Ministry of Labor, Invalids and Social Affairs Proposes Two Options for One-time Social Insurance Payout

If workers choose to preserve and not receive one-time social insurance benefits, they will receive an additional 5 benefits.

The Ministry of Labor, Invalids, and Social Affairs (MOLISA) has just submitted a report absorbing and explaining the opinions of the Standing Members of the Government of Vietnam and members of the Government regarding the draft Law on Social Insurance (amended). MOLISA proposes to supplement an option to limit the one-time withdrawal of social insurance.

Option to Preserve with Additional 5 Benefits

According to MOLISA, the issue of one-time social insurance withdrawal is quite complex and significantly impacts socio-economic life. Absorbing the opinions of the Standing Members of the Government of Vietnam, based on three previously reported options, MOLISA has consolidated and formulated them into two options for the one-time withdrawal of social insurance to report and seek opinions from the Government of Vietnam.

Option 1 stipulates the right to withdraw one-time social insurance for two different groups of workers.

In option 1, Group 1 includes workers who have participated in social insurance before the amended Law on Social Insurance comes into effect. After 12 months of leaving work, if they so desire, they are entitled to withdraw one-time social insurance.

Essentially, this provision inherits Resolution No. 93/2015/QH13, which allows workers to choose between preserving their social insurance participation period to enjoy a pension or receiving one-time social insurance if desired. However, the difference this time is that if workers choose to preserve and not receive one-time social insurance, they will receive an additional 5 benefits.

These 5 benefits include: Workers only need to contribute to social insurance for 15 years and reach the retirement age to enjoy a pension; receive a monthly allowance if their social insurance contribution period is insufficient for a pension and they have not yet reached the age for social pension benefits; enjoy health insurance funded by the State budget during the period of receiving the monthly allowance; enjoy health insurance funded by the Social Insurance Fund, with the duration equating to their social insurance contribution period; and receive financial support policies in case they are unemployed to tackle immediate financial difficulties.

If workers choose to receive one-time social insurance, they will not be entitled to the additional benefits mentioned above.

In option 1, MOLISA adds Group 2, which includes workers who start participating in social insurance from the effective date of the amended Social Insurance Law onwards (expected January 1, 2025). This group is not eligible for one-time social insurance withdrawal, except in cases where they are of retirement age but have insufficient contribution years to receive a pension; are migrating overseas for settlement; or suffering from life-threatening diseases.

MOLISA evaluates that the advantage of Option 1 will gradually address the one-time social insurance withdrawal situation that has persisted over the years.

According to statistical data, nearly 99% of one-time social insurance withdrawals are made "after a year of leaving work", with about 67% of these withdrawals by those with contribution periods of less than 5 years.

With Option 1, the number of one-time social insurance withdrawals in the initial years will not reduce significantly but will decrease considerably in subsequent years. From the fifth year onwards, the withdrawal numbers can potentially be halved compared to the recent period, aligning with international practices, addressing one-time social insurance withdrawals only for those not eligible/unable to receive monthly pensions. This ensures that workers benefit maximally from long-term benefits upon reaching retirement age, thus contributing to the stability of their lives in old age.

In the short term, Option 1 may not maintain or increase the number of social insurance participants as effectively as Option 2, but it is more optimal in the long term. Since this regulation does not affect currently participating workers, it is less likely to encounter opposition from them.

However, this option has the downside of only applying to workers who start participating in social insurance from the effective date of the Law, meaning that over 17.5 million current participants still have the choice to withdraw their one-time social insurance.

Therefore, the number of one-time social insurance withdrawals will not significantly decrease, especially in the years immediately following the new Law's enforcement. It also creates a comparison between workers participating before and after the Law’s effective date regarding one-time social insurance withdrawal.

Option for Balancing Interests, Increasing Opportunities for Workers

Option 2 proposed by MOLISA states: "After 12 months of not being subject to compulsory social insurance, not participating in voluntary social insurance, and having an insurance contribution period of less than 20 years, if desired, the worker can withdraw a portion but not exceeding 50% of the total contribution time into the retirement and survivor fund. The remaining social insurance contribution period is preserved for the worker to continue participating and enjoying social insurance policies."

The advantage of this option is that it balances the short-term demand for one-time social insurance withdrawal with the long-term social welfare policies. Although the number of one-time withdrawals may not significantly reduce compared to the current situation, workers withdrawing one-time social insurance are still partially preserving their contribution period (not affecting participant numbers).

Workers who continue participating will have their contribution periods combined to enjoy higher social insurance policy benefits; they will be more motivated to continue participating and accumulating contribution periods to qualify for a pension; they will have more opportunities to meet the conditions for a pension upon retirement.

MOLISA assesses that this option meets the current demand for one-time social insurance withdrawal by workers, prevents social backlash, and also ensures the stability of the system and long-term benefits for workers.

The disadvantage of Option 2 is that it does not completely resolve the one-time social insurance withdrawal. Workers may feel their benefits are reduced as they cannot withdraw their entire contribution period.

Additionally, this option may lead to an increase in applications for one-time social insurance withdrawal before the new Law takes effect ("rushing the law"). With this option, the situation of young workers (not yet at retirement age) withdrawing one-time social insurance will continue in the future.

According to MOLISA, one-time social insurance withdrawal is a very sensitive and complex issue; therefore, MOLISA, the drafting agency, proposes that the Government of Vietnam report to seek opinions from the National Assembly on both of the aforementioned options.

Thu Cuc

According to the Government of Vietnam's electronic portal

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