The 6.2 percent Social Security payroll tax will apply on up to $137,700 of earnings in 2020, up from $132,900. For FERS employees, that tax cuts off at that threshold and from there on they pay only the civil service retirement contribution (which is either 0.8, 3.1 or 4.4 percent, depending on when they were hired). Above the cutoff CSRS Offset employees continue to pay their same 7 percent total (6.2 into Social Security and 0.8 into the federal retirement fund) but all the money after that point goes into the federal retirement fund instead. Employees under “pure” CSRS don’t pay the Social Security tax.
For those drawing Social Security benefits, the earnings test applying to beneficiaries aged 62 through “full retirement age,” currently 66, is rising rise to $18,240. 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 but prior to the individual attaining that age. One dollar in benefits will be withheld for every $3 in earnings above $48,600. There is no limit on earnings beginning the month an individual attains full retirement age.
For purposes of determining the benefit offset under the windfall elimination provision—which can reduce Social Security benefits of CSRS retirees who worked long enough in each system to qualify for a benefit from each—the annual “substantial earnings” minimum is now $25,575.
The standard monthly Medicare Part B (physicians and related services) premium is now $144.60 for most enrollees, an increase from $135.50. Those with annual taxable incomes above $85,000 for single filers and $170,000 for joint filers also pay surcharges that range from $57.80 to $347 a month.
The Part B annual deductible is rising by $13 to $198, and the average monthly premium for Part D prescription drug coverage (which only some federal retirees choose because it largely duplicates what is covered under FEHB plans) is falling on average from about $33 to about $30 a month.
In Part A, which covers hospitalization and related costs, the deductible will rise from $1,364 to $1,408 for the first 60 days, and proportionate boosts also will apply to the additional deductibles for longer periods.