11.1 Definition of Social Insurance Trust System

To be categorized as a social insurance trust for Census Bureau purposes, a government's system must meet all of the following criteria*:

1. The system must be financed by a separate accounting fund of the administering government. This criteria excludes many pay-as-you-go plans.

2. This fund must have some type of assured revenue stream or dedicated revenue source other than appropriations from the administering government (generally, contributions or premiums imposed on its members and/or member employers).

3. The system must be a social insurance plan--that is, it must have a social purpose such as benefiting the disabled or disadvantaged, aiding individuals who cannot afford private insurance, providing future income, and the like.

4. The members of the system must be outside the government itself--that is, the plan cannot be for insuring the government itself against risks. For this criteria, public employees are considered to be outside the government.

5. The plan must be administered directly by the government itself--that is, it just cannot collect contributions and then turn them over to a private insurer who assumes the actual risks and administers the plan.

11.11 Examples of Insurance Systems Included and Excluded by this Definition

• Since the Federal Government workers' compensation program is a pay-as-you-go "plan" funded by agency operating funds and having no separate accounting fund, it fails the first two criteria for being an insurance trust system.

• Some state governments operate pooled, self-insurance programs providing general liability insurance to local governments within the state, funded by premiums levied against its members. Generally, their purpose is to provide a low-cost alternative to more expensive (or unavailable) private insurance. Since these types of insurance plans, however, are designed to protect the governments themselves, they do not meet the social benefit test of criteria three.

• Since most self-insurance or risk management funds are designed to insure the government itself, they fail to meet the fourth criteria regarding outside membership.

• A state government insurance plan to protect homeowners against certain catastrophic risks, either because private insurance is unavailable or unaffordable, would meet the social criteria test and would be classified as an insurance trust as long as it met the other four criteria.

11.2 How Insurance Trust Statistics Relate to Regular Finance Statistics

To provide these missing pieces, the Bureau has created exhibit categories used only for special presentations of insurance trust activities.

The principle differences in insurance trust finances between the regular statistics and these exhibit data can be summarized as follows:

1. Regular finance insurance trust revenue excludes (as an intragovernmental transfer) contributions and other payments from the administering government, including payments made on behalf of its employees who are members of the system. Insurance trust revenue statistics, on the other hand, include these important sources of funds.

2. Intergovernmental transfers, taxes levied specifically to support insurance trusts, or other sources of general revenue to finance insurance trusts activities are classified as general revenue, not as insurance trust revenue. Note that intergovernmental transfers representing contributions from other governments on behalf of their employees who are members of the system are treated as insurance trust revenue (see Section 6.45).

3. The cost of administering an insurance trust system is classified as a general expenditure of the administering government. It is recorded also under a special exhibit code for displaying insurance trust statistics.

11.3 Types of Insurance Trust Systems

11.31 Public Employee Retirement Systems

Excluded are "pay-as-you-go" retirement programs (i.e., direct payments to retired or disabled employees from appropriation of general funds), plans not defined as contributory, and payments to private trustee or insurance carrier who administer the investments and benefits. Although it is a retirement system, the Federal Social Security program is classed as an "other" insurance trust because its membership is not limited to public employees.

11.32 Unemployment Compensation Systems

The financial transactions of the Federal-state and railroad unemployment insurance systems are made through the Unemployment Trust Fund. All state and Federal unemployment tax receipts are deposited in the trust fund and invested in Federal Government securities. If necessary, the Federal general fund advances monies to the trust fund.

State governments and the District of Columbia pay for unemployment benefits from this trust fund. They also may receive repayable advances from the fund when their balances in the fund are insufficient to pay benefits.

State payroll taxes (i.e., contributions coded Y01) pay for all regular state government benefits. During high periods of unemployment, extended benefits are paid also and are financed equally between state and federal payroll taxes. Benefits to former Federal civilian employees, Postal Service workers, and ex-servicemembers are paid also by the state governments from the trust fund, which is reimbursed by the various Federal agencies.

11.33 Workers' Compensation Systems

Note that the Federal Government workers' compensation program is not classified as an insurance trust system because it is financed directly from agency operating funds rather than through an insurance fund financed by contributions (i.e., it is a pay-as-you-go plan).

11.34 Other Insurance Trust Systems (including Federal-only ones)

For state governments, there were only six states with such systems in fiscal year 1998. These included three disability programs, a medical disaster fund, an automobile liability insurance system, and a life insurance program.

For the Federal Government, this category includes social insurance programs unique to the U.S. Government, including the biggest insurance trust (See Note 2):

• The Social Security and Medicare programs, also referred to as OASDHI (Old-Age Survivors', Disability, and Health Insurance program). It actually consists of multiple insurance funds, including the Old-Age and Survivors Insurance Trust Fund (OASI), Disability Insurance Trust Fund (DI), Hospital Insurance Trust Fund (HI), and Supplementary Medical Insurance Trust Fund (SMI), The last two funds constitute the Federal Medicare program.

• Veterans' life insurance system which provides low-cost life insurance to eligible veterans of the armed services.

• Railroad retirement system which provides retirement-survivor benefits to railroad workers and their families. The unemployment portion of this system is included with the unemployment compensation data.

11.4 Insurance Trust Exhibit Codes

These exhibit codes largely represent financial transactions that are intragovernmental or interfund transfers by the government administering the system. For public employee retirement systems, they also include investments that fall outside the cash and security definition used in the regular finance survey.

Chart 11-A provides a complete listing of all codes related to insurance trust finances, including the exhibit codes described below.

11.41 Public Employee Retirement System Exhibit Codes

11.42 Unemployment Compensation Exhibit Codes

11.43 Workers' Compensation Exhibit Codes

11.44 Other Insurance Trust Systems Exhibit Codes

11.5 Special Topics

11.51 Classifying Debt for Unemployment Compensation Funds

• Revenue, Contributions (Code Y01): The government's unemployment compensation revenue consists of two parts: the "normal" payment to the UC fund and the amount needed to cover debt service (principal and interest). The former is treated as an UC revenue (code Y01); the latter is classified under Miscellaneous General Revenue (code U99).

• Revenue, Federal Advances and Contributions (Code Y04): One possible reason for such debt is to repay the Federal Government for advancing funds when the government's UC account was insufficient to pay benefits. As described in Chapter 7, repayment of Federal advances is deducted from code Y04, leading to the possibility of a negative value for this revenue code. Note that, in a situation requiring a government to issue debt to repay the advances, it is possible that the repayment is so large that not only is code Y04 negative, but so is total unemployment compensation revenue.

• Debt Retired, Issued, and Outstanding: This debt is classified in the "all other general debt" categories. Note that the transfer of the proceeds to the insurance trust fund would be an intragovernmental transfer. (Expenditures from it will eventually be reported as an insurance trust outlay.)

• Interest on Debt: Interest on the debt outstanding is reported under Interest on General Debt, code I89.

11.52 Loans to Parent Government by Insurance Trust Systems

The insurance trust system may help out its parent government by purchasing its regular debt instruments; these are treated the same as other debt and investment transactions. That is:

• It is not reported as either revenue of the parent government or as expenditure of the insurance trust.

• It is reported under debt statistics of the parent government (debt issued and outstanding) and under cash and security holdings data of the insurance trust.

• Interest payments on the debt is reported as an interest expenditure of the parent government (generally, code I89) and as earnings on investment of the insurance trust. No effort is made to exclude this transaction as an interfund transfer.

1. Based largely on information in the appendix to the Budget of the United States. References to state governments in this description also refer to the District of Columbia. Citation

2. The Federal Government also administers its own public employee retirement systems and is a member of the Federal-state cooperative unemployment compensation program. Citation

3. Data reported in these categories usually are transferred to other, more applicable insurance trust codes. Citation