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New-Hire Reporting
In 1996, congress passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). It was a major piece of welfare reform legislation and had wide effects on how states manage social welfare programs. This is particularly important for business owners in terms of their new hire reporting requirements. Businesses must report personal identification information about newly hired employees in accordance with federal rules, plus additional reporting requirements which differ from state to state.
Though it may seem a little daunting, PRWORA reporting is actually pretty straight forward. It's important that you have an understanding of new hire reporting and have the tools you need to report in your state.
Let’s get started.
An overview of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA)?
Though PRWORA is federal legislation, the bill was designed to give states more oversight over social welfare programs. So long as states comply with a set of federal regulations, they can design additional requirements and limitations into their own system.
For our purposes here, the bill was passed to do two essential things:
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Ensure that people owed child support payments receive them quickly and efficiently, which can include such measures as wage garnishment and wage assignments.
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Reduce the risk of fraudulent government benefit payments.
Through reporting, federal and state governments are able to find anyone who is employed, but not paying child support. Reporting goes through the state to the National Directory of New Hires (NDNH), which is what the Federal Parent Locator Service (FPLS) relies upon to find parents who aren’t paying child support.
Businesses that participate in new reporting are also ensuring that a new hire does not continue to receive unemployment and other government benefits they’re no longer entitled to. PRWORA is especially effective for tracking new hires who have children or receive benefits in another state.
Who is considered a new hire?
A new hire isn’t just a person coming to work for you for the first time. You should also report any employee who returns to work and has to complete a new W-4. Also, if your new hire quits before your reporting deadline, you still have to report them if they earned wages.
Additionally, while federal law does not require you to report independent contractors, some states do. See the table below for a list.
Is new hire reporting enforced?
Every quarter, the federal government sends each state agency a list of employers that are not complying with reporting requirements. The state then has the option about how to proceed with enforcement, which can include:
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A letter informing the employer of their requirements with information on how to report.
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A civil fine of up to $25 per unreported new hire.
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A civil fine of up to $500 per unreported new hire when the employer and employee conspired not to report.
What information is required to comply?
To comply, you need to report to your state’s State Directory of New Hires (SDNH). It may be its own department or part of a larger division—typically the Department of Health and Human Services or the Department of Labor. The state will share information with the NDNH, which then cross-references new hire information with other state reporting centers.
Employers or their payroll service provider will be asked to submit a report within a set number of days after the individual is hired. The number of days varies by state, but won’t be more than 20 calendar days. The employer is required to report at least these seven pieces of information for each new hire or rehire:
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Employee’s name
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Employee’s address
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Social Security number (SSN)
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Date of hire (the date the employee first performs services for pay)
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Employer’s name
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Employer’s address
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Federal Employer Identification Number (FEIN)
Most states require additional information about employees and sometimes employers. This could be the employee’s date of birth or information about the employer’s point of contact. Many states ask employers to share optional information as well.
Each state also has its own rules about where employers can file new hire reporting. Most states have easy-to-use online services where companies can create a profile for future use. Most states also have mail and fax options as well.
Multistate employers can report via the Office of Child Support Enforcement’s Child Support Portal. This is a faster way to conduct reporting. State laws about reporting information still apply.
How is the information used?
When states get new hire data, they cross-reference it with child support orders. When a non-compliant parent is found, child support payments are automatically pulled from their paycheck. It works like other forms of income withholding, such as wage garnishment.
When a new hire is found to have public assistance, the state government will remove the individual from the assistance program. Typically, nothing further is required from the employer, but there are some cases where the state will attempt to recuperate erroneous assistance payments. States do this through income withholding.
New hire reporting requirements by state
Below is an overview of each state's new hire reporting requirements including a link to each state's new hire reporting center: