Phase 1 Report of Feasibility Study on New Hire Programs for Canada: New Hire Programs in the United States
- Rationale and Objectives
- Federal Policy Development and Legislative Process
- Enforcing Employer Compliance
- Employer Response
- Privacy and Security Issues
- Location of the National Directory
- Exchange of Data with Other Social Welfare Programs
- State and Federal Government Funding and Costs
The 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) required each state to develop a new hire program for all employers. The act also established the National Directory of New Hires (also called the National Directory) to receive data from each state's program. The PRWORA requires computerized state-wide procedures and requires child support agencies to maintain a state registry of child support orders and a support payment clearinghouse to receive and disburse payments.
The PRWORA expanded the role of the Federal Parent Locator Service (FPLS) to include the National Directory and the Federal Case Registry of all child support orders in the country. The Federal Case Registry contains an abstract of information on all public assistance cases, as well as voluntary child support cases, from every state. This registry makes it easier to find people who cross state lines and helps governments decide who has continuing jurisdiction. The data in the registry are matched with the data in the National Directory and any matches are sent automatically to the appropriate states for processing and enforcement. The federal Office of Child Support Enforcement (OCSE), in the Department of Health and Human Services, is responsible for the programs.
The National Directory includes federal and state new hires information, federal and state quarterly wage reports, and state information about unemployment insurance claimants. State employment security agencies (SESAs) supply the state wage and unemployment insurance reports; it is estimated that they will submit 140 million wage and 25 million unemployment insurance records to the National Directory each quarter. Approximately 60 million new hire records will be submitted to the National Directory every year.
Other support enforcement components of the PRWORA legislation include provisions to streamline paternity establishment; more uniform interstate collection laws; and uniform procedures for suspending professional, occupational, recreational and drivers' licences when their holders fail to pay child support.
Approximately 30 percent of child support cases in the United States involve non-custodial parents who do not work in the state where their children live. It is argued that the National Directory will greatly improve cross-state enforcement of child support maintenance. Although no data we have support the claim, the federal Department of Health and Human Services has estimated that the program will increase national child support collections by $6.4 billion in its first 10 months, of which $1.1 billion will accrue to the federal government.
A federal respondent described new hire programs as an
“initiative of the Administration,” which sees the PRWORA as a way to focus parental responsibility on supporting children. According to this source, new hire programs in Washington state and elsewhere had convinced both public servants and politicians that a national program could increase collections from people who move from state to state.
Paul Legler, who helped draft the PRWORA, wrote that
“the vision for child support enforcement that guided much of the development of the legislation is that the payment of child support should be automatic and inescapable—‘like death or taxes'” (1996:538). Three elements were reflected in the legislation: access to information, which includes the new hire program; mass case processing by means of computers and information technology; and automatic enforcement action rather than action driven by complaints.
The first mention of mandatory employer reporting occurred in the report of a three‑year U.S. Commission on Interstate Child Support. The Commission's report to Congress, issued in August 1992, recommended that each state establish a program requiring all employers to report new hires and rehires to the state where the employee provided services. The Commission concluded that this disclosure could help authorities find debtors and quickly establish income withholding. The Commission recommended that employers file the W‑4 form with the state employment agency within 10 days of hiring a new employee.
At this point, only the states of Washington and Alaska had evaluated any part of their programs (see Appendix C). So the Commission had very little information on monitoring new hire programs and none at all on mandatory programs involving all state employers. Its recommendation was, therefore,not based on program experience.
In June 1993, President Clinton appointed the Working Group on Welfare Reform, Family Support, and Independence. A sub‑committee, the Child Support Issue Group, was made up of federal government staff, although the National Child Support Enforcement Association and the National Council of State Child Support Administrators met with the working group many times.
In addition, advocates from the American Bar Association, the National Women's Law Center, the Children's Defense Fund, the Center for Law and Social Policy, and the Women's Legal Defense Fund all helped develop the child support provisions of the PRWORA.
“Child support enforcement was incorporated within the broader welfare reform issue because it was viewed as an important element of a new system of supports for single parent families outside the welfare system” (Legler, 1996:524).
The new hire provisions were in the original welfare reform bill introduced by President Clinton, the Work and Responsibility Act of 1994. A new Republican Congress incorporated the child support component into other 1994 bills. President Clinton vetoed the next welfare reform bill, but the third was passed as the PRWORA. Congress kept the new hire program in the PRWORA, perhaps because of its cost savings appeal. There had been some discussion of waiving the reporting requirements for some industries and for employers with fewer than a specified number of employees, but these provisions were not incorporated into the final law.
States that had employer reporting programs in place before the PRWORA had until October 1, 1998 to comply with federal requirements. States that had no programs had to comply by October 1, 1997.
All employers in the United States must now report their new hires and rehires to one state within 20 days of hiring or, if reporting magnetically or electronically, they must report twice per month, with reports separated by no less than 12 and no more than 16 days. States may establish more stringent reporting requirements. An employer is defined the same way that it is in the federal income tax rules, and includes governmental entities and such labour organizations as hiring halls. If a returning employee has not been formally terminated or removed from payroll records, the employer need not report his or her return as a rehire. Employers with offices in more than one state can choose a single state to which they report all their new hires.
As was the case with state-initiated new hire programs, the federal legislation makes no mention of the self-employed. Presumably, the self-employed are not included in state or national directories.
1. Required Data Elements
Under the PRWORA, the federal government requires states to collect six data elements: the employer's name, address and identification number, and the new employee's name, address and Social Security Number (SSN). The legislation gives states the option of adding additional elements. Three of the additional variables (date of hire, state of hire and employee date of birth) can be reported to the National Directory if the state so wishes. According to the federal OCSE, these optional data fields will improve state fraud detection efforts.
Employer groups lobbied strongly for standard data elements in every state, whereas states preferred more flexibility. Congress discussed having multi-state employers report nationally, under a standard set of data requirements. Employers preferred this option, but states preferred state reporting.
2. Multi‑state Employers
Multi-state employers have two options for reporting new hires:
- they may report new hires to the state in which the employees are working, following that state's regulations; or
- they may select one state where employees work and report all new hires to that state, although they must supply the data electronically or magnetically.
Employers must notify the U.S. Department of Health and Human Services in writing and specify the state designated to receive all new hire information for the business. Multi-state employers “shop around” to find the least onerous reporting requirements. When employers submit all new hire records to one state, the employee's work state will not be able to use the new hire database to detect fraud in unemployment insurance and workers' compensation programs.
The National Directory of New Hires tells states where their multi-state employers have elected to report.
3. Format and Transmission
The reporting format is specified under federal law: the report must be made on either a W‑4 form or, at the employer's option, on an equivalent form defined by the employer. States may develop alternative reporting formats, so long as their use by employers is clearly optional. Employers who prefer to transmit their new hires data on diskette or magnetic tape must submit the data twice monthly, not less than 12 or more than 16 days apart.
4. Time Frames
State new hire directories must enter new hire reports within five business days of receipt. Within two business days, the state must look for matches between the SSNs and the child support registry. It must notify the child support agency of any matches, and the agency's staff must mail the wage withholding cover letter and the wage lien to the employer within 48 hours of receiving the information from the new hire database. Within three business days after the new hire data are entered into the state directory, the data must be furnished to the National Directory.
5. Data Matching
With the Federal Case Registry in place since October 1998, new data in the National Directory are now matched to child support cases and to order information in the Registry. States are no longer required to submit individual locate requests. Instead, states automatically get current employment information on child support debtors every time the non-custodial parent takes a new job. States also get information on debtors' quarterly wages and unemployment insurance claims.
If employers don't comply, the federal law specifies that states may levy fines of up to $25 for each employee not reported, with the fine increasing as high as $500 if there is a conspiracy between the employer and the employee. Typically, state laws have established penalties of $24 and $499, respectively. Federal legislation does not preclude civil penalties under state law for non-compliance. States have found that the fines are not worth the cost of enforcement and expect that employers will comply for other reasons.
One payroll publication cites a common employer complaint:
“Many state legislators don't seem to understand that the more information they require from employers, the longer it takes to get a report out. They also don't understand that employers in their state don't just have one state to comply with. They have to comply with multiple states” (Paytech, 1997).
Two data privacy and security concerns are noted in the literature. First, some employers and state employment security agencies have been concerned about the increased exchange of data among public agencies and the private contractors some states use to run part or all of their new hire programs. Second, feminist advocates want limits on the disclosure of information to guard against domestic violence.
There are no time requirements in the PRWORA for keeping new hire data, either in the state or the national directories. The same applies to data in the National Directory, at least according to a 1997 OCSE publication.
The National Directory is housed in the National Computer Center of the Social Security Administration (SSA). This collaboration between OCSE and the SSA helped get the database off the ground more quickly. The National Directory uses the SSA's secure telecommunications network established to send information between the mainframe and other state government sites. The two agencies were able to share resources and technical expertise, including the data centre, network and systems designers. An OCSE official says that
“as a result, we have been able to assemble the National Directory in less time and at a lower cost than if we had reproduced the existing Social Security Administration's infrastructure.”
Until legislation is passed, state employment security agencies (SESAs) cannot check the National Directory for information on unemployment insurance fraud and abuse. One respondent suggested that this might have been an inadvertent omission from the 1996 federal legislation.
The new hire reports submitted to the state directories, however, must be made available to state agencies that run the income and eligibility system programs of the Social Security Act, and to state agencies operating employment security and workers' compensation programs. Whether the state may share new hire reports with other state agencies depends on the location of the state directory, and whether the operation of the directory is part of the state's automated data processing system required by the PRWORA. If the state directory is within the child support agency, then information sharing is possible, with certain safeguards. If not, the state may legislate to extend new hire data access to other agencies.
As of late 1997, 34 new hire programs were located in child support enforcement agencies,19 in state employment security offices and one in a state treasury.
Although the federal government will not fund the operation of new hire directories,it will, under specific circumstances, give states money to develop them. States may be reimbursed for 80 percent of the following costs: changing their automated child support enforcement system; developing the system, if the directory is within the child support agency and part of the automated enforcement system; and developing the interface between the automated enforcement system, if the directory is outside the state's automated support enforcement system.
If the state puts its directory in a SESA or other entity outside the child support enforcement automated system, the child support agency may be reimbursed for 66 percent of the cost of developing and maintaining the directory. Child support agencies must negotiate agreements to reimburse the state directory for the costs of the state directory related to child support.
The federal government will reimburse states for “reasonable” costs of sending the new hire data and the quarterly wage and unemployment insurance claims to the National Directory. Reimbursement excludes the costs of obtaining, verifying, maintaining and comparing the information.
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