FICA is the acronym for the Federal Insurance Contributions Act. This act mandates that an employer withhold a set percentage of an employee’s salary each pay period. FICA also requires that the employer match the employee’s amount and contribute the money to a government account known as the Social Security Trust Fund. This fund provides retirement income, as well as disability insurance, Medicare, and benefits for survivors.
FICA was the result of the Social Security Act of 1935, proposed by President Franklin D. Roosevelt. The program began collecting taxes and paying benefits in 1937. In 1939, FICA was amended to include widows and orphans of working spouses, as well as elderly people who had not paid into the system.