$1.7 Trillion in Uncredited Wages – 8 Employer Questions Answered

$1.7 Trillion in Uncredited Wages – 8 Employer Questions Answered

Recently a large number of employers have received letters from the Social Security Administration (SSA) department titled “Employer Correction Requests”. These letters notify of discrepancies between the information SSA has on record relative to an individual’s name and/or social security number (SSN), and that which the employer has submitted on their W-2s.

In managing these correction requests (also referred to as “no match letters”), there are a number of legalities for which employers need to be aware. I sat down with Arizona employment attorney, Julie Pace to help navigate what tends to be a sensitive topic for employers.

1. Is there any correlation between the SSN No-Match letters and the current administration’s focus on illegal immigration?

Because a no match may be caused by legitimate reasons that do not relate to an individuals’ work authorization or immigration status, a No-Match letter does not necessarily mean that an individual is not authorized to work in the United States.

The SSA No-Match letters advise employers that an SSN mismatch is not an assumption of falsification or other misconduct and the SSA letter expressly states that the SSA mismatch is not a statement about immigration. Over 17 million people who are legal to work in the United States do not match their names and SSNs.

2. What are the types of discrepancies that occur?

Mismatches can be caused by typographical errors, unreported name changes, incomplete records, or SSN misuse.

What might be some of the reasons behind the SSA mismatches? Discrepancies can result from:

  • clerical or transcription errors
  • name changes that are not reported either to the employer or the SSA (marriages, divorces, adoptions, etc)
  • an individual that has multiple surnames and uses a different surname for employment than appears in their SSA file
  • because the employee is using a Social Security number that does not belong to the employee

3. Why is the burden of correcting these discrepancies placed on employers?

If an employer sends in an SSA report that contains an employee’s wages, but with a different name or SSN than shown in the SSA’s records, the SSA is supposed to write the employee at the address shown on the wage report and request the missing or corrected information.

However if the wage report does not show an employee address or has an incomplete address, the SSA will often write to the employer and request the missing or corrected employee information. These letters, often titled “request for employee information,” are generally called a “No-Match letter.”

4. What problem is created when employee W-2 information like name and SSN don’t match SSA’s records?

Because the information submitted by the employer does not match the SSA’s records, the SSA is unable to credit the earnings to an individual SSA earnings file, so it is placed in the “earnings suspense file” until the records can be matched and the money properly allocated.

As of the end of 2017, the earnings suspense file of uncredited earnings contains more than $1.7 trillion in uncredited wages. The SSA No-Match letters are the SSA’s attempt to obtain corrected information in order to properly allocate funds from the earnings suspense file to individual SSA accounts.

5. Can I terminate an employee who is the subject of an SSA-No Match letter?

If an employer takes adverse action against an employee based on the receipt of the letter, then SSA warns that action could be discriminatory and unlawful.

Here are just SOME examples of what employers should NOT do in response to these letters:

  1. Do not give a deadline for an employee to resolve the matter with SSA; or
  2. Do not terminate the employee (unless the employee in a Human Resources investigation admits he or she is not authorized to work in the United States); or
  3. Do not require the employee to show you a Social Security Card as that can be an unfair immigration-related employment practice; or
  4. Do not change the employee’s status from an employee to a 1099 independent contractor.

6. What happens if an employer just ignores the SSA-No Match letter?

The No-Match letter should not be the basis for an adverse employment action. It is not an immigration enforcement tool and makes no statement about an employee’s immigration status. However, Immigration and Customs Enforcement (ICE) may view the SSA No-Match letter as some indication that an individual does not have status and potential constructive knowledge.

Therefore, an employer should not merely ignore an SSA No-Match letter. It should take steps to demonstrate good-faith efforts to investigate and verify the accuracy of the employee’s Social Security number.

7. How does an employer demonstrate a “good faith” effort when it comes to verifying the accuracy of employee records?

Developing standard procedures may help the company provide a good-faith defense if ICE attempts to use the SSA No-Match letter as evidence that the company had knowledge regarding an employee’s immigration status based on receipt of a No-Match letter.

In developing procedural guidelines companies should remember, “Confirm, Communicate, Record”.

Confirm

1. Upon receiving notice from the SSA of discrepancy, the company should first confirm that the error was not made by the employer. If it was a transcription error on the part of the company, the company can file a Form W-2C to correct the SSA records.

Communicate

2. Provide employees with a letter communicating the discrepancy. Advise the employee that he/she must provide a Taxpayer Identification Number (TIN) (which should be the SSN) and that he/she is subject to a $50 penalty imposed by the IRS if the employer fails to furnish the TIN.

3. Explain that the employee is responsible for correcting the mismatch or risk losing his/her SSA earnings based on the shorter statute of limitations.

4. Obtain an updated W-9 form

5. Obtain an updated W-4 form

6. Include a return envelope for the employee to return the W-9 to the filer

Record

7. Retain all returned forms in personnel files.

8. Keep an extra copy in a tickler file.

9. Solicit an additional W-9 and W-4 from each employee subject to the No-Match letter within the first three weeks of November, so that employees subject to a No-Match letter complete three signatures in the same calendar year verifying their name and SSN is correct.

8. Under what circumstances should an employer consult with legal counsel in response to an SSA no match letter?

Because of the lack of legal guidance in this area, following the procedure outlined above is not a guarantee that the employer avoids liability in cases where the employee is not authorized to work in the United States. Companies should consider working with a legal professional experienced in immigration and/or employment law, rather than taking on the SSA themselves.

Experienced counsel can submit a letter under the applicable rules to the SSA on behalf of the company. The company does not need to respond to the SSA directly and there are reasons it’s often in their best interest not to.

For more information and/or guidance in responding to SSA No Match letters, contact me at jmorrow@abcllc.org or call 602-903-4047.

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Author
Joanna Morrow

Joanna Morrow is an employer consultant and advocate who has worked in the employee benefits industry for over two decades. She works diligently to help employers overcome obstacles in their business by sharing her expertise in Human Resources, Benefits & Compensation, Process Mapping, Risk Management and ERISA/DOL/IRS compliance. She is a licensed life and health insurance professional in the State of Arizona and is an active member of the National Association of Health Underwriters (NAHU). Joanna is a senior partner at Arizona Benefit Consultants in Phoenix.

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