Under an agreement with the International Monetary Fund, the government committed to raise budget revenue and downsize spending. Within this scope, the Ministry of Finance raised social insurance fees by two percentage points in 2018 and by one percentage point this year. Another two percentage point rise is expected in 2020, and the public is largely opposed.
On Monday, Chief of Staff of the President's Office Z.Enkhbold informed that President Kh.Battulga is preparing to place a veto on the increase in the social insurance premium rate.
To get a better picture of the Mongolia's social insurance system and learn more about the fee increase, Unuudur spoke with Head of the General Social Insurance Office D.Zorigt.

Can you tell us about the current situation on social insurance in Mongolia, its scope and revenue-expenditure performance?

Last year, 45,500 employers paid social insurance premium, 907,700 individuals paid compulsory insurance, and 197,000 people were voluntarily insured. This generated a total of 1.5 trillion MNT in revenue and accounted for 14.7 percent of the state budget revenue.

On the other hand, the Social Insurance Fund distributed 1.8 trillion MNT in pension, allowance and other expenses to 637,200 insured people.

As of October 2019, 46,900 employers and 1.1 million individuals paid social insurance premium and our revenue reached 1.5 trillion MNT. The fund’s expenditure reached 1.7 trillion MNT as we provided pensions, allowances and other forms of social benefits to 618,900 people.

Have the number of people getting insured voluntarily increased?

The self-employed and people such as students and herders who haven’t signed a contract with an employer can pay social insurance premium on a voluntary basis. In the first 10 months of this year, 178,100 people were insured voluntarily. By getting voluntarily insured, people will get the same insurance coverage, including pensions and welfare benefits, as people paying mandatory social insurance fees.

How much has the government spent on unemployment benefits? Does the General Social Insurance Office cooperate with the General Agency for Labor and Welfare Services on helping the unemployed find jobs?

The state budget doesn’t provide supplementary financing to the Unemployment Insurance Fund. This fund covers its expenses solely with its revenue. In the first 10 months of 2019, the fund spent 34.6 billion MNT to provide benefits to 19,200 people. To receive unemployment benefits, people are required to be registered as unemployed at their local Labor and Welfare Services Department.

How many people get insured for industrial accidents and occupational diseases (IAOD) annually? The Confederation of Mongolian Trade Union claims that people who pay this type of insurance aren’t able to receive their benefits. Is this true?

I don’t agree with this. The amount of IAOD insurance is determined at a high rate and doesn’t consider the amount of time the person paid insurance. Based on the average of the last five years, 102 new people get disability pension, 35 people receive disability support pension, and 1,001 people get their IAOD insurance determined each year.

Last year, 4.1 million people received 23.9 billion MNT in disability pension, 533 people received 2.6 billion MNT in disability support pension, 1,066 people received 0.7 billion MNT in temporary disability benefits, 17 people received 17.4 million MNT in rehabilitation payment, and 3,451 people received one billion MNT to cover their spa resort fees and transportation costs.

The problem lies in the fact that employers are required to determine the cause of the industrial accident and report about it (to the social welfares department). We’ve received information that employers tend to avoid doing this. On the other hand, the insured whose industrial accident has been verified will be able to receive their pensions and benefits without any problem.

How much does the office spend on benefits insurance? Some people seem unaware of their claims to such benefits.

The Benefits Insurance Fund provides three types of short-term benefits, which are for temporary loss of workability, pregnancy and motherhood, and burial and funeral. A person can receive temporary disability benefits if they paid benefits insurance for three or more months, and maternity and motherhood benefits if they paid insurance for no less than 12 months and consistently in the last six months. If they paid social insurances for no less than 36 months, their family can receive burial benefits.

The government-approved social insurance fund’s benefits insurance spending for 2019 is 114.2 billion MNT. In the first 10 months, 102.4 billion MNT was issued as benefits to 176,300 people.

People are expressing contradicting opinions about the current social insurance system. Does Mongolia have a strong social insurance law and regulation? 

Parliament passed a comprehensive Social Insurance Law in 1994 and adopted a new system in 1995. Over the years, this law was amended around 40 times but never reformed. From one side, this indicates that our social insurance system is relatively stable and has a good foundation. Some international advisors highlighted Mongolia's social insurance system as a good practice. From another side, people think it’s time to renew the law in consideration of changes in the socio-economic situation, demography, and coverage of social insurance services.

Unlike commercial insurance, social insurance is public-oriented, anyone earning revenue can get insured and receive services and benefits. It is a solidarity-based system. Anyone who is legally considered eligible can receive social insurance services.

Some people suggested it’s better to deposit money in a bank savings account rather than paying social insurance premiums. What do you think about this?

At present, almost every Mongolian has a bank account but only 21 percent of all households have savings. On the contrary, 52 percent of all families in Mongolia have some kind of loan and the majority of them have a second loan. Just think about it, how many individuals who pay loan interests to the bank be able to make savings in preparation for potential social risks? It wouldn’t be wrong to say that once a person stops paying social insurance, they will fall under the poverty line. Right now, one in every five people in Mongolia is receiving social insurance benefits.

Social insurance doesn’t only provide pensions. It provides services for a wide range of people including the injured, pregnant, deceased, unemployed, employed, and disabled.

You just mentioned that there are many types of social insurance services. How much does an average person pay in social insurance and what kind of services do they receive in return?

To make it easier for the public to understand, our specialists made an abstract calculation about the benefits a person would get during their lifetime if they pay the social insurance premiums. For example, if a person worked for 20 years and earned 800,000 MNT a month, he will have paid 100,000 a month as social insurance premium based on the 2020 rate. He’ll have paid 1.2 million MNT in premium a year and 24 million MNT in 20 years. If we calculate the possible social risks he might face over these years, this person can receive pensions, benefits and other social welfare services amounting to 125.8 million MNT. As this is a calculation based on minimum rates, the cost of his social risks could be much higher. He can also receive our services more frequently.

Not everyone will retire, get injured or have children at the same time. The social insurance fund distributes pensions and benefits with public funds. This is based on the “pay as you go” principle, which makes it different from commercial non-compulsory insurances. It’s also different from depositing money into the bank and increasing it through interest.

Social insurance is an inseparable part of the social protection policy. As long as a person pays the social insurance premiums, the state will ensure their social security.

Apparently, the early retirement of military officers and police officers is burdensome for the state budget. How much was paid to retired law enforcement workers last year? How much have you projected to spend on their pensions next year?

According to Article 21.1 in the Law on Pension and Benefits of Military Officers, the General Social Insurance Office determines pensions of military officers as specified in contract and distribute it through partner banks. Under this regulation, we’ve established contracts with the Independent Agency Against Corruption, National Emergency Management Agency, General Staff of the Mongolian Armed Forces, General Intelligence Agency, General Police Department, border and domestic police departments, and judicial institutions.

According to Article 5 in the law, the pension of military officers is financed by the state budget and its budget is approved by Parliament every year. In 2018, 17,800 retired officers received a total of 122.9 billion MNT as pension. This year, 18,000 will receive 122.9 billion MNT as pension. As of October, 18,600 military officers have received pensions amounting to 115.6 billion MNT.

Amendments to the Social Insurance Law will take effect next year. Is the general office ready for this?

Starting in 2020, a new package law for social insurance will be implemented. Changes in the law include to have (employer) pay social insurance premium on behalf of new mothers until child turn three years of age, increase maternal benefits of voluntarily insured women, provide maternal and paternal benefits every time they give birth, allow old-age pensions, adding a-year-and-a-half to the number of years a woman paid social insurance for every child delivered or adopted, and allow herders and the self-employed to pay social insurances in bulk on voluntarily basis. Additional funds required for these changes have been included in the draft 2020 Social Insurance Fund budget. Parliament is discussing it at the moment. (The budget was approved by Parliament last week.)