The National Directory of New Hires

The National Directory of New Hires
Carmen Solomon-Fears
Specialist in Social Policy
Domestic Social Policy Division
Summary
The National Directory of New Hires is a database that contains personal and
financial data on nearly every working American, as well as those receiving
unemployment compensation. Contrary to its name, the National Directory of New
Hires includes more than just information on new employees. It is a database that
includes information on (1) all newly hired employees, compiled from state reports (and
reports from federal employers), (2) the quarterly wage reports of existing employees
(in Unemployment Compensation (UC)-covered employment), and (3) unemployment
compensation claims. The National Directory of New Hires was originally established
to help states locate noncustodial parents living in a different state so that child support
payments could be withheld from that parent’s paycheck. Since its enactment in 1996,
the National Directory of New Hires has been extended to several additional programs
and agencies to verify program eligibility, prevent or end fraud, collect overpayments,
or assure that program benefits are correct. Although the Directory is considered very
effective, concerns about data security and the privacy rights of employees remain a part
of debates regarding expanded access to the National Directory of New Hires. This
report may be updated periodically if legislation granting additional access to the
database is enacted.
Background
The National Directory of New Hires is a database of personal information and wage
and employment information of American workers. Employers are required to provide
to the State Directory of New Hires a report that contains the name, address, and social
security number of each new employee and the employer’s name, address, and tax
identification number. The State Directory of New Hires is then required to furnish these
six data elements on new employees to the National Directory of New Hires. States also
are required to send quarterly wage information of existing employees (in UC-covered
employment) and unemployment compensation claims information to the National
Directory of New Hires. Federal agencies send their new hire information and quarterly
wage information directly to the National Directory of New Hires. It contains three
components. (1) The first component of the National Directory of New Hires is the new

hires file (i.e., report). It contains information that is also on each employee’s W-4 form.¹
Employers are required by P.L. 104-193² to send new hire reports to the State Directory
of New Hires, which then sends the required information to the National Directory of
New Hires. Federal employers (i.e., agencies) send their new hire reports directly to the
National Directory of New Hires. (2) The second component of the National Directory
of New Hires is the quarterly wage file.³ 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 National Directory of New Hires 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.⁴ 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 National Directory of New Hires obtains its data from State Directories of
New Hires, State Workforce Agencies, and federal agencies.
The National Directory of New Hires, 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, Maryland. According to the Department of Health and
Human Services (HHS), during FY2004 about 690 million records were posted to the
National Directory of New Hires.
Original Purpose. The original purpose of the National Directory of New Hires
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. Moreover, because many noncustodial parents are in

¹ The W-4 form, also called the Employee’s Withholding Allowance Certificate, is the form all
employees must complete so that employers can withhold the correct federal income tax from
each person’s paycheck.
² Federal law provisions related to the State Directory of New Hires are in Section 453A of the
Social Security Act. Federal law provisions related to the National Directory of New Hires are
in Section 453(i) and Section 453(j) of the Social Security Act. The National Directory of New
Hires, together with the State Directories of New Hires and the federal and state child support
case registries, were enacted as part of the 1996 welfare reform law (P.L. 104-193, the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996).
³ Employers are required to submit a wage report of UC-covered employees every three months
to the State Employment Security Agency. About 90% of all private employers are covered by
UC. The quarterly wage report contains the name, social security number, and total wages paid
to each employee during the calendar quarter.
⁴ Office of Child Support Enforcement. Department of Health and Human Services. Division
of Federal Systems. A Guide to the National Directory of New Hires (January 2007).

temporary employment or move from job to job, the quick reporting of information on
new hires greatly increases the likelihood that the National Directory of New Hires 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.⁵ Since its enactment in 1996,
access to the National Directory of New Hires has been expanded, mostly to prevent fraud
and abuse, to certain other programs and agencies (discussed later).
National Directory Data
Employers are required to collect from each newly hired employee and transmit to
the State Directory of New Hires⁶ 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.
Data Deletion Requirements. New hire reports must be deleted from the
National Directory of New Hires 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 National Directory of New Hires. (The HHS Secretary may keep
samples of data entered into the National Directory of New Hires 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 National Directory of New Hires, but it

⁵ Although quarterly wage data to a certain extent duplicate information in the new hires report,
quarterly wage data (alone) were not very useful to the CSE agencies. Many noncustodial
parents changed jobs so frequently that the quarterly data were often out-of-date before the CSE
agencies received the information. Generally, there is about a six-month lag between the time
the quarterly wage data are submitted to the State Workforce Agency and when the data are
available to the CSE agencies.
⁶ P.L. 104-193 allows certain employees of a federal or state agency performing intelligence or
counterintelligence functions to not be reported to the new hires directories. States have the
option of imposing a civil monetary penalty for the failure of employers to report the required
new hire information. The penalty cannot exceed $25 per failure to meet the requirements with
respect to each newly hired employee, or $500, if under state law the failure is the result of a
conspiracy between the employer and the employee to not supply the required report or to supply
a false or incomplete report.

is flagged indicating that SSA was not able to verify the social security number and name
combination.⁷
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.⁸ The
new hires report must be entered into the database maintained by the State Directory of
New Hires within 5 business days of receipt from an employer.
Within 3 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 National Directory of New Hires.
Within 2 business days after the new hire information is received from the State
Directory, the information must be entered into the computer system of the National
Directory of New Hires.
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 National Directory against information in the
child support abstracts in the Federal Child Support Case Registry at least every 2 business
days. If a match occurs, the HHS Secretary must report the information to the appropriate
state CSE agency within 2 business days. The CSE agency is then required to instruct,
within 2 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
National Directory of New Hires from the State Workforce Agencies within four months
of the end of a calendar quarter. However, some states report quarterly wage data to the
National Directory of New Hires on a monthly or weekly basis. Federal agencies are
required to transmit quarterly wage information on federal employees to the National
Directory of New Hires no later than one month after the end of a calendar quarter.⁹

⁷ Office of Child Support Enforcement. Department of Health and Human Services.
Administration for Children and Families. Accuracy of Data Maintained by the National
Directory of New Hires and the Effectiveness of Security Procedures. Report to the House of
Representatives Committee on Ways and Means and the Senate Committee on Finance. July 31,

2002.

⁸ Federal employers send their new hire reports directly to the National Directory of New Hires
(generally within 20 days after an employee is hired).
⁹ Office of Child Support Enforcement. Department of Health and Human Services. Division
of Federal Systems. A Guide to the National Directory of New Hires (January 2007). p. 4.

Unemployment compensation information (which comes from State Workforce
Agencies) is required to be transmitted to the National Directory of New Hires within one
month of the end of a calendar quarter.¹⁰
Current Access to the National Directory of New Hires
The National Directory of New Hires 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 National Directory of New Hires, Congress must authorize a change in law.
The HHS Secretary is required to share information from the National Directory of
New Hires with state CSE agencies, 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, Veterans’ Administration (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.
Concerns Regarding the National Directory of New Hires
The National Directory of New Hires is almost unanimously viewed as a successful
and pivotal element of the CSE program. According to HHS, in FY2007, 4.9 million
noncustodial parents and putative fathers were located through the National Directory of
New Hires, up from 2.8 million in FY1999 (a 75% increase).

¹⁰ Ibid., p. 4.

Since the establishment of the National Directory of New Hires, federal law has been
amended five times to expand access of more programs and agencies to the National
Directory (listed above). Although Congress specifically included several provisions that
would safeguard the information in the National Directory, some advocacy groups are
concerned that as more agencies and programs are granted access to the National Directory
of New Hires, the potential for mismanagement of the database and accidental or
intentional misuse of confidential information escalates.
The National Directory of New Hires 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 National Directory 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 National Directory after
specified time periods.¹¹ 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 National Directory.
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
National Directory of New Hires 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 National Directory. 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 National Directory may conceal
the unauthorized use of the personal and financial data in the National Directory.
Some policymakers maintain that, although many agencies and programs could
potentially benefit from access to the National Directory of New Hires, 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 National Directory. 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 National
Directory is nonexistent. Moreover, many of the privacy protections and strict security
requirements tied to the National Directory may be administratively burdensome for many
agencies.
Finally, some child support advocates are concerned that the wider access to the
National Directory may have negative repercussions for the CSE program in that as other
programs and agencies use the National Directory 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 income of noncustodial parents or other
debtors.

¹¹ See earlier subsection on “Data Deletion Requirements.”