The Social Security Administration.

According to an internal audit, the SSA, which runs E-Verify, failed to run checks on its own employees 20% of the time in the past two years. Also, about half the checks that were done weren’t finished in a timely manner, the Washington Times reports.

When companies sign up for E-Verify, they’re required to use the system for all new hires and begin the process within three days after the hire date.

Some critics have used the SSA audit’s findings to argue that the system is impractical in its current form.

What do you think? Do you use E-Verify? Does SSA have an excuse for not following the requirements? Let us know in the comments section below.

With the SSA announcement that there will be no change over the prior year – almost unheard of in recent memory – there’s sure to be plenty of confusion. The higher-ups will want to confirm that they won’t pay more in Social Security taxes next year, while retirees may ask why they’re not getting a cost-of-living increase in their monthly checks. The latter may also have questions about the Obama Administration’s proposal to send those receiving Social Security benefits a one-time $250 check to help stimulate the economy.

Here’s what you might want to tell them:

• Higher-ups – Indeed, those earning more than $106,800 won’t pay more in FICA taxes in 2010. This tax is the combined Social Security tax rate of 6.2% plus the Medicare tax rate of 1.45%. So, the maximum Social Security tax employees making $106,800 or more will pay is $6,621.60 in 2010. Employers must pay an equal share on each worker. You may want to explain to these employees, though, that as always, there’s no limit to the wages subject to the Medicare tax – so all covered wages are still subject to this 1.45% withholding.
• Retirees – This is the first time there will be no cost-of-living increase since 1975, when the agency began adjusting the amounts based on inflation. The Department of Labor announced this week that consumer prices fell 2.1% since the third quarter of 2008. SSA actuaries base the cost-of-living adjustment on the change in consumer prices from the third quarter of one year to the same period the following year. Since prices are falling, retirees actually have more spending power because the agency never decreases benefits. As for the $250 “supplement,” you may want to suggest that retirees not go spending any potential windfall just yet. Right now, it’s just one idea the Administration has suggested to further stimulate the economy.

A few other updates

The wage bases for the following also remain unchanged in 2010:

• Self-employed individuals – $106,800. There’s no limit for the Medicare tax for these workers, either. The self-employment tax rate remains 15.3%, which is the combined Social Security tax rate of 12.4% plus the Medicare rate of 2.9%. The maximum Social Security tax for those self-employed will be $13,243.20.
• Domestic employees – $1,700.
• Election workers – $1,500.

The agency had planned to immediately end its live-operator system, but now says it’s pushing back the original Sep. 21 deadline a few weeks, until the end of October, to give those who prefer speaking to a live person more time to call in.

But employers won’t have to completely say goodbye to the system. Beginning in November, they can still choose between these options to verify up to 10 employee names and SSNs at once:

• Telephone Number Employer Verification (800-772-1213) – This is an automated system which will give you instant results.

• Social Security Number Verification Service – Use this if you prefer going online for instant verification. Batch filers can upload up to 250,000 names/numbers online and usually get results the next business day.

Note that users must register to use both systems on SSA’s Web site. The options are available 24 hours a day, seven days a week.

The announcement comes just as the Department of Homeland security notified employers that it’s dropping the controversial “no match” rule.

The reason: Fraudulent income tax returns and and annual wage reports are costing the federal and state treasuries millions annually.

In theory, more frequent reporting would allow the IRS and states to match wage and withholding data to workers’ tax returns – a difficult, if not impossible, task right now.

Think about it: Companies submit W-2s to SSA and the states mid-tax season. So, by the time their file arrives at the agency, identity thieves have had weeks to create false W-2s and tax refund requests – plenty of time to file, collect and spend a fraudulent tax refund.

Two problems with the current structure:

• Even states with updated processing technology don’t have time to cross-check the data before the tax season begins, and
• Many states require electronic filing, but not all do. Specifically, about 63% of states with income taxes require electronic W-2 filing.

States have been including ever-smaller employers under such mandates, but these numbers still leave a lot of room for paper filing.

For this proposal to work, far more employers would have to e-file their data, or the SSA would need to share electronic W-2 data sooner.

Should the idea move forward, “The Administration will work with the states so that the overall reporting burden … is not increased,” the Administration’s May 2009 Budget Overview suggests.

The Social Security Administration just announced it’ll discontinue its operator-assisted hotline in favor of an automated system that works like voice-mail jail, where you have to either continually punch numbers or speak clearly into the phone.

The agency’s calling the overhauled system the Telephone Number Employer Verification (TNEV) system, and it’s available beginning 9/21/09. TNEV allows you to verify up to 10 employee names and SSNs (currently five) at one time through a voice response system, without speaking to an agent.

But you can get the same results – faster, and for more SSNs than if you call the agency – by going online. The Social Security Number Verification Service (SSNVS), a pre-existing system, allows you to:

• verify up to 10 names and SSNs online and receive immediate results. There’s no limit to the number of times the SSN verification Web page may be used within a session
• upload electronic files of up to 250,000 names and SSNs and usually receive results the next government business day.

You must register with SSA’s Business Services Online to use both SSNVS and TNEV. (So, since you’re online anyway, why bother to use the phone system?)

How do I use these systems?
Whatever your preference, using either SSNVS or TNEV couldn’t be easier. Here’s what to do:
1. SSNVS – After registering for BSO, go to www.socialsecurity.gov/employer to enter the necessary info.

2. TNEV – Call either of these two numbers:
• 800-772-1213 – SSA’s National 800 number. When prompted say, “Employer SSN Verification.”
• 800-772-6270 – SSA’s Employer Reporting Service Center. When prompted say or press “1″ to verify an SSN.

Who can use these systems?
Employers and third parties acting on behalf of an employer (e.g., payroll service providers, CPAs, etc.) can access both TNEV and SSNVS. However, the systems may only be used for wage reporting purposes, and after the employer/employee relationship is established.

Note: To verify SSNs for non-wage reporting purposes, you can use SSA’s Consent Based SSN Verification Service (CBSV) at www.socialsecurity.gov/cbsv.

To verify your personal SSN, you need proof of identity when visiting your local Social Security field office

The Social Security taxable wage base is expected to be $106,800 in 2010 and 2011 – the same as 2009, which means anyone bringing home a bigger paycheck won’t have to pay more into the Social Security system.

That’s according to SSA’s Office of the Chief Actuary, which makes these estimates every spring. SSA won’t officially determine the parameters until October, and only then by following formulas set by law. Having a good estimate, though, will help your CFO with budgeting in the coming months.

Here are some post-2010 predictions using “intermediate” forecasting assumptions:

2011 $106,800
2012 $114,900
2013 $119,400
2014 $124,200
2015 $129,300
2016 $134,700
2017 $140,400
2018 $145,500

According to the report, Social Security trust funds will be adequately funded over the next six years. In 2016, however, tax revenues are expected to fall below program costs. That’s one year earlier than last year’s prediction.

SSA expects to pay full benefits until the trust funds become exhausted in 2037 — four years earlier than in last year’s report. Once that happens, tax revenues (at current rates) will cover just 76% of scheduled benefits.

To get a copy of the report, go to www.ssa.gov/OACT/TR/2009/index.html.

IRS and SSA have changed the format of Form W-2 to help protect workers’ privacy. To keep employees’ Social Security Numbers from showing through a window envelope, the agencies have moved:

- the “Employee’s Social Security number” (SSN) box from Box d to Box a

- “Control number” box from Box a to Box d (this is optionally used by some employers to identify individual W-2s)

- The form ID Number “22222” AND “Void” boxes to the top left corner of the form.

SSA says it’s received many paper W-2s where the SSN and/or name aren’t in the proper position – which delays processing. Before submitting paper W-2s to SSA, be sure someone reviews them, especially Copy A, to ensure printer accuracy.

Get the 2009 filing instructions here.

Suppose one day you get a “no-match” letter from the Social Security Administration saying an employee’s information doesn’t match what’s in the fed’s database. Also, suppose the employee doesn’t take any action to correct the problem. What now?

And here’s the real dilemma: You of course can get penalized for keeping an employee you know is unauthorized to work in the U.S. But you can also be liable for wrongful termination if you fire an employee who, in fact, is eligible to work.

Key court ruling
One company, Aramark Facility Services, faced this problem after the SSA notified the company that information it reported about some employees didn’t match what the SSA had on file.

In response to the no-match letter, Aramark gave the employees three days to provide proof they had applied for new Social Security cards. It then fired the employees who didn’t provide the proof after seven days.

When the fired employees sued, a federal court held that the company had blundered and had to reinstate the fired employees, with back pay. Here’s why:

• An SSA no-match letter does not, by itself, put a company on notice that the employees named in the letter are undocumented.
• The no-match letter combined with the employees’ response, or lack of response, to the company’s request for valid Social Security numbers still did not put the company on notice that the workers might be undocumented, given the short turnaround time the employees had to produce the proof.

Avoiding a lawsuit
What’s the correct – and lawsuit-proof – procedure? The laws give you 90 days to straighten out no-match problems. And unless you have overwhelming proof that the employees don’t have a legal right to work in the U.S., you probably should take the full 90 days.

For more on dealing with no-match letters and related matters, see the advice from Anita Patel, with the law firm of Wimberly Lawson Seale Wright & Daves.  

Cite: Aramark Facility Services v. SEIU, No. 6917.

The big push is on – especially at the state and local level – to nudge employers to register with E-Verify, the government Web program that allows you to electronically verify the information provided on the Form I-9. Whether you’re using the program already or are thinking about it, there are some facts and factors you should be aware of.

If I sign up our company, I know it gives me access to a system for checking employees’ citizenship, but what obligations does the government mandate for employers who are in the system?
You’ll be faced with 10 major responsibilities outlined in a Memorandum of Understanding you’ll sign:

1. Post a notice supplied by the DHS that you use E-Verify.
2. Provide the identification of the designated E-Verify employer representative.
3. When completing Form I-9, accept only List B documents that contain a photograph.
4. Photocopy and retain Form I-551 (Permanent Resident Card) or Form I-766 (Employment Authorization Document) with I-9 records if they are presented by an employee.
5. Notify DHS if you continue to employ following a nonconfirmation (with civil penalties of $500 – $1000 for failure to notify).
6. Initiate the E-Verify process within three business days after hire.
7. Follow required procedures, including notifying an employee in writing of any tentative nonconfirmations.
8. Record the case verification number on the employee’s I-9;
9. Allow DHS and SSA representatives to make periodic visits to review your E-Verify procedures and make such records available along with any materials related to the I-9 process.
10. Agree not to use E-Verify for pre-employment screening, for re-verification purposes, or for screening of any employees hired before the signup date.

How does does the verification process work?
You must initiate an electronic inquiry for all new hires no later than three days after the start of employment or whenever the I-9 employment verification process is done. There are three possible results from E-Verify:

1. Confirmation: This creates a rebuttable presumption of I-9 compliance. The case verification number needs to be attached to Form I-9. This ends the process with the exception of time limited authorizations, when re-verification is necessary.

2. Tentative Nonconfirmation: This is not grounds for termination and requires follow-up steps: double checking for errors, recording case verification number, and informing employee of the right to contest nonconfirmation with SSA or DHS. If an employee doesn’t contest the nonconfirm, then employment must be terminated. If an employee contests, you must provide the employee with a referral letter to the SSA or refer to DHS. The employee has eight federal working days to resolve the discrepancy unless SSA or DHS extends the time period. After 10 days, you must query the system again.

3. Final Nonconfirmation: The employer must record the case verification number on Form I-9. If the employer does not terminate employment, there is rebuttable presumption of unlawful hire.

What are the advantages of the system?
The advantages of using E-Verify are that it allows the employer to query the government databases as to validity of documentation. For those in vulnerable industries, it saves time and training by identifying unauthorized workers.

Disadvantages?
The disadvantages of E-Verify are that there are significant problems with underlying databases, creating errors that may lead to termination of lawful U.S. workers. E-Verify is also limited to new hires and does not create a safe harbor from worksite enforcement. In addition, eight days is often not enough for employees to resolve discrepancies and there is no formal appeal process. Continued hire after final nonconfirmation will result in a rebuttable presumption of a violation and can lead to further worksite enforcement scrutiny by the DHS.

How many employers are signed up already?
As of last month, about 70,000 employers are in the program, and there are about 1,000 new signups each week. Expect to see that figure go up since the federal government mandated that all of its contractors must be registered and more states are considering mandatory E-Verify participation.

Where do I go to register?
You can get started here.

Here’s what the employment-law experts at the law firm of Frederickson & Byron recommend:

Don’t ignore the letter. If you do, U.S. Immigration and Customs Enforcement ICE could cite the inaction as proof that you knew you employed an unauthorized worker. So, first, check your records to ensure there’s no typographic error in reporting the employee’s SSN.

• If there’s no error:
  1. Share the “no match” letter with each employee listed on the letter.
  2. Advise the employee to check to be sure that the correct name and SSN has been submitted to the SSA.
  3. Don’t require the employee to produce his or her social security card or any other specific documentation; that could be considered document abuse under employment-eligibility-verification laws.
  4. Give the employee a reasonable amount of time to investigate and/or correct any errors.
• If there is an error: In addition to submitting the correct information to the SSA, you should also correct the employee’s Form I-9. As with any employment matter, be sure to treat all employees listed on the “no match” letter similarly without regard to the employee’s national origin, race or citizenship status.
• If an employee admits to a false SSN: You must immediately terminate employment with your company.
• If an employee verifies that the information given is correct: Ask the employee if he or she can provide any other reason for the “no match” letter. If there’s none, report back to the SSA in writing that the company has reverified that the information submitted is correct and that neither you nor the employee can explain the discrepancy. Ask the SSA to contact the company if any additional employer action is required.
• If an employee verifies that the information given is correct but you uncover additional information: You may learn that, for other reasons – such as an admission of illegal residence – that the employee is unauthorized to work in the United States. If so, you terminate employment. Note: Without other evidence, a co-worker tip in and of itself isn’t basis for termination, or even reverification of an I-9.