July 3, 1986
COMPTROLLER'S MEMORANDUM NO. 01 (1986-87)
| SUBJECT: | CALCULATION PROCEDURES USED FOR SOCIAL SECURITY AND FEDERAL HOSPITAL INSURANCE
TAXES |
The Bureau of State Payrolls will
revise the calculation procedure used for social security and
Federal Hospital Insurance effective with the biweekly payroll
warrants dated July 18, 1986. This revision is being made to
more closely conform to the federal reporting standards.
The amounts remitted to the Social
Security Administration for these taxes are required to be the
product of the total covered wages times the combined employee
and employer contribution percentages. The present procedure
used computes the employee and employer share separately for each
payment. This doubles any variance introduced by rounding the
computation to whole cents. It also causes the rounding variance
to aggregate with each payment. This procedure has resulted in
a small under-collection of taxes.
The revised procedure will work in the following manner for social security.
- The year-to-date social security
wages, including the current payment, will be determined.
- The year-to-date total social
security will be calculated by multiplying the year-to-date social security wages by
the total contribution rate. For 1986, this rate is 14.3 percent.
- The resulting total amount due
will be split into the employee and employer shares. Any odd cent due will be assigned
to the employer share. For 1986 this is divided into equal shares of 7.15 percent each.
- The amounts already paid by both
the employee and employer will be subtracted from the respective year-to-date
amounts due. The remainders will be the contributions charged to the
current payment.
For Federal Hospital Insurance, the
same procedures will be used; only the rate will be different.
The total rate is 2.9 percent, 1.45 percent for employee and
employer.
This procedure will result in employee
deductions and employer contributions which are continually adjusted
for rounding fractional cents. Both employing agencies and employees
may notice some very minor changes. The employer contribution
may not be exactly equal to the employee contribution. In both
individual cases and for the total payroll it may be more or less,
depending on the rounding variance being corrected from the previous payroll. The employee contribution
may vary by one cent from pay period to pay period on a constant
salary amount. Or, it may vary once in a while as the rounding
aggregates to the point when there is a one cent rounding upward.
Upon initial implementation both agencies
and employees may notice a difference of several cents the first
time; this will be the result of correcting the rounding variances
which have accumulated since January 1, 1986. It should be the
only occasion when the difference exceeds one cent unless there
have been errors made in the adjustment of employee records.
The procedure has been designed to
assure that excess contributions will not be refunded as part
of the payroll. In the rare case when an employee and employer
have paid more than the maximum contribution, a manual refund
still will be required.
Any questions regarding this procedure
should be directed to Payroll Systems Section at 488-9395, SUNCOM
278-9395.
