Social Security Reform in

Indonesia
by
Isa Rachmatarwata
and
Edimon Ginting

ADB Social Protection Conference

21 April 2010
Disclaimer: The views expressed in this paper/presentation are the views of the author and do not
necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of
Governors, or the governments they represent. ADB does not guarantee the accuracy of the data
included in this paper and accepts no responsibility for any consequence of their use. Terminology
used may not necessarily be consistent with ADB official terms.
Agenda
y Current situation
y Rationale for change
y SJSN Law
y Social protection strategy: 2010-2014

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Current Situation
y Fragmented programs
y Inadequate coverage
◦ Retirement: 15%
◦ Health care: 49%
y Differing benefits and administrators by
labor market segment

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Administrators and programs
y Taspen
◦ Covers civil servants
◦ Benefits
x Pension (includes old-age, disability, survivor and
worker accident)
x Endowment
y Askes: Health benefits for civil servants,
and retired military and police
y Jamkesmas: Tax-financed health for
poorest Indonesians

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Administrators and programs
y Asabri: Pension and death benefits to
military and police
y Jamsostek
◦ Formal sector workers
◦ Benefits
x Old-age savings
x Worker accident
x Health
x Death benefits

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Supervision and Control
y Taspen: Ministry of Finance
y Asabri: Ministry of Defense and Ministry
of Finance
y Askes: Ministry of Health and Ministry of
Finance
y Jamsostek: Ministry of Finance and
Ministry of Labor and Transmigration
y Ministry of State-Owned Enterprises for
all
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Rationale for Change
y Family-based social protection system no
longer adequate
y Ageing population due to
◦ Declining birth rates and
◦ Longer life expectancy
y Increased urbanization
y Global economy
y Economic development

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Rationale for Change
y Workers need protection against adverse
events, requires government support
y Health insurance
y Weather insurance (crop failure)
y Income after leaving labor force
y Life insurance

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Social Insurance
y Key component of overall social
protection program
y Risk pooling
y Prefunding protection against catastrophic
events
y Based on ability to pay; contributions
usually percent of income

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SJSN Law
y Framework law – Basic structure but not
details
y Five social insurance programs
y Four administrators
y Covers all workers
y Managed by National Social Security
Council appointed by President
y Other issues left to regulations

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SJSN Law – Benefits
y Pension
y Old-age savings
y Health
y Worker accident
y Death benefit

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SJSN Law – Contributions
y Formal sector = % of wages, shared
between workers and employers
y Informal sector = nominal amount in
rupiah
y Government makes contributions for the
poor

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SJSN Law – Administrators
y Existing administrators become
administrators for SJSN programs
y New legal structure
◦ Not-for-profit
◦ Manage social security funds organized as
trusts
y Unclear who manages what programs

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SJSN Law – National Social Security
Council
y 15 members appointed by President
y Government, employer and labor
representatives plus outside experts
y Chairperson is government
representative
y Supported by Council Secretariat

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SJSN Law – National Social Security
Council
y Formulating general policy
y Synchronizing administration of the SJSN
system
y Conducting review and research
y Proposing investment policy for the social
security funds
y Proposing the government budget for
operations and contribution assistance for
the poor
y Monitoring and evaluation of administrators

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SJSN Law – Completed
Implementation Activities
y Appointment of the DJSN members
y Draft law on Administrators
y Draft regulation on contribution assistance
for the poor
y Draft government regulation regarding
contributions and benefits for the pension,
old-age savings and death benefit programs
y Draft Presidential regulation on health
insurance
y Draft White Paper written by the Ministry
of Finance and Asian Development Bank
(ADB)
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Medium Development Plan:
2010 to 2014
y Issuance of Single Identification Numbers (SIN).
y Laws and regulations required to establish the
foundation for the SJSN system
y Procedures for identifying those entitled to
government contribution subsidy
y Completion of studies and research in social
insurance to strengthen the foundation of SJSN
y Synchronization of regulations and programs in social
insurance
y Establishment of universal coverage for SJSN health
y Completion of an effective and efficient system,
procedure, and organizational structure for the social
security administrators

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DJSN Strategic Plan: 2010 to 2014
y Vision: Social security for all Indonesians
y Strategic objectives
◦ Implementing laws and regulations
◦ Heath insurance for the entire population
◦ Gradual expansion of coverage
◦ Sustainable social security funds
◦ Good governance
◦ Strong and sustainable DJSN institution

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Other Priorities: 2010 to 2014
y Consolidation of existing programs,
including severance pay reform
y Consolidated supervision and control of
entire financial sector
y Fundamental reform of civil servant
benefit design and financing
y Reformed contribution collection and
enforcement paradigm
y Establishment of Office of the Actuary for
proper risk management
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Ultimate Goals
y Universal coverage through full SJSN
implementation
y Simplified, rationalized, consolidated
social insurance structure
y Proper governance structure
y Fiscal sustainability of all social protection
programs
y Further financial sector consolidation

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