Texas PACT Business and Finance 776 Practice Test

FICA stands for the Federal Insurance Contribution Act, which is a crucial piece of legislation in the United States that governs the collection of payroll taxes. These taxes fund two significant social insurance programs: Social Security and Medicare. Social Security provides benefits to retirees, disabled individuals, and survivors of deceased workers, while Medicare offers health insurance for people aged 65 and older and certain younger individuals with disabilities.

By designating the correct answer as the Federal Insurance Contribution Act, it's recognized that FICA plays a vital role in ensuring the financial stability of these programs through compulsory contributions from both employees and employers. These contributions are essential for maintaining the social safety net that assists millions of Americans, highlighting the importance of FICA in regulating how funds are collected and allocated for social services.