Workshop: Forum on Federal Payroll Issues

May 21, 2009

Speakers:
Michael O’Toole, APA Senior Director of Publications and Government Affairs
Anita Bartels, Senior Program Analyst, Office of Employment Tax, IRS
Chuck Liptz, Director, Office of Electronic Services Support and Communication, SSA
Amy Lawson, Associate Chief, Verification Division, USCIS
Sherry Grigsby, Manager, Employer Services, Office of Child Support Enforcement
Ruben Rosalez, Deputy Regional Administrator, Wage and Hour Division, DOL

Agencies Comment on No Match, Electronic Streamlining, and Free Shirts

“Praise the Lord,” an attendee was heard to remark after the IRS’s Anita Bartels noted during the APA Congress Forum on Federal Payroll Issues that employers will not be required to submit W-2s or 1099s for COBRA subsidies.

“Keep in mind, though,” Bartels said, that employers still need to keep a record of each employee’s payments along with other documentation and that, if information is missing, a credit will be frozen until the record is completed. 

Bartels—senior program analyst, SB/SE compliance policy, Office of Employment Tax—and representatives of other agencies fielded questions on topics ranging from Social Security number verification to complying with child support reporting in various states. Moderated by  Michael  O’Toole, senior director of publications and government affairs at APA, the session also included speakers Amy Lawson, associate chief, Verification Division, U.S. Citizenship and Immigration Services, Department of Homeland Security; Sherry Grigsby, manager, Employer Services Team, Office of Child Support Enforcement; and Ruben Rosalez, deputy regional administrator, Western Region, Wage and Hour Division, Department of Labor.

Bartels said that a company’s COBRA refund will be frozen if any of the required information is missing. An employer will be notified immediately in case of a problem, and someone from IRS will get back to the company within 30 days to collect the missing information.

“We won t be looking at anything else,” in that investigation, Bartels told BNA after the session.

Asked whether employers need to amend plan documents to reflect the fact that they will pay 65 percent of the COBRA premium, Rosalez said no.
 
SSA’s Liptz noted that big changes are on the horizon for the SSN verification system, with a new process set to roll out Sept. 21. Among the changes, employers calling in will have to register ahead, and there will no longer be the option of speaking to a live representative. A key advantage of the new system, Liptz said, is that the information will be keyed in and the employer will receive an electronic response, automatically providing documentation for its files.

Part of the idea of the new program, Liptz said, is to have a higher level of authentication before it gives out information on SSNs.

Regarding no match letters, Liptz said his agency remains in limbo as to when letters including Homeland Security’s warning about employer liability for hiring undocumented workers will be released. The agency is subject to a restraining order as the lawsuit challenging the DHS rule makes its way through the judicial system.
 
Liptz clarified that SSA’s interest is getting employees matched up with their earnings and future benefits. While the agency has sent the letters for many years to individuals to inform them there is a problem in their information, it is more recently that the agency has sent letters to employers. When it was sending the no match letters to employers, it was notifying only those whose mismatches between Social Security numbers and names had reached a certain percentage of their employees.

Asked whether employers might need to start reporting wages more frequently than once a year, Liptz said, “Frankly I don’t have an answer” but went on to say that given the 43 million paper W-2s the agency must handle in a year—which currently take nine months to process—it would be hard to conceive of even doubling that paperwork with one extra report per year.

Liptz said that SSA is getting ready for a long-overdue computer system overhaul­—the agency’s system was last updated 15 years ago—and asked employers to weigh in with their suggestions, noting that they probably will have to wait another 15 years for an another overhaul, once this one is completed in a couple years.
 
Asked whether federal contractors will need to do E-Verify checks on existing employees once the system becomes mandatory for them, USCIS’s Lawson said that this requirement was part of a rule proposed by the Bush administration and that the proposal—including the troublesome clause—is under review in the new administration.

Asked whether a Democratic administration will be tougher on employers than the GOP, DOL’s Rosalez said he could not answer that but that DOL is currently very focused on Davis-Bacon prevailing wage violations. He said that contractors and subcontractors several levels down working on projects involving even $1 of stimulus money must be in compliance with the law.

OCSE’s Grigsby, asked about the status of the electronic income withholding order project, said: “It’s up and running and working great in 16 states.” The system is fully automated, and the agency provides employers with one file from multiple states. Grigsby noted that four large employers are up and running on the system, including the U.S. Postal Service, the Department of Defense, ADP, and Ruby Tuesday. Families are getting their funds at least three weeks sooner under the new system. She did note that employers have had difficulties with requests for information in many different formats from various states. OCSE is tackling the problem in reverse, she said, by developing a single standard reply to the requests that employers can create and send to any state.
 
Grigsby also confirmed that OCSE is in the process of developing a National Medical Support Notice but could give no completion date.
 
Asked whether companies would be penalized for using the wrong version of Form I-9, Employment Eligibility Verification, CIS’s Lawson said that “as long as it’s not an egregious and consistent violation,” employers do not have to worry. 

“A couple of times are okay,” Lawson said, “if it’s a legitimate mistake.”
 
Asked what an employer can do to rectify the situation when it has treated a nonexempt employee as exempt, Rosalez replied that employers just need to make the employee whole by providing two years of back pay to cover the statute of limitations. He invited employers to call and ask for help interpreting the requirements, if they need to, but said there is no need to have the agency officially clarify the situation. In fact, he said, making it official would require DOL to do a formal investigation and leave the employer with a record of the problem.
 
Bartels commented on the perennial fringe benefits question of whether the value of company-logo’d clothing given to employees is taxable income. Although she said an investigation of all the facts is called for in order to make an absolute determination, generally such items would come under the business purposes exclusion. She also noted that the cost of the item could have some bearing, along with how usable the apparel is outside of work.