SSA Revises Social Security Taxable Wage Base for 2018

The Social Security Administration (SSA) has announced that the Social Security taxable wage base for 2018 will be lower than previously announced. On October 13, 2017, the SSA announced that the maximum amount of earnings subject to the Social Security tax (taxable wage base) was to increase to $128,700 in 2018, from $127,200 in 2017 (see our Checkpoint article). That announcement was based on national wage data available at the time. In late October, however, a payroll service filed approximately 500,000 corrected Form W-2s that resulted in changes to the calculations used to determine the 2018 taxable wage base. The taxable wage base for 2018, based on the updated wage data, is $128,400.

EBIA Comment: Some 401(k) plans that provide for profit-sharing contributions use the SSA taxable wage base for their permitted-disparity allocation formulas. The taxable wage base also impacts certain fringe benefits and is relevant when determining the tax savings from a cafeteria plan. For more information, see EBIA’s 401(k) Plans manual at Section IX.C.3.b.iii (“Profit-Sharing Contributions—Permitted Disparity: Taking Social Security Contributions Into Account”). See also EBIA’s Cafeteria Plans manual at Sections III.D (“Advantages and Disadvantages of Cafeteria Plans for Employees”) and III.E (“Advantages and Disadvantages of Cafeteria Plans for Employers”), and EBIA’s Fringe Benefits manual at Section III.D (“Adoption Tax Credit Is Also Available: How It Works”).

Contributing Editors: EBIA Staff.