Social Insurance
In social insurance, PAYGO refers to an unfunded system in which current contributors to the system pay the expenses for the current recipients. In a pure PAYGO system, no reserves are accumulated and all contributions are paid out in the same period. The opposite of a PAYGO system is a funded system, in which contributions are accumulated and paid out later (together with the interest on it) when eligibility requirements are met.
U.S. Social Security
An important example of such a PAYGO system in this second sense is Social Security in the U.S. In that system, contributions are paid by the currently employed population in the form of a payroll tax, also called the FICA tax, which stands for the "Federal Insurance Contributions Act", while recipients are mostly individuals of at least 62 years of age. Social Security is not a pure PAYGO system, because it accumulates excess revenue in so-called Trust Funds, officially known as the Old-Age, Survivors, and Disability Insurance Trust Funds (OASDI).