Wage Reports and Pension Information

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 422

RIN 0960-AD70

Wage Reports and Pension Information

AGENCY: Social Security Administration.

ACTION: Final rules.

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SUMMARY: We are updating 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 adding to our rules the procedures we have for

maintaining and providing information we receive from employers on

deferred vested pension benefits.

effective DATe: These rules are effective August 16, 1995.

ADDRESSES: Organizations and individuals desiring to submit comments on

the information collection requirements under ``Paperwork Reduction

Act'' should submit them to the Office of Information and Regulatory

Affairs, OMB, New Executive Office Building, Room 3208, Washington, DC

20503, Attention: Desk Officer for SSA.

FOR FURTHER INFORMATION CONTACT: Jack Schanberger, Legal Assistant, 3-

B-1 Operations Building, 6401 Security Boulevard, Baltimore, MD 21235,

(410) 965-8471.

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SUPPLEMENTARY INFORMATION:

Employer Identification Numbers

Pursuant to section 205(c)(2)(A) of the Social Security Act (the

Act), SSA maintains a record of the wages and self-employment income of

each individual. The record includes earnings covered under title II of

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 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 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, as

amended by section 107 of Public Law 103-296, provides authority for

the Secretary of the Treasury to make available to the Commissioner of

Social Security 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

Public Law 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 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 consolidating Secs. 422.115 and 422.120 to include in

one section (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 this revised

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 in that submittal are unidentified or incorrectly

identified. We also explain in revised 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.

Pension Plan Information

Under section 6057 of the Internal Revenue Code, 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, as amended by section 108(h)(5)

of Public Law 103-296, provides for transmitting copies of the annual

reports to the Commissioner of Social Security. Then SSA transcribes

the reports 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, as amended by section 108(b)(11) of Public

Law 103-296, requires that whenever the Commissioner of Social Security

is requested to do so, or whenever he or she 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, he or she must

transmit to the individual any information, as reported by the

employer, regarding any deferred vested benefits under a private

pension plan. In these rules, we explain how we administer this

provision.

Final Rules

On August 30, 1994, we published proposed rules in the Federal

Register at 59 FR 44674 with a 60-day comment period. We received no

comments on these proposed rules. We are, therefore, publishing the

proposed rules essentially unchanged as final rules.

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 Executive Order 12866. Thus, they

were not subject to OMB review.

Regulatory Flexibility Act

We certify that these final 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 final 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 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. 0960-0471).

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 have submitted 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 address shown in ADDRESSES.

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. We expect that annually there will be 2,280

requesters of pension plan information. Therefore, the annual

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reporting burden is expected to be 1,140 hours. 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. 96.001 Social

Security-Disability Insurance; 96.002 Social Security-Retirement

Insurance; 96.004 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: July 27, 1995.

Shirley Chater,

Commissioner of Social Security.

For the reasons set out in the preamble, we are amending 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- )

Subpart M--[Amended]

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 Pub. L. 99-

272, 100 Stat. 287; sec. 9002 of Pub. L. 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 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

Subpart B--[Amended]

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 section 6109 of the

Internal Revenue Code 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 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 equivalent 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

Statements,'' 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

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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 wages 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. (For wage reports

where earnings are reported without a social security number or with an

incorrect name or social security number, see Sec. 422.120.) 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 to SSA 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 to IRS 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, 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

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section 1131 of the Act. 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 section

204(d) of the Act. 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 any information the

requestor 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. 95-19501 Filed 8-15-95; 8:45 am]

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