[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21355]


[[Page Unknown]]

[Federal Register: August 30, 1994]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Parts 404 and 422

RIN 0960-AD70

 

Wage Reports and Pension Information

AGENCY: Social Security Administration, HHS.

ACTION: Proposed rules.

-----------------------------------------------------------------------

SUMMARY: We are proposing to update our rules on the need for and use 
of employer identification numbers and on processing reports of wages 
provided annually by employers to the Social Security Administration 
(SSA). In addition, we are proposing to add to our rules the procedures 
we have for maintaining and providing information we receive from 
employers on deterred vested pension benefits.

DATES: Your comments will be considered if we receive them no later 
than October 31, 1994.

ADDRESSES: Comments should be submitted in writing to the Commissioner 
of Social Security, Department of Health and Human Services, P.O. Box 
1585, Baltimore, MD 21235, sent by telefax to (410) 966-0869, or 
delivered to the Office of Regulations, Social Security Administration, 
3-B-1 Operations Building, 6401 Security Boulevard, Baltimore, MD 
21235, between 8 a.m. and 4:30 p.m. on regular business days. Comments 
received may be inspected during these same hours by making 
arrangements with the contact person shown below.

FOR FURTHER INFORMATION CONTACT:
Jack Schanberger, Legal Assistant, 3-B-1 Operations Building, 6401 
Security Boulevard, Baltimore, MD 21235, (410) 965-8471. The electronic 
file of this document is available of the Federal Bulletin Board (FBB) 
at 9:00 on the date of publication in the Federal Register. To download 
the file, modem dial (202) 512-1387. The FBB instructions will explain 
how to down load the file and the fee. This file is in WordPerfect and 
will remain on the FBB during the comment period.

SUPPLEMENTARY INFORMATION: 

Employer Identification Numbers

    SSA maintains a record of the wages and self-employment income of 
each individual. The record includes earnings covered under title II of 
the Social Security Act (the Act), earnings covered under title XVIII 
of the Act, and earnings not covered under the Act. The record is 
identified by the individual's social security number. Wages posted to 
an individual's record are based on wage reports submitted to SSA and 
the Internal Revenue Service (IRS) by employers. IRS regulations at 26 
CFR 31.6011(a)-1 require an employer to file employment tax returns 
with IRS each year and IRS regulations at 26 CFR 31.6051-2 and 31.6091-
1(d) require an employer to file wage reports with SSA each year. These 
requirements are also explained on wage reporting forms and in related 
instructions issued by SSA and IRS. To help account for these returns 
and reports, IRS assigns an employer identification number (EIN) to 
every employer. However, SSA will assign a special identification 
number to one or more political subdivisions of a State which submits a 
modification to its coverage agreement with the Secretary of Health and 
Human Services (HHS) under section 218 of the Act. These numbers are 
assigned only for State bookkeeping purposes unless coverage is 
extended to periods prior to 1987. Then, the special number will be 
assigned and used for reporting the pre-1987 wages to SSA. The special 
number will also be assigned to an interstate instrumentality if pre-
1987 coverage is obtained.

Annual Wage Reporting

    Section 232 of the Act, 42 U.S.C. 432, was added by section 8 of 
Public Law 94-202. Section 8 is cited as the ``Combined Old-Age, 
Survivors, and Disability Insurance-Income Tax Reporting Amendments of 
1975.'' Section 232 provides authority for the Secretary of the 
Treasury and the Secretary of HHS to make available such documents that 
are agreed upon as being necessary for processing information contained 
in returns required by the Internal Revenue Code and by IRS 
regulations. Under this authority and Pub. L. 94-455 and 95-216, SSA 
and IRS have entered into an Agreement governing the manner in which 
employer wage reports will be processed. Included in this process are 
the wage reports which employers are required to file annually with 
SSA. As required by IRS regulations at 26 CFR 301.6011-2, employers who 
file 250 or more wage reports per year must file them on magnetic 
media, unless the requirement is waived by IRS. These proposed 
regulations reflect these requirements for filing annual wage reports 
with SSA and explain how SSA will process the reports and reconcile 
reporting errors with IRS, employees, and employers.

Incorrect Wage Reports

    We are also proposing to consolidate Secs. 422.115 and 422.120 to 
include in one section (proposed Sec. 422.120) our current procedures 
for processing wage reports, submitted to us by employers, that do not 
include a worker's social security number or include an incorrect name 
or number. The existing regulations provide that we will first contact 
the employer for the missing information or correction. However, in the 
proposed regulation, we state our current procedure which is to attempt 
to contact the employee first. Additionally, we provide that we may 
return to the employer a wage report submittal if 90 percent or more of 
the wage reports are unidentified or incorrectly identified. We also 
explain in the proposed Sec. 422.120 that we will inform IRS of all 
wage reports filed with SSA that do not include the required social 
security numbers. IRS may then assess the employer a penalty for 
erroneous report filing, pursuant to the authority provided in section 
6721 of the Internal Revenue Code, 26 U.S.C. 6721.

Pension Plan Information

    Under section 6057 of the Internal Revenue Code, 26 U.S.C. 6057, 
certain private pension plan administrators must file with the IRS 
annual reports that identify individuals who separated from plan 
coverage during the year and still have a right to future retirement 
benefits. In addition, this provision of the Internal Revenue Code 
provides for transmitting copies of the annual reports to the Secretary 
of HHS. The copies are forwarded to SSA and transcribed onto an 
electronic record for the purpose of maintaining the pension 
information which SSA must provide to specified individuals, as 
explained below.
    Section 1131 of the Act requires that whenever the Secretary of HHS 
makes a finding of fact and a decision as to the entitlement of an 
individual to social security or medicare benefits under title II of 
the Act or is requested to do so, the Secretary must transmit to the 
individual any information, as reported by the employer, regarding any 
deferred vested benefits under a private pension plan. In these 
proposed rules, we explain how we administer this provision.

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these rules do not meet the criteria for a 
significant regulatory action under E.O. 12866. Thus, they were not 
subject to OMB review.

Regulatory Flexibility Act

    We certify that these proposed rules will not have a significant 
economic impact on a substantial number of small entities because the 
procedures stated in these rules are already in effect without having 
caused a significant impact. Therefore, a regulatory flexibility 
analysis as provided in Public Law 96-354, the Regulatory Flexibility 
Act, is not required.

Paperwork Reduction Act

    These proposed rules contain reporting requirements in 
Secs. 422.114 (e) and (f) and 422.120(a). We would normally seek 
approval of these requirements, under the Paperwork Reduction Act, from 
the Office of Management and Budget (OMB). We are not doing so in this 
situation because we already have clearance from OMB to collect this 
information using forms SSA-L93, 95 and 97 (OMB No. 0960-0432) and form 
SSA-2765 (OMB No. 0960-0694).
    There is also a reporting requirement in Sec. 422.122, which deals 
with information on deferred vested pension benefits. As required by 
section 2(a) of the Paperwork Reduction Act of 1980, 44 U.S.C. 3504(h), 
we will submit a copy to OMB for its review of this information 
collection requirement. Other organizations and individuals desiring to 
submit comments on these information collection requirements should 
direct them to the Office of Information and Regulatory Affairs, OMB, 
New Executive Office Building, Room 3208, Washington, DC 20503, 
Attention: Desk Officer for HHS.
    Public reporting burden for this collection of information is 
estimated to average 30 minutes per response. This includes the time it 
will take to understand what is needed, gather the necessary facts, and 
provide the information. If you have any comments or suggestions on 
this estimate, write to the Social Security Administration, ATTN: 
Reports Clearance Officer, 1-A-21 Operations Building, Baltimore, MD 
21235, and to the Office of Management and Budget, Paperwork Reduction 
Project (0960-NEW), Washington, DC 20503.

(Catalog of Federal Domestic Assistance Program Nos. 93.802 Social 
Security-Disability Insurance; 93.803 Social Security-Retirement 
Insurance; 93.805 Social Security-Survivors Insurance)

List of Subjects

20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, 
Old-age, survivors and disability insurance, Reporting and 
recordkeeping requirements, Social Security.

20 CFR Part 422

    Administrative practice and procedure, Freedom of information, 
Organization and functions (Government agencies), Social Security.

    Dated: June 27, 1994.
Shirley S. Chater,
Commissioner of Social Security.

    Approved: August 24, 1994.
Donna E. Shalala,
Secretary of Health and Human Services.

    For the reasons set out in the preamble, we are proposing to amend 
subpart M of part 404 and subpart B of part 422 of 20 CFR chapter III 
as follows:

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE 
(1950-    )

    1. The authority citation for subpart M of part 404 continues to 
read as follows:

    Authority: Secs. 205, 210, 218, and 1102 of the Social Security 
Act; 42 U.S.C. 405, 410, 418, and 1302; sec. 12110 of Public Law 99-
272, 100 Stat. 287; sec. 9002 of Public Law 99-509, 100 Stat. 1970.

    2. Section 404.1220 is amended by revising paragraphs (a) and (e) 
to read as follows:


Sec. 404.1220  Identification numbers.

    (a) State and local government. When a State submits a modification 
to its agreement with the Secretary under section 218 of the Act, SSA 
will assign a special identification number to each political 
subdivision included in that modification. SSA will inform the State of 
the special identification number(s) by sending a Form SSA-214-CD, 
``Notice of Identifying Number,'' to the State. These numbers are 
assigned only for State bookkeeping purposes unless coverage is 
extended to periods prior to 1987. Then, the special number will be 
assigned and used for reporting the pre-1987 wages to SSA. The special 
number will also be assigned to an interstate instrumentality if pre-
1987 coverage is obtained and SSA will send a Form SSA-214-CD to the 
interstate instrumentality to notify it of the number assigned.
* * * * *
    (e) Use. For wages paid prior to 1987, the employer shall show the 
appropriate SSA-issued identifying number, including any coverage group 
or payroll record unit number, on records, reports, returns, and claims 
to report wages, adjustments, and contributions.

PART 422--ORGANIZATION AND PROCEDURES

    1. The authority citation for subpart B of part 422 is revised to 
read as follows:

    Authority: Secs, 205, 232, 1102, 1131, and 1143 of the Social 
Security Act; 42 U.S.C. 405, 432, 1302, 1320b-1, and 1320b-13.

    2. Section 422.112 is revised to read as follows:


Sec. 422.112  Employer identification numbers.

    (a) General. Most employers are required by Sec. 6109 of the 
Internal Revenue Code (26 U.S.C. 6109) and by Internal Revenue Service 
(IRS) regulations at 26 CFR 31.6011(b)-1 to obtain an employer 
identification number (EIN) and to include it on wage reports filed 
with SSA. A sole proprietor who does not pay wages to one or more 
employees or who is not required to file any pension or excise tax 
return is not subject to this requirement. To apply for an EIN, 
employers file Form SS-4, ``Application for Employer Identification 
Number,'' with the IRS. For the convenience of employers, Form SS-4 is 
available at all SSA and IRS offices. Household employers, agricultural 
employers, and domestic corporations which elect social security 
coverage for employees of foreign subsidiaries who are citizens or 
residents of the U.S. may be assigned an EIN by IRS without filing an 
SS-4.
    (b) State and local governments. To facilitate a State's 
bookkeeping, SSA will assign a special identification number to each 
political subdivision included in a modification to the State's 
agreement with the Secretary under section 218 of the Act. These 
numbers are not used for reporting purposes unless coverage is extended 
to periods prior to 1987. Then, the special number will be assigned and 
used for reporting the pre-1987 wages to SSA. This special number will 
also be assigned to an interstate instrumentality if pre-1987 coverage 
is obtained. SSA will inform the appropriate State or interstate 
instrumentality official of the assigned number by sending a Form SSA-
214-CD, ``Notice of Identifying Number.''

    3. A new Sec. 422.114 is added to read as follows:


Sec. 422.114  Annual wage reporting process.

    (a) General. Under the authority of section 232 of the Act, SSA and 
IRS have entered into an agreement that sets forth the manner by which 
SSA and IRS will ensure that the processing of employee wage reports is 
effective and efficient. Under this agreement, employers are instructed 
by IRS to file annual wage reports with SSA on paper Forms W-2, ``Wage 
and Tax Statement,'' and Forms W-3, ``Transmittal of Income and Tax 
Statements,'' or equivalentP W-2 and W-3 magnetic media reports. 
Special versions of these forms for Puerto Rico, Guam, American Samoa, 
the Virgin Islands, and the Commonwealth of the Northern Mariana 
Islands are also filed with SSA. SSA processes all wage reporting forms 
for updating to SSA's earnings records and IRS tax records, identifies 
employer reporting errors and untimely filed forms for IRS penalty 
assessment action, and takes action to correct any reporting errors 
identified, except as provided in paragraph (c) of this section. SSA 
also processes Forms W-3c, ``Transmittal of Corrected Income Tax 
Statement,'' and W-2c, ``Statement of Corrected Income and Tax 
Amounts'' (and their magnetic media equivalents) that employers are 
required to file with SSA when certain previous reporting errors are 
discovered.
    (b) Magnetic media reporting requirements. Under IRS regulations at 
26 CFR 301.6011-2, employers who file 250 or more W-2 wage reports per 
year must file them on magnetic media in accordance with requirements 
provided in SSA publications, unless IRS grants the employer a waiver. 
Basic SSA requirements are set out in SSA's Technical Instruction 
Bulletin No. 4, ``Magnetic Media Reporting.'' Special filing 
requirements for U.S. territorial employers are set out in SSA 
Technical Instruction Bulletins No. 5 (Puerto Rico), No. 6 (Virgin 
Islands), and No. 7 (Guam and American Samoa). At the end of each year, 
SSA mails these technical instructions to employers (or third parties 
who file wage reports on their behalf) for their use in filing wage 
reports for that year.
    (c) Processing late and incorrect magnetic media wage transmittals. 
If an employer's transmittal of magnetic media wage reports is received 
by SSA after the filing due date, SSA will notify IRS of the late 
filing so that IRS can decide whether to assess penalties for late 
filing, pursuant to section 6721 of the Internal Revenue Code. If 
reports do not meet SSA processing requirements (unprocessable reports) 
or are out of balance on critical money amounts, SSA will return them 
to the employer to correct and resubmit. In addition, beginning with 
wage reports filed for tax year 1993, if 90 percent or more of an 
employer's magnetic media wage reports have no social security numbers 
or incorrect employee names or social security numbers so that SSA is 
unable to credit their earnings to its records, SSA will not attempt to 
correct the errors, but will instead return the reports to the employer 
to correct and resubmit (see also Sec. 422.120(b)). An employer must 
correct and resubmit incorrect and unprocessable magnetic media wage 
reports to SSA within 45 days from the date of the letter sent with the 
returned report. Upon request, SSA may grant the employer a 15-day 
extension of the 45-day period. If an employer does not submit 
corrected reports to SSA within the 45-day (or, if extended by SSA, 60-
day) period, SSA will notify IRS of the late filing so that IRS can 
decide whether to assess a penalty. If an employer timely resubmits the 
reports as corrected magnetic media reports, but they are unprocessable 
or out of balance on W-2 money totals, SSA will return the resubmitted 
reports for the second and last time for the employer to correct and 
return to SSA. SSA will enclose with the resubmitted and returned forms 
a letter informing the employer that he or she must correct and return 
the reports to SSA within 45 days or be subject to IRS penalties for 
late filing.
    (d) Paper form reporting requirements. The format and wage 
reporting instructions for paper forms are determined jointly by IRS 
and SSA. Basic instructions on how to complete the forms and file them 
with SSA are provided in IRS forms materials available to the public. 
In addition, SSA provides standards for employers (or third parties who 
file wage reports for them) to follow in producing completed reporting 
forms from computer software; these standards appear in SSA 
publication, ``Software Specifications and Edits for Annual Wage 
Reporting.'' Requests for this publication should be sent to: Social 
Security Administration, Office of Financial Policy and Operations, 
Attention: AWR Software Standards Project, P.O. Box 17195, Baltimore, 
MD 21235.
    (e) Processing late and incorrect paper form reports. If SSA 
receives paper form wage reports after the due date, SSA will notify 
IRS of the late filing so that IRS can decide whether to assess 
penalties for late filing, pursuant to section 6721 of the Internal 
Revenue Code. SSA will ask an employer to provide replacement forms for 
illegible, incomplete, or clearly erroneous paper reporting forms, or 
will ask the employer to provide information necessary to process the 
reports without having to resubmit corrected forms. If an employer 
fails to provide legible, complete, and correct W-2 reports within 45 
days, SSA may identify the employers to IRS for assessment of employer 
reporting penalties.
    (f) Reconciliation of wage reporting errors. After SSA processes 
wage reports, it matches them with the information provided by 
employers to the IRS on Forms 941, ``Employer's Quarterly Federal Tax 
Return,'' for that tax year. Based upon this match, if the total social 
security or medicare wages reported to SSA for employees is less than 
the totals reported to IRS, SSA will write to the employer and request 
corrected reports or an explanation for the discrepancy. If the total 
social security or medicare wages reported to SSA for employees is more 
than the totals reported to IRS, IRS will resolve the difference with 
the employer. If the employer fails to provide SSA with corrected 
reports or information that shows the wage reports filed with SSA are 
correct, SSA will ask IRS to investigate the employer's wage and tax 
reports to resolve the discrepancy and to assess any appropriate 
reporting penalties.
Sec. 422.115  [Removed]
    4. Section 422.115 is removed.
    5. Section 422.120 is revised to read as follows:
Sec. 422.120  Earnings reported without a social security number or 
with an incorrect employee name or social security number.
    (a) Correcting an earnings report. If an employer reports an 
employee's wages without the employee's social security number or with 
a different employee name or social security number than shown in SSA's 
records for him or her, SSA will write to the employee at the address 
shown on the wage report and request the missing or corrected 
information. If the wage report does not show the employee's address or 
shows an incomplete address, SSA will write to the employer and request 
the missing or corrected employee information. SSA notifies IRS of all 
wage reports filed without employee social security numbers so that IRS 
can decide whether to assess penalties for erroneous filing, pursuant 
to section 6721 of the Internal Revenue Code. If an individual reports 
self-employment income without a social security number or with a 
different name or social security number than shown in SSA's records, 
SSA will write to the individual and request the missing or corrected 
information. If the employer, employee, or self-employed individual 
does not provide the missing or corrected report information in 
response to SSA's request, the wages or self-employment income cannot 
be identified and credited to the proper individual's earnings records. 
In such cases, the information is maintained in a ``Suspense File'' of 
uncredited earnings. Subsequently, if identifying information is 
provided to SSA for an individual whose report is recorded in the 
Suspense File, the wages or self-employment income then may be credited 
to his or her earnings record.
    (b) Returning incorrect reports. SSA may return to the filer, 
unprocessed, an employer's annual wage report submittal if 90 percent 
or more of the wage reports in that submittal are unidentified or 
incorrectly identified. In such instances, SSA will advise the filer to 
return corrected wage reports within 45 days to avoid any possible IRS 
penalty assessment for failing to file correct reports timely with SSA 
(see also Sec. 422.114(c)). Upon request, SSA may grant the employer a 
15-day extension of the 45-day period.

    5. A new Sec. 422.122 is added to read as follows:


Sec. 422.122  Information on deferred vested pension benefits.

    (a) Claimants for benefits. Each month, SSA checks the name and 
social security number of each new claimant for social security 
benefits or for hospital insurance coverage to see whether the claimant 
is listed in SSA's electronic pension benefit record. This record 
contains information received from IRS on individuals for whom private 
pension plan administrators have reported to IRS, as required by 
section 6057 of the Internal Revenue Code (26 U.S.C. 6057), as possibly 
having a right to future retirement benefits under the plan. SSA sends 
a notice to each new claimant for whom it has pension benefit 
information, as required by section 1131 of the Act (42 U.S.C. 1320b-
1). If the claimant filed for the lump-sum death payment on the social 
security account of a relative, SSA sends the claimant the pension 
information on the deceased individual. In either case, SSA sends the 
notice after it has made a decision on the claim for benefits. The 
notice shows the type, payment frequency, and amount of pension 
benefit, as well as the name and address of the plan administrator as 
reported to the IRS. This information can then be used by the claimant 
to claim any pension benefits still due from the pension plan.
    (b) Requesting deferred vested pension benefit information from SSA 
files. Section 1131 of the Act also requires SSA to provide available 
pension benefit information on request. SSA will provide this pension 
benefit information only to the individual who has the pension coverage 
(or a legal guardian or parent, in the case of a minor, on the 
individual's behalf). However, if the individual is deceased, the 
information may be provided to someone who would be eligible for any 
underpayment of benefits that might be due the individual under 
Sec. 404.503(b) of part 404 of this chapter. All requests for such 
information must be in writing and should contain the following 
information: the individual's name, social security number, date of 
birth, and parent's names; any information the requester may have 
concerning the name of the pension plan involved and the month and year 
coverage under the plan ended; the name and address of the person to 
whom the information is to be sent; and the requester's signature under 
the following statement: ``I am the individual to whom the information 
applies (or ``I am related to the individual as his or her ______''). I 
know that if I make any representation which I know is false to obtain 
information from Social Security records, I could be punished by a fine 
or imprisonment or both.'' Such requests should be sent to: Social 
Security Administration, Office of Central Records Operations, P.O. Box 
17055, Baltimore, Maryland 21235.

[FR Doc. 94-21355 Filed 8-29-94; 8:45 am]
BILLING CODE 4190-29-M