What does FICA stand for?

FICA stands for the Federal Insurance Contributions Act. This act is essential as it governs the federal payroll tax that funds Social Security and Medicare, two vital programs that provide benefits for retirees, the disabled, and certain dependents. Under FICA, employers and employees contribute a percentage of wages towards these programs, which are crucial for maintaining economic stability for individuals who rely on these benefits.

The inclusion of both Social Security and Medicare in FICA underscores its significance in providing a safety net for U.S. workers and their families. Therefore, recognizing FICA is important for anyone studying payroll processes, as it directly impacts employee paychecks and contributes to broader social welfare programs.