On Aug. 8, 2020, President Donald J. Trump signed an executive memorandum directing the U.S. Department of the Treasury (Treasury) to provide employers with the option of deferring the employee portion of the 6.2% social security payment obligations amid the ongoing COVID-19 pandemic.
If employers choose to participate, the deferral would start Sept. 1, 2020 and end Dec. 31, 2020 for workers earning less than $100,000 annually. The deferred social security payments would then be repaid by the employee from Jan. 1, 2021 through April 30, 2021 through additional payroll deductions.
What would this mean for eligible employees?
For example, an employee earning $40,000 annually would see an increase in their normal monthly paycheck of approximately $206 from September through December. However, the employee would see a decrease of approximately $206 in their normal monthly paycheck from January through April 2021. This is because the employee would, in effect, be “borrowing” $206 from their September through December paychecks, which they would have to repay January through April.
Let’s assume this employee’s take home pay is normally $2,530 per month.
The four paychecks between September through December would then be $2,736 ($2,530 +$206)
The four paychecks between January through April would then be $2,324 ($2,530-$206)
This program, as designed, appears to create an undue financial risk and administrative burden for both the university and its eligible employees. For these reasons, the university has elected not to implement the deferral/repayment for employee social security tax.