[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


COMPLEXITIES AND CHALLENGES OF SOCIAL SECURITY COVERAGE AND PAYROLL TAX 
               COMPLIANCE FOR STATE AND LOCAL GOVERNMENTS

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                  AND

                       SUBCOMMITTEE ON OVERSIGHT

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 29, 2017

                               __________

                          Serial No. 115-SS04

                               __________

         Printed for the use of the Committee on Ways and Means
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]   


                    U.S. GOVERNMENT PUBLISHING OFFICE                    
33-479                      WASHINGTON : 2019                     
          
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                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California              SANDER M. LEVIN, Michigan
PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
LYNN JENKINS, Kansas                 RON KIND, Wisconsin
ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
KENNY MARCHANT, Texas                JOSEPH CROWLEY, New York
DIANE BLACK, Tennessee               DANNY DAVIS, Illinois
TOM REED, New York                   LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania             BRIAN HIGGINS, New York
JIM RENACCI, Ohio                    TERRI SEWELL, Alabama
PAT MEEHAN, Pennsylvania             SUZAN DELBENE, Washington
KRISTI NOEM, South Dakota            JUDY CHU, California
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
TOM RICE, South Carolina
DAVID SCHWEIKERT, Arizona
JACKIE WALORSKI, Indiana
CARLOS CURBELO, Florida
MIKE BISHOP, Michigan

                     David Stewart, Staff Director

                 Brandon Casey, Minority Chief Counsel

                                 ______

                    SUBCOMMITTEE ON SOCIAL SECURITY

                      SAM JOHNSON, Texas, Chairman

TOM RICE, South Carolina             JOHN B. LARSON, Connecticut
DAVID SCHWEIKERT, Arizona            BILL PASCRELL, JR., New Jersey
VERN BUCHANAN, Florida               JOSEPH CROWLEY, New York
MIKE KELLY, Pennsylvania             LINDA SANCHEZ, California
JIM RENACCI, Ohio
JASON SMITH, Missouri

                                 ______

                       SUBCOMMITTEE ON OVERSIGHT

                    VERN BUCHANAN, Florida, Chairman

DAVID SCHWEIKERT, Arizona            JOHN LEWIS, Georgia
JACKIE WALORSKI, Indiana             JOSEPH CROWLEY, New York
CARLOS CURBELO, Florida              SUZAN DELBENE, Washington
MIKE BISHOP, Michigan                EARL BLUMENAUER, Oregon
PAT MEEHAN, Pennsylvania
GEORGE HOLDING, North Carolina

 
                            C O N T E N T S

                               __________
                                                                   Page

Advisory of June 29, 2017 announcing the hearing.................     2

                               WITNESSES

Marianna LaCanfora, Acting Deputy Commissioner, Office of 
  Retirement and Disability Policy, Social Security 
  Administration.................................................     8
Sunita Lough, Commissioner, Tax Exempt and Government Entities 
  Division.......................................................    19
Maryann Motza, Ph.D., Legislative Committee Chair and Past 
  President, National Conference of State Social Security 
  Administrators.................................................    27

                        QUESTIONS FOR THE RECORD

Questions from The Honorable Sam Johnson and Vern Buchanan, to 
  Marianna LaCanfora.............................................    59
Questions from The Honorable Jim Renacci, to Marianna LaCanfora..    60
Questions from The Honorable Sam Johnson and Vern Buchanan, to 
  Sunita B. Lough................................................    70
Questions from The Honorable Tom Rice, to Sunita B. Lough........    71
Questions from The Honorable Sam Johnson and Vern Buchanan, to 
  Maryann Motza..................................................    78
Questions from The Honorable Tom Rice, to Maryann Motza..........    80
Questions from The Honorable Jim Renacci, to Maryann Motza.......    83

                   PUBLIC SUBMISSIONS FOR THE RECORD

Rincon Band of Luiseno Indians, statement........................   105

 

COMPLEXITIES AND CHALLENGES OF SOCIAL SECURITY COVERAGE AND PAYROLL TAX 
               COMPLIANCE FOR STATE AND LOCAL GOVERNMENTS

                              ----------                              


                        THURSDAY, JUNE 29, 2017

             U.S. House of Representatives,
                       Committee on Ways and Means,
            Subcommittee on Social Security, joint with the
                                 Subcommittee on Oversight,
                                                    Washington, DC.
    The subcommittees met, pursuant to call, at 10:00 a.m., in 
Room 1100, Longworth House Office Building, Hon. Sam Johnson 
[chairman of the Subcommittee on Social Security] presiding.
    [The advisory announcing the hearing follows:]
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    Chairman JOHNSON. Good morning, and welcome to today's 
hearing on the complexities and challenges of ensuring Social 
Security coverage and payroll tax compliance for State and 
local government employees.
    Before we begin, I would like to take a moment to say a few 
words about my friend and former Social Security Subcommittee 
Chairman Jim Bunning. You remember him?
    Mr. LARSON. Absolutely.
    Chairman JOHNSON. Sadly, Jim passed away just a few weeks 
ago. Chairman Bunning was a member of the Ways and Means 
Committee for four Congresses, and he chaired this 
Subcommittee. While many will remember Chairman Bunning as a 
baseball Hall of Famer--who pitched two no-hitters, by the 
way--I will always remember him as the guy who showed me the 
ropes on serving as Chairman on Social Security.
    Among many other bills, he introduced the Rehabilitation 
and Return to Work Opportunity Act of 1996, that ultimately 
became the basis of the Ticket to Work Act of 1999.
    More than 20 years later, this Subcommittee continues to 
look for ways to help those beneficiaries who can return to 
work. And I look forward to having another hearing on that 
topic later this year.
    Jim Bunning was a patriot, a strong supporter of Social 
Security, and a friend. We are thankful for his service and 
keep his wife, Mary, and all his family in our prayers.
    Turning back to today's hearing, usually when we talk about 
State and local workers and Social Security, we talk about how 
many of them aren't covered by Social Security. But today we 
are going to focus on the close to three-quarters of State and 
local workers who are covered and figuring out why their Social 
Security coverage and payroll tax compliance is so complicated.
    When Social Secuity was created, State and local government 
employees were excluded due to constitutional concerns. Over 
time the law was changed to allow State and local governments 
to extend Social Security coverage to their employees. Today, 
all States have at least some employees who are covered by 
Social Security and pay Social Security taxes on their 
earnings. But who is covered can vary by State and even 
locality.
    With all this complexity, it is up to Social Security, the 
IRS, and the States to work together to get it right. But as we 
will hear, that doesn't always happen.
    Back in 2010, the Government Accountability Office found 
that both Social Security and the IRS have trouble identifying 
problems with Social Security coverage for State and local 
government employees and, instead, must rely on public 
employers to ensure compliance. Not much has changed, has it?
    Social Security still does not have the ability to verify 
that State and local governments are properly reporting wages 
for covered workers, and the IRS still doesn't know whether the 
employer has reported and paid the correct amount of payroll 
tax without doing an audit. Even though payroll taxes are the 
biggest tax most people pay, efforts to improve compliance 
generally focus on other taxes.
    These problems, like the one in Missouri that we will hear 
about today, can go undetected for years and have real 
consequences for Americans' retirement security and for Social 
Security's Trust Funds. If someone thinks they are covered, but 
aren't, according to Social Security they may not qualify for 
the Social Security benefits that they have been counting on. 
And if an individual receives benefits without having paid the 
correct amount of Social Security tax, the Social Security 
Trust Funds and taxpayers are left to make up the difference.
    Let me be clear. The answer here isn't mandatory coverage, 
but Social Security and the IRS need to get their act together. 
At the end of the day, we need to be sure that State and local 
employees pay the right amount of taxes and receive the Social 
Security benefits they are counting on, and that the Social 
Security Trust Funds get the taxes that they are owed. The 
American people deserve nothing less.
    I thank our witnesses for being here today, and I look 
forward to hearing their testimony.
    I now recognize Mr. Larson for his opening statement.
    Mr. LARSON. Thank you, Mr. Chairman.
    And thank you Chairman Buchanan and my distinguished 
colleague, Mr. Lewis.
    I would like to welcome back Chairman Johnson. As often as 
I get to say this, I will, but to be seated at this dais 
between two iconic American heroes in Sam Johnson and John 
Lewis is in and of itself, I think for every member of this 
committee and the body in general, an honor to serve with 
perhaps two of the greatest Americans in the history of our 
Nation.
    With that, Mr. Chairman, I am also going to renew my 
pledge--or request, I would say, is better put--to have a 
hearing down in Plano, Texas. Inasmuch as--and I know you have 
had hearings there before--but inasmuch as this is your last 
term, I only think it fitting that we have a hearing down in 
Plano, Texas, preferably during the winter up here, but I am 
not saying--whenever you call for that.
    Chairman JOHNSON. Thank you.
    Mr. LARSON. Listen, also, a sad note on Jim Bunning. I 
would also like to note, not of the stature of Jim Bunning, but 
equally important to me and many people in the State of 
Connecticut, Lillian Marlow passed last evening as well. Not 
known to many at this dais.
    She was, like so many people who work on this staff, just 
an extraordinary person who kept government running with her 
hard work and wit and dedication. And I just wanted to 
recognize her here today.
    Social Security is important to all Americans. And as I 
like to say when we are out talking about it, where could you 
find in the private sector guaranteed retirement income that 
cannot be outlived, protection in the event of a career-ending 
disability, life insurance for families of a worker who dies, a 
full cost-of-living adjustment to combat the effects of 
inflation? Social Security is also portable and goes with you 
everywhere. There simply is nothing on the private sector 
market that can even remotely come close to touching Social 
Security.
    Today, 94 percent of workers in the United States are 
covered by Social Security. They and their employers contribute 
to the trust fund and earn their benefits with every paycheck, 
with half of the contributions coming from the employee and 
half coming from the employer, the employer side being tax 
deductible. But it is the responsibility of the employer to 
ensure that they are in compliance with payroll taxes.
    The only large group of workers that are outside Social 
Security are some State and local government workers who have 
their own pension plan in place of Social Security. About 
three-quarters of the State and local workers participate in 
Social Security, but about a quarter don't. In my own State of 
Connecticut, teachers have a separate retirement plan and are 
not participating in Social Security, but they have an 
alternative plan that they pay for, regardless.
    The fundamental principle is one way or another, every 
American should have basic retirement coverage at work. Our job 
today is to make sure that that is the case.
    For the 90,000 units of State and local government in the 
United States, it can be complicated sometimes to determine 
which employees are participating in Social Security and who 
pays into the State plan, as Mr. Johnson has already outlined. 
But when mistakes are made, workers' financial security is at 
stake.
    That is why this hearing today is so vitally important. I 
thank our witnesses for being here.
    It is also why we have introduced the Social Security 2100 
Act, because we believe so strongly that Social Security needs 
to be expanded and needs to be made solvent into the next 
century, and so that it is there for every single American and 
providing the kind of benefits with the greatest efficiency.
    And with that, Mr. Chairman, I will yield back my time. 
And, again, it is great to see you.
    Chairman JOHNSON. Thank you. I appreciate that. Thank you 
very much.
    Would you like to make an opening statement?
    Chairman BUCHANAN. Yes. Thank you, Mr. Chairman.
    And I also would like to comment on Jim Bunning. As a young 
kid growing up in Detroit, he was a hero to a lot of us. He was 
an incredible pitcher. And I know he served here in Congress. 
So I share your thoughts with him.
    Good morning. I want to thank the panel for coming today 
and I look forward to the hearing. I also want to thank 
Chairman Johnson for his important oversight work.
    Today we are looking to better understand the challenge 
that State and local governments face when applying Social 
Security coverage to their workers. While many states and local 
government workers rely on their own retirement plans, others 
rely on Social Security through voluntary arrangements between 
the State and the Social Security Administration.
    Giving states flexibility on coverage decisions is 
important. However, it often leads to complication, individual 
coverage situations for State and local employees. This creates 
a unique challenge for State and local employees as well as the 
Social Security Administration, and the IRS, who oversees these 
programs.
    Nearly 70 percent of the $3.3 trillion collected by the IRS 
comes from employment-related taxes, like those for Social 
Security and Medicare. These contributions must be accurate.
    However, the complexity of the coverage issue for State and 
local governments requires a combined effort in terms of the 
Social Security Administration, the IRS, and the Social 
Security administrators to provide State and local employers 
with appropriate guidance and oversight.
    I look forward to the hearing, and also look forward to our 
witnesses, so we can assist them to ensure that we better work 
together. Also, I would like to just add, I want to make sure 
that the information we get today, that we can clearly work 
with you.
    I yield back.
    Chairman JOHNSON. Thank you, sir.
    I now recognize Mr. Lewis for any opening statement you 
wish to make.
    Mr. LEWIS. Thank you very much, Mr. Chairman.
    Chairman Johnson, Chairman Buchanan, Ranking Member Larson, 
and fellow members, good morning. And good morning to our 
witnesses. Thank you for being here.
    Chairman Johnson, thank you for remembering Jim Bunning. We 
came in the same class.
    Chairman JOHNSON. Did you?
    Mr. LEWIS. In the same class. Wonderful, wonderful man. He 
played well, baseball well, but he played well as a Member of 
the House and the Senate. And our prayers go out to his family.
    Every working American should have basic retirement 
coverage. This can be provided through Social Security or 
through a State's retirement system for public sector 
employees. These benefits help ensure that Americans maintain a 
basic standard of living during their retirement.
    Ninety-four percent of American workers receive their basic 
retirement coverage through Social Security. However, about six 
million State and local government employees do not. These 
workers participate in their State's retirement system and 
generally include teachers, firefighters, and police officers. 
In my home State of Georgia, more than 180,000 State and local 
employees are not covered by Social Security.
    State and local governments often have their own retirement 
system. However, these governments have the option to enter 
into voluntary agreements with the Social Security 
Administration to have their employees covered by Social 
Security. If a local government decides to provide coverage 
through Social Security, its employees must pay Federal payroll 
taxes just like every other American worker.
    Today's hearing will look at how Federal and State agencies 
work together to provide Social Security coverage to State and 
local government employees and ensure compliance with payroll 
tax requirements. We will learn from the witnesses more about 
how the Internal Revenue Service, the Social Security 
Administration, and State Administrators work together to 
ensure governments comply with payroll tax requirements.
    I look forward to receiving recommendations from all of our 
witnesses on how to improve compliance. And, again, I want to 
thank you for being here this morning.
    I yield back, Mr. Chairman.
    Chairman JOHNSON. Thank you.
    As is customary, any Member is welcome to submit a 
statement for the hearing record.
    Before we move on to our testimony today, I want to remind 
our witnesses to please limit your oral statements to 5 
minutes. However, without objection, all of the written 
testimony will be made a part of the hearing record.
    We have three witnesses today. Seated at the table are 
Marianna LaCanfora, Acting Deputy Commissioner, Office of 
Retirement and Disability Policy, Social Security 
Administration.
    Sunita Lough, Commissioner, Tax Exempt and Government 
Entities Divison, Internal Revenue Service.
    Maryann Motza, Legislative Committee chair and past 
president, National Conference of State Social Security 
Administrators.
    Please proceed, Ms. LaCanfora.

 STATEMENT OF MARIANNA LACANFORA, ACTING DEPUTY COMMISSIONER, 
  OFFICE OF RETIREMENT AND DISABILITY POLICY, SOCIAL SECURITY 
                         ADMINISTRATION

    Ms. LACANFORA. Chairman Johnson, Chairman Buchanan, Ranking 
Member Larson, Ranking Member Lewis, and members of the 
subcommittees, thank you for inviting me to discuss Social 
Security coverage for State and local employees. I am Marianna 
LaCanfora, Social Security's Acting Deputy Commissioner for 
Retirement and Disability Policy.
    About 94 percent of employees in the United States are 
covered by Social Security. That is, they pay Federal Insurance 
Contributions Act, or FICA, taxes on their earnings up to a 
certain limit. Those earnings can qualify them and their 
families for benefits under our retirement, disability, and 
survivors insurance programs.
    There are approximately 23 million State and local 
employees, and about one-fourth of them are not covered by 
Social Security. My written testimony provides the long history 
of coverage-related laws for this group. But in short, when 
Social Security was enacted in 1935, no State or local 
employees were covered.
    Over time, Congress amended the Social Security Act to 
allow States to decide whether to cover employees who fall 
under a State retirement system, and to require coverage for 
those who do not. The method used by the States to establish 
coverage is called a 218 Agreement, after the authorizing 
section of the act. These Agreements specify which positions 
are covered.
    Every State, Puerto Rico, the Virgin Islands, and 60 
interstate instrumentalities have a 218 Agreement with us. Over 
the years, each Agreement has been modified numerous times as 
political subdivisions, positions, and retirement systems have 
been created and as groups of employees have petitioned their 
States to obtain Social Security coverage.
    Under current law, there is tremendous variability in which 
positions are covered between and even within the same State. 
For example, if two teachers are working in the same position 
in the same school district, one might be covered while the 
other is not.
    Each State and local employer is responsible for applying 
the terms of their State's 218 Agreement, accurately reporting 
earnings to SSA, and appropriately withholding FICA taxes for 
covered employees.
    Each State has a designated State Social Security 
Administrator. This State official is critical in ensuring that 
the State get its employees' coverage status right. The 
Administrator performs many functions, such as being the point 
of contact with the SSA and the IRS, interpreting the 218 
Agreement, and educating State employers and employees. They 
also hold referendums and notify us of the creation or 
dissolution of State entities.
    The IRS also plays a critical role in this process by 
performing compliance checks to ensure that States have 
appropriately withheld and remitted FICA taxes for covered 
employees.
    Given the complexity involving State and local employee 
coverage, it is no surprise that employers sometimes make 
mistakes. SSA is committed to working closely with our State 
partners and the IRS to provide the tools and training that 
States need to get these decisions right from the start and to 
address issues when they arise.
    I would like to highlight some of the actions SSA has taken 
to improve this process since GAO's last review.
    We worked with the IRS to develop a tool that States can 
use to ensure compliance with Federal tax requirements. We 
designated an employee in each of our regional offices to serve 
as an expert and point of contact. We scanned nearly all of our 
agreements and modifications, including tens of thousands of 
pages, into a central database to allow for ease of access and 
search.
    We modernized the system our employees use to resolve 
differences between the earnings reports sent to SSA and the 
IRS. We updated and clarified our policy guidance based on our 
experience and feedback from State Administrators. We developed 
comprehensive training materials and resources for the 
Administrators and provided training sessions to State and 
local employees.
    We established standing meetings with representatives from 
the IRS and the National Conference of State Social Security 
Administrators to share information and best practices and 
identify challenges and solutions to issues that arise.
    In addition, we recently started a project to compile and 
maintain lists of covered positions based on the 218 
Agreements, which will be a valuable tool and quick reference 
for the Administrators to identify coverage issues. We are also 
reviewing our regulations to identify areas that we might 
streamline or clarify.
    We remain open to ideas regarding how to further enhance 
our valuable relationship with the States and the IRS as we 
work together on these issues.
    Thank you for the opportunity to describe the history and 
complexity of Social Security coverage for State and local 
employees. I would be happy to answer any questions.
    [The prepared statement of Marianna LaCanfora follows:]
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    Chairman JOHNSON. Thank you, ma'am.
    Ms. Lough, welcome. Please, proceed.

    STATEMENT OF SUNITA LOUGH, COMMISSIONER, TAX EXEMPT AND 
                  GOVERNMENT ENTITIES DIVISION

    Ms. LOUGH. Chairman Johnson, Chairman Buchanan, Ranking 
Member Larson, Ranking Member Lewis, and members of the 
subcommittees, thank you for the opportunity to testify on 
issues surrounding the proper withholding and payment of Social 
Security and Medicare taxes in regard to State and local 
government employees.
    Mandatory Social Security and Medicare coverage for State 
and local employees is a relatively recent development. Under 
the original Social Security Act of 1935, State and local 
government employees were excluded from Social Security 
coverage. Beginning in 1951, States were allowed to enter into 
voluntary agreements with the Federal Government to provide 
Social Security coverage to public employees. These 
arrangements are called Section 218 agreements because they are 
authorized by the Section 218 of the Social Security Act.
    In 1991, Congress made Social Security coverage mandatory 
for State and local government employees who were not already 
covered by a Section 218 agreement. But this mandate does not 
apply to employees participating in a qualifying public 
retirement system sponsored by their government employer. So 
today Social Security coverage of Government employees varies 
greatly among State and local employers.
    In general, employers are required to withhold Social 
Security and Medicare taxes from employees' wages and also pay 
the employer's share of these taxes. Employers are responsible 
for furnishing Form W-2 Wage and Tax Statement annually to each 
employee when income, Social Security, or Medicare tax was 
withheld. Employers above a certain size report quarterly to 
the IRS on total wages, wages subject to Social Security and 
Medicare taxes, and Federal income taxes using the Form 941, 
Employer's Quarterly Federal Tax Return. Smaller employers file 
annually using Form 994, Employer's Annual Federal Tax Return.
    For State and local employers, determining proper 
withholding of FICA taxes for employees is especially 
challenging because some or all employees may or may not be 
covered by Social Security. For example, a school district may 
provide a qualifying retirement system only for a particular 
group of employees who meet certain criteria, not just 
teachers, making that group of employees exempt from Social 
Security coverage.
    The IRS has the responsibility for ensuring that all 
employers, both public and private, properly withhold and pay 
Social Security and Medicare taxes for their employees. The IRS 
and the SSA routinely match Social Security and Medicare wages 
on Form 941 with amounts reported on Form W-3, the Transmittal 
of Wage and Tax Statements, and follow up where there are 
discrepancies.
    In addition, the IRS reviews employment tax return 
information to classify returns for potential discrepancies 
that would indicate compliance action should be taken, 
including an audit. The IRS, through our Federal, State, and 
local function, has provided extensive outreach services and 
training to units of State and local governments. As indicated 
above, we conduct audits to evaluate employment tax and 
information reporting compliance at the State and local level.
    The IRS also works with the SSA and State Social Security 
administrators on an ongoing basis on significant issues 
related to Social Security and Medicare coverage of public 
employees. This includes coordinating, when necessary, with the 
SSA or State Administrators when there is an audit of a public 
employer.
    We look forward to continuing collaboration with State and 
local government employers, the SSA, and the State Social 
Security Administrator, to ensure that Social Security earnings 
are accurately reported for public employers.
    This concludes my statement. I would be happy to answer 
your questions.
    [The prepared statement of Sunita Lough follows:]
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    Chairman JOHNSON. Thank you, ma'am.
    Ms. Motza, is that correct pronunciation?
    Ms. MOTZA. It is Motza, but that is close enough.
    Chairman JOHNSON. Thank you. You are recognized. Please, 
proceed.

STATEMENT OF MARYANN MOTZA, PH.D., LEGISLATIVE COMMITTEE CHAIR 
    AND PAST PRESIDENT, NATIONAL CONFERENCE OF STATE SOCIAL 
                    SECURITY ADMINISTRATORS

    Ms. MOTZA. Thank you.
    Chairman Johnson, Chairman Buchanan, Ranking Member Larson, 
Ranking Member Lewis, and members of both subcommittees, thank 
you for inviting the National Conference of State Social 
Security Administrators, or NCSSSA, to testify about the 
States' perspectives on Social Security coverage and payroll 
tax compliance by State and local government.
    To supplement our written testimony, I want to provide 
Members of Congress with a couple of examples of the types of 
issues and concerns the State Social Security administrators 
deal with.
    A small town calls the State Administrator in utter panic. 
The IRS' service center in Cincinnati is about to seize all of 
the town's police and fire vehicles for failure to pay FICA on 
their police officers and firefighters. The service center 
assumes Social Security payments were owed based on its review 
of 941 filings.
    The State Administrator's record show that a town has a 
Section 218 agreement that covers civilian employees under 
Social Security, but excluded police officers and firefighters. 
The State Administrator intervenes and provides the accurate 
coverage and tax obligation information to the IRS, and they 
reverse their erroneous assessment. The town can continue 
protecting and serving the public.
    Another example is that in the early 1950s a State provides 
public pension plan coverage for their employees, but not for 
employees of its cities and towns. State legislature authorizes 
voluntary Social Security coverage for employees of cities and 
towns. The city of last resort enters into a Section 218 
agreement in 1954. In 1961, the State legislature establishes a 
separate public pension plan for employees of cities and towns.
    The next year, the city asked the State Administrator to 
file the necessary paperwork with the Social Security 
Administration to withdraw from the Section 218 agreement so 
they can join the new public pension plan. SSA approves the 
withdrawal from Social Security in 1965. If the city had waited 
to request permission to withdraw until the mid-1980s, the 
State Administrator would not have even contacted SSA and 
instead would have advised the city that withdrawal from Social 
Security was no longer an option.
    These two examples show how the State Administrator is the 
critical bridge or liaison and facilitator between the Federal 
Government, both SSA and IRS, and States, public employers, 
employees, and pension systems. Rather than being a one-way 
street and just sending information from the Federal Government 
down to the State and local governments, the Social Security 
State Administrator is the key conduit of information both 
ways.
    The proper performance of that facilitator role, however, 
has been problematic since 1987, in part because of how the 
Treasury Department and IRS interpreted an IRC Section 6103. 
The State Administrators are no longer aware of noncompliant 
public employers. The lack of communication between the IRS and 
State Administrators results in erroneous Social Security and 
Medicare coverage and benefits, as well as incorrect FICA tax 
assessments by the IRS.
    Since 2012, the IRS has identified approximately 10 major 
risk areas nationwide among State and local governments. The 
IRS cannot, however, tell State Administrators what specific 
issues exist in their individual States. Thus, the State 
Administrator cannot assist the public employers to voluntarily 
comply like they did prior to 1987.
    The valued partnership with SSA also needs to be renewed 
and reinvigorated. Prior to 1987, the States and SSA worked 
closely together to ensure proper coverage and collection of 
contributions. Since 1987, the efficiency and effectiveness of 
that partnership has been erratic and has even at times 
resulted in inconsistent advice from different regional offices 
and the headquarters policy office.
    A further complicating factor is that the Government 
Accounting Standards Board, GASB, disclosure standards and 
other auditing oversight organizational guidance standards do 
not test for Social Security or Medicare. As a result, when 
public employers receive a so-called clean audit, they have no 
idea that a potentially significant noncompliance area isn't 
even being examined. A FICA standard will account for 71 
percent of State and local government employees' earnings 
nationwide that are currently not even reported on financial 
statements.
    In conclusion, the irony of the State Administrator job is 
that when our role is performed properly and completely, it 
gives the impression that either nothing is being done or the 
job is minimal. To me, the job of State Social Security 
administrator is like a duck on a pond, everything looks smooth 
and unlabored on the surface, but underneath you are padding 
like crazy. NCSSSA would appreciate congressional, SSA, 
Treasury Department, and IRS help with the paddling.
    I am happy to answer questions. Thank you.
    [The prepared statement of Maryann Motza follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman JOHNSON. Thank you. I thank you for your 
testimony.
    We will turn to questions now. As is customary for each 
round of questions, I will limit my time to 5 minutes, and I 
will ask my colleagues to also limit their questioning time to 
5 minutes as well.
    Ms. LaCanfora, this clearly is a complicated topic, and I 
want to be sure we all understand Social Security's role in 
this process with a few yes-or-no questions. Our time is 
limited, so just answer yes or no, if you can.
    Is Social Security responsible for making sure that workers 
receive the correct Social Security benefit amount?
    Ms. LACANFORA. Yes.
    Chairman JOHNSON. Is the amount of benefit a worker 
receives based on his average lifetime earnings?
    Ms. LACANFORA. Yes.
    Chairman JOHNSON. And to determine a person's benefit 
accurately, does the person's earnings record need to be 
correct?
    Ms. LACANFORA. Yes.
    Chairman JOHNSON. You have said yes to these questions, and 
it is clear that earnings information is the basis for the most 
important thing Social Security does, paying the right amount 
of benefits to the right person. Yet, in your testimony you say 
Social Security's role in the 218 coverage and compliance 
process is limited.
    Why is your role limited when these processes are at the 
very heart of your mission when it comes to correctly paying 
benefits for State and local workers?
    Ms. LACANFORA. Our role at the Social Security 
Administration is limited only to the extent that we cannot 
operate alone. But our role is both substantive and integral to 
making this process work. We just have to do so in conjunction 
with the IRS and the State Administrator.
    Chairman JOHNSON. So you think the IRS--does the IRS have a 
collar around your neck?
    Ms. LACANFORA. I wouldn't say that, no. I would say it is a 
partnership between the three entities that are here testifying 
today. I think Dr. Motza in her testimony said that the State 
Administrators have a profoundly important role, and I would 
agree with that. the State Administrator role is sort of the 
lynchpin to making this process work. But the Social Security 
Administration, as I said, also has a very substantive integral 
role that we take very seriously.
    Chairman JOHNSON. Okay. Do you think the system is working 
properly right now?
    Ms. LACANFORA. I think, as you will find out through this 
hearing, the statutory construct is extremely complicated, 
making it a challenge to administer perfectly, and thus, 
employers do make mistakes in this area. And I am sure that we 
can all improve. But I think we are all doing due diligence to 
make sure that we are having this process work as well as 
possible.
    Chairman JOHNSON. Thank you.
    Ms. LaCanfora, the bedrock of Social Security is that an 
earned benefit, workers pay taxes on their hard-earned wages 
for the promise of future benefits. But in your testimony you 
said what matters is that a worker had earnings, not that they 
properly paid taxes on their earnings. Why is that?
    Ms. LACANFORA. The law stipulates that the way in which we 
credit earnings is based on the money that is earned as opposed 
to the taxes that are paid.
    Chairman JOHNSON. Well, that has to be a drain on the trust 
fund since benefits are being paid without taxes ever being 
received. How often do you think that happens?
    Ms. LACANFORA. I don't know how often we have errors, but I 
think it is safe to say that we uncover them rarely, and when 
we do, we try to address them in collaboration with our 
partners expeditiously.
    Chairman JOHNSON. Mr. Larson, do you care to question?
    Mr. LARSON. Thank you, Mr. Chairman.
    I want to thank all of our witnesses as well.
    And along the same line of questioning that the chairman 
had, Ms. LaCanfora, Social Security is widely known as being 
the most efficient governmental program that we have. I believe 
your loss ratio, a term that is used in the private sector 
frequently, is at 1 percent. Is that correct?
    Ms. LACANFORA. That is a fair characterization.
    Mr. LARSON. Could you explain what that means in terms of 
the delivery of service and what that means in the private 
sector? In the insurance industry in the private sector, they 
say between 70 and 75 percent loss ratio is a good mark to 
achieve.
    Ms. LACANFORA. I think a simple way of explaining it would 
be to say that our administrative expenditures, that is, the 
money that it takes to actually run the agency, hire employees, 
and so forth, our administrative budget is less than 1 percent 
of our outlays or what we pay out in benefits.
    Mr. LARSON. That is correct. And along those same lines, 
and yet, what we have seen consistently is that the budget for 
Social Security has fallen by 10 percent since 2010, while the 
number of beneficiaries, primarily the often referred to baby 
boomers, has increased by 13 percent. Has that placed a strain 
on the ability of Social Security to administer this very 
complicated program that we have been talking about this 
morning?
    Ms. LACANFORA. I think, like all Federal agencies, we have 
challenges. Our objective is really to try to operate as 
efficiently as we can within the constraints of the budgetary 
environment, and to try to automate where we can, and to try to 
improve processes and policies, which I think is what we are 
trying to do today.
    Mr. LARSON. Is there anywhere in the private sector where 
you could pick up an insurance plan that is as comprehensive as 
Social Security?
    Ms. LACANFORA. I am probably not well-qualified to answer 
that question.
    Mr. LARSON. Ms. Lough or Ms. Motza, if you want to answer 
that?
    Ms. LOUGH. I wouldn't know.
    Ms. MOTZA. No.
    Mr. LARSON. I can answer it for you: There is not. But, 
nonetheless, I raised that point because this is an insurance 
program.
    The last time there was a premium increase in this 
insurance program was 1983. I ask everybody in the audience and 
all of our panelists up here, have any of your other insurance 
programs gone up since 1983? Have any of you seen an increase 
in what you have to pay in terms of a premium?
    I think we all know what the answer is, it is a resounding 
yes, they have. And yet, Social Security, what we have managed 
to do, is cut it back in terms of the services that we provide, 
while baby boomers are coming through the process.
    And we know from previous testimony that oftentimes the 
best individuals that are equipped to detect fraud are those 
that are in the front lines, who are in there doing the actual 
screening of citizens that take up Social Security. That is 
why, Ms. Motza, you were able to say that you are like a duck 
that keeps in calm water, but there is an awful lot of paddling 
that goes on underneath.
    The point that I would like to make is this. We do have to 
continue, and I applaud the chairmen, both chairmen, because we 
have to be persistent to make sure that we are wringing out any 
kind of fraud, abuse and waste. But in the process, we 
shouldn't throw the baby out with the bathwater. Meaning, we 
shouldn't be cutting back on quality employees that can 
actually assist and help better navigate these very complicated 
waters and do it in an efficient matter with a 1 percent loss 
ratio that also provides these kinds of benefits.
    And I think when there is a final examination about what 
insurance is, and to look at the fact that there hasn't been an 
increase since 1983, and to understand that if you were making 
$400,000 a year, about six-tenths of 1 percent of the American 
people do, it would cost you less than this Starbucks latte to 
make Social Security solvent into the next century. And I know 
that is a goal of everybody on this committee.
    It is our goal on this side to talk about how we make it 
more efficient, how we root out any kind of fraud and 
inefficiencies, but how also we expand this program, the most 
efficient Government program that is run, so that it assists 
the American people in a way that they have become accustomed 
to, so that no one, especially women, can retire into poverty, 
that they got the COLA that they deserve. And, yeah, even so 
that many seniors, because we haven't indexed this right, get a 
tax break as well.
    And with that, I will yield back my time.
    Chairman JOHNSON. Thank you.
    Mr. Buchanan, you are recognized.
    Chairman BUCHANAN. Thank you, Mr. Chairman.
    And I want to thank our witnesses today.
    Ms. LaCanfora, let me mention, you said, just so I get a 
sense of this, you said that there are 23 million people part 
of this program, now there are 6 million. Explain exactly what 
you mean. There are six million who are still involved where 
the funds are being managed on a State or a local basis? Is 
that what you are referring to?
    Ms. LACANFORA. There are 23 million people who are State or 
local employees in total.
    Chairman BUCHANAN. Okay.
    Ms. LACANFORA. Of that 23 million, about a fourth of them, 
about 6 million, are not covered by Social Security. And the 
reason for that is because the law gives States discretion 
about which of those public employees to cover or not to cover, 
and there is a wide variety of different scenarios across the 
states.
    Chairman BUCHANAN. Okay. So they are paying into some 
various state, county. Who is managing the funds?
    Ms. LACANFORA. Well, all of the public pension systems at 
the State level are different. Some of them are statewide, some 
of them are not, so there is great variation there.
    Chairman BUCHANAN. How big of a problem do you think there 
is? I mean, with someone managing the fund, let's say someone 
puts in their--35 years they pay in--I grew up in the Detroit 
area and Detroit went bankrupt--what happens to the funds and 
what risk does the Federal Government have if somehow it is 
mismanaged or the funds there aren't for a worker's retirement?
    Ms. LACANFORA. I think that might be a question better 
addressed by the IRS.
    Chairman BUCHANAN. Okay. Well, let me ask you.
    Ms. LOUGH. So the State employees, if they are covered by a 
qualifying public retirement plan and they don't have a 218 
agreement, they don't pay into Social Security. So the question 
I think is whether the plan is a qualifying retirement plan or 
is it solvent? I think that is the question.
    Chairman BUCHANAN. The question is, is it solvent? It is 
kind of like what we did with Social Security in the mid-1960s, 
we commingled the funds into general funds and we have a trust 
fund but there is no money in there. What happens locally if it 
gets mismanaged, there is not the funds? What responsibility 
does the Federal Government have with those workers?
    Ms. LOUGH. Just like any other qualifying plan, if it is 
covered by the PBGC or--it is a question of whether it is--it 
is fully funded is----
    Chairman BUCHANAN. In other words, if you have six million 
people with their funds are being managed at the State or local 
level, if somehow they don't get what they expected or what was 
going to be paid out to them over time--that is what happened 
in the Detroit area, my understanding--what happens, what 
responsibility does the Federal Government have, if any?
    Ms. LOUGH. So the IRS looks at the plans to see if they are 
run properly according to the requirements of the Tax Code. But 
if the funds are not properly funded, the responsibility is 
outside the IRS' purview.
    Chairman BUCHANAN. Ms. Motza, let me ask just quickly. You 
mentioned about the firefighters as one example. How big of a 
problem is it for these six million workers?
    I am concerned that at the end of the day they paid in, 
their employer probably paid in, there was some kind of match, 
those funds need to be managed, you want to make sure it is 
there. I agree with my friend, Mr. Larson, that Social 
Security, I think, is one of the best programs on the planet. 
You can count on it.
    I am worried, frankly, about cities, counties, and states 
mismanaging funds and there being some question about whether 
they are going to get paid out. I have seen that happen on a 
local level. So I wanted to get your sense of it. How big of a 
problem or challenge is this?
    Ms. MOTZA. Thank you, Chairman Buchanan. I would be happy 
to address it.
    I actually--one of my hats I wore before I retired from the 
State in January was to serve as a trustee for the Colorado 
Public Employees' Retirement Association, the biggest public 
pension plan in Colorado and one of the biggest in the Nation. 
And we recognized when the financial downturn occurred that the 
way the benefit structure was configured and the contribution 
rates were configured, we couldn't sustain it. And so we 
actually went to our State legislature, we came up with a game 
plan----
    Chairman BUCHANAN. We are going to run out of time. I want 
to ask you one other question along those lines.
    Ms. MOTZA. Okay. But basically most pension funds in the 
Nation are not in dire straits. Unfortunately, Illinois is one 
of the worst----
    Chairman BUCHANAN. Okay. But let's say Illinois has got a 
problem. Do they look to the Federal Government? Does the 
Federal Government, in your opinion, have liability if somehow 
it gets mismanaged for a worker in Illinois?
    Ms. MOTZA. Not that I know of under current law.
    Chairman BUCHANAN. Thank you. I yield back.
    Chairman JOHNSON. Thank you. Good question.
    Mr. Lewis, you are recognized.
    Mr. LEWIS. Thank you very much, Mr. Chairman.
    Let me thank each of you for being here and for your 
testimony.
    My question is for the panel, for each one of you. I 
understand that the Tax Code, Section 6103, does not allow the 
IRS to share the name with the local government, the State 
Administrator when requesting information to ensure payroll 
compliance, tax compliance.
    Would each of you please share with us how the law makes 
compliance difficult?
    Ms. LOUGH. Section 6103 of the code, you are absolutely 
right, doesn't allow us to share--unless there is an exception 
in there--specific taxpayer information with other Federal 
agencies. But there is an exception in 6103 for us to share 
information with the Social Security----
    Mr. LEWIS. You said there is an exception?
    Ms. LOUGH. There is an exception under 6103(l) for us to 
share that with the Social Security Administration, and we do 
share information when it becomes necessary with the Social 
Security Administration with regard to specific public 
employers. But we are not permitted to share that with the 
State Social Security administrators.
    Mr. LEWIS. Ms. Motza, would you like to comment?
    Ms. MOTZA. Yes, please. This is an area that has been 
problematic ever since 1987, since the Federal responsibility 
for FICA tax collection went to the IRS, and previously State 
and local government contributions to Social Security were 
collected by the State Administrator.
    NCSSSA believes that it was inadvertent oversight when the 
Treasury regulations related to 6103 were adopted, because when 
6103 was originally adopted by Congress, the State 
Administrator was collecting the contributions. So it wasn't 
even thought that they would need to have them carved out as a 
separate classification.
    The fact that IRS cannot talk with State Administrators and 
find out what information we have, which is extensive in our 
records, we have lots of interpretative documents and legal 
opinions that don't exist anywhere else. As a matter of fact, 
many of our public employers think that the 218 agreements and 
documents they have can be thrown out. We know they can't be, 
they are permanent binding agreements and all the important 
information is in those files.
    The IRS when they are--because of 6103, they can't reach 
out to us and find out all the coverage requirements for that 
particular entity. It would be far more efficient and effective 
for everybody, including the Federal and State and local 
governments, as well as save taxpayers' dollars, if the IRS was 
able to contact the State Administrator initially, find out 
exactly what the coverage requirements are under that 
particular 218 agreement, and also the particular pension 
systems that exist in that State, and any other nuances that 
exist. They can't do that.
    So it has really been a significant hampering of the 
efficiency and effectiveness of administering this program, in 
my opinion.
    Mr. LEWIS. So you are suggesting that as Members of the 
Congress and members of the Ways and Means Committee, we can 
fix it?
    Ms. MOTZA. You can fix it. You absolutely can, and we would 
definitely appreciate it. And we would encourage you to work 
with the Treasury Department and NCSSSA and all of us. And I 
think everybody on this panel would recognize that that would 
be a vast improvement because it would make all the difference. 
It would save tons of time and effort, and it would reduce the 
error rate dramatically, I am convinced.
    Mr. LEWIS. The other two members of the panel, are you 
prepared to say yes?
    Ms. LOUGH. So implementing the tax law, we implement the 
law as currently written. If it is a matter of policy we defer 
that to the Treasury Department.
    Mr. LEWIS. Thank you very much.
    Do you want to respond?
    Ms. LACANFORA. I think my colleagues summed it up well. I 
would say generally that information sharing is absolutely 
critical to making this process work well.
    Mr. LEWIS. Thank you. I yield back.
    Chairman JOHNSON. Thank you. Thanks for your question.
    Mrs. Walorski, you are recognized.
    Mrs. WALORSKI. Thank you, Mr. Chairman.
    Thank you to our witnesses for being here and lending your 
expertise, I appreciate it.
    Ms. Lough, I just wanted to walk back through your 
testimony to make sure I understand exactly what we are talking 
about here.
    When the IRS receives tax information for a public 
employee, does the IRS know whether the employee is covered by 
Social Security? And then my question is, if not, so is there 
additional information that could help? And how would the IRS 
or other parties go about getting or setting up that line of 
communication? Is it just the line of communication that you 
are talking about here between the sharing that you have done? 
Help me understand.
    Ms. LOUGH. So the IRS receives from the employers Form 941 
and W-3 statements, and we can match to look to see if the 
amounts that are listed on the 941 and W-3 match. We also get 
W-2 returns for each employee. And based on the percent of 
Social Security listed on the W-2 and the wage amount, we can 
guess whether the employee has paid the correct amount of 
Social Security.
    But my office looks at the 941s and W-3s because we have 
jurisdiction over the employers, not the employees. And so we 
look at that, and if there is a mismatch between what they told 
us in the 941 and the W-3 filed, then they get an automatic 
reconciliation notice, depending on the difference between the 
mismatch.
    But we also look at the 941s and W-3s to see why there is 
less Social Security or the percent is so little. And then we 
look to see, in our database that Marianna just talked about, 
whether there is a 218 agreement or not. And based on those 
filters, we make a determination whether the employer may be 
potentially noncompliant, and we reach out with regard to some 
compliance action, which could be a compliance check or an 
audit.
    But on the face of the returns, we can't with certainty 
tell whether all the employees of that public employer were 
appropriately covered or not.
    Mrs. WALORSKI. You can or can't?
    Ms. LOUGH. Cannot.
    Mrs. WALORSKI. Cannot. Okay. So short of an audit that you 
just mentioned, you really don't know whether an employer 
reported and paid the correct amount of FICA taxes without an 
audit? And is an audit the only fail-safe mechanism here?
    Ms. LOUGH. Short of an audit, that is the only way for us 
to know certainly, by 100 percent certainty whether the 
employer is covering all the employees appropriately.
    But we do provide extensive outreach, and we have a 
questionnaire and an assessment tool that the employers can use 
to have a checklist to make a determination whether a group of 
employers should or shouldn't be covered. We do webinars.
    And for the most part, this is a very compliant employer 
base. If they do make errors, like my colleague from Social 
Security Administration said, most of the time it is because of 
the complexity of the laws and the lack of understanding.
    In my opinion, there is no aggressive noncompliance or 
trying to hide. It is basically an education up front by all of 
us, and also an audit at the back end to do the checks.
    Mrs. WALORSKI. So since there is not an audit on every 
single person, since you do some of the sharing of information 
back and forth, and it is the result of this massive complexity 
of how this thing is tied together, which I think reiterates, 
again, how badly we need reform in a much more simple kind of 
system than we have now, so short of an audit there is really 
no way to tell for sure if these records actually match.
    And what do you think the error rate is, I mean, that comes 
through your office? Is it 10 percent of people that never get 
matched up? Or is it 5 percent of people that don't get matched 
up and don't have an audit? How many just percentage do you 
think are out there where we never actually get this right?
    Ms. LOUGH. I really don't have the percent. I will be happy 
to get back with you on the exact change rates that we have in 
an audit. But I do want to reiterate that the changes we do see 
are generally as a result of not understanding the rules.
    Mrs. WALORSKI. . . . But, so short of an audit, there's 
really no way to tell, for sure, if these records actually 
match and what you think the error rate is, I mean, that comes 
through your office? Is it 10 percent of people that never get 
matched up or is it five percent of people that never--that 
don't get matched up and don't have an audit? How many, just 
percentage, do you think are out there where we never actually 
get this right?
    Ms. LOUGH. I really don't have the percent. I'll be happy 
to get back with you on the exact change rate that we have, in 
an audit.
    Public as well as private employers are responsible for 
reporting Social Security coverage on Forms 941 and W-3, which 
are mechanically matched. For both public and private 
employers, Federal Insurance Contributions Act (FICA) and 
unemployment tax are about 3 percent of the tax gap for under-
reporting (TY 2008- 10 annual average). https://www.irs.gov/
pub/newsroom/
tax%20gap%20estimates%20for%202008%20through%202010.pdf, Table 
2.
    The IRS audited approximately 0.6 percent of all returns 
(including income, employment, and other taxes) filed in CY 
2015. IRS Pub. 55-B, Data Book (2016) at pg. 21, https://
www.irs.gov/pub/irs-soi/16databk.pdf.
    Each year, the IRS Federal, State & Local (FSL) function 
selects for audit a few hundred from tens of thousands of 
public employers. In FY 2016, of 362 audits, FSL proposed 
adjustments to taxable wages in 254, 78 of which related to 
FICA, including but not limited to Section 218 coverage.
    Mrs. WALORSKI. Of the complexity, right?
    Ms. LOUGH. The complexity of the laws. And not only the 
complexity, but also the various timings in which the laws came 
and when the employer came on board--the employee came on 
board. So that makes a difference also.
    Mrs. WALORSKI. I got it and I appreciate it.
    Thank you, Mr. Chairman, I yield back.
    Chairman JOHNSON. Thank you.
    Ms. Sanchez, do you care to question?
    Ms. SANCHEZ. Thank you, Mr. Chairman.
    And I want to thank the witnesses for being here today to 
provide us with some insight as to what you deal with.
    Social Security lifts many millions of Americans out of 
poverty, and after a lifetime of hard work, every American 
deserves the peace of mind to know that they are going to be 
able to retire with a little bit of financial security and a 
little bit of dignity.
    For 94 percent of American workers, knowing that Social 
Security is going to be there when they retire is a great peace 
of mind that they can carry with them. But Social Security 
generally doesn't cover State and local employees.
    For example, in my home State of California, there are 1.3 
million Californians who are not covered by Social Security, 
who likely participate in the California State Retirement Plan 
or CalPERS, as it is known. For them, knowing that CalPERS will 
be there in retirement provides them with the same sense of 
security.
    But there are cities or school districts that can sign 
agreements with the Social Security Administration which 
specify that certain State and local employees will be covered 
by Social Security. And these agreements might say that 
principals are not covered by Social Security, but 
administrative staff is. And so they can get a little 
complicated. And the IRS is tasked with enforcing these 
agreements, but they aren't always able to take proactive steps 
if they think that there is a problem.
    I know that this particular case happened in D.C., but I 
can't imagine how troubling it would be for a worker to find 
out that after 10 years of work they had not been paying into 
State retirement or into the Federal Social Security program. 
And I am glad that D.C.'s own audit discovered that and they 
quickly corrected that.
    Most of us here today just want to make sure that this 
isn't happening in our districts or that our constituents 
aren't similarly affected by technical mistakes like this. And 
it is our job to try to figure out ways to make it easier to 
identify these issues early on to prevent that kind of 
situation from happening again.
    So I will begin with Ms. Lough. In the 218 agreement 
assessment project the IRS identified some risk areas. I 
understand that the IRS can't work directly with the State 
Social Security agencies. So how does the IRS handle those 
situations? What kind of proactive steps is the IRS able to 
take? And are you able to inform the cities so that they can 
take some remedial action?
    Ms. LOUGH. With the risk areas, our first step is to try to 
educate and do outreach on areas where we see that employers 
are having noncompliance as a result of not understanding the 
rules. So we do webinars. We have very robust education tools 
on our IRS.gov. And we also have a Desk Guide that we have. It 
is pretty lengthy. We worked with the Social Security 
Administration on the Desk Guide, which is on our website.
    And then we have approximately 50 agents that are spread 
throughout the country.
    They build good relationships with their State Social 
Security Administrators and the employers, and they are 
available to answer questions when employers have those 
questions. Although we can't talk to State Social Security 
Administrators about specific taxpayers, we do have 
conversations with them on general questions when they reach 
out to us. We have quarterly meetings with the Social Security 
Administration. Regularly, we attend meetings with the National 
Council of State Social Security Administrators. So our first 
preference is always outreach and education.
    Ms. SANCHEZ. Okay. Do you know roughly how many 218 
Agreements the IRS helps to administer?
    Ms. LOUGH. We are not party to the 218 Agreements. We just 
get copies, and we look at them to see who is covered or not. 
So I wouldn't know the answer.
    Ms. SANCHEZ. You don't have an answer.
    Can you just tell me, in the little remaining time that I 
have, how have budget cuts impacted your agents' ability to 
perform compliance check?
    Ms. LOUGH. So resources are always an issue. We have had 
attrition in resource, but we do the best we can. And as I 
stated, the best way to make sure there is voluntary 
compliance, which is the Federal tax system, is that employers 
voluntarily do their correction and comply with the rules of 
education and outreach. So we do that with the best use of 
resources, like doing a webinar. Do it once and put it out so 
people can listen to it. And so resource is always an issue, 
and we try to allocate them appropriately.
    Ms. SANCHEZ. Great. Thank you so much for your testimony 
and for your answers.
    And I yield back.
    Chairman JOHNSON. Mr. Bishop, do you care to question?
    Mr. BISHOP. Thank you, Mr. Chairman. Yes.
    Ms. Motza, I understand that, under section 218 of the 
Social Security Act, State/local governments may extend social 
security benefits to their employees. Can you give us more 
information about exactly what a 218 agreement is, what is in 
it, and what type of information is included in an agreement 
like that?
    Ms. MOTZA. Certainly. I would be happy to.
    The basic information is that the section 218 agreement 
with each State was entered into originally, usually in the 
fifties. And that is what we commonly call the 218, Main Master 
218 agreement. Modifications to that agreement are made to add 
employers and their employees.
    The agreements are contracts effectively between the State 
and the Social Security Administration. No individual State or 
local government can enter into a 218 agreement independent of 
going through the State, because of section 218 of the Social 
Security Act. And that is why the State Administrator is such a 
key liaison with administering those.
    The agreements basically outline that the employer 
understands and appreciates that, since 1983, once they enter 
into a section 218 agreement, it is a permanent, binding 
agreement. They can no longer withdraw. Prior to that, they 
could withdraw from coverage with the 2-year period and 
approval from Social Security Administration.
    It includes what positions that are employed by that 
employer are to be covered under Social Security. Sometimes 
there are optional exclusions that they choose. Some of the 
most common ones are student optionally excluded. And there are 
obvious things, like mandatory exclusions, that are just in 
Federal law. Like emergency workers during a flood, for 
example, are automatically excluded. It includes the effective 
date. It includes, you know, basically, you know, typical terms 
and conditions of a contract, saying, going forward, this is 
how it is going to be.
    And then we submit the agreements. The State Administrator 
does all the work up front, works with the employer, educates 
them about what they need to know to make an informed decision, 
because of the mandatory Social Security provisions of OBRA-90. 
And that they don't have to be permanently bound to Social 
Security if they fall under OBRA-90. So, basically, it is a 
contract that outlines, you know, who is covered, who is not, 
and effective dates and agreeing to be taxed.
    Mr. BISHOP. Okay, thank you for that. So there are a lot of 
subentities, local governments. Each State has one agreement 
then with several sub----
    Ms. MOTZA. It is a master agreement that has been modified 
over the years. For example, in Colorado, where I am from, 
there are about 750 agreements. There are States--I can't think 
of some of the numbers, but, you know, there are States, like 
the GAO report in appendix II documented that virtually every 
public employee in Vermont--there are some exceptions--is 
covered under, you know, Social Security.
    Mr. BISHOP. But it is one agreement per State, and then 
subsections to each.
    Ms. MOTZA. There is one--that is exactly right, yes, uh-
huh.
    Mr. BISHOP. What triggers a modification? Exactly what is 
the process?
    Ms. MOTZA. It can be a variety of things. It can be a 
change in State law, for example, where a--let's say a State 
that has added a new pension plan, they decide that, in 
addition to the pension plan, they also want Social Security 
coverage. So, in that case, the State Administrator would amend 
or modify the agreement.
    Mr. BISHOP. Okay, thank you. That is helpful. I have so 
little time, but----
    Ms. MOTZA. I know.
    Mr. BISHOP.--I would love to hear more.
    Ms. Lough, a 2010 GAO report on Social Security coverage 
for the State and local governments noted that the IRS has a 
database of public employees. I just wondered how the Social 
Security Administration validates that database and what it is 
used for.
    Ms. LOUGH. So we have a database, like my colleague from 
Social Security Administration said, of the modifications and 
the master agreement. So we know, to the best that we can, when 
we are provided the modifications every time there is a 
modification that occurs, but we can't be 100 percent certain 
we have all of them. So we have created a database. And if 
there is a mismatch, if the 941 shows very little Social 
Security coverage, we look to see if there is a 218 agreement 
or not, whether we should do a compliance action or not. Now, 
we don't validate with the Social Security Administration. It 
is a matter of resources for the Social Security Administration 
and IRS to go over that. Given the fact that this is a largely 
compliant taxpayer base, it just comes down to resources.
    Mr. BISHOP. Thank you.
    And I yield back, Mr. Chairman.
    Chairman JOHNSON. Thank you.
    Mr. Pascrell, you are recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman. Great to see you.
    Mr. Chairman, I want to commend this panel, particularly 
when public employees have been under so much of an assault--I 
mean assault--over the last several years. You come before us, 
objectively, knowing that everybody on this panel is on some 
bill or other to cut waste and fraud in government. That is a 
given. But you stood tall today.
    I really appreciate what you have done and what you are 
doing. And at the same time, we know that the Social Security 
Administration's phone service has so deteriorated over the 
last 10 years. Why? Because they don't have enough people. I 
mean, they didn't decide to talk to one another and say: I will 
only take two phone calls today; I will be busy the rest of the 
day.
    No, they have their schedule every day, I know this.
    So, to get back to the major topic, retirement security is 
essential for all Americans. I think Mr. Larson pointed that 
out dramatically. For those workers who rely on retirement 
funds other than Social Security, which you are talking about 
today, they need that certainty. They need predictability about 
their retirement income. So ensuring compliance with agreements 
about how State and local government employees participate in 
Social Security can help provide this certainty.
    In order to have robust oversight of compliance, you have 
to have well-trained personnel in place to do it. You have got 
to have training programs. You have got to make sure that 
people participate in those training programs.
    So this is not a sexy discussion today. I don't know if the 
media will even cover it, because to them, it is immaterial 
because it is not sexy. But this is critical to a lot of 
people. And I thank you for what you are doing. Many times I 
have said this: In the context of the IRS, Medicare, Social 
Security, my friends on the other side--and I call them my 
friends, and they know that--cannot continue to make deep cuts 
in agencies' operating budgets, or the resources, and 
simultaneously expect to have a world-class service. That is 
what we want. That is what you are capable of. So training for 
the administration of State and local coverage and tax 
compliance is critical.
    Dr. Motza, let me ask you this: In your written testimony, 
you discuss a shift in the training in section 218 and the 
oversight in many States as well as within the SSA and the IRS. 
You attribute these changes to funding reductions.
    Can you discuss the shift and give us a sense of how it has 
impacted the quality of this training?
    Ms. MOTZA. Thank you, Congressman.
    Yes, I would be happy to. The lack of resources at SSA and 
IRS, because of limited funding, has dramatically impacted 
their ability to help State and local government employers and 
employees comply voluntarily. And as Ms. Lough indicated, it is 
a group that wants to comply.
    Mr. PASCRELL. You provided in your written testimony, you 
made certain recommendations.
    Ms. MOTZA. Absolutely. We would like to see----
    Mr. PASCRELL. Tell us all.
    Ms. MOTZA. We would like to see grants from Congress that 
go to the States, SSA and IRS, so that we can conduct ongoing 
education outreach to make sure that these employers and 
employees know exactly what they need to do, when and how to do 
it. And they will comply. When Pub 963, IRS Pub 963, the 
Federal-State Reference Guide, was first published in 1995, IRS 
documented that, within the next 4 years, voluntary 
contributions to the Social Security and Medicare trust funds 
skyrocketed. That is important.
    Mr. PASCRELL. Yes. I want to thank the gentleman from 
Georgia who brought up the question about--and you will 
elaborate on--6103, which is my favorite part of the Tax Code. 
I wonder why.
    Ms. MOTZA. It is certainly not our favorite.
    Mr. PASCRELL. I know. Thank you.
    Ms. MOTZA. Unless you change it.
    Mr. PASCRELL. Thank you.
    Chairman JOHNSON. Mr. Rice, you are recognized.
    Mr. RICE. Ms. Motza, who do you work for?
    Ms. MOTZA. I am gloriously retired. I worked for the State 
of Colorado for over 41 years. And yes, I was hired before 
child labor laws went into effect. That is why. But--that is a 
joke.
    But I am here representing the National Conference of State 
Social Security Administrators, because I was the State Social 
Security Administrator for nearly 24 years for Colorado.
    Mr. RICE. Who do the State--who does the Colorado State 
Social Security Administrator work for?
    Ms. MOTZA. It is actually in the Labor and Employment 
Department. It was placed there as a fluke. There was 2 years, 
my understanding, at the beginning of the 1950s, when the 
Social Security Administration at the national level was under 
the U.S. Department of Labor. So I think the State legislature 
there just took the easy out and said: Well, let's throw it in 
the Labor Department.
    Mr. RICE. So that is the Colorado State Labor.
    Ms. MOTZA. Colorado State Labor and Employment.
    Mr. RICE. Not Federal, it is the State. You work for the 
State.
    Ms. MOTZA. It was the State. It is part of the State, yes. 
Department of----
    Mr. RICE. So do all of the State Social Security 
Administrators work for the various States and not the Federal 
Government?
    Ms. MOTZA. Absolutely. And we want to keep it that way, 
because of the 10th Amendment. The independence and State 
sovereignty is important. Each State was given the option, 
under the Social Security Act, based on section 218, to 
determine what the configuration of coverage for their 
employees, their public employees was----
    Mr. RICE. What is the function of the State--does every 
State have a State Social Security Administrator?
    Ms. MOTZA. They are required to under Federal law. 
Unfortunately, because of funding cutbacks and since the 
transfer of responsibility for collecting contributions in 
1987, a number of States, I am sad to say, no longer take that 
job seriously. And that is one of the things we would encourage 
Congress to help us with. We would appreciate a resolution or 
something that gives us clout to say to State officials that 
this is a vital and critical role, an important role that helps 
not only the public employers and employees, but taxpayers.
    Mr. RICE. So not every State has one.
    Ms. MOTZA. They do have a named official. But are they 
active? Not necessarily.
    Mr. RICE. All right. So Federal law requires that every 
State have at least one, but they are not paid for by the 
Federal Government.
    Ms. MOTZA. No. They are----
    Mr. RICE. So, in some States, you say there is only one 
person that works for this entity, this group. And in other 
States, do they have big staffs?
    Ms. MOTZA. No. In most--they used to have big staffs when 
they were collecting the contributions, but most State 
officials, it is one or two people. And in very many States, it 
is a portion of a job. It has been really relegated to----
    Mr. RICE. You are saying some folks don't even have a full-
time person.
    Ms. MOTZA. No, many do not have a full-time person.
    Mr. RICE. And it is the job of this position to be an 
intermediary between the Federal Government and the State and 
local governments?
    Ms. MOTZA. Absolutely. And to know exactly what is going on 
at the Federal level and within their own State to make sure 
that they are reconciling and they are staying compliant.
    Mr. RICE. When you did it, was it a full-time job?
    Ms. MOTZA. Part of the time, it was a full-time job. Other 
times, I was wearing other hats.
    Mr. RICE. Did you, in the course of your undertaking this 
activity, frequently find municipal governments and county 
governments that thought they were complying with the law but 
weren't, as we have discovered here of late?
    Ms. MOTZA. Yeah. And we--early on, when I took on the job 
in 1993, I was very fortunate to have an excellent executive 
director of that department who did training and outreach.
    Mr. RICE. So that was a frequent thing that you found 
people----
    Ms. MOTZA. It wasn't frequent, but it was enough----
    Mr. RICE. Was it once a year, every 2 years, every 3 years?
    Ms. MOTZA. Pardon me. I am sorry?
    Mr. RICE. Was it annually that you found somebody who 
thought they were complying with the law?
    Ms. MOTZA. Initially, yes. And then, again, once Pub 963 
came out and they had a clear understanding of what was 
necessary and appropriate, the noncompliance was less. And we 
were doing education and outreach jointly with IRS and Social 
Security that really enhanced the improvement rate.
    Mr. RICE. All right.
    Ms. LaCanfora, IRS does most of your compliance testing, 
right?
    Ms. LACANFORA. I am sorry, can you repeat the question?
    Mr. RICE. The IRS does most of your compliance testing, is 
that correct?
    Ms. LACANFORA. That is correct.
    Mr. RICE. I am out of time.
    I yield back, Mr. Chairman.
    Chairman JOHNSON. Well, thank you. You can go ahead and get 
an answer to that question, because I would like to hear it.
    Mr. RICE. Well, my next question was going to be, the way 
that you determine whether or not somebody's in the Social 
Security system is just from their 941s and their W-2s. Is that 
right?
    Ms. LACANFORA. As Ms. Lough described, there is a 
reconciliation process to determine whether the employee wage 
reports match up with the employer tax return.
    Mr. RICE. Well, here is my question: Do you have cases with 
relative frequency where people have not had Social Security 
withheld from their paycheck and that you determined that it 
should have been and you go ahead and pay them their Social 
Security benefits?
    Ms. LACANFORA. Not with relative frequency, no.
    Mr. RICE. Okay. Thank you.
    Chairman JOHNSON. Thank you.
    Ms. DelBene, you are recognized.
    Ms. DELBENE. Thank you, Mr. Chairman, and thank you to all 
of you for being with us today.
    For more than 80 years, Social Security has kept seniors 
out of poverty and provided a vital safety net for our middle 
class. But, unfortunately, due to a legal technicality, Tribal 
governments are currently prohibited from entering into 
agreements with Social Security Administration to allow their 
elected leaders to participate in the program. This makes 
elected Tribal leaders one of the few classes of Americans that 
are prohibited by law from paying into Social Security and 
receiving benefits from it. I believe that is unfair and 
punishes Tribal members who wish to give back to their people 
through government service. And that is why I, along with my 
colleague Congressman Reichert, my Washington State colleague 
Congressman Reichert, introduced the Tribal Social Security 
Fairness Act earlier this year, allowing elected Tribal leaders 
to opt into the Social Security program.
    There is really no reason the same benefit shouldn't be 
extended to Tribal leaders who choose to participate, putting 
them on par with pretty much every other American.
    And so, Ms. LaCanfora, I assume you are very aware of this 
issue, and could you tell us how you feel about allowing 
elected Tribal officials to be able to participate and 
contribute to the Social Security system in the same manner as 
every other American?
    Ms. LACANFORA. I think you explained it very well. The 
legislation that you are referring to would allow Tribal 
governments to voluntarily opt into Social Security coverage, 
and we would be happy to work with the committee to provide any 
technical assistance you may need.
    Ms. DELBENE. And do you agree that this is a technical 
issue, in terms of why they have been excluded?
    Ms. LACANFORA. I think there could be views on various 
sides of the issue. And I don't think we have a particular 
position on it, but we can certainly provide assistance as 
needed.
    Ms. DELBENE. I want to thank--both the IRS and the Social 
Security Administration have provided technical assistance to 
the drafting of legislation we put together.
    Ms. Lough, do you believe this legislation or legislation 
like this would have a positive impact on Indian country?
    Ms. LOUGH. I defer. That is a policy issue, and I defer 
that to the Office of Tax Policy. And we are willing to work 
with them to implement anything that is enacted.
    Ms. DELBENE. Thank you. This legislation is really about 
equity for Tribal nations and removing barriers from talented 
native leaders who really wish to serve their communities. And 
all Americans, I think we can all agree all Americans deserve 
to retire with dignity and economic security.
    And I will continue to work in a bipartisan fashion, like 
this legislation was put together, to advance forward-looking 
reforms to improve Social Security for all Americans.
    Thank you for your time, and I yield back.
    Chairman JOHNSON. Thank you, ma'am.
    Mr. Curbelo, you are recognized.
    Mr. CURBELO. Thank you, Mr. Chairman, for allowing us the 
opportunity of this hearing, and I thank all of the witnesses 
for their testimony today.
    Ms. Lough, 70 percent of taxes collected are payroll taxes. 
Does that sound right?
    Ms. LOUGH. Yes, 70 percent are payroll taxes, but that 
includes individual income tax as well, that 70 percent.
    Mr. CURBELO. Well, given that significant number, it seems 
to me that this should be a compliance priority for the IRS. 
Does that make sense?
    Ms. LOUGH. Again, it is a compliance priority for the IRS, 
the payroll income tax. But 70 percent of the tax that is 
collected--I just want to make sure I understand your 
question--38 percent is the income tax part of it and 32 
percent is the Social Security and Medicare tax part of the 70 
percent.
    Mr. CURBELO. I understand that, but either way, we are 
talking about at least around a third of total collections. So 
my question to you is, what percentage of audits conducted by 
the IRS are related to payroll taxes?
    Ms. LOUGH. So a large number--this also includes public and 
private government, public and private employers. And I have 
jurisdiction over the public employers, which are about 90,000 
government entities. So we do audit. We audit a few hundred per 
year, but we also provide extensive outreach to these 
government entities. That can be small towns or large States 
and cities.
    Mr. CURBELO. So do you have empirical evidence that this 
is, indeed, a compliant group?
    Ms. LOUGH. From the basis of the audits that we have done 
and our relationships that we have with the State and local 
governments, my opinion is that this is largely a compliant 
group. Not that they always meet 100 percent of the 
requirements, but the reason often is because of the complexity 
of the rules and lack of understanding of where the employee 
falls, whether they are covered or they are not, whether they 
are under a qualified retirement plan. When did they start 
working? Was there a break in service? It is an exceedingly 
complex area of the law.
    Mr. CURBELO. Well, we have heard many examples over the 
years of local employers being noncompliant. So I just want to 
make sure--and I understand the issue of resources, and I 
certainly believe that we need to make sure not just the IRS 
but the entirety of our government is adequately resourced. But 
it does seem to me like we are leaving a significant amount of 
money on the table. And I still wonder if there is a focus on 
enforcing compliance in this area, given that it represents 
around a third of collections for the IRS.
    Ms. LOUGH. The IRS does have a robust payroll employment 
tax audit program, whether it is a private or public employer 
program, commensurate to the amount of resources we have. But 
for the public employers, one in five employees works for the 
public employer. So the large portion are private employers. 
And public employers are largely a very compliant taxpayer 
base.
    Mr. CURBELO. Thank you, Ms. Lough.
    Ms. Motza, a question for you. I want to focus on this 
issue of classification. What role specifically do State Social 
Security Administrators play to ensure that workers within the 
State who are covered by Social Security are properly 
classified? What oversight role should State Social Security 
Administrators play in this process?
    Ms. MOTZA. Thank you, Congressman.
    Ideally, the State and local governments should contact the 
State Social Security Administrator to verify what their 
obligations are under both Federal and State laws. You know, 
also, the State Administrator should also monitor changes in 
pension laws in their State to make sure that pension laws that 
are being changed or have been changed aren't causing confusion 
and causing somebody who is under a 218 agreement and must 
continue paying into Social Security to suddenly stop and join 
a pension plan.
    So, as far as classification, it is just a matter of 
advising them that, if they have a 218 agreement, certain 
positions are covered under Social Security and others are 
optionally excluded, or whatever the case may be.
    Mr. CURBELO. And quickly, do you think that SSA and the IRS 
can do more to support States in getting this classification 
issue right?
    Ms. MOTZA. Yeah. I think, again, it is back to our bugaboo, 
1987. If we could communicate more openly and directly upfront, 
I think it would make it easier on all of us and certainly 
would save taxpayers money, because everybody that we are 
dealing with is funded by some form of tax.
    Mr. CURBELO. Thank you very much.
    Chairman JOHNSON. The time of the gentleman has expired.
    Mr. Reichert, do you care to question?
    Mr. REICHERT. I do, Mr. Chairman.
    Chairman JOHNSON. You are recognized.
    Mr. REICHERT. Thank you. I thank Chairman Johnson and 
Chairman Buchanan for allowing me to make a brief appearance 
today at your hearing. I am not on either committee, but I am 
on the Ways and Means Committee, and I chair the Trade 
Subcommittee, so I appreciate this opportunity. Thank you both.
    I want to follow up with a line of questioning that Ms. 
DelBene was pursuing. As we have heard today, State and local 
government employees may participate in Social Security through 
voluntary coverage agreements. However, no such option exists 
for members of Tribal Councils. And I know that has been 
discussed briefly.
    I understand, in 2006, the SSA issued a policy ruling 
clarifying that Tribal Council members cannot receive Social 
Security coverage because of a 1959 IRS ruling which states 
that service performed by Tribal Council members do not 
constitute employment for FICA purposes. While the SSA says 
that this clarification did not represent a policy change, the 
effect was that Tribal Council members could no longer 
contribute to Social Security or have their earnings count 
toward any future benefits.
    And the real question I have, as you might guess, Ms. 
LaCanfora--close enough?--why did it take SSA over 45 years to 
provide clarification on this issue? So, from 2006 to 1959, 
what took so long? What was happening in the meantime?
    Ms. LACANFORA. We periodically put out clarification when 
questions arise. My understanding is that Tribal Council 
leaders were not paid by Tribal Governments until the eighties. 
And we really didn't receive a lot of questions on the issue. 
It was only when questions began to come into the Social 
Security Administration that it was clear that we needed to 
clarify what was always our longstanding policy.
    Mr. REICHERT. You don't do systematic reviews of policy or 
anything that may be controversial or disconnected within the 
organization?
    Ms. LACANFORA. We do. But, again----
    Mr. REICHERT. Audits?
    Ms. LACANFORA.--we generally clarify issues when questions 
arise. And in this case, around 2006 was when it became very 
clear to us that clarification was necessary on that particular 
issue.
    Mr. REICHERT. So now we have a problem. You have identified 
a problem. How do you think this problem should be addressed?
    Ms. LACANFORA. As I mentioned in response to the earlier 
question, we would certainly be pleased to support you with any 
technical assistance on the legislation that you proposed.
    Mr. REICHERT. Okay. So I would guess that you would agree 
this is an unfair policy that has been in existence for these 
past number of years?
    Ms. LACANFORA. We don't have a position on the policy 
itself.
    Mr. REICHERT. But you would be happy to help us correct it.
    Ms. LACANFORA. Absolutely.
    Mr. REICHERT. Whatever the problem is.
    Okay. I think that the situation has created an unfair 
environment for our Tribal friends. And I have heard from 
Tribal Council members, from the Muckleshoot Tribe in 
Washington State and others across the country. They want to 
participate in Social Security, and I think we need to make 
that happen. I have introduced a bill to make this possible. So 
I will have my staff reach out to you and look forward to your 
cooperation in resolving this issue.
    Ms. LACANFORA. Thank you.
    Mr. REICHERT. Thank you. I yield back.
    Chairman JOHNSON. Thank you.
    I appreciate the testimony of everyone. As we have heard 
today, Social Security and the IRS don't have their act 
together when it comes to State and local workers. Social 
Security doesn't know whether State and local governments are 
reporting the right amount of wages, and Social Security counts 
earnings toward future benefits, even if taxes weren't paid. 
The IRS doesn't know whether an employee, employer, or worker 
is paying the right amount of payroll tax.
    When errors go unnoticed for years, like in Missouri, this 
has a real effect on workers' retirement security and on the 
Trust Funds. Social Security, the IRS, and States must accept 
the responsibility for the roles they play in making this 
process work the way it should. I think you all would agree: 
Americans deserve nothing less.
    I want to thank our witnesses for your testimonies. Thank 
you so much. And thank all the Members for being here.
    With that, the Subcommittee stands adjourned.
    [Whereupon, at 11:33 p.m., the subcommittees were 
adjourned.]
    [Member Questions for the Record follows:]
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