20 Sectorization of Social Security Funds

Abstract

To shed light on the merits of classifying social security funds separately or together with other parts of government, this paper examines several key characteristics of social security operations, drawing primarily on data in the Fund's Government Finance Statistics Yearbook (GFS Yearbook) and the U.S. Social Security Administration's Social Security Programs Around the World1 and on papers appearing in the International Social Security Review.2 The question of the appropriate classification of social security funds arises from differences between the United Nations' A System of National Accounts (SNA) and the IMF's Manual on Government Finance Statistics (GFSM). Although both data systems consider social security funds to be a part of general government and include social security schemes that are not separately organized as funds within the level of government at which they operate, the SNA treats social security funds as a separate subsector of government, and the GFS includes them in the level (subsector) of government at which they operate. Thus, the GFS calls for the inclusion of statistics for all national social security schemes with data for central government and the inclusion of data relating to all separate schemes operating at regional or local government levels with the statistics for regional or local governments, respectively. Social security funds, as distinguished from other social security schemes, are defined in the SNA (page 237) as “schemes imposed, controlled or financed by the public authorities for purposes of providing social security benefits for the community, or large sections of the community, which are separately organized from the other activities of the public authorities and hold their assets and liabilities separately from them.” The SNA's treatment of social security funds as a separate subsector, therefore, turns on their separate organization, separate finances, and, by implication, their relative independence as a decision-making center.

Author: Vicente Galbis