Social insurance

Social insurance is any government-sponsored program with the following four characteristics:

• the benefits, eligibility requirements and other aspects of the program are defined by statute;
• explicit provision is made to account for the income and expenses (often through a trust fund);
• it is funded by taxes or premiums paid by (or on behalf of) participants (although additional sources of funding may be provided as well); and
• the program serves a defined population, and participation is either compulsory or the program is heavily enough subsidized that most eligible individuals choose to participate.^[1]

Social insurance has also been defined as a program where risks are transferred to and pooled by an organization, often governmental, that is legally required to provide certain benefits.^[2]

In the U.S., programs that meet these definitions include Social Security, Medicare, the PBGC program, the railroad retirement program and state-sponsored unemployment insurance programs.^[1] The Canada Pension Plan (CPP) is also a social insurance program.