NII to stop transfers to Finance Ministry

Amid growing concerns over its deteriorating financial health, the National Insurance Institute (NII) has canceled a decades-old agreement with the Finance Ministry permitting the transfer of surplus NII funds to the government budget.

“The time has come for the NII to have the responsibility and authority for the management of its own policy,” Welfare and Social Services Minister Haim Katz informed Prime Minister Benjamin Netanyahu in a letter on Wednesday, following recommendations from a committee established in 2009 to ensure the financial sustainability of the NII.

The agreement, signed in 1980, will come to an end early next year.

The agreement has until now enabled the Finance Ministry to borrow and add surplus funds gathered from mandatory national insurance contributions to the government’s budget, with the funds set to be repaid to the NII when needed at a later date.

Yet the government’s debt toward the NII stands today at more than NIS 200 billion and recent estimates suggest the NII could run a deficit within four years and go bankrupt in 2037 – eight years earlier than previously estimated and leaving the most vulnerable in Israeli society without greatly-needed financial assistance.

“In 2009, a committee was established, including the most senior economists in the field, which evaluated ways to safeguard the financial steadfastness of the NII,” said Katz.

“The committee’s recommendations were unambiguous in the need for the institute to manage its surplus funds in an independent manner and to transfer the current sum of the surplus fund into the institute’s possession.”

All Israeli residents aged 18 and older, besides a limited number of exceptions, must pay national insurance contributions in accordance with their level of income. The NII then guarantees benefits and basic subsistence for those unable to work or sufficiently provide for themselves.

MK Itzik Shmuli (Zionist Union) welcomed the cancellation of the long-standing agreement and strongly condemned the government’s waste of the NII’s surplus funds.

“The decision to cancel the agreement is justified and correct. Over the years the Finance Ministry has robbed more than NIS 220m. from the NII,” said Shmuli.

“Instead of safekeeping the funds... they went up in flames for the political needs of governments. This reckless and dangerous conduct has brought us to a catastrophic situation in which the NII is unable to give the elderly, the disabled and other future beneficiaries what they deserve according to law,” he added.

“A committee to investigate this failure should have been established a long time ago.”

MK Ilan Gilon (Meretz) also praised the end of the agreement.

“I welcome that the NII has finally decided what it wants to be – a strong and independent insurance service for all the citizens of Israel, and not a branch for the collection of taxes and growth of the Finance Ministry’s cash register in order to advance all sorts of political objectives,” said Gilon.

“If the current situation in which surplus collections are transferred to the Finance Ministry won’t change, it’s not only a matter of the NII going bankrupt as forecasts predict, but also the moral bankruptcy of the nation,” he added.

“A country that cares for its people cannot exist without national insurance.”