From 1 July 2020 significant changes will enter into force in the national social security system. The former Act LXXX of 1997 on the Eligibility for Social Security Benefits and the Private Pensions and the Fundings for These Services (hereinafter: SSBA or Social Security Benefits Act) will be replaced by the new Act CXXII of 2019 on Entitlements to Social Security Benefits and on Funding These Services (hereinafter: new SSBA or Social Security Benefits Act) after 23 years. The new Social Security Benefits Act contains more several new rules compared to the former Social Security Benefits Act and it also includes the implementing decrees. That article – due to its size limits – describes the more important changes only.
The new Social Security Benefits Act Sec. 6 (1) – contrary to the former Social Security Benefits Act Sec. 5 (1) – no longer contains the concept of person engaged in auxiliary activities in the sphere of the insured person for example pensioner entitled to draw pensions own his own right. The sphere of the insured person is clarified by the new SSBA Sec. 6 (1). From 1 July the flat rate contribution base will be introduced by the new social security law which qualifies as a new legal institution in the Hungarian social security system. The flat rate contribution base rate is 18.5 per cent contrary to the former rate of 8.5 per cent of health insurance and labor market contributions which was regulated in the previous Social Security Act Sec. 19 (3). The former health insurance and labor market contribution comprised: 4 per cent health insurance contributions provided in kind, 3 per cent health insurance contributions provided in money and 1.5 per cent in labor market contributions.
The new SSBA applies stricter rules then the former Social Security Benefits Act. Pursuant to the new SSBA Sec. 24 and 27 (2) the contribution base is 30 per cent of the minimum wage which shall be paid even if the income of the employee is smaller than the minimum wage.
In case of business partner and private entrepreneur the health insurance and labor market contributions shall be paid based on the mandatory minimum wage/guaranteed wage minimum instead of the former 150 per cent. The social security contribution base (Szocho) is still remains 112.5 per cent.
Increased maximum of family contribution allowance availing after the children will be introduced as a new element. The maximum of the allowance will be enforceable opposite to the rate of 18.5 per cent of the social contributions. The maximum rate of the family allowance is equal to rate of the social contribution base which is grown from the previous rate of 8.5 per cent to 18.5 per cent based on the new Social Security Benefits Act.
The rate of pension contribution is still 10 per cent.
The further renewal of the new Social Security Benefits Act is comprised in its Sec. 46 (2)-(3). The essence of the amendment in short if persons liable to pay do not fulfill their health service contributions (hereinafter: ESZO) payment obligation and the amount of arrears exceed the threefold monthly amount of ESZO, the social security number (TAJ number) will be invalid in connection with the requisitioning of the health service. The health service is not available free of charge except if the debt was paid retroactively before the health service was availed.
The ESZO unified monthly amount is 7710 HUF, which is daily 257 HUF. The ESZO shall be paid until the 12th day of the current month.
It is important to note that the National Tax and Customs Administration (hereinafter: state tax authority or NAV) shall supply the data of the arrears derived from non-fulfillment of the health service payment obligation to the Administrative Agency. The record is kept by the Headquarters of Hungarian State Treasury (MÁK).
Two more new benefits will be introduced from January 2020. One benefit is the adoption allowance, the other is the grandparent child-care benefits. The person entitled to adoption allowance who adopts or raising child who has reached the age of two. The person entitled to grandparent child-care benefits availing by grandparents who was insured person in one year of the two years preceding the benefits. The maximum amount of the benefit is 70 per cent of double the minimum wage.
The person who is insured in other member country of the European Economic Area (EEA) and avail of health service based on paying health service contribution, the natural person must refund that cost which charge the Health Insurance Fund. The specified amount of unjust requested health service contributions (ESZO) will be cancelled on the tax invoice by the state tax authority. The amount of unjust requested ESZO will be prescribed on the tax invoice as tax obligation by the Health Insurance Fund based on its data supply.
Further renewal is introduced by the new Social Security Benefits Act. Pursuant to the new SSBA Sec. 52 (3) an agreement for the provision of healthcare services may be concluded subject to assessment of the state of health of the person initiating the conclusion of the agreement, with the proviso that the agreement shall not cover healthcare services to be provided in connection with any disease, health impairment identified by the said medical examination. The medical examination for health assessment is subject to a fee. The medical examination for health assessment shall be ordered by the regulatory body empowered to conclude the agreement to be carried out by the healthcare service provider designated by the minister in charge of the health insurance system, according to the procedure therein provided for.
The SSBA Sec. 52 (4) states the following: an agreement for acquiring pensionable income and service time shall become operative on the day on which it is executed, at the earliest on the first day of the month to which it pertains. No arrangements shall be permitted for any preceding period. After that, payments of pension contributions shall be made by the twelfth day of the month following the month to which it pertains. Any default in payment shall result in termination of the agreement.
To summarize the above-mentioned two subpoints, it is indispensable to be assessed the state of health of the person who initiating the conclusion of the agreement to conclude an arrangement for the provision of healthcare services.
In addition to the aforementioned points, the health insurance rules have not changed.
It is worth to note that, in connection with the changes of the tax rules which concern the social security system that the vocational training scholarship will be tax-free and particular educational grants too. Additional change is to notify the state tax authority about the starting and terminating of the operation of the enterprises.
The simplified contribution to public revenues (EKHO) of the pensioners was reduced to 9.5 per cent and the 17.5 per cent social security contribution (Szocho) will not have to be paid for them either.
These changes will enter into force from 1 July 2020. The article described the more important changes and amendments in short only to give an assistance in the complex and constantly changing Hungarian social security system.