Definition of Federal Insurance Contributions Act (FICA)

the federal law that provides for the imposition of the Social Security tax.

commonly known as Social Security, the federal law requiring employers to withhold wages and make payments to a government trust fund providing retirement and other benefits.

tax charged to finance the Old Age, Survivors, Disability, and Health Insurance (OASDHI) plan. Both employer and employee share in the cost, making contributions on an equal basis. The employer pays the tax on its payroll, and the employee pays the tax on wages earned. The total contribution (employer and employee payments) tax rate is 15.3% in 1990 for the covered wages.