The social security in most countries require by law or regulations that both the employer and the employee formalize their situation to the social security systems , in order to access benefits like health care insurance or Mericare, disability insurance, old age or survival.
In the United States, the federal social security system has been the responsibility of the Social Security Administration ( SSA ) for more than 80 years. The SSA administers the pension system for at least 65 million older people as well as the health insurance and security system for some 170 million workers.
OASDI / EE means Old Age Insurance, Survivorship and Disability for employees in English ” Old Age Survivors and Disability Insurance Employess 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 withholding of the requested contribution 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 enrolled, both employees and employers will pay social security tax .
The rate or aliquot corresponding to the OASDI / EE deduction is set depending on the tax category of the fiscal year. The employee is deducted a certain percentage of his income, up to a limit of USD 128,400 per year, (according to the SSA) and the company will pay that same percentage as an “employer contribution”.
In other words, for every dollar deducted from the OASDI / EE your employer makes an equivalent contribution.
To speak of a specific year, during the calendar year 2018. The rate for the OASDI social program according to the SSA was set at 6.2 percent and your employer was responsible for contributing another 6.2 percent, making up a total of 12.4 percent. . The deduction must be reflected in the receipt of payment 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 earnings on December 31.
Although most companies do not deduct OASDI , when employee income reaches the limit it is always good to make sure, especially if you work for more than one employer or have changed jobs in the middle of the year, also check to see if your Combined compensation from all employers exceeds 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 salary. Certainly, that box called “federal income tax” is not a mystery.
If you see an ” OASDI / EE ” box , you will most likely see another label with the acronym ” HI ” (Hospital Insurance) or some other name for the part of Medicare insurance such as one of the Social Security programs, administered by the SSA.
In addition to the OASDI, you and your employer are required to pay Medicare for a total of 2.9 percent, 1.45% is covered by your salary and the other 1.45% is provided by the company. Both taxes are required by law Contribution to Social Security (FICA, for its acronym in English Federal Isurance Contribution Act ).
Companies can 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 provides a detailed history of the Social Security Program , enacted in 1935 by President Franklin D. Roosevelt.
Initially , the SSA provided continuous income only for retirees over 65. Later the amendments added benefits for the spouses and minor children of retired workers, for the families of workers who die prematurely and for the disabled.
Medicare was added in 1965 to provide health insurance for almost everyone 65 years of age or older. The 1935 law contained initial provisions for social security taxes . However, in 1939, the tax provisions of the Social Security Law were adopted and the Internal Revenue Code added in the section we call FICA .
It may interest you: What does the employee pay in payroll taxes?
Usefulness and management of the OASDI / EE
If you are a formal employee as defined by the Internal Revenue Service (IRS), then both you and the company where you work are required to pay OASDI and HI taxes on your wage income.
Publication 15-A “ Supplemental Tax Guide for Employers ” provides useful information on types of payroll taxes and the classification of workers. Although almost all employees are required to pay OASDI taxes , there is a certain group of people who are exempt, students enrolled in a university and who also work part-time for that university, are an example of this.
Have you ever wondered what your employer does with the withholdings for the OASDI and the rest of the withholdings on your behalf?
In general, amounts must be remitted regularly to the IRS throughout the year. The payment format varies according to the size of the company, being biweekly or monthly.
Payments are made through the Electronic Federal Tax Payment System ( EFTPS ) by check or by deposit at a recognized financial institution.