Saturday, July 16, 2011

Guest Post: Introduction to Israel's National Insurance Program- Bituach Leumi

Recently, I was at an expo in Jerusalem for new olim where I met Ms.Yael Harari of Transhomation, a company that helps recent immigrants to Israel. They help navigate some of the bureaucratic hassles that can arise for anyone moving to a foreign country, including dealing with the Ministry of Interior, banks, finding a school for children, and buying a car.
Below is an article from Transhomation explaining Israel's National Insurance Program- Bituach Leumi with a few minor edits for clarity:


The National Insurance Institute, a.k.a. “Bituach Leumi” in Hebrew, is the governmental body responsible for collecting premiums and dispensing various insurance benefits to these entitled.

The mere mention of “Bituach Leumi” to an Israeli, often rewards one with a frustrated look or a heart stopping sigh on his/her part, as this is regarded one of the most complicated bureaucratic bodies in Israel.

In a series of short articles, we attempt to provide you with a basic understanding of the system, including some helpful tips.

Rationale
The rationale behind Bituach Leumi, is to provide means of subsistence to those who are unable to support themselves whether temporarily or permanently, while granting benefits and allowances to those who have accumulated rights (i.e. maternity leave payment, work injury compensation etc.).

The purpose is to attempt an equal distribution of the national income, so that those who are able to do so pay their insurance premiums in accordance to their financial ability, while at the same time Bituach Leumi transfers this income to those who are in financial need.



Who Needs to Pay
Under the law, all Israeli residents aged 18 and above, must be covered by the National Insurance and pay periodic insurance contributions. Non-payment or delayed payment of the compulsory contribution will result in fines and interest.

However, there are 4 specific cases where a person may be exempt from payment:
1)      Unemployed married housewives.
2)      People who made Aliyah and became Israeli citizens for the 1st time at the age of 62 (and older).
3)      People aged 18 who are still in high-school are exempt, until they join the army, provided they do so by the age of 21.  
4)      New immigrants are exempt during their 1st year in Israel (see additional details below).

The insurance contribution to be paid to Bituach Leumi is based on a person's income and insurance status (as detailed below).

Determining Insurance Status
A person's insurance status is important as it defines the various coverage and potential benefits he may be entitled to.
For example, only women are entitled to [high] risk pregnancy benefits. Moreover, a person below 18 years of age who is either a salaried or self-employed worker, is covered for work accidents only, whereas an older individual under the same circumstances may be found eligible for different types of work related insurance coverage.

Additionally, a person's status has direct influence on who is responsible for the payment of the contribution i.e. the contributions for a salaried worker are the employer's responsibility, the Ministry of Defense is responsible to ensure payment by military personnel and a self employed worker is responsible to pay her own contributions on time. 
Moreover, this determination directly affects the issue of which insurance branches will be required to pay the individual, once he is found eligible for benefits.

Hence there are several factors taken under consideration when determining a person's insurance status i.e.:
1)      Is the person an Israeli resident?
2)      At what age did a person become an Israeli citizen for the 1st time (to determine whether a person is eligible for old age pension or special old-age benefits)?  
3)      Gender of the insured (pregnancy related benefits are mostly for women).
4)   Marital status – non-working married housewives are exempt from payment of contribution to Bituach Leumi, but so are women, formally recognized by Bituach Leumi as “common-law partner” (“Yedua Be'Zibor”) under similar circumstances, living with an insured partner.

Calculating Income Basis for Determining Contribution Rates
Sources of income are defined in Sec.2 of the Income Tax Ordinance. Consequently, Bituach Leumi considers 3 types of income, as those requiring insurance contribution:
1)      Income from self employment in a business or occupation.
2)      Income from salaried work
3)      Income not from work.
Once it was determined that your source of income falls within one of the 3 types of income stated above, the calculation of “how much” is calculated on a purely mathematical basis. 

Who Pays
1)    Salaried worker – the employer is responsible to deduct a fixed percentage from the employee's salary and pay the deducted sum on their behalf.  The amount to be deducted is determined by Bituach Leumi. In cases where the employer fails to pay, the employee's rights are not put at risk but the employer can be penalized either by 1 year imprisonment or a high fine.
2)    Self-employed worker or a person who does not work, but enjoys an income - is responsible to pay their contributions in advance, by the 15th of each month. The premiums are determined based on an assessed income and are re-evaluated on an annual basis.
3)   Non-salaried individuals – this includes un-employed individuals, Yeshiva students and students studying at a higher education facility who do not work.  Similar to the self-employed, these individuals are responsible for paying their contributions themselves. They should register at their local Bituach Leumi branch, where upon subsequent to providing the required documentation proving their status, they will be required to pay the minimal rate of national and health insurance (presently NIS 154).

Methods of Payment
1)      Salaried worker – employer reports and pays on form No. 102 in one of the following ways:
(a)    Online – the Bituach Leumi payment website.
(b)   Hand written report.
(c)    The bank.

2)      Self-Employed, Non-workers, Yeshiva students and higher education students who are responsible to pay their contributions, may pay in one of the following ways:
a)    Pay book – sent to your address once a year in January, you can pay with it at the bank the stipulated fee.  Self employed workers must pay on a monthly basis up to the 15th of each month.  Students and non-workers pay on a quarterly basis.
b)     Credit card – by providing your credit card number, you can either pay online or via the phone payment center.
c)     Standing order at the bank – fill out the relevant Bituach Leumi form authorizing the bank to pay your premiums.

New Immigrants/Olim
New immigrants to Israel, are exempt from payments during their first year in Israel (unless income exceeds the set minimum). Despite non-payment of insurance contributions, they are still entitled to child allowances, work injury compensation and maternity benefits throught this period.
Elderly immigrants are not insured during their first year in Israel, unless they do not have alternative sources of income, in which case they may be found eligible for a special allowance, determined on a “case by case” basis.   

Filing a Claim for Benefits
If you believe you are eligible and wish to receive a benefit, you must actively apply to Bituach Leumi in a branch near you by providing written details on the relevant form and attaching supportive documents backing up your claim. Most forms can be easily downloaded from Bituach Leumi's website (www.btl.gov.il).
Do not delay the filing of your claim, as it may result in losing your eligibility.

Practical Tips
1)      Register for a “personal service” (“sherot ishee”) – if you are going to your local branch, you may as well take advantage and sign up for this free service. This will provide you with a personal code and password, enabling you to access your personal file online. This is important as you can monitor the details Bituach Leumi stores on you, which may subsequently affect your eligibility for specific benefits. i.e. ensure your employment history is accurate as it can influence your maternity leave rights.
2)  This code, also provides you access to Bituach Leumi's telephone service. This service aims to answer questions regarding your personal case, via phone. However it is an “outsourced” service and the information provided should be double checked, especially when the answer is crucial, as it is not always accurate.
3)     Debts to Bituach Leumi are accumulated automatically – payment obligations kick in without formal notification (i.e. when the 1st year ends for new immigrants, when a person reaches the age of 18 etc…) and if the payments are not made regularly and promptly your debt (including interest and fines) will increase without you even knowing! Therefore, settling any issues with this bureaucratic body will require your active initiative, whether to inform them of a change of status, application for benefits or settling a debt.    

In our next articles,  discussing the “ins and outs” of Bituach Leumi, we will further clarify the common benefits provided by the National Insurance (old age pensions, assistance to mothers and work related benefits), in addition to the health insurance contributions, also handled by Bituach Leumi.

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