Pastor, Church & Law

§ 8.02

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Employers must provide a designated state agency with information about every new hire as a result of federal legislation that seeks to facilitate the enforcement of child support orders and reduce fraud in welfare programs. The "new hire reporting law" does not exempt religious organizations.

In 1996 Congress enacted the Personal Responsibility and Work Opportunity Reconciliation Act, popularly known as the "welfare reform" bill.[1] 42 U.S.C. §653a.The Act has many provisions designed to reduce welfare payments and address welfare fraud. One of these provisions requires employers to report all "new hires" to a designated state agency. The purpose of this requirement is to locate "deadbeat dads" who avoid their child support obligations by changing jobs and their place of residence. Forcing these persons to honor their support obligations will enable many women to go off welfare. Another purpose of the new law is to reduce fraudulent unemployment benefits payments to persons who are working.

States are not required to mandate new hire reporting. But, if they fail to do so, they will forfeit federal funding under certain programs. To date, all states have enacted legislation mandating new hire reporting,

1. Church Coverage

The new hire reporting requirements apply to all "employers." The Act uses the same definition of "employer" as is contained in section 3401(d) of the Internal Revenue Code. This section defines an employer as "the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person." This definition contains no exception for religious organizations. And there is no exception for "small" employers having only one or two employees. Note that the reporting requirement only pertains to new hires, as defined by state law. This generally will be any employee hired after a date specified by state law.

2. How It Works

When employers (including churches) report new hire information to their designated state agency, the agency will match the information against its own child support records to locate parents and enforce existing child support orders. Once these matches are done, the information is sent to the "National Directory of New Hires" so other states can compare the information with their own child support records. The information also will be shared with state welfare and unemployment agencies, to detect and prevent fraudulent or erroneous payments.

Federal law requires that employers include the following seven items of information in their new hire reports:

1. employer's name

2. employer's address

3. employer's federal employer identification number (EIN)

4. employee's name

5. employee's address

6. employee's Social Security Number

7. date of hire

Most of this information is contained on the W-4 form ("withholding allowance certificate") completed by each new employee at the time of hire, and as a result most states allow employers to comply with the reporting requirements by sending copies of W-4 forms completed by newly hired employees.

Although most states require only the seven basic "data elements," some states require or request additional data.

Tip. The employer's federal identification number is inserted on line 10 of Form W-4 only when the form is sent to the IRS. Since this happens infrequently, the employer's identification number generally does not appear on the form. So, for an employer to use W-4 forms to comply with the new hire reporting requirements, it must manually insert its federal employer identification number (EIN) on line 10. The employer's name and address also may need to be manually inserted on line 8.

Tip. Some states ask employers to voluntarily report additional information, such as date of hire, or medical insurance information.

The deadline for filing a report is specified by state law. However, it may not be later than 20 days after an employee is hired. New hire reports should be sent to the State Directory of New Hires (SDNH) in the state where the employee works. Many states allow employers to report data using the following media:

• Mail
• Fax
• Interactive telephone systems
• Secure email
• State websites
• Magnetic tape or other electronic media

Tip. Be sure to check with your designated state agency to find out what reporting options are available in your state.

Tip. Does your church use a payroll reporting service? If so, it may be automatically making the new hire reports for you. Check to be sure.

3. Penalties

Federal law prohibits states from assessing a penalty in excess of $25 for each failure to report a new hire. However, states may impose a penalty of up to $500 if an employer and employee "conspire" to avoid the reporting requirements, or agree to submit a false report.

4. Employees in More than One State

Some churches, denominational agencies, and parachurch ministries have employees in more than one state. How do they comply with the new hire reporting rules? They may report newly hired employees to the state in which the employees are working; or they may select one state where employees are working and report all new hires to that state's designated new hire reporting office. Note that employers using this option must register with the federal Department of Health and Human Services (HHS).

Multistate employers that choose to report to one state must submit new hire reports electronically or magnetically. Multistate employers should contact the state agency to find out what data elements they need to report and the electronic data specifications for that state.

Key Point. "One state" reporting requires new hire information to be reported twice a month, not less than 12, nor more than 16, days apart.

Key Point. A multistate employer that elects to report all new hire information to one state must inform the Secretary of the United States Department of Health and Human Services of its decision by (1) registering through the Multistate Employer Registry (MSER), or (2) download the registration form and mail or fax to: Department of Health and Human Services, Administration for Children and Families, Office of Child Support Enforcement, Multistate Employer Registration, Box 509, Randallstown, MD 21133. The fax number is (410) 277-9325. The registration form can be found on the Office of Child Support Enforcement website.