What Does OASDI Stand For on a Pay Stub?
Understand 'OASDI' on your pay stub. Learn what this key payroll deduction means, how it's calculated, and the long-term support it secures.
A pay stub details your earnings and the various deductions taken from your gross pay. Among these deductions, federal taxes often appear as acronyms, which can be confusing. One common entry is OASDI. This article clarifies what OASDI stands for on your pay stub, its purpose, and its impact on your financial well-being.
Understanding OASDI on Your Pay Stub
The acronym OASDI on your pay stub represents Old-Age, Survivors, and Disability Insurance. This is the official name for the Social Security tax. It is a mandatory federal payroll tax withheld from an employee’s gross wages.
OASDI provides a financial safety net for qualified workers and their families. This tax is a component of the Federal Insurance Contributions Act (FICA) taxes, which also include Medicare taxes. Both employees and employers contribute to this system, ensuring continuous funding. The collected funds provide benefits to eligible individuals who are retired, have become disabled, or are survivors of deceased workers.
How OASDI Contributions are Calculated
The OASDI tax involves a set rate and an annual earnings limit. For employees, the tax rate for OASDI is 6.2% of their gross wages. Employers match this amount, bringing the total contribution to 12.4% of an employee’s wages. For self-employed individuals, they are responsible for paying both the employee and employer portions, totaling 12.4% of their net earnings.
The “wage base limit” is the maximum amount of earnings subject to this tax each year. For 2024, the wage base limit is $168,600. This means that any earnings an individual receives above this threshold are not subject to the OASDI tax. For example, an employee earning $70,000 in 2024 would have $4,340 withheld for OASDI (6.2% of $70,000), while an employee earning $200,000 would only have $10,453.20 withheld (6.2% of $168,600). These rates and limits are subject to annual adjustments, with the Social Security Administration announcing updated figures, such as the preliminary 2025 wage base limit of $176,100.
The Benefits Funded by OASDI
The contributions made through OASDI taxes fund three primary categories of benefits. Old-Age benefits provide a steady income stream for eligible retirees, offering financial support during retirement years.
Survivors benefits offer financial assistance to the families of deceased workers who contributed to the system. This can include spouses, minor children, and sometimes dependent parents. Disability benefits are provided to workers who become unable to engage in substantial gainful activity due to a severe physical or mental impairment. All these benefits are administered by the Social Security Administration (SSA) and are intended to serve as a foundational safety net, rather than a complete replacement of pre-retirement or pre-disability income.