ADP, which processes the paychecks of millions of Americans, announced it will not offer a means to implement the controversial White House executive order to stop collecting a 6.2% Social Security levy.
“ADP TotalSource has decided to not take part in the deferral, and it will not be an option for any client or employee,” an ADP staffer wrote in an email seen by Fortune.
An ADP spokesperson told Fortune the clients who use its TotalSource product will not have an option to take part in the deferral. However, other clients will be able to suspend the Social Security collection at their discretion. The spokesperson added its TotalSource product is used by more than 13,000 firms and the executive order puts responsibility for federal tax liability and penalties on ADP.
In early August, President Trump signed an executive order deferring the collection of payroll taxes from employees through the end of 2020. The payroll tax is a 6.2% tax on an employee’s salary (up to $137,700 for 2020) that is withheld from their paycheck to fund Social Security, and the employer pays another 6.2%.
Trump touted the order as a way to keep money in the pockets of Americans suffering from the coronavirus pandemic and the economic fallout. However, the payroll tax cut will only suspend the tax. Workers will still owe the tax in 2021. Additionally, many economists have pointed out that the executive order would effectively kill Social Security by 2023.
ADP, which serves more than 800,000 businesses across the country, published a guide for employers last week explaining to employees that Trump’s order is simply a deferral and not a tax cut. ADP also said individual employers could implement the payroll order by switching to another payroll provider or carrying out the task themselves, but it’s highly unlikely many will considering the order received little support in Congress or from organized labor.
The U.S. government will implement the payroll tax deferral for its employees beginning later this month. The move has led critics to say the government is treating its employees like guinea pigs.
President Trump suggested Congress could forgive the tax deferral by means of legislation when he signed the order, but there is no indication that will happen for now.