Federal Insurance Contributions Act
What Does Federal Insurance Contributions Act Mean?
The Federal Insurance Contributions Act (FICA) is a U.S. law enacted in 1935 that requires employees to contribute a percentage of their earnings, with employers matching this amount, to fund public health insurance and Social Security. FICA only funds the Medicare benefits that begin at age 65, so most working-age employees still pay separately for private coverage and can compare health insurance quotes on their own.
Insuranceopedia Explains Federal Insurance Contributions Act
Under FICA, an employee must contribute a portion of their salary to Medicare and Social Security, with the employer matching this contribution. The contribution amount is based on the employee’s income. Because FICA contributions come out automatically and can’t be reduced, employees who want to cut their overall healthcare spending generally need to focus on their private premiums, where there are several ways to lower your health insurance costs.
Individuals who belong to religions that oppose insurance are exempt from this requirement, provided that both the employer and the employee follow the same religion to qualify for the exemption.
