Maintaining accurate employee records extends beyond basic employment information. Affordable Care Act (ACA) reporting obligations require employers to collect and maintain Social Security Numbers for all individuals covered under employer-sponsored health plans. This compliance step affects ACA reporting accuracy and penalty exposure.
Compliance
Applicable Large Employers (ALEs) face annual reporting requirements through Forms 1095-C and 1094-C that enable IRS enforcement of coverage mandates and verification of minimum essential coverage. Successful reporting hinges on complete Taxpayer Identification Numbers, typically Social Security Numbers, for every covered person, including enrolled spouses and dependent children.
This data collection requirement supports the IRS's ability to cross-reference coverage information with individual tax filings and marketplace subsidy records, making accuracy essential for avoiding compliance issues.
Addressing Missing Information
When dependent SSNs remain unavailable despite collection efforts, the IRS permits alternative reporting using date of birth information. However, this accommodation requires employers to demonstrate "reasonable effort" in pursuing the missing SSNs through a documented process.
Establishing Reasonable Effort Standards
The IRS defines reasonable effort through specific outreach requirements:
Initial Request: Collect dependent SSNs during the enrollment process
Follow-up Contact: Issue a second request within 75 days if initial collection is unsuccessful
Final Attempt: Complete a third request by December 31 of the reporting year (or within 75 days of the second request, whichever is later)
Documenting these collection attempts protects employers from penalties related to incomplete Form 1095-C submissions and demonstrates good-faith compliance efforts.
Strategic Implementation Approaches
Enrollment Integration: Incorporate dependent SSN collection directly into benefits enrollment workflows, making it a standard requirement rather than an optional field.
Communication Strategy: Educate employees about the legal requirement for dependent SSNs and explain how this information supports accurate ACA reporting while remaining secure.
Systematic Follow-up: Implement automated reminders and tracking systems to manage the multi-step reasonable effort process for missing SSNs.
Data Protection: Establish robust safeguards for SSN storage and access, ensuring compliance with HIPAA requirements and organizational privacy policies.
Operational Timing Considerations
Proactive SSN collection prevents year-end reporting complications when correction opportunities become limited. Organizations that address missing dependent information throughout the plan year maintain better compliance positioning and reduce administrative burdens during reporting season.
Late-stage collection efforts often prove unsuccessful as employees focus on other priorities, making systematic enrollment-time collection the most effective strategy.
Risk Management Perspective
Incomplete or inaccurate Forms 1095-C can trigger IRS correspondence and penalty assessments that require significant administrative resources to resolve. Beyond direct penalties, reporting errors may affect employees' ability to reconcile premium tax credits, creating additional compliance exposure.
Establishing comprehensive SSN collection processes protects against these downstream complications while supporting accurate coverage verification for all stakeholders.
Implementation Checklist
Conclusion
Dependent SSN collection represents a fundamental component of ACA compliance that requires systematic attention throughout the plan year. Organizations that integrate these requirements into standard enrollment processes position themselves for successful reporting while minimizing penalty exposure and administrative complications.
Benefit Allocation Systems (BAS) provides best-in-class, online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.
MyEnroll360 can Integrate with any insurance carrier for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, United Health Care, Kaiser, CIGNA and many others), and integrate with any payroll system for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and many others).
This article is for informational purposes only and is not intended as legal, tax, or benefits advice. Readers should not rely on this information for taking (or not taking) any action relating to employment, compliance, or benefits. Always consult with a qualified professional before making decisions based on this content.