provided in section
6721 of the Internal Revenue Code, 26 U.S.C. 6721.
Pension Plan Information
Under section 6057 of the Internal Revenue Code, 26 U.S.C. 6057,
certain private pension plan administrators must file with the IRS
annual reports that identify individuals who separated from plan
coverage during the year and still have a right to future retirement
benefits. In addition, this provision of the Internal Revenue Code
provides for transmitting copies of the annual reports to the Secretary
of HHS. The copies are forwarded to SSA and transcribed onto an
electronic record for the purpose of maintaining the pension
information which SSA must provide to specified individuals, as
explained below.
Section 1131 of the Act requires that whenever the Secretary of HHS
makes a finding of fact and a decision as to the entitlement of an
individual to social security or medicare benefits under title II of
the Act or is requested to do so, the Secretary must transmit to the
individual any information, as reported by the employer, regarding any
deferred vested benefits under a private pension plan. In these
proposed rules, we explain how we administer this provision.
Regulatory Procedures
Executive Order 12866
We have consulted with the Office of Management and Budget (OMB)
and determined that these rules do not meet the criteria for a
significant regulatory action under E.O. 12866. Thus, they were not
subject to OMB review.
Regulatory Flexibility Act
We certify that these proposed rules will not have a significant
economic impact on a substantial number of small entities because the
procedures stated in these rules are already in effect without having
caused a significant impact. Therefore, a regulatory flexibility
analysis as provided in Public Law 96-354, the Regulatory Flexibility
Act, is not required.
Paperwork Reduction Act
These proposed rules contain reporting requirements in
Secs. 422.114 (e) and (f) and 422.120(a). We would normally seek
approval of these requirements, under the Paperwork Reduction Act, from
the Office of Management and Budget (OMB). We are not doing so in this
situation because we already have clearance from OMB to collect this
information using forms SSA-L93, 95 and 97 (OMB No. 0960-0432) and form
SSA-2765 (OMB No. 0960-0694).
There is also a reporting requirement in Sec. 422.122, which deals
with information on deferred vested pension benefits. As required by
section 2(a) of the Paperwork Reduction Act of 1980, 44 U.S.C. 3504(h),
we will submit a copy to OMB for its review of this information
collection requirement. Other organizations and individuals desiring to
submit comments on these information collection requirements should
direct them to the Office of Information and Regulatory Affairs, OMB,
New Executive Office Building, Room 3208, Washington, DC 20503,
Attention: Desk Officer for HHS.
Public reporting burden for this collection of information is
estimated to average 30 minutes per response. This includes the time it
will take to understand what is needed, gather the necessary facts, and
provide the information. If you have any comments or suggestions on
this estimate, write to the Social Security Administration, ATTN:
Reports Clearance Officer, 1-A-21 Operations Building, Baltimore, MD
21235, and to the Office of Management and Budget, Paperwork Reduction
Project (0960-NEW), Washington, DC 20503.
(Catalog of Federal Domestic Assistance Program Nos. 93.802 Social
Security-Disability Insurance; 93.803 Social Security-Retirement
Insurance; 93.805 Social Security-Survivors Insurance)
List of Subjects
20 CFR Part 404
Administrative practice and procedure, Blind, Disability benefits,
Old-age, survivors and disability insurance, Reporting and
recordkeeping requirements, Social Security.
20 CFR Part 422
Administrative practice and procedure, Freedom of information,
Organization and functions (Government agencies), Social Security.
Dated: June 27, 1994.
Shirley S. Chater,
Commissioner of Social Security.
Approved: August 24, 1994.
Donna E. Shalala,
Secretary of Health and Human Services.
For the reasons set out in the preamble, we are proposing to amend
subpart M of part 404 and subpart B of part 422 of 20 CFR chapter III
as follows:
PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE
(1950- )
1. The authority citation for subpart M of part 404 continues to
read as follows:
Authority: Secs. 205, 210, 218, and 1102 of the Social Security
Act; 42 U.S.C. 405, 410, 418, and 1302; sec. 12110 of Public Law 99-
272, 100 Stat. 287; sec. 9002 of Public Law 99-509, 100 Stat. 1970.
2. Section 404.1220 is amended by revising paragraphs (a) and (e)
to read as follows:
Sec. 404.1220 Identification numbers.
(a) State and local government. When a State submits a modification
to its agreement with the Secretary under section 218 of the Act, SSA
will assign a special identification number to each political
subdivision included in that modification. SSA will inform the State of
the special identification number(s) by sending a Form SSA-214-CD,
``Notice of Identifying Number,'' to the State. These numbers are
assigned only for State bookkeeping purposes unless coverage is
extended to periods prior to 1987. Then, the special number will be
assigned and used for reporting the pre-1987 wages to SSA. The special
number will also be assigned to an interstate instrumentality if pre-
1987 coverage is obtained and SSA will send a Form SSA-214-CD to the
interstate instrumentality to notify it of the number assigned.
* * * * *
(e) Use. For wages paid prior to 1987, the employer shall show the
appropriate SSA-issued identifying number, including any coverage group
or payroll record unit number, on records, reports, returns, and claims
to report wages, adjustments, and contributions.
PART 422--ORGANIZATION AND PROCEDURES
1. The authority citation for subpart B of part 422 is revised to
read as follows:
Authority: Secs, 205, 232, 1102, 1131, and 1143 of the Social
Security Act; 42 U.S.C. 405, 432, 1302, 1320b-1, and 1320b-13.
2. Section 422.112 is revised to read as follows:
Sec. 422.112 Employer identification numbers.
(a) General. Most employers are required by Sec. 6109 of the
Internal Revenue Code (26 U.S.C. 6109) and by Internal Revenue Service
(IRS) regulations at 26 CFR 31.6011(b)-1 to obtain an employer
identification number (EIN) and to include it on wage reports filed
with SSA. A sole proprietor who does not pay wages to one or more
employees or who is not required to file any pension or excise tax
return is not subject to this requirement. To apply for an EIN,
employers file Form SS-4, ``Application for Employer Identification
Number,'' with the IRS. For the convenience of employers, Form SS-4 is
available at all SSA and IRS offices. Household employers, agricultural
employers, and domestic corporations which elect social security
coverage for employees of foreign subsidiaries who are citizens or
residents of the U.S. may be assigned an EIN by IRS without filing an
SS-4.
(b) State and local governments. To facilitate a State's
bookkeeping, SSA will assign a special identification number to each
political subdivision included in a modification to the State's
agreement with the Secretary under section 218 of the Act. These
numbers are not used for reporting purposes unless coverage is extended
to periods prior to 1987. Then, the special number will be assigned and
used for reporting the pre-1987 wages to SSA. This special number will
also be assigned to an interstate instrumentality if pre-1987 coverage
is obtained. SSA will inform the appropriate State or interstate
instrumentality official of the assigned number by sending a Form SSA-
214-CD, ``Notice of Identifying Number.''
3. A new Sec. 422.114 is added to read as follows:
Sec. 422.114 Annual wage reporting process.
(a) General. Under the authority of section 232 of the Act, SSA and
IRS have entered into an agreement that sets forth the manner by which
SSA and IRS will ensure that the processing of employee wage reports is
effective and efficient. Under this agreement, employers are instructed
by IRS to file annual wage reports with SSA on paper Forms W-2, ``Wage
and Tax Statement,'' and Forms W-3, ``Transmittal of Income and Tax
Statements,'' or equivalentP W-2 and W-3 magnetic media reports.
Special versions of these forms for Puerto Rico, Guam, American Samoa,
the Virgin Islands, and the Commonwealth of the Northern Mariana
Islands are also filed with SSA. SSA processes all wage reporting forms
for updating to SSA's earnings records and IRS tax records, identifies
employer reporting errors and untimely filed forms for IRS penalty
assessment action, and takes action to correct any reporting errors
identified, except as provided in paragraph (c) of this section. SSA
also processes Forms W-3c, ``Transmittal of Corrected Income Tax
Statement,'' and W-2c, ``Statement of Corrected Income and Tax
Amounts'' (and their magnetic media equivalents) that employers are
required to file with SSA when certain previous reporting errors are
discovered.
(b) Magnetic media reporting requirements. Under IRS regulations at
26 CFR 301.6011-2, employers who file 250 or more W-2 wage reports per
year must file them on magnetic media in accordance with requirements
provided in SSA publications, unless IRS grants the employer a waiver.
Basic SSA requirements are set out in SSA's Technical Instruction
Bulletin No. 4, ``Magnetic Media Reporting.'' Special filing
requirements for U.S. territorial employers are set out in SSA
Technical Instruction Bulletins No. 5 (Puerto Rico), No. 6 (Virgin
Islands), and No. 7 (Guam and American Samoa). At the end of each year,
SSA mails these technical instructions to employers (or third parties
who file wage reports on their behalf) for their use in filing wage
reports for that year.
(c) Processing late and incorrect magnetic media wage transmittals.
If an employer's transmittal of magnetic media wage reports is received
by SSA after the filing due date, SSA will notify IRS of the late
filing so that IRS can decide whether to assess penalties for late
filing, pursuant to section 6721 of the Internal Revenue Code. If
reports do not meet SSA processing requirements (unprocessable reports)
or are out of balance on critical money amounts, SSA will return them
to the employer to correct and resubmit. In addition, beginning with
wage reports filed for tax year 1993, if 90 percent or more of an
employer's magnetic media wage reports have no social security numbers
or incorrect employee names or social security numbers so that SSA is
unable to credit their earnings to its records, SSA will not attempt to
correct the errors, but will instead return the reports to the employer
to correct and resubmit (see also Sec. 422.120(b)). An employer must
correct and resubmit incorrect and unprocessable magnetic media wage
reports to SSA within 45 days from the date of the letter sent with the
returned report. Upon request, SSA may grant the employer a 15-day
extension of the 45-day period. If an employer does not submit
corrected reports to SSA within the 45-day (or, if extended by SSA, 60-
day) period, SSA will notify IRS of the late filing so that IRS can
decide whether to assess a penalty. If an employer timely resubmits the
reports as corrected magnetic media reports, but they are unprocessable
or out of balance on W-2 money totals, SSA will return the resubmitted
reports for the second and last time for the employer to correct and
return to SSA. SSA will enclose with the resubmitted and returned forms
a letter informing the employer that he or she must correct and return
the reports to SSA within 45 days or be subject to IRS penalties for
late filing.
(d) Paper form reporting requirements. The format and wage
reporting instructions for paper forms are determined jointly by IRS
and SSA. Basic instructions on how to complete the forms and file them
with SSA are provided in IRS forms materials available to the public.
In addition, SSA provides standards for employers (or third parties who
file wage reports for them) to follow in producing completed reporting
forms from computer software; these standards appear in SSA
publication, ``Software Specifications and Edits for Annual Wage
Reporting.'' Requests for this publication should be sent to: Social
Security Administration, Office of Financial Policy and Operations,
Attention: AWR Software Standards Project, P.O. Box 17195, Baltimore,
MD 21235.
(e) Processing late and incorrect paper form reports. If SSA
receives paper form wage reports after the due date, SSA will notify
IRS of the late filing so that IRS can decide whether to assess
penalties for late filing, pursuant to section 6721 of the Internal
Revenue Code. SSA will ask an employer to provide replacement forms for
illegible, incomplete, or clearly erroneous paper reporting forms, or
will ask the employer to provide information necessary to process the
reports without having to resubmit corrected forms. If an employer
fails to provide legible, complete, and correct W-2 reports within 45
days, SSA may identify the employers to IRS for assessment of employer
reporting penalties.
(f) Reconciliation of wage reporting errors. After SSA processes
wage reports, it matches them with the information provided by
employers to the IRS on Forms 941, ``Employer's Quarterly Federal Tax
Return,'' for that tax year. Based upon this match, if the total social
security or medicare wages reported to SSA for employees is less than
the totals reported to IRS, SSA will write to the employer and request
corrected reports or an explanation for the discrepancy. If the total
social security or medicare wages reported to SSA for employees is more
than the totals reported to IRS, IRS will resolve the difference with
the employer. If the employer fails to provide SSA with corrected
reports or information that shows the wage reports filed with SSA are
correct, SSA will ask IRS to investigate the employer's wage and tax
reports to resolve the discrepancy and to assess any appropriate
reporting penalties.
Sec. 422.115 [Removed]
4. Section 422.115 is removed.
5. Section 422.120 is revised to read as follows:
Sec. 422.120 Earnings reported without a social security number or
with an incorrect employee name or social security number.
(a) Correcting an earnings report. If an employer reports an
employee's wages without the employee's social security number or with
a different employee name or social security number than shown in SSA's
records for him or her, SSA will write to the employee at the address
shown on the wage report and request the missing or corrected
information. If the wage report does not show the employee's address or
shows an incomplete address, SSA will write to the employer and request
the missing or corrected employee information. SSA notifies IRS of all
wage reports filed without employee social security numbers so that IRS
can decide whether to assess penalties for erroneous filing, pursuant
to section 6721 of the Internal Revenue Code. If an individual reports
self-employment income without a social security number or with a
different name or social security number than shown in SSA's records,
SSA will write to the individual and request the missing or corrected
information. If the employer, employee, or self-employed individual
does not provide the missing or corrected report information in
response to SSA's request, the wages or self-employment income cannot
be identified and credited to the proper individual's earnings records.
In such cases, the information is maintained in a ``Suspense File'' of
uncredited earnings. Subsequently, if identifying information is
provided to SSA for an individual whose report is recorded in the
Suspense File, the wages or self-employment income then may be credited
to his or her earnings record.
(b) Returning incorrect reports. SSA may return to the filer,
unprocessed, an employer's annual wage report submittal if 90 percent
or more of the wage reports in that submittal are unidentified or
incorrectly identified. In such instances, SSA will advise the filer to
return corrected wage reports within 45 days to avoid any possible IRS
penalty assessment for failing to file correct reports timely with SSA
(see also Sec. 422.114(c)). Upon request, SSA may grant the employer a
15-day extension of the 45-day period.
5. A new Sec. 422.122 is added to read as follows:
Sec. 422.122 Information on deferred vested pension benefits.
(a) Claimants for benefits. Each month, SSA checks the name and
social security number of each new claimant for social security
benefits or for hospital insurance coverage to see whether the claimant
is listed in SSA's electronic pension benefit record. This record
contains information received from IRS on individuals for whom private
pension plan administrators have reported to IRS, as required by
section 6057 of the Internal Revenue Code (26 U.S.C. 6057), as possibly
having a right to future retirement benefits under the plan. SSA sends
a notice to each new claimant for whom it has pension benefit
information, as required by section 1131 of the Act (42 U.S.C. 1320b-
1). If the claimant filed for the lump-sum death payment on the social
security account of a relative, SSA sends the claimant the pension
information on the deceased individual. In either case, SSA sends the
notice after it has made a decision on the claim for benefits. The
notice shows the type, payment frequency, and amount of pension
benefit, as well as the name and address of the plan administrator as
reported to the IRS. This information can then be used by the claimant
to claim any pension benefits still due from the pension plan.
(b) Requesting deferred vested pension benefit information from SSA
files. Section 1131 of the Act also requires SSA to provide available
pension benefit information on request. SSA will provide this pension
benefit information only to the individual who has the pension coverage
(or a legal guardian or parent, in the case of a minor, on the
individual's behalf). However, if the individual is deceased, the
information may be provided to someone who would be eligible for any
underpayment of benefits that might be due the individual under
Sec. 404.503(b) of part 404 of this chapter. All requests for such
information must be in writing and should contain the following
information: the individual's name, social security number, date of
birth, and parent's names; any information the requester may have
concerning the name of the pension plan involved and the month and year
coverage under the plan ended; the name and address of the person to
whom the information is to be sent; and the requester's signature under
the following statement: ``I am the individual to whom the information
applies (or ``I am related to the individual as his or her ______''). I
know that if I make any representation which I know is false to obtain
information from Social Security records, I could be punished by a fine
or imprisonment or both.'' Such requests should be sent to: Social
Security Administration, Office of Central Records Operations, P.O. Box
17055, Baltimore, Maryland 21235.
[FR Doc. 94-21355 Filed 8-29-94; 8:45 am]
BILLING CODE 4190-29-M
