Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.
Do employers and/or employees make pension contributions to the government in your jurisdiction? If so, briefly outline the existing state pension system.
In the United States, employers and employees both contribute to the social security system, which is a federal retirement programme, in the form of a tax based on an employee’s income. The tax is paid pursuant to the Federal Insurance Contributions Act (known as the FICA tax) in the form of a payroll tax. The current FICA tax rate is 15.3% of an employee’s income, with the employer and the employee each paying 50% of the tax (7.65% each). However, the employee’s annual contribution is capped when his or her income reaches a certain amount that is adjusted annually (for 2017, this amount is $127,200). Employees who meet certain eligibility criteria (such as meeting a retirement age requirement – generally 65 years) are entitled to life annuities at retirement age, based on compensation earned during their working lives that was subject to the social security (FICA) tax. All 50 states do not offer state pension systems.
Can employers deduct any state pension contributions from their taxable income?
Yes, employers can deduct their FICA tax contributions from their taxable income.
Are there any proposals to reform or amend the existing system?
Other mandatory schemes Are employers required to arrange or contribute to supplementary pension schemes for employees? If so, briefly outline how the scheme is enforced and regulated.
Click here to view the full article.