FICA Alternative Plan

[DTH]

We have rehired some retirees on a part-time basis. The retirees are receiving an annuity from our defined benefit plan but are no longer eligible to accrue additional benefits under that plan. These employees also will not have deductions taken out of their pay for social security.

Must we take the mandatory 7.5% out of their pay or can we exclude these rehired retirees from our FICA Alternative plan.

Thank you.

[My 2 cents]

How can you not take deductions for Social Security from their part-time wages?

[DTH]

I have found my answer in 26 CFR 31.3121(b)(7)-2(d)(4)(ii), The employer may exclude this group from the mandatory 7.5% contribution in the FICA Alternative plan.

Treatment of re-hired annuitants. An employee who is a former participant in a retirement system maintained by a State, political subdivision or instrumentality thereof, who has previously retired from service with the State, political subdivision or instrumentality, and who is either in pay status (i.e., is currently receiving retirement benefits) under the retirement system or has reached nomal retirement age under the retirement system, is deemed to be a qualified participant in the retirement system without regard to whether he or she continues to accrue a benefit or whether the distribution of benefits under the retirement system has been suspended pending cessation of services. This rule also applies in the case of an employee who has retired from service with another State, political subdivision or instrumentality thereof that maintains the same retirement system as the current employer, provided the employee is a former participant in the system by reason of the employee's former employment. Thus, for example, if a teacher retires from service with a school district that participates in a state-wide teachers' retirement system, begins to receive benefits from the system, and later becomes a substitute teacher in another school district that participates in the same state-wide system, the employee is treated as a re-hired annuitant under this paragraph (d)(4)(ii).