Employees’ payroll tax reduced for 2011 only
The bill passed by Congress and signed into law by President Obama late last week that extended what is commonly referred to as the Bush tax cuts contains a provision that will affect employees’ net pay for one year only.
The payroll (Social Security) tax is being reduced by 2 percentage points to 4.2 percent for 2011. This payroll tax is currently 6.2 percent of employee earnings and appears on our GFU pay statements in the “Taxes” section as “Fed OASDI/EE.†The amount of an employee’s earnings used to pay medical insurance premiums, dental insurance premiums and to contribute to flexible spending accounts is not subject to this tax, so an employee’s salary should be reduced by those deductions to determine what this amount is each month. You will first see the result of this payroll tax reduction on your Jan. 31 pay statement. The Fed MED/EE (Medicare tax), which appears on the row above, will continue to be 1.45 percent.
As you make any long-term financial plans, it is important to be aware that beginning in January 2012 this Social Security tax will again be 6.2 percent.
This legislation did not reduce the employer’s matching amount of this tax, so the university will continue to contribute a 6.2 percent Social Security tax on your earnings.