What Is FICA?
FICA stands for Federal Insurance Contributions Act, which is an act that requires employers to keep a certain percentage of an employee’s salary during the pay period. This same act also compels employers to put up a match for the amount of money that is taken from the employee’s salary and the sum is contributed to a government account, which is more popularly known as Social Security Trust Fund. This fund is used to ensure that there is a retirement income and disability insurance for employees. The fund also ensures Medicare and other benefits for the dependents and beneficiaries of the employees.
FICA was created through the Social Security Act of 1935, which was originally presented by President Franklin Delano Roosevelt. In its original implementation, Social Security benefits were only made available to employees
who are under 65 years old. It is also limited to people who work in commerce and industry. All other employees – like those in government, medical personnel, agricultural workers, and lawyers – were not included in the FICA because they are not mandated to pay and contribute to the fund. But these limitations have been largely lifted and now more employees can enjoy FICA. It should be noted though that there are still some workers in certain industries and categories who can decide not to join the FICA.
Only the employees who have contributed money to the FICA are given the eligibility to get benefits from the fund. Based on the current regulations, a person who is aged 62 years old can already get reduced benefits. The full benefits are given based on the individual’s birth year.