SR 05-02 Dated 01/05

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.

POLICY

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 in recent years.

·   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 $87,900 to $90,000.

·   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, 2005, making the 2004 Circular E obsolete. Copies of the January 2005 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. For retirees born in 1939, full retirement age is 65 and 4 months; for those born in 1940, it is 65 and 6 months. Full retirement age will gradually increase to age 67 for those born in 1960 or later. Earning limits are adjusted annually as follows:

·   For individuals age 62 through age 64, the 2005 earnings limit is $12,000 per year, or $1,000 per month. One dollar in benefits will be withheld for every $2 in earnings above the limit.

·   Individuals who reach full retirement age in the 2005 calendar year are subject to a modified earnings test of $31,800 per year, or $2,650 per month, until the month in which they reach full retirement age. 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 reaches full retirement age. For example, a retiree born in 1939, turning 65 and 4 months in April will be subject to the $31,800/$2,650 earnings test through March 31. Beginning April 1, no earnings test applies.

POLICY MANUAL REVISIONS

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

IMPLEMENTATION

Policy changes are effective January 1, 2005.

CLIENT NOTIFICATION

No client notification is required as the information is for agency staff use.

TRAINING

No training is necessary.

DISPOSITION

This SR may be destroyed or deleted after 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.nh.gov/DHHS/DFA/LIBRARY, effective January 10, 2005.

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/DMS:s