Employer Bulletin

All WRS Employers
Vol. 21, No. 15
December 20, 2004

Social Security Wage Base Set to Increase for 2005; New Law Regarding Employees Not Covered by Social Security

As the designated liaison between the Social Security Administration and employers with Social Security Section 218 Agreements, the Department of Employee Trust Funds provides the following updated information including Social Security and Medicare wage bases for 2005. This information applies to all Wisconsin Retirement System employers and all other public employers subject to a Social Security Section 218 agreement.

• Social Security and Medicare Wage Bases and Rates for 2005

  Effective for all wages paid on or after January 1, 2005, the Social Security (full FICA) wage base will increase from $87,900 to $90,000. The Medicare wage base will not have a dollar limit for 2005.

  Although the wage base will increase, the employer and employee tax rates will remain the same in 2005. The Social Security (full FICA) rate remains at 7.65% (6.20% Social Security plus 1.45% Medicare) for wages up to $90,000. All wages over $90,000 are subject only to the 1.45% Medicare rate. The rate remains at 1.45% for others who are subject only to Medicare.

• Earnings Exemptions for 2005

  The maximum amount a Social Security beneficiary between the ages of 62 through 64 may earn without any reduction in benefits will increase to $12,000 per year ($1,000 a month). An increased earnings limit will then apply beginning January 1 following the calendar year during which the individual turned 64 and will remain in effect through the end of the month in which the individual turns 65 years and 4 months. The maximum earnings amount prior to turning 65 years and 4 months, without any reduction, is $31,800 per year or $2,650 a month. There is no limit on earnings beginning the month after the individual attains age 65 years and 4 months.

  Example:
  John Doe will turn 65 on June 10, 2005. Through December 31, 2004, Mr. Doe’s earnings limit is $1,000 a month. For the months of January 2005 through September 2005, John Doe’s earnings limit is $2,650 each month. There is no earnings limit beginning October 2005.

• 2005 Earnings Requirement for One-Quarter Credit for Social Security

  In 2005, the amount of earnings required for a Social Security credit (one quarter of coverage) will increase from $900 to $920 ($1,840 will earn two quarters, etc.).

• 2005 Benefit Increase for Social Security

  The Social Security benefit increase for 2005 will be 2.7%.

• Election Worker Exclusion for 2005

  The earnings exclusion for election workers will remain the same at $1,200 for 2005.

For more information, contact Dale Ferron, Department of Employee Trust Funds, at (608) 266-0728 or e-mail dale.ferron@etf.state.wi.us.

New Law Regarding Employees Not Covered by Social Security

Section 419(c) of Public Law 108-203, the Social Security Protection Act of 2004, requires State and local government employers to disclose the effect of the Windfall Elimination Provision and the Government Pension Offset to employees hired on or after January 1, 2005, in jobs not covered by Social Security. The law requires newly hired public employees to sign a statement that they are aware of a possible reduction in their future Social Security benefit entitlement. For more detailed information about this law and to view a copy of the statement concerning employment in a job not covered by Social Security (Form SSA-1945), go to the following link: http://www.socialsecurity.gov/form1945.