Social Security Administration Adjusts Previously Announced 2018 Taxable Wage Base

The Social Security Administration has announced an adjustment to the previously released taxable wage base (TWB) amount for 2018. The TWB for 2018 now is $128,400, adjusted down from the earlier announced $128,700 (the 2017 TWB is $127,200). The reason given for the change is updated wage data made available to the Social Security Administration, data that is used in the cost-of-living-adjustment formula.

What Is TWB?

The TWB represents the level of worker income that is subject to taxation for purposes of Social Security’s Old Age, Survivors and Disability Insurance (OASDI) program. Conversely, taxpayer earnings above this level do not generate additional Social Security OASDI benefits for taxpayers.

TWB Used in Some Retirement Plan Formulas

The TWB figure is used in some “integrated” retirement plan contribution allocation formulas. This may include profit sharing and simplified employee pension (SEP) plan allocations. Under an integrated allocation formula, certain employees’ earnings above a specified level (the integration level) may receive an additional allocation based on those earnings.

A common integration level for such plans is the TWB. In such a formula for 2018, earnings above $128,400 (the 2018 TWB) would qualify for an additional employer contribution because those earnings do not generate a Social Security benefit for the recipient.