Social security in the vast majority of countries requires by law or regulations that both the employer and the employee formalize their situation before the social security systems, to access benefits such as medical care insurance or Medicare, disability insurance, old age, or survival.
In the United States, the federal social security system has been under the purview 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 stands for Old Age Survivors and Disability Insurance Employees 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 requested tax withholding 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 registered, both employees and employers will pay the social security tax.
The rate or aliquot corresponding to the deduction of the OASDI/EE deduction is set depending on the tax category of the fiscal year. The employee has 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 “employer contribution”.
In other words, for every dollar that is deducted for the OASDI/EE, your employer makes an equivalent contribution.
To talk about 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 a total of 12.4 percent. . The deduction must be reflected in the payment receipt 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 December 31 earnings.
Although most companies don’t deduct OASDI, when employees’ earnings hit the limit it’s always good to make sure, especially if you work for more than one employer or changed jobs mid-year, also check to see if your Combined earnings from all employers exceed the limit.
OASDI/EE and Medicare
Employers are generally required to make certain withholdings on your wages. Certainly, that box labeled “federal income tax” is no mystery.
If you see an ” OASDI/EE ” box, you will most likely see another label with ” HI ” (hospital insurance) or some other name for the insurance part of Medicare 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 contributed by the company. Both withholdings are required by the Federal Insurance Contribution Act (FICA ).
Businesses may 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.”