Forget “no news is good news.” The Social Security Administration’s announcement that the 2010 taxable wage base will remains at $106,800 will bring HR a few questions from your highly compensated employees and retirees.
With the SSA announcement that there will be no change over the prior year – almost unheard of in recent memory – there’s sure to be plenty of confusion. The higher-ups will want to confirm that they won’t pay more in Social Security taxes next year, while retirees may ask why they’re not getting a cost-of-living increase in their monthly checks. The latter may also have questions about the Obama Administration’s proposal to send those receiving Social Security benefits a one-time $250 check to help stimulate the economy.
Here’s what you might want to tell them:
- Higher-ups – Indeed, those earning more than $106,800 won’t pay more in FICA taxes in 2010. This tax is the combined Social Security tax rate of 6.2% plus the Medicare tax rate of 1.45%. So, the maximum Social Security tax employees making $106,800 or more will pay is $6,621.60 in 2010. Employers must pay an equal share on each worker. You may want to explain to these employees, though, that as always, there’s no limit to the wages subject to the Medicare tax – so all covered wages are still subject to this 1.45% withholding.
- Retirees – This is the first time there will be no cost-of-living increase since 1975, when the agency began adjusting the amounts based on inflation. The Department of Labor announced this week that consumer prices fell 2.1% since the third quarter of 2008. SSA actuaries base the cost-of-living adjustment on the change in consumer prices from the third quarter of one year to the same period the following year. Since prices are falling, retirees actually have more spending power because the agency never decreases benefits. As for the $250 “supplement,” you may want to suggest that retirees not go spending any potential windfall just yet. Right now, it’s just one idea the Administration has suggested to further stimulate the economy.
A few other updates
The wage bases for the following also remain unchanged in 2010:
- Self-employed individuals – $106,800. There’s no limit for the Medicare tax for these workers, either. The self-employment tax rate remains 15.3%, which is the combined Social Security tax rate of 12.4% plus the Medicare rate of 2.9%. The maximum Social Security tax for those self-employed will be $13,243.20.
- Domestic employees – $1,700.
- Election workers – $1,500.