## 2.21 Social Security Schemes

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### Overall findings and high-level draft recommendations
- Recommend an updated version of the decision tree in GFSM 2014 Figure A2.2 and additional recommendations on five topics.
- Key draft recommendations:
  - Provide more granular explanations on the nature of the employer-employee relationship to resolve ambiguities between social security and employment-related schemes.
  - Introduce the concept of constructive liabilities and clarify that they are not included in the liabilities reported in GFS.
  - Specify employer-independent schemes for self-employed workers in line with 2025 SNA and consistently use the term “other social insurance” for schemes other than social security.
  - Expand GFSM 2014 guidance on the sector classification of provident funds and on the instrument classification of their liabilities.
  - Provide recommendations on distinguishing between pension and non-pension defined benefit schemes.

### Introduction: scope and rationale
- Recent SNA developments highlighted conceptual and practical issues in treating social security and other social insurance, including:
  - Ambiguities and inconsistencies affecting recording of pension entitlements.
  - Treatment of constructive liabilities and provident funds.
  - Need for clearer practical distinction between pension and non-pension defined benefit schemes.
- The DN examines five issues (A–E) with background, options, and draft recommendations, and proposes questions for Global Consultation.

### Issue A — Distinguishing between Social Security and Employment-related Schemes
- Background and issues:
  - SNA distinctions:
    - Social security schemes: cover the entire community or large sections of the community and are imposed, controlled and financed by government units.
    - Employment-related (other social insurance) schemes: derive from a specific employer-employee relationship; social protection arrangement is part of conditions of particular employment.
  - Pension and other entitlements:
    - Social security schemes: pension and other entitlements related to social security schemes are not recognized in the sequence of economic accounts and are recorded only in supplementary tables.
    - Other social insurance: pension entitlements treated as contractual obligations and recognized as liabilities towards households.
  - Practical complications noted:
    - Employer-managed schemes may include mechanisms allowing benefit adjustments depending on scheme finances; some publicly run social security schemes involve legally binding obligations.
    - Unified social security funds that include government employees may raise classification questions when government employees receive more generous terms; splitting may be required but data limitations often prevent it.
    - Inconsistent criteria and wording across 2008 SNA paragraphs and GFSM add uncertainty.
  - 2025 SNA provides more granular explanations (2025 SNA paragraphs 24.127 and 24.196) and assumes comparability of public and private employment contract conditions when determining recognition as liabilities.
- Options considered:
  - Option A1: Keep current GFSM guidance unchanged.
  - Option A2: Add more explanations and criteria aligned with 2025 SNA, introducing decision criteria such as:
    - Do the schemes cover only employees of government and/or public corporations? (“yes” points towards other social insurance scheme).
    - Are benefits tailored to (a) the population as a whole or (b) to individual employment conditions? ((a) indicates social security, (b) indicates other social insurance).
    - Can the scheme sponsor unilaterally change the benefits? (“yes” points to a social security scheme).
    - Is the scheme similar to schemes offered by private employers for their employees? (“yes” points to other social insurance scheme).
  - Option A3: Add clarifications on the coverage of “large sections of the community” with sub-options:
    - Sub-option A3 (a): If government and public corporations’ employees constitute a large section of the community, the scheme could be considered social security.
    - Sub-option A3 (b): Schemes that only ensure government and/or public corporations’ employees should be treated as other social insurance schemes irrespective of their population share.
- Draft recommendation:
  - Majority of the Task Team favors Option A2 to align GFSM with 2025 SNA and provide clearer criteria on the employer-employee relationship and limitations on altering entitlements.
  - Additional limited statement: when government and public corporations’ employees constitute a considerable part of the working population, it may be easy to treat the scheme as social security; more weight should be placed on the decision criteria from Option A2 rather than the size of the group.
  - GFS Advisory Committee (GFSAC) supported Option A2 after written review.

### Issue B — Defining and Recognizing Constructive Liabilities
- Background and issues:
  - 2008 SNA defined constructive liabilities but provided no examples (paragraphs 3.34 and 3.40). Constructive liabilities arise from long-standing and well-recognized custom rather than a contract, giving creditors a valid expectation of payment despite no legal contract.
  - 2025 SNA clarifies constructive liabilities are not recognized in the sequence of economic accounts (paragraph 4.102); typical example relates to pensions provided by government under a social security scheme (paragraph 4.102).
  - 2025 SNA reiterates sequence of economic accounts includes legal liabilities but excludes constructive and contingent liabilities, with an exception for standardized guarantees where an actual liability is established for the proportion likely to be called (paragraph 4.108).
  - GFSM 2014:
    - Defines liabilities and explicit and implicit contingent liabilities, but does not define “constructive liabilities.”
    - Contingent liabilities are recorded as memorandum items (GFSM 2014, paragraph 4.47).
    - Distinguishes explicit contingent liabilities (legal or contractual) and implicit contingent liabilities (not legal/contractual but recognized after a condition/event is realized) (GFSM 2014, paragraph 7.252).
    - Net implicit obligations for future social security benefits (other than employment-related retirement benefits) are not recognized as liabilities (GFSM 2014, paragraph 4.48).
    - Examples of implicit contingent liabilities include ensuring banking sector solvency, covering obligations of subnational governments in event of default, and assuming non-guaranteed debt of public sector units.
  - Gap: GFSM 2014 lacks a definition and explicit treatment of “constructive liabilities,” despite potential similarities to implicit contingent liabilities.
- Options considered:
  - Option B1: Keep current guidance without introducing the concept of constructive liabilities. No underreporting expected; absence of reference would lead compilers not to recognize such liabilities, but would ignore SNA concept and not clarify exclusion.
  - Option B2: Introduce the concept of constructive liabilities and clarify they are not included in liabilities reported under the GFSM. Aligns GFSM with 2025 SNA and could encourage disclosure as part of the memorandum item on implicit contingent liabilities.
  - Option B3: Introduce the concept of constructive liabilities and recognize them as liabilities in the sequence of accounts. Deviates from 2025 SNA; would broaden debt definition and change main indicators.
- Draft recommendation:
  - Majority of the Task Team favors Option B2 to preserve current treatment, strengthen guidance, and align terminology with 2025 SNA without introducing practical changes for GFS compilers.
  - GFSAC supported Option B2 following written review.

### Issue C — Delineating Social Insurance and Employer-independent Schemes
- Background and problems:
  - 2008 SNA guidance lacked explicit references to self-employed workers and related collective insurance arrangements (paragraphs referenced: 8.74, 8.76, 11.107).
  - Autonomous pension schemes for self-employed people may be obliged or encouraged by government and regulated similarly to employer-related pension schemes.
  - Guidance Note F.12 recommends clarifying that autonomous, employer-independent schemes or funds can qualify as social insurance pensions if accumulated contributions are set aside for retirement income and are subject to regulation or supervision similar to employer-related schemes/funds.
  - For employer-independent non-pension schemes: if obligatory or encouraged and organized by government, they are part of social insurance; absent government involvement, not to be treated as social insurance unless collective arrangements resemble government-organized arrangements and are managed by separate institutional units subject to similar regulation or supervision.
  - 2025 SNA includes explicit references to self-employed persons (2025 SNA, paragraphs 9.67 and 24.91) and additional guidance (paragraphs 9.78, 9.79, 24.99, 24.100); term “other social insurance” used consistently.
  - GFSM 2014 focuses on employer-employee relationship in defining social insurance and treats self-employed primarily in classifying source of social contributions (GFSM 2014 paragraphs A2.22, A2.40, A2.38).
- Options proposed:
  - Option C1: Keep current GFSM guidance unchanged. Easy to implement but ignores new collective arrangements for self-employed and would complicate international comparisons.
  - Option C2: Expand GFSM guidance with additional specifications for employer-independent schemes to align with 2025 SNA, including definition of a social insurance scheme and delineation between different insurance schemes; use the term “other social insurance” instead of “employment-related social insurance schemes”.
- Draft recommendation:
  - Majority of the Task Team favors Option C2 to align GFSM with 2025 SNA and improve reliability and integrity of international comparisons in fiscal statistics.
  - GFSAC supported Option C2 following written review.

### Issue D — Classifying Provident Funds
- Background and problems:
  - GFSM 2014 defines Provident Funds as compulsory saving schemes that maintain the integrity of contributions for individual participants (GFSM 2014, paragraph 2.148). Resident Provident Funds controlled by government and satisfying institutional unit and market producer definitions are classified as public financial corporations; if not an institutional unit, they are classified with the controlling government unit.
  - GFSM 2014 paragraph 2.151 notes a Provident Fund may include aspects of a social security scheme as well as a compulsory saving scheme; this appears incompatible with uncertainty about payment of social security benefits and no liabilities associated with potential future social security claims in GFS.
  - No specific guidance in the Note on Action Point 13 or 2025 SNA for Provident Funds.
  - Uncertainty whether household financial assets in Provident Funds and the Provident Fund’s associated liability should be classified as deposits or pension entitlements. 2025 SNA paragraph 12.117 defines pension entitlements as claims against an employer or a fund designated by their employer or a fund for the self-employed; Provident Fund assets resemble restricted deposits but withdrawal limits can be strict.
  - Sector/subsector classification implications:
    - If liabilities recorded as other deposits → Provident Fund presumably in deposit-taking corporations subsector.
    - If claims treated as pension entitlements → Provident Fund presumably in pension funds subsector.
  - Question whether Provident Funds are market producers given compulsory nature; arguments for classification as public financial corporations due to financial intermediation; GFSM 2014 has historically classified Provident Funds outside government sector.
  - Research Agenda includes project 2.2 Boundary between government and financial public corporations.
- Options proposed:
  - Option D1: Keep current GFSM guidance unchanged.
  - Option D2: Expand guidance on institutional classification and clarify classification of the Provident Funds liability to households, with sub-options:
    - Sub-option D2 (a): In pure form, classify Provident Funds as deposit-taking corporations and the liability as other deposits. If there are elements of other social insurance, classify the Provident Funds as the way the social insurance scheme is organized (GFSM 2014, paragraph A2.43) and the liability accordingly as pension entitlements.
    - Sub-option D2 (b): Always classify Provident Funds as deposit-taking corporations and the liability as other deposits.
    - Sub-option D2 (c): Classify Provident Funds as the way the social insurance scheme is organized (GFSM 2014, paragraph A2.43) and the liability accordingly as pension entitlements.
- Draft recommendation:
  - Majority of the Task Team favors Option D2 (a). Clarify GFSM guidance to capture Provident Funds while leaving room for structural differences. Coordinate approach with GFSM Update Research Project 2.2.
  - GFSAC supported Option D2 following written review.

### Issue E — Distinction between pension and non-pension defined benefit schemes
- Background and analytical distinctions:
  - Under a defined-benefit scheme, ultimate benefit is calculated by a formula embodied in the terms of the social insurance scheme; benefits usually determined by undertakings made by the employer or operator (GFSM 2014, paragraph A2.17).
  - Many social insurance arrangements provide a bundle of benefits (old-age, survivors, disability, sickness, unemployment) under a single legal framework; some benefits are “pension-type” (long-term income replacement) while others are “non-pension” (short-term or event-contingent).
  - Key conceptual distinction for statistical treatment:
    - Employment-related pension entitlements: treated as obligations that accrue over time, usually linked to compensation and constrained by “no retrospective adjustments”.
    - Non-pension social benefits: often contingent on a future event and generally do not create a stock of accrued rights in the same way.
  - For non‑pension defined‑benefit schemes, liabilities are recognized when relevant reserves, provisions, or other recognized liabilities actually exist in the account of the scheme; typically recorded as transfers when eligibility condition met, with unpaid amounts recorded as payables, rather than as an actuarially valued liability for future benefits.
- Operational criteria and recording steps (paragraph 36 and Step 1–3):
  - Step 1 — Operational criteria to identify pension-type benefits:
    - A defined benefit scheme is "pension-type" if it is predominantly characterized by all or most of the following:
      - Purpose and duration: provides long-term income replacement after retirement/old age, permanent disability/invalidity, or to survivors (typically paid as a long-duration annuity or for an extended period).
      - Accrual logic: eligibility and/or benefit level depends materially on past service/contributions (e.g., years of service, insured periods) and often past earnings, consistent with an accrued-to-date concept.
      - Benefit event: entitlement does not require a recurring short-term contingency like temporary sickness or temporary unemployment and is not primarily a reimbursement of specific costs like healthcare.
    - If yes, treat the benefit as pension-type and proceed to Step 2. If no, treat it as non-pension without recognition of a liability.
  - Step 2 — Determination of pension entitlements recognition:
    - Apply scheme-delineation guidance (Issue A and Issue C).
    - Recording rules:
      - Where the benefit is pension-type and the scheme qualifies as other social insurance, associated pension entitlements are recorded as liabilities.
      - Where the pension-type benefit is provided under a social security scheme, the treatment follows the GFSM/SNA approach for social security pensions.
  - Step 3 — Treatment of bundled or hybrid schemes:
    - Preferred approach: split the scheme into pension and non-pension components for recording (positions and flows) where feasible.
    - If a split is not feasible: define the primary purpose of the scheme and treat it accordingly.
- Options identified:
  - Option E1: Keep GFSM guidance unchanged (no additional operational criteria). Current guidance defines the distinction in GFSM 2014 (Figure A2.2) as “provides mainly pension benefits”; hybrid schemes likely treated as pension schemes.
  - Option E2: Expand GFSM guidance with:
    - (i) practical pension vs non-pension criteria (as proposed in paragraph 36),
    - (ii) explicit treatment rules for bundled schemes, and
    - (iii) a concise conceptual explanation of why pension entitlements are recognized while other social benefits are not.
- Draft recommendation and governance view:
  - Majority of the Task Team favors Option E2 to improve cross-country consistency and reduce misclassification risks while remaining aligned with SNA/GFSM rationale.
  - GFSAC supported Option E2 following written review.
  - An earlier version was shared with GFSAC for written review in April 2026; current version addressed GFSAC suggestions and is consistent with preliminary views of most GFSAC members.
- Consultation question (selected):
  - Issue E: Indicate your preferred choice: Option E1, Option E2. Explain the reason and provide additional comments or alternative options.

### Procedural and harmonization points
- Emphasize harmonizing GFSM guidance with 2025 SNA where appropriate to reduce misclassification risk and improve international comparability.
- Note GFSM-specific presentation differences (e.g., treatment of government employment-related pension benefits as liquidations of pension liabilities rather than current expense) that need alignment or clarification alongside SNA updates.

### Annex 2 — Examples and classification criteria for autonomous pension schemes for self-employed
- Types of schemes:
  - Employer-Independent Schemes: organized for self-employed individuals or groups, may be established as autonomous pension funds with accumulated contributions set aside for retirement income; must operate as separate institutional units and be subject to regulation or supervision akin to employer-related pension schemes.
  - Multi-Employer Pension Schemes: involve multiple employers or groups of self-employed individuals pooling resources; managed by specialized units that assume funding risk.
  - Collective Arrangements: schemes for specific professions or industries (e.g., trade unions or professional associations) that resemble employer-related schemes.
  - Individual Pension Trusts: may be treated as part of social insurance if they meet conditions for social insurance, such as being collective arrangements and subject to regulation.
- Key criteria for classification:
  - Autonomy: scheme must be managed as a separate institutional unit directly accountable for its decisions and actions.
  - Regulation and Supervision: scheme must adhere to regulations similar to those governing employer-related pension schemes.
  - Funding: contributions must be accumulated in a segregated fund to provide retirement income.

*Source: Discussion Note 2.21 Social Security Schemes, GFSM 2014 Update Consultation: May 2026.*

### 2.21 Social Security Schemes

### 2.21 Social Security Schemes

### Summary Details
- Task Team Responsible: GFS compilation Task Team (TT1)
- Authors of Discussion Note: Irina Dubinina, Simon Koller, Diana Vargas, Geraldine Kyalo
- Purpose: Examine five conceptual and practical issues relating to the delineation of social security and other social insurance schemes and provide draft recommendations for the updated Government Finance Statistics Manual (GFSM).

### Overall Findings and Draft Recommendations (high level)
- The Discussion Note (DN) recommends an updated version of the decision tree in GFSM 2014 Figure A2.2 and offers additional recommendations on five topics.
- Key draft recommendations include:
  - Provide more granular explanations on the nature of the employer-employee relationship to resolve ambiguities between social security and employment-related schemes.
  - Introduce the concept of constructive liabilities and clarify that they are not included in the liabilities reported in GFS.
  - Specify employer-independent schemes for self-employed workers in line with 2025 SNA and consistently use the term “other social insurance” for schemes other than social security.
  - Expand GFSM 2014 guidance on the sector classification of provident funds and on the instrument classification of their liabilities.
  - Provide recommendations on distinguishing between pension and non-pension defined benefit schemes.

*The views expressed in this Discussion Note are those of the authors and/or Task Team and do not necessarily represent the views of the IMF.*

### Introduction: scope and rationale
- Recent developments in the update of the System of National Accounts (SNA) highlighted conceptual and practical issues in treating social security and other social insurance, including:
  - Ambiguities and inconsistencies affecting recording of pension entitlements.
  - Treatment of constructive liabilities and provident funds.
  - Need for clearer practical distinction between pension and non-pension defined benefit schemes.
- The DN examines five issues (A–E) with background, options, and draft recommendations, and proposes questions for Global Consultation.

### Issue A — Distinguishing between Social Security and Employment-related Schemes
Background and issues:
- SNA distinguishes social security from employment-related schemes:
  - Social security schemes: cover the entire community or large sections of the community and are imposed, controlled and financed by government units.
  - Employment-related (other social insurance) schemes: derive from a specific employer-employee relationship; social protection arrangement is part of conditions of particular employment.
- Pension and other entitlements related to social security schemes are not recognized in the sequence of economic accounts and are recorded only in supplementary tables; other social insurance pension entitlements are treated as contractual obligations and recognized as liabilities towards households.
- Practical complications:
  - Employer-managed schemes may include mechanisms allowing benefit adjustments depending on scheme finances; some publicly run social security schemes involve legally binding obligations.
  - Unified social security funds that include government employees may raise classification questions when government employees receive more generous terms; such cases may require splitting the scheme between social security and other social insurance, though data limitations often prevent splits.
  - Inconsistent criteria and wording across 2008 SNA paragraphs and GFSM add to uncertainty.
- 2025 SNA provides more granular explanations (2025 SNA paragraphs 24.127 and 24.196) and assumes comparability of public and private employment contract conditions when determining recognition as liabilities.

Options considered:
- Option A1: Keep current GFSM guidance unchanged.
- Option A2: Add more explanations and criteria aligned with 2025 SNA, introducing decision criteria such as:
  - Do the schemes cover only employees of government and/or public corporations? (“yes” points towards other social insurance scheme).
  - Are benefits tailored to (a) the population as a whole or (b) to individual employment conditions? ((a) indicates social security, (b) indicates other social insurance).
  - Can the scheme sponsor unilaterally change the benefits? (“yes” points to a social security scheme).
  - Is the scheme similar to schemes offered by private employers for their employees? (“yes” points to other social insurance scheme).
- Option A3: Add clarifications on the coverage of “large sections of the community” with sub-options:
  - Sub-option A3 (a): If government and public corporations’ employees constitute a large section of the community, the scheme could be considered social security.
  - Sub-option A3 (b): Schemes that only ensure government and/or public corporations’ employees should be treated as other social insurance schemes irrespective of their population share.

Draft recommendation:
- Majority of the Task Team favors Option A2 to align GFSM with 2025 SNA and provide clearer criteria on the employer-employee relationship and limitations on altering entitlements.
- Additional limited statement noting that when government and public corporations’ employees constitute a considerable part of the working population, it may be easy to treat the scheme as social security; however, more weight should be placed on the new decision criteria from Option A2 rather than the size of the group.
- GFS Advisory Committee (GFSAC) supported Option A2 after written review.

### Issue B — Defining and Recognizing Constructive Liabilities
Background and issues:
- 2008 SNA defined constructive liabilities but provided no examples (paragraphs 3.34 and 3.40). Constructive liabilities arise from long-standing and well-recognized custom (consistent past behavior or expectations) rather than a contract, giving creditors a valid expectation of payment despite no legal contract.
- 2025 SNA clarifies that constructive liabilities are not recognized in the sequence of economic accounts (paragraph 4.102); the typical example relates to pensions provided by government under a social security scheme (paragraph 4.102).
- 2025 SNA reiterates that the sequence of economic accounts includes legal liabilities but excludes constructive and contingent liabilities, with an exception for standardized guarantees where an actual liability is established for the proportion likely to be called (paragraph 4.108).
- GFSM 2014:
  - Defines liabilities and explicit and implicit contingent liabilities, but does not define “constructive liabilities.”
  - Contingent liabilities are recorded as memorandum items (GFSM 2014, paragraph 4.47).
  - Distinguishes explicit contingent liabilities (legal or contractual) and implicit contingent liabilities (not legal/contractual but recognized after a condition/event is realized) (GFSM 2014, paragraph 7.252).
  - Net implicit obligations for future social security benefits (other than employment-related retirement benefits) are not recognized as liabilities (GFSM 2014, paragraph 4.48).
  - Examples of implicit contingent liabilities include ensuring banking sector solvency, covering obligations of subnational governments in event of default, and assuming non-guaranteed debt of public sector units.
- Gap: GFSM 2014 lacks a definition and explicit treatment of “constructive liabilities,” despite potential similarities to implicit contingent liabilities.

Options identified to address Issue B:
- (Options are introduced in the DN but not fully listed in the excerpt provided; the DN proposes to introduce the concept of constructive liabilities into GFSM and to clarify that constructive liabilities are not included in liabilities reported in GFS.)

### Other Issues (C–E) — Overview of scope (as introduced)
- Issue C: Delineating social insurance and employer-independent schemes — DN recommends specifying employer-independent schemes for self-employed workers in line with 2025 SNA and consistently using the term “other social insurance” for non-social security schemes.
- Issue D: Classifying provident funds — DN recommends expanding GFSM 2014 guidance on the sector classification of provident funds and on the instrument classification of their liabilities.
- Issue E: Distinguishing between pension and non-pension defined benefit schemes — DN provides recommendations on clarifying the practical distinction.

### Procedural and harmonization points
- The DN emphasizes harmonizing GFSM guidance with 2025 SNA where appropriate to reduce misclassification risk and improve international comparability.
- GFSM-specific presentation differences (e.g., treatment of government employment-related pension benefits as liquidations of pension liabilities rather than current expense) are highlighted and need alignment or clarification alongside SNA updates.

*Source: Discussion Note 2.21 Social Security Schemes, GFSM 2014 Update Consultation: May 2026.*

### 15. To address the issue of defining constructive liabilities in the updated GFSM guidance, the

### GFSM Discussion Note 221 — Social Security Schemes

### Issue B: Defining constructive liabilities
- Options considered by the Task Team:
  - Option B1: Keep the current guidance in the GFSM update without introducing the concept of constructive liabilities. Under this option, no underreporting of such liabilities is expected, given that they are not currently reported under existing frameworks. The absence of any reference to constructive liabilities in the GFSM should lead compilers not to recognize such liabilities in fiscal statistics. However, this option would ignore the SNA concept of constructive liabilities, and then not specifically clarify that constructive obligations are not included in GFSM concept of liabilities.
  - Option B2: Introduce the concept of constructive liabilities and clarify that they are not included in the liabilities reported under the GFSM. This option would align the updated GFSM with the 2025 SNA guidance and alert compilers and data users that these established obligations by long-standing and well-recognized custom are not included in liabilities. The guidance could encourage disclosure as part of the memorandum item on implicit contingent liabilities.
  - Option B3: Introduce the concept of constructive liabilities in the new GFSM and recognize them as liabilities in the sequence of accounts. This option would deviate from the 2025 SNA. It would result in a more comprehensive debt definition and consequently change main indicators.
- Draft recommendations:
  - The majority of the Task Team favors Option B2. This option would preserve the current treatment of these liabilities, strengthen the guidance, and align the GFSM terminology with the 2025 SNA without introducing practical changes for GFS compilers.
  - Following written review, GFSAC supported the Task Team’s recommendation of Option B2.

### Issue C: Delineating social insurance and employer-independent schemes
- Background and problems identified:
  - The 2008 SNA guidance on delineating social insurance schemes lacked explicit references to self-employed workers and related forms of collective insurance arrangements (paragraphs referenced: 8.74, 8.76, 11.107).
  - Autonomous pension schemes for self-employed people exist in several countries; they may be obliged or encouraged by government for certain groups and are regulated similarly to employer-related pension schemes.
  - The Guidance Note F.12 recommends clarifying that autonomous, employer-independent schemes or funds can also qualify as social insurance pensions, specifying the criterion: accumulated contributions are set aside for retirement income and are subject to regulation or supervision in line with or similar to employer-related pension schemes/funds.
  - For employer-independent schemes providing benefits other than pensions, if obligatory or encouraged and organized by government, such schemes are part of social insurance; absent government involvement the Note on Action Point 13 recommends not treating such non-pension schemes as social insurance unless they are collective arrangements resembling government-organized arrangements and are managed by separate institutional units subject to regulation or supervision similar to employer-related schemes.
  - The 2025 SNA provides more specific guidance, including explicit references to self-employed persons (2025 SNA, paragraphs 9.67 and 24.91) and additional paragraphs (9.78, 9.79, 24.99, 24.100) on inclusion of schemes not derived from an employer-employee relationship; the term “other social insurance” is used consistently.
  - GFSM 2014 focuses on employer-employee relationship in defining social insurance and considers self-employed workers primarily in the context of classifying the source of social contributions (GFSM 2014 paragraphs A2.22, A2.40, A2.38).
- Options proposed by the Task Team:
  - Option C1: Keep the current GFSM guidance in delineating social insurance schemes unchanged. This option would be easy to implement but would ignore new collective arrangements for social insurance, such as those for self-employed workers, complicating international comparisons and undermining benchmarking of fiscal performance.
  - Option C2: Expand the GFSM guidance with additional specifications for employer-independent schemes to align with the 2025 SNA guidance, including the definition of a social insurance scheme and delineation between different insurance schemes. Use the term “other social insurance” for schemes other than social security instead of “employment-related social insurance schemes” and “other employment-related social insurance schemes”.
- Draft recommendations:
  - The majority of the Task Team favors Option C2. Implementing this option provides for better alignment of GFSM with 2025 SNA and improves the reliability and integrity of international comparisons in fiscal statistics.
  - Following written review, GFSAC supported the Task Team’s recommendation of Option C2.

### Issue D: Classifying Provident Funds
- Background and problems identified:
  - GFSM 2014 includes a definition of Provident Funds and institutional classification recommendations: Provident Funds are compulsory saving schemes that maintain the integrity of the contributions for individual participants (GFSM 2014, paragraph 2.148). Resident Provident Funds controlled by government and satisfying institutional unit and market producer definitions are classified as public financial corporations; if they do not satisfy the criteria to be an institutional unit, they are classified with the controlling government unit.
  - GFSM 2014 paragraph 2.151 notes a Provident Fund may include aspects of a social security scheme as well as a compulsory saving scheme; the Note observes this reference seems incompatible with uncertainty about payment of social security benefits and that no liabilities are associated with potential future claims on social security schemes in GFS.
  - There is no specific guidance in the Note on Action Point 13 or 2025 SNA for Provident Funds.
  - Uncertainty exists about whether household financial assets in Provident Funds and the Provident Fund’s associated liability should be classified as deposits or pension entitlements. 2025 SNA paragraph 12.117 defines pension entitlements as claims against an employer or a fund designated by their employer or a fund for the self-employed; Provident Fund assets resemble restricted deposits but limits on withdrawals can be unusually strict.
  - Sector/subsector classification implications:
    - If liabilities recorded as other deposits → Provident Fund presumably in deposit-taking corporations subsector.
    - If claims treated as pension entitlements → Provident Fund presumably in pension funds subsector.
  - Question whether Provident Funds are market producers given compulsory nature; arguments exist for classification as public financial corporations due to financial intermediation; GFSM 2014 has long classified Provident Funds outside government sector.
  - Research Agenda includes project 2.2 Boundary between government and financial public corporations.
- Options proposed by the Task Team:
  - Option D1: Consider the current GFSM guidance as sufficient and keep it in the GFSM update. Preserve existing treatment; biggest uncertainty is subsector classification in financial corporations sector.
  - Option D2: Expand guidance on institutional classification and clarify the classification of the Provident Funds liability to households, with sub-options:
    - Sub-option D2 (a): In its purest form, Provident Funds should be classified as deposit-taking corporations and the liability should be other deposits. If there are elements of other social insurance, the Provident Funds should be classified as the way in which the social insurance scheme is organized (GFSM 2014, paragraph A2.43) and the liability accordingly as pension entitlements. This option would lead to classifications that take into account the different setups of Provident Funds and help classify the liability if the scheme is classified within government.
    - Sub-option D2 (b): Provident Funds should always be classified as deposit-taking corporations and the liability should be other deposits. This option ensures equal treatment of all Provident Funds and highlights the liability’s deposit-like nature.
    - Sub-option D2 (c): Provident Funds should be classified as the way in which the social insurance scheme is organized (GFSM 2014, paragraph A2.43) and the liability accordingly as pension entitlements. This option ensures equal treatment of all provident funds and emphasizes the pension nature of the liability.
- Draft recommendations:
  - The majority of the Task Team favors Option D2 (a). Implementing this option would clarify GFSM guidance to ensure GFS accurately capture Provident Funds, while still leaving room for differences in how Provident Funds are structured. The approach should be coordinated with the results of the research on GFSM Update Research Project 2.2 (Boundary between government and financial public corporations).
  - Following written review, GFSAC supported the Task Team’s recommendation of Option D2.

### Issue E: Distinction between pension and non-pension defined benefit schemes
- Background and analytical distinctions:
  - Pension and non-pension defined benefit schemes often look similar legally or administratively. Under a defined-benefit scheme, the ultimate benefit is calculated by means of a formula embodied in the terms of the social insurance scheme. These benefits are usually determined in terms of undertakings made by the employer or operator of the scheme (GFSM 2014, paragraph A2.17).
  - Many social insurance arrangements provide a bundle of benefits (old-age, survivors, disability, sickness, unemployment) under a single legal framework and sometimes a single institutional unit; some benefits are “pension-type” (long-term income replacement following permanent withdrawal from the labor force, or for survivors) while others are “non-pension” (typically short-term or event-contingent such as sickness and unemployment).
  - Key conceptual distinction for statistical treatment:
    - Employment-related pension entitlements: treated as obligations that accrue over time, usually closely linked to compensation and typically constrained by the “no retrospective adjustments” condition associated with employment contracts.
    - Non-pension social benefits: often remain contingent on a future event and generally do not create a stock of accrued rights in the same way.
    - For non‑pension defined‑benefit schemes, liabilities are recognized when relevant reserves, provisions, or other recognized liabilities actually exist in the account of the scheme. They are typically recorded as transfers when the eligibility condition is met, with unpaid amounts recorded as payables, rather than as an actuarially valued liability for future benefits.
- Identified need and potential guidance:
  - The updated GFSM guidance would benefit from practical criteria to help compilers separate pensions from non-pension defined benefit schemes within broader social insurance arrangements.
  - Guidance should explain the conceptual rationale for recognizing pension liabilities rather than other liabilities from non-pension schemes, improving cross-country comparability where similar benefits are delivered through different institutional arrangements.
  - Clearer delineation would help ensure economically comparable obligations are recorded consistently in government accounts, reduce the risk of overstating or understating government liabilities, and enhance the analytical usefulness of fiscal indicators such as net worth and the net operating balance.

*Source: GFSM 2014 Update Consultation: May 2026 — Task Team options, draft recommendations, and background discussions on social security schemes, constructive liabilities, delineation of social insurance, Provident Funds, and the pension vs non-pension defined benefit distinction.*

### 36. To support consistent compilation, the updated GFSM guidance could include a simple set

### Distinction between pension and non-pension defined benefit schemes

### Operational criteria to identify pension-type benefits (Step 1)
- A defined benefit scheme is "pension-type" if it is predominantly characterized by all or most of the following:
  - Purpose and duration: provides long-term income replacement after retirement/old age, permanent disability/invalidity, or to survivors (typically paid as a long-duration annuity or for an extended period).
  - Accrual logic: eligibility and/or benefit level depends materially on past service/contributions (e.g., years of service, insured periods) and often past earnings, consistent with an accrued-to-date concept.
  - Benefit event: entitlement does not require a recurring short-term contingency like temporary sickness or temporary unemployment and is not primarily a reimbursement of specific costs like healthcare.
- If yes, treat the benefit as pension-type and proceed to Step 2. If no, treat it as non-pension without the recognition of a liability.

### Determination of pension entitlements recognition (Step 2)
- Apply the scheme-delineation guidance (social security vs other social insurance/employment-related) developed in Issue A and Issue C.
- Recording rules:
  - Where the benefit is pension-type and the scheme qualifies as other social insurance, the associated pension entitlements are recorded as liabilities.
  - Where the pension-type benefit is provided under a social security scheme, the treatment follows the GFSM/SNA approach for social security pensions.

### Treatment of bundled or hybrid schemes (Step 3)
- Preferred approach: split the scheme into pension and non-pension components for recording (positions and flows) where feasible.
- If a split is not feasible: define the primary purpose of the scheme and treat it accordingly.

### Options identified to address the issue (paragraph 37)
- Option E1: Keep GFSM guidance unchanged (no additional operational criteria). The current guidance defines the distinction in GFSM 2014 (Figure A2.2) as “provides mainly pension benefits”. Hybrid schemes are likely to be treated as pension schemes. This is not very different to the suggested additional guidance.
- Option E2: Expand GFSM guidance with:
  - (i) practical pension vs non-pension criteria (as proposed in paragraph 36),
  - (ii) explicit treatment rules for bundled schemes, and
  - (iii) a concise conceptual explanation of why pension entitlements are recognized while other social benefits are not.

### Draft recommendations and governance views
- The majority of the Task Team favors Option E2 to improve cross-country consistency and to reduce misclassification risks in large, multi-benefit social insurance arrangements, while remaining aligned with the underlying SNA/GFSM rationale for liability recognition. (paragraph 38)
- Following written review, GFSAC supported the Task Team’s recommendation of Option E2. (paragraph 39)
- An earlier version of the discussion note was shared with GFSAC for written review in April 2026. This version of the discussion note has addressed suggestions made by GFSAC members and the task team recommendations in the note are consistent with the preliminary views of most GFSAC members. (paragraph 40)

### Questions posed for global consultations (selected)
- Issue E: Distinction between pension and non-pension defined benefit schemes
  - Indicate your preferred choice: Option E1, Option E2. Please explain the reason for your choice and provide any other additional comments (including any alternative options you would like to propose).

### Examples and classification criteria for autonomous pension schemes for self-employed (Annex 2)
- Types of schemes:
  - Employer-Independent Schemes: organized for self-employed individuals or groups, may be established as autonomous pension funds with accumulated contributions set aside for retirement income; must operate as separate institutional units and be subject to regulation or supervision akin to employer-related pension schemes.
  - Multi-Employer Pension Schemes: involve multiple employers or groups of self-employed individuals pooling resources; managed by specialized units that assume funding risk.
  - Collective Arrangements: schemes for specific professions or industries (e.g., trade unions or professional associations) that resemble employer-related schemes.
  - Individual Pension Trusts: may be treated as part of social insurance if they meet conditions for social insurance, such as being collective arrangements and subject to regulation.
- Key criteria for classification:
  - Autonomy: the scheme must be managed as a separate institutional unit directly accountable for its decisions and actions.
  - Regulation and Supervision: the scheme must adhere to regulations similar to those governing employer-related pension schemes.
  - Funding: contributions must be accumulated in a segregated fund to provide retirement income.

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_Source: https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/may-2026/gfsm-discussion-note-221-social-security-schemes.pdf_