Reduction in Social Security Payroll Tax for 2011

To: Academic and Staff Employees

From: Public Affairs

On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Included in the Act is a provision that reduces the social security withholding rate from 6.2% to 4.2% for 2011. This change will be effective with paychecks (and direct deposit) issued on or after January 1, 2011. Because the law was enacted so close to the end of the calendar year, the IRS has given employers until January 31, 2011 to implement this withholding change. The new withholding rate will be implemented with the monthly pay date on February 1, 2011.

To compensate for the January 3, 2011 over-withholding, employees paid on February 1, 2011 will see an additional 2-percentage point reduction in their social security tax withholding. As a result, the net withholding for social security will be 2.2% for the February 1, 2011 payment only. The withholding rate will then change to 4.2% for all subsequent pay dates in 2011. If you have any questions about this change, please contact the Payroll Office at 459-2488.