What is Old-Age, Survivors, and Disability Insurance (OASDI)?

Old-Age, Survivors, and Disability Insurance (OASDI) definition and meaning

Old-Age, Survivors, and Disability Insurance (OASDI), commonly known as Social Security, provides financial support to Americans who have lost income as a result of retirement, disability, or death. OASDI and Medicare are two of the taxes that make up the Federal Insurance and Contributions Act (FICA). Together, these payroll taxes equal 15.3%.

More about OASDI and its purpose

6.2% of your employees’ paychecks go toward OASDI, and as the employer, you match the rest. The OASDI tax gets sent directly to the federal government so they can fund Social Security, and it’s the employer’s responsibility to withdraw OASDI from their employees’ paychecks, so this is taken care of. Another item to point out is that self-employed individuals also pay OASDI taxes, but at a higher rate because there is no employer to match their contribution.

Who is eligible for OASDI benefits?

In general, eligibility for OASDI benefits depends on how long an employee has worked and the “work credits” they accumulate. For example, once a worker has 40 credits, they’re entitled to the benefits. Employees can earn a maximum of four credits in a single year. In 2024, $1,730 is required for a credit. However, this number is not set in stone and changes annually.

Is there a difference between Social Security and OASDI?

Though many think there’s a difference between each of these terms, Social Security and OASDI refer to the same program. When your employees review their pay stub, they’ll likely notice an OASDI deduction, which means they paid their Social Security taxes.

However, OASDI and Supplemental Security Income (SSI) are different as SSI is for individuals who are at least 65 with limited income and a disability. While those who are eligible for SSI are likely also eligible for OASDI, not everyone who qualifies for OASDI also qualifies for SSI.

What is the OASDI limit?

Known as the taxable limit, the OASDI limit places a cap on how much of your employees’ wages can be subject to OASDI taxes. In 2024, the maximum amount is $168,600, meaning that the most a worker can pay toward Social Security is $10,453.20 or 6% of $168,600. Note that the OASDI limit changes annually.

Are OASDI taxes mandatory?

Some employees may want to know if paying OASDI taxes is mandatory, and the answer is that most in the workforce are required to pay their fair share to Uncle Sam. However, there are some exceptions. Certain groups are not required to pay these taxes and, in turn, are not entitled to the benefits in retirement. These groups include qualifying religious groups, such as Amish and Mennonites, nonresidents of the U.S., students who work at the school they attend, and foreign government employees.

Terms related to: Old-Age, Survivors, and Disability Insurance (OASDI)

• Supplemental wages
• Employee
• Employer

Articles and resources related to: Old-Age, Survivors, and Disability Insurance (OASDI)