**Impact Assessment of Texas' Employer New Hire Outreach**

**Background**

The Federal Office of Child Support Enforcement (OCSE) conducts
quarterly data matches that attempt to determine the number of employers
in each state that are not submitting new hire (W4) data to the National
Directory of New Hires (NDNH). OCSE initiated the Employer Participation
Project (EPP) in 1999 to assist states in conducting outreach to
employers in an attempt to increase participation.

The EPP data match is conducted by comparing two consecutive quarters of
quarterly wage records submitted by a State Employment Security Agency
(SESA). Employees listed in the first quarterly data match file, but not
found in the second under the same Federal Employer Identification
Number (FEIN) are considered possible new hires. Those possible new
hires are then compared to W4 data contained in the NDNH.

A quarterly report is produced that calculates the participation rate
for each state based on their selection criteria for a single quarter.
Because of the possibility of data anomalies and problems with employer
subsidiaries reporting new hires under the parent company's FEIN, OCSE
highly recommends that states consider alternative possibilities before
concluding that an employer has willfully violated new hire laws.

OCSE can, at the request of the state, customize the EPP report to
expand or limit the report segments, such as large employers or
employers with many violations. Texas requested that OCSE customize the
EPP report to target employers reporting 50 or more employees.

**Purpose**

The need for the Texas employer outreach project was based on EPP
reports generated by OCSE. The EPP rate of Texas employers during the
fourth quarter of 1999 was 51%. The rate of employer new hire
participation dropped to 34% during the first quarter of 2001. Texas has
not had an employer outreach project since October 1998, when welfare
reform legislation went into effect for them mandating all employers to
report new hires.

The goals of the employer outreach project were to increase:

• Employer compliance;

-   The number of employers reporting new hire information
    electronically; and

-   Collections through the Administrative Income-Withholding (AIW)
    process.

**Scope and Methodology**

The Office of the Attorney General's (OAG) Employer New Hire Reporting
Outreach Project was a collaboration of external organizations and
section areas within the OAG's Child Support Division. The project
immediately followed a separate employer outreach project initiated by
the Texas Workforce Commission (TWC) in July 2001. While TWC's outreach
focused more towards gaining employer cooperation to detect fraud in the
State's Unemployment Insurance Benefits Program, the OAG's campaign
focused on enhancing the State's ability to collect child support and
the introduction of new services provided to employers. TWC included a
one-page insert in their July 2001 Tax publication (Attachment A).
Together, the two outreach projects provided increased coverage to the
employer community. [^1]

The outreach project utilized information from the Texas State Directory
of New Hires (SDNH) database (operated under contract to a vendor), the
TWC Quarterly Wage file, and the OCSE EPP report. Employers were grouped
into six categories according to their compliance level, method of
reporting, and size.

Although employers that hire less than 50 employees were included in the
employer outreach effort, the main target was the employers who employ
50 or more employees. This category has a greater potential for
collections, because of its workforce population. The first, second, and
third outreach mailings concentrated heavily on the non-compliant
employers appearing in the EPP report with 50 or more employees.

Employer packets were mailed over a three-month period beginning August
30, 2001. The OAG staggered the mailings in order to better measure
employers' reaction and control the volume of calls to the OAG Call
Centers.

Employers who had reported 90% or more of their new hires received thank
you letters to show appreciation for their participation and compliance.
A list of the categories used to send the outreach packets follows.
These categories not only allowed the OAG to target specific employers
but also to assess the effect the outreach had on meeting its goals.

1\. Employers with 50 or more employees who did not report any new hires
to the SDNH during the second quarter of 2000, but reported new
employees through TWC.

2\. Employers with 50 or more employees who reported some, but not all,
new hire records via **hard copy**.

> 3\. Employers with 50 or more employees who reported some, but not
> all, new hire records **electronically.**
>
> 4\. Employers who **reported all new hires electronically**.
>
> 5\. Employers who reported **all new hires via hard copy**.
>
> 6\. Employers reporting less than 50 new employees through TWC.

Table 1 shows the distribution of employer packets mailed for the
various categories.

+-----------------------+----------------------------+-----------------+
| ## Date Mailed        | **Employer Packets         | ## Category     |
|                       | Mailed**                   |                 |
+-----------------------+----------------------------+-----------------+
| August 30, 2001       | 1,000                      | 1               |
+-----------------------+----------------------------+-----------------+
| September 13, 2001    | 1,000                      | 1, 2, and 3     |
+-----------------------+----------------------------+-----------------+
| September 27, 2001    | 100,000                    | 1, 2, 3, 4, 5,  |
|                       |                            | and 6           |
+-----------------------+----------------------------+-----------------+
| October 11, 2001      | 100,000                    | 6               |
+-----------------------+----------------------------+-----------------+
| October 25, 2001      | 100,000                    | 6               |
+-----------------------+----------------------------+-----------------+
| November 8, 2001      | 75,954                     | 6               |
+-----------------------+----------------------------+-----------------+
| #                     |                            |                 |
+-----------------------+----------------------------+-----------------+
| # Total               | **377,954**                |                 |
+-----------------------+----------------------------+-----------------+
| #                     |                            |                 |
+-----------------------+----------------------------+-----------------+

Table 1[^2]

**Impact and Effectiveness of the Outreach Campaign**

It is too early to determine if the employer compliance level in Texas
has increased from the 34% low reported in the EPP report for the first
quarter of 2001. The EPP reports produced by OCSE typically run about
one year behind. Because of this delay, before and after data maintained
in the SDNH and information contained in the Texas Child Support
Enforcement System (TXCSES) were compared to illustrate the effect the
outreach effort had on meeting the project goals.

The outreach project started two months after a slow down in the economy
began. The unemployment rate in Texas rose from 4.1% in February 2001,
to 5.7% in January 2002. Conceivably, the increase in the unemployment
rate could have a negative impact on child support collections, new hire
reporting, and issuance of administrative income-withholding orders.
While increases were noted in all three of these areas, it is reasonable
to assume that the outreach project would have produced better results
under better economic conditions.

**Electronic Reporting**

Electronic reporting is a significant element in reporting new hires,
because of its efficiency, convenience, and accuracy. In order to
maximize new hire reporting methods, several new services were
introduced in the outreach effort: Internet reporting (including online
submissions and file upload), shareware program (generates an output
file for submission) and the file transfer protocol (FTP).

The number of new hire records transmitted electronically increased by
30% during the last two quarters of 2001. The increase in electronic
reporting correlates directly with the time the outreach effort was
conducted (see Graph 1).

![](media/image1.wmf)

Graph 1[^3]

Internet reporting was available to Texas employers for the first time
in June 2001. The new hire web site requests employers to register
before allowing them to submit new hire records online. As of December
31, 2001, 11,617 employers had registered to submit records online (see
Table 2).

+--------------------------+-------------------------------------------+
| []{.mark}                | [**New Employers Registered on            |
|                          | Website**]{.mark}                         |
| **[Month]{.mark}**       |                                           |
+--------------------------+-------------------------------------------+
| July 2001                | 1,365                                     |
+--------------------------+-------------------------------------------+
| August 2001              | 684                                       |
+--------------------------+-------------------------------------------+
| September 2001           | 464                                       |
+--------------------------+-------------------------------------------+
| October 2001             | 5,353                                     |
+--------------------------+-------------------------------------------+
| November 2001            | 2,834                                     |
+--------------------------+-------------------------------------------+
| December 2001            | 917                                       |
+--------------------------+-------------------------------------------+
| ##### TOTAL              | ###  11,617                               |
+--------------------------+-------------------------------------------+

Table 2^3^

Since the outreach effort began, 13,475 employers reported 99,576 new
hires via the Internet. In addition, 247,549 new hire records were
submitted on the Internet by web upload submissions and 65,943 were
submitted through FTP. A total of 413,068 electronic new hire records
were submitted through the Internet from July 1, 2001, through February
28, 2002.

**Increase In Employer Compliance with New Hire Reporting Requirements**

The outreach project had a significant impact on the total number of
employers reporting new hires.

Out of the 5,725 Texas employers in category one (employers with 50 or
more employees that had not reported any new hires), 2,278 (39.79%)
reported new hires to the SDNH within five months after receiving the
outreach materials.

Overall, 39,453 employers that had not reported a single employee within
six months prior to the outreach project, began submitting new hire
records to the SDNH. Between July 2001 and December 2001, these new
employers reported over 191,000 new hire records to the SDNH (see Table
3).

Table 3[^4]

Out of 14 state Child Support Enforcement agencies that responded to an
informal study, over half reported double digit drops in the percentage
of new hire records received in January 2002 to those reported in
January 2001. Texas had a 7.3% decline in new hire records in January
2002, compared to records received in January 2001. However, Texas
recorded a 5.7% increase in the volume of new hire records received in
December 2001, compared to the volume in December 2000.

Using the first quarter of 2001 as a baseline, Texas recorded an
increase in each subsequent quarter compared to the prior year (see
Table 4).

>  

+---------------------+------------------------------------------------+
| **Quarter**         | ####### Increase in New Hire Records Received  |
+---------------------+------------------------------------------------+
| 1st quarter 2001    | Baseline                                       |
+---------------------+------------------------------------------------+
| 2nd quarter 2001    | 13.76%                                         |
+---------------------+------------------------------------------------+
| 3rd quarter 2001    | 11.04%                                         |
+---------------------+------------------------------------------------+
| 4th quarter 2001    | 15.46%                                         |
+---------------------+------------------------------------------------+

Table 4^4^

TWC reported that the unemployment rate in Texas began to increase in
February 2001, and continued to increase through the remainder of the
year. Texas realized gains in new hire records in spite of a downturn in
the economy.

**Increase Collections Through Automated Income-Withholding Process**

OCSE and State Child Support Enforcement agencies have long wrestled to
find ways to measure child support collections produced by new hire
reporting. While Texas' analysis does not prove conclusively that an
increase in collections was a result of the outreach project, it does
show that issuance of Automated Income Withholding (AIWs) and
collections from AIWs continued to increase despite the rising
unemployment rate.

Texas' analysis also shows that a close correlation exists between new
hire records processed, AIWs issued, and collections made. Significant
and corresponding increases occurred in all three of these key areas
during the period covered by the outreach effort.

AIWs issued to employers during 2001 increased from 80,559 during the
first quarter to 94,620 during the fourth quarter (see Graph 2).

![](media/image2.wmf)

Graph 2[^5]

Collections from AIWs increased from approximately \$24 million per
month in January 2000, to \$65 million per month in December 2001 (see
Graph 3).

![](media/image3.wmf)

Graph 3[^6]

AIW total collections rose from \$143 million to \$191 million in 2001
(see Graph 4).

![](media/image4.wmf) Graph 4^6^

The match rate for SDNH records in Texas to noncustodial parents for
fiscal year 2002 is approximately 5% with 57% of the matches occurring
on obligated cases. Comparing the new hire matched records to the number
of AIWs processed reveals a close correlation (see Graph 5).

![](media/image5.wmf)

Graph 5[^7]

**Conclusion**

The Texas outreach project met its objectives by increasing:

-   Employer compliance with new hire reporting requirements;

-   The number of employers reporting new hire information
    electronically; and

-   Collections through the AIW process.

The data demonstrate increases in compliance, utilizing new reporting
methods for employers, and collections.

The outreach project prompted nearly 40,000 employers, who had not
reported any new hires within a six-month period before the outreach
project was initiated to begin reporting. These new employers reported
over 191,000 employees to the SDNH for matching with child support.

The number of records transmitted electronically increased by 30% during
the last two quarters of 2001. Over 11,617 employers registered on the
web site to report new hire records. Since the outreach effort began,
13,475 employers reported 99,576 new hires via the Internet.

In addition, 247,549 new hire records were submitted on the Internet by
web upload submissions and 65,943 were submitted through FTP. A total of
413,068 electronic new hire records were submitted through the Internet
from July 1, 2001, through February 28, 2002.

The rising unemployment rate in Texas shows 173,000 more people lost
their jobs and were unable to find new employment. The number of AIWs
automatically sent to employers increased by 4% between the second and
fourth quarter of 2001. Collections increased by 15% during the same
period. It is reasonable to assume that the outreach project would have
produced more positive results under improved economic conditions.

State and national employer new hire records are one of the primary
sources of confirmed employment information on absent parents in Texas.
A correlation exists between the number of new hire records received,
AIWs, and child support collections received. During 2001, many states
reported drastic declines in the number of new hire records processed.
Texas, on the other hand, has enjoyed an overall increase.

The seasonally adjusted unemployment rate in Texas remained at 5.7% in
January 2002, for the second consecutive month, according to TWC.
Although January marks the second month since February 2001 that the
unemployment rate did not rise, it may be too early to tell if the
employment situation in the State is improving.

When the economy recovers, additional outreach to employers will be
necessary. Despite the recent outreach approximately 3,450 of the
largest employers (50 or more employees) have not reported any new hires
in the past eleven months. While employers with less than 50 employees
hire only 30% of the Texas workforce, they represent nearly 93% of the
employer population. Texas believes these employers may not have had new
hires to report because smaller employers tend to have a lower turnover
rate.

Texas' conclusion is that an ongoing and systematic employer outreach
effort needs to be implemented. AIWs accounted for 62% of the total
child support collections made in December 2001. Easing the burden on
employers by educating them on new reporting methods available, while
increasing employer participation through ongoing outreach, is one of
the best ways to ensure that Texas stays ahead of the curve.

For further information on the State of Texas' Employer New Hire
Outreach program contact Thomas Neal at (512) 460-6129 or
<thomas.neal@cs.oag.state.tx.us> or contact Patricia Matthews at (512)
460-6353 or
[patricia.matthews@cs.oag.state.tx.us](../patricia.matthews@cs.oag.state.tx.us).

[^1]: 7% of employers, who hire 50 or more employees, hire 70% of the
    workforce. (Data based on second quarter 2001 TWC statistics.)

[^2]: Source: Automated Mail Center

[^3]: Source: Texas SDNH

[^4]: Source: Texas SDNH

[^5]: Source: Texas SDNH

[^6]:  Source: Texas SDNH

[^7]: Source: Texas SDNH

    The spike in AIWs in January 2002 was from another project initiated
    by field operations in December 2001