What does FICA stand for?

FICA stands for the Federal Insurance Contributions Act. This act was enacted to fund Social Security and Medicare programs, which provide benefits to retirees, the disabled, and survivors of deceased workers. FICA establishes a payroll tax that is collected from employees and employers to support these vital social insurance programs. The contributions are based on the employee’s earnings and are crucial for ensuring that these programs remain funded and can provide support to those who need it. The act is a key component of the U.S. federal tax system, making it essential for anyone working in an employment context to understand its implications on their paycheck and the funding of social security benefits.