Social Security Wage Base Increases to $127,200 for 2017

American Payroll Association - Compliance Update

Social Security Wage Base Increases to $127,200 for 2017 The Social Security Administration (SSA) announced on Tuesday, October 18, 2016, that the 2017 social security wage base will be $127,200, which is an increase of $8,700 from $118,500 in 2016 (view the SSA Fact Sheet). As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax. As in 2016, wages paid in excess of $200,000 in 2017 will be subject to an extra 0.9% Medicare tax that will be withheld only from employees' wages. Employers will not pay the extra tax.

The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2017 up to the social security wage base. The maximum social security tax employees and employers will each pay in 2017 is $7,886.40, an increase of $539.40 from $7,347 in 2016.

The social security wage base for self-employed individuals in 2017 will also be $127,200. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%) up to the social security wage base. In 2017, the maximum social security tax for a self-employed individual will be $15,772.80.

FICA coverage threshold for domestic, election workers The threshold for coverage under social security and Medicare for domestic employees (i.e., the "Nanny tax") will be $2,000 in 2017, unchanged from 2016; the coverage threshold for election workers will be $1,800 in 2017, up from $1,700 in 2016.

Exempt Employee Salary Threshold Goes From $455 to $913 Per Week on December 1


The American Payroll Association has sent out this Compliance Update:

Exempt Employee Salary Threshold Goes From $455 to $913 Per Week on December 1

Today, the U.S. Department of Labor released the final rules governing which executive, administrative, and professional employees (white collar workers) are exempt from the Fair Labor Standards Act's minimum wage and overtime pay protections. The DOL last updated these regulations in 2004.

Effective December 1, 2016, the final rule raises the salary threshold to $913 a week or $47,476 a year (up from $455 a week or $23,660 a year).

The final rule focuses primarily on the salary and compensation levels needed for white collar workers to be exempt. Specifically, the rule: 
•?Sets the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Region (currently the South).
•?Increases the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers, or $134,004 (up from $100,000).
•?Establishes a mechanism for automatically updating the salary and compensation levels going forward. Future automatic updates to the thresholds will occur every three years, beginning on January 1, 2020.
•?Allows employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level. The amounts must be paid on a quarterly or more frequent basis, but there is a provision allowing a "catch-up" payment to be made during the first pay period of the next quarter.
•?Does not change any of the existing job duty requirements to qualify for an exemption. Both the standard duties tests and the HCE duties test remain unchanged. The final rule, which is scheduled to be published in the Federal Register on May 23, is available for
preview. Additional information is available on the DOL's website.

For more coverage, see the June issue of PAYROLL CURRENTLY.

How will the increased salary requirement impact your organization, and what steps should you take to ensure compliance? Find out when you attend APA's webinar What Do the New Overtime Rules Mean for Payroll? The webinar will be held on June 10 and will also be offered on demand. Registration information will be available on APA's
Payroll Webinars website soon!