Payroll administrators should note that the Social Security Administration announced on Oct. 19 that the Social Security Old Age Survivor’s and Disability Insurance (OASDI) taxable wage base for 2012 will increase to $110,100 from $106,800. The maximum 2012 OASDI tax payable by each employee will be $6,826.20, (6.2% of the wage base) compared to $6,621.60 in 2011, an increase of $205.
Keep in mind that the 4.2% rate now in effect for employees is scheduled to expire Dec. 31 and will revert back to the 6.2% rate for 2012 unless the federal government acts to extend the current rate. There are indications that keeping the rate at 4.2% will be part of a finalized jobs stimulus program. However, some Congressional leaders are against such a reduction since the Social Security program is facing serious financial strain.
Normally the employer matches the amount of Social Security taxes paid by the employee with an equal contribution. Currently while employees are paying 4.2%, employers are still matching at 6.2%. A reduction in the employer match to 4.2% is also being considered in the jobs stimulus proposals.
The SSA also announced a 3.6% cost of living increase amount that affects several thresholds for benefits and coverage. The Social Security tax annual coverage threshold amount for domestic employees for 2012 increases to $1,800, and remains at $1,500 for election workers.
Remember the 1.45% Medicare tax portion of the Federal Insurance Contributions Act (FICA) taxes has no wage base and all wages earned are subject to Medicare taxes except where pre-tax benefit deductions are involved.