Social Security Rates Changing

For FERS employees, the Social Security maximum wage base is rising to $97,500 from $94,200. That is the portion of their salaries on which they pay the 6.2 percent “FICA” tax—there is no limit on the 1.45 percent Medicare tax paid by both FERS and CSRS employees. Also, for those retired under FERS, the earnings test applying to Social Security beneficiaries aged 62-through “full retirement age”–for 2007 is 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. There is no limit on earnings beginning the month an individual attains full retirement age. And 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 will be $18,150 in 2007.