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Roadmaps for SSO Recovery
Roadmaps for SSO Recovery

Roadmaps for Iran Social Security Organization Recovery

Roadmaps for Iran Social Security Organization Recovery

The research arm of the Iranian Parliament has conducted a thorough study on the dire condition of Social Security Organization–the country's largest pension fund–and offered short- and long-term roadmaps to steer the entity away from a full-blown crisis.  
The study conducted by Majlis Research Center notes that SSO is "the biggest fund in terms of members in both its pension account and health insurance services" covering 42 million Iranians who constitute more than half the population of the country.
It sets out to review the current status of the organization, determine the depth of its current woes and the reasons behind them, and offers ways of resolving longstanding issues with an eye toward their resolution.

Close Call

The parliamentary think-tank asserted that studies show SSO will face serious crises in the near future.
According to MRC, declining birthrates and an aging population have led to a significant rise in the number of pensioners.
The issue of SSO's expenses outpacing its revenues has emerged as a major challenge.
What is more, a serious liquidity deficit is visible from the fiscal 2013-14 onwards, which is mainly a consequence of entitlement programs and the government not paying its debts to the organization.
A rapid growth in the ratio of pensioners to the insured in tandem with a decrease in support ratio–workers to pensioners–has caused SSO expenses to outpace its income, a gap that will only widen by the time the second term of President Hassan Rouhani ends in 2021.
MRC believes that the "national threat" of social security crisis is absent from the administration's top priorities because it is presumed to be far off in the future and that it can be managed through government intervention.
Firstly, "the probability of financial collapse of SSO within the next decade is very high" and secondly, "the scale of the crisis is so big that the government will not have the required economic capacity to intervene", it said.
To put the scale of the crisis in perspective, the think-tank estimated that the credit required to pay income and benefits to more than five million pensioners covered by SSO in the next 10 years will require a total of 900 trillion rials ($22 billion) on the current scale.
"One the other hand, the scale of the geographical coverage and variety of people covered by the organization can pave the way for widespread economic and social unrest in the country," the study stressed.

Time Left
As MRC notes, speedy measures must be undertaken, even though the deep-rooted troubles cannot be resolved quickly.
Based on current statistics, the think-tank said SSO will be able to employ incomes generated from its assets and government arrears only till the end of the current fiscal year on March 20, 2018.
It added that subsequently and in the eight following years, it will have to tap into its coffers and exhaust all its reserves.
However, it will have no choice but to "completely account for its budget deficit from the annual public budget", the parliamentary think-tank said.

Reform Measures
To prevent the current course of crisis, MRC underscores the need to define fundamental values, create expert consensus and a political will to reform, work closely with social partners, prevent the formation of new debts and make the incomes and expenses of SSO transparent.
It calls for systematic reforms, including changing Iran's benefit pension plan to a contribution pension plan, which it warns will not be void of its own dangers and would bear fruit in two to three decades.
The study encourages parametric reforms, i.e. organizing the components influencing the input and output of each retirement fund, including entry age, insurance premiums, age of retirement, etc.
MRC also urges structural reforms that could entail many dimensions, namely changing the macro-structure of the social security system, the way the components of the organization connect with government bodies and ministries, and the way each fund interacts with the public.
Among other things, it also advocates for and details a host of technical and executive reforms.

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