Under the law, the SSA credits back pay awarded under a statute to an individual's earnings record in the period(s) the wages should or would have been paid. This is important because wages not credited to the proper year may result in lower social security benefits or failure to meet the requirements for benefits.

However, back pay under statute payments will remain posted to the employee's social security earnings record in the year reported on Form W-2 (or Form W-2c) unless the employer or employee notifies the SSA (in a separate, special report) of the back pay under a statute payment. Then, the SSA can allocate the statutory back pay to the appropriate periods.

You should send the special report to the SSA when or after you submit the Form W-2 (on paper or electronically) to the SSA for the year you pay the statutory back pay to the employee. There is no statute of limitations on the filing of the special report to enable the SSA to allocate the wages. The SSA needs the following information: 1) The employer's name, address, and employer identification number (EIN). 2) A signed statement citing the federal or state statute under which the payment was made. (If the statute is not identified, the SSA will assume the payment was not under a statute and will not allocate to earlier period(s).) 3) The name and telephone number of a person to contact. (The SSA may have additional questions concerning the back pay case or the individual employee's information.) 4) A list of employees receiving the payment and the following information for each employee: a) The tax year you paid and reported the back pay. b) The employee's social security number (SSN). c) The employee's name (as shown on his or her social security card). d) The amount of the back pay award excluding any amounts specifically designated otherwise, for example, damages for personal injury, interest, penalties, and legal fees. e) The period(s) the back pay award covers (beginning and ending dates—month and year). f) The other wages paid subject to social security and/or Medicare taxes and reported in the same year as the back pay award (if none, show zero).* Do not include the back pay award shown in that wage report. If you originally submitted the report under an establishment number, show that number and the amount of money that is to remain under that establishment number. g) The amount to allocate to each reporting period.* This includes any amount you want allocated (if applicable) to the tax year of the award payment. If you do not give the SSA specific amounts to allocate, the SSA does the allocation by dividing the back pay award by the number of months or years covered by the award.

Special wage payments may be reported on magnetic computer tape or 3480 cartridges. The SSA does not accept special wage payment reports on diskettes. Use the specifications and record layout shown in Table 2 on page 10. Include a transmittal using the format shown in Table 3 on page 11 for each tape or cartridge submission. Mail magnetic media reports to the SSA at the address shown in Table 3.

Tapes or cartridges not meeting the specifications in Table 2 will be rejected. All data must be in capital letters. Year refers to the year the payment was reported as wages on Form W-2. Do not use punctuation (periods and/or commas) in the name field.

A paper listing can be used to report special wage payments to several employees. Use the format shown in Table 4 on page 12. Submit paper listings to the local SSA office nearest your place of business.

Use Form SSA-131 (see page 6) to report special wage payments made to an employee. Also, use this form to report nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in box 11 of Form W-2.

Publication 957 Reporting Back Pay to the Social Security Administration EMPLOYER INSTRUCTIONS FOR COMPLETING SPECIAL WAGE PAYMENT FORM 1. Provide the EIN that was used or will be used to report the employee's wages on the Form W-2. 2. Enter the date the employee retired. Enter Not Retired if the employee has not retired. 3. Enter the date that the employee last performed services; was not expected to return to work; and was not subject to recall to render additional services. This date should be the same as or earlier than the date in item 2. Enter Not Retired if the employee has not retired. 4. Enter the wages that were paid to the employee in the tax year that were for services that were performed in years prior to the tax year or that were paid on account of retirement. Examples (not all inclusive) of payments to be included:

Payments in lieu of vacation that were earned in a year prior to the tax year.

Accumulated sick payments which were paid in a lump sum based on retirement as the sole condition of payment.

Accumulated sick payments paid at or after the date in item 3, which were earned in a year prior to the tax year.

Payments on account of retirement–dismissal, severance or termination pay paid because of retirement.

Bonuses which are paid pursuant to a prior contract, agreement or promise causing the employee to expect such payments regularly; or announced to induce the employee to work more steadily, rapidly or efficiently or to remain with the employer.

Stock Options.

Do not include in item 4 payments:

For annual, sick, holiday, or vacation pay if used (absence from work) prior to the date of retirement (earlier of items 2 or 3).

That were reported or will be reported under Nonqualified Plans on the Form W-2.

That were deducted from the employee's wages and paid to a deferred compensation plan (e.g., 401k).

Employees health and dental plan benefits (non-covered/non-taxable for Social Security Wages).

Bonuses earned and paid in the tax year.

5. Check whether payments listed in item 4 will be made for years after the tax year. If yes, please show the amounts and years in which these will be paid, if know. 6. Nonqualified deferred compensation and section 457 plans only. If you were unable to report nonqualified deferred compensation or section 457 plan payments and deferrals (contributions) on Form W-2 because both payments and deferrals occurred during the year, show the amount of wages earned by the employee during the tax year. Generally, the wages earned will be the compensation reported in block 1 of Form W-2 less payments from a nonqualified deferred compensation (or 457) plan, but including any amounts deferred under the plan during the tax year (See IRS Publication 957). Paperwork/Privacy Act Notice: This report is authorized by regulation 20 CFR 404.702. The information that you provide will be used in making a determination regarding the amount of Social Security benefits payable to the above named individual. While your response is voluntary, if you do not respond we may not be able to make a correct determination regarding the amount of Social Security benefits payable to the above named individual for the year in question. We may also use the information you give us when we match records by computer. Matching programs compare our records with those of other Federal, State, or local government agencies. Many agencies may use matching programs to find or prove that a person qualifies for benefits paid by the Federal Government. The law allows us to do this even if you do not agree to it. Explanations about these and other reasons why information you provide us may be used or given out are available in Social Security Offices. If you want to learn more about this, contact any Social Security Office. The Paperwork Reduction Act : This information collection meets the clearance requirements of 44 U.S.C. §3507, as amended by Section 2 of the Paperwork Reduction Act of 1995. You are not required to answer these questions unless we display a valid Office of Management and Budget control number. We estimate that it will take you about 20 minutes to read the instructions, gather the necessary facts, and answer the questions. Form SSA-131 (8-2001) EF (06-2002)

Submit Form SSA-131 to the SSA office nearest your place of business. Or, the employee can submit it to the SSA office handling the claim. You or the employee must submit this form before the SSA can exclude the special wage payments for purposes of the earnings test. If reporting on more than one employee, complete a separate Form SSA-131 for each employee or use the paper listing format (except for reporting nonqualified and section 457 plan deferrals and payments), in Table 4.