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Student Employee OASI (Social Security and Medicare) Exemption

Background
In 1998, federal legislation was passed that allowed Texas to modify its agreement with the Social Security Administration to exclude students who are employed by the school at which they are also enrolled and regularly attending classes. This exemption took effect with services performed after June 30, 2000.

Eligibility Criteria
IRS Revenue Procedure 2005-11 defines the criteria by which a student meets the "enrolled and regularly attending classes" provision:

  • Student must be enrolled at least half-time
  • Includes students that enrolled less than half-time IF enrolled in all hours needed to graduate.
  • Post-doctoral students do not qualify
  • Cannot be "career employee", i.e. eligible for TRS or ORP participation

Enrollment hours and exemption status will be determined at the end of the add/drop period (Census date). Adding or dropping hours after this date will not affect exemption status for the remainder of the academic period.

Exemption Period
The exemption covers any pay period that falls wholly or partially within the academic period. The pay period is always a full month.

Example: Fall classes begin August 2. A student who meets the enrollment criteria on the census date (September 14) will be entitled to the exemption for any work performed during the month of August.

The exemption applies to breaks of five weeks or less (e.g., winter break), IF the student is still enrolled half-time as of the last day of exams.

Example: The fall semester is August 29 through December 18. Spring semester begins January 14. A student is enrolled half time in the fall as of the census date, but drops to below half time two weeks later. The student is exempt through December 31 (end of the month in which the academic period ends), but not January (unless re-enrolled half time or more for the spring).

Example: Same academic period, but student remains enrolled at least half time through the end of exams on December 18. The student is exempt through January 31, even if not re-enrolled for the spring.

The paycheck period must overlap the exemption period for the exemption to apply regardless of when the check is issued.

Example: If a student remains enrolled at least half-time through the end of exams in May, the student is exempt for the month of May. If the break period between the end of the spring semester and the beginning of the first summer session extends into June, the exemption will also be extended into June, even if not enrolled for the summer. If the student does not enroll for summer classes, the July and August pay periods will have OASI deductions. Since fall classes begin in August, a student who meets the enrollment criteria for the fall semester will be entitled to the exemption for August.

Exemption for Summer Session(s)
The exemption covers any pay period that falls wholly or partially within the academic period. The pay period is always a full month.

Graduate students must enroll in at least one hour during a 6-week session, or 2 hours during a 9- and/or 12-week session to be exempt during the months of that session.

Undergraduate students must enroll in at least 3 hours to be exempt during a 6-week session. To be exempt during a 9- and/or 12-week session, they must enroll in at least 6 hours.

For students enrolled in both a 6-week class and a 9- or 12-week class, the hours for the 9-week and 12-week sessions are divided between the two 6-week sessions and added to any hours that they are enrolled for the 6-week session.

Undergrad scenarios:

Scenario #1:
Enrolled in 3 hours for first 6-week session.
Exempt only for June and July.

Scenario #2:
Enrolled in 3 hours for second 6-week session.
Exempt for July and August.

Scenario #3:
Enrolled in 6 hours for 9- or 12-week session.
Exempt for June, July, and August.

Scenario #4:
Enrolled in 2 hours for first 6-week session and 2 hours for 12-week session.
1 of the 2 hours from the 12-week session is added to the first 6-week session, so the student is exempt for June and July.

Most common scenarios for not getting the exemption:

Scenario #1:
Enrolled in fewer than 6 hours for the 9- or 12-week session.

Scenario #2:
Enrolled in fewer than 3 hours for a 6-week session.

Automatic Refund Process
Student OASI Exemption status is set at census date for each academic period. Some eligible pay periods may have already been paid and taxed before student exemption is determined. For each academic period, there will be one automatic refund process to issue any refunds due as a result of this timing difference. The refunds will process through the payroll system, generating a separate check or earnings statement. In most cases, refunds will be processed on the semi-monthly payroll following the census date.