Railroad Retirement Taxes and Unemployment Insurance Taxes, What changed?
In 2024, changes to railroad retirement taxes and unemployment insurance contributions mark the landscape of financial responsibilities for both employers and employees in the railroad industry. While the compensation subject to taxes sees an increase, tax rates remain stable for employers and employees alike.
Notably, improved economic conditions have spared railroad employers from a previously imposed surcharge, highlighting a positive shift in the economic climate.
Railroad Retirement Tax Rates
Employers and employees maintain a 7.65% tax rate. Tier I tax, akin to social security, comprises 6.20% for retirement and 1.45% for Medicare. The maximum earnings subject to the 6.20% rate rise from $160,200 in 2023 to $168,600 in 2024, with no cap on earnings subject to the 1.45% Medicare rate.
Additional Medicare Tax
Individuals earning over $200,000 (or $250,000 for married couples) face an extra 0.9% Medicare tax. Employers start withholding once wages surpass $200,000, but the final amount due or refunded is calculated during tax filing.
Tier II Tax Rates
In 2024, employees and employers maintain 4.9% and 13.1% rates, respectively. The maximum earnings subject to tier II taxes rise from $118,800 to $125,100. Tier II rates vary based on fund levels, ranging from 0% to 4.9% for employees and 8.2% to 22.1% for employers.
Railroad Unemployment Insurance Contributions
Employers, not employees, pay railroad unemployment insurance contributions. These contributions are experience-rated, meaning they vary based on the employer’s history of unemployment claims. In 2024, the rates will range from a minimum of 0.65 percent to a maximum of 12.0 percent. This rate applies to monthly compensation up to $1,985, which is an increase from the previous year’s limit of $1,895.
Furthermore, the Railroad Unemployment Insurance Act includes provisions for surcharges when the balance of the Railroad Unemployment Insurance Account falls below a certain threshold. However, due to improved employment conditions since the pandemic, no surcharge will be added in 2024. The balance of the account on June 30, 2023, was approximately $363.1 million, exceeding the indexed threshold amount of $100 million (currently about $150.3 million).
In 2024, the minimum contribution rate of 0.65 percent will apply to the majority of covered employers, accounting for 87 percent of them. Only 3 percent of employers will pay the maximum contribution rate of 12.0 percent. New employers will pay a contribution rate of 4.58 percent, reflecting the average rate paid by all employers during the period 2020-2022.
Closing
As we highball; to fiscal year 2024, the railroad industry witnesses subtle yet significant adjustments in taxation and unemployment insurance contributions. Employers and employees navigate these changes with steadiness, benefitting from stable tax rates while adapting to updated contribution limits.
Railroad Retirement Taxes and Unemployment Insurance Taxes with the absence of a surcharge, attributed to economic progress. This signals resilience and optimism for the future of railroad employment.
And for those already retired a secure retirement benefit.