SSA Announces It Will Hold "No Match" Letter for 2007 Tax Year

By Michael C. Saqui & Anthony P. Raimondo

The so-called “safe harbor” regulation remains blocked in federal court. This regulation would link Social Security mismatches to immigration violations for the first time, and would require employers to resolve mismatches within 93 days of notification by the Social Security Administration (SSA). While the court’s order prohibited mailing or otherwise sending to employers new Social Security Administration (SSA) no-match letters that have Department of Homeland Security (DHS) inserts explaining the regulation, the injunction never precluded the SSA from sending out its traditional no-match letters to employers. However, on May 7, 2008 the SSA has announced that just like Tax Year (TY) 2006, it will not sent no-match letters to employers for TY 2007

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Each year, employers submit employee wages to the SSA on the Form W-2 -- Wage and Tax Statements. When the SSA is unable to match an employee's name and Social Security number (SSN) from the W-2 with its own records, the employee's earnings are posted to the SSA's Earnings Suspense File until they can be matched with SSA records. SSA estimates that as many as 8 to 9 million employees each year provide incorrect Social Security data. The SSA, whose role is to "improve the accuracy of wage reporting data," has attempted to correct mismatched records by sending out no-match letters to employers and employees requesting corrected information. The no-match letters to employers are usually sent in bunches starting in March or April.

No-match letters were not sent to employers for TY 2006 because of the DHS insert and the restrictions imposed by the court. DHS's regulation required the SSA to revise its no-match letters to employers, and by the time the preliminary injunction was granted in October, it was too late in the year to revise the letters again to send them out for TY 2006. The DHS insert outlined the safe harbor procedures, explaining the steps that employers should take to resolve the mismatch consistent with the employer's obligations under US immigration law or face civil and criminal sanctions.

On March 26, 2008, DHS published a supplemental proposed rulemaking in the Federal Register addressing the concerns raised by the court. The supplemental rulemaking does not alter any of the steps or time frames, called safe harbor procedures, employers can take in response to receiving a no-match letter, but instead: (1) clarified DHS’s policy on no-match letters; (2) deleted the regulation’s assurances that compliance would not trigger discrimination charges against employers; and (3) provided a mandatory analysis of the economic impact of the regulation upon business. Once a final regulation is published, DHS will likely seek to have the preliminary injunction dissolved so that the regulation can be implemented.

On April 25, 2008, DHS announced that after the agency completes its review of the comments received on the supplemental rule and finalizes the regulation it will simultaneously asked the court to vacate the preliminary injunction. DHS expects the process to take a few months.

Due to the continuing legal challenges, the SSA has decided not to send out no-match letters to employers for TY 2007.

COUNSEL TO MANAGEMENT:

This area of law continues to change rapidly, and employers should monitor developments closely. While the SSA has stated it will not send the letters for TY 2007, this position could change if the injunction is dissolved or the lawsuit is resolved. Employers must have Social Security mismatch protocols in place with steps to follow if a no-match letter is received, and should have alternative protocols ready if the safe harbor regulation is implemented. Sample protocols are available at www.srlaborlaw.com

The goal of this article is to provide employers with current labor and employment law information. The contents should not be interpreted or construed as legal advice or opinion. For individual responses to questions or concerns regarding any given situation, the reader should consult with Saqui & Raimondo at (831) 443-7100 in Salinas, or (916) 782-8555 in Sacramento.