What is the meaning of Federal Insurance Contributions Act (FICA)?

FICA is the federal law that requires employers to withhold wages from employee paychecks and deposit that money in designated government accounts. These accounts, or trust funds, provide a variety of benefits to US citizens through a program commonly known as Social Security. Retirement income is the largest benefit that FICA withholding supports, but it also funds disability and unemployment insurance. FICA takes 6. 2% of every paycheck you receive, up to an annual cap ($84, 900 for 2002) set by Congress. Your employer is required to contribute an equal amount. If you're self-employed, you pay as both employer and employee, or 12. 4%. An additional 1. 45% of your salary is also withheld, and matched by your employer, to pay for Medicare, a medical trust fund for people over 65. There's no salary cap for this part of your contribution.