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.

Jean Fort Office of Graduate Studies and Research Pearl Trinidad Payroll Phyllis Walker Career Services