FICA


Also found in: Dictionary, Thesaurus, Acronyms, Wikipedia.

Federal Insurance Contributions Act

Legislation in the United States that requires employees to contribute a certain percentage of their wages or salaries via payroll deductions to finance Medicare and Social Security. Employees are required to contribute 6.2% of each paycheck toward Social Security, up to a certain income limit. They are also required to pay 1.45% to pay for Medicare, with no income limit. Employers are required to make matching contributions for each employee. Under the Federal Insurance Contributions Act, employees do not actually receive this percentage of their wages or salaries. Proponents of the Act argue that that this allows employees to budget their taxes better while critics state that the tax is regressive. See also: FICA Tax.

Federal Insurance Contributions Act (FICA).

The Federal Insurance Contribution Act (FICA) is the federal law that requires employers to withhold 6.2% from their employees' paychecks, up to an annual earnings cap.

Employers must match employee withholding and deposit the combined amount in designated government accounts.

These taxes provide a variety of benefits to qualifying workers and their families through the program known as Social Security. Retirement income is the largest benefit that FICA withholding supports, but the money also funds disability insurance and survivor benefits.

Under this act, an additional 1.45% is withheld, and matched by the employer, to pay for Medicare, which provides health insurance for qualifying disabled workers and people 65 and older. There's no earnings cap for this tax.

If you're self-employed, you pay FICA taxes as both employer and employee, or 15.3%.

FICA (Federal Insurance Contributions Act)

The law that provides for social security and Medicare benefits. This program is financed by payroll taxes imposed equally on the employer and the employee. See our Social Securty Wages and Earnings Base for the current wage base.
References in periodicals archive ?
By taking into account and paying the FICA and FUTA obligation at that time, the employer and employee also take advantage of the benefits of the nonduplication rule.
The unanimous decision by the Supreme Court rejected Quality Stores' contention that the supplemental unemployment compensation was exempt from FICA, thereby reversing the Sixth Circuit.
65 percent in severance costs from FICA payroll tax savings on the separation payments and federal and state unemployment tax savings of about 3 percent, depending on the state, the employer's experience rating, and the time of year the reduction in force occurs.
However, there is an additional exception that allows the employer to delay FICA withholding on amounts distributed as monthly annuity payments until the present value of those payments become reasonably ascertainable.
In addition to the FICA payroll tax exemption, employers will receive a general business tax credit for every "qualified employee" the employer retains for at least 52 consecutive weeks.
With the enactment of the Medicare portion of FICA in 1965, all Section 218 agreements were automatically covered with Medicare.
Congress intended that FICA taxation apply to a wide range of payments arising from the employment relationship.
Daub further explained that the FICA benefit is adjusted to affect the personal account cost, "with the long run accumulation's invested growth increasing the aggregate total benefit with the setting of some type of vesting rule, before which forfeiture occurs, and after which an estate-building inheritable balance could be paid to a named beneficiary.
17) In other words, the only issue would be the failure to impose FICA and FUTA taxes on the payments.
FICA insists that that demand is legally unenforcable as the said rights were signed away without their knowledge and consultation.
We are unsure as to how to treat the plan for FICA purposes.
The American Camping Association and APCO Associates are currently working to build support from members of Congress on FICA tax withholding.