Social security in the vast majority of countries requires by law or regulations that both the employer and the employee formalize their situation before the social security systems to access benefits such as medical care insurance or Medicare, disability insurance, old age, or survival.
In the United States, the federal social security system has been under the purview of the Social Security Administration ( SSA ) for more than 80 years. The SSA administers the pension system for at least 65 million older people and the health insurance and security system for some 170 million workers.
OASDI/EE stands for Old Age Survivors and Disability Insurance Employees Share. It is one of the payroll tax deductions in the United States set by law.
Therefore, the deduction called OASDI/EE in your paycheck means social Security coverage and represents the requested tax withholding for your federal Social Security account.
How does the OASDI/EE deduction work?
The federal government urges all companies and workers to formalize their situation with Social Security. Once registered, both employees and employers will pay the social security tax.
The rate or aliquot corresponding to the OASDI/EE deduction set depends on the tax category of the fiscal year. The employee has deducted a certain percentage of his income from her, up to a limit of USD 128,400 per year (according to the SSA). The company will pay that same percentage as “employer contribution.”
In other words, for every dollar that deducts for the OASDI/EE, your employer makes an equivalent contribution.
To talk about a specific year, during the calendar year 2018. The rate for the OASDI social program, according to the SSA set at 6.2 percent, and your employer was responsible for contributing another 6.2 percent, making a total of 12.4 percent. . The deduction must be reflected in the payment receipt of your salary.
OASDI/EE only applies to the first $128,400 of an employee’s earnings per calendar year. For example, if your earnings reach that total before September 30, you don’t have to pay social security taxes on your additional December 31 earnings.
Although most companies don’t deduct OASDI, it’s always good to ensure that employees’ earnings hit the limit, primarily if you work for more than one employer or changed jobs mid-year. Also, check if your Combined earnings from all employers exceed the limit.
Remember that there is no similar limitation for Medicare.
OASDI/EE and Medicare
Employers are generally required to make certain withholdings on your wages. Indeed, that box labeled “federal income tax” is no mystery.
Suppose you see an “OASDI/EE” box. You will most likely see another label with “HI” (hospital insurance) or some other name for the insurance part of Medicare, such as one of the Social Security programs administered by the SSA.
In addition to the OASDI, you and your employer required to pay Medicare for a total of 2.9 percent, 1.45% covered by your salary, and the company contributes the other 1.45%. Both withholdings are required by the Federal InsuranceContribution Act (FICA ).
Businesses may refer to these statutory deductions by different names on their checks or pay stubs, for example, FICA-OASDI and FICA-HI, or simply “SOC SEC” for (Social Security) and “Medicare.”
a little history
The Social Security Administration website offers a detailed history of the Social Security Program, signed into law in 1935 by President Franklin D. Roosevelt.
At first, the SSA provided a continuing income only for retirees over 65. Later amendments added benefits for the spouses and minor children of retired workers, the family of workers who die prematurely, and the disabled.
Medicare was added in 1965 to provide health insurance for almost everyone age 65 and older. The 1935 law contained initial provisions for social security taxes. However, in 1939, the tax provisions of the Social Security Act were adopted and added to the Internal Revenue Code in the section we call FICA.
Usefulness and management of the OASDI/EE
If you are a formal employee as defined by the Internal Revenue Service (IRS), you and the company you work for are required to pay OASDI and HI taxes on your wage income.
Publication 15-A “Supplemental Tax Guide for Employers” provides helpful information on types of payroll taxes and the classification of workers. Although almost all employees are required to pay OASDI taxes, a particular group of people who are exempt, students enrolled in a university and who also work part-time for that university, are examples of this.
Have you ever wondered what your employer does with the withholdings for the OASDI and the rest of the withholdings in your name?
In general, amounts must be regularly remitted to the IRS. The payment format varies according to the company’s size, being bi-weekly or monthly.
Payments are made through the Electronic Federal Tax Payment System ( EFTPS ) by check or deposit at a recognized financial institution.