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Wednesday, March 20, 2019, 11:00
Social security system reform to help elders
By Zheng Bingwen
Wednesday, March 20, 2019, 11:00 By Zheng Bingwen

At a news conference at the end of the second session of the 13th National People's Congress on Friday, Premier Li Keqiang reiterated the importance of taking good care of senior citizens, and said that the social security fees employers pay for their staff will be reduced from 20 to 16 percent from May 1.

The Government Work Report Li delivered to the national legislature on March 5 said major reforms will be initiated in the eldercare system in order to build a robust multilevel aged-care social protection system, so as to strengthen macroeconomic regulation, facilitate economic operation and improve the lives of the people.

Lowering the share borne by employers for urban workers' basic eldercare insurance and allowing localities to reduce their contribution to 16 percent are the highlights of the government's social security tasks for this year. China's eldercare insurance has a unified premium rate of 28 percent, which is among the highest in the world. To reduce the burden of the enterprises, the premium rate in many provinces has already been reduced to 19 percent as part of the supply-side structural reforms in recent years.

The new round of premium rate cut is expected to reduce the enterprises' burden by about 370 billion yuan (US$55.17 billion), which in turn will support supply-side structural reforms and boost the development of the real economy. But the move could create a serious problem, the problem of balancing the payment of the eldercare insurance fund in the medium term, and the government should be well prepared to deal with it.

Eldercare insurance fund reform to be accelerated

The central government launched the eldercare insurance allocation system on July 1 last year, fixing the contribution ratio at 3 percent. The Government Work Report says the central government will increase the ratio to 3.5 percent. The move will largely ease the difficulties some provinces face due to an imbalance of payment in their eldercare insurance funds, and accelerate the provincial-level eldercare insurance fund reform.

Also, the reform of provincial-level eldercare insurance fund management will be expedited.

The low pooling level of China's aged-care insurance system has created many difficulties for its smooth operation. And the year 2019 is critical to establishing efficacious and effective provincial-level management for eldercare insurance funds. This is important because in the past more than one decade the so-called provincial-level management for eldercare insurance funds have achieved unification only in terms of operations, and a unified income and expense as well as accounting system has to be established.

The Government Work Report says social security funds will be replenished through the injection of State capital. At the end of 2017, the State Council, China's Cabinet, announced a plan for partly replenishing social security funds with State capital, and stipulated that State-owned enterprises uniformly turn in 10 percent of their stocks to the national social security fund. Last year, three centrally controlled SOEs contributed 20 billion yuan to the social security fund.

More contributions to social security fund

Replenishing the social security fund with State capital will not only boost the fund in relatively less time but also propel local SOEs to expedite their contribution to the fund. This year, the government will focus on using State capital to replenish the social security fund in order to accelerate the eldercare social security system reform.

The Government Work Report says trials for long-term care insurance will be extended. In June 2016, the central government launched a pilot program for long-term care insurance in 15 cities, which has now been extended to at least 40 cities. But the absence of a unified national standard means the pilot programs in these cities are very different in nature. So the authorities should accumulate the data on the pilot programs in the different cities to work out a unified national standard for long-term care insurance.

"Building a robust multilevel aged-care social protection system", as mentioned in the Government Work Report, means there will be two major institutional breakthroughs in the construction of a multilevel aged-care social security system.

First, the pilot program for the tax-deferred eldercare insurance system will be extended nationwide this year, after a year's trial in Shanghai, Fujian province, and Suzhou Industrial Park in Jiangsu province. And second, a pilot program for preferential tax policy for the eldercare fund will be launched. Which means the insurance industry and State capital will play vital roles in upgrading the eldercare social security system.

The year 2019 is crucial for building a moderately well-off society in an all-round way, and the establishment of a sound eldercare social security system will play a key role in achieving that goal. This, in a way, makes the reform of the social security and eldercare insurance systems akin to covering "the last mile" in building a moderately well-off society in an all-round way, which is of historical significance.

The author is director of the Center for International Social Security Studies, Chinese Academy of Social Sciences. 

The views don't necessarily represent those of China Daily.


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