Impact Assessment of Employer New Hire Outreach

Impact Assessment of Texas’ Employer New Hire Outreach

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-compliantemployers 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 Mailed /

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).

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).

Month / New Employers Registered on Website
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 23

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).

New Hire Outreach Statistics July 2001 – December 2001

Month / Answered Calls / New Employers Reporting* / New Hire Records Reported By New Employers
July 2001 / 3,406 / 5,196 / 25,011
August 2001 / 2,939 / 4,306 / 23,140
September 2001 / 2,539 / 2,788 / 13,874
October 2001 / 18,004 / 10,297 / 52,188
November 2001 / 9,249 / 11,175 / 39,153
December 2001 / 3,695 / 5,691 / 38,326
Total / 39,832 / 39,453 / 191,692
* Employers who had not reported new hires in the past six months.

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
2ndquarter 2001 / 13.76%
3rdquarter 2001 / 11.04%
4thquarter 2001 / 15.46%

Table 44

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).

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).

Graph 3[6]

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

Graph 46

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).

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 or contact Patricia Matthews at (512) 460-6353 or .

Tips, Techniques, and Technology

for Using FPLS Data1March 2003

[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