Welcome to PayTech’s November Update
The U.S. Department of Labor (DOL) published monumental changes to the overtime rule that will make approximately 4.2 million currently exempt employees eligible for overtime pay later this year.
The Fair Labor Standards Act (FLSA) overtime rule determines whether employees are eligible or exempt for overtime pay. Exempt employees, because of their rate of pay and type of work that they do, are not eligible for overtime pay for hours worked over 40 in a workweek. Nonexempt employees must be paid time and a half for any hours worked more than 40 in a workweek.
All employers must comply with the changes made to the overtime regulations of the Fair Labor Standards Act by Dec. 1, 2016.
What Is The New FLSA Overtime Rule?
- The rule extends overtime protections to 4.2 million workers who are not currently eligible under federal law.
- Workers who do not earn at least $47,476 a year ($913 a week) will have to be paid overtime, even if they’re classified as a manager or professional.
- The Department of Labor will increase the salary threshold every three years. Based on current projections, the salary threshold is expected to rise to more than $51,000 with its first update on January 1, 2020… (read more)
2017 SOCIAL SECURITY CHANGES – Cost-of-Living Adjustment (COLA): Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2014 through the third quarter of 2016, Social Security and Supplemental Security Income (SSI) beneficiaries will receive a 0.3 percent COLA for 2017. Other important 2017 Social Security information is as follows:
Tax Rate: 2016 2017
Employee: 7.65% 7.65%
Self-Employed: 15.30% 15.30%
NOTE: The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The Medicare portion (HI) is 1.45% on all earnings. Also, as of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes. The tax rates shown above do not include the 0.9 percent.
Maximum Taxable Earnings: 2016 2017
Social Security (OASDI only): $118,500 $127,200
Medicare (HI only): No Limit No Limit
The Social Security Administration (SSA) has announced that Social Security and Supplemental Security Income (SSI) benefits will increase by 0.3 percent in 2017. The rates for Old-Age, Survivors and Disability Insurance (OASDI) and Medicare Hospital Insurance (HI) taxes will remain at a combined 7.65 percent in 2017. Because of the increase, the maximum taxable earning for OASDI purposes will increase from $118,500 to $127,200.
The SSA cost-of-living adjustments (COLAs) are based on the rise in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of 2014 through the third quarter of 2016. Because of the increase in the CPI-W during that period, the law increases benefits to help offset inflation. As a result, monthly Social Security and SSI benefits for over 65-million Americans will increase 0.3 percent in 2017.
Comment. The Social Security wage base for 2017 will be $127,200. According to the SSA, of the estimated 173-million workers who will pay Social Security taxes in 2017, some 12 million will pay more because of the increase in the wage base. The SSA explained on its website that the formula for determining the wage base is set by law. The formula is applicable only if a cost-of-living increase becomes effective for December of the year in which a determination of the base would ordinarily be made. Because there is a cost-of-living increase for December 2016, the formula is applicable, the SSA explained.
For the year in which an individual attains full retirement age, the retirement earnings test exempt amount increases to $44,880 for 2017. The test applies to earnings from the months prior to when the individual reaches full retirement age. One dollar in benefits will be withheld for every three dollars in earnings above the limit. No limit on earnings will be imposed beginning in the month in which individual reaches full retirement age. For retirees under the full retirement age, the retirement savings test exempt amount will increase to $16,920 for 2017, with one dollar withheld for every two dollars in earnings above the limit.
Federal law requires specific coverage thresholds for domestic employees. On its website, the SAA reported that the domestic employee coverage threshold amount is $2,000 for 2017, unchanged from 2016.