Law no 7703, dated 11.05.1993 #8220;On Social Insurance in the Republic of Albania", amended, regulates and provides how SII is managed and administered. Under this law, social insurance in the Republic of Albania is managed and administered by Social Insurance Institute (SII), which is an independent public institution, whose organization and operation is regulated by this Law. Social Insurance Institute is directed by:

1. Administrative Council;
2. Director General.

Administrative Council of SII is the supreme executive body. It consists of 12 members, of which:

• 6 members are representatives of the Government;
• 6 members are representatives of trade unions and employers.

 SII Director General is elected by SII Administrative Council. SII Director General:

• Manages and organizes the overall SII activity;
• Nominates the directors of Regional Social Insurance Directorates;
• Reports to Administrative Council on the SII activity.

The first legal act in social insurance field in SII possession, is the Law No. 129, date 28.10.1927 “On Civil Pensions”. The content of this legal act, itself, assumes that there have been earlier regulatory provisions for pensions. Some foreign enterprises, operating in Albania, had voluntarily developed a protection network at work, were a big part was the social insurance for work injuries. Likewise, with specific acts, the state had established the state employee’s and military personnel pensions. Establishment of a more comprehensive system of social insurance coincides with August 1947. This system was completed and further consolidated in 1966, with the approval and implementation of Law No. 4171, date 13.09.1966 “On State Social Insurance in PSRA (Peoples Socialist Republic of Albania). Modeled in accordance with the socialist political system, based on the development of a planned economy, in detail, centrally, the social insurance system was to generous on one side and on the other it did not provide full social protection. It predicted lower retirement age and differential treatment for certain categories of individuals. Meanwhile, with the aim of limiting economic costs, over the period 1947-1992, the social insurance system developed in two schemes: one for the employees of the state sector and the other for the members of the agricultural cooperatives, which differed substantially from each other in some ways. The insurance scheme for members of agricultural cooperatives provided very low benefits which did not pass 60% of the monthly minimal income that was offered by the state scheme. Profound transformation of the political and socio-economic situation in the 90’, made it necessary to undertake a radical reform on social insurance system, with the aim on one side, to stop further degradation of the pension scheme and on the other to choose an efficient system that would not only face the emerging problems of the period as well as the inherited costs, but would also resist in time for future generations. Therefore, in May 11^th 1993, the Parliament approved the Law No 7703 “On Social Insurance in Republic of Albania”, which entered into force in October of that year. Reformation of the old scheme of social insurance is reached by establishing a new system, whose foundations carry the principles of social justice.

The General System of Social Insurance is based on the contributory principle, on the principle of individual responsibility for future risks in the social field, as well as in the principle of generation’s agreement “pay today to benefit tomorrow (Pay As You GO)”. The overall system of social insurance consists of: Compulsory Social Insurance, Voluntary Social Insurance, Supplementary Social Insurance and Special State Pensions. With the contributions, the system covers with income the employed persons in relation to: maternity, temporary inability to work due to sickness, occupational diseases and work injuries, old age pension, disability, loss of the holder of the family, unemployment and the other economically active persons (employers and self-employed) in relation to: maternity, old age, invalidity, loss of the holder of the family. Also, through voluntary and supplementary schemes, the system offers pensions to a wider extent and earlier than offered by the compulsory social insurance scheme. The system management is carried out by the Social Insurance Institute (SII), as a public independent state institution. The system built in 1993, as a whole, responded to the most pressing needs of social insurance of contingencies covered, but in line with the economic developments and needs dictated by time, has undergone reforms and improvements. This has been realized through a process of general and special studies, done in cooperation and guide of the international institutions, such as:

• Integration into the new system of pensions of individuals who worked in the former agricultural cooperatives and that after 1993 lived in the village and conducted agricultural and livestock activities, by establishing a new formula for pension calculation;
• Improvement of the financial viability of the system, reducing costs and improving employee participation in the contributory scheme, through the gradual increase of the retirement age, by 5 years within the time frame of ten years: men from 60 to 65 years, women from 55 to 60 years and a reduction of contributions by 4%, from 42.5% to 38.5%
• Setting up a reduced pension scheme with retirement up to 3 years before reaching the age for full pension, for those persons that cannot continue the economic activity, but have reached an insurance period of 35 years;
• Increase of the individual income of the pensioners with minimal income, through setting up and development of income compensation schemes, as well as avoidance of the abuses through deep reformation and development of income compensation schemes for the pensioners, as a result of price and life services increase, by clearly establishing the circle of the persons in economic dependency from the pensioner;
• Improvement of the contributions’ collection and facilitation of business procedures through delegating the contribution collection from the social insurance structures to tax offices;
• Unification of the Albanian legislation in social insurance field with the international norms and standards, through decrease of the minimal insurance period for entitlement to partial old age pension, from 20 to 15 years, widening of the contingencies covered, including the stateless individuals, improvements and adjustments of the legislation regarding the calculation and indexing of the assessment base for effect of initial calculation of pensions;
• Further implementation of the business climate and work reducing through the continuance of the process for the gradual continuous reducing of the contribution amount, which in the end of 2009 became 24.5% from 38.5% that was in 2006;
• Deepening of the administrative reform, by realizing procedures simplicity for appealing decisions taken in benefits field, sanctioning by law the right for information, sanctioning by law the responsibility of SII to pay pension not later than the next month from the date of submission and acceptance of the application and necessary documents for pension, recognition of the right for choosing at any time one of the pensions, when conditions for more than one pension amount are met, for example, to shift from old age pension to the invalidity pension and vice-versa, setting up the maximal amount of the deduction that will be kept from the monthly pension amount of a pensioner, in the cases when there has been voluntary and involuntary overpayment, respectively 50% and 20%, strengthening of the sanctions regarding corruption and informality in the pensions field.

Naturally, in the strategy for the system development are also predicted other programs and reforms that will not only aim at the increase of financial sustainability of the system, but also its improvement regarding the balancing of the rights, pro-client service and the increase of the pensioner’s income.

Each reform that SII will undertake, first of all will keep in mind the improvement of the pro-contributors system as well as the increase of the state responsibility for guaranteeing the social protection of the pensioners as well as the protection and development of the rights entitled. Among the most important identified reforms remain:

• Redistribution of social insurance, by treating as separate the basic pensions and the supplements by preserving the solidarity in the basic level of pension, which must guarantee the minimum standard of living and developing a complete connection between contributions and supplements over the basic pension;
• Completing the social insurance system with all columns, in order to guarantee social insurance elements to all the population;
• Improvement of the technical operations for services exercised by SII, through the establishment of the digital archives system as well as the establishment of contributors personal accounts.

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