I have this question about the Social Security Holiday, which capped contributions at 4.2 rather than 6.2 per cent and it is this, “Will lower payroll deductions impact future payouts, e.g., will your contributions at 4.2 give you a lesser payout when they calculate future benefits?
No. SS benefits are not determined by contributions but on lifetime earnings. “Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or “primary insurance amount” (PIA). This is how much you would receive at your full retirement age — 65 or older, depending on your date of birth.”
http://www.ssa.gov/pubs/10070.html
And the 2% decrease in employee contributions (employer contribution remained at 6.2% during the “holiday”) was made up by revenue out of the general fund as required by the legislation for 2011 and extended through 2012.
Benefits are calculated on indexed average earnings, not contributions.
Benefits are calculated on indexed average earnings, not contributions.
Benefits are calculated on indexed average earnings, not contributions.