COMPTROLLER'S MEMORANDUM NO. 01 (1986-87)
|SUBJECT:||CALCULATION PROCEDURES USED FOR SOCIAL SECURITY AND FEDERAL HOSPITAL INSURANCE TAXES|
The amounts remitted to the Social Security Administration for these taxes are required to be the product of the total covered wages times the combined employee and employer contribution percentages. The present procedure used computes the employee and employer share separately for each payment. This doubles any variance introduced by rounding the computation to whole cents. It also causes the rounding variance to aggregate with each payment. This procedure has resulted in a small under-collection of taxes.
The revised procedure will work in the following manner for social security.
For Federal Hospital Insurance, the same procedures will be used; only the rate will be different. The total rate is 2.9 percent, 1.45 percent for employee and employer.
This procedure will result in employee deductions and employer contributions which are continually adjusted for rounding fractional cents. Both employing agencies and employees may notice some very minor changes. The employer contribution may not be exactly equal to the employee contribution. In both individual cases and for the total payroll it may be more or less, depending on the rounding variance being corrected from the previous payroll. The employee contribution may vary by one cent from pay period to pay period on a constant salary amount. Or, it may vary once in a while as the rounding aggregates to the point when there is a one cent rounding upward.
Upon initial implementation both agencies and employees may notice a difference of several cents the first time; this will be the result of correcting the rounding variances which have accumulated since January 1, 1986. It should be the only occasion when the difference exceeds one cent unless there have been errors made in the adjustment of employee records.
The procedure has been designed to assure that excess contributions will not be refunded as part of the payroll. In the rare case when an employee and employer have paid more than the maximum contribution, a manual refund still will be required.
Any questions regarding this procedure should be directed to Payroll Systems Section at 488-9395, SUNCOM 278-9395.