2015 OASDI tax and earnings base is $118,500; COLA is 1.7%


Social Security beneficiaries will see another small increase in their monthly checks in 2015–1.7%. This cost-of-living adjustment, or COLA, will produce an estimated average monthly benefit of $1,328 for all retired workers in 2015, $22 a month more than in 2014. The COLA increase will be applied to this coming year’s benefits, beginning with benefits for December 2014, which are payable in January 2015.

The amount of earnings subject to taxation under FICA and SECA, the “wage base,” is also going up in 2015. The 2015 wage base of $118,500 is $1,500 higher than the 2014 amount of $117,000.
The benefit and wage base increases for 2015 were announced October 22 by the Social Security Administration in a press release.

Tax increase appears in FICA tax deducted from individuals’ paychecks

The tax increase will show up in the FICA tax deducted from the paychecks of those individuals earning above the 2014 wage base of $117,000. Although the tax rate for the Old-Age, Survivors and Disability Insurance (OASDI) portion of the tax under the FICA has held steady at 6.2% since 1990, the amount of wages subject to the tax increases each year based on increases in the national average wage.

The $118,500 earnings base for 2015, which applies only to the 6.2% OASDI portion of the Social Security tax, could result in a FICA tax increase of as much as $93 for employees (and their employers) whose earnings exceed the 2014 tax and earnings base of $117,000. Self-employed individuals may owe as much as $186 in additional self-employment (SECA) tax in 2015 since they also must pay the “employer” portion of the taxes. However, they can recoup some of this amount through a deduction on their federal income tax return. There is no limit on the amount of earnings subject to the 1.45% Medicare (hospital insurance) portion of the tax.

About 10 million workers out of a total of approximately 168 million workers who will pay Social Security taxes in 2015 are affected by the higher wage base for 2015, according to the SSA.

No change in tax rates

The employee/employer Social Security tax rate remains at 7.65% for 2015, including 6.2% for the OASDI portion and 1.45% for the hospital insurance portion. For the self-employed, the rate continues to be 15.3%. Note that self-employed persons calculate their net earnings as gross earnings reduced by 7.65%, and they deduct half of their Social Security taxes from their net earnings for federal income tax purposes.

Change in CPI-W drives amount of increase

The cost-of-living increase of 1.7% will begin with Social Security checks that are received in January 2015. (Increased payments to more than 8 million Supplemental Security Income beneficiaries, however, will begin on December 31, 2014).

The 1.7% increase is based on the rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of 2013 through the third quarter of 2014. The CPI-W reflects cost increases for wage earners and thus excludes the impact of cost increases on higher income earning self-employed professionals and business owners.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.7% over the last 12 months to an index level of 238.031. The index for all items less food and energy rose 1.7% over the last year with the shelter and medical care indexes up 3.0% and 2.0%, respectively. The food index also rose 3.0%, while the energy index declined 0.6%. The CPI-W increased 1.6% over the last 12 months to an index level of 234.170.

Retired worker’s average monthly benefit becomes $1,328

For Social Security beneficiaries, the average monthly benefit (prior to deduction for the Part B Medicare premium) for all retired workers will rise to $1,328 in 2015, up from the average benefit of $1,306 paid one year earlier. The maximum Supplemental Security Income (SSI) monthly benefit for an individual will rise to $733, up from $721, and the maximum SSI payment to a couple will rise to $1,100, up from $1,082.

Domestic employee and election worker coverage

For 2015, there is no increase in the amount of wages a domestic worker may earn without being subject to FICA taxes. An employer may pay a domestic worker, such as a maid or a nanny, up to $1,900 in 2015 without having to wrestle with federal withholding on wages. The threshold for election workers remains at $1,600.

Age 65 birthday celebrants in 2015 required to wait until 2016 for full benefits
Workers who attain age 65 in 2015 will have to wait until 2016 to retire if they wish to receive their full retirement benefit. A gradual rise in the full retirement age began in 2000 resulting from the 1983 amendments to the Social Security Act, which increased the full retirement age from age 65 to age 67. The only individuals attaining full retirement age in 2015 will be individuals attaining age 66, i.e., individuals born January 2, 1949, through January 1, 1950. For such individuals, the maximum possible monthly benefit is $2,663. Full retirement age will remain at age 66 for the next six years for individuals born January 2, 1943, through January 1, 1955.

Reduced benefits for early retirees and the “break-even” age

Workers may retire as early as age 62, but they will receive a reduced benefit if they do. The full retirement age of 66, for those workers reaching age 62 in 2015, is also based on the 1983 amendments. The practical effect of this change is to slightly decrease the amount of early retirement benefits payable to individuals who reach age 62 in 2015 by increasing the reduction amount in the benefit formulas by 5/12 of 1.0% of an individual’s primary insurance amount (PIA) for each additional month of retirement beyond 36 months. This process is explained more fully in the Unemployment Insurance Reporter with Social Security at ¶12,305 in the “Social Security: Benefits Explained” division. PIAs are explained at ¶12,210 and ¶12,211 in the same division.

Increases for other beneficiaries

For an aged couple, both receiving benefits, the average monthly Social Security benefit becomes $2,176 (up from the average benefit of $2,140 paid when last year’s increase took effect in December 2014). For a widowed mother and two children, the average monthly benefit becomes $2,680 (up from $2,635). For an aged widow or widower living alone, the average monthly benefit becomes $1,274 (up from $1,253) and for a disabled worker with a spouse and one or more children, the average monthly benefit becomes $1,976 (up from $1,943). The average monthly benefit for all disabled workers becomes $1,165 (up from $1,146). All of these benefit amounts assume steady earnings since age 22 and no earnings prior to that point.

Miscellaneous additional changes

The amount of earnings required for a quarter of Social Security coverage in 2015 increases to $1,220, up from $1,200 in 2014.

The national average wage index for 2013 (most recent available) is $44,888.16. The index is 1.28% higher than that of 2012.

The “old-law” contribution and benefit base increases from $87,000 in 2014 to $88,200 in 2015.
The fees for services performed by a representative payee increase to $41 and $78 in 2015, up from $40 and $77 in 2014.

Medicare deductibles, premiums in 2015

For 2015, the Part A deductible is $1,260; the Part B annual deductible is $147; and the Part B monthly standard premium is $104.90.

Official notice to appear in Federal Register

The Social Security Administration’s official publication of the formula adjustments, cost-of-living increases, and tax and wage bases that will affect Social Security benefit computations in 2015, as well as its explanations of how the adjustments are calculated, will appear in the Federal Register shortly.

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