R. LITVINOV, PhD student in Law, Kharkiv National University of Internal Affairs, SOCIAL SECURITY SYSTEM IN THE USA: GOOD OR BAD EXPERIENCE FOR UKRAINE? Analyzing the process of implementation of the pension reform in Ukraine, it should be stated that during the nine-year period after the introduction of the pension reform remains an unresolved problem of introduction of the accumulation system of the mandatory state pension insurance. Today s existing the unified system in Ukraine is not able to provide high pension benefits. There still remains some unresolved issues such as pension: the presence of arrears of contributions for statutory state pension insurance of enterprises, institutions and organizations; lack of adequate differentiation of pension payments resulting from social insurance contributions during employment; the shadow wage and employment; undeveloped financial sector, and inadequate corporate governance; the lack of reliable financial instruments for investment Pansy and-owned assets; inadequate level of financial and legal awareness of the population on the issues of pension provision; distrust of the pension system, etc. For improvement of the existing national system the great importance has the study and the use of international experience in this field with the purpose of imitation of the best options and avoids the disadvantages faced by other countries. In this context the experience of the pension reform of specific foreign countries deserves an attention, specifically in the part of introduction and functioning of the accumulative mandatory level of pension. In my opinion the introduction of funded pension systems in the United States has been quite successful. The basis of pension provision in the United States for over 60 years served the main public pension system (Social Security), which is built on the-go basis. But over the past decade, private pension systems are growing very rapidly and by
their scale have almost reached the level of a second national pension system. Already, growing number of Americans have the possibility of not one, but two or three or more sources of retirement income. In the U.S., there are 3 main types of private pension systems: private pension plans in the workplace (defined benefit plans and defined contribution plans), individual retirement accounts and annuities, i.e. annuity (sponsored by insurance companies). In contrast to the state pension system, private pension schemes are voluntary [2]. In Ukraine, the main source of retirement income is provided by state solidarity pension insurance system, financed on a pay-as -you -go basis and administrated by the Pension Fund of Ukraine. As a part of state pension insurance system, special privileged (occupational) pension schemes exist for different categories of workers (civil servants, armed forces/military personnel, judges, and principally workers involved in hazardous or difficult work environment) covering around 20 per cent of retirees. The participation in the state pension system is mandatory for all citizens, enterprises (public or private), foreigners, and stateless people employed under labour agreements or agreements in civil law as well as self-employed persons. Migrant workers can participate on a voluntary basis in the state solidarity pension system too [4]. On 1 st January 2004, Ukraine adopted the effective law "On Mandatory State Pension Insurance" introducing social insurance principles in its pension system. At the same time, supplementary non state pensions were also legislated and implemented. Together, the reformed system provides a three pillar pension system: the 1 st pillar is a pay -as- you -go system of the mandatory state pension insurance; the 2 nd pillar is supplementary mandatory individual pension accounts; and the 3 rd pillar is voluntary private pension insurance [3, p. 2-5]. These reforms established the basis of a mixture of public/private and pay - as -you -go/funded pension system in Ukraine. Subsequently, on September 6, 2011 the Parliament of Ukraine passed the final change to the Law of Ukraine "On the Measures on Legislative Enactment of Pension System Reform" and this Law
was signed by the President on September 9, 2011 (hereinafter "Law on Pension Reform"). According to the Law on Pension Reform the changes become effective starting from October 1, 2011 and practical impact of the reform for employers are the following: increase of the pension age for women. Pension reform increases gradually the pension age for women to 60 years over a 4 year period, provided that the retiree has working experience or social insurance period of not less than 15 years (currently 5); the minimum amount of the pension is established at 35 years of experience for men and 30 years of experience for women in the amount of one minimal living cost as defined by the law. For each additional year of experience (years during which social mandatory payments were paid) above 35 years for men and 30 years for women the amount of the pension is increased by 1% from the amount of pension calculated in accordance with the rules provided in the legislation, but not more than by 1% of the minimal amount of pension based on age; upon reaching the pension age established in the legislation, an individual has decided to continue working and receive the pension from a later age, then the pension based on age will take into account the number of years of experience or the number of years when the mandatory insurance payments were paid for such employee as of the date when such individual has applied for appointment of the pension with addition of the following: 0.5% of the pension amount will be added for each full month of working experience (when insurance payments were paid) in case of delaying retirement for the period up to 60 months; 0.75 % of the pension amount will be added for each full month of working experience (when insurance payments were paid) in case of delaying retirement for the period exceeding 60 months;
women who are subject to the pension age (born up to December 31, 1961) will have the option either to retire and receive the pension under the previous system (however, provided that they have not less than 30 years of working experience, i.e., the number of years when the mandatory insurance payments were paid for such employee), or continue working which will add to their pension additional 2.5% of the pension amount for each additional half a year of work starting from 55 to 60 years of age; according to the Law on Pension Reform, the second pillar (or savings) state mandatory pension insurance payments will be started from the year when there is no budget deficit in the Pension Fund of Ukraine (unfortunately there is no fixed date for this). The participants of Savings Pension Fund will include employees that are no more than 35 years old at the date of coming into force of the second pillar state mandatory pension insurance payments; the third pillar of the pension system will become active two years after second pillar becomes operational: social insurance payments into private pension funds will be paid in two years term after introduction of the social payments into the Savings Pension Fund; the Law on Pension Reform provides that the salary of employees will not be decreased as a result of an increase of the single social insurance payment (due to requirement of payment to Savings Pension Fund) and employers will adjust their expenses accordingly [1]. The Law provides only very general guidelines on how the new pension system will look and requires numerous additional legislative acts for its implementation. Thus, it is expected that many provisions of the Law on Pension Reform will be detailed and extended in normative acts and clarifications of the Ministry of Social Policy of Ukraine and the Pension Fund of Ukraine. So, we could summarize that the most useful experience that we could take from the U.S. pension system is development of private or accumulative pension systems.
The considerable experience of successful functioning of the accumulative pension schemes has formed in the United States. In the last decade of the XX century private pension funds, and pension programs at the state and local authorities have become influential investors in the economy and provide significant on the amount payments to participants of pension plans, mainly due to investment income. In ensuring the reliability and efficiency of activity of pension systems important role belongs to the state regulation, which in the United States has reached a high level of development and is one of the main factors of stability and further improvement of the pension system in the country. In Ukraine the introduction of a funded system in the structure of the compulsory pension insurance will contribute to: the formation of the integrity of the pension system, the dinamization, insurance, diversification of social risks; strengthen stability of the national funded pension system to adverse demographic changes, which will be strengthened in the country; creation of conditions for increasing the level of social security of citizens by increasing their level of personal responsibility for their welfare. References: 1. New Pension System in Ukraine Becomes Effective from October 1, 2011 // http://www.chadbourne.com/files/publication/4ff89303-dd5b-43d8-8a5b- a6cd7eb6069b/presentation/publicationattachment/dfdf14c4-37a1-48b1-b1a0- b431200f8581/kyiv-pensionreforminukraine_ca(johnson).pdf 2. Social Security - The Official Website of the U.S. Social Security Administration // http://www.ssa.gov/ 3. Strategy Paper for Pension Policy in Ukraine. European Centre for Social Welfare Policy and Research // http://www.euro.centre.org/data/1330957218_74201.pdf 4. Ukraine: Pension system profile OECD // http://www.oecd.org/countries/ukraine/45336467.pdf.