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Federal, State, and Local Governments
Government Finance and Employment Classification Manual
Chapter 11: Social Insurance Trust Systems
 
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Contents and Abstract:

11.1 Definition of Social Insurance Trust System
11.11 Examples of Insurance Systems Included and Excluded by this Definition

11.2 How Insurance Trust Statistics Relate to Regular Finance Statistics

11.3 Types of Insurance Trust Systems
11.31 Public Employee Retirement Systems
11.32 Unemployment Compensation Systems
11.33 Workers' Compensation Systems
11.34 Other Insurance Trust Systems (including Federal-only ones)

11.4 Insurance Trust Exhibit Codes
11.41 Public Employee Retirement Exhibit Codes
11.42 Unemployment Compensation Exhibit Codes
11.43 Workers' Compensation Exhibit Codes
11.44 Other Insurance Trust Systems Exhibit Codes

11.5 Special Topics
11.51 Classifying Debt for Unemployment Compensation Funds
11.52 Loans to Parent Government by Insurance Trust Systems

Chart:
11-A Summary of Insurance Trust Codes (Regular and Exhibit)

Among their numerous duties, governments provide social insurance to the public, ranging from retirement systems and disability compensation to life insurance. One of the four sectors of governments, insurance trust systems have become a major component of the economy over the years, accounting for 15.3% of total state, and local government revenue in fiscal year 1996-97.

The Census Bureau provides two types of statistics on insurance trust systems. First, they are reported with the regular finance data about governments. Second, since insurance trust systems involve major financial activities that fall outside the scope of the regular classification schema, the Bureau provides additional exhibit statistics whose focus is exclusively on insurance trusts.

11.1 Definition of Social Insurance Trust System

Governments administer a wide variety of insurance-type programs in addition to maintaining various "trust" funds. For Census Bureau statistics, however, only a selected few of these qualify as "insurance trust systems."

To be categorized as a social insurance trust for Census Bureau purposes, a government's system must meet all of the following criteria*:

  1. The system must be financed by a separate accounting fund of the administering government. This criteria excludes many pay-as-you-go plans.

  2. This fund must have some type of assured revenue stream or dedicated revenue source other than appropriations from the administering government (generally, contributions or premiums imposed on its members and/or member employers).

  3. The system must be a social insurance plan--that is, it must have a social purpose such as benefiting the disabled or disadvantaged, aiding individuals who cannot afford private insurance, providing future income, and the like.

  4. The members of the system must be outside the government itself--that is, the plan cannot be for insuring the government itself against risks. For this criteria, public employees are considered to be outside the government.

  5. The plan must be administered directly by the government itself--that is, it just cannot collect contributions and then turn them over to a private insurer who assumes the actual risks and administers the plan.

* Note that of the four types of insurance trust systems recognized by the Census Bureau, only the public employee retirement systems category applies to local government finances (plus the District of Columbia's unemployment compensation system); all other types apply to Federal and/or state governments.

11.11 Examples of Insurance Systems Included and Excluded by this Definition

The following examples illustrate the types of insurance programs that meet and fail the above criteria:

  • Since the Federal Government workers' compensation program is a pay-as-you-go "plan" funded by agency operating funds and having no separate accounting fund, it fails the first two criteria for being an insurance trust system.

  • Some state governments operate pooled, self-insurance programs providing general liability insurance to local governments within the state, funded by premiums levied against its members. Generally, their purpose is to provide a low-cost alternative to more expensive (or unavailable) private insurance. Since these types of insurance plans, however, are designed to protect the governments themselves, they do not meet the social benefit test of criteria three.

  • Since most self-insurance or risk management funds are designed to insure the government itself, they fail to meet the fourth criteria regarding outside membership.

  • A state government insurance plan to protect homeowners against certain catastrophic risks, either because private insurance is unavailable or unaffordable, would meet the social criteria test and would be classified as an insurance trust as long as it met the other four criteria.

11.2 How Insurance Trust Statistics Relate to Regular Finance Statistics

Regular Census Bureau finance statistics provide only selected data on insurance trusts, excluding such activities as contributions from the administering government, the cost of administering systems (reported in general government sector), and certain investment assets that are neither cash nor securities.

To provide these missing pieces, the Bureau has created exhibit categories used only for special presentations of insurance trust activities.

The principle differences in insurance trust finances between the regular statistics and these exhibit data can be summarized as follows:

  1. Regular finance insurance trust revenue excludes (as an intragovernmental transfer) contributions and other payments from the administering government, including payments made on behalf of its employees who are members of the system. Insurance trust revenue statistics, on the other hand, include these important sources of funds.

  2. Intergovernmental transfers, taxes levied specifically to support insurance trusts, or other sources of general revenue to finance insurance trusts activities are classified as general revenue, not as insurance trust revenue. Note that intergovernmental transfers representing contributions from other governments on behalf of their employees who are members of the system are treated as insurance trust revenue (see Section 6.45).

  3. The cost of administering an insurance trust system is classified as a general expenditure of the administering government. It is recorded also under a special exhibit code for displaying insurance trust statistics.

Both regular and insurance trust exhibit statistics on revenue and expenditure exclude the purchase and sale of investments as well as the extension and recoupment of loans to members.

11.3 Types of Insurance Trust Systems

The Census Bureau recognizes four types of insurance trust systems, including an "other" category that encompasses three major Federal-only social insurance trusts.

11.31 Public Employee Retirement Systems

This category covers retirement systems sponsored by a recognized unit of government whose membership is comprised primarily of public employees compensated with public funds and which holds identifiable assets to finance retirement and associated benefits.

Excluded are "pay-as-you-go" retirement programs (i.e., direct payments to retired or disabled employees from appropriation of general funds), plans not defined as contributory, and payments to private trustee or insurance carrier who administer the investments and benefits. Although it is a retirement system, the Federal Social Security program is classed as an "other" insurance trust because its membership is not limited to public employees.

11.32 Unemployment Compensation Systems

This category refers to the Federal-state cooperative program for unemployment insurance which also covers the District of Columbia, the only local government member. These data are obtained from the Employment and Training Administration of the U.S. Department of Labor. The unemployment compensation system operates in a unique fashion unlike any other aspect of government finance. How it works is described below (See Note 1).

The financial transactions of the Federal-state and railroad unemployment insurance systems are made through the Unemployment Trust Fund. All state and Federal unemployment tax receipts are deposited in the trust fund and invested in Federal Government securities. If necessary, the Federal general fund advances monies to the trust fund.

State governments and the District of Columbia pay for unemployment benefits from this trust fund. They also may receive repayable advances from the fund when their balances in the fund are insufficient to pay benefits.

State payroll taxes (i.e., contributions coded Y01) pay for all regular state government benefits. During high periods of unemployment, extended benefits are paid also and are financed equally between state and federal payroll taxes. Benefits to former Federal civilian employees, Postal Service workers, and ex-servicemembers are paid also by the state governments from the trust fund, which is reimbursed by the various Federal agencies.

11.33 Workers' Compensation Systems

This category includes state government-administered plans for compulsory accident and injury insurance of workers (public or private) through the accumulation of assets in order to provide disability or death benefits related to an on-the-job injury or accident.

Note that the Federal Government workers' compensation program is not classified as an insurance trust system because it is financed directly from agency operating funds rather than through an insurance fund financed by contributions (i.e., it is a pay-as-you-go plan).

11.34 Other Insurance Trust Systems (including Federal-only ones)

This category includes any other Federal or state government- administered insurance trust system which meets the Bureau's definition of a social insurance trust.

For state governments, there were only six states with such systems in fiscal year 1998. These included three disability programs, a medical disaster fund, an automobile liability insurance system, and a life insurance program.

For the Federal Government, this category includes social insurance programs unique to the U.S. Government, including the biggest insurance trust (See Note 2):

  • The Social Security and Medicare programs, also referred to as OASDHI (Old-Age Survivors', Disability, and Health Insurance program). It actually consists of multiple insurance funds, including the Old-Age and Survivors Insurance Trust Fund (OASI), Disability Insurance Trust Fund (DI), Hospital Insurance Trust Fund (HI), and Supplementary Medical Insurance Trust Fund (SMI), The last two funds constitute the Federal Medicare program.

  • Veterans' life insurance system which provides low-cost life insurance to eligible veterans of the armed services.

  • Railroad retirement system which provides retirement-survivor benefits to railroad workers and their families. The unemployment portion of this system is included with the unemployment compensation data.

Excluded from insurance trust data (and reported in the general government sector) are Federal insurance programs such as crop and farm mortgage insurance, investment guarantees, home mortgage insurance (e.g., FHA, TVA), and the like.

11.4 Insurance Trust Exhibit Codes

Insurance trust statistics have a two-tier classification scheme. The first tier consists of the regular categories used in reporting the finances of a government--that is, statistics on government revenue, expenditure, and cash and securities. The second tier consists of special exhibit codes used only to present statistics on insurance trusts by themselves--i.e., without regard to their effect on other areas.

These exhibit codes largely represent financial transactions that are intragovernmental or interfund transfers by the government administering the system. For public employee retirement systems, they also include investments that fall outside the cash and security definition used in the regular finance survey.

Chart 11-A provides a complete listing of all codes related to insurance trust finances, including the exhibit codes described below.

11.41 Public Employee Retirement System Exhibit Codes

Statistics on public employee retirement systems have more exhibit codes than any other insurance trust category, reflecting the greater complexity of their finances. Some of these codes represent additional detail for a regular finance code (e.g., cash and short-term deposits, code X21, is divided into three exhibit categories). Other codes are used solely for data collection and are never published (although they do appear in the special retirement data file). Additional codes reflect the retirement survey's broader definition of investments compared to the regular finance survey.

 
Code Description Where Classified in Regular Finances*
 
Revenue:
X04 Contribution from local government to system it administers (X)
X06 Contribution from state government to system it administers. This item is the sum of two subcodes, Z99 and V87:  
Z99 State government contributions to own system on behalf of state employees (X)
V87 State government contributions to own system on behalf of local employees (X)
Z95 Private gifts, donations, and other receipts (3)
Z96 Gain on sale of investments X08
Z98 Rentals from the state government to a state retirement system (X)
X99 Federal Government Only--Interest on U.S. Securities held by Federal retirement systems (X)
 
Expenditure:
X14 Administration, investment fees, losses on sale of investments (also deducted from X08), and other costs not representing benefits or withdrawals. This exhibit code is the sum of three subcodes, Z91, Z93, and Z90:  
Z91 Loss on sale of investments Deducted from X08
Z93 Administration, including investment fees E23
Z90 Other (3)
 
Cash, Securities, and Other Investments:
Z81 Total cash, securities, and other investments. Numeric total of all regular and exhibit codes (X)
Z88 Cash on hand and demand deposits X21
Z87 Time or savings deposits, including certificates of deposits X21
Z68 All other short-term investments, including securities in repurchase agreements (repo's), commercial and finance company paper and bankers acceptances, and miscellaneous money market funds X21
Z89 Federal securities, including short and long-term obligations of U.S. Treasury and Federal Financing Bank X30
X33 Federal agency securities, including bonds and mortgage-backed (where applicable) issued by CCC, Export-Import Bank, FHA, GNMA, Postal Service, and TVA. (Mortgages directly held by a retirement system are reported under code X42) X30
Z67 Federally-sponsored agency securities, including bonds and mortgage-backed notes issued by FHLB, FHLMC, FNMA, Farm credit banks, and SLMA X40
Z79 Other corporate bonds including debentures, convertible bonds, and railroad equipment certificates X40
Z82 Total other investments is the sum of an exhibit subcodes (X46) and a regular finance code (X47):  
X46 Real property directly held by retirement system. (Property held in investment trusts and in pooled or partner ship agreements is reported under code X47.) (X)
Z84 Investments held in trust by other agencies, such as funds administered by private agencies, guaranteed investment accounts, and system share of funds in governmental investment accounts X44
X35 Securities of state and local governments including those of its parent government (other than for the Federal retirement systems) X44
X69 Foreign and international securities X44
Z83 Other securities, N.E.C., including shares held in mutual funds, foreign and international securities, conditional sales contracts, and direct loans to members X44
 
Other Exhibit Codes:
Z97 Amounts for transmittal to Federal Social Security System. Collected to avoid misreporting elsewhere (X)
Z92 Amounts transmitted to Federal Social Security System. Collected to avoid misreporting elsewhere (X)
Z77 Market value of corporate bonds (book value reported at X40) (X)
Z78 Market value of corporate stock (book value reported at code X41) (X)

  * (X) means not reported in regular finance data.
 

11.42 Unemployment Compensation Exhibit Codes

The only exhibit code for unemployment compensation systems pertains to the Federal Government and reflects the fact that all its investments are in Federal securities whose interest payments represent interfund transfers.
 
Code Description Where Classified in Regular Finances*
 
Revenue:
Y99 Federal Government Only--Interest on U.S. Securities held by Federal retirement systems (X)

  * (X) means not reported in regular finance data.
 

11.43 Workers' Compensation Exhibit Codes

Exhibit codes for workers' compensation system are limited to one each for revenue and expenditure.
 
Code Description Where Classified in Regular Finances*
 
Revenue:
Y10 Contributions from state government to its own workers' compensation system (X)
 
Expenditure:
Y15 Administration, investment fees, losses on sale of investments (also deducted from Y12), and other costs not representing benefits or withdrawals E23#

  * (X) means not reported in regular finance data.
  # Administrative costs only included.
 

11.44 Other Insurance Trust Systems Exhibit Codes

Exhibit codes for other state government insurance trust systems are limited to one each for revenue and expenditure. In addition, each of the three Federal-only insurance trust systems has an exhibit code reflecting the fact that all its investments are in Federal securities whose interest payments represent interfund transfers.
 
Code Description Where Classified in Regular Finances*
 
Revenue:
Y50 Contributions from state government to its own other insurance trust system (X)
Y54 Administration, investment fees, losses on sale of investments (also deducted from Y52), and other costs not representing benefits or withdrawals
Federal Government systems interest on U.S. securities held as investments:
E23#
Y22 Social Security and Medicare (X)
Y32 Veterans' Life Insurance (X)
Y42 Railroad Retirement (X)

 * (X) means not reported in regular finance data.
 # Administrative costs only included.
 

11.5 Special Topics

Insurance trust finances are among the most complicated in the field, partly as a result of the large amount of intragovernmental transactions as well as the sophisticated but complex investments in which they engage. This section discusses some of the more complex topics and describes how they are treated for Census Bureau statistics.

11.51 Classifying Debt for Unemployment Compensation Funds

In rare cases, a government may issue debt to bolster its unemployment compensation (UC) system. Typically, it raises the contribution rate it levies on employers to cover debt service. This situation is classified in the following manner:

  • Revenue, Contributions (Code Y01): The government's unemployment compensation revenue consists of two parts: the "normal" payment to the UC fund and the amount needed to cover debt service (principal and interest). The former is treated as an UC revenue (code Y01); the latter is classified under Miscellaneous General Revenue (code U99).

  • Revenue, Federal Advances and Contributions (Code Y04): One possible reason for such debt is to repay the Federal Government for advancing funds when the government's UC account was insufficient to pay benefits. As described in Chapter 7, repayment of Federal advances is deducted from code Y04, leading to the possibility of a negative value for this revenue code. Note that, in a situation requiring a government to issue debt to repay the advances, it is possible that the repayment is so large that not only is code Y04 negative, but so is total unemployment compensation revenue.

  • Debt Retired, Issued, and Outstanding: This debt is classified in the "all other general debt" categories. Note that the transfer of the proceeds to the insurance trust fund would be an intragovernmental transfer. (Expenditures from it will eventually be reported as an insurance trust outlay.)

  • Interest on Debt: Interest on the debt outstanding is reported under Interest on General Debt, code I89.

11.52 Loans to Parent Government by Insurance Trust Systems

Because of their large amounts of cash and security holdings, insurance trust systems (especially public employee retirement ones) sometimes help out their parent government during times of fiscal distress. How these financial transactions are treated depends on the situation involved.

The insurance trust system may help out its parent government by purchasing its regular debt instruments; these are treated the same as other debt and investment transactions. That is:

  • It is not reported as either revenue of the parent government or as expenditure of the insurance trust.

  • It is reported under debt statistics of the parent government (debt issued and outstanding) and under cash and security holdings data of the insurance trust.

  • Interest payments on the debt is reported as an interest expenditure of the parent government (generally, code I89) and as earnings on investment of the insurance trust. No effort is made to exclude this transaction as an interfund transfer.

The insurance trust system may loan money directly to the parent government with a special note being involved. In these situations, the loan is not treated as debt of the parent government nor as a cash and security holding of the parent government. It is not reported as an insurance trust expenditure. The purpose of this treatment is to avoid duplication.


  1. Based largely on information in the appendix to the Budget of the United States. References to state governments in this description also refer to the District of Columbia. Citation

  2. The Federal Government also administers its own public employee retirement systems and is a member of the Federal-state cooperative unemployment compensation program. Citation

  3. Data reported in these categories usually are transferred to other, more applicable insurance trust codes. Citation


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Source: U.S. Census Bureau, Governments Division
Created: November 16 2000
Last revised: October 31 2011