VIII. THE SECONDARY DISTRIBUTION OF INCOME ACCOUNT
D. Social insurance schemes
1. Introduction
| 8.55. | Social insurance schemes are schemes in which social contributions are paid by employees or others, or by employers on behalf of their employees, in order to secure entitlement to social insurance benefits, in the current or subsequent periods, for the employees or other contributors, their dependants or survivors. They may be organized privately or by government units. Social insurance benefits may be provided in cash or in kind. They become payable when certain events occur, or certain circumstances exist, that may adversely affect the welfare of the households concerned either by imposing additional demands on their resources or reducing their incomes. The contingencies covered are liable to vary from scheme to scheme. However, the identification of certain receivables as social insurance benefits depends not just on the contingencies covered but also the way in which coverage is provided. |
2. Circumstances covered by social insurance schemes
| 8.56. | Six kinds of circumstances illustrate when social insurance benefits may be payable as follows:
(a) The beneficiaries, or their dependants, require medical, dental or other treatments, or hospital, convalescent or long-term care, as a result of sickness, injuries, maternity needs, chronic invalidity, old age, etc. The social insurance benefits are usually provided in kind in the form of treatment or care provided free or at prices which are not economically significant, or by reimbursing expenditures made by households. Social insurance benefits in cash may also be payable to beneficiaries needing health care;
(b) The beneficiaries have to support dependants of various kinds - spouses, children, elderly relatives, invalids, etc. The social insurance benefits are usually paid in cash in the form of regular dependants' or family allowances;
(c) The beneficiaries suffer a reduction in income as a result of not being able to work, or not being able to work full-time. The social insurance benefits are usually paid regularly in cash for the duration of the condition. In some instances a lump sum may be provided additionally or instead of the regular payment. People may be prevented from working for various different reasons, in particular:
(i) Voluntary or compulsory retirement;
(ii) Involuntary unemployment, including temporary lay-offs and short-time working;
(iii) Sickness, accidental injury, the birth of a child, etc. that prevents a person from working, or from working full-time;
(d) The beneficiaries suffer a reduction in income because of the death of the main income earner. The social insurance benefits are usually paid in cash in the form of regular allowances or, in some instances, a lump sum;
(e) The beneficiaries are provided with housing either free or at prices which are not economically significant or by reimbursing expenditure made by households;
(f) The beneficiaries are provided with allowances to cover education expenses incurred on behalf of themselves or their dependants; education services may occasionally be provided in kind. |
| 8.57. | The above are typical circumstances in which social insurance benefits are payable. However, the list is illustrative rather than exhaustive. It is possible, for example, that under some schemes other benefits may be payable. Conversely, by no means do all schemes provide benefits in all the circumstances listed above. In practice, the scope of social insurance schemes is liable to vary significantly from country to country, or from scheme to scheme within the same country. |
3. The organization of social insurance schemes
| 8.58. | The schemes themselves are intended to cover beneficiaries and their dependants during their working lives and usually also into retirement, whether they are employees, employers, own-account workers, or persons temporarily without employment. Eligibility for social insurance benefits requires social contributions to have been paid by, or on behalf of, the beneficiaries or their dependants in the current or previous accounting periods. As already noted, the social contributions may be payable not only by the participants themselves but also by employers on behalf of their employees. |
| 8.59. | Social insurance schemes must be organized collectively for groups of workers or be available by law to all workers or designated categories of workers, possibly including non-employed persons as well as employees. They may range from private schemes arranged for selected groups of workers employed by a single employer to social security schemes covering the entire labour force of a country. Participation in such schemes may be voluntary for the workers concerned, but it is more common for it to be obligatory. For example, participation in schemes organized by individual employers may be required by the terms and conditions of employment collectively agreed between employers and their employees. Participation in nationwide social security schemes organized by government units may be compulsory by law for the entire labour force, except perhaps for persons who are already covered by private schemes. |
| 8.60. | Many social insurance schemes are organized collectively for groups of workers so that those participating do not have to take out individual insurance policies in their own names. In such cases, there is no difficulty about distinguishing social insurance from private insurance. However, some social insurance schemes may permit, or even require, participants to take out policies in their own names. In order for an individual policy to be treated as part of a social insurance scheme the eventualities or circumstances against which the participants are insured must be of the kind listed in paragraph 8.56 above, and in addition, one or more of the following conditions must be satisfied:
(a) Participation in the scheme is obligatory either by law for a specified category of worker, whether employer or non-employed, or under the terms and conditions of employment of an employee, or group of employees;
(b) The scheme is a collective one operated for the benefit of a designated group of workers, whether employees or non-employed, participation being restricted to members of that group;
(c) An employer makes a contribution (actual or imputed) to the scheme on behalf of an employee, whether or not the employee also makes a contribution.
The premiums payable, and claims receivable, under individual policies taken out under a social insurance scheme are recorded as social contributions and social insurance benefits. |
| 8.61. | Thus, social insurance schemes are essentially schemes in which workers are obliged, or encouraged, by their employers or by general government to take out insurance against certain eventualities or circumstances that may adversely affect their welfare or that of their dependants. When individuals take out insurance policies in their own names, on their own initiative and independently of their employers or government, the premiums payable and claims receivable are not treated as social contributions and social insurance benefits, even though the policies may be taken out against the same kinds of eventualities or situations as are covered by social insurance schemes - accident, ill health, retirement, etc. The premiums payable and claims receivable under such individual insurance policies are recorded as current transfers in the secondary distribution of income account in the case of non-life insurance, while the premiums payable and claims receivable under individual life insurance policies are recorded as acquisitions and disposals of financial assets in the financial account. |
| 8.62. | As can be seen from the consideration of individual insurance policies, the nature of the benefit is by no means sufficient to identify the social nature of the transactions. For example, the receipt of free medical services does not always constitute a social benefit. If the medical services received by one household are paid for by another, they are not social benefits but transfers in kind between households. First aid rendered to employees at work is not a social benefit, the costs involved being recorded as intermediate consumption of the employer. In general, social benefits cannot be provided by one household to another except in the relatively rare case in which an unincorporated enterprise owned by a household operates an unfunded scheme for the benefit of its employees. |
| 8.63. | Three main types of social insurance schemes may be distinguished:
(a) The first consists of social security schemes covering the entire community, or large sections of the community, that are imposed, controlled and financed by government units;
(b) The second type consists of private funded schemes. There are two categories of private funded schemes. The first consists of schemes in which the social contributions are paid to insurance enterprises or autonomous pension funds that are separate institutional units from both the employers and the employees. The insurance enterprises and autonomous pension funds are responsible for managing the resulting funds and paying the social benefits. The second consists of schemes in which employers maintain special reserves which are segregated from their other reserves even though such funds do not constitute separate institutional units from the employers. These are referred to as non-autonomous pension funds. The reserves are treated in the System as assets that belong to the beneficiaries and not to the employers;
(c) The third type consists of unfunded schemes in which employers pay social benefits to their employees, former employees or their dependants out of their own resources without creating special reserves for the purpose.
Social insurance schemes organized by government units for their own employees, as opposed to the working population at large, are classified as private funded schemes or unfunded schemes as appropriate and are not classified as social security schemes. |
Social security schemes
| 8.64. | In many countries, social security schemes are by far the most important category of social insurance schemes and it is worth summarizing their main characteristics. Social security schemes are schemes imposed and controlled by government units for the purpose of providing social benefits to members of the community as a whole, or of particular sections of the community. The social security funds established for this purpose are separate institutional units organized and managed separately from other government funds. Their receipts consist mainly of contributions paid by individuals and by employers on behalf of their employees, but they may also include transfers from other government funds. The payment of social security contributions by, or on behalf of, certain specified individuals, such as employees, may be compulsory by law, but some other individuals may choose to pay voluntarily in order to qualify for the receipt of social security benefits. The benefits paid to individuals, or households, are not necessarily determined by the amounts previously paid in contributions, while the levels of the benefits paid out to the community as a whole may be varied in accordance with the requirements of the government's overall economic policy. |
Private funded social insurance schemes
| 8.65. | In the case of private funded social insurance schemes that are arranged by employers, via insurance enterprises and autonomous pension funds, the premiums paid by employees to obtain social benefits include a service charge. This service charge is recorded as final consumption expenditure by households. In the case of non-autonomous pension funds, however, no service charge is deducted from contributions paid by the employees. As such funds do not constitute separate institutional units from the employers, the costs of managing and administering the funds are assimilated with the employers' general production costs. |
4. Different types of social contributions and benefits
| 8.66. | Social contributions and social benefits have various characteristics that affect their classification:
(a) Social benefits may be divided into those paid as social insurance benefits under a social insurance scheme and those paid as social assistance benefits outside any such scheme;
(b) Social insurance schemes may be classified according to the type of scheme - social security, private funded or unfunded;
(c) Social contributions may be divided into actual contributions payable under social security and private funded schemes and imputed contributions recorded for unfunded schemes;
(d) Social contributions may be divided into those paid by employers on behalf of their employees and those paid by employees, self-employed or non-employed persons on their own behalf;
(e) Social contributions may be divided into those that are compulsory by law and those that are not;
(f) Social benefits may be divided into those paid in cash and those in kind.
These various characteristics are built into the classification of social contributions and benefits utilized in the secondary distribution of income account and in the redistribution of income in kind account. Sections E and F below describe the social contributions or benefits included under each heading of the classification in the secondary distribution of income account. The final section of this the chapter (see section H) describes the social benefits included under each heading in the redistribution of income in kind account. | | | Text refers to: table 8.1.  | | | Text refers to: table 8.2. |
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