New Laws on Social Security Numbers

[zimbo]

Back in 2006, New York State passed a law effective 1/1/2008 which restricts the use of Social Security Numbers by employers for many purposes. My understanding is that 6 or 7 more states, including Florida and California, have or are considering adopting similar legislation.

Does anyone know whether this affects our operations as administrators, actuaries, and TPAs? For example, many plan administration systems use the SSN as an identifier for an employee or as an initial password for a participant's web access. Many daily administration systems such as Relius use these numbers for transmission and allocation of periodic contributions by payroll as well as for distributions and other purposes. Would these features run afoul of the new laws? There appears to be some relief when encryption is used. What about the transmission of employee census data requests and information received by e mail? By regular mail?

Has anyone read or heard any commentary about these laws and whether or not they potentially affect our practice areas?

[Guest mjb]

Payroll reporting functions required under fed or state tax laws are exempt from this kind of legislation. Information which is transmitted to facilitate plan administration/recordkeeping/ taxation of benefits of ERISA plans would be exempt from state laws under preemption of ERISA 514 b/c such laws prevent uniform administration of the plan.

[zimbo]

I like your answer but I'm not entirely persuaded. In theory, unique identifiers other than SSN could be developed without impeding the orderly administration of retirement plans. Is your opinion the general consensus among people who have studied these laws?

[BG5150]

I would think you (as a record keeper) would need SSN's so proper tax forms could be produced if necessary.

[austin3515]

I could easily argue that not using SS#'s would impede administration. There is no other identifier in the world unique to that individual as considered against every other American. What better way is there to make sure everyone gets THEIR money?

[Guest mjb]

IRS and state tax authorities will not accept unique idenitifiers for filing tax information. Show me a state law that can dictate plan administriaton that is not preempted.

[zimbo]

IRS and state tax authorities will not accept unique idenitifiers for filing tax information. Show me a state law that can dictate plan administriaton that is not preempted.

I believe that tax filings are exempt from this law, so my concern is for whether our "normal" plan administration and/or recordkeeping could be affected by this and similar laws. Don't disagree with your comments, but I would love to see what the lawyers think. Stay tuned.

[Guest mjb]

1. What are the penalities for non compliance and how will it be enforced?

2. Read the Ingersoll Rand case and Shaw v. Delta Airlines cases from the US Supreme court on preemption of state laws that interfere with benefit plan operations.