Social insurance in Lithuania counts its history since the 23rd of March 1926 when the President of the Republic of Lithuania A. Stulginskis established the Law on the Head Board of Social Insurance. The present day even today in Lithuania is referred to as the professional day of the social insurance employees. The Board was established under the Ministry of the Interior, the mentioned Law provides that the Board is being established for “dealing with the social insurance matters.”
During the interwar period in Lithuania the mostly developed was the illness insurance. Only before the II World War the insurance against accidents at work was introduced. The sickness funds in Lithuania started to be established at the end of 1928. The Law on the sickness funds provided that everyone who served to the state, municipalities or private persons and the members of their families was insured by the illness insurance. However, some very important exceptions were projected: the persons working in agriculture field, the state servants and the employees that earn more than 400 Litas per month were not insured by the illness insurance. In this way the social insurance in the interwar Lithuania involved a small part of the inhabitants of the country, as two thirds of the contemporary Lithuania were farmers and they, as it was already mentioned, were not insured. The insurance rendered free treatment, illness, burial, mother and nursing pays.
The Law on the insurance against accidents was adopted in 1936, following which the employees and servants of factories, forest companies, buildings, roads, ports, telegraph and streets maintenance received an obligatory insurance.
After two years the Law on the provision for the victims of the accidents working in the agriculture farms was adopted. According to the Law the aggrieved person was provided with medical care, temporary disability and burial payments, as well as disability and loss of the breadwinner pensions.
In 1937 the cash register of the insurance against accidents started to function. That was one central office dealing with the insurance against accidents in the whole Lithuania. The cash register allocated and paid payments and pensions and the contributions were collected by the sickness funds.
The pension insurance was not successfully implemented in the interwar Lithuania. The state paid pensions only to the soldiers, state servants and prominent society members. The right to the pension was vested only after the state service for 25 years. The size of the pension included 60 percent of the former salary.
The rudiment of the unemployment insurance could be traced already in 1919. Then the Laws on the Labor Exchange were adopted. They provided free service for the persons seeking a job and the persons seeking employees.
The Folk Commissioners Board in 1940 finished the history of the social insurance of the interwar Lithuania by the decision assigning all the social purpose offices, Sickness Fund and the Head Board of the Social Insurance to the Social Provision Commissariat.
Social Insurance during the Soviet Period
The Soviet social insurance model was applied after the occupation of Lithuania. At that time the state social insurance was being applied to all employees and servants despite the duration and payment forms for the work. Social insurance was implemented only on the expenses of the state, the contributions were paid by companies and organizations, the employees themselves did not pay any contributions from their salaries. The payments of the social insurance did not depend on the fact of paying contributions.
Up to 1990 the functions of the social insurance in Lithuania were administered by the professional unions. They managed the expenses of the social insurance, the subjected sanatoriums, preventive homes, rest houses, offices for culture and education, tourism and sport.
Lithuania did not have its own separate social insurance budget. All the contributions passed to the common social insurance budget that made a part of the USSR State Budget. The companies, offices and organizations of Lithuania paid contributions to the professional unions.
The benefits of the temporary disability were paid from the first disability day up to the time when the employee recovered or was acknowledged as a disabled person. The size of the benefit depended on the size of the salary, continuity of service and membership in the trade union.
The pension system in the “socialistic” Lithuania was very complicated. The pensions were allocated in the cases of retirement, disability and loss of the breadwinner, as well as for the persons executing some service for a determined time. The size of the retirement pension that later on was inherited by the newly created social insurance system in an independent Lithuania was 55 years for men and 50 years for women. Work experience of 25 years was established for men and 20 years for women. The pensions were allocated following the Law on USSR state pensions and the necessary means for their payment were transferred from Moscow.
The social insurance during the Soviet period was not separated from the social support, it was being attempted to create a view that the state takes care of all the people. During the period of “perestroika upheaval” it became clear that the larger state was not capable to bear a burden of social provision. For 1990 “the centre” planned for Lithuania the deficit of even 420 mln. Rubles for the social use. Such “cheerless” forecasts definitely encouraged Lithuania to detach from the centralized budget and seek its own financing sources.
Social Insurance in Lithuania Counts the Fifteenth Year
Already 17 years passed since the foundations for the social insurance in Lithuania were laid. 13 February 1990 the contemporary Supreme Board adopted the decision “Regarding the Reformation of the USSR State Social Insurance System” providing to assign the social insurance from the professional unions of Lithuania to the state.
In the same year when just a few days after the restoration of the independence passed (15/03/90) the Head Board of the States Social Insurance under the Labor and Social Provision Ministry was established that was assigned to perform social insurance functions in the Republic. The Head Board of the State Social Insurance and its territorial departments started to register the insurers, collect contributions, organize and control the operations of contributions, implement the budget of the social insurance. Already then a shorter name for the Head Board of the State Social Insurance was established – “Sodra” (the abbreviation of words “social insurance”).
On 23 October 1990 the Law on the Basis of the State Social Provision System was being adopted that segregated social insurance from social work and care and legitimated an independent social insurance budget.
In May 1991 the Law on State Social Insurance comes into force consolidating the kinds, finances and management of social insurance. The Law provided that “the state social insurance is the system of the social economic means established by the state, providing the insured inhabitants of the Republic, also in the foreseen cases the members of the families of the insured with the means and services necessary for a living if they are unable regarding the reasons established in the Law to be provided from work or other income and due to the reasons established by the Law are subject to have additional expenses.”
On 21 November 1991 “Sodra” was admitted to the International Social Security Association (ISSA) as an actual member. This enabled the employees of the social insurance system not only to participate in the ISSA General Assembly, conferences but also gain experience from the other countries.
On 7 February 1992 the Council of the State Social Insurance decided that the 23rd of March would be declared the day of the state social insurance. On that day in 1926 the first law on the social insurance was adopted in the history of Lithuania. During the first five years of the social insurance existence the legal basis was formed, structural departments were created, the computer information data basis started to be created.
In 1994-1995 the pension reform took place. On 1 January 1995 the Law on the State Social Insurance Pensions entered into force. It converted the former valid Law on the Soviet Pension Allocation and Payment of the year 1956.
The new system was oriented to the future and had to be applied to the persons who would retire after 1 January 1995, i.e., after the date when the Law comes into force. However, by the decision of the Seimas on the basis of the new Law the pensions of all the pensioners were recalculated by applying the non-reduction of the pension rule.
In 1995 the Seimas decided to calculate the pensions once again this time paying attention to the most favorable salary.
The period of 1995 entered the history of “Sodra” as one of the most difficult. The pension reform required lots of additional expenses, the pensions and other social payments delayed. Besides, the contemporary bank crisis affected “Sodra” as well.
During 1996-1998 the project “Phare Support to “Sodra” was implemented. The experts of Ireland Social Welfare Ministry were the main project implementors from the side of the European Union.
In 1997 the health reform started, the health insurance functions from “Sodra” went to the sickness funds. A separate health insurance fund was established.
In 1999 the Law on the pension funds was adopted. The present Law created possibilities for the establishment and activity of the pension fund.
In 2000 a new insurance form was legitimated – the insurance against accidents and occupational diseases.
In 2003 a new reform of the pension system started. From 1 January 2004 the inhabitants may independently direct a part of the contributions to “Sodra” to the private pension funds. During the first years of the reform a contribution to the accumulative insurance is only 2,5 percent – the same amount as now is paid by the insured himself to the social pension insurance. The rate of the accumulative contribution each year will be increased by 1 percentage point up to 5,5 percent in 2007. During the first stage of the pension system reform lasting from 6 September up to 1 December the pension accumulation agreement was signed by 441 606 inhabitants of Lithuania or 36,6 percent of all the insured by the state social insurance.