Towards the end of each year, we report on the many upcoming changes to payroll requirements that you can expect. 2025 is no exception, and those changes are quickly approaching. What follows is an extensive list of items that may initiate some payroll changes in your organization. We understand that this is a very long list to review, but we hope it provides a valuable reference guide for your organization.
FICA Tax Rate Increase
The maximum amount of earnings subject to the Social Security payroll tax beginning January 1, 2025 will increase from the current $168,600 to $176,100. The 7.65% employee tax rate remains unchanged and is the combined rate for Social Security (6.2%) and Medicare (1.45%). These rates do not include the additional 0.9% paid by individuals with an earned income of $200,000 and more.
State Unemployment Tax Act (SUTA)
The current Oregon SUTA base for 2024 is $52,800. The 2025 base will increase to $54,300. The Washington State base for 2024 is currently $68,500. That base rate in 2025 will go to $72,800. The base rate is the maximum amount of wages per employee for which unemployment tax is applicable each year. It is the same for all employees within a state, while the unemployment rate is specific to each individual company.
Federal Unemployment Tax Act (FUTA)
The current FUTA rate is 6.0% of the first $7,000 of employee wages. Employers generally get a credit of up to 5.4% (i.e. state tax credit) if unemployment taxes are paid in full and on time, making the FUTA rate 0.6% after the credit is applied.
401(k) Limit Increase
The contribution limit for employees who participate in 401(k) and 403(b) plans in 2025 will increase slightly from the current $23,000 to $23,500. Employees age 50 and over will have a ‘catch-up’ contribution limit of $7,500, which remains unchanged from 2024. Beginning in 2025, those between 60 and 63 will be eligible for a special catch-up contribution of up to $11,250 under the SECURE 2.0 Act. This is instead of the standard $7,500. The maximum contributions from all sources (employer and employee combined) will rise by $1,000 in 2025 to $70,000.
Flexible Spending Account (FSA) / Parking and Transit Limits
Employee pre-tax deductions for FSA health reimbursement accounts will increase slightly for the 2025 plan year to $3,300. This is an increase of just $100 over 2024. For health FSA plans that contain the carryover feature, the maximum carryover amount for 2025 is increasing to $660. Parking and transit limits for 2025 are also increasing slightly to $325 per month. The dependent care reimbursement remains unchanged at $5,000 ($2,500 if married and filing taxes separately).
Health Savings Account (HSA) Contributions
For 2025, the IRS is increasing pre-tax deductions for HSAs to $4,300 for individual coverage (a $150 increase) and $8,550 for family coverage (a $250 increase). Those 55 and older can contribute an additional $1,000 as a catch-up contribution. This is for members that have high deductible medical coverage who qualify to be paired with a Health Savings Accounts.
ACA
Applicable Large Employers (ALEs) are defined as having an average of 50 full-time employees. Small employers that are part of an aggregate group may also be classified as an ALE. ALEs’ annual filing for ACA 1095-C forms for 2024 in paper format must have less than 10 forms to report, and they must do so by February 28, 2025. The electronic filing deadline is March 31, 2025. The benefits of electronic filing include instant IRS acknowledgment of submission and immediate response if the submission was accepted or rejected. ALEs must provide 1095-C forms to full-time employees by no later than March 3, 2025.
Workers’ Compensation
Workers’ Compensation pure premium rates are the base rates before insurer costs are added. The pure premium rates for 2025 are expected once again to decrease by 3.2% from 2024. This marks 12 years of average decreases in the pure premium rate. The pure premium is the portion employers pay to cover claims and to maintain workplace safety programs. The pure premiums are combined with an assessment rate which is expected to remain unchanged from 2024 at 9.8% of premiums paid.
Oregon Paid Family and Medical Leave
Paid Leave Oregon is a family, medical, and sick leave insurance program that was created to provide eligible employees with paid time off from work for qualifying reasons. Employers will continue to be responsible for 40%, and employees 60%, of the contribution rate, which is continuing at the rate of 1% for 2025. This contribution percentage applies to up to $176,100 of wages in 2025 (i.e. the Social Security taxable maximum wage). Employers with 25 or more employees are required to submit the employee and employer contributions. Employers with fewer than 25 employees do not need to make the employer contributions but are still required to submit the employee portion.
Oregon Minimum Wage
Minimum wage adjustments in Oregon are effective July 1st of each year. The minimum wage for July 1, 2024, through June 30, 2025 is $14.70 for Standard, $15.95 for Portland Metro, and $13.70 for Nonurban counties. Reference the interactive map on the Oregon.gov website to find the minimum wage for specific counties or metropolitan areas. Rates effective July 1, 2025 will be adjusted based on the Consumer Price Index by April 30th.
Oregon Local Taxes
In 2025, the Lane Transit District tax will be increasing from the current .0079 to .0080. The Eugene Employee Payroll Tax rate table was released for 7/1/2024 to 6/30/2025. Rates are 0.0030 for wages less than $31,221 and 0.0044 for equal to and more than $31,221. The Wilsonville transit tax is currently .005. The TriMet transit tax rate for 2025 is unchanged at .008137.
Oregon Statewide Transit Tax
The Statewide Transit Tax remains unchanged from its inception in July of 2018 at one-tenth of 1 percent, or .001. This tax applies to wages of Oregon residents (regardless of where work is performed) and wages of nonresidents who perform services in Oregon. For additional information and filing instructions, please reference the Oregon.gov website.
Oregon Workers’ Benefit Fund
The current 2024 2.0 cents per hour worked remains unchanged in 2025 for the Oregon Workers’ Benefit Fund. Employers must continue to pay at least half of the amount (1.0 cent) and deduct no more than 1.0 cent from employees’ wages. This fund pays for benefits to injured workers and their beneficiaries. The fund also helps injured workers return to work.
Oregon Metro Supportive Housing
The current Oregon Metro Supportive Housing personal income tax is 1% on taxable income above $125,000 for individuals ($200,000 for those filing jointly). The business income tax is 1% on net income with gross receipts above $5 million. At the time of this communication, the Metro Council is weighing possible adjustments to the tax rate and governance structure, but there will be no changes for the 2025 tax year. Currently, tax filers who have income from business activity both within and without the Metro district must apportion that income to determine the amount earned within the Metro district. Oregon residents within the Metro jurisdiction are subject to this tax as are non-residents with wages paid for work performed within the Metro District. Keep in mind that Metro’s boundaries do not align with Clackamas, Multnomah, and Washington Counties. To determine if a residence or workplace are within Metro’s jurisdiction, we advise you to use the Find your councilor tool on Metro’s website.
Preschool For All (PFA) Tax
On August 29, 2024, the Board of County Commissioners delayed the scheduled 0.8% increase in the Preschool for All (PFA) tax that was scheduled to take effective January 1, 2026. It is now scheduled for January 1, 2027. The PFA program is funded by a personal income tax of 1.5% on taxable income over $125,000 for individuals ($200,000 for joint filers), and an additional 1.5% (3% total) on taxable income over $250,000 for individuals ($400,000 for joint filers). Residents of Multnomah County have 100% of their Oregon Taxable Income subject to the tax thresholds. For non-residents of Multnomah County, income sourced within the county is subject to the tax withholdings. For additional information, please reference the Multnomah County FAQ.
OregonSaves
OregonSaves was rolled out in October 2017 and is a mandatory state retirement program. Employers that do not offer an employer-sponsored retirement plan are required to facilitate OregonSaves. Employees make contributions to personal IRAs through payroll deductions starting at 5% of gross pay, which increase 1% each year of participation up to 10%. Employees can choose additional amounts. Employers that are out of compliance are subject to fines and penalties.
Washington Paid Family and Medical Leave
On January 1, 2025, the Paid Family and Medical Leave premium amount will increase to 0.92% (up from .74%) for gross wages up to the 2025 Social Security cap of $176,100. For employers with over 50 employees, the premium is shared by the employer (28.48%) and the employee (71.52%). An employer can choose to pay the employee portion of the premium. Employers with fewer than 50 employees are not required to pay the employer portion of the premium but are still required to collect and remit the employee portion. For additional information you can visit the Washington Paid Family & Medical Leave website.
Washington Long Term Care
Voters did not pass Initiative 2124 during the last election, and no changes have been made to Washington Cares. Thus, workers will continue to contribute to the WA Cares Fund. Washington workers contribute 0.58% of their gross wages towards the fund. Employers aren’t required to pay any share of the contribution for their employees but they may choose to. Employers are responsible for collecting and remitting payments. Unlike the Washington Paid Family and Medical Leave program, contributions do not top out at the Social Security maximum. For additional information please reference the Washington Cares Fund website.
Washington Minimum Wage Increases
Effective January 1, 2025, the Washington state minimum wage will be increased from $16.28 to $16.66 per hour (a 2.35% increase). Seattle, Tukwila, and The City of SeaTac have their own local minimum wage rates that exceed the state minimum wage. To find the correct wage for your organization, and to download the most recent minimum wage poster, please visit the Washington State Department of Labor & Industries website.
As we come to the close of another year, you may be examining your systems and processes. We are People Inspiring Solutions at Bennett/Porter. So if we can be of assistance as you ponder what changes you need to make in your organization to adapt to changes such as those listed here, we would love to help! Please reach out and let’s chat.
To you and yours we wish you a very happy and safe holiday season!
Let Bennett/Porter and People Savvy HCM guide you toward perfect year-end payroll. We’re here to help!
