Social Security Wage Base for 2010:For the first time since 1975, the Social Security Administration will not be increasing the OASDI (Old-Age, Survivors, and Disability Insurance) wage base, also referred to as Social Security wage base.  For prior years, the annual wage base increase has been the result of an automatic cost-of-living adjustment (COLA), but since there will not be a COLA increase in the amounts paid to Social Security beneficiaries in 2010, the wage base will remain unchanged at $106,800.  At the current Social Security rate of 6.2%, the maximum amount an employee may have withheld in 2010 remains at $6,621.60.

Pension Plan Limits for 2010:
In similar fashion, the IRS will not increase pension plan limits for 2010.  Plan limitations are as follows:

    Plan Type    Annual Limit       Catch-Up    
    401(k)            $16,500            $5,500 (maximum total contribution is $49,000)

    403(b) - (SIMPLE)     $11,500            $2,500

The optional catch-up contribution is for employees age 50 and greater that want to make additional contributions to there pension plan.  In some cases, the matching criteria is different for catch-up contributions than for regular contributions that fall under the annual limit.  In this case, it may be necessary to setup a different deduction for the catch-up amounts so that the match can be applied properly. By defualt, APS OnLine, our online payroll software, will stop all employee contributions at the annual limit unless the "Max Override" deduction field is used for specific employees that want to make additional contributions. 

 

Comment if you have questions about this new payroll tax update.