Federal Insurance Contributions Act(redirected from Federal Insurance Contribution Act)
Federal Insurance Contributions Act
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%.