The National Directory of New Hires
Released: 2014-02-24T00:00:00

Background

The National Directory of New Hires (NDNH) is a database of personal information and wage and employment information of American workers. Employers are required by P.L. 104-193 to send new hire reports to the State Directory of New Hires, which then sends the required information to the NDNH. States also are required to send quarterly wage information of existing employees (in UC-covered employment) and unemployment compensation claims information to the NDNH. Federal employers (i.e., agencies) send their new hire reports and quarterly wage information directly to the NDNH. A new hire report contains six data elements on new employees, which include the name, address, and Social Security number of each new employee and the employer's name, address, and tax identification number.

The NDNH contains three components. (1) The first component of the NDNH is the new hires file (i.e., report). It contains information that is also on each employee's W-4 form. (2) The second component of the NDNH is the quarterly wage file. The quarterly wage file contains quarterly wage information on individual employees in UC-covered employment. This information comes from the records of the State Workforce Agencies (sometimes called State Employment Security Agencies) and the federal government. When an individual has more than one job, separate quarterly wage records are established for each job. (3) The third component of the NDNH is the Unemployment Compensation file. The Unemployment Compensation file contains information pertaining to persons who have received or applied for unemployment compensation, as reported by State Workforce Agencies. With respect to this file, the state can only submit information that is already contained in the records of the state agency (i.e., generally the State Workforce Agency) that administers the Unemployment Compensation program.

Thus, the NDNH obtains its data from State Directories of New Hires, State Workforce Agencies, and federal agencies.

The NDNH, itself, is a component of the Federal Parent Locator Service (FPLS), which is maintained by the federal Office of Child Support Enforcement (OCSE) and is housed at the Social Security Administration's National Computer Center in Baltimore, MD. According to the Department of Health and Human Services (HHS), during FY2010 about 672 million records were posted to the NDNH.

Original Purpose

The original purpose of the NDNH was to help states locate child support obligors who were working in other states so that child support could be withheld from the noncustodial parent's paycheck. It is estimated that about 30% of child support cases involve noncustodial parents who do not live in the same state as their children. States generally use NDNH data rather than state new hire data or state quarterly wage data because they are more likely to acquire earnings information about noncustodial parents who have obtained work or claimed unemployment insurance benefits in a different state, or who are employed by the federal government. Moreover, because many noncustodial parents are in temporary employment or move from job to job, the quick reporting of information on new hires greatly increases the likelihood that the NDNH will be able to locate a noncustodial parent and pass on the information to states, so that the Child Support Enforcement (CSE) agencies can collect child support via income withholding before the noncustodial parent changes jobs. Since its enactment in 1996, access to the NDNH has been expanded, mostly to prevent fraud and abuse, to certain other programs and agencies (discussed later).

National Directory of New Hires Data

Employers are required to collect from each newly hired employee and transmit to the State Directory of New Hires a report that contains the name, address, and Social Security number of the employee and the employer's name, address, and tax identification number. Most states require only these six basic data elements in each new hires report; some states require or request additional information. The State Directory of New Hires is required to submit its new hire reports to the NDNH.

Data Deletion Requirements

New hire reports must be deleted from the NDNH 24 months after the date of entry. For CSE purposes, quarterly wage and unemployment compensation reports must be deleted 12 months after entry unless a match has occurred in the information comparison procedures. The reporting and deletion requirements result in a constant cycling of wage and employment data into and out of the NDNH. (The HHS Secretary may keep samples of data entered into the NDNH for research purposes. )

Data Verification

The HHS Secretary has the authority to transmit information on employees and employers contained in the new hires reports to the Social Security Administration (SSA), to the extent necessary, for verification. SSA is required to verify the accuracy of, correct, or provide (to the extent possible) the employee's name, Social Security number, and date of birth and the employer's tax identification number.

According to OCSE, all Social Security numbers on new hire reports and unemployment compensation files are verified by SSA before the information is added to the database of the National Directory of New Hires. Quarterly wage files, however, often do not include all of the necessary elements for a successful verification. In such situations, the information is transmitted to the NDNH, but it is flagged indicating that SSA was not able to verify the Social Security number and name combination.

Time Frames

Employers must provide a new hires report on each newly hired employee to the State Directory of New Hires generally within 20 days after the employee is hired. The new hires report must be entered into the database maintained by the State Directory of New Hires within five business days of receipt from an employer.

Within three business days after the new hire information from the employer has been entered into the State Directory of New Hires, the State Directory of New Hires is required to submit its new hire reports to the NDNH.

Within two business days after the new hire information is received from the State Directory, the information must be entered into the computer system of the NDNH.

For purposes of locating individuals in a paternity establishment case or a case involving the establishment, modification, or enforcement of child support, the HHS Secretary must compare information in the NDNH against information in the child support abstracts in the Federal Child Support Case Registry at least every two business days. If a match occurs, the HHS Secretary must report the information to the appropriate state CSE agency within two business days. The CSE agency is then required to instruct, within two business days, appropriate employers to withhold child support obligations from the employee's paycheck, unless the employee's income is not subject to withholding.

Quarterly wage information on existing employees is required to be transmitted to the NDNH from the State Workforce Agencies within four months of the end of a calendar quarter. However, some states report quarterly wage data to the NDNH on a monthly or weekly basis. Federal agencies are required to transmit quarterly wage information on federal employees to the NDNH no later than one month after the end of a calendar quarter.

Unemployment compensation information (which comes from State Workforce Agencies) is required to be transmitted to the NDNH within one month of the end of a calendar quarter.

Current Access to the National Directory of New Hires

In order to safeguard the privacy of individuals in the NDNH, federal law requires that the OCSE restrict access to the NDNH database to "authorized" persons. Moreover, the NDNH cannot be used for any purpose not authorized by federal law. Thus, in order for any agency not mentioned in this section to gain access to the NDNH, Congress must authorize a change in law.

The HHS Secretary is required to share information from the NDNH with state CSE agencies, state agencies administering the Title IV-B child welfare program, state agencies administering the Title IV-E foster care and adoption assistance programs, state agencies administering the Temporary Assistance for Needy Families (TANF) program, the Commissioner of Social Security, the Secretary of the Treasury (for Earned Income Tax Credit purposes and to verify income tax return information), and researchers under certain circumstances.

P.L. 106-113 (enacted in November 1999) granted access to the Department of Education. The provisions were designed to improve the ability of the Department of Education to collect on defaulted student loans and grant overpayments. OCSE and the Department of Education negotiated and implemented a computer matching agreement in December 2000.

P.L. 108-199 (enacted in January 2004) granted access to the Department of Housing and Urban Development. The provisions were designed to verify the employment and income of persons receiving federal housing assistance.

P.L. 108-295 (enacted in August 2004) granted access to the State Workforce Agencies responsible for administering state or federal Unemployment Compensation programs. The provisions were designed to determine whether persons receiving unemployment compensation are working.

P.L. 108-447 (enacted in December 2004) granted access to the Department of the Treasury. The provisions were designed to help the Treasury Department collect nontax debt (e.g., small business loans, Department of Veterans Affairs (VA) loans, agricultural loans, etc.) owed to the federal government.

P.L. 109-250 (enacted in July 2006) granted access to the state agencies that administer the Food Stamp program. These provisions were designed to assist in the administration of the Food Stamp program. P.L. 110-246 (enacted in June 2008) changed the Food Stamp program references to the Supplemental Nutrition Assistance Program (SNAP). P.L. 113-79 (enacted in February 2014) required all state SNAP agencies (rather than giving them the option) to data-match with the NDNH at the time of SNAP certification for the purposes of determining eligibility to receive SNAP benefits and determining the correct amount of those benefits.

P.L. 110-157 (enacted in December 2007) requires the Secretary of Veterans Affairs to provide the HHS Secretary with information for comparison with the National Directory of New Hires for income verification purposes in order to determine eligibility for certain veteran benefits and services. It requires the Secretary to (1) seek only the minimum information necessary to make such a determination; (2) receive the prior written consent of the individual before seeking, using, or disclosing any such information; (3) independently verify any information received prior to terminating, denying, or reducing a benefit or service; and (4) allow an opportunity for an individual to contest negative findings. P.L. 110-157 terminated the New Hires Directory comparison authority for the VA Secretary at the end of FY2011 (i.e., September 30, 2011). P.L. 112-37 (enacted in October 2011) extended the termination date to November 18, 2011. During the period from November 19, 2011, through September 29, 2013, the provision was not in effect. The Department of Veterans Affairs Expiring Authorities Act of 2013 ( P.L. 113-37 ) made the provision effective beginning September 30, 2013, and for 180 days thereafter.

Concerns Regarding the National Directory of New Hires

The NDNH is almost unanimously viewed as a successful and pivotal element of the CSE program. According to HHS, in FY2010 4.7 million noncustodial parents and putative fathers were located through the NDNH, up from 2.8 million in FY1999 (a 68% increase). The NDNH, however, does not provide information on the self-employed nor does it include hours worked or industry/occupation-related data.

Since the establishment of the NDNH, federal law has been amended six times to expand access of more programs and agencies to the NDNH (listed above). Although Congress specifically included several provisions that would safeguard the information in the NDNH, some advocacy groups are concerned that as more agencies and programs are granted access to the NDNH, the potential for mismanagement of the database and accidental or intentional misuse of confidential information escalates.

The NDNH is a database that contains personal and financial data on nearly every working American, as well as those receiving unemployment compensation. The size and scope of the NDNH has continued to cause much concern over whether the privacy of individuals will be protected. In addition to the data security safeguards, federal law includes privacy protection provisions that require the removal or deletion of certain information in the NDNH after specified time periods. It has been argued that stronger safeguards may be needed to prevent the unauthorized intrusion into the personal and confidential information of millions of Americans associated with the NDNH.

The federal government and states administer numerous benefit programs that provide aid, in cash and noncash form, to persons with limited income. In theory, all of these programs could use the employment and income information contained in the NDNH to verify program eligibility, prevent or end unlawful or erroneous access to program benefits, collect overpayments, or assure that program benefits are correct. Some observers are worried that more of these federal and state programs will try to obtain access to the NDNH. They contend that expanded or wider access to, and use of, these data could potentially lead to privacy and confidentiality breaches, financial fraud, identity theft, or other crimes. They also are concerned that a broader array of legitimate users of the NDNH may conceal the unauthorized use of the personal and financial data in the NDNH.

Some policymakers maintain that, although many agencies and programs could potentially benefit from access to the NDNH, those entities will not pursue access because many of these agencies currently do not have the computer capacity or capability to use an automated system such as the NDNH. Many of these agencies and programs are administered at the local level where computer availability is limited or computer capability to interface with the automated NDNH is nonexistent. Moreover, many of the privacy protections and strict security requirements tied to the NDNH may be administratively burdensome for many agencies.

Finally, some child support advocates are concerned that the wider access to the NDNH may have negative repercussions for the CSE program in that as other programs and agencies use the NDNH effectively and find matches in cases that involve an overpayment, those agencies will want to collect their money and may use income withholding as the mechanism to do so. Thus, these other programs will be in direct competition with the CSE program for the income of noncustodial parents.