FICA

FICA, which stands for Federal Insurance Contributions Act, is a United States federal law that requires employers to withhold a percentage of employees' wages for payroll taxes and distribute them to the government. The law was enacted in 1956 and has undergone several amendments since then.

Under FICA, employers and employees together contribute a percentage of their wages to fund various social programs. The contributions are divided into two parts: the Old-Age and Survivors Insurance (OASI) program and the Disability Insurance (DI) program, also known as Social Security Disability Insurance (SSDI). The contributions are matched by employers and directly deducted from employees' paychecks.

For the OASI program, a 12.4% contribution is made, with 6.2% coming from employees and 6.2% from employers. This contribution is based on an employee's earnings up to a specified maximum amount, known as the FICA wage base. For the DI program, a 2.9% contribution is made, with 1.45% coming from employees and 1.45% from employers. This contribution is also based on an employee's entire earnings.

The Social Security Administration (SSA) receives the combined contributions and disburses them to beneficiaries. Benefits are typically distributed in the form of monthly payments to recipients who meet certain income and eligibility requirements, such as those who have retired, are disabled, or are the survivors of deceased workers. FICA funds are further used for various administrative expenses associated with the SSA.