No Match Letters: Social Security Administration and INS

Copyright Vikram Badrinath, P.C. 1998-2003. All rights reserved.

Recently, the Social Security Administration (SSA) has begun undertaking several activities that negatively impact immigrant communities nationwide. These actions could drive undocumented workers underground at the very time that our need to enhance national security highlights the importance of maintaining accurate records of foreign nationals in our country, conducting background checks to separate contributing individuals from those that may be here to do us harm, and utilizing immigrants\'92 cultural and community knowledge to increase our intelligence capacity. Furthermore, American businesses need these foreign workers who are paying taxes and contributing to Social Security. The sheer volume of no-match employees, although not entirely related to undocumented workers, is a symptom of an immigration system that is not responsive to current economic realities. Efforts to address this problem, principally through the immigration reform proposals central to the U.S./Mexico discussions, will result in a more economically sound and secure America.

No-Match Letters: The SSA annually reviews W-2 forms and credits social security earnings to workers. If a name or a Social Security Number (SSN) on a W-2 form does not match SSA records, the Social Security earnings go into a suspense file while the SSA works to resolve discrepancies. In recent years, the SSA has been unable to match employee information with SSA records for 6-7 million workers a year. SSA has deposited $280 billion dollars in the earnings suspense file as a result of the cumulative effect of these no-matches.

Previously, the SSA would send no-match letters to employers when information submitted for at least 10% of their employees did not match SSA records. Until 2000, that system resulted in about 40,000 letters sent annually to employers. In 2001, that number jumped to 110,000 letters, with 1 in 60 employers receiving no-match letters. Starting in 2002, the SSA changed its criteria. An employer now receives a letter as long as one employee\rquote s information does not match the SSA\rquote s records. This change in practice has resulted in the SSA issuing 800,000 letters, the equivalent of 1 in 8 employers receiving these letters. Roughly 7 million workers were included on these letters.

The no-match letter employers receive explains that the employer submitted at least one W-2 form in which a name or SSN did not match SSA records. The letter provides a list of the names and SSNs of all employees whose records do not match and requests that the employer provide the correct information within 60 days. It also instructs employers that the letter, in and of itself, does not provide a basis for taking adverse action against an employee and is not a statement about the employee\rquote s immigration status. Despite that language, employers have responded to the letters with panic and uncertainty. The letters have been confused with notification of immigration violations, with some employers immediately firing individuals appearing on the list. Even savvy employers are very confused as to how to respond to the letters and at the same time obey the immigrant worker protection laws.

According to SSA, the increased production of social security no-match letters does not reflect policy changes that have resulted from the September 11 terrorist attacks, but rather an effort to reduce the earning suspense file and clean up its database to prepare for the release of its new Internet based Social Security Number Verification System (which is discussed later in this backgrounder). SSA has reported that many of the no-matches result from typographical mistakes and human error and that it is having the most problems with last names that are changed or hyphenated, such as women\rquote s names, shortened names, and compound names. However, SSA\rquote s push to correct its files was put into practice at about the same time as the agency stopped issuing social security numbers to foreign nationals who requested them in order to obtain a driver\rquote s license. This policy, implemented in March, has made it difficult for some immigrants to obtain driver\rquote s licenses, open bank accounts and use other services for which a social security number is often required.

No matter why the no-match letters were issued, the result has been panic and confusion in immigrant communities. Employees face varying situations, depending on what actions their employers decide to take once they receive the no-match letter. These actions have ranged from employees being terminated immediately if their name appears on the no-match list, being given a limited timeframe in which to correct the inconsistent information, to quitting if they cannot correct the information. Confusing the issue further is employers\rquote and employees\rquote lack of understanding about how the no-match letters, the IRS regulations and employee protection laws interact with one another. It is important that employees be informed that they are able to ask for a copy of the letter and that they can consult with an attorney or advocate group.}

No-Match Letters and the IRS: Although the SSA does not have any power to enforce its request for corrected information, the SSA is required by law to provide the IRS with information on no-match W-2 forms. The IRS is authorized by regulation to fine employers $50 for each incorrectly reported social security number and is planning to begin enforcing the regulation after it develops a program for imposing penalties. The agency has indicated that it is currently considering fining employers for infractions that take place in 2002 and issuing the fines as early as 2004. However, it is unclear if it will meet this timeframe.

Until the new program is implemented, employers are still subject to the current regulations that impose penalties if incorrect information is submitted to the IRS. These regulations provide waivers from penalties if the employer acts in a responsible manner and if the events of noncompliance are beyond the employer\rquote s control. As currently interpreted by an IRS representative, the regulations carve out a number of safe harbors for employers:

Once the Social Security Number Verification System (SSNVS) (see below) is operational, employers will be able to verify an employee\rquote s social security number via the Internet. The IRS is not requiring that employers use this system, but it will be considered within the context of due diligence. An IRS representative has indicated that discontinued use of the system could be a factor in determining that the employer has not satisfied the threshold of due diligence. It is unclear how these safe harbors will change once the IRS develops its new plan. }

Social Security Number Verification System (SSNVS): The SSNVS is an Internet based system that enables employers to verify that an employee\rquote s social security number is correct. Currently, the system has been implemented as a pilot program for a small group of employers. The Social Security Administration has proposed broader access to the SSNVS. It remains unclear how the system would comply with the anti-discrimination provisions of the Immigration Reform and Control Act of 1986 (IRCA), safeguard employee\rquote s information from unauthorized verifications and prohibit employers from targeting select groups for scrutiny.

Information Sharing with the INS:According to SSA and IRS representatives, neither agency is currently sharing detailed information with the INS. The only information that the SSA shares with the INS is information relevant to investigations between the two agencies and an annual review, required by law, of earnings reported for Social Security numbers that were assigned for purposes other than employment. The SSA is considering a program whereby it would share more information with the INS and possibly grant the INS authority to issue social security numbers (much like a hospital\rquote s authority to issue a social security card to new born infants). The IRS indicates that it does not share any information on no-match letters with any agency, but the new IRS program currently under development would include meetings with the INS.

SSA Verification of Foreign Nationals\rquote Documentation of with INS: On September 1, 2002, the SSA implemented a nationwide policy change in the processing of SSN applications submitted by all foreign nationals. The change requires the SSA to verify a foreign national\rquote s immigration documents and status with the INS\rquote s Systematic Alien Verification for Entitlements (SAVE) information service and database before processing an application for a SSN or a replacement card. Foreign nationals who have been in the country for less than 30 days may still have their SSN applications processed even if the SAVE system does not verify their INS documentation. If the foreign national submits his or her application after the 30 day mark, he or she will have to wait for a positive verification from SAVE before obtaining the SSN. A more rigorous check is required for foreign nationals who were either born in, or most recently resided in, Iran, Iraq, Sudan or Libya.