Q: I’m a Federal Employees Retirement System employee and I am confused about what advantages there are to the payroll tax deduction reducing the contribution into Social Security from 6.2 percent to 4.2 percent in 2011 as part of a payroll tax holiday. Won’t I still need to pay 6.2 percent at the end of the year when I’m filing my taxes? And will it not also affect my Social Security?
A: No, you won’t have to pay the difference at the end of the year. Right now, Social Security benefits are not indexed to the rate at which you pay into the system, so under the current rules it will not affect your benefits. What happens in the future is anyone’s guess.