Ministry of Labor, War Invalids and Social Affairs of Vietnam proposes two options for lump-sum social insurance

If employees in Vietnam choose to preserve and not receive lump-sum social insurance benefits, they will receive an additional 5 benefits.

The Ministry of Labor, War Invalids, and Social Affairs of Vietnam (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 lump-sum withdrawal of social insurance.

Option to Preserve with Additional 5 Benefits

According to MOLISA, the issue of lump-sum 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 lump-sum withdrawal of social insurance to report and seek opinions from the Government of Vietnam.

Option 1 stipulates the right to withdraw lump-sum social insurance for two different groups of employees.

In option 1, Group 1 includes employees 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 lump-sum social insurance.

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

These 5 benefits include: employees 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 employees choose to receive lump-sum social insurance, they will not be entitled to the additional benefits mentioned above.

In option 1, MOLISA adds Group 2, which includes employees 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 lump-sum 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 lump-sum social insurance withdrawal situation that has persisted over the years.

According to statistical data, nearly 99% of lump-sum 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 lump-sum 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 lump-sum social insurance withdrawals only for those not eligible/unable to receive monthly pensions. This ensures that employees 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 employees, it is less likely to encounter opposition from them.

However, this option has the downside of only applying to employees 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 lump-sum social insurance.

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

Option for Balancing Interests, Increasing Opportunities for Employees in Vietnam

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 employee 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 employee to continue participating and enjoying social insurance policies."

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

employees 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 lump-sum social insurance withdrawal by employees, prevents social backlash, and also ensures the stability of the system and long-term benefits for employees.

The disadvantage of Option 2 is that it does not completely resolve the lump-sum social insurance withdrawal. employees 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 lump-sum social insurance withdrawal before the new Law takes effect ("rushing the law"). With this option, the situation of young employees (not yet at retirement age) withdrawing lump-sum social insurance will continue in the future.

According to MOLISA, lump-sum 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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