Changes to Kela benefits in 2017
Benefits tied to the national pensions index were cut by 0.85% in the beginning of 2017. The administration of the basic social assistance scheme was transferred from municipalities to Kela, and an experiment testing an unconditional basic income was launched.
2017 will see changes in benefit legislation affecting among others unemployment benefits and reimbursements of medicine expenses. The two single biggest changes are the transition of the administration of the basic social assistance scheme to Kela, the Finnish Social Insurance Institution, and the launch of an experiment testing an unconditional basic income.
The following is a summary of the key changes in the social security schemes administered by Kela. Some are still Government proposals that have not been reviewed by Parliament. Also, some laws remain to be ratified. We will update Kela's website with the latest changes.
Changes in benefit rates
As a result of a 0.85% reduction in the national pensions index, nearly all benefit rates changed at the turn of the year.
The index change affected not only national pensions and guarantee pensions but also any other benefits tied to the national pensions index. This includes disability benefits, basic unemployment allowances, labour market subsidies and child increases.
In practice, the index adjustment reduced the benefits linked to the national pension index by less than 50 cents per day or by an amount not exceeding 10 euros per month. The front-veterans' supplements and the disability supplement for war veterans remained unchanged.
Although child benefits were delinked from the index at the beginning of 2016, they were cut as well. The basic amount of social assistance increased.
Applications for basic social assistance will be reviewed by Kela
The administration of the basic social assistance scheme was transferred from the municipalities to Kela on 1 January 2017. Municipal social services offices may continue to provide supplementary and preventive social assistance at their discretion. Following the switch to Kela, social assistance will continue to be provided for the same expenses as before.
After receiving an application for basic social assistance, Kela gives a decision on it within 7 working days if the application includes all necessary information. Basic social assistance is paid regularly on the first business day of the month. If assistance is granted too late for the payment to be made on the regular payment date, it will be deposited into the recipient's bank account two days after the decision granting the assistance.
The changes in social assistance do not apply to the Åland Islands, where the social assistance scheme is administered by the municipal authorities.
Numerous changes in unemployment benefits
The full rate of the basic unemployment allowance and labour market subsidy is €32.40 per day in 2017.
The maximum period for which basic unemployment allowance is available will be reduced from 500 to 400 days. Unemployed persons with an employment history of three years or less will be able to get unemployment allowance for a maximum of 300 days.
The maximum period will remain 500 days for unemployed persons who meet the work requirement after reaching age 58 and who have completed at least five years of employment during the last 20 years.
The waiting period for the basic unemployment allowance and the labour market subsidy will increase from five to seven days.
Compensations for expenses will no longer be available during self-motivated study subsidised by means of an unemployment benefit. Young persons under 25 years of age who have no vocational qualifications become eligible for compensations for expenses during work try-out periods. The compensation is equal to €9 per day. The increased rate of the compensation is €18 per day.
The rules requiring unemployed persons to seek employment and to participate in activation measures are tightened.
Persons who neglect to participate in measures can be denied benefits and assigned an additional qualifying period, even if the measures are not specified in the employment plan drawn up with the Employment and Economic Development Office.
Unemployed persons who turn down a job offer can be placed on a 90-day qualifying period without benefits. The qualifying period begins 30 days after the job offer was declined.
A commuting and relocation allowance is available to persons entitled to unemployment allowance. It replaces the travel allowance and the compensation for moving costs. Commuting and relocation allowances are paid by Kela. Until now, compensations for moving costs have been provided by Employment and Economic Development Offices.
A commuting and relocation allowance is available for a job lasting at least two months in which the daily commute lasts on average three hours or more (in part-time work, two hours or more). The average weekly working time must be at least 18 hours. The allowance is equal to €32.40 per day. The commuting and relocation allowance can be paid for 30, 45 or 60 days depending on the duration of the job.
Applications must be made to Kela before the job begins.
Not all of the Acts of Parliament pertaining to unemployment benefits have yet been approved.
A 2-year experiment testing a basic income
Finland carries out a unique experiment testing an unconditional basic income. The experiment is implemented by Kela, and began on 1 January 2017.
The experiment seeks to find out if the social security system could be simplified and combined with more effective work incentives. A total of 2,000 participants were selected by random sample from among unemployed persons between the ages of 25 and 58. Kela contacted the participants at the end of December.
The participants are paid a monthly basic income of €560. They may also qualify for a certain unemployment benefit payments. The basic income is a tax-free benefit which is not reduced by any other income the participants may have. Any participant who finds work during the experiment will get to keep the basic income.
The participants' employment situation is monitored during the 2-year run of the experiment. The experiment is expected to produce valuable information about whether a basic income could simplify the social security system and increase the likelihood of finding employment.
General housing allowance: Criteria for maximum housing costs and basic deductible tightened slightly
The Government has proposed limiting the maximum housing costs allowed under the general housing allowance scheme. The proposal is based on the savings targets outlined in the state budget proposal and is intended to offset the additional costs arising from the decision to provide housing aid to students under the general housing allowance scheme. In class 1 and 2 municipalities, the maximum housing costs are proposed to remain unchanged from 2016. In class 3 and 4 municipalities, the costs would be reduced by 5%.
Separate water and heating charges would be accepted up to the same amount as in 2016.
For the general housing allowances scheme, the 0.85% cut in the national pensions index means that the rules concerning the basic deductible will be tightened. In 2016, the full rate of benefit is available on an income of €605 plus €100 for each adult and €223 for each child in the household. In 2017, the full rate of benefit would be available on an income of €597 plus €99 for each adult and €221 for each child in the household.
Drug reimbursement expenditure cut but maximum limit on out-of-pocket costs lowered as well
Many of the savings implemented in 2017 which will affect medicine expenditures have to do with the reimbursements for medicine expenses provided by Kela. For example, diabetes medications will be transferred to the lower special reimbursement category (65%), which also includes drugs used in the treatment of coronary disease and hypertension. Insulins will remain in the higher special reimbursement category (100%).
At the same time, the maximum annual limit on out-of-pocket medicine expenses will be lowered from €610.37 in 2016 to €605.13 in 2017. If the annual maximum is exceeded, customers only pay a €2.50 copayment for each reimbursable medicine for the rest of the year.
In the case of particularly expensive medications, Kela will provide reimbursement for one month's worth of medicines rather than three months. Particularly expensive medicines are considered to include medicines the retail price of which, including value-added tax, exceeds €1,000 for one package.
All reimbursable medications will be subject to restrictions concerning the frequency of dispensing. From now on, reimbursement will be available for a new batch of medicine, clinical nutrient or emollient cream if the previous batch is nearly used up and the patient has used the medication as prescribed. For example, a new batch cannot be reimbursed more than 3 weeks before the previous batch will run out, assuming that the previous batch contained medicine in an amount equivalent to 3 months of treatment. Medication can be dispensed more frequently if purchased in smaller batches.
Medical prescriptions will be valid for two years rather than one.
The proposed changes are part of the Government's fiscal plan aimed at achieving €150 million worth of savings in drug reimbursement expenditures in the period beginning 2017.
Rules for calculating sickness and rehabilitation allowances revised
The minimum amounts of the sickness allowance and the rehabilitation allowance paid during participation in other than vocational rehabilitation will be cut from €23.93 to €23.73 per day.
The calculation rules for the earnings-related sickness and rehabilitation allowance will be revised with effect from 1 January 2017. Under the new rules, on annual earnings of €30,000 or less, the sickness allowance will be equal to 70% of the earnings. On annual earnings exceeding €30,000, the compensation rate will be reduced from 35% to 20%. This change does not apply to the special care allowance or the maternity, paternity and parental allowances.
The new calculation rules are relevant to sickness and rehabilitation allowance payments beginning on or after 1 January 2017. They are part of the steps taken to cut public spending by €22 million.
Rates of all national health insurance contributions changed
As part of the competitiveness pact signed by the labour market organisations, all contributions to the national health insurance scheme will be adjusted.
The social security contribution collected from employers will be transformed into a health insurance contribution, and will be equal to 1.08% of payroll costs in 2017 (2.12% in 2016). This means a cut of 0.94 percentage points in the contribution levied from employers.
In 2017, insured wage and salary earners will pay 1.58% of their pay towards daily allowances (0.82% in 2016). Self-employed persons insured under the Farmers' Pension Insurance scheme will also pay 1.58% of their earned income. Self-employed persons insured under the Self-Employed Persons' Pension Insurance scheme will pay an additional contribution of 0.06%, bringing their total contribution to 1.64% (0.95% in 2016).
No contributions to medical care insurance will be collected from wage and salary earners and self-employed persons in 2017. A 1.3% contribution was collected in 2016. A contribution to medical care insurance of 1.45% will be withheld from pensions and other benefit income (1.47% in 2016). It is included in each pension and benefit recipient's tax withholding rate.
Simplified benefit system for persons with an infectious disease
The Government proposes combining the daily allowance and benefit paid in respect of an infectious disease into a single daily allowance. The process of claiming the daily allowance in respect of infectious disease is also proposed to be simplified. According to the proposal, the decision whether an employee with an infectious disease should stay away from work would in all cases be made at the municipality or hospital district level by the physician specialising in infectious diseases. The act is planned to enter into force in spring 2017.
Slight cut in disability benefits
There will be a reduction of 0.85% in disability allowances and pensioners' care allowances. The new rates will be €0.50-€3.60 lower than in 2016.
The rates of the disability allowances will be as follows: basic rate, €92.14 per month; increased rate, €215 per month; and highest rate, €416.91 per month.
The new rates of the pensioners' care allowance are: basic rate, €61.71 per month; increased rate, €153.63 per month; and highest rate, €324.85 per month.
The disability supplement for war veterans will remain unchanged.
Changes in rehabilitation services for family caregivers and the rehabilitation allowance for young persons
Starting 2017, rehabilitation courses for family caregivers and couples can also be attended by persons caring for children and young persons.
The Finnish Parliament has approved a bill improving the economic security of young rehabilitation clients and those without attachment to working life and encouraging them to participate in active rehabilitation.
The rehabilitation allowance for young persons and the minimum amount of the rehabilitation allowance paid during participation in vocational rehabilitation will be increased to the level of the guarantee pension. The increased minimum amount is €30.41 per day in 2017. The rehabilitation allowance for those participating in other than vocational rehabilitation will be at least the same as the minimum sickness allowance, or €23.73 per day.
Rehabilitation allowance can from now on be granted for general education also to rehabilitation clients over the age of 20 who do not have vocational qualifications. General education means comprehensive school, upper secondary school, and folk high school.
Kela has an obligation to examine the eligibility of young persons claiming rehabilitation allowance to receive financial assistance with school supplies and travel expenses under the vocational rehabilitation scheme. Also, rehabilitation provided under the legislation on earnings-related pensions will take precedence over the rehabilitation allowance available from Kela if it coincides with a period of apprenticeship training.
Vocational rehabilitation supporting integration into work will replace work trials and preparatory training for the working life. It is intended for rehabilitation clients who, because of an illness or their overall circumstances, need individual help with choosing a job, occupation or line of study or with securing employment.
Occupational health care: Changes in reimbursement rates and allowable maximum costs
Kela compensates employers and self-employed persons for their occupational health costs on the basis of allowable maximum amounts, which are confirmed annually. The maximum rate of reimbursement paid for financial year 2016 will be increased by about 0.8% per employee. Also the employer-specific maximum rate will increase by about 0.8%.
Starting with financial year 2016, a workplace survey is required for the employer to qualify for reimbursements of occupational health care costs. This now applies to self-employed persons as well.
Preventive occupational health e-services (reimbursement category I) can be reimbursed as occupational health care starting 2017. Workplace surveys must include a visit to the workplace.
Medical care and other occupational health services provided as an e-service have been reimbursable as occupational health care since March 2016.
It is proposed that employers should under certain conditions have the obligation to provide occupational health services to laid-off former employees for up to 6 months after termination.
During that period, employers would be entitled to reimbursements under the Health Insurance Act. This is part of the transition assistance measures foreseen in the competitiveness pact.
Changes to financial aid and housing assistance for students
Applications for student financial aid from students at the Universities of Lapland, Oulu, Tampere and Vaasa will be processed at Kela starting 1 January 2017. Previously the applications have been processed by the financial aid committee of the university. This change does not require students to take any action.
The study grants paid to higher education students will be adjusted to the level of the grants provided to students at the secondary level (max. €250.28 per month). The government guarantees for student loans will be raised, which will increase the total amount of financial aid (study grant and student loan).
Students will gain coverage under the general housing allowance scheme, with the exception of those studying abroad and those enrolled in a tuition-based programme at a folk high school or a sports institute and living in a school dormitory.
There will be a number of further changes in the student financial aid programme. Among others, the period for which financial aid is available for higher education study will be shortened.
Parliament has passed the bills. They are scheduled to enter into force on 1 August 2017.
Index-related changes to family benefits
The minimum rates of maternity, paternity and parental allowances were reduced by 0.85% in the beginning of the year. The minimum rate decreased from €23.93 to €23.73. All allowances already in payment were adjusted automatically.
The rates of child home care and private day care allowances and those of the partial and flexible care allowances were reduced by 0.85% at the turn of the year. Kela made the required changes to child care allowances already in payment automatically.
Family benefits were reduced by 0.85% as well. The rates of the child benefit in 2017 are as follows: for the first child, €94.88; for the second child, €104.84; for the third child, €133.79; for the fourth child, €153.24; and for each additional child, €172.69. The rate of the single-parent supplement is €48.55 for each eligible child.
Child maintenance allowance and child support payments were raised by 0.47% at the turn of the year. This is due to the increase of the cost-of-living index. The child maintenance allowance is €155.50 per month and per child in 2017. All allowances already in payment were adjusted automatically.
Changes in benefits for same-sex parents
Parliament has passed a range of amendments to the social security legislation, which will bring changes in terms of the family benefits available to same-sex couples in accordance with equal marriage rights. Starting in March 2017, same-sex spouses and their income may affect the amount and qualifying criteria for child care allowances and child benefits.
In addition, the female married spouse or partner of a child's mother will be entitled to parental and paternity allowances under the same conditions as a male spouse or partner. The new provisions will be applied to payments beginning on or after 1 March 2017.
Fathers with custody of a child will be entitled to paternity and parental allowances even if the child's mother and father do not live in the same household as married spouses or cohabiting partners. The father's entitlement to parental allowance begins when he assumes custody of the child. If he does so during the maternity allowance payment period, he is entitled to a parental allowance already in that period. The new provisions concerning fathers will be applied to fathers who assume custody of a child on or after 1 March 2017.
Starting 2017, child maintenance allowance is not available in situations where currently a child born out of wedlock is paid child maintenance allowance because paternity has not been established, despite the fact that the child has two parents liable for maintenance.
New family leave compensation for employers
Following the amendment of the Health Insurance Act, a new family leave compensation will be introduced for employers.
It is a one-time payment of €2,500 available to employers with paid staff who are on maternity leave or on a post-adoption parental leave. To qualify for the compensation, employers must pay the employee who is on leave a salary for at least one month. Applications for the family leave compensation must be submitted within 6 months of the date on which payment of maternity, paternity or parental allowance ended.
The act is expected to enter into force on 1 April 2017.
Cuts in index-linked pensions
Parliament has approved a permanent cut of 0.85%. The changes in pension rates were made automatically. However, no cuts were made to front-veteran's supplements.
In 2017, the national pension for persons living alone is €628.85 per month and for those living together with another person, €557.79 per month. The full amount of the guarantee pension was reduced from €766.85 per month to €760.26 per month.
Also the survivors' pensions paid by Kela was reduced. The starting pension for surviving spouses is €324.33, and the basic amount of the continuing pension €101.59. The basic amount of the orphans' pension is €59.69.
The increase available to pensioners with a dependent child under 16 years of age is equal to €21.93 per month.
New benefit: Pension assistance
The Government has proposed a new benefit for persons aged 60 years or older, which would be introduced in June. It is known as pension assistance and would be equal in amount to the guarantee pension. It is intended for persons who have reached the age of 60, who are long term unemployed and whose labour market status is precarious.
Pension assistance is akin to a pension in the sense that recipients may also qualify for other pension benefits available from Kela, such as the housing allowance and care allowance for pensioners.
Housing allowance for pensioners
The heating, water and maintenance charges as well as average and maximum housing costs applicable to the housing allowance for pensioners will remain the same in 2017 as in 2015 and 2016.
However, the basic deductible, the limits that trigger the additional deductible and the asset limits will be adjusted as they are tied to the national pensions index.
Working while receiving a pension
It is possible to work while receiving a pension. Persons whom Kela pays rehabilitation subsidy or disability pension can in 2017 earn up to €737.45 per month. This limit applies even if they also receive an earnings-related pension with a higher earnings limit. In the case of self-employed persons, for example, not only salary income but also earned income under the Self-Employed Persons' Pensions Act is counted.
Kela must be notified if the income limit is exceeded. Typically this will result in the payment of the rehabilitation subsidy or disability pension being interrupted. The limit is €6.39 per month lower in 2017 than in 2016.
Old-age pensioners are free to work without restrictions. However, earnings will affect the taxation of the pension and the eligibility for housing allowance.
Effect of marriage equality on benefits
Parliament has approved a range of changes in the social security legislation which are indirectly related to the amendment of the Marriage Act concerning marriage equality. These changes are intended to come into force on 1 March 2017 simultaneously with the amendment of the Marriage Act.
After the amendment of the Marriage Act, same-sex couples will be able to marry. The concept of marriage will be redefined as well. Same-sex spouses and cohabiting partners and the income they have may affect the qualifying criteria and amount of certain benefits, including the following:
- child care allowances
- child benefit
- housing supplement for students
- general housing allowance
- housing allowance for pensioners
- national pension
- child increase (pensions and unemployment benefits
Additional information for customers:
Kela Benefits in Figures 2017 (pdf)
The revised amounts of the benefits were posted on Kela's website on 1 January 2017.