Federal Insurance Contributions Act

• Date: June 01, 2011
• Source: http://www.ssa.gov/

The Federal Insurance Contributions Act (FICA) is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicare federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI).

Social Security payroll taxes are collected under authority of the Federal Insurance Contributions Act (FICA). The payroll taxes are sometimes even called "FICA taxes.”.

 In the original 1935 law the benefit provisions were in Title II of the Act (which is why we sometimes call Social Security the "Title II" program.) The taxing provisions were in a separate title, Title VIII. There is a deep reason for this, having to do with the constitutionality of the law (see discussion of the Constitutionality of the 1935 Act).  As part of the 1939 Amendments, the Title VIII taxing provisions were taken out of the Social Security Act and placed in the Internal Revenue Code. Since it wouldn't make any sense to call this new section of the Internal Revenue Code "Title VIII," it was renamed the "Federal Insurance Contributions Act."

So FICA is nothing more than the tax provisions of the Social Security Act, as they appear in the Internal Revenue Code.

ComplianceOnline Webinars Related to Insurance

Understanding the new NAIC (National Association of Insurance Commissioners) Model Regulation

To Download the summary of major changes to Federal Insurance Contributions Act (FICA).

Click here to download the file