Fundamental Payroll Certification (FPC) 2025 – 400 Free Practice Questions to Pass the Exam

FICA stands for the Federal Insurance Contributions Act. This act is a crucial piece of legislation in U.S. payroll, as it establishes the federal payroll tax used to fund Social Security and Medicare programs. When employers and employees contribute to these programs through FICA taxes, they are essentially funding benefits that will support individuals during retirement, as well as healthcare requisites for the elderly and disabled.

Understanding FICA is essential for payroll professionals, as it impacts how payroll taxes are calculated and reported. The other options, while related to taxation or federal programs, do not accurately reflect what FICA stands for or its purpose within the payroll system. For example, "Federal Income Collection Agency" suggests a focus on income tax collection rather than social insurance, and "Federal Insurance Calculation Assistance" or "Federal Individual Contribution Act" neither exist in the confirmed terminology nor address the specific components covered by FICA.