The New Swiss Program of Old-Age and Survivors Insurance
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nomic security of their families was The New Swiss Program of Old-Age and gravely endangered. A remedy was necessary and was found in the form Survivors Insurance of compulsory mutual aid. By Max Bloch* Two laws were enacted and later combined into one voluminous code— The Swiss people, in a referendum held July 6, 1947, ap• the law on the refund of lost wages proved by a majority of 4 to 1 the establishment of a Nation• and income. This law provided for wide compulsory system of old-age and survivors insurance. the establishment of compensation The legislation ends a period of almost 30 years of planning funds, financed half by the Federal and marks the beginning of a new era of social security in Government and the Cantons and Switzerland. In this brief outline of the background and pro• half by a general tax of 4 percent on visions of the new law the author has the benefit of information all wages and on income from inde• gained while visiting Switzerland early this year. pendent work. No upper limit was put on the amounts to be taxed. The PLANNING FOR an old-age and sur• ment of the long-deferred insurance tax on wages was divided equally be• vivors insurance program for Switz• program, and four Cantons also sub• tween employees and employers. In erland started soon after the First mitted petitions on the subject. The consequence, the employer had to pay World War, when the Confedera• present law went before the Assembly 2 percent of his workers' wages and, tion's Constitution was amended to in 1946, after a report and recom• in addition, 4 percent of his own permit the establishment of an insur• mendations by a committee of ex• income. ance program. In 1925 the amend• perts set up for the purpose. In De• Each employer served as an agent ment was confirmed by a majority of cember 1946 the bill was passed by the for the system. If one of his men 2 to 1 in a popular referendum. One National Council (the lower cham• had to leave his job to join the army of the main features of the amended ber) by a vote of 170 to 8 and by the in the field, the employer paid a fixed Constitution is the clear statement Council of State (the upper chamber) amount to the family out of the tax that old-age and survivors insurance by a vote of 34 to 1. The bill was collected in his own enterprise. The must be the first program enacted; then submitted to popular referen• employers' actions were supervised by introduction of disability insurance is dum; more than a million voters, rep• local and Cantonal agencies, whose to be a subsequent step. resenting 87 percent of the electorate, main functions were to administer Preliminary work in drafting a law gave a 4-to-l majority to the new the system for self-employed persons took 4 more years, and it was not un• legislation, which goes into effect and to equalize or pool the funds col• til 1929 that the Federal Assembly January 1, 1948. lected by employers in a given region. received the draft bill. In 1931 the The two factors that were probably To achieve Nation-wide equalization proposed law received large majori• most influential in changing public and uniform administration, a Fed• ties in both legislative bodies, but it opinion between the two referendums eral Equalization Fund was also was rejected by popular vote in the were the wartime measures for the established. The system proved same year—511,000 to 339,000. No protection of soldiers' families and both popular and successful. The new attempts to enact social insur• the Federal decree on transitional Swiss economy, which moved forward ance legislation were made before the noncontributory old-age and survi• on a high level as soon as hostilities Second World War. vor benefits. were ended, easily absorbed the tax, Probably the main reason for the and it was therefore continued after popular rejection of the program was Special Measures the war, though the amounts paid out the feeling of the Swiss people that dropped to almost nothing. As a re• the financial burden was too great. Protection of Soldiers' Families sult, the Federal Equalization Fund 1 Moreover, they were not accustomed now has about 1 billion Swiss francs All male Swiss citizens above the to pay-as-you-go taxes, and wage de• at its disposal. age of 20 must serve in the army, un• ductions were an almost revolution• less they are absolutely incapacitated ary concept. The other arguments Transitional Old-Age and Survivor for such service. The Swiss Army against a compulsory system were Benefits was fully mobilized during the war, much the same as in other countries. and places were found in it even for At the end of 1945 the Federal Gov• The argument that real democratic severely disabled persons. When the ernment decided not to wait for the freedom demands that the individual fighting near the Swiss border was introduction of an insurance law but himself make all the necessary provi• sufficiently inactive, a system of rota• to institute a temporary program of sions for the last years of his life tion permitted men to serve in the old-age and survivor benefits for proved particularly strong. field for a certain number of weeks Swiss citizens. Since no special con• In 1942, an initiative bearing 180,- or months in a year and to return to tributions are levied for these transi• 000 signatures petitioned for enact• their civilian activities for other pe• tional benefits, some sort of means riods. Even with this system, how• * Office of Military Government for Ger• ever, the periods of service for each 1 The Swiss franc is valued at approxi• many (U.S.), Manpower Division, Social man were so prolonged that the eco- mately 23.5 cents in United States cur• Insurance Branch. rency. test was necessary. The one adopted son who has reached age 65. This 40-45 years, the 5 lowest income (and is simple and moderate. Localities benefit, which starts on the January contribution) years are excluded. are divided into three classes—urban, 1 or July 1 that follows within 6 semiurban, and rural—and maximum months of the individual's sixty-fifth Derived Full Benefits amounts of income for receipt of ben• birthday, consists of an annual All other types of benefit payable efits are fixed for each class. Persons amount of 300 francs, plus a variable under the system are based on the with income in excess of this maxi• amount related to average annual primary benefit amount. mum do not receive benefits. Yearly contributions. This variable amount pensions are flat amounts. For resi• is computed by multiplying by 6 the Derived dents in urban communities, they average yearly contribution up to and Yearly Yearly benefit as equal half the maximum full benefits including 150 francs and by 2 the Type of benefit mini• maxi• percent of mum (in mum (in primary provided for in the new insurance law amount in excess of 150 francs. The francs) francs) benefit but are considerably higher than the minimum benefit is 480 francs; the ----- minimum benefits. If the benefit, to• maximum, 1,500 francs a year. Primary 480 1,500 Aged couple's 770 2,400 160 gether with income from other The benefit formula is based on Widow's 375 1,350 50-90 sources, exceeds the maximum in• Half orphan 145 360 30 contributions rather than income, be• Whole orphan 215 540 45 come specified for the locality in cause income itself is not a prerequi• which the beneficiary lives, it is re• site for coverage. For the sake of The primary benefit for an insured duced by the excess amount. This comparison, however, the formula may man is supplemented by a payment system seems to have become as pop• be expressed in terms of income. A for his wife, provided she has reached ular as the allowances for soldiers' flat monthly benefit amount of 25 age 60. This joint benefit equals 160 families and to have modified any francs is supplemented by 24 percent percent of a primary benefit which public feeling that people were get• of the individual's average monthly is, however, not always identical with ting nothing in return for the 4-per• earnings up to and including 312.5 the old-age benefit to which the man cent tax for the latter system. francs, but not by less than 15 francs; alone would be entitled. If the wife from monthly income in excess of has paid contributions of her own— Scope of the New Law 312.5 francs and up to a limit of 625 either before her marriage or on the The new law makes coverage francs, a further increment is derived basis of gainful activity after mar• compulsory for all persons residing at the rate of 8 percent; the maximum riage—her contributions (but not in Switzerland, including aliens and monthly benefit therefore totals 125 years of coverage) are added to those stateless persons, and for Swiss citi• francs. of the husband in computing the pri• zens working abroad for wages paid The number of years of coverage, it mary benefit. The joint benefit of by a Swiss employer. Other Swiss should be noted, has no effect on the 160 percent is based on the resulting citizens living abroad can insure vol• amount of the full primary benefit. higher primary benefit amount.