Federal Insurance Contributions Act

What Does Federal Insurance Contributions Act Mean?

The Federal Insurance Contributions Act (FICA) is a piece of American legislation that requires employees to give up a percentage of their earnings, and for employers to match that amount, in order to fund public health insurance and social security. The law was first passed in 1935.

Insuranceopedia Explains Federal Insurance Contributions Act

Under FICA, an employee must give up a fraction of his salary for Medicare and Social Security. The employer, meanwhile, must match the employee's contribution. The amount given under FICA is based on the employee's income.

Those who practice a religion opposed to insurance are exempt from this law and are not required to make contributions. For the exemption to work, however, both employer and employee must be followers of the same religion.