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Old 05-03-2012, 04:21 PM   #61
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Originally Posted by MichaelB View Post

The payroll tax paid by the employer is compensation cost and conceptually part of your wage, but in real life you would not get it, the employer would save it.
I vote with Sam on this one.

I've done commission programs for products that were sold by both a mega-corp's employees and by independent "brokers". I've sat in meetings with both groups present and explained why the independents got more cash than employees. The FICA difference generates zero discussion (other differences are debatable). Everybody can see that the company is going to spend the same total either way, so the employees are going to lose the cash cost of FICA.

I've also done cost/benefit studies on outsourcing and automating. It's clear that in those decisions employees compete against contractors and machines, and FICA is economically charged to employees.
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Old 05-03-2012, 04:35 PM   #62
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Originally Posted by Andre1969 View Post
I never noticed before, that health insurance and such reduces the amount of your income subject to SS and medicare. Has it always been that way, I wonder?
This is due to Section 125, the "cafeteria plan" provision of the IRS code.

Cafeteria plan - Wikipedia, the free encyclopedia

I know it is only Wikipedia, but this has a quick description of it. It was introduced in 1978. Back in my working days, my company qualified for it circa 1990. From the above link:

"Employees' pretax contributions are not subject to federal, state, or social security taxes."

I would dispute the "state" portion of the above sentence because it is up to the state as to whether it will exempt pretax health insurance premiums from its own definition of income. (New Jersey did not, for example.)
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Old 05-03-2012, 04:45 PM   #63
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This is due to Section 125, the "cafeteria plan" provision of the IRS code.

Cafeteria plan - Wikipedia, the free encyclopedia

I know it is only Wikipedia, but this has a quick description of it. It was introduced in 1978. Back in my working days, my company qualified for it circa 1990. From the above link:

"Employees' pretax contributions are not subject to federal, state, or social security taxes."
Sadly, this is not the case with self-employed (1099) income. It needs to pass through your own corporation first.

I'm wondering why my online SS statement has numbers about $2500 less than what my 1040 says?
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Old 05-03-2012, 06:23 PM   #64
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Originally Posted by MichaelB

The payroll tax paid by the employer is compensation cost and conceptually part of your wage, but in real life you would not get it, the employer would save it.
I vote with Sam on this one.

I've done commission programs for products that were sold by both a mega-corp's employees and by independent "brokers". I've sat in meetings with both groups present and explained why the independents got more cash than employees. The FICA difference generates zero discussion (other differences are debatable). Everybody can see that the company is going to spend the same total either way, so the employees are going to lose the cash cost of FICA.

I've also done cost/benefit studies on outsourcing and automating. It's clear that in those decisions employees compete against contractors and machines, and FICA is economically charged to employees.
and i gotta agree with MB. do you really think that when companies did away with DB plans, replacing them with 401k's, that they then put all the money they had been paying into those DB plans right into their employees 401k's? i think not and so i doubt that if they no longer had to pay FICA that they would just pass what they were paying to FICA to their employees.
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Old 05-03-2012, 10:41 PM   #65
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This was the first part of one of my questions:

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You may have opened a mortgage loan in or around April 2004. Please select the lender to whom you currently make your mortgage payments...
Clearly the SSA doesn't understand the benefits of being a serial re-financer.

Fortunately, all of the choices were wrong for both my 2004 and current mortgages, so "none of the above" was my correct answer.

By the way, my social security card has just a first and last name (my legal name is longer). I used the short one and left the middle name box untouched. I was accepted for an account the first time through, with no problems at all.
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Old 05-03-2012, 11:05 PM   #66
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It's now possible to get an online version of the social security statement we used to get in the mail every year.

https://www.socialsecurity.gov/

They've added a section where you can see the total social security and medicare payments you and your employer made. Since a good half of my working life was at the much lower contribution rates, it looks like I'm getting a good return on my SS money unless the government decides I'm too "lucky" and cuts my benefits.
Thank you for the link. It's interesting to see that the estimate for my benefit at 62 at the end of this year is only 1% higher than the paper estimate I received in Mid 2010. I ER'd 10 years ago so I have 10 years of zero's as income. My wife is already collecting SS and her payment went up over 3% this year. I guess SS uses a different index before payments are started (Wage index) and another index (CPI) after SS payments start. Does this discrepancy of utilizing different indexes continue if payment is delayed to age 70?
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Old 05-04-2012, 07:38 AM   #67
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I vote with Sam on this one.

I've done commission programs for products that were sold by both a mega-corp's employees and by independent "brokers". I've sat in meetings with both groups present and explained why the independents got more cash than employees. The FICA difference generates zero discussion (other differences are debatable). Everybody can see that the company is going to spend the same total either way, so the employees are going to lose the cash cost of FICA.

I've also done cost/benefit studies on outsourcing and automating. It's clear that in those decisions employees compete against contractors and machines, and FICA is economically charged to employees.
I agree. This reminds me of the ridiculous argument that we need to cut taxes on small business so they "can hire more employees". In reality, cutting taxes on small business means more profit for the small business owner! As a couple of my friends said, "we hire additional people when we have to". Has nothing to do with their tax rate.
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Old 05-04-2012, 07:40 AM   #68
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Originally Posted by eridanus View Post
Sadly, this is not the case with self-employed (1099) income. It needs to pass through your own corporation first.

I'm wondering why my online SS statement has numbers about $2500 less than what my 1040 says?
Your statement lists your Taxed Social Security Earnings and your Taxed Medicare Earnings. This is not your total income as some income is not eligible for these taxes.
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Old 05-04-2012, 08:00 AM   #69
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Thank you for the link. It's interesting to see that the estimate for my benefit at 62 at the end of this year is only 1% higher than the paper estimate I received in Mid 2010. I ER'd 10 years ago so I have 10 years of zero's as income. My wife is already collecting SS and her payment went up over 3% this year. I guess SS uses a different index before payments are started (Wage index) and another index (CPI) after SS payments start. Does this discrepancy of utilizing different indexes continue if payment is delayed to age 70?
I am not 100% sure, but I believe (hope) the wage indexing stops once you are first eligible to start collecting at 62, at which point the cpi indexing takes over. Where is jdw_fire, I'll bet he can answer this with certainty.
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Old 05-04-2012, 08:03 AM   #70
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I am not 100% sure, but I believe (hope) the wage indexing stops once you are first eligible to start collecting at 62, at which point the cpi indexing takes over. Where is jdw_fire, I'll bet he can answer this with certainty.
I'm not jdw but can confirm your understanding is correct.

Edit for clarification: you reach eligibility age of 62, your PIA is calculated, and from then on all increases are CPI only.
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Old 05-04-2012, 08:32 AM   #71
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Has anyone here tried to use the data from the newly created online SS statements as input to the SS Benefit Calculator to see if the projected benefits match? It was an unintentional nudge from one of you which prompted me to make another attempt to get the SS Benefit Calculator I downloaded last year to work better. And it did, matching my own spreadsheet's results (within rounding) after I replaced the outdated Wage Indexing Factors with the current ones from the Calculator.
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Old 05-04-2012, 08:40 AM   #72
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I'm not jdw but can confirm your understanding is correct.

Edit for clarification: you reach eligibility age of 62, your PIA is calculated, and from then on all increases are CPI only.
Thanks for confirming. To me its an important point, as I wouldn't be surprised to see further wage erosion over the next few years.
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Old 05-04-2012, 08:45 AM   #73
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Thanks for confirming. To me its an important point, as I wouldn't be surprised to see further wage erosion over the next few years.
Right. The BLS report released a few minutes ago shows median hourly wage rising at an annual rate of only 1.8%, below inflation. It's been like that since the beginning of the recovery. Wage erosion is not something that might happen, it is happening.
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Old 05-04-2012, 09:16 AM   #74
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Right. The BLS report released a few minutes ago shows median hourly wage rising at an annual rate of only 1.8%, below inflation. It's been like that since the beginning of the recovery. Wage erosion is not somethinig that might happen, it is happening.
Yes, that's why I wondered which index was used. Thank you all for answering that question.
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Old 05-04-2012, 09:20 AM   #75
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Why would the SSA know who I took house and car loans with
Well, they do already have your SSN....
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Old 05-04-2012, 09:22 AM   #76
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Right. The BLS report released a few minutes ago shows median hourly wage rising at an annual rate of only 1.8%, below inflation. It's been like that since the beginning of the recovery. Wage erosion is not somethinig that might happen, it is happening.
The irony is that one of the commonly touted ways to "save" Social Security is to tie future benefit increases to inflation rather than wage growth. If wages continue to fail to keep up with inflation, this would actually do more harm than good.

And looking at my earnings record, it looks like my Medicare earnings peaked in 2005 and has been flat to slightly down since (8% less in '11 than in '05). 2011 was the lowest year since 2004 as we had smaller bonuses (which, combined with no raises for several years, and of course, there's been no inflation).
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 05-04-2012, 09:30 AM   #77
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Well, they do already have your SSN....
So, they asked me to take a survey and, of course, for improvements. I told them they should give me access to all the information they have on me. I imagine if someone actually reads these things, that person will probably have a "Huh?" moment.

Actually, since I was a DOD employee, the government probably has lots more info on me than most people.
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Old 05-04-2012, 09:51 AM   #78
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As a couple of my friends said, "we hire additional people when we have to".
If they are hiring people, they are looking at how much each costs (in toto--including benefits and payroll taxes, etc) and how much value they'll add. If they aren't doing this math, they aren't running their business.

And if the other taxes a business pays are reduced, the dough certainly doesn't automatically go into the owner's pocket. If every other business has their costs (taxes) similarly reduced, we may see a downward trend in the prices of their goods (that's how competition works, else they'd already be charging more right now), we may see them buy more/newer equipment so the business can be more productive, or they may hire more people so they can produce even more products and make more profit. If it benefits the business, they could increase compensation to their present employees (bonuses, benefits, pay) so they'll stay with the company and hiring/training costs are reduced. Lower taxes can certainly increase hiring and increase pay for present employees, but it depends on many other factors.
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Old 05-04-2012, 09:59 AM   #79
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As a couple of my friends said, "we hire additional people when we have to". Has nothing to do with their tax rate.
Of course, these days the job market is so pitiful that you don't even have to hire more people when business picks up. You just make the people work 50-60 hours a week to meet the extra demand. And you make them "salaried" employees so they don't get overtime. And you remind them that they have few options in the current job market so they are stuck.

Not that I'm cynical.....
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 05-04-2012, 10:14 AM   #80
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Of course, these days the job market is so pitiful that you don't even have to hire more people when business picks up. You just make the people work 50-60 hours a week to meet the extra demand. And you make them "salaried" employees so they don't get overtime. And you remind them that they have few options in the current job market so they are stuck.

Not that I'm cynical.....
Lots of truth there, too. OTOH, there are certainly opportunities out there. Here in Dayton employers are having a very hard time finding skilled employees, including machinists. Really. And the jobs pay pretty well. For years we had a glut of machinists as GM shuttered factories. Now, those folks are out of the labor market or don't have CNC skills. Businesses are finding that younger applicants who have the needed school training are (in general) so undependable and so fickle that it's costing a lot to find and train ones who will reliably show up for work and stay on the job. So, many businesses are concentrating more on retraining proven workers they already have. It turns out that it's easier to train people in specific skills and tasks than to inculcate them with maturity and a strong work ethic. Of course, some will say "strong work ethic" = "mindless corporate drone", but when I read about this issue it leads me to believe our employment problems haven't yet reached point where it has affected the attitudes of the young. ("Hey, I'd better get a job and stick with it.")
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