Court Orders National Insurance to Refund 13 Years of Erroneous Deductions

A Tel Aviv Regional Labor Court has ordered the National Insurance Institute (Bituah Leumi) to refund all funds improperly deducted from unemployment and disability benefits, and to cancel old debts. The ruling stems from a case involving a woman who returned to Israel after two decades abroad and discovered the Institute was attempting to collect ancient debts from the early 2000s.

For approximately 13 years, from 2011 until 2024, the National Insurance Institute made no valid collection attempts. According to the Institute's own internal procedures, a period exceeding seven years without proper collection activity mandates the complete cancellation of old debts. The court found that the Institute had violated its own regulations by continuing to pursue these debts.

The woman had faced thousands of shekels in deductions from her unemployment benefits, compounded by draconian interest and adjustments. Later, portions of her basic disability pension were also seized. Under severe financial pressure, she had agreed to payment plans, but the court ruled these were made under duress and were invalid given the Institute's procedural failures.

The court rejected the National Insurance Institute's claims of "lack of good faith" by the citizen, stating that after more than two decades, it was unreasonable to expect the individual to prove a history that the Institute itself had ignored. The ruling mandates a full refund of all amounts deducted from her unemployment and disability payments, cancellation of any outstanding debts from payment plans, and the complete erasure of the remaining debt.

This landmark decision establishes a precedent, affirming that state institutions are not above the law and must adhere to their own established procedures. The court emphasized that after 13 years without collection activity, debts are automatically nullified, regardless of any claims or justifications by the Institute.