573 Social Security and Medicare Contributions

573.1 Federal Insurance Contributions Act (FICA) Taxes

573.11 Employee/Employer Payments
  1. The Postal Service and covered employees each pay equal amounts of FICA taxes to the U.S. Treasury Department through employee payroll deductions and matching Postal Service contributions.
  2. All employees listed in 572.11 contribute amounts for the full Social Security coverage (Social Security benefits and Medicare); while employees hired prior to January 1, 1984, and covered by the CSRS, contribute for Medicare coverage only.
573.12 Effective Percentage Rate
573.121 Full Coverage

Beginning in 1989, the Postal Service, and all employees covered under Social Security as listed in 572.11 and CSRS employees who transferred to FERS each pay 7.51 percent of the employee’s gross annual earnings (including cost–of–living adjustments and premium pay differentials). The total contribution rate for both Social Security and Medicare benefits, however, is scheduled to change to 7.65 percent beginning in 1990 and remaining constant through 1999.

573.122 Medicare Coverage Only

Employees covered for Medicare only contribute 1.45 percent of their gross wages with the Postal Service contributing a like amount. The Medicare rate is scheduled to remain the same through 1999.

573.13 Base Earnings

The maximum amount of annual earnings that can be used for Social Security purposes and on which contributions are based is $65,400 in 1997. The earnings maximum may be adjusted annually according to the increase in earnings level.

573.14 FICA Inquiries

Direct inquiries on FICA payroll deductions to the Director, Eagan ASC.

573.2 Allowances Not Subject to FICA Taxes

Allowances not subject to FICA taxes include:

  1. Clothing allowances.
  2. Territorial cost–of–living allowances paid to employees in Puerto Rico, Virgin Islands, Hawaii, Alaska, and Guam.
  3. Equipment maintenance allowances.
  4. Lock pouch allowance.