Payroll Services What is Student FICA Exemption?
Based on enrolled number of credit hours.
FICA is the Federal Insurance Contribution Act. This Act precludes students from participating in Social Security and Medicare coverage.
The Internal Revenue Service states that if the employment is “incident to” the education, then the student retains the Student FICA Exemption. However, if the education is “incident to” the employment, then the student loses the Student FICA Exemption. If a student loses the exemption, then 6.2% is deducted for Social Security and 1.45% is deducted for Medicare. The University also matches Medicare deductions and pays 6.2% for Social Security.
Washington State University has determined that if a student meets the credit hour eligibility determination for Financial Aid and is recognized as a student by the Federal Government, WSU will recognize and retain the Student FICA Exemption for this individual. The credit hour eligibility determination for undergraduates is six (6) or more credit hours during the Fall or Spring, and three (3) or more credit hours during the Summer term. The credit hour eligibility determination for graduate students is six (6) or more credit hours during the Fall or Spring and three (3) or more credit hours during the Summer term.
Prior to each semi-monthly payroll calculation, the OARS System is accessed to determine the number of enrolled credit hours per student. If the student employee does not meet the minimum number of credit hours, then their earnings are changed from student to non-student, while losing the Student FICA Exemption. Social Security (6.2%) and Medicare (1.45%) are then deducted, remitted and reported to the Federal Government, as well as the employer contributions.