Social Security Figures Also Affected

Meanwhile, several figures important in the Social Security program also are being adjusted for 2007. Earnings subject to the 6.2 percent Social Security withholding tax will rise to $97,500 from $94,200 (the 1.45 percent Medicare tax has no cutoff). Employees in FERS and CSRS-offset pay the tax, but while the withholding cuts off for FERS employees at that level, CSRS-offset employees continue to pay it, with the money going into the federal retirement trust fund rather than the Social Security fund. Also, the earnings test applying to Social Security beneficiaries aged 62 through “full retirement age”–for 2007, 65 and ten months–is increasing to $12,960 from $12,480. Those beneficiaries lose $1 in Social Security benefits for every $2 in earnings through employment or self-employment above the limit. A separate earnings test applies only to earnings for months in the year an individual reaches full retirement age prior to the individual attaining that age. One dollar in benefits will be withheld for every $3 in earnings above $34,440, up from $33,240. There is no limit on earnings beginning the month an individual attains full retirement age.