Student FICA Exemption

The Federal Insurance Contributions Act (FICA) has two components:

• Old-Age, Survivors, and Disability Insurance (OASDI)
• Medicare

FICA is the social security and medicare taxes that are withheld from an employee's wages/earnings. Employers match the amount withheld and submit the money, of which there is an employee and an employers share, to the federal government. The federal government then deposits the funds into the Social Security trust fund. The trust fund monies are used to provide retirement income, disability insurance, Medicare and survivor benefits.

An automatic exemption from FICA is applied to all eligible students who are also employees of Cornell. The exemption from paying FICA taxes will remain in effect during breaks that are five weeks or less, and is applicable during the summer break if the student is enrolled at least half-time. Some foreign nationals who are considered nonresident aliens for tax purposes (based on the "Substantial Presence Test" - see IRS Publication 519) are also exempt from FICA taxes (see IRS Alien Liability for Social Security and Medicare Taxes).

Erroneous FICA Withholdings

Some students were affected by incorrect FICA withholdings in January 2025.

The Cause

This issue was caused by an error in the integration between PeopleSoft and Workday. PeopleSoft, which stores student data, determines FICA withholding exemptions. It does so based on whether students are eligible and are also Cornell employees. The system should tell Workday to exempt these students from FICA withholding, but this function was not working correctly.

Resolution

The PeopleSoft team has resolved the problem and Payroll and Tax are monitoring the situation to ensure no further errors occur.

Who Was Impacted

This issue appears to affect students who started new positions in January 2025.

What Students Need to Do

Students do not need to take action. We have a process in place to identify the errors, and we know which students were affected.

Refunds

We will refund the affected students in the next paycheck. For student employees who are paid biweekly, that is February 13; for those paid semimonthly, February 14.

Tax Reporting Impacts

The affected students will see no changes to their W-2 forms. The tax withheld will be reported as refunded, resulting in a zero-sum tax withheld.