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Introduction

As many publishers' sites are billboards, BookWorld Publications will start to offer free and paid information for everybody in the legal society in a way that is easy, fast and less expensive.

Our first project will be the publication of constitutional cases from courts in 7 Central and Eastern European countries for a free access to the ones we couldn't publish in the East European Case Reporter of Constitutional Law.

Look for the first cases to appear on this site in April 1997, later to be followed by a separate site where you can access the newer cases against a fee.

Periodicals

BookWorld Publications publishes 6 periodicals:

Law Books Catalogue

Barnhoorn, B. et al.
Human Rights as Constitutional Rights
1996, ISBN: 90-75228-08-6

Jacobs, Antoine
Labour Law and Social Security in the Netherlands,
an introduction. 2nd revised edition
1997, ISBN: 90-75228-11-2

Elliigett, Raymond & Scheb, John
Florida Appellate Practice & Advocacy
1998, ISBN: 90-75228-15-5

Rich, William, et al.
The Law of 6 December 1996 on the Registered Pledge and the Pledge Registry
A New Tool for Bankers
1997, ISBN: 90-75228-12-0

Leszczynski, Leszek, et al.
Protection of Human Rights in Poland and the European Communities, 2nd. edition
1997, ISBN: 90-75228-13-9

Troskie, Herman
An Introduction to Strikes in the Netherlands
1995, ISBN: 90-75228-06-6

Vause, W. Gary
Introduction to International Business Transactions
1997, ISBN: 90-75228-09-0

Vause, W. Gary & Sarmova, Kalina
Business Law Guide: Bulgaria
1997, ISBN: 90-75228-10-4

Voluntary Social Security in THE NETHERLANDS

Frans Pennings

1. INTRODUCTION

Several forms of voluntary social security can be distinguished in the Netherlands and the differences between the different types are quite substantial.

First of all, we have to mention the supplementary pension schemes. These schemes will be discussed in Section 2; a characteristic of these schemes is that in some areas they are declared compulsory for employers and employees.

A second type of schemes are those in which employees can insure themselves on a voluntary basis for statutory sickness benefit, disability benefit, or unemployment benefit. These schemes will be discussed in Section 3.

A third category is that of the voluntary insurance supplements to statutory social security, organised after statutory benefits have been reduced considerably. These benefits will be discussed in Section 4.

A fourth category of voluntary social security is the "really" voluntary type. We will discuss these benefits in Section 5.

In Section 6, we will discuss the future role of voluntary benefits in the Netherlands.

2. SUPPLEMENTARY PENSION SCHEMES

In the Netherlands, all residents are insured for a flat-rate old-age pension. For each year they reside in the Netherlands, persons acquire two percent of the full rate; the years relevant for acquiring two percent in each year lie between their fifteenth and sixty-fifth birthday. In this way, persons who lived during this period exclusively in the Netherlands (and who were not employed abroad) acquire the full old-age pension. The full benefit rate is fifty percent of the minimum wage in force for an individual who is married. A retired couple is, therefore, entitled to an old-age pension which is equal to the minimum wage. Single retired persons over sixty-five are entitled to seventy percent of the minimum wage. We will not discuss the other rates of this benefit here. Although the statutory old-age pension is (still) on a decent level, many people feel that the difference between the income they will earn at the end of their occupational life and the basic pension is too low. For this reason, large supplementary pension schemes have been created. As the Netherlands statutory pensions are flat-rate (in which they differ from the neighbouring states), there is considerable room for establishing such supplementary pensions.

It is up to the organisations of employers and employees to establish a supplementary pension scheme. The government cannot force the social partners to make such a scheme, but once such scheme is created, the Act on the compulsory participation in occupational pension schemes is relevant to that scheme.

This law provides that if one or more organisations, who are, in the opinion of the Minister of Social Affairs, sufficiently representative for the branch concerned, make a request to the Minister to make a pension scheme generally binding for (all or some groups working in) that branch, the Minister has the powers to do so. If the Minister has issued such a decree, the scheme becomes generally binding, in which there is no longer voluntary participation, neither on the part of the employees, nor on the part of the employers.

Social partners are easily inclined to make a request to make a scheme generally binding, because otherwise there would be a large difference in wage costs contributions having to be paid for this scheme only for employees covered by the scheme. This would lead to distortion of competition. Furthermore, there are reasons of a social policy nature to make these provisions binding for all the employees working in the branch.

The schemes concerned generally do not only give rules on old-age pensions, but also on supplementary survivors' pensions and invalidity benefits.
There are no statutory rules on the contents of the schemes and the levels of the pensions; for the purpose of making the scheme generally binding, the Minister investigates the financial safety of the fund, but not the contents.

In practice, there are several differences as concerns to the level of pensions. Some old-age pensions provide for a supplement to the basic old-age pension up to seventy percent of the last earned wages (e.g., of the last two years before retirement), provided that the person concerned was covered the full insurance period (most times from his twenty-fifth year until sixty-five). In case the insured period is shorter, the pension is proportionately reduced. There are, however, also pension schemes which promise a pension based on the average earnings during the full employment period. Other schemes do not promise a certain percentage of the last earned wages, but provide for a pension which is the result of contributions paid during coverage by the fund, plus the earnings from investing the contributions during the periods.
We can call these schemes voluntary insofar as the social partners (and the board of the pension fund, which consists of representatives of the social partners) have to decide on (the contents of) the funds. For individual employers and employees, these schemes are not voluntary; after a fund is made compulsory, they are forced by law to participate (pay contributions) and there are even penal sanctions in case they refuse to pay the contributions.

The legislator chose this instrument of making participation compulsory because it wished to enable funds to make schemes in which pensions are adjusted to the rising general income level. For this purpose a broad participation is required. Other reasons were that the legislator also wished to promote solidarity between the younger and older generations within branches and that schemes had to pay pensions which also took the years into account lying before the occupational scheme came into force. Such a general coverage was possible only if all persons working in that branch participated. The legislator acknowledged that such a scheme could infringe on the individual interests of some or more participants in that branch; such an infringement, however, had to be accepted, because, as it is argued, any collective scheme infringes on individual freedoms.

The law was disputed before the Dutch High Court in the case of a physiotherapist who claimed that the scheme of physiotherapists was against his interests. The physiotherapists made an occupational scheme in 1978; this scheme implied that a foundation was to be established and participants, both employers, employees and self-employed persons, had to adhere to this scheme. An exception was made for those persons who were covered by a scheme which was at least equivalent to the physiotherapists' scheme. The general scheme was made compulsory by a decree of the Secretary of Social Affairs.

The fund itself later made an appendix to the scheme which provided that a scheme in order to be equivalent had to apply to all persons working for a particular employer; furthermore, this was possible only in the case of persons working as employees.

The claimant in this case was a physiotherapist who bought a pension insurance from a private company. His employer declared that this scheme was equivalent to that of the physiotherapists. The claimant was, however, not allowed to "contract out" of the general scheme because not all of his colleagues were covered by that private pension scheme.

It is interesting to see that we started to describe the occupational pensions as a voluntary scheme and that we now arrived at a stage in which persons are not allowed to escape the voluntary scheme to join a scheme they chose themselves.

This is not the place to discuss the procedures followed in this case to the full extent; the courts in the three instances followed by the claimant each had their own opinions on the acceptability of the rule. The judge of the last instance, the High Court, decided that the requirement of the physiotherapists' scheme, that an alternative to be equivalent had to be a collective scheme, was to be accepted, as the basis for allowing exceptions was not meant as a rule to give people the freedom to escape the general scheme, but only to avoid situations in which people could be covered by two collective schemes at the same time. As a result of this decision, under national law, the physiotherapist could not leave the general scheme. Under the rules of EC law, it is, however, unclear whether it is allowed to restrict competition in the way it is done as shown in the case described here. Since courts have, in case there is no opportunity of another instance, to ask the Court of Justice for a preliminary ruling if there is any uncertainty on EC law, the Dutch court asked the Court of Justice to clarify this issue. We are still waiting for a reply, which can shed more light on this question.
A final point where people do no longer feel satisfied with accepting "compulsory" voluntary benefits concerns the contents of the insurance. More and more people are no longer interested in insurance for a survivors' pension. Still, many schemes have such a pension and all participants have to pay contributions. Recently, parliament decided that pension funds have to adjust their regulations as to offer the participants the opportunity to choose to acquire a higher old-age pension instead of insurance for a survivors' pension. This opportunity must be realised in the year 2000.
Conclusion
Supplementary pensions are usually deemed to belong to the category of voluntary social security. We will not refute this indication, but it will be clear that the freedom to establish a scheme and to decide on the contents of a scheme exists for the representatives of the participants only. For the participants there are now some small signs of more choice and it can be expected that indeed the freedom in this area will increase, either or not as a result of EC law. Although it would not be a good result if people could choose to join or not join a scheme at all, it certainly would be a good development if people could decide which fund they wish to join, regardless of the branch they work in. If this freedom exists, commercial insurance plans should also be an alternative, provided they are equivalent to the general schemes.

3. VOLUNTARY ADHERENCE TO STATUTORY

EMPLOYEES INSURANCE SCHEMES
Under the present statutory Dutch rules, two forms of voluntary insurances can be distinguished. One form is the so-called "compulsory" voluntary insurance (in case of sickness benefits, disability benefits and unemployment benefits). The other is the so-called "voluntary" voluntary insurance. So here again we see that voluntary social security schemes are not always voluntary. We will investigate what voluntary means with respect to these types of schemes.

By compulsory voluntary insurance we mean that the benefit administration is obliged to admit certain categories of persons to the statutory benefit scheme if these persons apply for admittance.

One category is of persons, living or working in the Netherlands, who have been compulsorily insured immediately before applying for the voluntary insurance, part-timers, persons working as domestic persons and persons who were or are entitled to a Dutch disability benefit; the other category is of persons working abroad.

In these cases there is, in general, a link with the compulsory insurance. The voluntary insurance is, for instance, a bridge between two periods of compulsory insurance, and like in France, the vacances zone b and vacances zone c. With respect to persons working abroad, the link with the compulsory insurance can be seen in the requirement that these persons are still available for the Netherlands' labour market. This requirement can be satisfied in several ways: by living in the Netherlands, by working for an employer whose office is in the Netherlands, or by doing work subsidised by the Netherlands.
We will describe these categories, in order to give an example, in more detail for the disability insurance. The categories exist of:
persons, whose compulsory insurance is terminated and in respect of whom it is reasonable to assume on the basis of the circumstances that the interruption of his compulsory insurance will be of a short period, or that they intend to accept employment when available;
persons who, while residing in the Netherlands, had been compulsorily insured abroad for disability benefits, provided they are no longer insured abroad on the grounds that they no longer work in that country. The second condition they have to fulfil is the same as that for the first category: and in respect of whom it is reasonable to assume on the basis of the circumstances that the interruption of their compulsory insurance will be of a short period;
persons whose compulsory insurance is terminated and who started to work as a self-employed person, on the condition that during the three years immediately before the end of their compulsory insurance they had been continuously insured, whether or not in the Netherlands, for disability benefits (this condition intends to avoid abuse of the system);
persons with a part-time contract of employment and who are compulsorily insured can be voluntarily insured for the other part of the week, on the condition that during the three years immediately before the end of his compulsory insurance they had been continuously insured, whether or not in the Netherlands, for disability benefits;
persons who had a disablement benefit based on a reduction of their earnings capacity for less than 55 percent and who lost the right to this benefit (...).
The obligation to admit persons also exists with respect to those:
whose compulsory insurance is terminated and who live outside the Netherlands, and who immediately, after the termination of the compulsory insurance are employed abroad for a maximum period of five years and whose employer lives or took residence in the Netherlands;
who have Dutch nationality (or nationality of an EU Member State or a State with which the Netherlands concluded a treaty on social security) and who are posted by the Minister of Development Aid to a particular project;
who live in the Netherlands and work abroad as an employee.
The second category of voluntary insurance, is the voluntary voluntary insurance. This type implies that the benefit administration has the power to admit persons to the insurance who belong to categories other than those who are compulsorily insured. These powers exist only with respect to persons whose activities belong exclusively or predominantly to the part of the occupational branch in which the concerned benefit administration works. The categories concerned are mentioned in the act, such as employers covered by the concerned benefit administration, other self-employed persons working in the field of work of the benefit administration, the spouse of persons belonging to the two former categories, and persons who work for a person who is covered himself by the benefit administration.

The benefit administration can require those who wish to be insured to undergo a medical examination.
Conclusion
A possibility for persons not covered by a compulsory scheme to join that scheme voluntarily would of course be a magnificent way to cover many of the present groups who fail to be covered by social security schemes, such as persons in atypical work, many homeworkers, many self-employed persons. Such a general possibility does, however, not exist and it is hard to imagine such facility. The reluctance to broaden a scheme has to do with the fear that abuse will be made of the system. For instance, self-employed persons who expect to become ill or pregnant can join a sickness benefit scheme for a certain period. Secondly, categories other than employees are hard to supervise. For instance; when, is a self-employed person really unemployed? (i.e. independent from his own will). If benefits are earnings-related, how are the last-earned wages to be calculated relevant to the determination of the rate of benefit?

These problems are an explanation for the small field that is given for voluntary insurance in this area as was described in this section.

4. COLLECTIVE VOLUNTARY BENEFITS TO REPAIR CUTS IN STATUTORY BENEFITS

In addition to the functions of voluntary social security we discussed above, we will also describe a type of benefit which has the objective to repair cuts in statutory social security benefits. These types are special in nature as compared to the other categories because the legislator has specific ideas on whether these types are desirable (to its own opinion) or not. These ideas have a considerable influence on how these types are or have to be elaborated. This is the reason why we describe these benefits in a separate section.

From the beginning of the 1990's, the discussion on the future of statutory social security has grown to considerable heights. The present statutory system has been criticised for not leaving enough room and incentives to the recipients of benefit to be responsible for trying to earn a living themselves. In the opinion of many politicians and others, the present system is to be blamed for not giving enough incentives to realise such responsibilities, there have been some developments to increase the responsibility of the various actors concerned.

A first answer to this criticism in the Netherlands was that the disability allowance rate was reduced. Initially, the rate was related to the decrease in the earnings capacity of an individual; this decrease was expressed in a percentage. This percentage was applied on the earlier earnings (this is a gross indication of the actual rules, but useful for our purpose). For instance, if one was fully incapable of work, the percentage was 70: this meant that the disability allowance was 70% of the previous wages. If one was able to earn only half of one's previous earnings, the benefit was 35% of the last earned wages. Under the old law, benefit was payable until pension age, unless one recovered from the disability. Under the new law, benefit at this level is payable for a limited period only, depending on age. After this period, the benefit percentage is not applied on the last earned wages but on a lower sum (intermediary between the minimum benefit and the previous wages). This means that benefit is lower than before. As trade unions and many employees did not accept this lack in coverage, they tried and succeeded in introducing clauses in collective agreements which ensure that private insurance is bought in order to supplement the statutory disablement benefits, as far as these are lower than the benefits under the previous rules.

In fact, it appeared that after the dust was cleared, that the coverage of the employees by these additional insurances was quite general. The wish of the government had been that because the statutory benefits were reduced, employees would become less inclined to apply for these benefits. The government was, therefore, not happy with this general coverage by voluntary, additional insurances. It could, however, not prohibit these insurances. When the trade unions representing civil servants wished to make a collective agreement for these workers, the minister of Internal affairs, who is the employer of the civil servants, had to accept this as well. As a result, all civil servants were given the opportunity to join the insurance. In fact, they were asked to return a form if they did not wish to adhere to the insurance. If they did nothing, they would be insured. This is, of course, a good method to reach a high participation rate.
There have been several types of supplementary schemes on offer. Most insurance companies offered an insurance which, if it were to apply to all workers of a particular firm, did not require medical assessment of the employees. This offer took away a large disadvantage of private insurances, which is that such insurances often require a serious medical assessment, and this would imply a refusal of persons with a bad health condition. As such persons would not be able to buy private insurance, the amendments to the statutory laws would affect them much more than other employees. The policy of insurance companies made it easier for the legislator to adopt the new law, as most of the gaps were to be filled. There still was the problem of people in bad health, who were, at the time the law was adopted, not employed. These persons could not benefit from the offer of the private companies that employees were accepted without medical assessment. Parliament forced the government to make a special act on this subject, which established a fund for persons who would not be accepted by private companies under the normal conditions. This fund, however, does not fill all gaps, as persons who came in bad health after the act was accepted and who came in this situation while not being employed, cannot benefit from this fund. Now these insurances exist for three years, it is interesting to take a look at the effects of these insurances. In practice, it appeared that most of the private insurances follow the decisions of the statutory benefit administrations. The main reason for this is that most of the persons who are interested in these insurances did not want the uncertainty which would exist if the private company would not follow the decision of the benefit administration. Still, an insurance scheme with a medical assessment by the company itself could be attractive as the contribution rate of such a scheme is more than ten percent lower than the "following scheme."

At the same time when these private insurance schemes were created, the benefit conditions of the statutory benefit scheme were amended seriously. From now on, there is a very strict test on what work you can still do with the handicap you incurred. This test is done on a very theoretical level; it is not necessary that an appropriate vacancy is available and the work which is found relevant need not be suitable work. For instance, if you are a professor at a university and you lose the use of your eyes, it is investigated which work you can do as a blind person. Work as a switchboard operator is appropriate in this case; this means that your earnings capacity as a professor is reduced to that of a switchboard operator. Whereas under the old rules it was nil. Benefit allows for a compensation of this difference only. As a result of these new rules, the number of recipients of statutory disability benefit was reduced dramatically (and many persons receive a considerably lower benefit). Since most private insurances follow the decisions on the statutory ones, they did not compensate for the effects of these rules. Therefore, private insurance was not helpful to many persons (who thought that they were safe after they had entered the additional insurance).
Furthermore, it could be seen that the contributions of private insurance schemes were not as well adapted to the income position of the insured persons as under the statutory scheme. The contributions of the statutory scheme are applied on the income between a minimum and a maximum level. Private insurance schemes can be financed in various ways, but a common way is a flat-rate sum per month. In that case, the lower paid have to pay as much as the higher paid and in this respect the new system is less fair than the (old) statutory one. Moreover, the private insurance scheme compensates, as we have seen above, for the difference between x% of the previous earnings and x% of the sum as referred to under the new act. If, however, the earlier earned earnings are close to the latter sum (which is the case of lower paid workers), the private insurance is not very useful as it covers nothing or hardly anything.

These effects were the result of the fact that the new rules and private insurance schemes are not very transparent (or as private companies made it more attractive for employers to insure the collectivity of workers).
At present, the Dutch government is planning to increase the role of private insurances, which have to replace (parts of) statutory insurances. These proposals, which still have to be accepted by Parliament, concern the Sickness Benefit Act and the Disability Benefits Act.

With respect to the Sickness Benefits Act, there has already been a serious reduction in the coverage by the statutory act. From January 1994, if an employee falls ill, his employer has to continue to pay wages during the first six weeks (in small firms during two weeks only). The level of the payments must be at least 70 percent of their earlier earned wages and it must be at least at the rate of the minimum wage. The latter threshold is to ensure that people will not rely on public benefits for a supplement. This rule applies only for persons working on a contract of employment; for persons who do not have an employer who signed such a contract (e.g., sick unemployed persons and home workers), it is still possible to claim benefit on the basis of the Sickness Benefit Act from the third day of their illness period.

Of course, it can happen that if an employee claims that he is ill, his employer denies his claim on the ground that he (the employer) doubts whether the employee is really ill. As this can lead to problematic situations, the legislator introduced a clause into the act as to enable the employee or employer in such a case to ask for a so-called second opinion from the benefit administration. If by means of this second opinion the benefit administration comes to the conclusion that the employee is ill, but the employer still refuses to pay the wages, the benefit administration will pay sickness benefits to the employee (and the employer has to reimburse these costs to the benefit administration).

Instead of (or alongside with) following this procedure, the employee can also go to court and require the employer to pay wages.
It is up to the employer to insure himself for the risk of having to pay wages during the period of illness. Thus, insurances for this period are on the basis of voluntary membership. It appeared that many employers wish to bear the costs of this period themselves.
One year after the introduction of this rule, we see a considerable reduction in the figures of ill persons. These have been reduced from 6 to 4.5 percent. Employers appear to have taken several kind of measures to reduce illness. In addition, there is also a more strict medical assessment procedure when recruiting new employees. They wish to reduce the risk of having to pay wages for sick employees.
The Sickness Benefit Act was also changed to allow more employers to opt out of the statutory benefit scheme and to bear the costs of benefits themselves completely. These employers will normally not insure themselves. An employer who wishes to bear the risk himself has to show a certificate from the bank that he is able to bear the costs of this risk or an insurance agreement.
At this moment, the government is investigating the possibility of extending the responsibility of the employer to the full period of illness (maximum is fifty-two weeks). Also, in this case, we can expect that provisions are made for persons without a contract of employment, pregnant women, and persons with a contract of employment which expires during a period of illness.

It is uncertain yet whether these proposals will be accepted. If they will be accepted, it can be expected that the role of private insurance to cover this risk will increase because the risk to bear these costs will be too high for small employers.

In addition, we can expect that employers will take even more tight measures to avoid "bad risks" in the future. On the other hand, the private insurances have made it easier to accept the new plans as their association made a statement in which companies declared that employers can buy an insurance, regardless of the extent of their enterprise. There will not be a medical assessment on an individual basis for the insurance. In addition, the level of the contribution rate will depend on the sickness figures of the branch and not on those of the enterprise concerned; only with respect to enterprises with more than five hundred employees will the contribution rate be adjusted to that particular enterprise. These offers will, to some extent, reduce the effect of the government proposals, as there is not a direct link between the policy of the employer to improve working conditions in his firm and the contribution he has to pay.

It is unclear whether this measure will lead to advantages. In the case of the six-week-continuation of payment of wages, it appeared, as we saw above, that the illness figures were reduced. Even in this case, it is not clear how to assess that development, because, in theory, it is possible that the reduction of the figures is the result of the fact that people do not stay at home even when they are ill. In other cases, it must be admitted that one can expect that the new approach prevents persons who are not really ill from claiming sickness benefit. In that case the new measures are adequate. It is, however, impossible to know whether and when such effects occur. In any case, the effects we just described occur in the first period of illness, and are not likely to occur for more than six weeks.

The advantage of private insurances could lie, however, in another area. As private insurances are very keen on reducing costs, they will organise measures to bring people to work again or to have employers change adverse working circumstances. Such measures are, however, very work intensive, so it is unclear to what extent they will be reality. The offer of the association of private insurance companies to determine the contribution rates on the branch level makes that the contribution rates will not directly influence the illness figures in the smaller enterprises.

In case of employers who will not buy an insurance to cover the 52-week periods of sickness payments, there is the risk that they will offer contracts for a limited period in many more cases than at present, and will use workers from offices for temporary work in order to avoid payments of a whole year period.

So far, we discussed sickness benefits. With respect to the benefits for disablement, there are also plans to increase the role of private insurance. The government investigates at this moment the possibilities of an "opting out" facility, in which employers can opt out of the statutory benefit system and buy private insurance instead. In this case, it is contrary to the case of sickness payments, obligatory to buy such insurance if the employer wishes to leave the statutory system. In addition, the private insurances will have to satisfy certain conditions on duration and level of benefit comparable to those of the statutory schemes.

There is, however, an important threshold for establishing private insurance schemes. These thresholds lie in the legislation on private insurances, which provide that private insurances have to be built on capital coverage of the risks. This means that the private companies will have to create reserves from which future benefits will have to be paid. On the other hand, private companies have to pay benefits to those persons who become disabled from the moment they got insured by the company. This leads to double charges for the companies. The association of the private companies made calculations which showed that it may last between eight and twenty-one years before the contributions of the private companies will be lower than those of the public benefit administrations.
Conclusion
We saw in this paragraph that the role of voluntary insurance is increasing in social security, although this role has different faces in each of the areas I described above. First, we saw the supplementary insurances to repair the cuts in disablement benefits. In this area, collective agreements were made, which left individuals certain room not to participate. In the area of sickness benefit, the freedom to buy private insurance exists for the employer only; the employee is not affected by the choice of the employer because he is entitled to receive payments on the basis of statutory rules (in the labour code), regardless of the way the employer finances these. In the case of disablement payments, the employer has a freedom to opt out, but he does not have the freedom to buy or not to buy. Furthermore, the law gives rules on the contents of the insurance. The choice of the employer will affect the legal position of the employee, as in the long term the conditions of private insurances and the statutory insurance will diverge (at least with respect to some elements).

5. THE VOLUNTARY SOCIAL SECURITY IN THE STRICT SENSE

The largest category of voluntary social security schemes is that of private insurances for self-employed persons (as self-employed persons have never been covered by the employees insurances). The disablement insurances supplement the national insurance scheme which exists for disablement benefits. The national insurance scheme provides for a subsistence benefit only. Usually, persons who buy such insurance make an agreement on the level of benefit they wish to receive in case of disablement (a waiting period of twelve months applies before entitlement starts for the national insurance benefit; usually this period also applies in the case of the private benefit). The private insurances often follow the decisions of the benefit administration on the application of the national insurance benefit; these insurances are, however, infamous for their medical assessments test when deciding on accepting someone for insurance or not. This fitted with the policy of the companies, that once people are insured, they should not be disappointed too often because that would be bad for the companies' name. Therefore, in order to ensure that they do have a sound policy, companies apply a strict selection procedure.

Because the companies wished to have an efficient administration of their schemes and as litigation procedures are often expensive and bad for the company's name, a characteristic of these insurances is that they try to avoid litigation. In other words, if problems occur, they try to seek a compromise in order to avoid litigation.
Another type are provisions to supplement the statutory benefits (or to create income provisions if statutory schemes do not exist) on an individual basis. These benefits are offered by private insurances and may vary from each other. In fact we do not know much of their influence and to what extent they are sold. Apart from the disablement insurances for the self-employed and those insurances that repaired the cuts in benefits, such schemes for disablement benefits do not really seem to play a large role. Neither are unemployment benefits a factor in the area of private insurances; some authors even claim that it is impossible to make an insurance scheme for unemployment. This has to do with the fact that insurances work well only if it is accidental when a risk occurs. In the case of unemployment, the risk occurs at the same time ("clustering of risks").

The area where these schemes play a major role is that of old age schemes (and preretirement schemes) and life insurances. Some types of schemes are encouraged by the legislator by allowing tax payers to deduct the contributions for the scheme from their present taxable income. In the Netherlands, this tax facility was recently reduced to allowing a deduction of around 5,500 guilders (2,750 ecu) for a single person for the 1994 tax year. Still, this sum enables people to create a considerable sum (and nothing prevents them from saving more). These schemes are, to a large extent, savings plans and have only small elements of insurance. Sometimes, there are provisions which add insurance elements to the scheme, such as payments in case of the death of the contribution payer or a non-contributory continuation of the scheme in case persons become disabled. People can often choose between payments at once at a certain age (e.g., sixty, to allow preretirement) or they can receive an annual sum on the basis of the acquired sum as long as they live.
Other schemes have the form of life insurances. In these cases, the contributions are not deductible from tax. The payments are, however, tax free below some levels.
The schemes discussed here have to satisfy certain conditions as specified by law, in order to prevent the insurance company from going bankrupt as a result of bad management of a company. An independent organisation supervises the companies.
Above, we discussed some types of schemes. We saw that a main distinction is between schemes which allow tax deduction now (and make payments taxable later) and other schemes which have no-deductible contributions (but later tax free payments). The role of the taxes is very interesting in this area. In this respect, we saw a case of international law is relevant, where exactly the tax deduction rules with respect to voluntary insurance were under dispute.

In this case, a national rule was directly tested against Article 48 EC Treaty, which forbids discrimination. The case concerns Hans-Martin Bachmann v. Belgium.
Bachmann, of German nationality, took out, before he went to Belgium where he entered into a contract of employment, a number of private voluntary insurances against illness and disability from a German private company. Bachmann wished to deduct the contributions concerned on these insurances from his Belgian income taxes. The Belgian legislation did not allow this; according to Article 54 of the Tax Law, such contributions could only be deducted when paid to Belgian companies.
In the proceedings before the Court, the Belgian Government argued, in order to justify these provisions, that they did not make a distinction between Belgian workers and workers of other Member States, who continued their insurances taken out abroad. The Court did not accept this argument; it will mainly be migrant workers who have taken out insurance before coming to Belgium. This rule was liable to be especially disadvantageous to workers who were nationals of another Member State.

Belgium argued furthermore that the pensions, interests and capital which were received as a result of these insurances were not taxable under Belgian Law. This was also the reason why Belgian law did not allow the deduction of contributions on taxes; no deduction of contributions and no tax liability on benefits. However, it might occur that after they had returned to their home state, these people would have to pay taxes on the sums they received from these insurances. According to the Belgian Government, this violation of the free movement of workers is not the result of Belgian law, but due to a lack of harmonisation of tax legislations of the Member States. Again, the Court ruled that this argument could not be accepted. In practice, it will be mainly the nationals of other Member States who return to countries where tax is paid on these amounts; these nationals are unable to compensate for the fact that they cannot deduct the contributions from income tax. This is indeed the result of a lack of harmonisation. It can, however, not be held that Article 48 of the Treaty is not relevant just because of this lack of harmonisation. The Belgian argument that a national could solve the problem by cancelling the insurance bought in another Member State, was not accepted, since this would involve efforts and costs to the person concerned which would be a violation of the right of free movement.

All these arguments did not alter the fact that the rule constituted indirect discrimination which was prohibited by Article 48 of the Treaty. However, the abolition of any discrimination is subject to limitations justified on grounds of public order. The Court considered that it was essential to the Member States to maintain the coherency of their tax legislation. This coherency required that if the Member State had, on the basis of Community law, to allow the deduction of contributions from taxes, it must also be able to impose taxes on the sums paid by the insurance, even when the payments take place in another state. There were problems of a practical nature, however, in finding out how much is paid in another state; it would also be problematic to oblige insurance companies to deduct taxes. Of course, the obligation for an insurance company to deduct taxes could be realised by demanding a guarantee, but this again results in extra costs for the worker, which will be added to the contributions. Moreover, this opens the possibility of double tax levy on these sums, so that, because of the higher contribution rates, the insured persons will no longer be interested in foreign insurances. A solution to this would only be possible by means of a (conclusive system of) bilateral agreements or by means of harmonisation initiatives by the Commission. In the present state of Community law, the coherency of the tax legislation could not be ensured by less restrictive provisions than those of the Belgian legislation. Consequently, they were not incompatible with Article 48 of the EC Treaty.

Apparently the Court, with an eye on the disruptive consequences of a radical application of the prohibition of indirect discrimination provisions, hesitated to apply Article 48 radically in a clear case of suspected indirect discrimination.

Conclusion
There is a system of individually based provisions to supplement in particular old age provisions. A relevant distinction between the schemes is whether contributions are tax deductible or payments are tax free. There is a link between these elements: option 1: tax deductible contributions lead to taxed payments, or option 2: non-deductible contributions will often lead to tax free payments (subject to an upper level).

It may happen that in one country a scheme is built in option 1 and in another state a comparable scheme in option 2. This may sometimes lead to cross country problems. For the purpose of the free movement of workers it may be necessary that the European Union creates a more uniform approach in this area.

6. THE FUTURE OF VOLUNTARY SOCIAL SECURITY

In the previous paragraphs, I have given a critical review of the developments and plans in the Netherlands to give more room for private insurances. Some of these private insurances were voluntary and some of these to some extent only. The government, however, wishes to extend the scope of private insurance or to reduce the extent of statutory insurance schemes, and leave it to individuals or the social partners to repair the reductions. To some extent, it can be expected that private insurances give more responsibility to the persons concerned and will eventually reduce the costs of social security.

There are side-effects of more private insurance. One of these effects is that the administrative burden will increase as people have to claim from more organisations. The transparency of the system will decrease. So far, the private insurances generally followed the decisions on the benefit claims with respect to the public ones, but when their share increases, it is more attractive for them to play a larger role in the administration of benefits.

Secondly, companies may take all kinds of measures to reduce the occurrence of the risk. Some of these can be assessed positively, such as preventing people from claiming when they are not-seriously ill. Others are more problematic, such as imposing more strict medical assessments. So far, the companies have not chosen for this option (but employers seem to select more tightly). Selection is, however, very closely linked with insurance, so we cannot be confident that there will not be such tighter tests in the future.

A positive effect of these plans is that the very threat of more competition brings the public benefit administrations to more efficient policies and measures. This phenomenon can already be seen. Also, employees seem to be more reluctant to claim disablement benefit, as they are afraid of their future once they have been accepted in such a scheme.

These critical remarks concern insurance schemes which have replaced statutory benefits. In that case, one feels inclined to compare these schemes with the previous statutory ones and that will lead to critical remarks.
It is interesting to see that in other areas, such as the supplementary old-age benefits, the government does not wish to increase the role of private insurances, whereas, exactly in this area, it is ironical to notice, competition would lead to fewer problems for the persons who are insured and to more freedom of choice for the participants.

The paradox of this attitude has to do with the view of the legislator on the total social security system: the government wishes to influence certain developments, wishes to reduce public expenditure, and does not interfere too much with the pension schemes of the social partners. As a result the role of "real" voluntary social security, apart from the saving systems described in section 5, is rather small in the Netherlands.