Rates and computation of employee representative tax

(a) Rates—(1)(i) Tier 1 tax. The Tier 1 employee representative tax rate equals the sum of the tax rates in effect under sections 3101(a) and 3111(a), relating to the employee and the employer tax for old-age, survivors, and disability insurance, and sections 3101(b) and 3111(b), relating to the employee and the employer tax for hospital insurance. The Tier 1 employee representative tax rate is applied to compensation up to the contribution base described in section 3231(e)(2)(B)(i). The contribution base is determined under section 230 of the Social Security Act, and is identical to the old-age, survivors, and disability insurance wage base and the hospital insurance wage base, respectively, under the Federal Insurance Contributions Act.

(ii) Example. The rule in paragraph (a)(1)(i) of this section is illustrated by the following example.

Example.

B, an employee representative, received compensation of $60,000 in 1992. The sections 3101(a) and 3111(a) rates of 12.4 percent (6.2 percent plus 6.2 percent) would be applied to B's compensation up to $55,500, the applicable contribution base for 1992. The sections 3101(b) and 3111(b) rates of 2.9 percent (1.45 percent plus 1.45 percent) would be applied to the entire $60,000 of B's compensation because the applicable contribution base for 1992 is $130,200.

(2) (i) Tier 2 tax. The Tier 2 employee representative tax rate equals the percentage set forth in section 3211(a)(2) of the Code. This rate is applied up to the contribution base described in section 3231(e)(2)(B)(ii).

(ii) Example. The rule in paragraph (a)(2)(i) of this section is illustrated by the following example.

Example.

B received compensation of $60,000 in 1992. The section 3211(a)(2) rate of 14.75 percent would be applied to B's compensation up to $41,400, the applicable contribution base for 1992.

(3) Supplemental Annuity Tax. The supplemental annuity tax for each work-hour for which compensation is paid to an employee representative for services rendered as an employee representative is imposed at the same rate as the excise tax imposed on every employer under section 3221(c). See also § 31.3211-3.

(b) (1) Computation. The employee representative tax is computed by multiplying the amount of the employee representative's compensation with respect to which the employee representative tax is imposed by the rate applicable to such compensation, as determined under paragraph (a) of this section. The applicable rate is the rate in effect when the compensation is received by the employee representative. For rules relating to the time of receipt, see § 31.3121(a)-2 (a) and (b).

(2) Example. The rule in paragraph (b)(1) of this section is illustrated by the following example.

Example.

In 1990, employee representative B received $1,000 as remuneration for services performed for employer R in 1989. The employee representative tax is payable at the rate of 30.05 percent (15.30 percent plus 14.75 percent) in effect for 1990 (the year the compensation was received), and not the 29.77 percent rate (15.02 percent plus 14.75 percent) in effect for 1989 (the year the services were performed).

(c) (1) Rule where compensation is received both as an employee representative and employee. The following rule applies to an individual who renders service both as an employee representative and as an employee. The employee representative tax is imposed on compensation received as an employee representative under the rules described in § 31.3211-2. The employee tax is imposed on compensation received as an employee under the rules described in § 31.3201-2. However, if the total compensation received is greater than the applicable contribution base, the employee representative tax is imposed on the amount equal to the contribution base less the amount received for services rendered as an employee.

(2) Example. The rule in paragraph (c)(1) of this section is illustrated by the following example.

Example.

C performed services both as an employee and an employee representative in 1992. C received compensation of $40,000 as an employee and $20,000 as an employee representative. C's entire compensation of $40,000 is subject to tax under the rules described in § 31.3201-2. The amount of employee representative compensation subject to the section 3101(a) and the section 3111(a) rate is $15,500 ($55,500−$40,000). The entire $20,000 is subject to the sections 3101(b) and 3111(b) rates since the combined compensation is less than $130,200, the applicable contribution base for 1992. The amount of the employee representative compensation subject to the section 3211(a)(2) rate is $1,400 ($41,400−$40,000).