Federal Register / Vol. 63, No. 127 /Thursday, July 2, 1998 /Rules and Regulations 36185

the States as outlined in Executive

Order 12612 (October 26, 1987).

List of Subjects in 37 CFR Part 1

Administrative practice and

procedure, Courts, Freedom of

information, Inventions and patents,

Reporting and recordkeeping

requirements, Small businesses.

For the reasons set forth in the

preamble, the interim rule amending 37

CFR Part 1 which was published at 63

FR 5732–5734 on February 4, 1998, is

adopted as a final rule without change.

Dated: June 25, 1998.

Bruce A. Lehman,

Assistant Secretary of Commerce and

Commissioner of Patents and Trademarks.

[FR Doc. 98–17632 Filed 7–1–98; 8:45 am]

BILLING CODE 3510–16–U

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Administration for Children and

Families

45 CFR Part 303

RIN 0970–AB67

Child Support Enforcement Program;

Quarterly Wage and Unemployment

Compensations Claims Reporting to

the National Directory of New Hires

AGENCY: Office of Child Support

Enforcement (OCSE), HHS.

ACTION: Final rule.

SUMMARY: This final rule implements

section 453A(g)(2)(B) of the Social

Security Act (the Act), as added by

section 313(b) of the Personal

Responsibility and Work Opportunity

Reconciliation Act of 1996 (PRWORA)

and amended by section 5533 of Public

Law 105–33, section 303(h) of the Act,

in part, as amended by section 316(g) of

PRWORA, and section 3304(a)(16) of the

Internal Revenue Code of 1986, as

amended by section 316(g) of PRWORA.

These provisions require certain State

entities to furnish quarterly wage and

unemployment compensation data to

the National Directory of New Hires or

to the Secretary of Health and Human

Services. A Notice of Proposed

Rulemaking was published in the

Federal Register on October 7, 1997 (62

FR 52306).

EFFECTIVE DATE: The final rule is

effective August 3, 1998.

FOR FURTHER INFORMATION CONTACT:

Anne Benson, Policy Branch, OCSE

(202) 401–1467, e-mail:

abenson@acf.dhhs.gov. Deaf and

hearing-impaired individuals may call

the federal Dual Party Relay Service at

1–800–877–8339 between 8:00 a.m. and

7:00 p.m. Eastern time.

SUPPLEMENTARY INFORMATION:

Statutory Authority

This regulation is published under the

authority of section 453A(g)(2)(B) of the

Social Security Act (the Act), 42 U.S.C.

653A(g)(2)(B), as added by section

313(b) of the Personal Responsibility

and Work Opportunity Reconciliation

Act of 1996 (PRWORA), Pub. L. 104–193

and amended by section 5533 of Public

Law 105–33; section 303(h) of the Act,

in part, 42 U.S.C. 503(h), as amended by

section 316(g) of PRWORA; and section

3304(a)(16) of the Internal Revenue

Code of 1986, 26 U.S.C. 3304(a)(16), as

amended by section 316(g) of PRWORA.

This regulation is also issued under

the authority granted to the Secretary of

Health and Human Services (Secretary)

by section 1102 of the Act, 42 U.S.C.

1302. Section 1102 of the Act authorizes

the Secretary to publish regulations that

may be necessary for the efficient

administration of the functions for

which she is responsible under the Act.

Section 453A(g)(2)(B) of the Act

requires the State Directory of New

Hires to furnish, on a quarterly basis,

data concerning the wages and

unemployment compensation paid to

individuals to the National Directory of

New Hires. Pursuant to section

453A(g)(2)(B) of the Act, the Secretary of

the Department of Health and Human

Services is required to publish

regulations to identify the dates, format,

and data elements necessary for the

State Directory of New Hires to furnish

the quarterly wage and unemployment

compensation data to the National

Directory of New Hires.

Section 3304(a)(16) of the Internal

Revenue Code of 1986 contains

requirements that must be included in

State Unemployment Compensation

laws for employers in the State to

receive Federal Unemployment Tax

credits. Section 316(g) of Public Law

104–193 amended section 3304(a)(16) of

the Internal Revenue Code of 1986 to

provide that the wage and

unemployment compensation

information contained in the records of

the State agency administering that

program shall be furnished to the

Secretary of Health and Human

Services, in accordance with regulations

promulgated by the Secretary, as may be

necessary for the purposes of the

National Directory of New Hires under

section 453(i)(1) of the Act. The

Secretary will maintain the quarterly

wage and unemployment compensation

data reported pursuant to section

3304(a)(16) in the National Directory of

New Hires (NDNH), which is

established pursuant to section 453 of

the Act.

Section 303(h)(1)(A) of the Act, as

amended by section 316(g) of Public

Law 104–193, requires the State agency

charged with the administration of the

unemployment compensation program,

on a reimbursable basis, to disclose

quarterly, to the Secretary of Health and

Human Services, wage and claim

information, as required pursuant to

section 453(i)(1) of the Act, that is

contained in the records of such agency.

As is the case with information reported

pursuant to section 3304(a)(16) of the

Internal Revenue Code of 1986, the

Secretary will maintain any quarterly

wage and unemployment compensation

data reported pursuant to section 303(h)

of the Act in the NDNH. Section

303(h)(3)(A) of the Act defines ‘wage

information’ as ‘‘information regarding

wages paid to an individual, the social

security account number of such

individual, and the name, address,

State, and the Federal employer

identification number of the employer

paying such wages to such individual.’’

Section 303(h)(3)(B) defines ‘claim

information’ as ‘‘information regarding

whether an individual is receiving, has

received, or has made application for,

unemployment compensation, the

amount of any such compensation being

received (or to be received by such

individual), and the individual’s current

(or most recent) home address.’’ Title III

of the Act, Grants to States for

Unemployment Compensation

Administration, is directly administered

by the Department of Labor. We are

referencing section 303(h)(1)(A) of the

Act because this provision references

information required pursuant to

section 453(i)(1) of the Act. Section

453(i)(1) is administered by the

Department of Health and Human

Services, and the information that is

required pursuant to that section (which

in turn references information supplied

pursuant to section 453A(g)(2)) is

established in this rule. The Secretary

also adopted the definitions included in

section 303(h) in the rule in order to

enable the implementation of the

provisions in an integrated and

complementary manner.

Background

The Federal Parent Locator Service

(FPLS) is a computerized network

established pursuant to section 453 of

the Act, 42 U.S.C. 653, through which

States may request information from

Federal and State agencies to find

noncustodial parents and/or their

employers for purposes of establishing

paternity and securing support. The
36186 Federal Register / Vol. 63, No. 127 /Thursday, July 2, 1998 /Rules and Regulations

Personal Responsibility and Work

Opportunity Reconciliation Act of 1996

requires the Secretary to develop an

expanded FPLS to improve States’

ability to locate child support obligors

and to establish and enforce child

support orders, as well as for other

specified purposes in Title IV–D of the

Act. The Office of Child Support

Enforcement (OCSE), within the

Administration for Children and

Families (ACF), is charged with the task

of developing, implementing, and

maintaining the expanded FPLS. The

expanded FPLS is housed in the Social

Security Administration’s National

Computer Center, because locating the

expanded FPLS there provides the most

efficient and cost-effective mechanism

for developing the expanded FPLS, as

well as ensuring state-of-the-art

standards for system security and

confidentiality of the data.

The expanded FPLS includes the

National Directory of New Hires and a

Federal Case Registry (operational no

later than October 1, 1998), and

maintains the capability to seek

information from existing FPLS data

sources, including, but not limited to,

the Internal Revenue Service, Social

Security Administration, Department of

Defense, and Department of Veterans

Affairs. The expanded FPLS will

perform regular cross matches between

the National Directory of New Hires and

the Federal Case Registry. With these

new FPLS resources, the interstate

matching of child support obligors and

employment, earnings, and benefits data

will flow more efficiently and quickly

between States.

The NDNH will contain three types of

information. First, the NDNH maintains

employment data on newly-hired

employees (new hire reporting)

submitted by State Directories of New

Hires pursuant to section 453A(g)(2)(A)

of the Act, and by federal agencies

pursuant to section 453A(b)(1)(C) of the

Act. Second, the NDNH will maintain

quarterly wage information on

individual employees received pursuant

to sections 453A(g)(2)(B) and 303(h) of

the Act, and section 3304(a)(16) of the

Internal Revenue Code of 1986, as well

as quarterly wage information on federal

employees received pursuant to 453(n)

of the Act. Third, the NDNH will

maintain unemployment compensation

claims data received pursuant to

sections 453A(g)(2)(B) and 303(h) of the

Act, and section 3304(a)(16) of the

Internal Revenue Code of 1986. States

will be required to transmit new hire,

quarterly wage and unemployment

compensation claims data electronically

to the NDNH.

The purpose of the NDNH is to

develop a repository of information on

newly-hired employees, and on the

earnings and unemployment

compensation claims data of employees.

The purpose of including quarterly

wage and unemployment compensation

claims data in the NDNH is to provide

States with the ability to quickly locate

information on the address of,

employment of, and unemployment

compensation being paid to, parents

with child support obligations who are

residing or working in other States.

States seek to locate these parents and

their employers to either establish or

enforce a child support order. Quarterly

wage and unemployment compensation

claims data will provide information on

continuously employed and

unemployed individuals who would not

be located solely by new hire reporting.

Most States have been matching their

quarterly wage and unemployment

compensation claims data against their

respective State child support caseloads

since the 1980’s. In addition, since 1990

the Federal Parent Locator Service has

conducted cross-matches between State

child support locate requests and State

Employment Security Agencies,

although such matches are currently

limited to 250,000 cases per State per biweekly cross-match. The information

generated from cross-matches between

quarterly wage, claims and child

support data, both at the State level and

in the more limited FPLS context, has

proven extremely beneficial for the

location of child support obligors and

their wages. The inclusion of quarterly

wage and unemployment

compensations claims data in the NDNH

will allow for a substantially higher

volume of interstate cross-matching

than is currently possible.

The Federal Case Registry will be a

national registry of individuals involved

in child support cases, constructed from

abstracts of child support case and order

information that State Case Registries

will transmit to the Federal Case

Registry. The expanded FPLS, through a

matching process between NDNH and

the Federal Case Registry, will be able

to automatically provide States with

information on address, employment,

and unemployment compensation

claims data on parents owing child

support. The expanded FPLS will also

alert States to other States that have

registered the same individual.

In an effort to be responsive to the

President’s Memorandum of March 4,

1995 to heads of Departments and

Agencies which announced a

government-wide Regulatory

Reinvention Initiative to reduce or

eliminate burdens on States, other

governmental agencies or the private

sector, OCSE formed an FPLS

workgroup which held three meetings

between September, 1996 and March,

1997. The purpose of the FPLS

workgroup is to provide consultation

regarding the design, development, and

regulatory requirements for the

expanded FPLS. This group is

comprised of representatives from State

Child Support Agencies, State

Employment Security Agencies, the

Federal Office of Child Support

Enforcement, the U.S. Department of

Labor, the Social Security

Administration, the Interstate

Conference of State Employment

Security Agencies, employer groups,

payroll associations, and other

interested individuals. The workgroup

members provided information

regarding quarterly wage and

unemployment compensation claims

reporting which was considered in

developing these regulations.

Description of Regulatory Provisions

This rule implements the three new

statutory wage and unemployment

compensation claims reporting

requirements by adding a new section,

45 CFR 303.108, ‘‘Quarterly Wage and

Unemployment Compensations Claims

Reporting to the National Directory of

New Hires,’’ to existing rules governing

the child support enforcement program

under Title IV–D of the Act. Although

there are three separate reporting

provisions, the information required to

be reported is substantially the same for

all three. Therefore, OCSE addresses the

Secretary’s responsibilities under all

three provisions by a single regulation

which permits the quarterly wage and

unemployment compensation data

required to be furnished under the three

provisions to be supplied in a single,

quarterly submission. Further, OCSE

will consider the reporting requirements

to have been satisfied if any one of the

required reporting entities submits the

information in accordance with the

provisions of the regulation. OCSE

intends to leave the decision as to

which entity will report up to the

individual States. Accordingly, the

regulation refers to the ‘‘State’’ as the

entity that must transmit data to the

NDNH. However, if data is not reported

as required under the proposed

regulation, OCSE will hold the State

Title IV–D agency accountable for the

failure of the State Directory of New

Hires to report as required under section

453A(g)(2)(B). Section 454(28) of the

Act, as added by section 313(a) of

PRWORA, added a new State plan

requirement for Title IV–D agencies to

operate a State Directory of New Hires
Federal Register / Vol. 63, No. 127 /Thursday, July 2, 1998 /Rules and Regulations 36187

in accordance with section 453A of the

Act. The failure to report as required

pursuant to section 303(h) of the Act or

section 3304(a)(16) of the Internal

Revenue Code of 1986 may also result

in actions being taken by the Secretary

of Labor.

45 CFR 303.108(a) contains

definitions designed to clarify quarterly

wage and unemployment compensation

claims reporting. Paragraph (a)(1)

defines ‘‘Reporting period’’ as the time

elapsed during a calendar quarter, e.g.

January–March, April–June, July–

September, October–December. ‘‘Wage

information’’ is defined in paragraph

(a)(2) as: (1) The name of the employee;

(2) the employee’s social security

number; (3) aggregate wages of the

employee during the reporting period;

and (4) the name and address (and

optionally, any second address for wage

withholding purposes) and Federal

employer identification number of the

employer reporting wages. In the event

that an individual is working more than

one job, the State must transmit separate

quarterly records containing the ‘‘wage

information’’ for each job an individual

has held. The information being

included as wage information is the

minimal amount of data needed to meet

the purposes of the NDNH. OCSE is

requesting data on the names of

employees in order to meet the

requirements of section 453(j)(1) of the

Act, 42 U.S.C. 653(j)(1). Section 453(j)(1)

requires the Secretary of Health and

Human Services to transmit the

information in the NDNH to the Social

Security Administration to verify the

accuracy of the name, social security

number, and birth date of each

individual. ‘‘Unemployment

compensation or claim information’’ is

defined in paragraph (a)(3) as: (1)

Whether an individual is receiving, has

received or has applied for

unemployment compensation; (2) the

individual’s name and current (or most

recent) home address; (3) the

individual’s social security number; and

(4) the aggregate gross amount of

compensation the claimant received

during the reporting quarter.

Paragraph (b) of 45 CFR 303.108

contains the requirements for quarterly

wage and unemployment compensation

claims reporting. Under paragraph (b),

the State is required to disclose

quarterly, to the National Directory of

New Hires, wage and claim information,

as defined in paragraph (a), that is

collected pursuant to a State’s

unemployment compensation program

referenced in Title III of the Act or

pursuant to section 1137 of the Act.

OCSE does not require the collection or

reporting of any additional wage

information for purposes of the NDNH

beyond that which is currently being

collected. Wage and unemployment

claim information is currently reported

to agencies administering

unemployment compensation laws

under title III of the Act or to other

agencies pursuant to section 1137(a) of

the Act as part of the income and

eligibility verification program, so

paragraph (b) does not impose an

additional information requirement.

OCSE is also aware that some States’

compensation records either do not

include employee names or record only

a partial set of the letters in the

employee’s name. Similarly, OCSE is

aware that State unemployment

compensation laws do not require all

employers to report information. In the

regulation, the State is only required to

supply wage information which is

already contained in the records of the

State. Therefore, in the case of employee

names or wages, a State is required to

send us as much information on

employee names or wages as exists in

the unemployment compensation

records, or in the records maintained for

purposes of section 1137 of the Act if

the information is maintained by

another agency. The reference to section

1137 has been included to cover those

situations where States have alternate

data collection systems to make it clear

that the data in such alternate systems

is covered by the regulation.

Similarly, the State is only required to

supply claim information which is

already contained in the records of the

State agency administering the

unemployment compensation program

or the records maintained for purposes

of section 1137 of the Act. There is no

requirement imposed to collect

additional claim information for

purposes of the NDNH. In addition, the

State is only required to furnish the

NDNH with claim information that is

processed electronically. OCSE believes

that it is neither feasible nor cost

effective to require that States transmit

claims data for those relatively few

benefit programs which are processed

manually. State Employment Security

Agencies and the Department of Labor

have indicated that manually processed

claims comprise a very small portion of

total claims. We understand that the

unemployment compensation programs

being administered by States cover any

compensation payable under State

unemployment compensation law

(including amounts payable in

accordance with agreements under any

Federal unemployment compensation

law) and extended benefits,

unemployment compensation for

Federal employees, unemployment

compensation for ex-servicemen, trade

readjustment allowances, and disaster

unemployment assistance.

45 CFR 303.108(c) sets the time

frames for quarterly wage and claims

reporting. The State is required to report

wage information for the reporting

period no later than the end of the

fourth month following the reporting

period. States will be required to begin

reporting on the first reporting date

occurring after the final rule becomes

effective. However, the NDNH will

accept earlier reports, beginning with

those for the July–September 1997

reporting period and States are

encouraged to begin submitting reports

as early as possible. Currently, State

laws generally allow employers one

month following the reporting period to

report quarterly wages to the State

agency administering the

unemployment compensation program.

We believe that the time frame for States

to report wage information to the

Secretary for the purposes of the NDNH

will ensure that States have adequate

time to enter, edit, and transmit wage

information to the Secretary. Given the

necessity and importance of

maintaining accurate wage data in the

NDNH, the schedule for reporting

allows States ample time to work with

employers to correct inaccurate wage

reports and to submit complete and

comprehensive wage information on

employees within a State.

The State is required to report claim

information for the reporting period no

later than the end of the first month

following the end of the reporting

period. The State is required to begin

the reporting of claim information on

the first reporting date occurring after

the final rule becomes effective.

However, the NDNH will accept earlier

reports, beginning with those for the

October–December 1997 reporting

period and States are encouraged to

begin submitting reports as early as

possible. We believe that a shorter time

frame for submitting claim information,

as opposed to wage information, is

appropriate because the State agency

charged with administering the

unemployment compensation program

maintains this data on an ongoing basis.

Also, as noted above, the collection of

wage information lags behind the

collection of claim information because

of the time required to ensure that wage

information submitted is accurate.

In order to ensure the effective

implementation of the NDNH, the

Secretary planned a staggered schedule

for initial data submissions to the

NDNH. The reporting of new hire data

began on October 1, 1997, to be
36188 Federal Register / Vol. 63, No. 127 /Thursday, July 2, 1998 /Rules and Regulations

followed by initial quarterly wage and

claims information submissions on

January 31, 1998 or the first reporting

date after the final rule becomes

effective. For this reason, the Secretary

will allow that the earliest claims

information be submitted for the period

beginning October–December, 1997,

rather than July–September, 1997.

45 CFR 303.108(d) provides that the

Secretary will establish standardized

formats for reporting quarterly wage and

claim information and that the States

will be required to adhere to such

formats for reporting purposes. The

formats identify the data elements,

descriptions and tape specifications for

reporting quarterly wage and claim

information. These formats were

published in the Federal Register for

comment on July 25, 1997 (62 FR

40092).

Response to Comments

In response to the Notice of Proposed

Rulemaking published October 7, 1997,

in the Federal Register (62 FR 52306)

we received thirteen comments from six

commenters, representing State IV–D

agencies, State Employment Security

Agencies/State Departments of Labor

and one Federal Agency. The comments

and our responses are as follows:

1. Comment: One commenter stated

that, under 45 CFR 303.108(b), there are

large programming costs associated with

submission of quarterly wage and

unemployment insurance claim data

because the information, while available

in the State Department of Labor’s

records, is not all in one place or in the

required formats for submission to the

National Directory of New Hires. The

commenter stated that the costs for the

extraction, formatting and transmission

of the data are not reimbursable from

Unemployment Compensation grant

money. Their recommendation is that

there be reimbursement for all

legitimate costs based on actual costs,

not an arbitrary figure. Another

commenter believes that this is an

unfunded mandate because states are

required to submit information

‘‘electronically.’’ They believe that there

is no provision for the costs associated

with electronic submission.

Response: Section 453(g) of the Act

states that ‘‘The Secretary may

reimburse Federal and State agencies for

the costs incurred by such entities in

furnishing information requested by the

Secretary under this section in an

amount which the Secretary determines

to be reasonable payment for the

information exchange (which amount

shall not include payment for the costs

of obtaining, compiling, or maintaining

the information).’’ OCSE is requesting

that States submit an itemized list of

projected costs for extraction and

transmission of the required data. These

will consist of both initial costs for

programming and ongoing costs for

transmission. OCSE will then be able to

respond specifically to requests for

reimbursement, and is planning to

reimburse States for reasonable direct

costs for extraction, formatting and

transmission. OCSE has also offered onsite technical assistance to complete the

required programming, and has

provided skeleton code programs to all

the States in order to assist with the

programming changes.

2. Comment: One commenter stated

that the source for estimates of the

burden on the States is not clearly

presented and that the impact on the

States in terms of hours spent is

‘‘grossly underestimated.’’ The

commenter stated that their start up

burden is underestimated and that the

annual reporting estimate ‘‘will not

begin to cover the time necessary.’’ They

also said they have spent a great deal of

time reviewing materials sent out by

OCSE. A second commenter also took

issue with the burden time estimates

and pointed out that any time spent

diverts resources from Year 2000

projects.

Response: The time estimates in the

Rule are based on industry practices and

on information from the Social Security

Administration. Detailed estimates were

presented in the Paperwork Reduction

Act package approved as of November

26, 1997 (OMB control number 0970–

0166.) There are burdens for start-up

programming, but OCSE has tried to do

everything possible to minimize these

burdens; for instance by providing onsite technical assistance if requested and

by providing on-going technical support

by telephone, as well as skeleton code

programs to assist with programming

changes. The burden estimates are based

on the assumption that once the

program is in place, extraction and

transmission of the data can be done on

an almost entirely automated basis,

requiring little or no human

intervention. Materials sent out by

OCSE were meant to reduce the burden

on the states by answering commonly

asked questions, giving further

explanations of program requirements,

and providing technical information

and assistance.

3. Comment: The commenter states

that there is ambiguity in the first

paragraph of the Description of

Regulatory Provisions. They indicate

that the phrase ‘‘the three new statutory

reporting requirements’’ might be

interpreted to refer to New Hire,

Quarterly Wage and Unemployment

Insurance. The commenter then points

out that the rule only defines reporting

requirements with respect to Quarterly

Wage and Unemployment Insurance.

The commenter’s recommendation is

that it be made more clear that this rule

does not address New Hire reporting

requirements. They also suggest that the

Rule ought to indicate where New Hire

reporting provisions are located.

Response: The phrase ‘‘the three new

statutory reporting requirements’’ refers

to the code sections cited in the first

paragraph under Statutory Authority, all

of which relate to Quarterly Wage and

Unemployment Insurance reporting. It

is understandable that this reference

may be confusing, so we have added

semi-colons between the three cites in

that section. We have also revised the

phrase to read ‘‘the three new statutory

wage and unemployment claims

reporting requirements’’. It is also made

clear within the body of the

commentary that Quarterly Wage and

Unemployment Insurance reporting are

the areas covered by the rule. As this

rule relates only to Quarterly Wage and

Unemployment Insurance, it is not

appropriate to give a reference to a third

program in the body of the rule.

4. Comment: Two commenters stated

that, while it is clear from the

description section, the rule itself is not

sufficiently clear that the State is not

required to collect additional

information to fulfill the requirements

of the rule. One commenter also wished

to point out that OCSE does not have

the authority to propose collection of

additional information by State

Employment Security Agencies. The

recommendation is that the rule be

clarified.

Response: We believe that 303.108(b)

makes it clear that the States are to

report information ‘‘that is collected

pursuant to a State’s unemployment

compensation program.’’ The rule does

not call for a State to collect any

additional information.

5. Comment: One commenter noted

the differences in time frames between

quarterly wage information and

unemployment insurance information

(four months after the end of the

reporting quarter and one month after

the end of the reporting quarter,

respectively). The commenter stated

that it is their understanding that this

time does not imply that the States must

undertake any new processing effort. A

second commenter believes that four

months is too long to allow for

submission, and that the data will be

stale after that amount of time.

Response: The key considerations in

determining the time period for

reporting quarterly wages were accuracy
Federal Register / Vol. 63, No. 127 /Thursday, July 2, 1998 /Rules and Regulations 36189

and timeliness. Currently, State laws

generally allow employers one month

following the reporting period to report

quarterly wages to the State agency

administering the unemployment

compensation program. The time period

for reporting quarterly wages was

determined so that States would have

adequate time to input, extract, format

and edit the information. Given the

necessity and importance of

maintaining accurate wage data in the

NDNH, the schedule for reporting

ensures that States have time to work

with employers to correct inaccurate

wage reports and to submit complete

and comprehensive wage information

on employees within a State. In

response to the one comment that the

time period is too long, it is important

to remember that quarterly wage

information exists for individuals who

have been employed at the same job for

a period of time. New hire reporting will

provide States with data on newlyemployed individuals within

approximately a month or less from the

date of hire (exact time depends on

State law).

6. Comment: One commenter pointed

out that while the State Departments of

Labor are responsible for collecting and

reporting this data, the child support

agency is held accountable if the

Department of Labor does not comply.

The commenter pointed out that this

may be beyond their control.

Response: Both agencies will be held

accountable for failure to comply. The

child support agency will be held

accountable through the State Plan

process. Under section 454(28) of the

Act, the State Plan must provide for the

operation of a State Directory of New

Hires (SDNH). Section 453A(g)(2)(b)

requires the SDNH to transmit quarterly

wage and unemployment insurance

information to the NDNH. Thus, the

child support statute directly places the

responsibility for reporting the

necessary information on the SDNH.

Failure to report could result in

disapproval of the State Plan, and put

federal funding of the State program at

risk.

Similarly, section 3304(a)(16) of the

Internal Revenue Code of 1986 contains

requirements that must be included in

State Unemployment Compensation

laws for employers in the State to

receive Federal Unemployment Tax

credits. Section 316(g) of Public Law

104–193 amended section 3304(a)(16) of

the Internal Revenue Code of 1986 to

provide that the wage and

unemployment compensation

information contained in the records of

the State agency administering that

program shall be furnished to the

Secretary of Health and Human

Services, in accordance with regulations

promulgated by the Secretary, as may be

necessary for the purposes of the NDNH

under section 453(i)(1) of the Act. Thus,

the State Employment Security Agency

may lose its certification by the

Secretary of Labor for failure to submit

the required information.

The provision of quarterly wage and

unemployment insurance information to

the NDNH is anticipated to be a

cooperative effort between two agencies;

in some States the information will be

provided by one agency and submitted

by another. Both agencies will by held

accountable.

7. Comment: One commenter pointed

out that the rule does not address the

fundamental issues of confidentiality

and security of the data to be provided.

Response: Under section

453A(g)(2)(B) the Secretary of the

Department of Health and Human

Services is required to identify the

dates, format, and data elements

necessary for quarterly wage and

unemployment compensation data. In

coordination with the President’s

Regulatory Reinvention Initiative,

OCSE’s intent is only to regulate where

required by statute, thus reducing the

regulatory burden on states; therefore

the rule only covers the required areas.

However, OCSE is committed to the

confidentiality and security of data

under this program, and is required to

guarantee its ‘‘integrity and security’’

under section 453(m) of the Act. Our

security approach covers policies and

procedures, computer and data

transmission systems, physical access,

and the integrity of the staff who have

access to the data or systems.

Only authorized persons, as defined

in Federal law, may request access to

information in the NDNH. (See sections

453 and 463 of the Act.) In accordance

with section 453(b)(2) of the Act, the

security plan for the NDNH incorporates

specific safeguards to prevent the

disclosure of information in cases where

domestic violence is indicated and

disclosure could be harmful to the

parent or child, or where disclosure

would contravene national policy or

security interests, or to protect the

confidentiality of census data.

The NDNH is physically housed at the

Social Security Administration’s (SSA)

National Computer Center (NCC) in

Baltimore, MD. SSA takes extensive

measures to ensure the physical and

electronic security of its data processing

facilities. SSA uses state of the art

technology to restrict physical and

electronic access to information,

limiting it to personnel specifically

authorized by OCSE and SSA and to

specific functions. New Hire, Quarterly

Wage and Unemployment Insurance

data are transmitted to the NDNH via

several methods, including SSA’s

leased-line CONNECT:Direct network

and transportable electronic media,

such as cartridge tapes. While the

measures vary according to the

transmission method, OCSE and SSA

have taken specific steps to ensure the

security of data during transmission,

including a clear chain of custody and

secure locked storage for physical

media.

The NCC is regularly reviewed and

monitored by outside security auditors

who report any concerns, violations or

breaches in security to SSA’s Security

Officer. Staff who have access to

sensitive data are assigned security level

designations. In addition, all staff

associated with the NDNH are required

to undergo background checks. Staff

sign non-disclosure agreements, and are

subject to fines and imprisonment for

misuse of data. (See 5 U.S.C. sec 552a(i)

and 18 USC sec 1905.)

States are required by law to

implement safeguards that are similar to

those at SSA and OCSE under section

454A(d) of the Act. These are designed

to protect the privacy rights of

individuals, and prevent the

unauthorized disclosure of information.

State agencies and systems are audited,

reviewed, or certified by a variety of

Federal agencies including the Internal

Revenue Service, Department of Labor,

DHHS’ Office of State Systems, and

SSA. SSA and NDNH security plans

fully document the approach

summarized here.

8. Comment: One commenter stated

that the rule fails to address the right to

privacy of individuals whose

information is to be disclosed,

especially privacy of social security

numbers.

Response: OCSE recognizes that the

right to privacy is of the utmost

importance, not only in regards to social

security numbers, but for all the

information that is to be reported to the

expanded Federal Parent Locator

Service. For that reason access to the

information in the database is very

strictly limited (see section 453(m) of

the Act.) While it would be optimal if

social security numbers did not need to

be disclosed, it would not be possible to

obtain the necessary accuracy of data

without social security numbers. This is

especially true because some States do

not collect the individual’s name at all

for quarterly wage, so a social security

number is the only identifier for the

individual. The number is absolutely

essential for the program to function,

and every precaution is being taken to
36190 Federal Register / Vol. 63, No. 127 /Thursday, July 2, 1998 /Rules and Regulations

be sure that the information is kept

confidential.

9. Comment: One commenter stated

that the definitions given are

inconsistent with existing income

eligibility and verification system data

element definitions, and that any rules

should be issued jointly with the

Federal Department of Labor in order to

ensure consistency.

Response: The definitions, while

worded slightly differently and in

slightly different order, are consistent

with the definitions under the Income

Eligibility Verification System. Any

differences have more to do with the

required reporting period than any

difference in intent. If anything, the

definitions given in this rule are more

specific. For instance, this rule asks for

‘‘aggregate gross amount of

compensation the claimant received

during the reporting quarter’’ rather

than ‘‘the amount of compensation the

individual is receiving or entitled to

receive.’’ Under 453A(g)(2)(B) of the

Act, the Secretary of the Department of

Health and Human Services is required

to issue the rule.

Paperwork Reduction Act of 1995

Sections 453A(g)(2)(B) and 303(h) of

the Act and section 3304(a)(16) of the

Internal Revenue Code of 1986 contain

information collection requirements. As

required by the Paperwork Reduction

Act of 1995 (44 U.S.C. 3507(d)), this

request for approval of a new

information collection has been

approved by Office of Management and

Budget as of November 26, 1997 under

OMB control number 0970–0166.

Because all quarterly wage and

unemployment compensation claims

data will be reported from the State to

the NDNH electronically and will be

limited to data already being collected,

the burden on the States will be

minimal. The average burden per

response is estimated to be 2 minutes

(.03 hours). States may also have a onetime initial start-up burden of two

weeks (80 hours) for reprogramming

their systems to comply with Federal

reporting requirements. The total annual

reporting and recordkeeping burden that

will result from the collection of

information is estimated to be 7.13

hours.

Regulatory Flexibility Analysis

The Secretary certifies, under 5 U.S.C.

605(b), as enacted by the Regulatory

Flexibility Act (Pub. L. 96–354), that

this rule will not result in a significant

impact on a substantial number of small

entities. The primary impact is on State

governments. State governments are not

considered small entities under the Act.

Executive Order 12866

Executive Order 12866 requires that

regulations be reviewed to ensure that

they are consistent with the priorities

and principles set forth in the Executive

Order. The Department has determined

that this rule is consistent with these

priorities and principles. The rule

implements the statutory provisions by

specifying the wage and unemployment

compensation claims information that

must be reported to the Secretary of

Health and Human Services.

Unfunded Mandates Act

Section 202 of the Unfunded

Mandates Reform Act of 1995 requires

that a covered agency prepare a

budgetary impact statement before

promulgating a rule that includes any

Federal mandate that may result in the

expenditure by state, local, and Tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year.

The Department has determined that

this rule would not impose a mandate

that will result in the expenditure by

State, local, and Tribal governments, in

the aggregate, or by the private sector, of

more than $100 million in any one year.

List of Subjects in 45 CFR Part 303

Child support, Grant programs/social

programs, Reporting and recordkeeping

requirements.

(Catalog of Federal Domestic Assistance

Programs No. 93.563, Child Support

Enforcement Program)

Dated: March 18, 1998.

Olivia A. Golden,

Assistant Secretary for Children and Families.

Approved: April 28, 1998.

Donna E. Shalala,

Secretary, Department of Health Human

Services.

For the reasons discussed above, title

45 CFR Chapter III is amended as

follows:

PART 303—STANDARDS FOR

PROGRAM OPERATIONS

1. The authority citation of Part 303

continues to read as follows:

Authority: 42 U.S.C. 651 through 658, 660,

663, 664, 666, 667, 1302, 1396a(a)(25),

1396(d)(2), 1396b(o), 1396b(p) and 1396(k).

2. A new § 303.108 is added to read

as follows:

§ 303.108 Quarterly wage and

unemployment compensation claims

reporting to the National Directory of New

Hires.

(a) What definitions apply to quarterly

wage and unemployment compensation

claims reporting? When used in this

section:

(1) Reporting period means time

elapsed during a calendar quarter, e.g.

January–March, April–June, July–

September, October–December.

(2) Wage information means:

(i) The name of the employee;

(ii) The social security number of the

employee;

(iii) The aggregate wages of the

employee during the reporting period;

and

(iv) The name, address (and

optionally, any second address for wage

withholding purposes), and Federal

employer identification number of an

employer reporting wages.

(3) Unemployment compensation or

claim information means:

(i) Whether an individual is receiving,

has received or has applied for

unemployment compensation;

(ii) The individual’s name and current

(or most recent) home address;

(iii) The individual’s social security

number; and

(iv) The aggregate gross amount of

compensation the claimant received

during the reporting quarter.

(b) What data must be transmitted to

the National Directory of New Hires?

The State shall disclose quarterly, to

the National Directory of New Hires,

wage and claim information as defined

in paragraph (a) of this section that is

collected pursuant to a State’s

unemployment compensation program

referenced in Title III of the Act or

pursuant to section 1137 of the Act.

(c) What time frames apply for

reporting quarterly wage and

unemployment compensation claims

data?

The State shall report wage

information for the reporting period no

later than the end of the fourth month

following the reporting period. The

State shall report claim information for

the reporting period no later than the

end of the first month following the

reporting period.

(d) What reporting formats will be

used for reporting data?

The State must use standardized

formats established by the Secretary of

Health and Human Services for

reporting wage and claim information.

[FR Doc. 98–17652 Filed 7–1–98; 8:45 am]

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