University of California, San Diego

May 21, 1998
SUBJECT:	Student Employee Exemption from FICA Withholding
We are pleased to report that the Internal Revenue Service has issued new and more flexible guidelines setting forth the standards that it will use to determine whether student employees are exempt from Social Security and Medicare taxes, which collectively are called FICA (Federal Insurance Contribution Act).
The University of California is implementing the following changes effective with May 1998 earnings. At UCSD, this will apply to paychecks issued on or after May 27, 1998.
No Work Hour Limitation - There is no limit on the number of hours per week students can work in non-career UCSD jobs and still be eligible for the FICA exemption. [Previously, students could work no more than 50% time (20 hours per week) to be FICA-exempt.] However, there has been no change in campus policy that permits graduate students to be employed a maximum of 50% time.
Half-Time Students Qualify - To be exempt from FICA, students need to be registered for a minimum of six units during any quarter (including summer session) in which they are employed in a non-career position. [Previously, the minimum was 12 units.] Graduate students who have advanced to Ph.D. candidacy are required to be registered to qualify for exemption, but there are no minimum number of units. Please note graduate students still must register for at least 12 units to serve as a 50% TA, GSR, Reader, or Tutor. International students on F-1 and J-1 visas who are nonresident aliens remain exempt from FICA taxes. Student fellowships, scholarships, and grants are not subject to FICA withholding.
Career employees who are also students are not exempt from FICA because their employment cannot generally be considered to be incidental to and for the purpose of pursuing a course of study. Exemption Periods - Student employees will be exempt during the academic terms in which they are registered for at least 6 units and will remain exempt during the quarter breaks in December and March. Also, student employees registered during spring quarter will be exempt for the month of June. Similarly, student employees registered for at least six units in fall quarter will be exempt during September. Students will not be exempt from FICA during July and August unless they register for at least six units during the full summer session period.
Students Subject to FICA - Students not registered for at least six units will be ineligible for the FICA exemption, and will be required to contribute 7.5% of their gross earnings to the Defined Contribution Plan (DCP) and 1.45% to Medicare, for a total of 8.95%. The Defined Contribution Plan is a qualified retirement plan established and maintained in lieu of the Social Security provision of FICA under section 401(a) of the Internal Revenue Code. The plan is administered by University of California Employee Benefits in the Office of the President, located in Oakland.
What Students Should Do to Remain Exempt from Student FICA
1. Register for at least six units by the end of the third week of the fall, winter, and spring quarters and by the end of the first week for summer session.
2. Resolve any problems with registration status (such as unpaid library fines or returned check charges).
Further Information - Undergraduate students may contact their employment timekeeper, and graduate students may contact their graduate coordinator. Questions about the Defined Contribution Plan (DCP) may be addressed to Corinne Castro, in the Benefits Office, 534-2816.
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