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Progress made in effort to exempt paychecksof student employees from FICA deductions

Officials at The University of Texas announced major progress in the effort to exempt student employees’ paychecks from Federal Insurance Contributions Act (FICA) deductions. Texas is one of only three states that do not currently provide this exemption for students. Sen. Phil Gramm (R-TX) included the provision in the recent budget agreement (H.R. 4328) approved by the Congress and signed by President Bill Clinton.

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AUSTIN, Texas–Officials at The University of Texas announced major progress in the effort to exempt student employees’ paychecks from Federal Insurance Contributions Act (FICA) deductions. Texas is one of only three states that do not currently provide this exemption for students. Sen. Phil Gramm (R-TX) included the provision in the recent budget agreement (H.R. 4328) approved by the Congress and signed by President Bill Clinton.

“This inequity has represented a significant challenge in drawing the best students,” Vice President and Dean of Graduate Studies Teresa Sullivan said. “We are very pleased that this inequity has been rectified at the national level. UT Austin will now be able to compete on a level playing field with the top campuses in the country to attract the nation’s best and brightest graduate students.”

Unlike most other universities and colleges, student employees of public universities in Texas are subject to FICA deductions for coverage by social security. Both student employees and–on student employees’ behalf–their institutional employers, pay FICA premiums through payroll deductions and payroll taxes, respectively. UT System officials estimate that there is potential for an annual savings to student employees of approximately $4.3 million once this change is fully implemented.

The way has been cleared for the state to take action to implement the exemption. State action still is necessary, said Gwen Grigsby, associate vice president for external relations.

UT Austin officials hope to finalize this important issue soon. “We are prepared to do everything we can to expedite the process to implement this change on behalf of our students as quickly as possible,” Sullivan said.