Child Support Enforcement Program; Quarterly Wage and Unemployment Compensations Claims Reporting to the National Directory of New Hires

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 303

RIN 0970-AB67

Child Support Enforcement Program; Quarterly Wage and

Unemployment Compensations Claims Reporting to the National Directory

of New Hires

AGENCY: Office of Child Support Enforcement (OCSE), HHS.

ACTION: Final rule.

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SUMMARY: This final rule implements section 453A(g)(2)(B) of the Social

Security Act (the Act), as added by section 313(b) of the Personal

Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA)

and amended by section 5533 of Public Law 105-33, section 303(h) of the

Act, in part, as amended by section 316(g) of PRWORA, and section

3304(a)(16) of the Internal Revenue Code of 1986, as amended by section

316(g) of PRWORA. These provisions require certain State entities to

furnish quarterly wage and unemployment compensation data to the

National Directory of New Hires or to the Secretary of Health and Human

Services. A Notice of Proposed Rulemaking was published in the Federal

Register on October 7, 1997 (62 FR 52306).

EFFECTIVE DATE: The final rule is effective August 3, 1998.

FOR FURTHER INFORMATION CONTACT: Anne Benson, Policy Branch, OCSE (202)

401-1467, e-mail: [email protected]. Deaf and hearing-impaired

individuals may call the federal Dual Party Relay Service at 1-800-877-

8339 between 8:00 a.m. and 7:00 p.m. Eastern time.

SUPPLEMENTARY INFORMATION:

Statutory Authority

This regulation is published under the authority of section

453A(g)(2)(B) of the Social Security Act (the Act), 42 U.S.C.

653A(g)(2)(B), as added by section 313(b) of the Personal

Responsibility and Work Opportunity Reconciliation Act of 1996

(PRWORA), Pub. L. 104-193 and amended by section 5533 of Public Law

105-33; section 303(h) of the Act, in part, 42 U.S.C. 503(h), as

amended by section 316(g) of PRWORA; and section 3304(a)(16) of the

Internal Revenue Code of 1986, 26 U.S.C. 3304(a)(16), as amended by

section 316(g) of PRWORA.

This regulation is also issued under the authority granted to the

Secretary of Health and Human Services (Secretary) by section 1102 of

the Act, 42 U.S.C. 1302. Section 1102 of the Act authorizes the

Secretary to publish regulations that may be necessary for the

efficient administration of the functions for which she is responsible

under the Act.

Section 453A(g)(2)(B) of the Act requires the State Directory of

New Hires to furnish, on a quarterly basis, data concerning the wages

and unemployment compensation paid to individuals to the National

Directory of New Hires. Pursuant to section 453A(g)(2)(B) of the Act,

the Secretary of the Department of Health and Human Services is

required to publish regulations to identify the dates, format, and data

elements necessary for the State Directory of New Hires to furnish the

quarterly wage and unemployment compensation data to the National

Directory of New Hires.

Section 3304(a)(16) of the Internal Revenue Code of 1986 contains

requirements that must be included in State Unemployment Compensation

laws for employers in the State to receive Federal Unemployment Tax

credits. Section 316(g) of Public Law 104-193 amended section

3304(a)(16) of the Internal Revenue Code of 1986 to provide that the

wage and unemployment compensation information contained in the records

of the State agency administering that program shall be furnished to

the Secretary of Health and Human Services, in accordance with

regulations promulgated by the Secretary, as may be necessary for the

purposes of the National Directory of New Hires under section 453(i)(1)

of the Act. The Secretary will maintain the quarterly wage and

unemployment compensation data reported pursuant to section 3304(a)(16)

in the National Directory of New Hires (NDNH), which is established

pursuant to section 453 of the Act.

Section 303(h)(1)(A) of the Act, as amended by section 316(g) of

Public Law 104-193, requires the State agency charged with the

administration of the unemployment compensation program, on a

reimbursable basis, to disclose quarterly, to the Secretary of Health

and Human Services, wage and claim information, as required pursuant to

section 453(i)(1) of the Act, that is contained in the records of such

agency. As is the case with information reported pursuant to section

3304(a)(16) of the Internal Revenue Code of 1986, the Secretary will

maintain any quarterly wage and unemployment compensation data reported

pursuant to section 303(h) of the Act in the NDNH. Section 303(h)(3)(A)

of the Act defines `wage information' as ``information regarding wages

paid to an individual, the social security account number of such

individual, and the name, address, State, and the Federal employer

identification number of the employer paying such wages to such

individual.'' Section 303(h)(3)(B) defines `claim information' as

``information regarding whether an individual is receiving, has

received, or has made application for, unemployment compensation, the

amount of any such compensation being received (or to be received by

such individual), and the individual's current (or most recent) home

address.'' Title III of the Act, Grants to States for Unemployment

Compensation Administration, is directly administered by the Department

of Labor. We are referencing section 303(h)(1)(A) of the Act because

this provision references information required pursuant to section

453(i)(1) of the Act. Section 453(i)(1) is administered by the

Department of Health and Human Services, and the information that is

required pursuant to that section (which in turn references information

supplied pursuant to section 453A(g)(2)) is established in this rule.

The Secretary also adopted the definitions included in section 303(h)

in the rule in order to enable the implementation of the provisions in

an integrated and complementary manner.

Background

The Federal Parent Locator Service (FPLS) is a computerized network

established pursuant to section 453 of the Act, 42 U.S.C. 653, through

which States may request information from Federal and State agencies to

find noncustodial parents and/or their employers for purposes of

establishing paternity and securing support. The

[[Page 36186]]

Personal Responsibility and Work Opportunity Reconciliation Act of 1996

requires the Secretary to develop an expanded FPLS to improve States'

ability to locate child support obligors and to establish and enforce

child support orders, as well as for other specified purposes in Title

IV-D of the Act. The Office of Child Support Enforcement (OCSE), within

the Administration for Children and Families (ACF), is charged with the

task of developing, implementing, and maintaining the expanded FPLS.

The expanded FPLS is housed in the Social Security Administration's

National Computer Center, because locating the expanded FPLS there

provides the most efficient and cost-effective mechanism for developing

the expanded FPLS, as well as ensuring state-of-the-art standards for

system security and confidentiality of the data.

The expanded FPLS includes the National Directory of New Hires and

a Federal Case Registry (operational no later than October 1, 1998),

and maintains the capability to seek information from existing FPLS

data sources, including, but not limited to, the Internal Revenue

Service, Social Security Administration, Department of Defense, and

Department of Veterans Affairs. The expanded FPLS will perform regular

cross matches between the National Directory of New Hires and the

Federal Case Registry. With these new FPLS resources, the interstate

matching of child support obligors and employment, earnings, and

benefits data will flow more efficiently and quickly between States.

The NDNH will contain three types of information. First, the NDNH

maintains employment data on newly-hired employees (new hire reporting)

submitted by State Directories of New Hires pursuant to section

453A(g)(2)(A) of the Act, and by federal agencies pursuant to section

453A(b)(1)(C) of the Act. Second, the NDNH will maintain quarterly wage

information on individual employees received pursuant to sections

453A(g)(2)(B) and 303(h) of the Act, and section 3304(a)(16) of the

Internal Revenue Code of 1986, as well as quarterly wage information on

federal employees received pursuant to 453(n) of the Act. Third, the

NDNH will maintain unemployment compensation claims data received

pursuant to sections 453A(g)(2)(B) and 303(h) of the Act, and section

3304(a)(16) of the Internal Revenue Code of 1986. States will be

required to transmit new hire, quarterly wage and unemployment

compensation claims data electronically to the NDNH.

The purpose of the NDNH is to develop a repository of information

on newly-hired employees, and on the earnings and unemployment

compensation claims data of employees. The purpose of including

quarterly wage and unemployment compensation claims data in the NDNH is

to provide States with the ability to quickly locate information on the

address of, employment of, and unemployment compensation being paid to,

parents with child support obligations who are residing or working in

other States. States seek to locate these parents and their employers

to either establish or enforce a child support order. Quarterly wage

and unemployment compensation claims data will provide information on

continuously employed and unemployed individuals who would not be

located solely by new hire reporting.

Most States have been matching their quarterly wage and

unemployment compensation claims data against their respective State

child support caseloads since the 1980's. In addition, since 1990 the

Federal Parent Locator Service has conducted cross-matches between

State child support locate requests and State Employment Security

Agencies, although such matches are currently limited to 250,000 cases

per State per bi-weekly cross-match. The information generated from

cross-matches between quarterly wage, claims and child support data,

both at the State level and in the more limited FPLS context, has

proven extremely beneficial for the location of child support obligors

and their wages. The inclusion of quarterly wage and unemployment

compensations claims data in the NDNH will allow for a substantially

higher volume of interstate cross-matching than is currently possible.

The Federal Case Registry will be a national registry of

individuals involved in child support cases, constructed from abstracts

of child support case and order information that State Case Registries

will transmit to the Federal Case Registry. The expanded FPLS, through

a matching process between NDNH and the Federal Case Registry, will be

able to automatically provide States with information on address,

employment, and unemployment compensation claims data on parents owing

child support. The expanded FPLS will also alert States to other States

that have registered the same individual.

In an effort to be responsive to the President's Memorandum of

March 4, 1995 to heads of Departments and Agencies which announced a

government-wide Regulatory Reinvention Initiative to reduce or

eliminate burdens on States, other governmental agencies or the private

sector, OCSE formed an FPLS workgroup which held three meetings between

September, 1996 and March, 1997. The purpose of the FPLS workgroup is

to provide consultation regarding the design, development, and

regulatory requirements for the expanded FPLS. This group is comprised

of representatives from State Child Support Agencies, State Employment

Security Agencies, the Federal Office of Child Support Enforcement, the

U.S. Department of Labor, the Social Security Administration, the

Interstate Conference of State Employment Security Agencies, employer

groups, payroll associations, and other interested individuals. The

workgroup members provided information regarding quarterly wage and

unemployment compensation claims reporting which was considered in

developing these regulations.

Description of Regulatory Provisions

This rule implements the three new statutory wage and unemployment

compensation claims reporting requirements by adding a new section, 45

CFR 303.108, ``Quarterly Wage and Unemployment Compensations Claims

Reporting to the National Directory of New Hires,'' to existing rules

governing the child support enforcement program under Title IV-D of the

Act. Although there are three separate reporting provisions, the

information required to be reported is substantially the same for all

three. Therefore, OCSE addresses the Secretary's responsibilities under

all three provisions by a single regulation which permits the quarterly

wage and unemployment compensation data required to be furnished under

the three provisions to be supplied in a single, quarterly submission.

Further, OCSE will consider the reporting requirements to have been

satisfied if any one of the required reporting entities submits the

information in accordance with the provisions of the regulation. OCSE

intends to leave the decision as to which entity will report up to the

individual States. Accordingly, the regulation refers to the ``State''

as the entity that must transmit data to the NDNH. However, if data is

not reported as required under the proposed regulation, OCSE will hold

the State Title IV-D agency accountable for the failure of the State

Directory of New Hires to report as required under section

453A(g)(2)(B). Section 454(28) of the Act, as added by section 313(a)

of PRWORA, added a new State plan requirement for Title IV-D agencies

to operate a State Directory of New Hires

[[Page 36187]]

in accordance with section 453A of the Act. The failure to report as

required pursuant to section 303(h) of the Act or section 3304(a)(16)

of the Internal Revenue Code of 1986 may also result in actions being

taken by the Secretary of Labor.

45 CFR 303.108(a) contains definitions designed to clarify

quarterly wage and unemployment compensation claims reporting.

Paragraph (a)(1) defines ``Reporting period'' as the time elapsed

during a calendar quarter, e.g. January-March, April-June, July-

September, October-December. ``Wage information'' is defined in

paragraph (a)(2) as: (1) The name of the employee; (2) the employee's

social security number; (3) aggregate wages of the employee during the

reporting period; and (4) the name and address (and optionally, any

second address for wage withholding purposes) and Federal employer

identification number of the employer reporting wages. In the event

that an individual is working more than one job, the State must

transmit separate quarterly records containing the ``wage information''

for each job an individual has held. The information being included as

wage information is the minimal amount of data needed to meet the

purposes of the NDNH. OCSE is requesting data on the names of employees

in order to meet the requirements of section 453(j)(1) of the Act, 42

U.S.C. 653(j)(1). Section 453(j)(1) requires the Secretary of Health

and Human Services to transmit the information in the NDNH to the

Social Security Administration to verify the accuracy of the name,

social security number, and birth date of each individual.

``Unemployment compensation or claim information'' is defined in

paragraph (a)(3) as: (1) Whether an individual is receiving, has

received or has applied for unemployment compensation; (2) the

individual's name and current (or most recent) home address; (3) the

individual's social security number; and (4) the aggregate gross amount

of compensation the claimant received during the reporting quarter.

Paragraph (b) of 45 CFR 303.108 contains the requirements for

quarterly wage and unemployment compensation claims reporting. Under

paragraph (b), the State is required to disclose quarterly, to the

National Directory of New Hires, wage and claim information, as defined

in paragraph (a), that is collected pursuant to a State's unemployment

compensation program referenced in Title III of the Act or pursuant to

section 1137 of the Act. OCSE does not require the collection or

reporting of any additional wage information for purposes of the NDNH

beyond that which is currently being collected. Wage and unemployment

claim information is currently reported to agencies administering

unemployment compensation laws under title III of the Act or to other

agencies pursuant to section 1137(a) of the Act as part of the income

and eligibility verification program, so paragraph (b) does not impose

an additional information requirement. OCSE is also aware that some

States' compensation records either do not include employee names or

record only a partial set of the letters in the employee's name.

Similarly, OCSE is aware that State unemployment compensation laws do

not require all employers to report information. In the regulation, the

State is only required to supply wage information which is already

contained in the records of the State. Therefore, in the case of

employee names or wages, a State is required to send us as much

information on employee names or wages as exists in the unemployment

compensation records, or in the records maintained for purposes of

section 1137 of the Act if the information is maintained by another

agency. The reference to section 1137 has been included to cover those

situations where States have alternate data collection systems to make

it clear that the data in such alternate systems is covered by the

regulation.

Similarly, the State is only required to supply claim information

which is already contained in the records of the State agency

administering the unemployment compensation program or the records

maintained for purposes of section 1137 of the Act. There is no

requirement imposed to collect additional claim information for

purposes of the NDNH. In addition, the State is only required to

furnish the NDNH with claim information that is processed

electronically. OCSE believes that it is neither feasible nor cost

effective to require that States transmit claims data for those

relatively few benefit programs which are processed manually. State

Employment Security Agencies and the Department of Labor have indicated

that manually processed claims comprise a very small portion of total

claims. We understand that the unemployment compensation programs being

administered by States cover any compensation payable under State

unemployment compensation law (including amounts payable in accordance

with agreements under any Federal unemployment compensation law) and

extended benefits, unemployment compensation for Federal employees,

unemployment compensation for ex-servicemen, trade readjustment

allowances, and disaster unemployment assistance.

45 CFR 303.108(c) sets the time frames for quarterly wage and

claims reporting. The State is required to report wage information for

the reporting period no later than the end of the fourth month

following the reporting period. States will be required to begin

reporting on the first reporting date occurring after the final rule

becomes effective. However, the NDNH will accept earlier reports,

beginning with those for the July-September 1997 reporting period and

States are encouraged to begin submitting reports as early as possible.

Currently, State laws generally allow employers one month following the

reporting period to report quarterly wages to the State agency

administering the unemployment compensation program. We believe that

the time frame for States to report wage information to the Secretary

for the purposes of the NDNH will ensure that States have adequate time

to enter, edit, and transmit wage information to the Secretary. Given

the necessity and importance of maintaining accurate wage data in the

NDNH, the schedule for reporting allows States ample time to work with

employers to correct inaccurate wage reports and to submit complete and

comprehensive wage information on employees within a State.

The State is required to report claim information for the reporting

period no later than the end of the first month following the end of

the reporting period. The State is required to begin the reporting of

claim information on the first reporting date occurring after the final

rule becomes effective. However, the NDNH will accept earlier reports,

beginning with those for the October-December 1997 reporting period and

States are encouraged to begin submitting reports as early as possible.

We believe that a shorter time frame for submitting claim information,

as opposed to wage information, is appropriate because the State agency

charged with administering the unemployment compensation program

maintains this data on an ongoing basis. Also, as noted above, the

collection of wage information lags behind the collection of claim

information because of the time required to ensure that wage

information submitted is accurate.

In order to ensure the effective implementation of the NDNH, the

Secretary planned a staggered schedule for initial data submissions to

the NDNH. The reporting of new hire data began on October 1, 1997, to

be

[[Page 36188]]

followed by initial quarterly wage and claims information submissions

on January 31, 1998 or the first reporting date after the final rule

becomes effective. For this reason, the Secretary will allow that the

earliest claims information be submitted for the period beginning

October-December, 1997, rather than July-September, 1997.

45 CFR 303.108(d) provides that the Secretary will establish

standardized formats for reporting quarterly wage and claim information

and that the States will be required to adhere to such formats for

reporting purposes. The formats identify the data elements,

descriptions and tape specifications for reporting quarterly wage and

claim information. These formats were published in the Federal Register

for comment on July 25, 1997 (62 FR 40092).

Response to Comments

In response to the Notice of Proposed Rulemaking published October

7, 1997, in the Federal Register (62 FR 52306) we received thirteen

comments from six commenters, representing State IV-D agencies, State

Employment Security Agencies/State Departments of Labor and one Federal

Agency. The comments and our responses are as follows:

1. Comment: One commenter stated that, under 45 CFR 303.108(b),

there are large programming costs associated with submission of

quarterly wage and unemployment insurance claim data because the

information, while available in the State Department of Labor's

records, is not all in one place or in the required formats for

submission to the National Directory of New Hires. The commenter stated

that the costs for the extraction, formatting and transmission of the

data are not reimbursable from Unemployment Compensation grant money.

Their recommendation is that there be reimbursement for all legitimate

costs based on actual costs, not an arbitrary figure. Another commenter

believes that this is an unfunded mandate because states are required

to submit information ``electronically.'' They believe that there is no

provision for the costs associated with electronic submission.

Response: Section 453(g) of the Act states that ``The Secretary may

reimburse Federal and State agencies for the costs incurred by such

entities in furnishing information requested by the Secretary under

this section in an amount which the Secretary determines to be

reasonable payment for the information exchange (which amount shall not

include payment for the costs of obtaining, compiling, or maintaining

the information).'' OCSE is requesting that States submit an itemized

list of projected costs for extraction and transmission of the required

data. These will consist of both initial costs for programming and

ongoing costs for transmission. OCSE will then be able to respond

specifically to requests for reimbursement, and is planning to

reimburse States for reasonable direct costs for extraction, formatting

and transmission. OCSE has also offered on-site technical assistance to

complete the required programming, and has provided skeleton code

programs to all the States in order to assist with the programming

changes.

2. Comment: One commenter stated that the source for estimates of

the burden on the States is not clearly presented and that the impact

on the States in terms of hours spent is ``grossly underestimated.''

The commenter stated that their start up burden is underestimated and

that the annual reporting estimate ``will not begin to cover the time

necessary.'' They also said they have spent a great deal of time

reviewing materials sent out by OCSE. A second commenter also took

issue with the burden time estimates and pointed out that any time

spent diverts resources from Year 2000 projects.

Response: The time estimates in the Rule are based on industry

practices and on information from the Social Security Administration.

Detailed estimates were presented in the Paperwork Reduction Act

package approved as of November 26, 1997 (OMB control number 0970-

0166.) There are burdens for start-up programming, but OCSE has tried

to do everything possible to minimize these burdens; for instance by

providing on-site technical assistance if requested and by providing

on-going technical support by telephone, as well as skeleton code

programs to assist with programming changes. The burden estimates are

based on the assumption that once the program is in place, extraction

and transmission of the data can be done on an almost entirely

automated basis, requiring little or no human intervention. Materials

sent out by OCSE were meant to reduce the burden on the states by

answering commonly asked questions, giving further explanations of

program requirements, and providing technical information and

assistance.

3. Comment: The commenter states that there is ambiguity in the

first paragraph of the Description of Regulatory Provisions. They

indicate that the phrase ``the three new statutory reporting

requirements'' might be interpreted to refer to New Hire, Quarterly

Wage and Unemployment Insurance. The commenter then points out that the

rule only defines reporting requirements with respect to Quarterly Wage

and Unemployment Insurance. The commenter's recommendation is that it

be made more clear that this rule does not address New Hire reporting

requirements. They also suggest that the Rule ought to indicate where

New Hire reporting provisions are located.

Response: The phrase ``the three new statutory reporting

requirements'' refers to the code sections cited in the first paragraph

under Statutory Authority, all of which relate to Quarterly Wage and

Unemployment Insurance reporting. It is understandable that this

reference may be confusing, so we have added semi-colons between the

three cites in that section. We have also revised the phrase to read

``the three new statutory wage and unemployment claims reporting

requirements''. It is also made clear within the body of the commentary

that Quarterly Wage and Unemployment Insurance reporting are the areas

covered by the rule. As this rule relates only to Quarterly Wage and

Unemployment Insurance, it is not appropriate to give a reference to a

third program in the body of the rule.

4. Comment: Two commenters stated that, while it is clear from the

description section, the rule itself is not sufficiently clear that the

State is not required to collect additional information to fulfill the

requirements of the rule. One commenter also wished to point out that

OCSE does not have the authority to propose collection of additional

information by State Employment Security Agencies. The recommendation

is that the rule be clarified.

Response: We believe that 303.108(b) makes it clear that the States

are to report information ``that is collected pursuant to a State's

unemployment compensation program.'' The rule does not call for a State

to collect any additional information.

5. Comment: One commenter noted the differences in time frames

between quarterly wage information and unemployment insurance

information (four months after the end of the reporting quarter and one

month after the end of the reporting quarter, respectively). The

commenter stated that it is their understanding that this time does not

imply that the States must undertake any new processing effort. A

second commenter believes that four months is too long to allow for

submission, and that the data will be stale after that amount of time.

Response: The key considerations in determining the time period for

reporting quarterly wages were accuracy

[[Page 36189]]

and timeliness. Currently, State laws generally allow employers one

month following the reporting period to report quarterly wages to the

State agency administering the unemployment compensation program. The

time period for reporting quarterly wages was determined so that States

would have adequate time to input, extract, format and edit the

information. Given the necessity and importance of maintaining accurate

wage data in the NDNH, the schedule for reporting ensures that States

have time to work with employers to correct inaccurate wage reports and

to submit complete and comprehensive wage information on employees

within a State. In response to the one comment that the time period is

too long, it is important to remember that quarterly wage information

exists for individuals who have been employed at the same job for a

period of time. New hire reporting will provide States with data on

newly-employed individuals within approximately a month or less from

the date of hire (exact time depends on State law).

6. Comment: One commenter pointed out that while the State

Departments of Labor are responsible for collecting and reporting this

data, the child support agency is held accountable if the Department of

Labor does not comply. The commenter pointed out that this may be

beyond their control.

Response: Both agencies will be held accountable for failure to

comply. The child support agency will be held accountable through the

State Plan process. Under section 454(28) of the Act, the State Plan

must provide for the operation of a State Directory of New Hires

(SDNH). Section 453A(g)(2)(b) requires the SDNH to transmit quarterly

wage and unemployment insurance information to the NDNH. Thus, the

child support statute directly places the responsibility for reporting

the necessary information on the SDNH. Failure to report could result

in disapproval of the State Plan, and put federal funding of the State

program at risk.

Similarly, section 3304(a)(16) of the Internal Revenue Code of 1986

contains requirements that must be included in State Unemployment

Compensation laws for employers in the State to receive Federal

Unemployment Tax credits. Section 316(g) of Public Law 104-193 amended

section 3304(a)(16) of the Internal Revenue Code of 1986 to provide

that the wage and unemployment compensation information contained in

the records of the State agency administering that program shall be

furnished to the Secretary of Health and Human Services, in accordance

with regulations promulgated by the Secretary, as may be necessary for

the purposes of the NDNH under section 453(i)(1) of the Act. Thus, the

State Employment Security Agency may lose its certification by the

Secretary of Labor for failure to submit the required information.

The provision of quarterly wage and unemployment insurance

information to the NDNH is anticipated to be a cooperative effort

between two agencies; in some States the information will be provided

by one agency and submitted by another. Both agencies will by held

accountable.

7. Comment: One commenter pointed out that the rule does not

address the fundamental issues of confidentiality and security of the

data to be provided.

Response: Under section 453A(g)(2)(B) the Secretary of the

Department of Health and Human Services is required to identify the

dates, format, and data elements necessary for quarterly wage and

unemployment compensation data. In coordination with the President's

Regulatory Reinvention Initiative, OCSE's intent is only to regulate

where required by statute, thus reducing the regulatory burden on

states; therefore the rule only covers the required areas. However,

OCSE is committed to the confidentiality and security of data under

this program, and is required to guarantee its ``integrity and

security'' under section 453(m) of the Act. Our security approach

covers policies and procedures, computer and data transmission systems,

physical access, and the integrity of the staff who have access to the

data or systems.

Only authorized persons, as defined in Federal law, may request

access to information in the NDNH. (See sections 453 and 463 of the

Act.) In accordance with section 453(b)(2) of the Act, the security

plan for the NDNH incorporates specific safeguards to prevent the

disclosure of information in cases where domestic violence is indicated

and disclosure could be harmful to the parent or child, or where

disclosure would contravene national policy or security interests, or

to protect the confidentiality of census data.

The NDNH is physically housed at the Social Security

Administration's (SSA) National Computer Center (NCC) in Baltimore, MD.

SSA takes extensive measures to ensure the physical and electronic

security of its data processing facilities. SSA uses state of the art

technology to restrict physical and electronic access to information,

limiting it to personnel specifically authorized by OCSE and SSA and to

specific functions. New Hire, Quarterly Wage and Unemployment Insurance

data are transmitted to the NDNH via several methods, including SSA's

leased-line CONNECT:Direct network and transportable electronic media,

such as cartridge tapes. While the measures vary according to the

transmission method, OCSE and SSA have taken specific steps to ensure

the security of data during transmission, including a clear chain of

custody and secure locked storage for physical media.

The NCC is regularly reviewed and monitored by outside security

auditors who report any concerns, violations or breaches in security to

SSA's Security Officer. Staff who have access to sensitive data are

assigned security level designations. In addition, all staff associated

with the NDNH are required to undergo background checks. Staff sign

non-disclosure agreements, and are subject to fines and imprisonment

for misuse of data. (See 5 U.S.C. sec 552a(i) and 18 USC sec 1905.)

States are required by law to implement safeguards that are similar

to those at SSA and OCSE under section 454A(d) of the Act. These are

designed to protect the privacy rights of individuals, and prevent the

unauthorized disclosure of information. State agencies and systems are

audited, reviewed, or certified by a variety of Federal agencies

including the Internal Revenue Service, Department of Labor, DHHS'

Office of State Systems, and SSA. SSA and NDNH security plans fully

document the approach summarized here.

8. Comment: One commenter stated that the rule fails to address the

right to privacy of individuals whose information is to be disclosed,

especially privacy of social security numbers.

Response: OCSE recognizes that the right to privacy is of the

utmost importance, not only in regards to social security numbers, but

for all the information that is to be reported to the expanded Federal

Parent Locator Service. For that reason access to the information in

the database is very strictly limited (see section 453(m) of the Act.)

While it would be optimal if social security numbers did not need to be

disclosed, it would not be possible to obtain the necessary accuracy of

data without social security numbers. This is especially true because

some States do not collect the individual's name at all for quarterly

wage, so a social security number is the only identifier for the

individual. The number is absolutely essential for the program to

function, and every precaution is being taken to

[[Page 36190]]

be sure that the information is kept confidential.

9. Comment: One commenter stated that the definitions given are

inconsistent with existing income eligibility and verification system

data element definitions, and that any rules should be issued jointly

with the Federal Department of Labor in order to ensure consistency.

Response: The definitions, while worded slightly differently and in

slightly different order, are consistent with the definitions under the

Income Eligibility Verification System. Any differences have more to do

with the required reporting period than any difference in intent. If

anything, the definitions given in this rule are more specific. For

instance, this rule asks for ``aggregate gross amount of compensation

the claimant received during the reporting quarter'' rather than ``the

amount of compensation the individual is receiving or entitled to

receive.'' Under 453A(g)(2)(B) of the Act, the Secretary of the

Department of Health and Human Services is required to issue the rule.

Paperwork Reduction Act of 1995

Sections 453A(g)(2)(B) and 303(h) of the Act and section

3304(a)(16) of the Internal Revenue Code of 1986 contain information

collection requirements. As required by the Paperwork Reduction Act of

1995 (44 U.S.C. 3507(d)), this request for approval of a new

information collection has been approved by Office of Management and

Budget as of November 26, 1997 under OMB control number 0970-0166.

Because all quarterly wage and unemployment compensation claims

data will be reported from the State to the NDNH electronically and

will be limited to data already being collected, the burden on the

States will be minimal. The average burden per response is estimated to

be 2 minutes (.03 hours). States may also have a one-time initial

start-up burden of two weeks (80 hours) for reprogramming their systems

to comply with Federal reporting requirements. The total annual

reporting and recordkeeping burden that will result from the collection

of information is estimated to be 7.13 hours.

Regulatory Flexibility Analysis

The Secretary certifies, under 5 U.S.C. 605(b), as enacted by the

Regulatory Flexibility Act (Pub. L. 96-354), that this rule will not

result in a significant impact on a substantial number of small

entities. The primary impact is on State governments. State governments

are not considered small entities under the Act.

Executive Order 12866

Executive Order 12866 requires that regulations be reviewed to

ensure that they are consistent with the priorities and principles set

forth in the Executive Order. The Department has determined that this

rule is consistent with these priorities and principles. The rule

implements the statutory provisions by specifying the wage and

unemployment compensation claims information that must be reported to

the Secretary of Health and Human Services.

Unfunded Mandates Act

Section 202 of the Unfunded Mandates Reform Act of 1995 requires

that a covered agency prepare a budgetary impact statement before

promulgating a rule that includes any Federal mandate that may result

in the expenditure by state, local, and Tribal governments, in the

aggregate, or by the private sector, of $100 million or more in any one

year.

The Department has determined that this rule would not impose a

mandate that will result in the expenditure by State, local, and Tribal

governments, in the aggregate, or by the private sector, of more than

$100 million in any one year.

List of Subjects in 45 CFR Part 303

Child support, Grant programs/social programs, Reporting and

recordkeeping requirements.

(Catalog of Federal Domestic Assistance Programs No. 93.563, Child

Support Enforcement Program)

Dated: March 18, 1998.

Olivia A. Golden,

Assistant Secretary for Children and Families.

Approved: April 28, 1998.

Donna E. Shalala,

Secretary, Department of Health Human Services.

For the reasons discussed above, title 45 CFR Chapter III is

amended as follows:

PART 303--STANDARDS FOR PROGRAM OPERATIONS

1. The authority citation of Part 303 continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660, 663, 664, 666, 667,

1302, 1396a(a)(25), 1396(d)(2), 1396b(o), 1396b(p) and 1396(k).

2. A new Sec. 303.108 is added to read as follows:

Sec. 303.108 Quarterly wage and unemployment compensation claims

reporting to the National Directory of New Hires.

(a) What definitions apply to quarterly wage and unemployment

compensation claims reporting? When used in this section:

(1) Reporting period means time elapsed during a calendar quarter,

e.g. January-March, April-June, July-September, October-December.

(2) Wage information means:

(i) The name of the employee;

(ii) The social security number of the employee;

(iii) The aggregate wages of the employee during the reporting

period; and

(iv) The name, address (and optionally, any second address for wage

withholding purposes), and Federal employer identification number of an

employer reporting wages.

(3) Unemployment compensation or claim information means:

(i) Whether an individual is receiving, has received or has applied

for unemployment compensation;

(ii) The individual's name and current (or most recent) home

address;

(iii) The individual's social security number; and

(iv) The aggregate gross amount of compensation the claimant

received during the reporting quarter.

(b) What data must be transmitted to the National Directory of New

Hires?

The State shall disclose quarterly, to the National Directory of

New Hires, wage and claim information as defined in paragraph (a) of

this section that is collected pursuant to a State's unemployment

compensation program referenced in Title III of the Act or pursuant to

section 1137 of the Act.

(c) What time frames apply for reporting quarterly wage and

unemployment compensation claims data?

The State shall report wage information for the reporting period no

later than the end of the fourth month following the reporting period.

The State shall report claim information for the reporting period no

later than the end of the first month following the reporting period.

(d) What reporting formats will be used for reporting data?

The State must use standardized formats established by the

Secretary of Health and Human Services for reporting wage and claim

information.

[FR Doc. 98-17652 Filed 7-1-98; 8:45 am]

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