2015 Social Security Wage Base–The Details

Yesterday I very quickly posted the 2015 social security wage base within a half hour after it was released by the SSA to make sure my readers got it as soon as possible.  But now I want to take the time to do all the math for you so you have all the details for the 2015.  First, again, the 2015 social security wage base is $118,500. This is up $1,500 from the current base of $117,000.  The rate does not change. It will still be 6.2% for employees and 6.2% for employer unless Congress passes legislation during its lame duck session after the November elections.  The maximum tax that can be deducted in 2015 is $7,347.00.  That is up $93 from this year.

The Medicare rate also remains 1.45 percent for both employees and employers and there is no wage limit.  The Additional Medicare Tax still kicks in at $200,000 in wages and still has a rate of 0.9% paid by the employee only.

IRS Releases Pension Plan Limits for 2015

The IRS today announced the 2015 pension plan limits. They are as follows:

  • Employee elective deferral will increase to $18,000 up from $17,500 for this year
  • Catch up contributions for employees 50 and over will actually increase this year to $6,000 up from $5,500
  • Limit on defined contribution plans will increase to $53,000 up from $52,000 for this year
  • Annual compensation limit will increase to $265,000 up from $260,000
  • Definition of highly compensated employee will increase to $120,000 up from $115,000 for this year

For those of you who need the full information on all the various limits please see attached pdf.  IRS 2015 Pension Plan Limitations Complete Text


Transportation Benefits: The Road is Starting to be More Traveled

It looks like we have a new movement afoot, shall I say.  Although under the 2013 U.S. Bureau of Labor Statistics National Compensation Survey  less than six percent of private sector employees have access to subsidized commuting that is available under the Internal Revenue Code.  But this may be changing. Cities are starting to mandate transit benefits to help out employees in that city. The latest is New York City whose Mayor Bill de Blasio signed into law a requirement that employers with 20 or more employees give their full-time New York City employees an option to purchase their transit benefits with pre-tax dollars.  The law was signed on October 20th and is effective January 1, 2016. It does not apply to parking benefits and there are civil penalties.  New York is the third city to enact such legislation. Washington D.C.’s mandate will take effect also in January 2016.  But the first city to do so was, of course, San Francisco, CA.  That ordinance was passed and effective in 2009.  All these cities impose the mandate on employers with 20 or more employees. The purpose of these mandates is to give the employees tax breaks on commuting already worked into the Internal Revenue Code but not readily available unless an employer offers it to them.  For example, according to the organization Riders Alliance if an employee uses the current pre-tax level of $130 per month, the New York City employee could save an average of $443 in taxes each year by buying the Metrocard (cost is $112) through an employer.  If you calculate the benefit out across the board any employee who buys the transit passes through their employer and uses the full $130 could save $514 per year in taxes.  And it doesn’t cost the employer anything either. In fact it could save them money according to Riders Alliance since offering the benefit could save the employer $103 per employee per year using the same $112 Metrocard.

And it may not be just cities who are imposing these mandates.  Air Quality Management Boards are also looking into this type of mandate to reduce traffic and improve air quality.   The first one so far is the San Francisco Bay Area Air Quality Management District.  San Francisco Bay Area employers with 50 or more full-time employees within their district’s geographical boundaries are required to register and offer pre-tax commuter benefits to their employees.  This became effective last month (September 30, 2014).

So be prepared and keep your eyes open as more cities and other entities look at this type of program.  Unfortunately, although the tax law that permits these types of savings is on the federal level, the mandates never comes on the federal level. Unlike other countries who mandate these types of national benefits on the national level the U.S. does not.  The result is that employers will have to work through hodgepodges of separate entities with separate requirements.  Information on each of the mandates is provided below.

New York City

San Francisco (City)

San Francisco Bay Area

Washington D.C

Weekly SUI Catch Up

As promised when I have the room in a blog week I will try to catch up on all the SUI wage bases and rates announcements or other SUI related news that comes across my desk since the previous update has been posted.  So here is what has come in since my last update:

Alaska: The state has announced that the SUI rates will be reduced in 2015 due to a stronger economy and legislation passed in 2013.  The actual rates and the wage base will not be released until December.

Arkansas:  According to my sources Arkansas has repaid its remaining federal unemployment insurance loan balance as of October 1 and will not be borrowing again this year.  That means that employers in Arkansas will see the return of the minimum net FUTA tax rate of 0.6%.

Delaware:  My sources are telling me that the SUI taxable wage base will remain $18,500 for 2015.  The tax schedule will also remain the same with the rates ranging from 0.3% to 8.2%. The special training tax assessment will also continue to be .085% for 2015. The SUI tax rate notices will go out to employers in mid-December.

Missouri:  The SUI taxable wage base will remain $13,000 for 2015.

New Hampshire:  The Governor’s office has announced that a “fund balance reduction” will go into effect for the fourth quarter of 2014.  The result should be a 0.5% reduction in their SUI rates beginning October 1st.

Rhode Island:  The state is announcing that their outstanding federal loan will be repaid before the November 10th deadline.  This will allow the net FUTA tax rate to return to 0.6% for calendar year 2014.

Wisconsin:  rates for 2015 will continue to be based on the Rate Schedule A but will range from 0.27% to 12% for small employers and 0.70% to 12% for large employers.

We should have another update for you next week covering all that comes in after today.