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Railroad Retirement and Unemployment Insurance Taxes in 2017
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PR 16-10 December 2016 |
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877-772-5772
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The amounts of compensation subject to railroad retirement tier I and tier II
payroll taxes will increase in 2017, while the tax rates on employers and
employees will stay the same. In addition, unemployment insurance contribution
rates paid by railroad employers will continue to include a 1.5 percent
surcharge in 2017.
Tier I and Medicare Tax.--The railroad retirement tier I
payroll tax rate on covered rail employers and employees for 2017 remains at
7.65 percent. The railroad retirement tier I tax rate is the same as the social
security tax, and for withholding and reporting purposes is divided into 6.20
percent for retirement and 1.45 percent for Medicare hospital insurance. The
maximum amount of an employee's earnings subject to the 6.20 percent rate
increases from $118,500 to $127,200 in 2017, with no maximum on earnings subject
to the 1.45 percent Medicare rate.
An additional Medicare payroll tax of 0.9 percent applies to an individual's
income exceeding $200,000, or $250,000 for a married couple filing a joint tax
return. While employers will begin withholding the additional Medicare tax as
soon as an individual's wages exceed the $200,000 threshold, the final amount
owed or refunded will be calculated as part of the individual's Federal income
tax return.
Tier II Tax.--The railroad retirement tier II tax rates in 2017
will remain at 4.9 percent for employees and 13.1 percent for employers. The
maximum amount of earnings subject to railroad retirement tier II taxes in 2017
will increase to $94,500 from $88,200. Since 2004, tier II tax rates are based
on an average account benefits ratio reflecting railroad retirement fund levels.
Depending on this ratio, the tier II tax rate for employees can be between 0
percent and 4.9 percent, while the tier II rate for employers can range between
8.2 percent and 22.1 percent.
Unemployment Insurance Contributions.--Employers, but not
employees, pay railroad unemployment insurance contributions, which are
experience-rated by employer. The Railroad Unemployment Insurance Act also
provides for a surcharge in the event the Railroad Unemployment Insurance
Account balance falls below an indexed threshold amount. The accrual balance of
the Railroad Unemployment Insurance Account was $93.8 million on June 30, 2016.
Since the balance is less than the indexed threshold of $152.9 million, a 1.5
percent surcharge will be added to the basic contribution rates for 2017, but
will not increase the maximum 12 percent rate. There was also a surcharge of 1.5
percent in 2015 and 2016, with no surcharge in 2013 and 2014.
As a result, the unemployment insurance contribution rates (including the 1.5
percent surcharge) on railroad employers in 2017 will range from the minimum
rate of 2.15 percent to the maximum of 12 percent on monthly compensation up to
$1,545, up from $1,455 in 2016.
In 2017, the minimum rate of 2.15 percent will apply to 78 percent of covered
employers, with 8 percent paying the maximum rate of 12 percent. New employers
will pay an unemployment insurance contribution rate of 1.62 percent, which
represents the average rate paid by all employers in the period 2013-2015.# # #
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