Wage Reports and Pension Information

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]

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