[Federal Register Volume 60, Number 158 (Wednesday, August 16, 1995)]
[Rules and Regulations]
[Pages 42431-42435]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19501]



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

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 422

RIN 0960-AD70


Wage Reports and Pension Information

AGENCY: Social Security Administration.

ACTION: Final rules.

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

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

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

ADDRESSES: Organizations and individuals desiring to submit comments on 
the information collection requirements under ``Paperwork Reduction 
Act'' should submit them to the Office of Information and Regulatory 
Affairs, OMB, New Executive Office Building, Room 3208, Washington, DC 
20503, Attention: Desk Officer for SSA.

FOR FURTHER INFORMATION CONTACT: Jack Schanberger, Legal Assistant, 3-
B-1 Operations Building, 6401 Security Boulevard, Baltimore, MD 21235, 
(410) 965-8471. 

[[Page 42432]]


SUPPLEMENTARY INFORMATION:

Employer Identification Numbers

    Pursuant to section 205(c)(2)(A) of the Social Security Act (the 
Act), SSA maintains a record of the wages and self-employment income of 
each individual. The record includes earnings covered under title II of 
the Act, earnings covered under title XVIII of the Act, and earnings 
not covered under the Act. The record is identified by the individual's 
social security number. Wages posted to an individual's record are 
based on wage reports submitted to SSA and the Internal Revenue Service 
(IRS) by employers. IRS regulations at 26 CFR 31.6011(a)-1 require an 
employer to file employment tax returns with IRS each year and IRS 
regulations at 26 CFR 31.6051-2 and 31.6091-1(d) require an employer to 
file wage reports with SSA each year. These requirements are also 
explained on wage reporting forms and in related instructions issued by 
SSA and IRS. To help account for these returns and reports, IRS assigns 
an employer identification number (EIN) to every employer. However, SSA 
will assign a special identification number to one or more political 
subdivisions of a State which submits a modification to its coverage 
agreement under section 218 of the Act. These numbers are assigned only 
for State bookkeeping purposes unless coverage is extended to periods 
prior to 1987. Then, the special number will be assigned and used for 
reporting the pre-1987 wages to SSA. The special number will also be 
assigned to an interstate instrumentality if pre-1987 coverage is 
obtained.

Annual Wage Reporting

    Section 232 of the Act was added by section 8 of Public Law 94-202. 
Section 8 is cited as the ``Combined Old-Age, Survivors, and Disability 
Insurance-Income Tax Reporting Amendments of 1975.'' Section 232, as 
amended by section 107 of Public Law 103-296, provides authority for 
the Secretary of the Treasury to make available to the Commissioner of 
Social Security such documents that are agreed upon as being necessary 
for processing information contained in returns required by the 
Internal Revenue Code and by IRS regulations. Under this authority and 
Public Law 94-455 and 95-216, SSA and IRS have entered into an 
Agreement governing the manner in which employer wage reports will be 
processed. Included in this process are the wage reports which 
employers are required to file annually with SSA. As required by IRS 
regulations at 26 CFR 301.6011-2, employers who file 250 or more wage 
reports per year must file them on magnetic media, unless the 
requirement is waived by IRS. These regulations reflect these 
requirements for filing annual wage reports with SSA and explain how 
SSA will process the reports and reconcile reporting errors with IRS, 
employees, and employers.

Incorrect Wage Reports

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

    Under section 6057 of the Internal Revenue Code, certain private 
pension plan administrators must file with the IRS annual reports that 
identify individuals who separated from plan coverage during the year 
and still have a right to future retirement benefits. In addition, this 
provision of the Internal Revenue Code, as amended by section 108(h)(5) 
of Public Law 103-296, provides for transmitting copies of the annual 
reports to the Commissioner of Social Security. Then SSA transcribes 
the reports onto an electronic record for the purpose of maintaining 
the pension information which SSA must provide to specified 
individuals, as explained below.
    Section 1131 of the Act, as amended by section 108(b)(11) of Public 
Law 103-296, requires that whenever the Commissioner of Social Security 
is requested to do so, or whenever he or she makes a finding of fact 
and a decision as to the entitlement of an individual to social 
security or medicare benefits under title II of the Act, he or she must 
transmit to the individual any information, as reported by the 
employer, regarding any deferred vested benefits under a private 
pension plan. In these rules, we explain how we administer this 
provision.

Final Rules

    On August 30, 1994, we published proposed rules in the Federal 
Register at 59 FR 44674 with a 60-day comment period. We received no 
comments on these proposed rules. We are, therefore, publishing the 
proposed rules essentially unchanged as final rules.

Regulatory Procedures

Executive Order 12866

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

Regulatory Flexibility Act

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

Paperwork Reduction Act

    These final rules contain reporting requirements in Secs. 422.114 
(e) and (f) and 422.120(a). We would normally seek approval of these 
requirements, under the Paperwork Reduction Act, from OMB. We are not 
doing so in this situation because we already have clearance from OMB 
to collect this information using forms SSA-L93, 95 and 97 (OMB No. 
0960-0432) and form SSA-2765 (OMB No. 0960-0471).
    There is also a reporting requirement in Sec. 422.122, which deals 
with information on deferred vested pension benefits. As required by 
section 2(a) of the Paperwork Reduction Act of 1980, 44 U.S.C. 3504(h), 
we have submitted a copy to OMB for its review of this information 
collection requirement. Other organizations and individuals desiring to 
submit comments on these information collection requirements should 
direct them to the address shown in ADDRESSES.
    Public reporting burden for this collection of information is 
estimated to average 30 minutes per response. This includes the time it 
will take to understand what is needed, gather the necessary facts, and 
provide the information. We expect that annually there will be 2,280 
requesters of pension plan information. Therefore, the annual 

[[Page 42433]]
reporting burden is expected to be 1,140 hours. If you have any 
comments or suggestions on this estimate, write to the Social Security 
Administration, ATTN: Reports Clearance Officer, 1-A-21 Operations 
Building, Baltimore, MD 21235, and to the Office of Management and 
Budget, Paperwork Reduction Project (0960-NEW), Washington, DC 20503.

(Catalog of Federal Domestic Assistance Program Nos. 96.001 Social 
Security-Disability Insurance; 96.002 Social Security-Retirement 
Insurance; 96.004 Social Security-Survivors Insurance.)

List of Subjects

20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, 
Old-Age, Survivors, and Disability Insurance, Reporting and 
recordkeeping requirements, Social Security.

20 CFR Part 422

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

    Dated: July 27, 1995.
Shirley Chater,
Commissioner of Social Security.

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

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

Subpart M--[Amended]

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

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

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


Sec. 404.1220  Identification numbers.

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

PART 422--ORGANIZATION AND PROCEDURES

Subpart B--[Amended]

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

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

    2. Section 422.112 is revised to read as follows:


Sec. 422.112  Employer identification numbers.

    (a) General. Most employers are required by section 6109 of the 
Internal Revenue Code and by Internal Revenue Service (IRS) regulations 
at 26 CFR 31.6011(b)-1 to obtain an employer identification number 
(EIN) and to include it on wage reports filed with SSA. A sole 
proprietor who does not pay wages to one or more employees or who is 
not required to file any pension or excise tax return is not subject to 
this requirement. To apply for an EIN, employers file Form SS-4, 
``Application for Employer Identification Number,'' with the IRS. For 
the convenience of employers, Form SS-4 is available at all SSA and IRS 
offices. Household employers, agricultural employers, and domestic 
corporations which elect social security coverage for employees of 
foreign subsidiaries who are citizens or residents of the U.S. may be 
assigned an EIN by IRS without filing an SS-4.
    (b) State and local governments. To facilitate a State's 
bookkeeping, SSA will assign a special identification number to each 
political subdivision included in a modification to the State's 
agreement under section 218 of the Act. These numbers are not used for 
reporting purposes unless coverage is extended to periods prior to 
1987. Then, the special number will be assigned and used for reporting 
the pre-1987 wages to SSA. This special number will also be assigned to 
an interstate instrumentality if pre-1987 coverage is obtained. SSA 
will inform the appropriate State or interstate instrumentality 
official of the assigned number by sending a Form SSA-214-CD, ``Notice 
of Identifying Number.''
    3. A new Sec. 422.114 is added to read as follows:


Sec. 422.114  Annual wage reporting process.

    (a) General. Under the authority of section 232 of the Act, SSA and 
IRS have entered into an agreement that sets forth the manner by which 
SSA and IRS will ensure that the processing of employee wage reports is 
effective and efficient. Under this agreement, employers are instructed 
by IRS to file annual wage reports with SSA on paper Forms W-2, ``Wage 
and Tax Statement,'' and Forms W-3, ``Transmittal of Income and Tax 
Statements,'' or equivalent W-2 and W-3 magnetic media reports. Special 
versions of these forms for Puerto Rico, Guam, American Samoa, the 
Virgin Islands, and the Commonwealth of the Northern Mariana Islands 
are also filed with SSA. SSA processes all wage reporting forms for 
updating to SSA's earnings records and IRS tax records, identifies 
employer reporting errors and untimely filed forms for IRS penalty 
assessment action, and takes action to correct any reporting errors 
identified, except as provided in paragraph (c) of this section. SSA 
also processes Forms W-3c, ``Transmittal of Corrected Income Tax 
Statements,'' and W-2c, ``Statement of Corrected Income and Tax 
Amounts'' (and their magnetic media equivalents) that employers are 
required to file with SSA when certain previous reporting errors are 
discovered.
    (b) Magnetic media reporting requirements. Under IRS regulations at 
26 CFR 301.6011-2, employers who file 250 or more W-2 wage reports per 
year must file them on magnetic media in accordance with requirements 
provided in SSA publications, unless IRS grants the employer a waiver. 
Basic SSA requirements are set out in SSA's Technical Instruction 
Bulletin No. 4, ``Magnetic Media Reporting.'' Special filing 
requirements for U.S. territorial employers are set out in SSA 
Technical Instruction Bulletins No. 5 (Puerto Rico), No. 6 (Virgin 
Islands), and No. 7 (Guam and American Samoa). At the end of each year, 
SSA mails these technical instructions to employers (or third parties 
who file wage reports on their behalf) for their use in filing wage 
reports for that year.
    (c) Processing late and incorrect magnetic media wage transmittals. 
If an employer's transmittal of magnetic media wage reports is received 
by SSA after the filing due date, SSA will notify 

[[Page 42434]]
IRS of the late filing so that IRS can decide whether to assess 
penalties for late filing, pursuant to section 6721 of the Internal 
Revenue Code. If reports do not meet SSA processing requirements 
(unprocessable reports) or are out of balance on critical money 
amounts, SSA will return them to the employer to correct and resubmit. 
In addition, beginning with wage reports filed for tax year 1993, if 90 
percent or more of an employer's magnetic media wage reports have no 
social security numbers or incorrect employee names or social security 
numbers so that SSA is unable to credit their wages to its records, SSA 
will not attempt to correct the errors, but will instead return the 
reports to the employer to correct and resubmit (see also 
Sec. 422.120(b)). An employer must correct and resubmit incorrect and 
unprocessable magnetic media wage reports to SSA within 45 days from 
the date of the letter sent with the returned report. Upon request, SSA 
may grant the employer a 15-day extension of the 45-day period. If an 
employer does not submit corrected reports to SSA within the 45-day 
(or, if extended by SSA, 60-day) period, SSA will notify IRS of the 
late filing so that IRS can decide whether to assess a penalty. If an 
employer timely resubmits the reports as corrected magnetic media 
reports, but they are unprocessable or out of balance on W-2 money 
totals, SSA will return the resubmitted reports for the second and last 
time for the employer to correct and return to SSA. SSA will enclose 
with the resubmitted and returned forms a letter informing the employer 
that he or she must correct and return the reports to SSA within 45 
days or be subject to IRS penalties for late filing.
    (d) Paper form reporting requirements. The format and wage 
reporting instructions for paper forms are determined jointly by IRS 
and SSA. Basic instructions on how to complete the forms and file them 
with SSA are provided in IRS forms materials available to the public. 
In addition, SSA provides standards for employers (or third parties who 
file wage reports for them) to follow in producing completed reporting 
forms from computer software; these standards appear in SSA 
publication, ``Software Specifications and Edits for Annual Wage 
Reporting.'' Requests for this publication should be sent to: Social 
Security Administration, Office of Financial Policy and Operations, 
Attention: AWR Software Standards Project, P.O. Box 17195, Baltimore, 
MD 21235.
    (e) Processing late and incorrect paper form reports. If SSA 
receives paper form wage reports after the due date, SSA will notify 
IRS of the late filing so that IRS can decide whether to assess 
penalties for late filing, pursuant to section 6721 of the Internal 
Revenue Code. SSA will ask an employer to provide replacement forms for 
illegible, incomplete, or clearly erroneous paper reporting forms, or 
will ask the employer to provide information necessary to process the 
reports without having to resubmit corrected forms. (For wage reports 
where earnings are reported without a social security number or with an 
incorrect name or social security number, see Sec. 422.120.) If an 
employer fails to provide legible, complete, and correct W-2 reports 
within 45 days, SSA may identify the employers to IRS for assessment of 
employer reporting penalties.
    (f) Reconciliation of wage reporting errors. After SSA processes 
wage reports, it matches them with the information provided by 
employers to the IRS on Forms 941, ``Employer's Quarterly Federal Tax 
Return,'' for that tax year. Based upon this match, if the total social 
security or medicare wages reported to SSA for employees is less than 
the totals reported to IRS, SSA will write to the employer and request 
corrected reports or an explanation for the discrepancy. If the total 
social security or medicare wages reported to SSA for employees is more 
than the totals reported to IRS, IRS will resolve the difference with 
the employer. If the employer fails to provide SSA with corrected 
reports or information that shows the wage reports filed with SSA are 
correct, SSA will ask IRS to investigate the employer's wage and tax 
reports to resolve the discrepancy and to assess any appropriate 
reporting penalties.


Sec. 422.115  [Removed]

    4. Section 422.115 is removed.
    5. Section 422.120 is revised to read as follows:


Sec. 422.120  Earnings reported without a social security number or 
with an incorrect employee name or social security number.

    (a) Correcting an earnings report. If an employer reports an 
employee's wages to SSA without the employee's social security number 
or with a different employee name or social security number than shown 
in SSA's records for him or her, SSA will write to the employee at the 
address shown on the wage report and request the missing or corrected 
information. If the wage report does not show the employee's address or 
shows an incomplete address, SSA will write to the employer and request 
the missing or corrected employee information. SSA notifies IRS of all 
wage reports filed without employee social security numbers so that IRS 
can decide whether to assess penalties for erroneous filing, pursuant 
to section 6721 of the Internal Revenue Code. If an individual reports 
self-employment income to IRS without a social security number or with 
a different name or social security number than shown in SSA's records, 
SSA will write to the individual and request the missing or corrected 
information. If the employer, employee, or self-employed individual 
does not provide the missing or corrected report information in 
response to SSA's request, the wages or self-employment income cannot 
be identified and credited to the proper individual's earnings records. 
In such cases, the information is maintained in a ``Suspense File'' of 
uncredited earnings. Subsequently, if identifying information is 
provided to SSA for an individual whose report is recorded in the 
Suspense File, the wages or self-employment income then may be credited 
to his or her earnings record.
    (b) Returning incorrect reports. SSA may return to the filer, 
unprocessed, an employer's annual wage report submittal if 90 percent 
or more of the wage reports in that submittal are unidentified or 
incorrectly identified. In such instances, SSA will advise the filer to 
return corrected wage reports within 45 days to avoid any possible IRS 
penalty assessment for failing to file correct reports timely with SSA. 
(See also Sec. 422.114(c).) Upon request, SSA may grant the employer a 
15-day extension of the 45-day period.
    5. A new Sec. 422.122 is added to read as follows:


Sec. 422.122  Information on deferred vested pension benefits.

    (a) Claimants for benefits. Each month, SSA checks the name and 
social security number of each new claimant for social security 
benefits or for hospital insurance coverage to see whether the claimant 
is listed in SSA's electronic pension benefit record. This record 
contains information received from IRS on individuals for whom private 
pension plan administrators have reported to IRS, as required by 
section 6057 of the Internal Revenue Code, as possibly having a right 
to future retirement benefits under the plan. SSA sends a notice to 
each new claimant for whom it has pension benefit information, as 
required by

[[Page 42435]]

section 1131 of the Act. If the claimant filed for the lump-sum death 
payment on the social security account of a relative, SSA sends the 
claimant the pension information on the deceased individual. In either 
case, SSA sends the notice after it has made a decision on the claim 
for benefits. The notice shows the type, payment frequency, and amount 
of pension benefit, as well as the name and address of the plan 
administrator as reported to the IRS. This information can then be used 
by the claimant to claim any pension benefits still due from the 
pension plan.

    (b) Requesting deferred vested pension benefit information from SSA 
files. Section 1131 of the Act also requires SSA to provide available 
pension benefit information on request. SSA will provide this pension 
benefit information only to the individual who has the pension coverage 
(or a legal guardian or parent, in the case of a minor, on the 
individual's behalf). However, if the individual is deceased, the 
information may be provided to someone who would be eligible for any 
underpayment of benefits that might be due the individual under section 
204(d) of the Act. All requests for such information must be in writing 
and should contain the following information: the individual's name, 
social security number, date of birth, and any information the 
requestor may have concerning the name of the pension plan involved and 
the month and year coverage under the plan ended; the name and address 
of the person to whom the information is to be sent; and the 
requester's signature under the following statement: ``I am the 
individual to whom the information applies (or ``I am related to the 
individual as his or her ____________''). I know that if I make any 
representation which I know is false to obtain information from Social 
Security records, I could be punished by a fine or imprisonment or 
both.'' Such requests should be sent to: Social Security 
Administration, Office of Central Records Operations, P.O. Box 17055, 
Baltimore, Maryland 21235.

[FR Doc. 95-19501 Filed 8-15-95; 8:45 am]

BILLING CODE 4190-29-P