Employer Bulletin

All Employers
Vol. 17, No. 24
November 20, 2000

Social Security Wage Base Set to Increase for 2001

As the designated liaison between the Social Security Administration and employers with Social Security Section 218 Agreements, the Department of Employee Trust Funds (ETF) produces this Employer Bulletin to provide updated information including Social Security and Medicare wage bases for 2001. The following applies to all Wisconsin Retirement System employers and all other public employers subject to a Social Security Section 218 agreement.

1. Social Security and Medicare Wage Bases and Rates for 2001

   Effective for all wages paid on or after January 1, 2001, the Social Security (full FICA) wage base will increase from $76,200 to $80,400. The Medicare wage base will not have a dollar limit for 2001.

   Although the wage base will increase, the employer and employee tax rates will remain the same in 2001. The Social Security (full FICA) rate remains at 7.65% (6.20% Social Security plus 1.45% Medicare) for wages up to $80,400. All wages over $80,400 are subject only to the 1.45% Medicare rate. The rate remains at 1.45% for others who are subject only to Medicare.

2. Earnings Exemptions for 2001

   The maximum amount a Social Security beneficiary, between the ages of 62 through 64, may earn without any reduction in benefits will increase to $10,680 per year ($890 a month). The Senior Citizens' Freedom To Work Act of 2000 requires individuals to test the earnings limit for the calendar year in which they attain the age of 65. The maximum earnings without any reduction for the individual turning 65 is $25,000 per year ($2,084 a month) for the calendar year months prior to age 65. There is no limit on earnings beginning the month an individual attains age 65.

   Example: John Doe will turn 65 on June 10, 2001. Until January 2001, Mr. Doe's earnings limit is $890 a month. For the months January 2001 through May 2001, John Doe's earnings limit is $2,084 each month. There is no earnings limit after May 2001.

3. 2001 Earnings Requirement for One-Quarter Credit for Social Security

   In 2001, the amount of earnings required for a Social Security credit (one quarter of coverage) will increase from $780 to $830 ($1,660 will earn two quarters, etc.).

4. 2001 Benefit Increase for Social Security

   The Social Security benefit increase for 2001 will be 3.5%.

5. Election Worker Exclusion for 2001

   The exclusion will remain at $1,100 for 2001.

For more information, contact Dale Ferron, Department of Employee Trust Funds, at (608) 266-0728.