The federal law that funds Social Security and Medicare through payroll taxes split between employer and employee.
FICA is the federal payroll tax that funds Social Security and Medicare. The 2026 FICA rate is 15.3% total: 12.4% for Social Security (capped at the Social Security wage base, which adjusts annually) and 2.9% for Medicare (uncapped). The cost is split: employees pay 7.65% via payroll deduction, employers match 7.65%.
Additional Medicare tax of 0.9% applies to employee wages above $200K (single) or $250K (married filing jointly) — the employer doesn't match this surtax but is responsible for withholding and remittance.
In a PEO arrangement, the PEO remits FICA on behalf of the co-employed workforce. CPEOs assume sole liability for FICA remittance under SBEA — meaning the IRS pursues the CPEO, not the client, for any shortfall. With non-certified PEOs, both the PEO and the client are jointly and severally liable.
The federal law that funds Social Security and Medicare through payroll taxes split between employer and employee.
FICA is the federal payroll tax that funds Social Security and Medicare.
Most PEO buying decisions touch several related concepts at once. Federal Insurance Contributions Act (FICA) typically comes up alongside the other terms in this category. Closely related terms include Federal Unemployment Tax Act (FUTA), Certified Professional Employer Organization (CPEO), Small Business Efficiency Act (SBEA).
This is one entry from our PEO glossary covering payroll, benefits, workers comp, HR compliance, and PEO mechanics. Browse all terms.
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