SR 02-02 Dated 01/02

STATE OF NEW HAMPSHIRE

INTER-DEPARTMENT COMMUNICATION

SUMMARY

This SR releases the annual updates to the:

·   Federal Minimum Wage;

·   withholding rates for FICA (Social Security) and FIT (Federal Income Tax);

·   FICA income ceiling; and

·   SSA retiree income ceilings.

FICA and FIT withholding rates are allowed in determining self-employment income for all programs and nursing facility and HCBC employment expense disregards. Employment expense disregards are based on allowable FIT and FICA withholding deductions.

Family Assistance Manual (FAM), Food Stamp Manual (FSM), and Adult Assistance Manual (AAM), Chapters 600, were revised accordingly.

POLICY

Revised Family Assistance Manual Topics

PART 601, TABLE H Federal Information, Taxes, Income Ceilings, and Minimum Wage Standards

Revised Adult Assistance Manual Topics

Section 603.03 Employment Expense Disregard

Revised Food Stamp Manual Topics

PART 601, TABLE H Federal Information, Taxes, Income Ceilings, and Minimum Wage Standards

Minimum Wage

·   The minimum wage remains unchanged at $5.15 an hour.

FICA (Social Security)

·   The FICA withholding rate for both employees and employers remains 7.65%. This subdivides into 6.20% for the Social Security (OASDI) share and 1.45% for Medicare’s (HI) portion.

·   Self-employed individuals pay a FICA withholding rate of 15.3%. These individuals may deduct from income tax one half of the 15.3% paid for the year as a business expense. The actual rate becomes 7.65% after the deduction. These figures have not changed since last year.

·   For employees and employers, the Medicare portion of the FICA rate is 1.45% on 100% of earned income; for a self-employed individual, the rate is 2.9% on 100% of earned income. These percentages have not changed in recent years.

FICA Income Ceiling

·   The income ceiling subject to the full FICA withholding rate increased from $80,400 to $84,900.

·   There is no ceiling to the amount of gross earned income from which Medicare may be withheld.

FIT (Federal Income Tax)

·   District Offices use IRS Circular E to determine the applicable federal income tax (FIT) withholding rate. Although the federal withholding rate has not changed this year, the ceiling on the maximum amount will increase January 1, 2002, making the 2001 Circular E obsolete. Copies of the January 2002 IRS Circular E will be sent to each District Office under separate cover when they are received from the IRS.

SSA Retiree Income Ceiling

On April 7, 2000, President Clinton signed the Senior Citizens’ Freedom to Work Act of 2000. This Act bases the maximum amount of earnings that SSA retirees may make without affecting their Social Security benefits upon the retiree’s age, adjusted annually as follows:

·   For individuals age 62 through age 64, the 2002 earnings limit is $11,280 per year, or $940 per month. One dollar in benefits will be withheld for every $2 in earnings above the limit.

·   Individuals who reach age 65 in the 2002 calendar year are subject to a modified earnings test of $30,000 per year, or $2,500 per month, until the month in which they reach age 65. One dollar in benefits will be withheld for every $3 in earnings above the limit.

·   There is no earnings limit beginning the month in which an individual turns age 65. For example, a retiree turning 65 in April will be subject to the $30,000/$2,500 earnings test through March 31. Beginning April 1, no earnings test applies.

IMPLEMENTATION

Policy changes are effective January 1, 2002.

CLIENT NOTIFICATION

Clients will be notified of the new policy at the time of application at the District Office.

TRAINING

No training is necessary.

DISPOSITION

This SR may be deleted or destroyed once its contents have been noted and the revised manual topics released by this SR have been posted to the On-Line Manuals.

DISTRIBUTION

This SR will be distributed according to the electronic distribution list for Division of Family Assistance policy releases. This SR, and revised On-Line Manuals, will be available for agency staff in the On-Line Manual Library, and for public access on the Internet at http://www.dhhs.state.nh.us/PMIndex.htm, effective January 1, 2002.

This SR, and printed pages with posting instructions, will be distributed under separate cover to all hard copy holders of the Family Assistance, Food Stamp, and Adult Assistance Manuals.

DFA/JBV:s