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A Split Develops in the Circuit Courts Over Whether or Not Early Retirement Payments Made to Tenured Faculty are Subject to FICA Taxes
Mark Aquilio,
St. John's University
ABSTRACT. A split has developed between the Sixth and Eighth Circuit Courts of Appeals over whether or not early retirement payments made to tenured faculty members constitute “wages” for purposes of FICA taxes and thus are subject to FICA taxes. The Sixth Circuit recently held that the payments constituted “wages” reasoning that the tenure rights were earned through service to the employer. Conversely, the Eighth Circuit held the payments do not constitute “wages” opining that the payments were made in exchange for the relinquishment of the tenured faculty member’s contractual and constitutionally – protected tenure rights rather than as remuneration for services arising out of the employer – employee relationship. A writ of certiorari has been denied by the Supreme Court with regard to the Eight Circuit’s decision. Tenured faculty who participated in early retirement plans and their employers should file refund claims for FICA taxes paid.
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