Nepal's Social Security Fund Under Fire: Policy Disparities and Fiscal Year-End Service Disruptions Raise Alarm

Nepal has been increasingly striving towards becoming a welfare state in recent years, mirroring the aspirations of developed nations that prioritize accessible, affordable, and often free basic services like healthcare, education, and transportation for their citizens. Initiatives such as the government's decision to implement free public transportation for women underscore a clear shift towards a more citizen-centric state. Such programs are pivotal in institutionalizing social justice, equality, and inclusivity, and are expected to pave the way for further enhancements in education, health, and social security sectors.

At the heart of this welfare ambition lies the Social Security Fund (SSF), a crucial institution established in Nepal to provide long-term financial security for workers and employees. The SSF is a government-backed scheme designed to offer economic protection to employees in cases of illness, accidents, maternity, disability, and old age. Under this system, employees contribute 11% of their salary, while employers contribute 20%, accumulating a total of 31% into the fund. This contribution is not merely a saving but an institutional effort to ensure social security, aiming to mitigate future risks for the workforce.

The SSF operates primarily through four major schemes: the Health and Maternity Security Scheme, the Accident and Disability Security Scheme, the Dependent Family Security Scheme, and the Old Age Security Scheme. These schemes are designed to cover not only the employee but also their spouse and children under 18 years of age. Particularly in healthcare, the SSF has shown positive impacts, facilitating access to treatment at subsidized rates in both government and reputable private hospitals. The provision of discounts on medicine purchases is also considered a significant achievement of this system.

However, a significant point of contention and debate has emerged regarding the policy differences between employees who joined the SSF before and after the fiscal year 2078 (mid-July 2021). Prior to Ashar 2078 (end of June 2021), employees participating in the SSF were offered a "Choice System." They could opt for one of two alternatives: the first was a Retirement Scheme, allowing a lump-sum withdrawal of accumulated funds, including 28.33% (Provident Fund and Gratuity) along with interest. The second option was a Pension Scheme, which employees could choose by submitting a separate application. This flexibility empowered employees to make decisions aligned with their individual financial needs and future plans.

Conversely, for employees joining the SSF after Shrawan 1, 2078 (July 16, 2021), this choice system has been abolished. They are mandatorily enrolled in the pension system. While this aims to ensure long-term security, it significantly curtails their freedom to access their funds for immediate needs. This has generated considerable dissatisfaction among new contributors, who feel restricted from utilizing their hard-earned money when urgently required.

The withdrawal provisions have also been made considerably stringent. Under normal circumstances, employees cannot withdraw their contributions until they reach 60 years of age. Early withdrawals are permitted only in specific severe situations such as critical illness, total disability, or inability to work. Furthermore, employees who contributed before 2078 can withdraw all their funds upon leaving their job, a facility denied to those who joined after 2078, creating a perception of inequality and injustice within the system. In the unfortunate event of an employee's death, dependent family members are entitled to receive the funds, which remains a positive aspect.

The SSF also enforces a mandatory registration system, requiring all private companies to enroll their employees. Contributions must be deposited within 15 days after the end of each month, failing which a penalty of up to 15% can be levied. To receive a pension, one must be 60 years old and have contributed for a specified period. A facility to take a loan of up to 80% after three years of contribution is available, but the inability to withdraw funds prematurely under normal circumstances remains a strict aspect of this system.

While the overall framework aims to ensure long-term security, the "Time Value of Money" principle raises serious questions. The value of money today will not be the same in the future, as inflation and economic changes erode its real purchasing power. Therefore, funds received 30 or 40 years later may not provide the same level of financial security as they would today, potentially creating a gap between employees' expectations and actual benefits.

Beyond these policy and structural issues, the practical implementation problems of the Social Security Fund are even more critical and concerning. Particularly towards the end of the fiscal year, around Ashar 29, 30, 31, and sometimes even 32 (mid-July), widespread complaints surface about SSF services being virtually shut down. Hospitals often refuse to provide SSF benefits, and pharmacies claim "out of stock" for medicines. Such situations are not mere administrative glitches but a direct injustice to service recipients.

For instance, if an employee has regularly contributed 31% (11% from salary, 20% from employer) to the SSF throughout the year, they should ideally receive seamless treatment in case of an emergency illness or accident. However, if the same employee is turned away by a hospital during the last days of Ashar, being told "SSF services are closed" or "claims cannot be processed," it signifies a grave systemic failure. In situations requiring urgent surgery, such service disruptions can literally become a matter of life and death.

Illnesses, accidents, or health problems are not bound by fiscal year limits; they are uncertain and sudden. Therefore, a social security system like the SSF must provide continuous and uninterrupted services. Service closures due to the end or beginning of a fiscal year are completely unacceptable and severely undermine public trust in the system.

This clearly indicates systemic weaknesses, a lack of coordination, and insufficient effective monitoring by regulatory bodies. If there were robust digital coordination among hospitals, pharmacies, and the SSF system, such problems would not arise. Therefore, it is imperative for the concerned authorities, especially the Social Security Fund, the Ministry of Health, and regulatory institutions, to intervene immediately.

To address these issues, legal and technical provisions must be put in place to ensure 24-hour service throughout the year. Hospitals and medicine providers must be given mandatory directives and strictly monitored. A digital system must be developed to ensure continuous claim processing even at the fiscal year-end. Strict penalties and actions should be taken against institutions that disrupt services, and an effective helpdesk must be established for resolving service recipient complaints.

If such reforms are not implemented promptly, not only will employees' trust in the Social Security Fund weaken, but its fundamental objective risks failure. Ultimately, it is unacceptable for employees who contribute regularly throughout the year to be denied services when they need them most. Therefore, the state must take concrete and effective steps without delay to translate the principle of "contribution without interruption, service without disruption" into practice.