Navigating Legal Rights for Lost Social Security Contributions

Many employees wonder if they can sue their employers for lost social security contributions. This question is complex and depends on various factors, including how the employer handled the contributions and whether the employer reported them correctly to the Social Security Administration (SSA).

How Employers Handle Social Security Contributions

Generally, employers are required to deduct Social Security contributions from an employee's gross wages and match these contributions. The employer then reports these amounts to the SSA. Even if the employer does not pay these contributions, the employee is still entitled to receive their benefits, as long as the employer reported the contribution correctly.

Steps to Take If You Suspect Lost Contributions

If you believe your employer has lost your social security contributions, it is advisable to take comprehensive steps. One of the first actions is to gather all pertinent documents and information. This includes any communication with your employer regarding the tax deductions and reports. Once you have this information, you can proceed to:

Report the Issue to the SSA/Office of Inspector General: Filing a complaint with the SSA or their Office of Inspector General can help initiate an administrative investigation. This step can uncover any discrepancies and help recover your contributions. Claim Pension Benefits from the Pension Guaranty Corporation: If you have pension benefits, you can file a claim with the Pension Guaranty Corporation, which provides protection for pensions and retirement benefits in the event of an employer's insolvency.

It is also important to consider:

Legal Recourse and Fees

While the recovery process can be lengthy and complex, some employees may wonder if it's worth hiring a lawyer to help. In many cases, the legal fees required to recover a small amount in back contributions may outweigh the actual recovery amount. For instance, if your employer underpaid by a few thousand dollars, a lawyer's fee could easily range from $5,000 to $10,000 or more.

That said, the contribution rate is 6.2% on gross wages. For a gross wage of $32,258, the social security contribution would be $2,000, and the employer's matching contribution would be the same. Medicare adds 1.45%, so the total contribution would be 7.65% of the gross wage. If your gross wage were to reach $137,700, which is the maximum subject to Social Security tax, the most your employer would owe you and the matching amount would be approximately $8,537.40.

Evaluating Employee vs. Independent Contractor Status

The better recourse might be to report the employer to the IRS, particularly if you fit the definition of an "employee" rather than an independent contractor. Determining your worker status can be crucial for legal actions and can impact your rights and benefits.

Employee vs. Independent Contractor Employee: An employee must be present at a time and place determined by the employer, perform specific tasks as detailed by the employer, and operate in a manner prescribed by the employer. Independent Contractor: An independent contractor will receive an assignment and complete the work in a manner, time, and place that they see fit, delivering the final product or service as required. They are typically professionals in their field and often work for multiple employers.

For example, if a CPA prepares taxes for multiple clients, they are usually considered an independent contractor. On the other hand, if an individual works in a company's accounting department and reports to an accounting supervisor, under specific and detailed instructions, they would be classified as an employee.

Conclusion

While it may not always be feasible to recover lost social security contributions, understanding your rights and exploring available options can help you navigate this complex issue. Whether it involves reporting to the SSA, the Office of Inspector General, or the Pension Guaranty Corporation, or seeking legal advice, taking action can protect your financial interests.