University of California, San Diego

February 17, 1995
SUBJECT: New Requirements for Student Employee Exemption
from FICA Withholding
Currently, all University of California student employees are treated as exempt from FICA and Medicare withholding. The Internal Revenue Service, however, has issued new interpretations that require universities to check each student employee's number of registered units and appointment percentage.
Effective with April 1995 earnings, new requirements and procedures for determining student employee FICA exemption will be implemented as follows:
Exemption Eligibility Criteria: To be exempt from FICA withholding, student employees must meet the following eligibility criteria:
1. Have appointments (both fixed and variable) that sum to 50% time or less for each pay period AND
2. Be registered for a minimum of 12 units.
Students advanced to Ph.D. candidacy are required to be registered to qualify for exemption but there is no minimum number of units.
These requirements do not apply to students on F-1 and J-1 visas because by federal law they are exempt from FICA and Medicare.
Verification of Registration: The verification of a student employee's registered units will be performed based on a computer interface between the campus Integrated Student Information System (ISIS) and the Payroll/Personnel System (PPS), using name, social security number, and birthdate.
Verification of Appointment Percentage: The verification that the sum of a student employee's appointments is not greater than 50% will be done automatically each pay period by a PPS computer program.
Departments that have student employees with multiple appointments should correct the percentages on the appointments and distributions to reflect the estimated percentages of time the students will actually work. For students employed in staff titles, these corrections should be forwarded to the Job Opportunities Program, Mail Code 0335 by March 6, 1995. For students appointed in academic titles, corrections should be forwarded to the Office of Graduate Studies and Research or the appropriate Provost's office by early April.
Defined Contribution Plan: Student employees who do not satisfy both of the above criteria will be subject to withholding in the same manner as other non-career employees. Specifically, they would be required to contribute 7.5% of their gross earnings to the Defined Contribution Plan (DCP), as an alternative to Social Security contributions, and 1.45% to Medicare. Employing departments will be assessed 1.68% of salary for Medicare and Unemployment Insurance in addition to the current 0.97% for Workers' Compensation.
Student employees who are non-exempt will be subject to the same DCP rules and may select the same investment options as other non-career employees.
Student Notification: Information notices are being prepared and will be mailed to departments for distribution to student employees about the end of February. The Associated Students and Graduate Student Association are being informed, and notices will be placed in The Guardian and over student e-mail networks.
Student leaders tell us the best method of student notification is "word of mouth," so departments are encouraged to personally inform student employees in their departments. In particular, they need to be told the importance of registering on time for at least 12 units, of resolving any problems with registration (such as unpaid library fines), and of understanding that accepting appointments that sum more than 50% time in a given pay period means they will have 8.95% taxes withheld from their entire paycheck for that period, not just the portion over 50% time.
Further Information: Detailed implementation procedures are being developed and will be provided to departments as soon as they are available--probably mid-March. Campus information meetings on these new procedures will be held in late March.
Steven W. Relyea Richard Attiyeh Joseph W. Watson Vice Chancellor- Vice Chancellor- Vice Chancellor- Business Affairs Research and Dean Student Affairs
of Graduate Studies