A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 A Global Guide to Retirement Plans & Schemes SCROLL DOWN A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Introduction User guide Click to return to start Click to return to list of countries and regions Click to browse our directory © 2017. The Mayer Brown Practices. All rights reserved. Click here to read our legal statement. Although retirement plans and schemes are generally jurisdiction specific creatures, the governance of retirement plans and schemes maintained by multi-national corporations is very much a global issue. They tend to be heavily regulated and pose numerous risks to the sponsor, including legal and regulatory compliance gaps, participant lawsuits, government investigations, embezzlement of trust funds, and plan funding and financial accounting consequences. There are also often tensions between a corporation’s desire for harmonizing global benefits and/or achieving cost control objectives with the reality of local labor markets and legal requirements. Many employers are in the process of assessing (or reassessing) their governance and risk management structures for their retirement programs on a global basis. A Global Guide to Retirement Plans & Schemes provides a brief overview of the laws relating to the regulation of retirement plans and schemes in 50 key countries. We hope it will be a valuable starting point for multi-national and global employers developing governance and risk management structures for their retirement programs. While the Guide is not a comprehensive discussion of the law governing retirement programs in each applicable country, each chapter summarizes the general contours of the country’s social security system and employer-sponsored broad-based plans/schemes. Key areas covered include the principal statutes governing, and the key features of the tax framework applicable to, such plans/schemes, employer funding obligations and the material rules governing plan/scheme investments, the employer’s principal reporting and disclosure obligations, circumstances in which a retirement plan/scheme may be terminated and associated employer liability for any underfunded benefits, portability of an employee’s benefits, and requirements, if any, to provide cost of living adjustments post-retirement. We hope that you find the Guide useful. It has been made possible with the input from lawyers across Mayer Brown’s global office network and partner law firms in other jurisdictions. Maureen Gorman | Nicholas Robertson | Hong Tran | Guido Zeppenfeld Firm Practice Leaders, Employment & Benefits Group | Mayer Brown A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contents STEP 1 – Select a Region Click a Region to Select KEY: AMERICAS EMEA ASIA A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 STEP 2 – Select a Country/Jurisdiction Selected: AMERICAS Contents Argentina Bolivia Brazil Canada Chile Colombia Ecuador Mexico Panama Paraguay Peru United States Uruguay Venezuela A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Argentina Contributed by: J.P. O’Farrell Abogados Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T:+55 11 2504 4202 F: +55 11 2504 4211 1. Does the state provide a pension, retirement income or social security program of some type? The Argentine government provides a state pension based on social security contributions, the Argentine Comprehensive Social Security System (“Sistema Integrado Previsional Argentino” or “SIPA”). Contributions are paid by the employer and the employee to the National Social Security Administrative Bureau (“ANSES”). Contributions are calculated as a percentage of the employee’s gross salary. Every year, the ANSES publishes the applicable earning-related caps. Under the state pension system, most employees can access retirement benefits after completing 30 years of service and at age 65 in the case of men, and at age 60 in the case of women. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Specific regimes often apply for certain occupations that have been classified as carrying an occupational health risk by the Labor Ministry. These apply lower minimum age and years of service requirements. The state pension system also provides cover for disability retirement. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are only required to pay the applicable contributions to the ANSES in connection with the state pension provided by the Argentine government. Although not required to maintain private pension/retirement plans, some companies – mostly multinational corporations – often offer them. They are generally offered to management employees as a labor benefit. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? As a general rule, no specific statutory regulations or requirements apply to pension/retirement plans, even when they cover a broad cross-section of the workforce. Private pension/retirement plans are instead governed by the contractual terms agreed between the employer and employee which may stipulate rules, contributions and termination conditions. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Employee and employer contributions to social security programs or pension plans based on monthly gross salaries, as well as payments made under such programs/plans, are subject to income tax. The following key issues must be considered: 1. Employer contributions (a) Employer contributions to SIPA and to national, provincial or municipal social security funds are entirely income taxdeductible (subsection (d), section 81 Income Tax Law (“ITL”)). (b) Employer contributions to private retirement insurance plans managed by insurance companies under the control of the National Superintendent of Insurance (“Superintendencia de Seguros de la Nación”) are income tax-deductible up to ARS 630.05 per year (subsection (h), section 87 ITL). Argentina A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (c) Following the Argentine Supreme Court of Justice decision in “Pan American Energy LLC Division Argentina (TF 28. 823-I) c / DGI” (08/26/2014), employer contributions to private retirement plans are entirely income tax-deductible. 2. Employee contributions (a) Employee contributions to SIPA or to national, provincial or municipal social security funds are entirely income taxdeductible (subsection (d), section 81 ITL). (b) Employee contributions to private retirement insurance plans managed by entities under the control of the National Superintendent of Insurance have not been income tax-deductible since December 9, 2008. (c) Contributions to private retirement plans are not income tax-deductible. 3. Payments received under pension plans or social security programs Payments received from pension plans or social security programs are subject to income tax where they originate from salaries or benefits that were subject to income tax (subsection (c), section 79 ITL). Payments of this nature are subject to withholding tax under General Resolution No. 2437/2008. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? In relation to the state pension provided by the Argentine government, employers are required to make the applicable contributions, which depend on the salary earned by the employee and the caps that are set annually by the ANSES. However, employers are not required to make a defined level of contribution when they adopt a private retirement plan/ scheme. The level of employer contributions (if any) is governed by the private contractual terms that the employer and employee agree upon. In practice, both the employer and employee usually make contributions to private retirement plans/schemes. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Retirement plans/schemes normally involve an insurance company taking charge of the administration of the funds in a trust-based scheme. The insurance company is responsible for the investment of the funds and performance of assumed obligations under the regulation and supervision of the National Superintendent of Insurance. Argentina A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 If the insurance company breaches its contractual obligations, this would give rise to civil or criminal liability, depending on the nature of the breach. Criminal liability may arise where funds have been mismanaged to benefit third parties. In most cases, under-performance or non-performance of contractual obligations is punishable by damages and fines. The employer may work with the insurer to select the desired investment scheme for the employees. However, there is no duty on the employer to monitor the scheme’s performance. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? As a general rule that applies in respect of most labor benefits, employers should provide employees with a written statement of the terms and conditions of any retirement plan/scheme that the employer has decided to implement. If employee contributions are required, the employee should provide the necessary authorization to allow the employer to deduct the contributions from salary payments. No other reporting, disclosure or employee consultation rules apply to private retirement plans/schemes. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Alteration of the terms of a private retirement plan/scheme is subject to two main conditions: • Any changes must comply with the terms of the scheme’s amendment power, which will usually require the consent of the employer and the employee. • Local labor legislation restricts detrimental changes to accrued employment benefits. The written consent of the affected members, especially the employee, is therefore required for detrimental changes. Consent should be valid meaning the employer must be able to demonstrate that the benefits before and after the change are effectively equivalent. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Withdrawal or termination of a plan/scheme would constitute a detrimental change to an accrued employment benefit. As mentioned in question 8, Argentine labor legislation is extremely restrictive regarding such alterations. Therefore, unless the employer can prove that the employee’s consent was obtained and that the plan/scheme was effectively replaced by an equivalent benefit, the employee could either claim monetary compensation for the loss of the plan or Argentina A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 claim a severance payment on the basis he or she was subjected to detriment and, in effect, dismissed by the employer as a result of the withdrawal of the plan. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Whether employees are entitled to take their private pension/retirement benefits with them in the event of a job change depends on the terms and conditions agreed by the parties in relation to the pension/retirement plan/scheme. No specific statutory requirements or obligations apply in these circumstances. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? While the state pension/retirement benefit usually receives inflation-based increases from time to time after the employee’s retirement decided by the Argentine government, private pension/retirement plans do not require such adjustments/increases unless the scheme expressly provides for them. Contributed by: Joaquin E. Zappa, J.P. O’Farrell Abogados Argentina A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Bolivia Contributed by: FERRERE 1. Does the state provide a pension, retirement income or social security program of some type? Yes, the state provides a comprehensive pension system (referred to as the “Comprehensive Pension System”) which consists of: (i) A contributory scheme that provides old age benefits, disability allowances, survivors’ pensions derived from these disability allowances and funeral expenses. (ii) A semi-contributory scheme which provides supplementary old age benefits, survivors’ pensions derived from these benefits and funeral expenses. (iii) A non-contributory scheme which provides an old age pension (“Renta Dignidad”) and funeral expenses. A Global Guide to Retirement Plans & Schemes Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T:+55 11 2504 4202 F: +55 11 2504 4211 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Yes, employers are required to register with a Pension Fund Administrator and to contribute to the Comprehensive Pension System, as well as to act as withholding agents of employee contributions for: (i) sickness; (ii) maternity; (iii) occupational risks; (iv) disability; and (v) old age or retirement. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal relevant statutes are the Labor Code, the Social Security Code, the Pension Law and its regulation decrees. Retirement/old age pensions under the Comprehensive Pension System are accessible at age 58, provided that an employee has made at least 120 contributions, regardless of the accumulated amount in an employee’s pension account. It is possible for women to retire earlier – one year earlier for each child born alive, up to a maximum of three years. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Retirement pension plans have some tax benefits, as employer contributions are tax-deductible as expenses, reducing the amount of tax that the employer has to pay on business profits. Employee contributions are not tax-deductible. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? The employer must register with a Pension Fund Administrator. In addition to deducting the contributions made by the employee, the employer must make monthly contributions called “Employer Solidarity Contributions” of 3% of the employee’s earnings, and Occupational Risk insurance premium contributions of 1.7% of the employee’s earnings. Bolivia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The legislation grants fiduciary investment powers to Pension Fund Administrators with respect to assets held under the Comprehensive Pension System. The related requirements and rules are set out in the Pension Law and require the funds managed by the Pension Fund Administrators to be invested exclusively in publicly-offered securities or financial instruments, through primary and secondary markets authorized in accordance with the Bolivian Law. Pension Fund Administrators must prioritize investment in resources managed in productive enterprises. Overseas investments must not make up more than 50% of each managed fund. Further restrictions apply regarding the level of investment in any one generic type of instrument, issuer limits, limits derived from risk rating and others in accordance with the law. 95% of the assets of each managed fund must be held by authorized depository institutions. Non-compliance with these requirements may result in criminal and civil liability. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employer information disclosure rules are set out in government policies by the Pension Fund Administrators. Employers are required to file returns with the Pension Fund Administrators as proof of compliance with the requirement to pay monthly contributions. Failure to do so may lead to the Pension Fund Administrators initiating proceedings for noncompliance. Under the Pension Law, Pension Fund Administrators must periodically send savings statements to insured employees, as well as information about the managed funds. Digital or physical means of communication can be used. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Employers cannot make detrimental changes to the terms of a pension plan as they are established by law. However, employers can make improvements to such plans, provided that following the alteration the plan continues to comply with the minimum requirements established by law. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers may only terminate a pension plan in the event of the termination of the employment relationship. Civil and criminal liability may arise if the employer fails to make the relevant employer/employee contributions. Bolivia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes, pension contributions are individual savings which belong to the employee rather than the employer. In the event of a change of employer, such contributions (including employer contributions) remain the property of the employee. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Any adjustment/increase is dictated by the government, state or public policy rather than by employers. Any increase to be made will be set out in a supreme decree or a law, usually made by the central state. Bolivia Contributed by: Luis Perez, FERRERE A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Brazil Contributed by: Tauil & Chequer Advogados in association with Mayer Brown LLP 1. Does the state provide a pension, retirement income or social security program of some type? Yes. The Brazilian government maintains a social security system, regulated by the Brazilian Social Security Institute (Instituto Nacional de Seguridade Social) (“INSS”). The pension system is funded by mandatory employer and employee contributions. The social security system provides a range of benefits to employees. In addition to a retirement pension, the main benefits are workplace accident coverage, work-related ill-health coverage, and pregnancy protection. Individuals are entitled to receive a pension under the social security system once they have contributed to the system for 35 years or upon reaching the minimum qualifying age. A Global Guide to Retirement Plans & Schemes Eduardo Soto Partner, São Paulo (T&C) E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? All Brazilian employees must be covered by the state social security system. The employer must pay 20% of each employee’s monthly salary to the INSS. The employer is also responsible for withholding the employee contribution from each employee’s monthly salary – this is a variable percentage of the employee’s monthly salary, ranging from 7.65% to 11% and is payable to the INSS. In addition, employers can, but are not required to, maintain a private and complementary retirement plan. In these circumstances, in addition to making social security contributions to the INSS, employers and/or employees will contribute a predetermined percentage of the employee’s monthly salary to the private retirement plan. The complementary retirement plan chosen by the employer will be managed by a separate entity and this entity pays the complementary private pension after the employee’s retirement. With all complementary retirement plans, employees can choose whether or not to participate in the plan. On average, Brazilian employer pension contributions to the INSS and private retirement plans amount to approximately 28% of employees’ gross monthly salary and benefits. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? In Brazil, retirement plans are governed by several laws. The principal statutes are the Brazilian Federal Constitution, Law No. 8,212/1991, Law No. 8,213/1991 and Decree No. 3,048/1999. The main laws regulating the complementary private pension system are Complementary Laws No. 109/2001 and No. 108/2001. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Employee contributions to the social security system are not subject to income tax where the contributions are withheld from the employee’s salary. In other cases, i.e., where the individual makes the contributions directly to the INSS (e.g., independent contractors), the contributions are deductible from the individual’s taxable income. Under article 6, I of Normative Instruction No. 1,500/2014, benefit payments from the state pension system to employees aged 65 and above are not subject to income tax, up to an annual amount of BRL 22,847.76. Payments from the social security system are therefore only taxable when the recipient is aged under 65 or when the recipient’s annual income exceeds BRL 22,847.76 – in this case, only the excess over BRL 22,847.76 will be taxable. Under article 72, first paragraph of Normative Instruction No. 1,500/2014, employee contributions to the private pension system can be deducted from the income tax calculation base, up to a maximum of 12% of the total taxable income. Brazil A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Social security contribution rates are set each year and are based on employees’ wages. The current monthly employer contribution rate is 20%. For regular employees, household workers, and rural workers, INSS contributions are deducted automatically from their wages. Independent contractors contribute to INSS as individual taxpayers. The monthly employee contribution rates currently in force are: • Wages up to BRL 1,556.94 = 8% • Wages between BRL 1,556.95 and BRL 2,594.92 = 9% • Wages above BRL 2,594.93 = 11%, but limited to a maximum contribution of BRL 570.88 In the complementary private pension system, contribution rates are set by the employers and are set out in the specific terms and conditions of the documents governing the relevant private pension plan. The employer can therefore select a type of complementary retirement plan which requires only employee, and not employer, contributions. The private pension plan can set rules governing the employer’s right to terminate its contributions. The private pension plan chosen by the employer will be managed by a separate entity and this entity pays the complementary private pension after the employee’s retirement. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? As noted in question 3, private/complementary retirement plans are governed by the Brazilian Constitution and Complementary Laws No. 108/2001 and 109/2001, which set out the minimum and general standards that a private pension plan must meet. The entities which manage complementary retirement plans are audited by government agencies, called Susep and Previc. The liabilities for non-compliance with the requirements set out in law or in the terms of the retirement plan are: (i) a warning; (ii) suspension of the entity’s right to carry on complementary retirement activities for up to 180 days; (iii) prohibition against the entity’s right to carry out the function of a complementary retirement entity, insurance company, financial institution or public service for a period of two to ten years; and (iv) a penalty from BRL 2,000 to BRL 1,000,000. The liabilities above can be applied cumulatively, including the criminal penalties provided in the Penal Code. Moreover, other liabilities for any specific non-compliance can be established by law. Brazil A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employers who have a private pension plan must submit annual financial statements and an actuarial valuation of the plan to the Brazilian government. Information about the retirement plan must also be sent to employees at least once a year. Employers must also provide information formally requested by an employee for clarification, or in order to defend personal interests. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Any alteration to the terms of a private/complementary retirement plan must receive prior approval from the Brazilian authorities. The employer cannot detrimentally alter employees’ vested rights. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? As noted above, employers cannot detrimentally alter employees’ vested rights, and employers cannot therefore withdraw from or terminate a plan/scheme. The main liabilities that may arise if an employer decides to terminate a private pension plan are related to the risk of future employee lawsuits claiming payment of the employer contributions and potentially even moral damages. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? If an employee changes job, the former employer stops contributing on his or her behalf to the INSS, while the new employer has to proceed with a new registration of the employee in the social security system and assume responsibility for making the employer INSS contributions and deducting the employee INSS contributions from then on. Contributions to the INSS are accumulated in the name of the employee and remain in the employee’s name following a change of job. The contractual terms governing private/complementary retirement plans will set out whether employer contributions are required. Following a change of job, employees are, however, allowed to retain the total amount of accumulated contributions made by or on their behalf to the plan. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Benefits provided by the social security system are increased annually by the amount set in a legal decree issued by the Brazilian government. The annual increase payable to pensions from private/complementary retirement plans depends on the specific terms and conditions governing the plan. Contributed by: Eduardo Soto & João Cunha, Tauil & Chequer Advogados in association with Mayer Brown LLP Brazil A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Canada Contributed by: McCarthy Tétrault LLP Mayer Brown LLP New York Office: 1221 Avenue of the Americas, New York, NY 10020-1001, United States Palo Alto Office: Two Palo Alto Square, Suite 300, 3000 El Camino Real, Palo Alto, CA 94306-2112, United States E: [email protected] T: NY +1 212 506 2679 PA +1 650 331 2015 1. Does the state provide a pension, retirement income or social security program of some type? The Government of Canada provides a Canada Pension Plan (“CPP”), funded through mandatory contributions from employees, employers and self-employed individuals. The CPP operates throughout Canada, except in Quebec where the Quebec Pension Plan (“QPP”) provides similar benefits. The CPP retirement pension provides a monthly benefit to eligible individuals in an amount determined by a statutorily prescribed formula. Participants can apply for and receive a full CPP retirement pension at age 65, a reduced pension as early as age 60, or an enhanced pension as late as age 70. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 In addition, the Government of Canada provides Old Age Security (“OAS”) benefits, funded out of the government’s general revenues. The OAS pension is a monthly payment available to most Canadians aged 65 or older. Low income individuals may receive an additional Guaranteed Income Supplement added to their OAS pension. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? With some exceptions, including the Quebec Voluntary Retirement Savings Plans (“VRSP”) and certain statutory or sector-wide plans, the maintenance of a retirement program, other than participation in the CPP, is voluntary with the employer. An employer may establish a pension plan for all of its employees, for certain groups of employees, or no pension plan at all. Employers of Quebec employees must provide a VRSP if the employer has more than five employees with a minimum of one year of uninterrupted service and does not provide other pension arrangements. Private pension benefit plans offered by Canadian employers fall into two categories: unregistered retirement plans and registered retirement plans. A registered plan must be registered with the government pension authority of the jurisdiction and is subject to minimum pension standards legislation. Unregistered pension plans are less formal arrangements that must be registered with the Canada Revenue Agency but are not subject to minimum pension standards legislation. The most common form of unregistered pension plan is a Group Registered Retirement Savings Plan (“Group RRSP”). A Group RRSP is a collection of individual RRSPs offered to employees by their employer. Contributions are taken from the employee’s pre-tax pay through payroll deductions if the employee so elects and are deposited directly into the employee’s RRSP account. Depending on the plan terms, the employer may contribute on a matching basis up to a prescribed percentage of the employee’s earnings. The two main types of registered pension plans are defined contribution and defined benefit plans. With defined contribution plans, usually the employer and employee contribute an established amount each year (pre-tax), typically defined in plan documents as a percentage of the employee’s wages. Defined contribution plans do not provide a set pension amount, as the benefit is based on the performance of the fund investments. With defined benefit plans, the employer contributes to the plan and employees usually, but not always, make additional contributions. The amount of the pension benefit is set using a formula based on the employee’s career earnings and years of service. Income tax legislation limits the amount that can be contributed to a pension plan each year. Employers may choose to provide a supplemental employee retirement plan (“SERP”) to provide retirement benefits in excess of the registered pension plan limits. Canada A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Multi-employer pension plans (“MEPPs”) are a type of registered pension plan that allows two or more unrelated employers to contribute to a single pension plan fund. They are typically found in unionized industries and are often sponsored or administered by a trade union. Pooled Registered Pension Plans (“PRPPs”), a new type of pension arrangement in Canada, help individuals who do not have access to a workplace pension plan to save for retirement. PRPPs are similar to defined contribution plans, except that in the case of PRPPs employer contributions are optional. Members’ contributions are made through payroll deductions. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal federal statute is the Pension Benefits Standards Act, 1985, RSC 1985, c 32 (2nd Supp). Pension plans must be registered with the Canada Revenue Agency and must comply with income tax rules and regulations. Registered pension plans must also be registered with the pension authority of the jurisdiction and must comply with minimum pension standards legislation. The legislative and regulatory scheme is administered in each province and in the federal jurisdiction by a government pension commission. Where plan members reside in more than one province, the employer is required to register the plan in the province in which the majority of members are employed, but plans must still comply with the legislation of each province in which plan members are employed. Employers are responsible for deducting member contributions from their wages and must pay those contributions (and any employer contributions) into the pension fund within the timeframes established by legislation or the terms of the plan. Employer and member contributions held in a pension plan, and the investment earnings on those contributions, must be held in trust separate and apart from the employer’s assets. While the minimum pension standards vary among Canadian jurisdictions, legislation imposes rules concerning matters such as membership, funding and solvency requirements, investment, asset transfers, locking in of contributions and benefits, vesting and corporate reorganizations. A pension plan may offer more beneficial arrangements to members, but must at least meet the legislated standards. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Pension plans must be registered under the Income Tax Act (Canada) and must comply with the Income Tax Act (Canada) and its regulations. Canada A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The Income Tax Act (Canada) provides deductions in respect of both employee and employer contributions, subject to maximum deduction limits. Investment earnings are tax-exempt until the member draws a pension benefit. Amounts can be transferred tax-free from a registered pension plan to a registered retirement savings plan, another registered pension plan or a registered retirement income fund. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Pension plans can be either contributory or non-contributory. In a contributory plan, members and the employer both make contributions. In a non-contributory plan, only the employer makes contributions. Usually, both the employee and employer contribute. In a defined contribution plan, the plan terms usually require a fixed level of employer contributions. In a defined benefit plan, the amount of employer contributions is based on the anticipated cost of providing benefits using certain assumptions about factors such as future salary levels, investment returns and the age at which members will retire. This information is contained in an actuarial report. If the actuary estimates that there might not be enough money in the pension fund to pay for the expected pension liabilities, the employer is required to make up the difference by making additional contributions until there is enough money in the fund. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The pension plan administrator—usually the employer—has a fiduciary duty to ensure that plan members receive the promised benefit and that assets are vested in a prudent manner. Administrators of defined contribution plans that permit members to make investment choices must offer investment options of varying degrees of risk and expected return that would allow a reasonable and prudent person to create a portfolio of investments suited to their retirement needs. Depending on the applicable legislation, the administrator is usually required to provide members with information in writing describing each investment option, including the investment objective, the type of investment and the degree of risk associated with it, performance history and the associated fees, levies and other charges. Investment policy for defined benefit plans should be based on the “prudent person” approach. The administrator should establish limits on the plan’s exposure to credit and market risks, and should ensure that the pension plan follows a sound investment policy. Depending on the jurisdiction, pension legislation imposes strict rules about how pension funds can be invested, limits the ability of the plan administrator to lend or invest plan funds to or in associated corporations, and limits the percentage of voting shares of a company that can be held in a pension fund. Canada A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Any employer who contravenes legislative rules and regulations concerning the investment of pension plan funds is guilty of an offense under pension legislation. The penalty depends on the jurisdiction. In the federal jurisdiction, for example, any person who commits an offense is, in the case of an individual, liable to a fine not exceeding CAD 100,000 or to imprisonment for a term not exceeding 12 months, or to both; and in the case of a corporation or other body, liable to a fine not exceeding CAD 500,000. If a corporation or other body is guilty of an offense, every officer, director, agent or mandatary or member of the corporation or body who directed, authorized, assented to, acquiesced in or participated in the offense is a party to and guilty of the offense and is liable to the punishment provided for the offense, whether or not the corporation or body is prosecuted or convicted. Further, at common law, a pension plan administrator that breaches its legal duties may be liable for breach of fiduciary duty, breach of contract or negligence. These actions could lead a court to order restitution, damages or other remedies. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Minimum standards legislation establishes administrator/employer obligations concerning reporting, disclosure and employee consultation. While these rules vary from jurisdiction to jurisdiction, the employer is usually required to file with the government regulatory body an application for registration of the pension plan and all required documents within the period of time specified in the legislation. Any amendment to the plan must also be filed with the regulatory body. An Annual Information Return must be filed within time limits prescribed by legislation, as well as annual plan financial statements. A Statement of Investment Policy and Goals must be prepared and filed in most cases. Periodically, usually every three years, an actuarial valuation and cost certificate for defined benefit plans must be filed. Each jurisdiction prescribes information that the employer must provide to plan members. This generally includes information such as: • a written explanation of the pension plan • an annual plan statement • a retirement statement to members who are retiring and a description of their retirement options • a termination statement to members whose employment terminates • a death benefit statement to the surviving spouse, designated beneficiary or estate following the death of a member In Ontario, for example, the employer must also make available for inspection, upon written request by a member, former member, spouse of a member or former member, or any other person entitled to benefits under the plan: • the current plan text, including any plan amendments Canada A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • any documents related to the pension plan that must be filed in support of an application for registration of the plan, and any amendments such as a trust agreement • annual information returns • financial statements regarding the pension plan or pension fund • actuarial funding reports • documents delegating administration of the pension plan or fund • correspondence between the plan administrator and the government regulatory authority within five years before the date of the request • any statement of investment policies and procedures • those parts of an agreement concerning the purchase or sale of a business or assets of a business that relate to the plan Under pension legislation or plan terms, an employer may be required to establish a pension committee with plan member representatives for purposes such as monitoring the administration of the pension plan, making recommendations to the administrator respecting the administration of the pension plan, and promoting awareness and understanding of the plan. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Provided that the employer has reserved the right to modify the terms of the plan, the contribution rate (in the case of a defined contribution plan) or the rate of benefit accruals (in the case of a defined benefit plan) may be reduced or cease completely prospectively. This is subject to collectively bargained obligations, which remain in place until the collective agreement is renegotiated, and to potential constructive dismissal claims of non-union employees if the provision of pension benefits at a certain level is a term of the employment contract. Plan amendments must be filed with the government regulatory body of the jurisdiction in which the plan is registered. Legislation generally prohibits plan amendments that reduce a person’s benefits retrospectively. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Unless a collective agreement between the employer and a trade union requires an employer to maintain and contribute a pension plan, an employer may decide to terminate or “wind up” the pension plan. Wind ups most often occur when Canada A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contributed by: Paul Boniferro & Margaret Gavins, McCarthy Tétrault LLP the employment of a significant number of plan members is terminated, when a business is shut down, or when an employer becomes insolvent or bankrupt. However, an employer may also decide to wind up a pension plan in other circumstances. The wind up date is usually chosen by the employer. On the wind up date, all members become fully vested and stop accruing benefits under the plan. All member entitlements are determined and settled in accordance with the pension plan documents and applicable legislation. A member of a plan that is being wound up who is not currently receiving a pension generally has the same transfer rights as a member whose employment ends under normal circumstances (see question 10). If, at the time of wind up, the liabilities of the pension plan exceed the plan’s assets, the plan is considered to have a deficit. In case of a deficit, the employer may be required to contribute additional amounts. If the employer is unable to make up the funding deficit, member entitlements will be reduced. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Employees whose employment ends before benefits have vested are not entitled to receive any pension benefits from the plan. However, an unvested member is entitled to a cash payment of the member’s contributions plus accrued interest or investment income on those contributions. The cash payment is taxable to the member in the year it is received. The member’s contribution and accrued interest or investment income may also be transferred to a registered retirement savings plan or a registered retirement income fund. An unvested member is not entitled to a refund of the employer’s contributions. If employment ends when the member is vested, the member is entitled to receive a pension from the plan on reaching retirement age. Instead of receiving a future pension, the member may be eligible for a refund of a portion of pension contributions, plus interest or investment earnings, and may be able to transfer the commuted value of the pension benefits out of the plan into another pension plan, a locked-in account or a life annuity purchased through an insurance company. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Pension income under the CPP/QPP is price indexed. For employer-sponsored plans, there is no requirement to index retirement income. However, some plans voluntarily provide for such increases at discretionary intervals or based on inflation rates. Canada A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Chile Contributed by: Morales & Besa Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 1. Does the state provide a pension, retirement income or social security program of some type? The Chilean pension system is an individual savings system that aims to ensure that employees receive a stable income in retirement that is closely related to the income that they received during their active working life. Under the individual savings system, each member has an individual savings account into which his or her social security contributions are deposited. The funds comprised by these social security contributions are managed by private entities called Pension Fund Administrators (“AFPs”), which are special stock corporations whose sole purpose is to manage the pension funds of Chilean employees. They are subject to extensive and continuous regulatory review by a technical authority, called the Superintendence of Pension Fund Administrators (“SAFP”). A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 AFPs collect social security contributions, deposit them in the personal account of each member, and use long-term investment strategies to invest the funds in order to be able to provide the corresponding benefits. In exchange for their management, AFPs are entitled to receive a commission, paid at the member’s expense. There are currently seven AFPs in operation in Chile. Employees are free to choose which AFP will manage their funds and may switch if they are dissatisfied with the performance of their investments or for any other reason. When an employee retires, the invested capital is returned to him or her as a pension in installments. The amount of the pension will depend on the amount of the accumulated savings. In order to be eligible to retire, the general rule is that men must have reached age 65 and women must have reached age 60. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required to maintain retirement plans/schemes. Their sole obligation consists of withholding on behalf of their employees 10% of the employee’s monthly salary and paying it directly to the AFP chosen by the employee. Employees are therefore required to make pension contributions of 10% of each month’s gross salary, subject currently to a cap of UF 75.7 (approximately USD 3,025). The UF is an indexation unit of the Chilean currency which is adjusted daily to reflect the previous month’s inflation. At the start of each new employment relationship, employees must inform their employer of their selected AFP to which the employer must pay the employee’s social security contributions. If it is the employee’s first job, the employer must inform the AFP designated for use by new employees for that year, and deposit the employee’s social security contributions with that AFP. At that point, the employee becomes a “member” of the Chilean pension system for life. The employee may subsequently choose to change AFP. The mandatory employee contributions must be paid by the employer to the AFP by the tenth day of the month following the month in which the salary was earned. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal statute governing the Chilean pension system is Law Decree No. 3,500, published on November 13, 1980. The Law Decree applies to three kinds of members of the pension system: (i) employees; (ii) independent contractors; and (iii) voluntary affiliates. Chile A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Employees are automatically enrolled in the system when they begin to render services under an employment agreement. Independent contractors are currently obliged to withhold 10% of their taxable income, unless they expressly opt out. However, from 2018, the ability to opt out will be removed and independent contractor participation will be mandatory without exception. Voluntary affiliates can choose to join the social security system at any time. 4. What are the key features of the tax framework that applies to retirement plans/schemes? As explained in question 2 above, employers are required to withhold on behalf of their employees 10% of the employees’ monthly gross salaries and pay that amount directly to the AFP chosen by the employee. These amounts are not subject to income tax. When employees reach retirement age, and apply for the scheduled withdrawal of their savings from the relevant AFP, such withdrawals are subject to income tax. Employees can also choose to make additional voluntary contributions (known as APVs) to the relevant AFP. APVs can be made directly by the employee or can be deducted from his or her salary by the employer. APVs are also not taxable (subject to an annual cap of UF 600 (approximately USD 23,650)). Unlike the mandatory employee contributions, APVs can be withdrawn prior to retirement age, but will be taxable according to a formula set out in the Income Tax Law. In addition, some employers may agree with their employees to make a voluntary contribution to the employees’ retirement savings accounts. This is called an Agreed Deposit (Depósito Convenido). Agreed Deposits are not taxable (subject to an annual cap of UF 900 (approximately USD 35,450)). Agreed Deposits may not be withdrawn prior to retirement age. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? As noted in question 4, employers may agree (but are not required) to make voluntary contributions known as “Agreed Deposits” to the employee’s individual capitalization account. Agreed Deposits can be a single one-off payment, a monthly payment of a percentage of the employee’s taxable income, or a fixed monthly amount. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? As explained, under the Chilean pension system, AFPs are the entities that invest pension funds. When doing so, they may only invest in financial instruments that have been specifically authorized by law, or by the Chilean Central Bank and the SAFP. Employees may only choose the AFP that they wish to join and the type of pension fund in which to invest their social Chile A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 security contributions. There are funds with lower and higher investment risks. However, where older members are concerned, certain limitations on fund choice apply, as such members must choose lower risk funds. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Not applicable. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Retirement plans are regulated by law and neither an employer nor an employee has a legal right to alter such plans. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? An employer does not have a legal right to terminate a plan/scheme. An employer’s sole obligation is to withhold from an employee’s monthly wage the relevant percentage for social security contributions and pay them over to the employee’s chosen AFP for so long as there is an employment relationship in force with that employee. When an employee’s employment is terminated, the employer must inform the relevant AFP. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? When an employee changes jobs, he or she must notify his or her new employer of which AFP he or she contributes to. This is so that the new employer can fulfill its obligation to withhold the employee’s social security contributions and pay them over to the relevant AFP. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Pension benefits do not need to be adjusted or increased after retirement. Chile Contributed by: Fernando Arab Verdugo, Morales & Besa A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Colombia Contributed by: Brigard & Urrutia Abogados Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 1. Does the state provide a pension, retirement income or social security program of some type? The Colombian Pension Social Security System is divided into two regimes known as the Individual Savings Regime (“ISR”) and the Common Benefit Regime (“CBR”). Employees can choose which regime to join. Both regimes pay retirement pensions, disability pensions and survivors’ pensions. The ISR consists of a personal account for each employee, into which the employee deposits his or her monthly pension contributions. Once the personal account savings reach an amount that is high enough to finance the payment of the pension, the employee is entitled to retire regardless of his or her actual age. This regime is administered by private pension funds. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The CBR, on the other hand, is a single collective account into which the contributions of all employees are deposited. These contributions are used to pay out benefits to current pensioners. In other words, current employees deposit their monthly contributions in the common account, and those contributions are used to pay the pensions of current retirees. In order to acquire a right to a pension from the CBR, employees must reach age 62 if male, or age 57 if female. In addition, employees must have accrued the equivalent of 1,300 weeks in monthly contributions (one month’s contribution equals approximately 4.35 weeks). This regime is administered by Colpensiones. Employers must enroll their employees in the pension regime selected by the employee (either ISR or CBR) and make monthly contributions comprising a portion paid by the employer and a portion paid by the employee. In addition to the mandatory employee contributions, employees have the right to make voluntary payments to a private pension fund in order to increase their pension savings. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Under Colombian labor legislation, employers are required to: • enroll their employees into the Pension Social Security System; • give their employees the right to choose the pension regime and, if the ISR regime is chosen, the private pension fund in which they will be enrolled; and • pay monthly contributions to the Pension Social Security System on behalf of their employees. The Colombian Constitution prohibits employers from implementing retirement plans/schemes that are different from those provided by law. The only additional pension benefits that could be provided by an employer would be voluntary contributions to the employees’ own voluntary pension savings accounts. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Pension schemes in Colombia are subject to a number of laws and regulations as well as numerous decrees made under those laws. The principal laws include Law 100 of 1993, Law 797 of 2003, and Legislative Act 01 of 2005, which between them impose a range of requirements including: • minimum scheme funding requirements (if enrolled into the ISR); • age requirements for pension eligibility (if enrolled into the CBR); and Colombia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • minimum weeks of monthly contributions for pension eligibility (if enrolled into the CBR). Legislative Act 01 of 2005 prohibits employers from interfering with their employees’ other retirement plans/schemes. 4. What are the key features of the tax framework that applies to retirement plans/schemes? As a general rule, all payments received by an employee from the labor relationship are considered to be labor income subject to income tax and, consequently, subject to the corresponding withholding tax (that must be applied by the employer), regardless of the name that is given to the corresponding payment or benefits (e.g., salary, travel expenses, bonuses, awards etc.) and regardless of whether the payment is made in cash or in kind. The income tax withholding rate ranges between 0% and 33%, depending on the amount of income earned by the employee. Under Section 126-1 of the Colombian Tax Code (“CTC”), mandatory contributions to the ISR or the CBR are not subject to income tax and are not included as income for the purposes of calculating the rate of tax on other taxable income of the employee. In addition, all amounts contributed (whether by the employee or by the employer) to voluntary pension savings accounts and to “special construction savings” (“AFC”) accounts are exempt when determining the applicable withholding tax on each salary payment and the employee’s final tax liability. This exemption applies up to an amount that does not exceed the lower of 30% of the total gross income received by the employee in the relevant tax year, and 3,800 UVT per year (2017: COP 121,064.20 – approximately USD 40,300). UVT (“Unidad de Valor Tributario”) is a tax value unit. In other words, the total amount of income that is not subject to tax (including mandatory and voluntary pension contributions and AFC contributions) must not be higher than the lower of 30% of the gross income received by the employee in the relevant tax year, and 3,800 UVT per year (2017: COP 121,064.20 – approximately USD 40,300). AFC accounts are a special form of savings account under which the funds can only be used to purchase residential property. In order to use this amount as exempted income, the employee must comply with some additional requirements that are set out in Section 126-1 of the CTC. These requirements are that the amount contributed must be held in the fund for a minimum of 10 years except where (i) the amount is used to purchase an urban house/apartment or (ii) the employee meets the conditions for accessing his or her pension. Note that if this amount is withdrawn in breach of the requirements mentioned above, the fund must apply the mandatory tax withholding on the amount withdrawn (i.e., either contingent tax withholding or a 7% withholding as determined by Section 15 of Law 1819, 2016). Section 388 of Law 1819 of 2016 introduced new limits for the application of the income tax deductions/exemptions allowed under tax law when determining the tax withholding applicable to payments made under a labor relationship. Colombia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 In particular, Section 388 states that income tax deductions (e.g., for healthcare, dependents, interest on housing loans, etc.) and tax-exempted income (i.e., voluntary pension contributions and AFC contributions) cannot exceed 40% of the amount of the payment received less income not subject to computation (e.g., mandatory pension and healthcare contributions). This limit must therefore be considered when applying the corresponding withholding tax, regardless of whether the requirements set out in Section 126-1 of the CTC have been fulfilled. Under Section 206 of the CTC, pension payments to an individual are subject to income tax on that element of the payment that exceeds 1,000 UVT per month (2017: COP 31,859 – approximately USD 10,600). The income tax rate ranges from 0% to 33%, depending on the level of income earned by the individual. Pension payments to individuals in the private sector rarely exceed USD 10,600 per month. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? In Colombia, employees must choose between the two legal pension regimes regulated by law. Employers cannot implement different retirement plans/schemes. Once the employee chooses between the two regimes, monthly contributions are jointly paid by the employer and the employee. The contribution rate is equivalent to 16% of the employee´s salary and is calculated as follows: (a) the employee pays 4%; and (b) the employer pays 12%. The employer is responsible for deducting the employee contributions from employees’ salaries and must pay those contributions (and the employer contributions) over to the pension plan within a statutory timeframe. In addition, employees earning more than four times the monthly minimum legal salary (“MMLS”) must pay additional pension contributions of between 1% and 2% of their salary as follows: • between 4 and 16 MMLS: 1%; • between 16 and 17 MMLS: 1.2%; • between 17 and 18 MMLS: 1.4%; • between 18 and 19 MMLS: 1.6%; • between 19 and 20 MMLS: 1.8%; and • more than 20 MMLS: 2.0%. Colombia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Only employees who participate in the ISR regime have the option to choose how their contributions are invested. Each pension fund must operate various investment funds, with different purposes, which can be freely selected by the employees according to their age and their risk appetite. There are four funds, divided into two groups: • Three types of investment fund are open to employees during the period in which they are making contributions. They are: (i) the conservative fund, aimed at employees who are close to retirement; (ii) the moderate fund, aimed at employees who are willing to accept some risk/losses; and (iii) the greater risk fund, aimed at employees with a high-risk tolerance, who are usually many years away from retirement. • The special fund of programmed retirement: this is a special fund for retired employees and recipients of a widow’s pension. When the employee chooses an investment fund, the manager must create a sub-account for that employee in the selected fund. The employee can change his or her choice of fund in the three days following his or her selection by submitting a retraction. After that, he or she may only change the selected fund every six months. If the employee does not choose an investment fund, his or her contributions will be invested by default in the moderate fund (unless the employee is older than 50 years of age (for women) or 55 years of age (for men), in which case they will be invested in the conservative fund). 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? In Colombia, pension regimes are not regulated or managed by employers. Therefore, employers are not subject to reporting, disclosure or consultation obligations. Pension funds, as managers of the ISR, are required to inform employees of their individual account balances and returns on a regular basis. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Employers are not able to alter or modify the terms of the statutory pension regimes. Colombia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? As explained, pension regimes are not managed or regulated by employers. As such, employers cannot withdraw from or terminate a retirement plan/scheme. If the employer fails to comply with the enrollment and payment of monthly contributions obligations for more than 10 years, and the employee is subsequently dismissed without cause, the employer will be obliged to pay the employee’s pension directly. If the employer decides to make a contribution to employees’ voluntary pension accounts as an employment benefit, it is possible to impose accrual conditions, permitting the withdrawal of those voluntary contributions if certain conditions are not met. Such conditions would be governed by the agreement with the employees and the pension fund. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? As pension regimes are not managed directly by employers, if an employee changes his or her job, it will not affect, in principle, his or her pension. Employees can only withdraw their pension/retirement benefits when they meet the requirements of the relevant regime. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Colombian legislation requires pension regimes to provide inflation-related increases each year. Colombia Contributed by: Catalina Santos, Brigard & Urrutia Abogados A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Ecuador Contributed by: Noboa, Peña & Torres Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 1. Does the state provide a pension, retirement income or social security program of some type? Yes. The Social Security Law establishes a social security program that provides benefits including pension and retirement benefits to all Ecuadorian employees. In order to be eligible to receive pension and retirement benefits under the program, employees must meet age requirements and make a minimum number of social security contributions. These employee contributions are deducted from salary by the employer, who is also required to pay social security contributions in respect of their employees. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are required to pay what the Labor Code refers to as an “employer retirement benefit” to employees who have worked for the same employer for at least 25 years, whether or not the employee’s service is continuous. In addition, employers are permitted to adopt voluntary, supplementary retirement plans. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Social Security Law provides that an employee who has reached age 60 and has made at least 360 monthly contributions can receive retirement benefits. If the employee has made at least 480 monthly contributions, there is no minimum age requirement. The Labor Code governs the employer retirement benefit for workers who have completed 25 years’ service (whether or not continuous service) with the same employer. This benefit has no minimum age requirement for eligibility. 4. What are the key features of the tax framework that applies to retirement plans/schemes? The Ecuadorian Tax Law provides that retirement benefits received by an employee are exempt from income tax. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Yes. The Labor Code provides that the employer must fully bear the cost of the employer retirement benefit. If an employer voluntarily offers a retirement program, in addition to the statutory social security program and the employer retirement benefit, it must cover the costs related to this program. Such costs will not be tax-deductible. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? There are no particular rules governing employers’ investments allocated for the payment of employer retirement benefits under the Labor Code. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employers are not obliged to disclose information relating to the calculation of the employer retirement benefit, unless required to do so by an authority. However, the employer is required to perform actuarial calculations to determine the Ecuador A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 amount of the benefit. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? If the plan is a voluntary retirement plan (as opposed to the statutory social security program or employer retirement benefit), there are no restrictions on the modification of such plans. The terms of employer retirement benefits paid pursuant to the Labor Code are fixed by law and can only be modified in favor of the employee. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? If the plan is a voluntary retirement plan, the circumstances in which the employer can terminate the plan should be set out in the plan’s governing policies and should be communicated to workers. Employers risk becoming liable if a retirement plan termination is deemed a significant enough decrease in compensation to constitute cause for constructive dismissal. If the plan termination results in a constructive dismissal, employees may be entitled to compensation. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Employees retain their right to retirement benefits under the statutory social security program irrespective of a change in employer. Employer retirement benefits under the Labor Code, as noted in question 2, require 25 years of service with the same employer, although such service need not be continuous or consecutive. Employees’ rights to benefits under voluntary plans will depend on the policies governing the particular plan. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Retirement benefits under the statutory social security program are indexed periodically. Ecuador Contributed by: Dr. Patricio Peña, Noboa, Peña & Torres A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Mexico Contributed by: Sánchez Devanny Mayer Brown LLP New York Office: 1221 Avenue of the Americas, New York, NY 10020-1001, United States Palo Alto Office: Two Palo Alto Square, Suite 300, 3000 El Camino Real, Palo Alto, CA 94306-2112, United States E: [email protected] T: NY +1 212 506 2679 PA +1 650 331 2015 1. Does the state provide a pension, retirement income or social security program of some type? Yes, the Mexican government provides employment-related pension, retirement and social security. Employers are legally required to enroll all employees with the Mexican Social Security Institute (“IMSS”) (Instituto Mexicano del Seguro Social) and to make required contributions under the Social Security Law (“SSL”). Employer contributions are made at a rate that will depend on the level of salary, benefits paid to the employee and the type of activity of the employer. Upon enrollment of an employee at the IMSS, the IMSS becomes responsible for providing all benefits under the SSL, and the employer is released from any liability thereof through the payment of monthly contributions. The SSL automatically entitles employees to the following non-waivable benefits: (i) medical care insurance, (ii) maternity insurance, (iii) pension for non-occupational illness, (iv) severance and pension for occupational illness and accidents, (v) pension for old age, (vi) death benefits (caused by work and unrelated causes), (vii) childcare benefits, and (viii) widowhood pension. The employer would have to grant these benefits if the employer fails to register the employee with the IMSS. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Under the Retirement Savings System (“SAR”) (Sistema del Ahorro para el Retiro), employers must make bimonthly contributions to a privately managed government approved fund selected by the employee. Employers are required to contribute 2% of the consolidated salary (base pay plus benefits) of each employee provided that the maximum amount of salary that may be taken into account for this purpose is 25 times the daily Updated Measure Unit (currently MXN 75.49). The “UMA” (Unidad de Medida y Actualización) is a hypothetical updated “minimum wage” that is increased annually for the rate of inflation and replaces the use of the actual minimum wage (which has not been subject to reasonable increases for inflation in 20 years) for the purposes of calculating certain obligations and sanctions. The employee can also make after-tax voluntary contributions to the SAR, subject to a cap. The employer’s contribution must identify each employee for whom a contribution is made with each employee’s federal taxpayer identification number. The employer must provide an employee, upon request, with a list of all contributions made on his or her behalf. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? The only mandatory pension/retirement plan in Mexico is the SAR (described in question 1). The contributions are administered by special-purpose institutions named Retirement Savings Administrating Companies (Administradoras de Fondos para el Retiro) (“AFORES”), who invest such funds within the rules established by the federal government. These special-purpose institutions are private and each worker can choose its AFORE and change its funds from one AFORE to another. There is no characterization of this pension scheme as defined benefit or defined contribution, but it is similar to a defined contribution system, as the amount paid to the employee is dependent on the investment return on the contributions. Although there are rules in place to avoid high-risk investment of retirement contributions, there is no guaranteed return on investments in the SAR. The Retirement Savings System National Commission (“CONSAR”) (Comisión Nacional del Sistema del Ahorro para el Retiro) regularly publishes a ranking of the different available AFORES showing the percentage of interest generated on the contributions administered by them, to enable workers to decide whether to remain with, or change, their AFORES. Employers are permitted to have private pension plans, provided that they meet the requirements set forth by the CONSAR. Private pension plans can be structured as either “defined benefit” or “defined contribution” schemes. Most employers with private pension plans are moving towards using a defined contribution structure, with some deciding to have “hybrid” plans with features of both structures. Under a private pension plan, an employee may be able to receive from the plan, based on actuarial calculations, an amount similar to what would otherwise be a severance payment for termination without pay, at the time of retirement. This pension benefit has the advantage of attracting more beneficial tax treatment than a regular severance payment. Under most plans, it is possible to pay this pension benefit as a one-off lump sum amount or as a lifetime payment. Mexico A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal statutes governing retirement/pension plans are: (a) Social Security Law (for employees in the private sector) (b) Social Security Law for Government Employees (for employees in the public sector) (c) Retirement Systems Law and its regulations Private pension plans are generally governed by the following statutes: (a) Social Security Law (b) General Rules for Private Pension Plans (c) Internal rules of the CONSAR (where private plans must be registered) (d) Income Tax Law The requirements to be eligible for retirement under the SAR are: (a) If the employee started working prior to 1997 (the year of the reform of the pension plan system), then he or she would need 500 weeks registered at the IMSS, and must be 60 to 64 years of age for early retirement or 65 years of age for regular retirement. (b) If the employee started working after 1997, then he or she would need 1,250 weeks registered at the IMSS, and must be 60 to 64 years of age for early retirement or 65 years of age for regular retirement. 4. What are the key features of the tax framework that applies to retirement plans/schemes? The retirement payments made by the SAR are only subject to payment of income tax by employees when the annual payments exceed 15 times the monthly UMA. Below such amount, pensions and retirement payments made by the SAR are tax-exempt to the employee. In the case of private retirement plans, approved by the CONSAR, the Income Tax Law (“LISR”) (Ley del ISR) establishes that in order for employer monthly contributions to be deductible, they should not surpass a total amount equivalent to five times the monthly UMA. Mexico A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Yes, if the employer adopts a retirement plan, following the CONSAR requirement, they are obligated to contribute to the plan an amount equal to the formula prescribed under the plan in the case of a defined contribution plan, on an actuarially sound basis. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The material rules governing retirement plans under the SAR program are described in our responses to questions 1 and 3. In the case of private retirement plans, the SAR requires that employers register their plans before the CONSAR. The registration document for private retirement plans should contain the general terms of the plan, the fixed contribution amount, information regarding the members of the administrative committee, the plan eligibility requirements, financial resources to support the plan, investment plans, and financial information. Although private pension plans must comply with the rules and registration required by the CONSAR, there are no limitations on permissible investments. Each employer, when designing the terms of a private pension plan, will decide on the level of risk that the employees will be willing to face. Usually, private pension plans provide for conservative investments in order to avoid claims from employees. If the requirements set forth by the CONSAR are not fully complied with by the employer, such plan may not be enforceable, nor considered a deductible expense for the employer. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? In the case of the SAR, the AFORES (referenced in question 2) are obliged to provide an account balance every four month period to every worker that chooses the AFORE to administer the contributions made into the mandatory pension plan. The relevant periods are: • from January 1st, to April 30th, • from May 1st, to August 31st, and • from September 1st, to December 31st. Should the AFORES fail to comply with such mandatory provision, the CONSAR, through its verification faculties, may sanction the AFORES. Mexico A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Additionally, employees may enforce this provision by issuing a claim before the National Defence Commission for the Defence of Financial Institution Users (“CONDUSEF”) (Comisión Nacional para la Defensa de los Usuarios de las Instituciones Financieras). Regarding private pension plans, such rules may be set forth by the plan’s administrative committee, within the governing plan documents. The General Rules for Private Pension Plans require that the plans are registered with the CONSAR, which in turn publicizes the private plans that have been registered. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Changes to the SAR are not permitted. According to the CONSAR, employers may alter the conditions of a private retirement plan, subject to the following provisions: (a) any modification of the plan can only enhance the benefits or the funding requirements, and (b) they may not reduce, partially or totally, the benefits that the employees may have acquired. Any reduction of labor rights is prohibited so any such change may be deemed null and void. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Private pension plans that have been duly registered before the CONSAR may be terminated at the employer’s will, as the plan has been unilaterally and voluntarily implemented by the employer in favor of its employees. However, upon the plan’s termination, amounts that are held under the trust established to fund the plan should be distributed in a proportional manner among the employees who are entitled to the plan’s benefits, according to the guidelines set forth by the plan’s committee in the plan’s governing documents, taking into consideration each employee’s salary and seniority. If the plan is underfunded and is terminated, employees may receive less than their full benefits. However, if employees meet the requirements to receive the pension benefit and the plan is underfunded, the employer is responsible for paying the full benefit according to the plan, either by paying the relevant amount directly to the employee or by funding the plan in an amount that will allow full payment of the pension benefit. Mexico A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? With respect to government plans (i.e., the SAR program), an employee’s interest in his or her account balance is nonforfeitable, and consequently, in the case of an employee’s termination for any reason, the employee will keep his or her account balance in the SAR, as such retirement plan is part of the mandatory social security coverage, which may not be waived. Nevertheless, private retirement plans that are registered before the CONSAR commonly provide, within their bylaws, that employees who voluntarily terminate their employment prior to retirement, under any circumstance, will not benefit from the plan, nor will they be able to withdraw amounts attributable to their employee contributions from the trust, except for defined contribution plans (where the general practice is that any contribution made by an employee will be reimbursed upon termination of employment or termination of plan participation). (This is not the case for defined benefit plans as they are entirely employer funded.) 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Regarding the mandatory contributions made to the SAR, once the employee is entitled to have access to his or her retirement pension, the IMSS will determine the amount of pension such individual is to receive, based on the employee’s reported salary for the five years previous to retirement and the number of weekly contributions made to the IMSS during his or her working life. Such pension may be increased if the employee chooses to transfer the funds to an insurance company of his or her election, which will create an annuity that will be adjusted on a yearly basis in accordance with the National Consumer Price Index. For private retirement plans that have been approved and registered with the CONSAR, employers may establish their own rules and guidelines. Hence, it is not mandatory for retirement plans to be adjusted or increased subsequent to the employee’s retirement, as the private retirement plan constitutes a benefit in addition to those mandated by law. Contributed by: David Puente-Tostado & Alfredo Kupfer-Dominguez, Sánchez Devanny Mexico A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Panama Contributed by: Aleman Cordero Galindo & Lee Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 1. Does the state provide a pension, retirement income or social security program of some type? The Social Security Institution, a state entity, is responsible for providing retirement and disability pensions to all employees in Panama. In addition, the Social Security Institution provides employees with health services and maternity subsidies among other benefits. Nearly all employees and independent workers, whether Panamanian or foreign nationals, who provide services within Panama, participate in the compulsory social security regime run by the Social Security Institution. As a general rule, employers, whether public or private, are required to participate in the program as well. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The social security regime is funded through monthly employer and employee contributions. These contributions are calculated as a percentage of the employee’s salary: 12.25% for the employer and 9.75% for the employee. Independent workers must contribute 13.5% of their income. The only employees who are exempt from the obligation to participate in the social security regime are expatriate executives in Panama at multinational companies established under the country’s “Seat of Multinational Headquarters” special regime, where such companies are established for the exclusive purpose of providing financial and logistical services to affiliated companies abroad. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Panamanian law allows employers to establish pension plans for the benefit of their employees and provides incentives for this purpose. Panamanian pension law’s underlying principle is that pension plans are private, voluntary, and supplementary to the benefits granted by the social security system. Private pension plans must be administered by particular corporations created for the purpose of administering pension funds. These corporations must also obtain a license from the Securities Market Superintendent in order to manage pensions. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Social Security Institution Organic Act was adopted through Law No. 51 of 2005. Private pension plans are governed by Law No. 10 of 1993 (as amended by Decree Law No. 1 of 1999), which establishes incentives for the creation of retirement funds, and also by Agreement No. 11 of 2005 issued by the National Securities Commission. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Contributions made by an employer to voluntary retirement funds can be deducted by the employer when calculating its tax base. Employee contributions are likewise income-tax deductible to the employee. Panama A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 5. If an employer adopts a retirement plan/scheme, are employer contributions required? An employer is not required by law to contribute to a retirement plan that it adopts voluntarily, but it may choose to do so. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Panamanian law requires companies licensed to administer retirement funds to carry out their investment activities with care, and with due regard to security, profitability, diversification, and “monetary congruence.” Monetary congruence means that at least two-thirds of the fund’s investments must be made in the currency in which the benefits will be paid. Pension fund administrators must issue a written Declaration of Basic Principles for Investment for each of the funds they manage, describing the allocation of assets, the style of management (i.e., active or passive), the methods used to monitor the absolute and relative investment yields, as well as the risks involved in the fund’s particular investment strategy. (Relative yields are measured by comparison to a risk index or parameter.) Pension fund administrators are required to establish a risk committee with operating rules set out in writing. The committee must analyze the credit risk of the investments made with pension fund assets under its care on a periodic basis and must also qualify that risk at least once every year. Panamanian law requires that at least 80% of the financial instruments acquired with pension fund assets must be traded on a primary market or a regulated secondary market, excluding instruments consisting of deposits issued by financial institutions. All pension fund administrators must maintain a Basic Fund that complies with the regulatory limits of investment for each asset type. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Pension fund administrators are required to submit the following reports to the Securities Market Superintendent: • Interim and audited financial statements for each retirement fund under their administration, every six months. • A statement of charges applicable to each administered fund, on a monthly basis. • A report on portfolio positions, every two weeks. • A report about developments related to the transactions made, every two weeks. Panama A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Pension fund administrators are also required to give each employee the following information: • A certificate stating the contributions made in respect of the employee during the preceding year and the value of the accrued savings, at least once a year. • A report on the member’s savings in the plan and any material issues relevant to plan participants, such as regulatory changes, the plan’s financial outlook, changes in the plan’s investment policy, or new fees for administration and custody. This report must be sent every six months. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? There are no legal restrictions regarding the modification of a retirement plan by the employer. Whether alterations are possible will depend on the terms governing the pension plan. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? The law does not prohibit an employer from withdrawing from or terminating a retirement plan. Whether this is possible – and the consequences of any such withdrawal/termination – will depend on the terms governing the plan. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? The employee’s personal account with the Social Security Institution will remain unchanged if the employee changes jobs. In his or her new employment, the employee will continue to participate in the social security regime and accrue contributions to his or her personal account with the Social Security Institution. An employee enrolled in a pension plan established voluntarily by his or her former employer may not withdraw his or her funds for a 10-year period following a job change unless he or she joined the plan after the age of 55 or reached that age after joining the plan, in which case the lock-up period may be reduced to a minimum of five years. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? The statutes governing pension plans do not require pension/retirement benefit payments to be adjusted after retirement. Whether such an adjustment is possible will depend on how the plan has been structured. Panama Contributed by: Jorge Federico Lee, Aleman Cordero Galindo & Lee A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Paraguay Contributed by: FERRERE Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 1. Does the state provide a pension, retirement income or social security program of some type? Yes. The Instituto de Previsión Social (“IPS”) is an autonomous entity that manages social security matters in Paraguay. Employers are required to withhold 9% of each employee’s salary and pay it to the IPS as a social security contribution. Employers are also obliged to contribute 16.5% of each employee’s salary to the IPS. The Paraguayan social security program provides ill-health benefits (for both occupational and non-occupational illhealth), maternity benefits, disability benefits, retirement benefits and death benefits for employees in Paraguay. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required to maintain retirement plans/schemes. However, the retirement scheme administered by the IPS (as outlined in question 1) is compulsory for employees in the private sector. A percentage of the social security contributions described in question 1 goes to the IPS retirement scheme. Once employees meet the qualifying age requirements and have completed the requisite years of contributions to the IPS, they can retire. The IPS provides two types of retirement benefits: (i) an old age pension; and (ii) a disability pension, for individuals who have suffered common illnesses/accidents or occupational diseases/accidents. In addition to the retirement scheme administered by the IPS, there are eight other retirement schemes in Paraguay, administered by public and private entities, for workers in the electricity sector, the Ministry of Finance, the Judicial Branch, Congress, city councils, banks, unions of physicians and others. In all these instances, employers are obliged to contribute to the schemes according to their respective rules. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The broadest cross-section of the workforce is covered by the IPS retirement scheme. The ordinary retirement old age pension and the disability pensions provided by the IPS are regulated by Law 98/92. Law 4,290/11 governs the proportional retirement old age pension provided by the IPS (see further below). The pension granted by the IPS is calculated by taking an average of the last 36 months’ wages earned by the employee, excluding mandatory bonuses and indemnities. The percentage of this pension to which employees are actually entitled varies according to a scale established by law, which takes into account the employee’s age and years of contributions to the IPS. The eligibility conditions for receipt of the different types of pension are as follows: Old age pensions (a) Ordinary retirement pension: (i) 60 years of age and 25 years of contributions to the IPS. The employee will receive 100% of the pension. Paraguay A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (ii) 55 years of age and 30 years of contributions to the IPS. The employee will receive between 80% and 96% of the pension depending on his or her age at the time of retirement. (b) Proportional retirement pension: If an employee is 65 years of age and has 15 years of contributions to the IPS, the employee will receive 60% of the pension. The percentage of the pension received will increase by 4% for each year of additional contributions to the IPS, for up to 25 years. Disability pensions (a) Non-occupational accidents or illnesses that cause disability to employees: A declaration of disability must be made by a commission of three physicians from the IPS. The pension will be equal to 50% of the average monthly salary received during the 36 months prior to the declaration of disability. Increases of 1.5% apply for each year of contributions that exceed three years, for up to 100% of the retirement allowance. (b) Accidents at work and occupational diseases that cause employees to lose at least 30% of the use of their limbs (arms, legs, hands, fingers or other) or partial immobility: A declaration of disability must be made by a commission of three physicians from the IPS. The pension received will be determined according to a table that assesses the degree of disability and considers the years of contributions to determine the percentage to be applied to the average monthly salary for 36 months prior to commencement of disability. 4. What are the key features of the tax framework that applies to retirement plans/schemes? In Paraguay, pensions and other retirement income are exempt from taxation. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Private employers are not obliged to adopt their own retirement plans/schemes. As noted above, employers and employees in the private sector are obliged to contribute to the IPS retirement scheme, and there are also eight other retirement schemes for workers in certain other sectors – employers are obliged to contribute to the schemes according to their respective rules. Paraguay A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? As noted in question 2 above, there are several retirement plans/schemes in Paraguay. Each one has its own specific rules governing investments. However, as the IPS retirement scheme covers the broadest cross-section of the workforce, its investment rules are summarized below. The investment of IPS funds is governed by Law 98/92 and Law 5,655/16. The IPS is required to have programs to invest and allocate its reserves to maintain their value. The income generated by these investments is intended to strengthen the IPS retirement scheme. The IPS is not subject to any restrictions on administering, investing and placing its reserves in local banks and finance entities. The IPS cannot grant loans to the state, public entities or city councils. The IPS’s investment of retirement funds must be made under the best possible conditions with regard to security, terms, guarantees and performance. The IPS can only invest retirement funds in real estate if this is likely to generate a considerable advantage. However, the IPS can set up trusts transferring real estate property to it under Law 921/96 in respect of up to 40% of the income generated by investments and financial placements during the previous year. Any breach of these rules can lead to administrative sanctions or criminal proceedings, depending on the circumstances of the case. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Each entity administering a retirement scheme establishes the consultation rules that apply to its scheme. However, as the IPS retirement scheme covers the broadest cross-section of the workforce, its consultation rules and their enforcement are summarized below. Employees enrolled in the IPS retirement scheme can contact the IPS with all enquiries about pension contributions, the benefits to which they are entitled, or other associated matters. The IPS is obliged by law to answer all such queries made by employees. If the IPS fails to answer queries made by employees enrolled in its scheme, the employees can file court proceedings in order to obtain an injunction ordering the IPS to provide them with the required information. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? If the employer and the employee are enrolled in the IPS retirement scheme, the employer cannot alter the terms of the scheme. Other retirement schemes may have specific provisions enabling or restricting the employer from altering the applicable terms. However, this would need to be assessed on a case-by-case basis. Paraguay A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? It is mandatory for employers in the private sector to participate in the IPS retirement scheme, and employers cannot withdraw from or terminate the scheme. Employers are only entitled to stop making their compulsory contributions in certain specified circumstances, for example, in cases of employee sick leave, disciplinary sanctions or termination. If employers fail to make their compulsory contributions, the IPS can impose administrative sanctions or take court action to enforce payment, depending on the circumstances of the case. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes. If the employee is enrolled in the IPS retirement scheme and changes job, the new employer and the employee continue paying their respective contributions until the employee meets the eligibility conditions for retirement. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Yes. Pensions paid by the IPS are adjusted annually based on the Paraguayan Consumer Price Index published by Paraguay’s Central Bank. The IPS must also consider other matters when granting increases, such as the level of its reserves, its budget and technical studies. Adjustment of benefits paid by other retirement schemes is governed by their respective foundational laws and documents. Contributed by: Marysol Estigarribia, FERRERE Paraguay A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Peru Contributed by: Estudio Olaechea 1. Does the state provide a pension, retirement income or social security program of some type? In Peru, employees have the right to choose the pension system to which they will contribute. They can choose either: (i) the National Pension System (“SNP”) (managed by the Government Pension Fund Office (“ONP”)); or (ii) the Private Pension System (“SPP”) (managed by Pension Fund Management Companies (“AFPs”)). Contributions to the chosen system are paid by the employee, and employers must withhold the contributions from the employee’s remuneration. The monthly SNP contribution is 13% of the employee’s monthly salary, while the monthly SPP contribution depends on the AFP selected and is approximately 12.9% of the employee’s monthly salary. A Global Guide to Retirement Plans & Schemes Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required to maintain retirement plans/schemes. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The SNP was created by Decree Law No. 19990. It is a common fund based on a solidarity and sharing model. There are no individual member accounts. Members must make payments for a minimum period of 20 years to be entitled to the retirement pension. The minimum age at which a member can retire and apply for a pension is 65. Members can also apply for an early retirement pension at age 50 for women and age 55 for men. Applicants must have a minimum of 25 and 30 years of contributions respectively to be able to take an early retirement pension. The SNP also provides disability and survivors’ pensions, as well as lump sum death benefits. The pensions provided by the SNP are subject to a minimum level of PEN 415 and a maximum level of PEN 857.36. The SPP was created in 1992 by Decree Law No. 27897. Members make a defined contribution to an individual savings account (“CIC”), which is administered by the AFPs, in order to accumulate an individual pension fund that can be accessed on retirement. In the SPP, employees can receive a retirement pension from age 65 – there is no requirement for a minimum period of contributions. However, it should be noted that the amount of retirement benefit to be received is calculated on the basis of the contributions made and the profits generated. The SPP also offers its members the option of “ordinary early retirement”. The SPP comprises four different portfolios which can be selected by the employee: • portfolio 0 (Capital Protection); • portfolio 1 (Capital Preservation); • portfolio 2 (Mix); and • portfolio 3 (Capital Appreciation). The main benefits provided by the SPP are: (i) retirement pensions; (ii) disability pensions; (iii) survivors’ pensions; and (iv) funeral expenses. Peru A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Other regimes managed by the ONP • The Decree Law No. 20530 Regime: This system is closed to new members. Its main feature is the calculation of the pension, whereby benefits are adjusted by reference to the salaries of current employees. The ONP only administers this regime for state entities that have been liquidated. Active state entities are required to pay the pensions of their unemployed workers under the regime of Decree No. 20530. • Special Social Security Regime for the Fishing Sector: This was created by Law No. 30003 in order to facilitate the access of workers and pensioners in the fishing sector to social security. This regime also includes members and pensioners from the former Social Benefits and Social Security Fund for Fishermen. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Income tax is not applicable on amounts paid as pensions or annuities for retirement, widowhood or incapacity. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Employers cannot adopt a retirement plan/scheme in Peru. As noted above, employees can choose to contribute to the SNP or the SPP. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Not applicable. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? When an employee is not a member of a pension system, the employer must give the employee a newsletter within five days of the start of the labor relationship that explains the characteristics, differences and other particular features of the SNP and SPP so that the employee can choose which pension system to join. The employee has to notify the employer in writing of his or her choice within 10 days of receipt of the newsletter. The employee has a further 10 days in which to confirm or change his or her choice. The latest date on which the employee can make his or her choice is the date on which the employee receives his or her remuneration. If the employee does not make a choice, the employer must enroll him or her in the SPP. Peru A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Not applicable. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Not applicable. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Not applicable. As noted above, the two pension systems are managed by external legal entities so are unaffected by a change of employer. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Pension/retirement benefit payments cannot be adjusted/increased after retirement. Peru Contributed by: José Antonio Valdez, Estudio Olaechea A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 United States Contributed by: Mayer Brown LLP 1. Does the state provide a pension, retirement income or social security program of some type? The US government provides “social security benefits” funded with employer and employee payroll taxes. With very limited exceptions, all employers are required to withhold from employee wages certain social security taxes, and to remit such amounts together with corresponding employer contributions to the Social Security Administration. Upon retirement, individuals receive monthly payments from the US government in an amount determined by a statutorily prescribed formula. A Global Guide to Retirement Plans & Schemes Maureen Gorman Partner, New York/Palo Alto E: [email protected] T: NY +1 212 506 2679 PA +1 650 331 2015 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? The maintenance of any retirement program, other than participation in the social security system, is entirely voluntary with the employer. The types of programs an employer may maintain include certain broad-based funded plans, known as “qualified plans” for which the employer receives substantial tax benefits in return for satisfying a variety of requirements, including among many others, coverage of a broad cross-section of its workforce in a manner that does not favor highly compensated employees. These generally consist of defined benefit and defined contribution plans (described below), with a number of variations within each category. Employers may also maintain retirement plans limited to highly compensated employees that are typically unfunded, and may also contribute to individual retirement accounts for employees. Further, tax-exempt and government employers may maintain other types of programs with their own special requirements. An employer may also, pursuant to a collective bargaining agreement with its employees, participate in a plan (referred to as a “multi-employer plan”) in which multiple employers, usually in the same industry, participate. The answers to the balance of the questions in this chapter pertain to the broad-based plans maintained by single private employers known as single employer “qualified plans.” 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Employee Retirement Income Security Act of 1974 (“ERISA”) imposes affirmative requirements on all manner of employer plans including both retirement plans and health and welfare plans. Those applicable to broad-based retirement programs include reporting and disclosure requirements, rules regarding vesting and rates of accrual, fiduciary obligations regarding plan investments, certain minimum funding requirements, rules governing claims procedures and lawsuits for benefits, and in the case of defined benefit plans, an insurance program maintained by a government agency known as the “Pension Benefit Guaranty Corporation” (or “PBGC”) that protects participant benefits, up to certain statutorily prescribed caps, in the event of the insolvency of the plan sponsor (see discussion of plan terminations, below). Plan sponsors of defined benefit plans are required to participate in the government insurance program and to pay premiums to the PBGC in connection therewith. 4. What are the key features of the tax framework that applies to retirement plans/schemes? The Internal Revenue Code imposes numerous requirements on qualified plans, some of which (e.g., those relating to vesting and benefit accrual) parallel those of ERISA. As noted above, qualified plans (which generally must be funded by either a trust or an insurance contract) enjoy special tax benefits not available to nonqualified deferred compensation plans: the employer enjoys an immediate deduction for contributions to the trust, employees are able to defer income inclusion until those benefits are distributed, and income on the trust used to fund benefits is not subject to taxation. United States A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The quid pro quo for these tax benefits is satisfaction of the very extensive and sometimes byzantine requirements known as the Internal Revenue Code “qualification rules,” as well as the deduction limitations and, in the case of defined benefit plans, the minimum funding rules, described below. Among the qualification rules are requirements that, as noted above, the plan cover a broad cross-section of the employer’s workforce, that benefits or contributions not favor highly compensated employees, that benefits or contributions not exceed certain maximum limits and that various intricate distribution rules are met. For purposes of ensuring satisfaction of these rules, annual, or in some cases triennial, testing is required. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? In the case of a defined contribution plan, employer contributions must be made in accordance with the plan terms. In some cases the plan terms will require a fixed level of employer contributions or will determine employer contributions in accordance with a formula; in others contributions are determined on a discretionary basis. In the case of defined benefit plans, promised benefits must be funded on a sound actuarial basis. The employer is required to retain an “enrolled actuary” who determines the level of funding required each year to satisfy certain minimum funding requirements prescribed by the Internal Revenue Code. Failure to meet the minimum funding requirements can result in excise taxes and, in some cases, may give rise to a lien (in favor of the PBGC, referenced above) attaching to the assets of the plan sponsor and its controlled group members. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? ERISA does not prescribe or prohibit specific types of investments, but instead imposes certain duties on fiduciaries responsible for plan investments (e.g., prudence, duty of loyalty, diversification, and anti-conflict of interest rules). In addition, certain categories of transactions between a plan and a party-in-interest are completely prohibited unless a statutory or administrative exemption applies. Fiduciaries, such as investment managers, who breach their duties to the plan are liable to the plan for losses resulting from the breach and must disgorge any profits earned as a result of the breach. Excise taxes apply to parties in interest who engage in prohibited transactions with the plans. Finally, ERISA provides special relief from certain aspects of fiduciary liability for certain plans with participant-directed investments; the relief is very important as these plans make up a very substantial portion of defined contribution plans offered by US employers. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? ERISA imposes extensive reporting and disclosure requirements for plans, including (i) an annual return (Form 5500) that must be filed with the Department of Labor and IRS and (ii) a requirement that employees (A) receive a summary plan description (SPD) that summarizes the terms of the plan in a manner calculated to be understood by the employee, (B) United States A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 a summary annual report each year, (C) in the case of a defined benefit plan, certain information on the plan’s funded status each year, (D) statements of the participant’s benefit at periodic intervals and, on request, (E) certain notices and other information relating to investments and fees in a participant-directed account plan. Failure to satisfy these requirements is subject to a variety of excise taxes and penalties. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Provided that the employer has reserved the right to modify the terms of a plan, the rate of benefit accruals (in the case of a defined benefit plan) or contributions to the plan (in the case of a defined contribution plan) may be reduced or cease completely prospectively, but the employer may not amend the plan to reduce benefits a participant has already earned under a defined benefit plan or amounts already earned under a defined contribution plan. In the case of a defined benefit plan (and a special type of defined contribution plan known as a money purchase plan), an employer must provide 45 days’ advance notice before reducing the rate of benefit accrual. Failure to do so subjects the employer to excise taxes and may render the amendment ineffective. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? As noted above, ERISA outlines the PBGC insurance program for defined benefit plans, imposes mandatory premium payments on sponsors of defined benefit plans and prescribes the circumstances under which a plan may be terminated. There are generally two types of plan terminations: (i) standard terminations in which a fully funded plan is terminated and assets distributed in satisfaction of plan liabilities by the purchase of annuities that constitute “irrevocable commitments” or by distribution of cash lump sums; and (ii) “distress terminations” of underfunded plans in which the PBGC assumes responsibility for payment of plan benefits up to the PBGC guaranteed amount, and the plan sponsor and its controlled group are liable for 100% of the shortfall between assets and liabilities measured on the date of plan termination. An “irrevocable commitment” is defined in ERISA Section 4001.2 as “an obligation by an insurer to pay benefits to a named participant or surviving beneficiary, if the obligation cannot be cancelled under the terms of the insurance contract (except for fraud or mistake) without the consent of the participant or beneficiary and is legally enforceable by the participant or beneficiary.” In certain circumstances specified in the statute and generally involving employers close to insolvency, the PBGC may involuntarily terminate a defined benefit plan. When an underfunded defined benefit plan terminates in a distress or involuntary termination, the PBGC has three types of claims: claims for PBGC premiums; a claim for any shortfall in plan assets needed to fund plan benefits (i.e., the difference between the value of all accrued liabilities under the plan on the date of plan termination and the value of plan assets on the date of plan termination) calculated using assumptions established in PBGC regulations; and a claim for unpaid contributions to the plan, if any, pro-rated to the date of plan termination (unpaid contributions liability). These liabilities are joint and several obligations of the plan sponsor and each member of its controlled group. If the United States A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 PBGC’s termination liability claim is not paid on demand, a lien arises in the amount of the lesser of: (x) termination liability or (y) 30% of the net worth of the plan sponsor and its controlled group. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? In the case of a defined contribution plan, employees can almost always obtain a distribution of their benefits upon termination. A distribution in a lump sum can be rolled over by the employee to an individual retirement account (“IRA”) typically maintained with a bank or trust company, or if the new employer’s plan so permits, the lump sum can be rolled over to that plan. In the case of a defined benefit plan, the employee can, in some cases, obtain a distribution upon termination of employment, but in other cases must wait to commence payment until he or she reaches a certain age (e.g., 55). Benefits under a defined benefit plan are typically offered in the form of an annuity. If a lump sum is offered under the plan, the employee may elect (with spousal consent) to take the lump sum distribution and roll it over to an IRA or the plan of a new employer (assuming the new employer’s plan so permits). 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No, although some plans voluntarily provide for such an increase. Contributed by: Maureen Gorman & James Crossen, Mayer Brown LLP United States A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Uruguay Contributed by: FERRERE Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 1. Does the state provide a pension, retirement income or social security program of some type? Yes. Uruguay has a mandatory social security system providing disability, old age and survivors’ benefits. No person covered by the law can opt out of the social security system. This “mixed” system includes both an intergenerational solidarity retirement scheme and a mandatory individual savings scheme. The former is managed by the state through the social security administration known as the “Banco de Previsión Social” (“BPS”), and the latter by Pension Fund Administrators known as “Administradoras de Fondos de Ahorro Previsional” (“AFAPs”). A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The social security system provides the following benefits: • retirement benefits; • temporary subsidies for partial disability; • survivors’ pensions; • subsidies for funeral expenses; and • old age and disability pensions. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? The social security system is mandatory for all residents of Uruguay engaged in occupations covered by the BPS. Covered occupational categories include: industry and commerce (including most of the services sector), civil and academic (civil service and teachers), rural, and domestic. Under this system, there are three types of retirement: ordinary retirement, retirement due to total disability, and old age retirement. Employers cannot opt out of the statutory social security system and must therefore pay mandatory employer contributions. Employers, if they wish, can establish supplemental retirement schemes for employees in addition to and separate from the statutory system. For example, an employer can implement incentive plans providing special compensation for retirement based on certain factors such as age and years of service with the company. If an employer chooses to set up such a scheme, it is free to set its own terms and conditions for the plan. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Law 16,713 of September 3, 1995 established the current state retirement scheme, which is both an intergenerational solidarity retirement scheme and a mandatory individual savings scheme. When the law was enacted, however, it excluded certain persons from this mixed scheme and instead put them in a temporary, exclusively intergenerational retirement scheme. The mixed scheme combines a basic defined benefit from the public system (the intergenerational solidarity retirement scheme) with complementary undefined benefits from the private system (the mandatory individual savings scheme and voluntary individual savings scheme). The scheme consists of the following: Uruguay A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 First level: intergenerational solidarity retirement scheme This scheme is administered by the state and is financed by employee and employer contributions and, in certain cases, by state contributions. Under the intergenerational solidarity retirement scheme, the law provides for three types of retirement: (a) Ordinary retirement The individual must have reached age 60 and have a minimum of 30 years of service. Upon demonstrating to the BPS that these requirements have been met, the member will be entitled to a retirement benefit upon retiring from work. (b) Retirement due to total disability The individual must have an absolute and permanent incapacity to work, signifying disability of 66% or greater. If the employee is aged below 25, a minimum of six months of service is required. (c) Old age retirement These benefits are provided to individuals who, while having reached age 60, do not have the minimum years of service required to access ordinary retirement. The law establishes certain alternative minimum age and years of service requirements for old age retirement – for example, 70 years of age and 15 years of service, 69 years of age and 17 years of service, etc. Second level: mandatory individual savings scheme This level of the scheme is administered by AFAPs and requires participants to make defined contributions in amounts set by law. The amounts contributed are invested via the member’s individual savings account during his or her active working life. Upon retirement, the amount of the monthly retirement benefit will depend on the amount that the member has accrued in his or her individual savings account (i.e., amounts contributed plus investment yields obtained by the AFAP) and the member’s life expectancy. Third level: voluntary individual savings scheme This level of the scheme is also administered by AFAPs and applies to persons with a high monthly income who wish to increase the monthly amount of their retirement benefit beyond the statutorily required minimum. Accordingly, participants make additional voluntary contributions to the individual savings account. Uruguay A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 4. What are the key features of the tax framework that applies to retirement plans/schemes? The state retirement scheme is funded as follows: • Employer contributions: these are set at a fixed rate of 7.5%. Employers also contribute to National Health Insurance (“FONASA”) at a rate of 5% and to the Job Retraining Fund at a rate of 0.125%. • Employee contributions: these are set at a fixed rate of 15%. Employees also contribute to FONASA at a rate of 4.5%, 6%, 6.5% or 8%, depending on whether they have dependent children and an economically dependent spouse or domestic partner, and to the Job Retraining fund at a rate of 0.125%. These contributions are distributed between the intergenerational solidarity retirement scheme and the employee’s individual savings account, with the distribution rate varying based on the employee’s salary. There is a ceiling on employer and employee contributions to the state retirement scheme of approximately USD 5,074. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Employer social security contributions are mandatory and payable in the month following the work performed. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? In addition to making the employer contributions mentioned above, employers must also withhold employee contributions from employees’ salaries and pay them to the BPS. Failure by the employer to pay the withheld employee contributions to the BPS constitutes a crime of misappropriation. Additionally, in such cases the law presumes that there is intent to defraud on the part of the employer. Companies can be held liable for this offense, in addition to any applicable penalties and surcharges. There is no rule exempting the employer from fulfilling its duty to withhold and pay employee and employer contributions to the BPS. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? If an employer fails to comply with its obligation to withhold employee contributions, or if it fails to properly transmit to the BPS any withheld employee contributions, it can be reported to the BPS by employees, whereupon the BPS may order an inspection of the employer to verify the complaint. If the failure to withhold or transmit contributions is confirmed, the employer will have to pay all related tax debts retrospectively plus penalties and surcharges. Uruguay A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? The employer cannot alter the terms of the mandatory social security system described above. However, if the employer has established a supplemental scheme for its employees, it can set its own terms and conditions for the plan. If an employer has implemented a supplemental retirement plan, though, it must take care when changing any terms that reduce any benefits otherwise accruing to the employee. The employer should carefully compare the terms and conditions of the agreed plan (as well as any informal agreements arising from company custom or practice) against the changes it seeks to make. By making such a change that is to the detriment of its employees, an employer risks claims of constructive dismissal. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Similar to question 8, the employer cannot withdraw from the mandatory social security system. If the employer has established a supplemental scheme for its employees, it can set its own terms and conditions for the plan, including with respect to plan termination. Likewise, care should be taken by employers who seek to terminate a retirement plan, because of the risk of claims by employees of constructive dismissal. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? As indicated above, the social security scheme is mandatory for all covered individuals. As such, a change of job will not affect an employee’s retirement benefits under the mandatory scheme or the right to access those benefits. If the employer has implemented a supplemental retirement plan, the employee’s voluntary decision to leave the employer means that the employee ceases to be eligible for benefits under that plan. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? The amount of the benefit that the individual will receive under the statutory social security system is adjusted annually by reference to the variation in the Average Wage Index. Similarly, age-related minimum retirement benefits are adjusted annually, along with the retirement benefit ceiling, which is approximately USD 1,395. Uruguay Contributed by: Verónica Raffo, FERRERE A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Venezuela Contributed by: Rodner Martínez & Asociados Tauil & Chequer Advogados in association with Mayer Brown LLP Rio de Janeiro Office Rua Teixeira de Freitas, 31 - 9º Andar, 20021-350 Centro, Rio de Janeiro, Brazil E: [email protected] T: +55 11 2504 4202 F: +55 11 2504 4211 1. Does the state provide a pension, retirement income or social security program of some type? Yes, there is a mandatory statutory social security program administered by the Instituto Venezolano de los Seguros Sociales (“IVSS”), funded by employers and employees. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required to participate in any retirement plans other than the IVSS program. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Employers can choose to offer additional company retirement plans. If there is an additional company retirement plan, the parties (i.e., the employer and the employees) are free to set its terms and conditions, and it will be offered in addition to the statutory IVSS program. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The IVSS program is governed by the Social Security Act (Ley del Seguro Social), published in the Official Gazette 39,912 of April 30, 2012. Under this Act, employers must register themselves and their employees with the IVSS and both must make monthly contributions (the employees’ contributions are withheld from their salary and paid to the IVSS by the employer). Employers must make contributions equivalent to 11% (if a low-risk business, 12% if middle-risk and 13% if high-risk) of the employee’s salary, and the employee must contribute 4% of his or her salary. Some employers offer additional company retirement plans. These are contracts between the employer and the employees, and provide additional benefits to those mandated by law. Pension funds can also be established as civil associations created as part of a voluntary employees’ pension program where the employees and the employer make contributions to the fund, in addition to the contributions to the IVSS. If this type of savings fund is created, it will be governed by the Savings Entities, Savings Funds and Similar Savings Associations Act (the “Savings Entity Act”), published in the Official Gazette No. 39,553 of November 16, 2010. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Pension payments are exempt from income tax (Article 14(6) of the Income Tax Act). Contributions to, and distributions from, savings funds are also tax-exempt (Article 14(8) of the Income Tax Act). 5. If an employer adopts a retirement plan/scheme, are employer contributions required? If there is an additional company retirement plan, the parties are free to set its terms and conditions, including whether employer contributions are required. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The Savings Entity Act sets out: • how each savings fund must be organized; Venezuela A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • limitations on the types of financial instruments in which the fund can invest (e.g., registered securities, instruments issued by banking institutions, and government bonds); • record-keeping and reporting obligations; • a regime for registration of savings funds with, and supervision of savings funds by, the Savings Entity Superintendent; and • penalties for breach of the obligations under the Savings Entity Act (these include fines and criminal liability). 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Under the Savings Entity Act, savings funds must: • prepare and file quarterly and annual financial statements with the Savings Entity Superintendent (Articles 50 and 51); • grant prompt access to the personal information held by the fund to each of the fund members (Article 60(7)); and • provide such other information as may be requested by the Savings Entity Superintendent (Article 76(2)). If a fund member believes that there has been a violation of the obligations under the Savings Entity Act, the fund member can file a complaint (Article 92), and if there is a determination that such a violation has occurred, penalties will be imposed on the savings fund. Failure to deliver periodic information is subject to specific fines (Article 105). 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? The terms and conditions governing an additional company retirement plan can be set by the employer. While there is a labor relationship between the employer and the employee, changes to such plans may require consent from the employee, who may benefit from certain protections under labor legislation, including the ‘in dubio pro operario’ rule of the Labor and Workers Act (Article 18(5)) and the Venezuelan Constitution (Article 89(3)) (which favor the employee in an employment relationship). Unless the plan documents specifically provide otherwise, any alteration may be opposed by an employee on the basis that it diminishes his or her rights. If the alteration is implemented without consent, the employee can argue it amounts to an unjustified dismissal because of the detrimental impact on his or her employment terms. If the employer has discretionary power to alter the plan or the alteration is approved by the employees, the alteration can be implemented. Venezuela A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? A withdrawal or termination of an additional company retirement plan may have a detrimental impact on an employee’s employment terms and, as such, it may constitute an unjustified dismissal, requiring a termination indemnification payment to be made to the employee. The plan documents may provide for discretionary termination or termination upon the occurrence of certain events, which would not give rise to an unjustified dismissal claim. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Employees will continue accruing pension and retirement benefits under the IVSS program even if they change jobs. The new employer will register the new employee and the account will be transferred accordingly. In relation to additional company retirement plans, a transfer of the employee’s benefits to a different plan may be possible if expressly provided for in the fund charter or plan documents. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Benefits under the IVSS program are adjusted from time to time by Presidential decree, to reflect the adjustment of the minimum salary. Adjustments of benefits under additional company retirement plans will depend on the terms and conditions of the plan, as set out in the fund charter or plan documents. Venezuela Contributed by: Jaime Martínez Estévez, Rodner Martínez & Asociados A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contents Belgium Czech Republic Denmark Egypt Finland France Germany Hungary Iceland Italy Kuwait Netherlands Poland Russia Saudi Arabia South Africa Spain Turkey United Arab Emirates United Kingdom STEP 2 – Select a Country/Jurisdiction Selected: EMEA A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Belgium Contributed by: Van Olmen & Wynant Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? The Belgian pension scene includes three pillars: • the first pillar consists of a state-funded pension that is funded by employer and employee contributions, which are deducted from payroll and managed by public institutions; • the second pillar consists of additional or supplementary retirement plans, which may be required by the employer’s industry sector, or may be voluntarily provided by employers, in each case, as an extra legal benefit for their employees; and A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • the third pillar consists of voluntary individual retirement saving plans that allow individuals to accumulate a capital sum that will be paid out when they reach retirement age. This category of plans consists only of employee contributions and is outside the scope of this Guide. Within the first pillar, Belgian social security provides two types of pension for employees. In addition to the state-funded pension that consists of monthly payments to employees who have reached retirement age, Belgian social security also provides a pension for the widow or widower of a former employee. Eligibility for this second type of state-funded pension depends on satisfaction of conditions relating to the individual’s marriage, age, retirement and residence in Belgium. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Beyond participating in the social security system (first pillar), employers are not legally required to provide retirement plans/schemes. However, in some sectors the social partners (broadly employers’ organizations and trade unions) have agreed that employers in those sectors are required to provide a supplementary retirement plan (second pillar). This is the case, for example, in the construction sector, the fishing industry and the chemical industry. Even where an employer is not required by its industry sector to provide a plan, the employer may voluntarily do so. These types of supplementary retirement commitments can be individual or collective (plans required by industry sector are generally only collective). Where the commitment is collective, i.e., for a group of employees, the rights and obligations of both the employer and the employees must be set out in a pension charter, which must also include general terms concerning access to, and the design of, the retirement plan. Where the commitment is individual, this information will be included in an individual agreement. It is important to note that an employer can only offer an individual retirement commitment if the employer already provides a collective retirement plan to all of its employees. In addition, an individual retirement commitment must be of an occasional nature (i.e., it cannot be offered to all employees, and it cannot be offered to an employee in the 36 months preceding the employee’s retirement). These restrictions are intended by the legislature to ensure that individual retirement commitments remain the exception and that the use of collective plans is preferred. Collective retirement plans can be provided at a company or industry/sector level. In the latter case, the plan’s terms and conditions must be set out in a collective agreement between the social partners for that sector. All companies in the sector will have to use the retirement plan set out in the collective agreement. In addition to traditional supplementary retirement plans, employers can also opt for a plan that not only provides a pension promise, but also a commitment concerning social security and solidarity as well (i.e., a commitment that is intended to safeguard the accrual of pension benefits during certain periods where the employee is not working or to Belgium A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 provide allowances in the event of permanent occupational disability, serious ill health or death). Employers who provide this type of retirement plan receive additional tax benefits as contributions paid to this type of plan are not subject to the annual tax on insurance operations (Art. 176, 4°bis of the Code of 2 March 1927 on various duties and taxes). 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? State-funded pension schemes in Belgium are subject to a number of specific statutes, as well as numerous regulations made under these statutes. The application of these statutes and regulations depends on whether the pensioner is a regular employee, a public officer or a self-employed person. Supplementary retirement plans (second pillar) in Belgium are regulated by the Act of 28 April 2003, which regulates the rights and obligations of the different parties that are involved in the provision of supplementary retirement plans for employees. The Act imposes requirements relating to the procedure for establishing a retirement plan, the nature, accrual and preservation of supplementary pensions, the information to be provided to employees and other requirements designed to protect employees’ rights in situations such as bankruptcy or insolvency. The Act also contains provisions on the taxation of these supplementary pensions. The Act of 28 April 2003 is supported by a royal decree of 14 November 2003, which contains more detail on the content of the pension charter that must be provided in case of a collective retirement plan. 4. What are the key features of the tax framework that applies to retirement plans/schemes? In order to encourage employers and employees to contribute to, and participate in, retirement plans, qualified retirement plans receive favorable tax treatment that benefits both the employer and the employees. Provided that the sum of both the state-funded pension and the supplementary pension does not exceed 80% of the employee’s gross remuneration at retirement, all contributions and grants paid by the employer are tax-deductible as professional expenses (Art. 59, §1st, 2° of the 10 April 1992 Income Tax Code). Furthermore, these contributions are not treated as benefits in kind and therefore are not taxed as such on the part of the employee. A one-off social security contribution of 8.86% is due on all pension contributions paid to supplementary retirement plans by the employer (Art. 38, §3ter Act of 29 June 1981 on the general principles of the Social Security), as well as a one-off insurance-related tax of 4.4% (Art. 175/1, §2, 4° of the Code of 2 March 1927 on various duties and taxes). Both are payable by the employer. If certain thresholds are reached, an additional social security contribution at a rate of 1.5% is due from the employer (Art. 38, §3terdecies Act of 29 June 1981). Between January 2012 and December 2015, this contribution was required where the pension contributions that were paid by the employer in connection with a . Belgium A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 supplementary retirement plan exceeded EUR 30,000 a year (subject to indexation). From January 2016, this contribution will only be required when the sum of the state-funded and supplementary pensions exceeds a threshold of the maximum state-funded pension. Under the income tax framework, employee pension contributions give rise to a tax benefit in the form of a decrease in the employee’s tax base that can vary between 30% and 40%. When an employee retires and takes his or her pension, a contribution for public healthcare at a rate of 3.55% is deducted from each payment to the employee (Art. 191, 7° Act of 14 July 1994 concerning the public healthcare). In addition, a so-called solidarity contribution (i.e., a kind of social security contribution) of 0%-2% is deducted from each payment to the employee (Art. 68 – 68quinquies Act of 30 March 1994). On reaching retirement age, the employee has to choose whether the accumulated capital will be paid out as a one-off lump sum or in the form of monthly payments. Regardless of form, the employee’s accumulated pension capital will also be subject to income tax when it is paid out of the supplementary retirement plan. That part of the accumulated capital that is built up by the employee’s contributions will be taxed at a rate of 10% in respect of contributions paid on or after 1 January 1993, and at a rate of 16.5% in respect of contributions paid before that date. That part of the capital built up by the employer’s contributions will be taxed at a rate of 16.5% (or 10% where the employee has worked for the employer in the three years preceding statutory retirement age). In the rare cases where the employee is entitled to take his or her pension capital before statutory retirement age, the tax rate will be higher. If the employee decides not to take the capital as a lump sum, but instead chooses to receive annuity payments, income tax is applied to each monthly payment. In addition, municipal surcharges will be levied and can vary between municipalities. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? In the case of second pillar plans, contributions to the supplementary retirement plans can be paid by the employer, by the employee, or by both. Theoretically, therefore, an employer could decide to provide such a plan without paying contributions. In practice, the employer will generally pay contributions since it is better from a tax and social security perspective for the employer to pay pension contributions on an employee’s behalf than to pay additional salary to the employee. Employer contributions must be made in accordance with the plan terms. Basically, there are two main funding systems. Firstly, a retirement plan can provide a defined benefit. In this case, the employer or social organizer commits to paying a pension that is defined in advance in the pension charter. The amount of the pension will vary depending on the length of the employee’s career, the level of the employee’s remuneration and the amount of the state-funded pension. Belgium A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The other option is a defined contribution system where the pension itself is not defined, but instead the contributions are fixed in advance, so the employer or social organizer only commits to paying those contributions. In this case, the amount of the ultimate pension can vary depending on investment returns. Even under this system, the employee enjoys a certain degree of certainty as he or she is entitled to a guaranteed return as set out in the answer to question 6. In both cases, employers are legally required to pay their contributions to a pension institution (i.e., a group insurer or a pension fund) that will be entrusted with the management of the plan funds. A pension fund is a legal entity created by the employer (or the corporate group to which the employer belongs). Generally, only large companies (or groups of companies) choose this option. The same legal rules apply to all pension institutions, and a pension fund must have a minimum solvency margin like insurance companies. The use of an external provider is designed to protect employees’ rights and pensions in the event of their employer’s bankruptcy. A transitional regime applies under which individual retirement plans that were established before 16 November 2003 are not subject to the requirement for involvement of an external provider. These existing plans can be maintained on the understanding that no further contributions can be made to the plan after this date. If the employer wishes to continue using an individual plan that was established preNovember 2003, it is legally required to deposit all future contributions with a pension institution. In such cases, the preNovember 2003 contributions can continue to be held by the employer or the employer can choose to transfer them to the external provider. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The Act of 28 April 2003 does not impose any specific investment rules in relation to retirement plans, provided that a certain return rate is guaranteed. Employee and employer contributions attract a guaranteed return at a rate of between 1.75% and 3.75% (Art. 24 Act of 28 April 2003). In defined benefit plans, the accumulated pension capital must include the same guaranteed return but only in respect of the employee contributions. This guaranteed return is payable if the accumulated capital is transferred to another plan on the employee’s retirement, or when the employee takes the pension capital in the rare cases where it is possible to do this before the statutory retirement age. It is important to note that the obligation to ensure this guaranteed return rests on the employer and not on the insurer. If, at the point that the pension capital is paid out, its amount is less than it should be under the guarantee, the employee is entitled to the higher amount. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? The Act of 28 April 2003 imposes numerous consultation, communication and cooperation requirements. Generally, the rules concerning the consultation of employees only apply to retirement plans that are established at a corporate level, as the social partners already play a central role in the establishment of sector plans. Employee consultation is, for Belgium A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 example, legally required on matters concerning the application, interpretation and modification of the pension charter, the method of financing the pension fund, and a change of pension institution. The duty is only to consult the employees via the regular consultative bodies at company level – the employer is under no obligation to follow their advice. Employer decisions that are taken without employee consultation on these specific topics can be nullified. Where the retirement plan is open to all employees, the employer is obliged to consult the works council, the Committee on Prevention and Protection at Work, or the union delegation. If the works council, the Committee on Prevention and Protection at Work or the union delegation is not consulted, the employer incurs penal fines of EUR 400 to EUR 4,000 or administrative fines of EUR 2,00 to EUR 2,000 (Art. 191, §1er, 1°, d/ Art. 191, § 2, 4°/ Art. 191, § 3, 3° Social Criminal Code). Where the retirement plan is only open to a certain category of employees, the employer can instead consult the regular consultative bodies mentioned above, if at least 10% of the employees concerned request this (Art. 39 Act of 28 April 2003). Failure to consult the regular consultative bodies can result in penal fines as outlined above. In terms of disclosure, the pension institution provides information in an annual report that must be made available to the plan organizer (the employer for a company level plan or the social partners for a sector level plan) who will provide this report to the employees on their request. The annual report must, for example, contain information concerning the plan’s investment strategy and the yield of the investments (Art. 42 Act of 28 April 2003). In addition to this annual report concerning the governance of the retirement plan, the pension institution or organizer is required to send employees a document setting out the accrued funds and the contributions made by the employees. This document must be provided at least once a year, but employees can also obtain an overview of their accrued funds and the contributions made by them on request (Art. 26 Act of 28 April 2003). 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? In theory, employee consent to the modification of the terms of a retirement plan is only required if the plan is open to all employees and is funded by both employer and employee contributions. In practice, however, the ability of the employer to alter the terms of a retirement plan is very limited. Even if the plan is not a collective retirement plan that is funded by both employer and employee contributions, the plan is part of the employees’ remuneration and is therefore an essential element of their employment contract, which cannot be modified unilaterally. There are many diverging views in case law about the enforceability of terms in the pension charter that give the employer the right to alter the terms of the charter unilaterally. It is generally recommended that employers obtain the agreement of the employees’ representatives whenever alteration of the retirement plan is required. Even if agreement has been obtained, the alteration can only affect future benefits – the modification may under no circumstances decrease accrued benefits or contributions (Art. 16, §2 Act of 28 April 2003). Belgium A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 If a modification to the retirement plan results in an increase of the employees’ obligations under the terms of the plan, the employees are no longer obliged to participate in the modified plan. Unless the modification is implemented by a collective labor agreement, the terms of the plan as they stood before amendment will remain in full force and effect as regards the dissenting employees (Art. 16 Act of 28 April 2003). 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? The termination of the retirement plan by its organizer is only possible within the framework of the pension charter. Withdrawal or termination of the plan is therefore only possible under certain conditions in which the employees have a say. Moreover, as mentioned above, entitlement to benefit accrual under a supplementary retirement plan forms part of the employees’ remuneration, meaning that an employer’s unilateral withdrawal from a supplementary retirement plan is not permitted. Should the employer choose to terminate benefit accrual unilaterally, it may be liable to pay compensation for breach of contract. In that case, the present accumulated reserves of the plan must be taken into account when calculating and determining the rights of each employee. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Where the employee is a member of a sector level retirement plan, his or her accrual under that plan will only end when he or she leaves the sector concerned. Where the employee is a member of a company level retirement plan, accrual ends when the employee leaves the employer in question. In these cases, the employee has two options in respect of his or her accumulated funds. He or she can: • transfer the accumulated funds to his or her new employer’s pension institution; or • leave the accumulated funds with his or her former employer’s pension institution. If the employee’s new employer does not provide a supplementary retirement plan, the employee can require the new employer to pay a certain amount of his or her salary to the pension institution of his or her choice. This is only possible if the employee has been a member of his or her previous employer’s supplementary retirement plan for at least 42 months (Art. 33 Act of 28 April 2003). In any event, the cessation of pension accrual may not, under any circumstances, give rise to any form of remuneration or compensation on behalf of the employee (Art. 29 Act of 28 April 2003). Belgium A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? On reaching retirement age, the employee has to choose whether the accumulated capital will be paid out as a oneoff lump sum, or in the form of monthly payments. Even if the pension charter provides for payment of a one-off lump sum, the employee is still able to choose monthly payments upon reaching retirement age. Monthly payments are not automatically indexed—any indexation will depend on the terms of the retirement plan. Contributed by: Nicolas Simon, Van Olmen & Wynant Belgium A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Czech Republic Contributed by: Havel, Holásek & Partners 1. Does the state provide a pension, retirement income or social security program of some type? The Czech government provides a mandatory state pension system funded by employers and employees (as well as self-employed persons and foreign workers who contribute to the Czech Social Security System) through statutorily prescribed payroll deductions. The deducted amount is paid to the Czech Social Security Administration (the “CSSA”). Upon retirement, former employees receive monthly payments from the CSSA, provided such retired employees have attained a certain age and have completed the required years of service. The level of pension payments depends on the number of years worked and the employee’s income level. Both employers and employees are required by statute to contribute to state pension insurance, and the employer is responsible for calculating, deducting, and paying the contributions on behalf of its employees. A Global Guide to Retirement Plans & Schemes Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required to maintain retirement plans/schemes, but they must fulfill obligations relating to the mandatory state pension system, i.e., they are required to pay contributions in respect of each employee to the CSSA. The mandatory contribution obligation applies to the vast majority of employees. Employers do not make contributions in respect of employees who perform work under an “agreement on the performance of work” (which is a type of labor law contract used mainly for short-term, temporary jobs) and who earn less than CZK 10,000 per month (approximately EUR 370). The obligation to make mandatory contributions applies regardless of the type of work, the number of working hours, or whether the employer is a state or private company. Although employers are not obliged to arrange additional retirement plans/schemes in addition to the public social security system, employees can voluntarily participate in supplementary private pension insurance offered by private insurance companies/funds. This type of pension insurance is a private contract between the employee and the insurance company/fund responsible for administering the pension scheme. It is typical for employers to pay part of the employee’s insurance contributions as an employee benefit. In addition, the state provides certain contributions in respect of employees participating in this system. Supplementary pension insurance payments may commence at age 60, unlike the statutory pension insurance system where the retirement age depends on the employee’s date of birth and the number of years worked by the employee. (In recent years, the retirement age has been increasing.) 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal legislation governing retirement insurance and retirement schemes is as follows: • Act No. 582/1991 Sb., on the Organisation and Administration of Social Security, as amended; • Act No. 155/1995 Sb., on Pension Insurance, as amended; • Act No. 589/1992 Sb., on Social Security Insurance, as amended; • Act No. 42/1994 Sb., the State-Contributory Supplementary Pension Insurance Act, as amended; and • Act No. 427/2011 Sb., on Supplementary Pension Savings, as amended. One material requirement or principle applicable to the state pension system is the inclusion of practically all economically active persons. Czech Republic A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 As far as supplementary (voluntary) pension insurance is concerned, equal treatment and non-discrimination are fundamental principles governing these schemes. If the employer provides a benefit – in this case, a contribution to the employee’s supplementary pension insurance – it must be provided in a non-discriminatory fashion. The Czech National Bank and the Ministry of Finance supervise the providers of these supplementary (voluntary) pension insurance contracts. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Employers who make contributions to their employees’ supplementary (voluntary) pension insurance receive tax advantages. Those contributions, up to a certain level, can be included in the employer’s business costs as a taxdeductible expense. Tax advantages are also available for employees if they pay a set monthly amount into their supplementary pension insurance account. Contributions paid by the employer as a benefit are, up to a certain level, not subject to employee income tax, and contributions paid by the employee are a tax-deductible expense. The level of contributions paid by the employee also, to a large extent, determines the employee’s entitlement to a further contribution provided by the government. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? As far as the mandatory state pension system is concerned, both employers and employees are required to pay statutory contributions for pension insurance. If an employee decides to participate in supplementary pension insurance, employer contributions are voluntary. Employer obligations to provide supplementary pension contributions can arise from the employer’s internal regulations, an agreement with a particular employee, or a collective agreement. In such cases, the employer is obliged to make the necessary contributions in order to perform its contractual or stated duties. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Retirement schemes, and therefore the investment of their assets, are provided primarily by pension funds and pension insurance companies. Pension funds and pension insurance companies are legal entities with a registered office in the Czech Republic that operate supplementary pension insurance under the State-Contributory Supplementary Pension Insurance Act and the Supplementary Pension Savings Act. Liability for breach of the statutory investment obligations therefore applies to pension funds and pension insurance companies. Czech Republic A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The investment obligations that are imposed by the relevant statutes on pension funds and investment companies include prudent investment obligations, restrictions and requirements relating to permissible investments, diversification obligations, and restrictions on participation in other legal entities. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Where the mandatory state pension insurance is concerned, employers are required to maintain a register of their employees. The register must contain employee identification data (such as name, date of birth, personal identification number, residence, etc.), as well as other data required to calculate the employee’s state pension. The Act on the Organisation and Administration of Social Security also requires employers to maintain “Personal Records for Pension Insurance” (“PRPI”). Employers must create two originals, one of which must be kept in the employer’s register, and the second of which must be submitted to the CSSA. The PRPI must be submitted annually for each employee. Failure to fulfill the obligations described above may result in a fine from the CSSA of up to CZK 500,000 (approximately EUR 18,518). The main disclosure obligations apply to the CSSA. Upon written request, the CSSA must provide citizens with “Informative Personal Records for Pension Insurance.” This document contains a summary of the citizen’s insurance periods and assessment bases. Where supplementary pension insurance is concerned, insurance beneficiaries are entitled to information from a pension plan about the level of funds that the plan holds for them and about the status of those funds, including information on percentage investment returns. Furthermore, pension funds and pension companies commit an administrative offense if they fail to inform insurance beneficiaries in writing about changes to the pension plan that relate to entitlements and payments from supplementary pension insurance. Failure to comply with this duty may result in a fine of up to CZK 20,000,000 (approximately EUR 740,740). Pension funds are obliged to submit a “Report on Financial Activity,” their Articles of Association, and a list of the members of their governing bodies to the Czech National Bank. Pension companies are also required to publish annual records and send them to the Czech National Bank. The Czech National Bank maintains a register of pension funds and pension companies, which is accessible via its website. If an employer provides contributions to employees’ supplementary pension insurance based on terms set out in its internal regulations, the content of those regulations should be the subject of consultation with trade unions. Czech Republic A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? State pension insurance system mandatory contribution levels cannot be changed as they are prescribed by Czech law. With respect to employer contributions to supplementary pension insurance, the employer is only bound by the employment contract, collective agreements, and its internal regulations. If the terms are stipulated in the employer’s internal regulations, the employer can amend them unilaterally without employee consent. However, if the terms are set out in a contract (whether an employment contract or a collective agreement), a further agreement is required to modify the terms. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? The requirement to make payments to the CSSA is a legal obligation, and employers and employees cannot withdraw from or terminate the state pension insurance system. The CSSA continually monitors the payments made to it to ensure they are made punctually and calculated correctly. In the event of late payment, employers must pay additional penalties. In relation to supplementary pension insurance, an employer cannot terminate the insurance arrangement since the contractual relations are between the insurance company (fund) and the employee. As contributions made by the employer are a benefit provided voluntarily, employees are not entitled to claim this benefit under Czech law, except as provided by the agreement between the employer and the employee, collective agreements, or the employer’s internal regulations. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? In terms of supplementary pension insurance, the employer pays its contributions into a special employee account maintained by an insurance company/fund. When an employee changes jobs, the contributions paid by the former employer remain in this account. As such, employees are entitled to retain any contributions paid by their former employer. However, the former employer is not required to pay further contributions once the employee has left their employment. Employees are also entitled to change their private pension insurance provider and to transfer their savings to another provider. Czech Republic A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No. Such adjustments/increases are not required by law. Czech Republic Contributed by: Jan Koval, Havel, Holásek & Partners A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Denmark Contributed by: Kromann Reumert Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? The Danish pension system is characterised by a number of public pension schemes and far-reaching mandatory occupational pension schemes primarily established by collective bargaining agreements. The primary first pillar pensions include the general state pension scheme (Folkepension), the Førtidspension, and the Efterløn. The Førtidspension and the Efterløn provide early retirement pensions while the general state pension scheme provides a universal basic old age pension. The general state pension scheme and the Førtidspension are both financed exclusively on a pay-as-you-go basis from tax revenues. The Efterløn is financed partly on a pay-as-you-go basis from tax A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 revenues and partly by contributions from individuals participating in the scheme. In addition to the primary first-pillar pensions, there is the Danish Labor Market Supplementary Pension Scheme (ATP) which is funded by employer and employee contributions. Together, these statutory pension schemes provide for a minimum retirement income. The level of monthly pension payments from the general state pension scheme depends on various factors, such as the employee’s marital status, while the level of payments under the Danish Labor Market Supplementary Pension Scheme depends on the contributions made during the employee’s working life. The retirement age at which an individual qualifies to receive payments under both the general state pension scheme and the Danish Labor Market Supplementary Pension Scheme is currently between 65 and 68 years, depending on the employee’s date of birth. There is also a public service pension scheme (Tjenestemandspension) for public sector employees. As only a small group of Danish employees are subject to this scheme, it falls outside the scope of this Guide. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Other than mandatory employer contributions to the Danish Labor Market Supplementary Pension Scheme (see question 1), employees are only entitled to employer pension contributions if this is agreed with the employer, e.g., in the employment contract, or if the employment is subject to a collective bargaining agreement which provides for employer pension contributions. Employers that are not subject to a collective bargaining agreement requiring participation in a pension scheme often offer their employees participation in a company pension scheme. Such voluntary occupational pension schemes are almost exclusively defined contribution schemes and are normally managed by a commercial pension provider. The employer’s obligations are therefore limited to payment of the specified contributions to the pension provider. The specified contribution rate often tracks the major collective bargaining agreements, as described below. The vast majority of collective bargaining agreements provide for fully funded defined contribution schemes. Contribution rates are often between 12-18% of employee earnings, of which 2/3 is paid by the employer and 1/3 by the employee. Employers generally fulfill these obligations through direct payments to the pension provider. Under most collective bargaining agreements, participation in the pension schemes is mandatory, and employers and individual employees cannot negotiate a higher salary or other benefits in lieu of pension contributions. A number of collective bargaining agreements designate specific pension providers to administer the pension schemes Denmark A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 set out in the collective bargaining agreement. Failure by an employer to pay pension contributions under the applicable collective bargaining agreement may lead to a claim for payment of up to five years’ worth of backdated contributions. In addition, noncompliant employers may owe significant penalties to the relevant trade union. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Other than the primary first pillar pensions and the Danish Labor Market Supplementary Pension Scheme (see question 1), pension schemes are generally not regulated by Danish law. However, collective bargaining agreements requiring participation in a pension scheme generally include detailed rules governing such pension schemes (see question 2). 4. What are the key features of the tax framework that applies to retirement plans/schemes? Employer contributions to an employee’s supplementary pension scheme are generally tax-exempt. However, this depends on the type of pension scheme, e.g., for some schemes, the tax exemption is limited to DKK 53,500 a year. Employee contributions are deducted before tax, but are still subject to labor tax. The pension provider automatically withholds the labor tax from the contribution. Most employee contributions to a supplementary pension scheme will be tax-deductible depending on the type of the scheme. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Employers may establish a voluntary company pension scheme under which only employees are required to contribute, with the contributions being paid to the employee’s individual pension savings/pension insurance arrangement. In such cases, the employer must ensure that the employee’s pension contributions are deducted from the employee’s salary and paid to the pension provider. This type of pension scheme can only be set up if the employee in question is not subject to an agreement with the employer or a collective bargaining agreement requiring employer pension contributions. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The Danish Financial Supervisory Authority and the Danish Business Authority oversee pension providers in accordance with the Danish Financial Business Act and the Danish Act on the Supervision of Company Pension Funds. The main aim of these authorities’ supervision of pension providers is to ensure that they comply with statutory requirements. If a pension provider violates any of the applicable rules, the Financial Supervisory Authority may issue a complaint, an order or a fine. Ultimately, the pension provider may be reported to the police or have its license withdrawn. Denmark A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 There is extensive client/employee-protection regulation in the financial sector, which also applies to pension providers. In this context, pension providers are subject to rules such as a good practice order, which regulates the guidance and information to be provided to customers/employees, and an investor protection order, which sets out guidelines for responsible investment. In addition, pension providers are under an obligation to comply with a “best execution” principle whereby they must take all reasonable measures to obtain the best possible outcome for their customers. If a pension provider fails to comply with the applicable rules, the breach is generally punishable by a fine. In more severe cases, the breach may be a criminal offense punishable by a fine or even imprisonment. A compensation claim may also be raised depending on the situation. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Generally, there are no statutory reporting, disclosure or employee consultation requirements in relation to pension schemes. However, collective bargaining agreements providing for pensions may include special formal procedures and rules on, for example, employee consultation. Moreover, employees who participate in a pension scheme set out in a collective bargaining agreement and employees who participate in a voluntary company pension scheme must be informed of any amendments to the pension scheme. If the amendments are material amendments that are to the employees’ detriment, they can only be made once each employee’s individual notice period has expired, unless otherwise specifically agreed with each employee (see question 8). In addition, under the Danish Financial Business Act, pension providers are required to provide individual counsel to their customers. This means that the pension provider must provide its customers with information on, for example, the risks associated with a specific arrangement and what the immediate consequences of a customer’s choice might be. Failure to comply with the information requirements under the Danish Financial Business Act is a criminal offense and may result in a claim for damages or even nullification of the agreement with the customer. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Generally, employers can make minor amendments to employees’ terms and conditions of employment without giving notice to the affected employees. However, material amendments to the terms and conditions of employment that are to employees’ detriment are treated as a termination of the employees’ employment and a simultaneous offer of re-employment on the amended terms and conditions of employment. As a result, material amendments can only be made once each employee’s individual notice period has expired, unless otherwise specifically agreed with each employee. Moreover, employees are not obliged to accept the offer of re-employment on the amended terms and conditions and can therefore consider themselves dismissed by the employer if they do not wish to accept the offer of Denmark A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 re-employment. In general, changes to the employee’s salary and pension rights that are to the employee’s detriment are considered material amendments to the employment terms and conditions and must therefore be made in accordance with the above rules. Notwithstanding the above, terms and conditions of employment (including, as relevant here, rules governing pension benefits) that arise from a collective bargaining agreement can only be amended in accordance with the specific rules outlined in that collective bargaining agreement. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Pension schemes based on collective bargaining agreements In general, it is not possible for employers to withdraw from or terminate a pension scheme set out in a collective bargaining agreement. If an employer wishes to terminate the pension scheme, the entire collective bargaining agreement must be terminated in accordance with the rules set out in that agreement. Usually, this will require negotiations for a new collective bargaining agreement and, if the employer does not wish to enter into a new collective bargaining agreement, termination of the existing collective bargaining agreement will generally require the employer to start a dispute with the trade union. Pension schemes based on agreement between the employer and the employee Whether an employer is able to withdraw from or terminate a pension scheme based on an agreement between the employer and the employee will depend on the terms and conditions of that agreement. In general, termination of a pension scheme is a material amendment to the employee’s terms and conditions of employment to the employee’s detriment and therefore can only be made upon expiration of the employee’s individual notice period (see question 8). 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Both employees subject to a collective bargaining agreement providing for pension provision and employees who participate in a voluntary company pension scheme can move their pension savings to another pension provider if they change jobs. In general, such transfers are either free of charge or are subject to a low fee. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? As a general rule, no. However, it is generally possible to adjust pension payments to suit individual needs. Denmark Contributed by: Tina Brøgger Sørensen & Bitten Elizabeth Hansen, Kromann Reumert A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Egypt Contributed by: Shalakany Law Office Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? Yes, the state provides a social security program that in addition to disability and death insurance, work injury insurance, medical insurance, and unemployment insurance, also provides retirement income. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Under Egyptian law, employers are required to either participate in the state’s social security program or adopt an A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 alternative fund. To participate in the social security program, employers pay social insurance contributions in respect of all their employees to the Social Insurance Authority. Employers can, instead, adopt an alternative fund that gives employees greater benefits than the state’s social security insurance system. Such alternative funds are extensively regulated by Law No. 54/1975 and 64/1980 and are supervised by the Egyptian Financial Supervisory Authority (“EFSA”). Alternative funds have independent legal personality and must be registered with the EFSA. In addition to the above, employers can adopt an optional retirement plan. Such plans are not explicitly regulated by law and are not supervised by any authority. Employees have the right to choose whether or not to adopt or join such plans. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Social Insurance Law governs retirement plans in Egypt. All employers are required to participate in the state social insurance system and to pay social insurance contributions in respect of all employees who: • are aged 18 or over; and • have a continuous (rather than intermittent) employment relationship with the employer. Alternative funds are regulated by Law No. 54/1975 and 64/1980. Optional retirement plans are not explicitly regulated by law and are treated as a stand-alone contract between the employer and the employee. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Social insurance contributions, contributions to alternative funds and contributions to optional retirement plans are exempt from taxes. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Employer contributions to either the state social insurance system or alternative funds are mandatory. Employer contributions to optional retirement plans are not required. Egypt A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Under Article 14 of the Executive Regulation of Law No. 54/1975, assets held by alternative funds must be invested as follows: (a) At least 25% of the fund’s total assets must be invested in securities that are guaranteed by the Egyptian government. (b) Not more than 60% of the fund’s total assets must be invested in some or all of the following: (i) real estate in Egypt; (ii) listed securities; (iii) fixed interest deposits in Egyptian banks; or (iv) any other investment with a guaranteed interest rate, subject to EFSA approval. (c) Not more than 15% of the fund’s total assets must be deposited in a current account at an Egyptian bank. As far as optional retirement plans are concerned, the employer is free to determine the means of investment. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? No reporting, disclosure or employee consultation rules apply to optional retirement plans. Disclosure rules do apply, though, to alternative funds. Under the Executive Regulation of the Law No. 54/1975, alternative funds must submit documents to the EFSA evidencing their investments under paragraph (b) of question 6 above as follows: • Real estate investments – funds must submit (i) documents and expert reports showing the value of the property and (ii) a certificate from the Registry of Deeds demonstrating that the property is free from any third-party rights. In addition, the fund may not dispose of the property in any way without the EFSA’s prior approval. •Investments under subparagraphs (b)(ii) to (b)(iv) of question 6 above – funds must submit certificate(s) from the bank(s) with which the funds have deposited the assets or the financial securities. In addition to the above, an actuarial expert must audit the fund’s accounting every five years. The EFSA can also require this audit to be carried out once every year at its discretion. A copy of the actuarial expert’s report must be sent to the EFSA. Egypt A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Employers may not unilaterally alter the terms of the state social insurance system or alternative funds, as they are mandatory and stipulated by law. Employers can alter the terms of an optional retirement plan unless otherwise agreed with the employee at the time that the employee joined the plan. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers cannot withdraw from the state social insurance system or from alternative funds. However, employers can withdraw from or terminate an optional retirement plan, but will remain contractually liable to employees for the employer contributions and any amounts due to the employees in accordance with the plan’s terms. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Only in the case of the mandatory state social insurance system. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? When employees reach retirement age (age 60), employers no longer need to contribute to the state social insurance scheme or to any alternative funds with respect to that employee. Contributed by: Khaled Sherif, Shalakany Law Office Egypt A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Finland Contributed by: Dittmar & Indrenius Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? The Finnish pension system comprises two separate pension systems that complement one another. The National and Guarantee Pensions are meant for those pensioners who have no Earnings-Related Pension or whose pension is very small. The National and Guarantee Pensions are funded by the state. The Earnings-Related Pension is earned by employment or income from self-employment. Employers are required to take out a pension insurance policy for each of their employees, which is funded by employer and employee contributions. The self-employed are responsible for their own insurance premiums. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Authorized pension providers – pension funds and foundations – provide the Earnings-Related Pensions. Under this program, all employers are required to take out a pension insurance policy for each of their employees from the insurance provider of the employer’s choosing. Employers then deduct employees’ contributions from their salaries and, along with the employer’s own contributions, pay insurance premiums to the pension provider. The self-employed are responsible for their own insurance premiums. Employers and employees are also allowed to set up additional voluntary pension arrangements. Options for voluntary pension arrangements are either group pension insurance or individual pension insurance. However, due to the current strong mandatory pension system, voluntary occupational pension schemes are less common in Finland than in other European countries. Supplementary pension schemes are seen as an additional benefit for employees and they mainly cover employees in executive positions. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? There are various pension laws governing the private and public sectors. In the private sector, employees are usually covered by the Employees Pensions Act. Finland has enacted wide-ranging pension reform that came into force on January 1, 2017. The central change under the 2017 pension reform is the gradual increase in the minimum retirement age from 63 to 65. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Employers can deduct the pension insurance contributions they pay towards the Earnings-Related Pension system as allowable expenses in taxation. Group pension insurance contributions are also deductible expenses for the employer. As employer group pension insurance contributions are typically not considered to be taxable income for the employees, they are not subject to income tax or social insurance contributions. The pension paid to the employee in due course under the supplementary pension scheme is regarded as taxable earnings and is therefore subject to income tax. Employer contributions made to an individual pension scheme are not considered taxable income of the employee, provided that the insurance contract is taken out by the employer and the contributions do not exceed EUR 8,500 a year. If the insurance contract is taken out by the employee, all employer contributions are considered to be the employee’s income and therefore are subject to income tax and social insurance contributions. Finland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Tax relief on employee pension contributions is only available for supplementary pension insurance contracts taken out by the employee (and not by the employer). 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Employers can arrange supplementary pension schemes for their employees through either group pension insurance contracts or individual pension insurance contracts. Currently, supplementary pension schemes are not particularly common in Finland. However, under the 2017 pension reform, supplementary schemes are a means by which employers can control employees’ retirement. Individual pension insurance, which can be either voluntary pension insurance or a long-term savings contract, may be taken out by the insured person or by the employer. If the employer is the policyholder, the insured person may not pay contributions to the insurance. Normally group pension schemes are based on defined contributions and the value of the pension is eventually determined on the basis of the accumulated savings. Contributions can, for example, be defined as a fixed percentage of the employee’s salary or may be linked to the company’s profits. Benefits under supplementary pension schemes can be linked to the employee’s salary or the employee contributions. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? There is specific legislation concerning the activity of pension providers, but this is not directly relevant for employers. More relevant for employers is what kind of pension promise they have made to employees. If the employer has promised to offer a certain kind or amount of pension to an employee in the employment agreement or by other binding measures, and the pension arrangement is insufficient to cover the employer’s pension promise, the employer may be liable to compensate the employee for the difference. Pension promises are particularly binding when they are included in an employment agreement, but a general statement in a company pension policy might also lead to employer liability. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? An employer that has taken out an insurance contract must provide the pension insurance company with the employer’s identification data, and the names, personal identity codes and salary information of the employees working under an employment contract within the time limit specified in the insurance contract. This notification obligation also applies Finland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 to employers who have made pension arrangements for their employees through an industry-wide pension fund or a company pension fund. The Finnish Centre for Pensions oversees employers’ compliance with these statutory obligations. In the supplementary pensions context, the pension provider oversees the employer’s compliance with its reporting and insurance obligations. The pension providers’ reporting and disclosure obligations are supervised by the Finnish Financial Supervisory Authority (“FSA”). The pension provider must prepare its financial reports in accordance with the Accounting Act 1997. Auditing of the pension provider must also be performed in compliance with the Auditing Act 2015. The FSA oversees pension providers’ compliance with these requirements. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? If an employer has reserved the right to alter the terms of a supplementary retirement plan/scheme unilaterally, it can in principle be done without employee approval. However, it should be noted that if the supplementary retirement plan/ scheme has been in place for a long time, it is possible that all or part of the plan/scheme could be considered part of the terms of employment. In this respect, the employer may not have a right to unilaterally alter the terms of the plan/ scheme even if the employer has reserved a right to do so. If a unilateral amendment right has not been reserved and the employer wishes to alter the terms of a plan/scheme, it may have to reach an agreement with the employees or, alternatively, grounds for termination of the employment relationship must exist. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? If the employer has reserved the right to withdraw from or terminate a supplementary retirement plan/scheme unilaterally, it may in principle do so without employee approval. If such a right has not been reserved and the employer wishes to withdraw from or terminate a plan/scheme, it may have to reach an agreement with the employees or alternatively, grounds for termination of the employment relationship must exist. If an employee refuses to agree to withdrawal or termination of a retirement plan/scheme as the employer wishes, the employment contract remains valid. If the employer has no right to withdraw from or terminate a plan/scheme (when the employee refuses to agree or no grounds for termination of the employment relationship exist) and the employer withdraws from or terminates the plan/scheme, the employees are entitled to compensation for damages. In Finland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 principle, no damages are payable if the employer has reserved the right to withdraw from or terminate the plan/scheme unilaterally, as long as the employee’s employment contract does not entitle him or her to a certain level of pension benefits. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? In principle, a paid-up policy entitlement applies to supplementary pension schemes. The employee may be entitled to the full or partial value of a paid-up policy at the time of termination of the employment contract, or the value may be connected to the duration of the employment contract. The employee’s rights also depend on the terms of the pension scheme and/or the employer’s pension promise. If the pension scheme does not provide those rights to the employee, however, the employee may not be entitled to the paid-up policy. In such cases, the employee loses his or her supplemental pension/retirement benefit entitlement when changing jobs. Supplementary pension rights to which the employee is entitled can be transferred to another pension insurance provider if the insurance was taken out in 2010 or later. Pension insurance taken out before 2010 is also transferable, but only with the consent of the pension insurance provider. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? For supplementary pension benefits, the employer is required to ensure that the supplemental pension is paid to the pensioner in accordance with the conditions that are valid at the time the person retires. Please also see question 6 about the employer’s compensation obligation. The National and Guarantee Pensions payments are revised yearly in line with the national pension index to reflect the increase in the cost of living. Finland Contributed by: Seppo Havia, Dittmar & Indrenius A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 France Contributed by: Mayer Brown 1. Does the state provide a pension, retirement income or social security program of some type? The French government provides a state pension funded by employer and employee “old age insurance” contributions that are deducted from payroll and paid to the URSSAF (the French social security authority). Upon retirement, individuals receive monthly payments from the French government in an amount determined by a statutorily prescribed formula. It should be noted that officials and employees of public companies benefit from specific pension systems which fall outside the scope of this Guide. A Global Guide to Retirement Plans & Schemes Régine Goury Counsel, Paris E: [email protected] T: +33 1 53 53 43 40 F: +33 1 53 96 03 83 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? In addition to the social security pension system, employers must contribute to complementary pension schemes. These schemes are operated by institutions jointly managed by employers’ associations and unions. The two largest such schemes are ARRCO, which provides benefits to employees in non-managerial positions, and AGIRC, which covers employees in managerial positions. These schemes are due to merge in 2019. There are other schemes specific to certain professions such as lawyers, pilots, etc. All of these complementary pension schemes are established as mandatory payas-you-go systems. In addition to these complementary schemes, employers may set up supplemental pension schemes. These generally consist of defined contribution plans, which benefit from preferential tax and social security treatment subject to compliance with a number of conditions. There are also defined benefit plans which are less common. Given the substantial proportion of retirement income provided by the social security system and the mandatory complementary pension systems/schemes, the private supplemental system tends to be less significant in France than in other countries. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Under Article L.921-1 of the Social Security Code, employees contributing to the general social security system or to the agricultural social security system must join a complementary pension scheme. As explained above (see question 2), these schemes are operated by institutions jointly managed by employers’ associations and unions. These institutions are grouped into two main federations, ARRCO and AGIRC, which are due to merge in 2019. The 1947 national collective bargaining agreement and its rules of procedure govern AGIRC, while the 1961 national collective bargaining agreement and its statutes govern ARRCO. Together these documents set out all material rules applicable to AGIRC and ARRCO. These rules mainly concern employer and employee contribution rates and accrual of pension rights. Given that complementary pension schemes are distinct, quasi-state pension schemes, to which employers have a duty to contribute on a pay-as-you-go basis, the following sections will not cover these schemes or the state pension scheme. In addition to the state pension scheme and complementary pension schemes, supplemental pension schemes may be set up by employers. This is usually not mandatory for employers, except in the rare case where an industry-wide France A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 collective bargaining agreement requires it. Such schemes can take the form of pension plans or savings plans, a choice that affects the tax treatment of employer contributions (see question 4). Supplemental pension schemes are often referred to by the particular French General Tax Code articles providing their tax exemptions. “Article 39” plans are defined benefit schemes, where benefits are conditional upon remaining an employee of the same employer until retirement with no vested individual rights. A specific social contribution regime is set out in Article L.137-11 of the Social Security Code for these plans. “Article 83” plans are defined contribution schemes, with mandatory employee participation and vested benefits that employees retain even if they leave the employer before retirement. Article L.242-1 of the Social Security Code sets out the conditions for preferential social security treatment for these schemes. Employers can also set up company-wide savings plan such as collective retirement savings plans (“PERCO”) in order to allow employees to invest their profit-sharing rights, their own savings and additional employer contributions in a retirement plan. Participation in such plans is optional for employees. Pension plans must not discriminate on the grounds of gender or between employees based in France and based overseas. Plans must also maintain all member rights in the event of employer insolvency or transfer. New pension plans must be outsourced to one of the regulated institutions (see question 6). 4. What are the key features of the tax framework that applies to retirement plans/schemes? Employer contributions to supplemental pension plans providing defined benefits are tax-deductible for the employer if the plan is outsourced to a regulated institution. For older pension plans where benefits are paid directly by the employer, provision made in the employer’s accounts for such benefits is not deductible, but the actual benefits are deductible when paid, within certain limits for listed companies. Employer contributions are free from employee income tax, subject to a number of conditions. Such contributions are subject to specific social security rates at the employer’s choice of either 32% on pension benefits paid, 24% on contributions to a regulated institution, or 48% on accounting provision for accrued benefits if the pension plan is managed internally by the company. Employer contributions to supplemental pension plans providing defined contribution benefits are tax-deductible for the employer and free from employee income tax, subject to a number of conditions and limits. They are also free from most social security contributions, subject to a number of conditions and limits, although they are subject to the “contribution sociale généralisée” (“CSG”) and the “contribution pour la remboursement de la dette sociale” (“CRDS”) and the “forfait social” at a total of 28%. These conditions, which are often modified and relatively numerous, relate to (i) the establishment of the plan, (ii) the legal entity paying the pension benefits, and (iii) the beneficiaries. The social security authorities tend to interpret these conditions strictly and reassessments are common. If any of these conditions are not met, employer contributions will be subject to income tax and social security contributions as if they were salary. France A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Supplemental pension plans with defined benefits are fully funded by the employer. Supplemental pension plans with defined contributions are usually funded either fully by the employer or partly by the employer and the employee. The employer cannot impose a contribution requirement on employees unless the pension terms are set by a collective bargaining agreement or an employee referendum. Employers can, however, set up individual retirement savings plans for employees (“PERP”). Employees can make individual contributions to these plans. Employers do not have to contribute to these plans. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Newly-created pension plans must be outsourced to regulated institutions, which are insurance companies, mutual insurance institutions or provident institutions (collectively, “Pension Institutions”). Former supplementary pension institutions (“IRS”) which were subject to limited legal requirements had to be transformed into either provident institutions or a newly-created form of institution for the management of supplementary pensions (“IGRS”) which only have administrative duties and must outsource management and investment to a Pension Institution. Pension Institutions are subject to prudential rules under the EU Solvency II Directive (2009/138/EC) as transposed into French law by ordinance No. 2015-378 of April 2, 2015, in particular regarding capital requirements, authorization, governance and control. Pension Institutions are supervised in France by the ACPR (Autorité de contrôle prudentiel et de résolution) in coordination with EIOPA (the European Insurance and Occupational Pensions Authority) at the European level. In the event of breach of these prudential rules, the ACPR may issue warnings, withdraw authorizations temporarily or permanently, or file for insolvency of the Pension Institution, depending on the nature of the breach. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Before setting up a collective supplementary pension scheme or before making any material change(s) to such a scheme, particularly changes to contribution rates, the works council must be informed and consulted. In the event of late payment of contributions by the employer, the works council again must be informed. The Pension Institution managing the pension plan must provide an annual report to the employer detailing contributions, charges, beneficiaries, investment allocations and investment performance. This report must then be sent by the employer to the works council. France A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Employers must give employees an explanatory note drafted by the Pension Institution about the pension plan and any amendment(s) to it, upon the later of establishment of the scheme or commencement of the employment contract. Employees must be provided with annual information about their acquired rights directly by the Pension Institution. They must also be given information by the Pension Institution on their rights when they leave the employer. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Pension plans are established by way of a collective bargaining agreement, an employee referendum or a unilateral employer decision. For each of these methods, specific rules apply in the event of amendments to, or termination of, the plan, the general guideline being that the plan can only be amended in the same way that it has been set up, except for collective bargaining agreements which can take precedence over the other methods. The works council must be consulted in all cases. Individual employee consent is not required unless reference to the pension plan is made in the employment contract. Nevertheless, employees must be informed in writing of any change(s). In the case of an “Article 39” defined benefit plan, where benefits are conditional upon the employee remaining an employee of the same employer until retirement, the employer is free to make any changes before retirement subject to the above restrictions. Employees are deemed not to accrue any rights until they retire and claim their pension. In the case of a defined contribution plan, employees accrue individual rights to amounts already invested and these benefits cannot be reduced. Once employees have retired, they acquire a right to their pension which cannot be modified except in relation to revaluation methods. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers can terminate a supplemental pension plan or scheme in the same way they can change it (see question 8). An “Article 39” defined benefit plan can be terminated at any time before retirement. It cannot be terminated after retirement. If a defined contribution plan is terminated, employees will keep their accrued rights invested in the Pension Institution and receive distributions upon retirement. Where the pension plan is provided for by an industry-wide collective bargaining agreement, the employer cannot terminate it. France A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Where an employee benefits from an “Article 39” defined benefit pension plan that is conditional upon his or her employment with the company until retirement, he or she will lose all entitlements to the pension on changing jobs. Where an employee benefits from a defined contribution pension plan, he or she has an individual right to the sums already accrued that he or she will keep until retirement. Indeed, unless certain specific circumstances apply, the employee cannot access these funds before retirement, and they will continue to be managed by the Pension Institution until then. The pension plan must also give the employee the option to request the transfer of his or her rights to another pension plan in the event of a change of employer. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No, although some plans voluntarily provide for such an increase. Contributed by: Régine Goury, Mayer Brown France A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Germany Contributed by: Mayer Brown LLP 1. Does the state provide a pension, retirement income or social security program of some type? The German pension system is usually viewed as a “three layer system,” comprising the following elements: Layer I: Basic Provision – This layer consists of the state pension plan (“gesetzliche Rentenversicherung”), which is still the most important element of the German pension system, and the “Ruerup-Pension,” which was introduced in 2005 and is a partially tax-exempt privately financed pension vehicle. Contributions to the state pension system are borne by employers and employees in equal shares. A Global Guide to Retirement Plans & Schemes Dr. Guido Zeppenfeld Partner, Frankfurt E: [email protected] T: +49 69 79 41 2241 F: +49 69 79 41 100 Dr. Nicolas Rößler Partner, Frankfurt E: [email protected] T: +49 69 79 41 2231 F: +49 69 79 41 100 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Layer II: Private Provision (“private Altersvorsorge”) – This layer is made up of various life insurance contracts or private equity investments. Again, certain tax incentives have been introduced to encourage participation in this layer, the most important of which is the so-called “Riester-Pension.” Layer III: Occupational Pension Plans (“betriebliche Altersversorgung”) – The German Pensions Act (“Betriebsrentengesetz”) generally recognizes two different methods of financing occupational pension promises: • internal financing under a so-called direct commitment – these are often asset-backed via so-called contractual trust arrangements (“CTAs”); and • external financing and indirect commitments. In this scenario, an external funding vehicle is used to fund the promised benefits. The German Pensions Act recognizes four different external funding vehicles: pension funds, Pensionskasse, support funds, and the most common funding method, direct insurance. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? The state pension plan (“gesetzliche Rentenversicherung”) is, as a general rule, compulsory for all employers and employees. Only civil servants, the self-employed and employees working in certain professions for which special professional plans have been set up (e.g., lawyers and artists) are either exempt from, or may opt out of, the state plan. Employers are not required to offer occupational pension plans. However, even if employers do not offer an occupational pension plan, employees can require the employer to pay an amount from the employee’s remuneration of up to 4% of the social security contribution ceiling (“Beitragsbemessungsgrenze”) to a deferred compensation plan (“Entgeltumwandlung”). On December 21, 2016, a draft bill to encourage the provision of occupational pensions (“Betriebsrentenstärkungsgesetz”) was adopted. If enacted, this new law will significantly amend the German Pension Act, the Gesetz zur Verbesserung der betrieblichen Altersversorgung or Betriebsrentengesetz. The legislation is expected to come into force by January 1, 2018. The draft bill allows employers to introduce automatic deferred compensation plans for all employees or for a group of employees of the company or single business under a collective bargaining agreement. Employees will need to actively opt out if they do not wish to be covered by such a plan. Germany A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The state pension plan is part of the German statutory social security system. The legal framework for the statutory state pension plan is contained in Book VI of the Social Code (“SGB VII”). The legal framework for occupational pension plans is contained in the German Pensions Act. Occupational pensions are promised by the employer to their employees. As such, the underlying promise is part of the employment relationship and is governed by German employment law. Occupational pensions can be promised individually, i.e., as part of the employment contract, or collectively as part of agreements with employee representative bodies (works councils or unions). Also, the German Income Tax Act (“Einkommensteuergesetz”) contains a large number of rules on the tax treatment of different plan designs. The regulatory framework of financing vehicles is governed by the Insurance Supervisory Act (“Versicherungsaufsichtsgesetz”), and the relationship between the employee and the financing vehicle is often governed by the Insurance Contract Act (the “Versicherungsvertragsgesetz”). The draft bill to strengthen occupational pension provision, which is expected to come into force by January 1, 2018, lays the foundation for industry-wide pension plans with more flexible pension promises. For the first time, German law on occupational pensions will allow pure defined contribution plans (“pay and forget”). These industry-wide defined contribution plans will be set up mainly through collective bargaining agreements between the social partners, i.e., the collective bargaining unions on the one hand and employers’ associations on the other hand, in new industry-wide pension funds or within the framework of existing pension funds, Pensionskassen or direct insurances. Currently, the employer always remains ultimately liable for a predefined benefit. The introduction of pure defined contribution plans will release employers from previous liability risks for company pensions. No minimum performance requirements or guarantees are required from the pension benefit provider under the draft bill. The new type of company pension will be supervised by Germany’s Financial Supervisory Authority, BaFin. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Before 2005, only investment returns earned by the state pension plan on employee contributions were subject to taxation. Since January 1, 2005, state benefits have become subject to an EET taxation model (“exempt, exempt, taxed” – i.e., contributions and investment returns are not taxed, while benefit payments are subject to income tax). When this model was introduced, 50% of the benefits payable under the state plan were taxable, and this rate applied to all pensioners who began receiving benefits in 2005 or earlier. The proportion of state pension benefits that are taxable increases depending on the year in which the benefits are drawn for the first time, with a rise of 2% a year from 52% in 2006, going up to 80% by 2020. As of 2021, the yearly increase will be reduced to 1% a year until 2040 (at which point all benefits payable under the state plan will become subject to income tax). Germany A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 As a very general rule, benefits from occupational pensions are taxable income when paid. Employee contributions are tax-free up to 4% of earnings below the social security contribution ceiling, plus a lump sum of EUR 1,800 if the pension promise was given in or after 2005. It is expected that, as part of the amendments to the law governing thirdlayer pensions under the draft bill to strengthen occupational pension provision, the threshold for tax-free employee contributions to a pension fund will be increased to 8% of earnings up to the social security contribution ceiling by January 1, 2018. The tax treatment of employer contributions depends on the funding method used. If the pension is internally financed, the employer can accrue book reserves on its balance sheet with a discount rate of 6% (this rate is statutorily defined and is currently the subject of significant debate). If the pension is externally financed, as a general rule contributions can be deducted as business expenses. Specific deduction limits may apply, depending on the chosen financing vehicle. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Contributions to the state plan amount to 18.7% of an employee’s gross income. Contributions are split equally between employer and employee. The employee’s gross income used to calculate contributions is capped at the social security contribution ceiling (“SSCC”) – in 2017, the SSCC is EUR 76,300 in the old German states (i.e., those states that made up the Federal Republic of Germany prior to reunification in 1990), and EUR 68,400 in the new German states (i.e., those states that made up the German Democratic Republic prior to reunification in 1990). In an occupational pension plan, employer contributions are not mandatory if internal financing is the chosen funding method. In such plans, no contributions are mandatory. However, internally financed plans are often asset-backed via CTAs, under which the employer may opt to make regular contributions on a voluntary basis, often in order to obtain a balance sheet advantage. If the chosen funding method is via an external vehicle, i.e., pension funds, Pensionskassen or direct insurance, the employer must pay contributions to the vehicle. The key differences between these vehicles are found in the regulatory and tax frameworks applicable to them. Hybrid funding systems (i.e., systems under which both employers and employees pay contributions) are common. Under the German Pensions Act, employees are entitled to contribute up to 4% of their salary, up to a maximum of EUR 2,976, to pension funds, Pensionskassen or direct insurance. Exercise of this right entitles employees to either defer taxation or to receive governmental incentives to the extent the employee invests in pension funds, Pensionskassen or direct insurance. Many plans combine such an employee contribution arrangement with additional employer contributions, which gives employees additional incentives to make timely arrangements for their retirement. Germany A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? In an internally financed plan, there are generally no investment restrictions. The employer is required to pay the promised pension benefits from its assets when they become due and, as such, the employer is free to invest its working capital as it deems appropriate. The same generally applies to CTAs, which are usually unregulated vehicles. In a CTA, the trustee and the sponsoring employer often agree on investment guidelines. For externally financed plans, the investment rules depend on the chosen funding vehicle. There are separate ordinances in place for each type of funding vehicle. As a general rule, pension funds have the greatest freedom of investment. Liabilities exist on two levels: (1) if the chosen financing vehicle is unable to pay the promised benefits to the beneficiaries, the employer will always be ultimately liable to pay those benefits; and (2) the financing vehicles are – with a limited number of exceptions – subject to regulator (BaFin) supervision. BaFin has a far-reaching discretion with regard to the sanctions it can impose on financing vehicles, up to a full shutdown of certain tariffs or the vehicle itself. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Occupational pension plans are generally subject to mandatory co-determination, i.e., employers are free to decide whether to offer an occupational pension scheme, but once this decision has been taken, questions relating to the design of the scheme must be agreed with the acting works council. With regard to investment decisions or the selection of providers for deferred compensation plans, there are no general rules on employee consultation. Generally speaking, if an employer makes a recommendation or arranges a consultation with a specific provider, the employer may be liable for any misrepresentations made in this context. When employees leave an employer, they are entitled to a written confirmation of their vested pension entitlements. The information to which they are entitled will be expanded as of 2018 and will include projections of their future entitlements based on indexation requirements that will be introduced in 2018 (currently, vested entitlements do not receive indexation once the employee leaves the employer). Germany A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Employers may not alter the state pension plan – only the legislator can. Once an occupational pension promise has been made, the conditions that must be met in order to change the plan rules are very strict, if the changes will affect benefit levels. The Federal Labor Court (“Bundesarbeitsgericht”) has developed a so-called three-level theory (“Dreistufentheorie”), which requires different levels of justification for changes based on the type of change proposed. As a general rule, changes affecting future service entitlements are possible if the employer has an objective justification for the change, while changes to past service entitlements require an urgent or important reason (it is rarely possible to establish such a reason). In certain circumstances, employees’ expectations as to their final pension entitlement may become protected. Where a change to future service entitlements would affect this protected expected entitlement, the employer must have a cogent reason for the change. In addition, as the plan rules are part of the employment relationship between the employer and the employee, general employment law principles – including co-determination rights of works councils – must be observed when changing plan rules. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers may not withdraw from or terminate the state pension plan. As occupational pension plans may only be altered within the framework of the so-called three-level-theory as outlined in question 8, an employer can usually only terminate a pension plan in relation to future service benefits. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? The state pension plan will automatically be continued at the new employer. Occupational pension entitlements can be transferred if the old employer, the new employer and the employee agree. Germany A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? In general, the state pension is adjusted each year for all pensioners. With regard to occupational pension plans, unless agreed differently in the plan rules, every three years employers must consider whether an adjustment of the ongoing pension benefits is reasonably required. Particular factors to be taken into account are the interests of the beneficiaries, i.e., developments in the cost of living, and the employer’s economic situation. The threshold that must be met in order for an employer to decide not to make an adjustment is very high. Contributed by: Dr. Guido Zeppenfeld & Dr. Nicolas Rößler, Mayer Brown LLP Germany A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Hungary Contributed by: Bán, S. Szabó & Partners Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? The Hungarian state provides a pension when citizens reach retirement age, provided they have completed the required period of social security service. State pension contributions are paid partly by the employee through deduction of a specified percentage of gross salary, and partly by the employer who pays a percentage of the employee’s salary. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required to maintain retirement plans/schemes, but can choose to do so. The Hungarian pension system comprises the following pillars: (a) State pension – This is provided by the state when the employee reaches retirement age, provided the employee has A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 the required period of social security service. This pension is maintained by the state and funded by employee and employer contributions as described in question 1 above. (b) Private pension funds – These funds are generally maintained by banks and insurance companies. Employees can choose to pay their state pension contribution to a private pension fund rather than to the state pension fund and will receive the minimum state pension, with the majority of their pension being paid by the private pension fund. Today, only a few small private pension funds operate in Hungary as most employees choose to pay into the state pension fund rather than to a private pension fund. (c) Voluntary pension funds – These funds are also generally maintained by banks and insurance companies. Employees and employers can choose to make a regular payment (monthly or annually) to a voluntary pension fund. This payment has tax advantages. The voluntary pension is paid in addition to the state pension when the employee reaches retirement age. In limited circumstances, employees can take their voluntary savings before reaching retirement age. (d) Retirement saving accounts – Individuals who wish to save for retirement can open retirement saving accounts which are generally held by banks. This type of bank account has some tax benefits and the bank invests the money according to the customer’s instructions. The account savings can only be withdrawn when the account owner reaches retirement age. (e) Employer pension funds – Employers can choose to establish their own pension fund or they can join an existing pension fund established for the purposes of collecting and investing payments made to employees for retirement. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The state pension fund and private pension funds are regulated by Act LXXX of 1997. This act regulates pension payments, as well as employee and employer contributions to the state pension fund. Voluntary private funds are regulated by Act XCVI of 1993. This act regulates how the pension fund must be operated, and how and under what conditions employees and employers can contribute to such funds. Retirement savings accounts are regulated by Act CLVI of 2005. This act regulates the basic features of these special bank accounts. Employer pension funds are regulated by Act CXVII of 2007. The details of this special type of employer’s scheme are outlined further below. Hungary A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 4. What are the key features of the tax framework that applies to retirement plans/schemes? Employee and employer contributions to voluntary pension funds both receive tax benefits. The tax treatment of an employer contribution is more favorable than if paid as salary. Similarly, employees also receive a tax benefit on up to 20% of their contributions (up to HUF 150,000 a year) to a voluntary pension fund. This 20% is then paid by the state to the employee’s voluntary pension fund. Contributions to retirement saving accounts receive the same tax benefits as contributions to voluntary pension funds. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? If an employer establishes a pension fund under the Employer’s Pension Act or joins an existing employer’s pension fund, the employer must pay contributions to the fund in respect of its employees. Each employee’s employment contract must contain a requirement for the employer to pay such contributions or, alternatively, a collective bargaining agreement can impose this requirement. The employer’s obligation to pay contributions lasts for the duration of the employee’s employment. Principles of equal treatment govern the level of contributions that employers may make. The law does not impose any further requirements in relation to the level of contributions that must be paid by employers. Should an employer fail to fulfill its obligation to pay contributions as agreed in the employment contract or the collective bargaining agreement, employees can seek payment of the contributions in court proceedings. Employees can choose to make their own contributions to supplement those paid by the employer. Contributions paid to the pension fund are owned by the employee to whom they relate. In the event of the employee’s death, his or her heir or other beneficiary appointed by the employee inherits the funds credited to the employee’s account. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Employer pension funds are regulated institutions, the establishment and operation of which are subject to licensing by the National Bank of Hungary. Funds must have certain material and personal resources in order to obtain a license. The assets of an employer pension fund are separated from the employer’s assets, so the employer’s creditors cannot claim against the assets of the employer’s pension fund. An employer pension fund has to hold reserves, including creation of a solvency fund to ensure that the pension fund will be able to pay the promised pensions to members even if the contributions in respect of those members do not generate Hungary A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 sufficient funds to fully pay pension obligations. The investment policy of an employer pension fund is determined by the board of directors of the fund. The fund cannot make loans to third parties from its assets and cannot provide guarantees. The fund can operate separate investment portfolios and members can choose which portfolio they would like to invest in. An employer pension fund must appoint a trustee, who is generally an investment institution or bank, and this trustee will hold the fund’s assets. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employer pension funds must send regular reports to the regulatory authority on the level of the reserves held by the fund. Funds must also submit their annual balance sheet to the regulatory authority. If the fund’s board of directors changes the fund’s investment policy, the board must notify members of the change. The fund must also send members annual account statements setting out contributions made by the employer during the year, how the member’s funds have been invested during the year, and details of the investment returns during the year. The statement must be provided by 31 March in the year following the year to which the statement relates. Employer pension funds must operate a customer service facility to enable members to make complaints and ask questions. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? As the Employer’s Pension Act requires the employer pension contribution level to be included in the employment contract, any change to that contribution level can only made with the mutual consent of the employer and the employee by a formal amendment to the employment contract. If an employer pension fund decides to change its investment policy, this action must be taken by the fund’s board of directors and members must be notified of the change. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers who join an existing employer pension fund can choose to join another employer pension fund. The contract that the employer enters into on joining the new fund must provide for the handover and assumption of the employees’ pension entitlements. As a basic principle, employees’ entitlements may not be reduced as a result of this fund change. Hungary A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 An employer pension fund can be terminated by voluntary dissolution. In this case, the regulatory authority will withdraw the fund’s license. An employer pension fund can only be terminated if it has fulfilled all its obligations towards its members or another employer pension fund has assumed liability to fulfill the obligations. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? If an employee moves jobs, the employee can choose to keep his or her pension savings in the former employer’s pension fund or, if the new employer has an employer pension fund, the employee can transfer his or her savings to the new employer’s pension fund. If the employee does not make a choice within 30 days following the end of his or her employment, it is assumed that the employee wishes to leave his or her savings in the former employer’s pension fund. Employer pension funds must put in place internal operational rules and these rules must set out a procedure for what happens when an employee terminates employment. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? There is no requirement to adjust or increase pension payments after retirement. Contributed by: Péter Szemán, Bán, S. Szabó & Partners Hungary A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Iceland Contributed by: LOGOS Legal Services Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? Under the Social Security Act No. 100/2007, the state provides old age pensions, disability pensions, age-related disability supplements, pension supplements, disability allowances, and child pensions. Social security contributions made by employers fund, inter alia, the social security scheme under the Social Security Tax Act No. 113/1990. Individuals aged 67 or older who have resided in Iceland for at least three years between the ages of 16 to 67 are entitled to old age pensions. Individuals who have resided in Iceland for at least 40 years between the ages of 16 and 67 are entitled to the full old age pension, but those who are residents for shorter periods receive prorated benefits. In the case of couples who are both pension recipients, the pensions of both partners may be based on the residence period A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 of the partner with the longer entitlement period. Residence, for the purposes of old age pension entitlement, refers to legal domicile under the Legal Domicile Act. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required to set up or run retirement plans. They are, however, required to contribute to the Icelandic pension system, which operates on three levels. First, under the Social Security Tax Act No. 113/1990, employers and self-employed individuals are required to pay a tax on all forms of wages, salaries, and emoluments from any kind of activity. The tax is composed of two parts: the general social security fee and the employment insurance fee. The rate for the general social security fee is 5.40%, although it was temporarily raised to 6.04% for the 2015 and 2016 tax years (income years 2014 and 2015). Second, under the Pension Act No. 129/1997 (the “Pension Act”), all employees and self-employed individuals are obliged to participate in an occupational pension fund between the ages of 16 to 70. Minimum contributions are 12% of the contribution base, which is all wages and remuneration for any type of work, task, or service. In the private sector, the division of contributions between the employee and the employer may be determined by collective labor agreements. Usually, the employee’s contribution amounts to 4% of total wages, and the employer’s contribution amounts to the other 8%. In the public sector, banking sector, and others, the employer’s contribution is higher. Third, tax incentives are in place for employees who make voluntary private pension savings. The maximum taxdeductible contribution by employees is currently 4%. There is no statutorily prescribed minimum employer contribution level, but employers have agreed in collective labor agreements between the trade unions and the employer federations to contribute 2% to employees’ voluntary pension savings provided that the employee’s contribution is at least 2%. The total contribution can therefore often amount to 6%. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? As set out in question 2, the Pension Act requires all employees and self-employed individuals between the ages of 16 and 70 to participate in an occupational pension fund. Employees in the public sector contribute to the Pension Fund for State Employees, governed by the Pension Fund for State Employees Act No. 1/1997, and contribute 4% of their income to the Fund which is matched by at least an 8% contribution from the employer. Similar divisions of the 12% minimum occupational pension fund contribution required by the Pension Act are found in most collective labor agreements and employment contracts for employees in the private sector. Iceland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 4. What are the key features of the tax framework that applies to retirement plans/schemes? For the employee, pension contributions of up to 8% of wages are tax-deductible as follows: • contributions of up to 4% to occupational pension funds; and • contributions of up to 4% to voluntary private pension funds. Upon retirement, all pension payments (whether paid by the state or from occupational or voluntary pension funds) are fully subject to income tax, which is withheld when the pension is paid out. For the employer, contributions to occupational and voluntary private pension funds are tax-deductible. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Yes. As set out in question 2, under the Pension Act an 8% employer contribution is usually required for occupational pension funds, while under collective labor agreements between the trade unions and the employer federations a 2% employer contribution to voluntary private pension funds is required, provided in the latter case that the employee also contributes at least that amount. As employer contributions to voluntary private pension funds are decided by collective labor agreements, the trade unions and the employer federations could in theory agree to reduce or terminate the minimum employer contribution rate; this is, however, very unlikely to occur in practice. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Employers’ roles in retirement schemes are limited to making contributions; employers do not manage plan investments. Operating a pension fund requires a license, and the investment of pension funds is strictly regulated under Chapter VII of the Pension Act. The Financial Supervisory Authority (the “Authority”) oversees the operations of pension funds, and pension funds are legally required to prepare and submit investment policy reports to the Authority. Of note, foreign investment by pension funds is limited by the Foreign Exchange Act No. 87/1992, although permission may be (and has been) granted by the Central Bank of Iceland. Violation of the Pension Act may result in fines or imprisonment for up to one year. In the event of violations by legal entities, the same penalties may be imposed on their management and, in addition, the legal entities themselves may be fined. Iceland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? The occupational pension fund to which the employee is obliged to, or intends to, pay into should be specified in the employment contract. Other specific reporting, disclosure, and consultation rules do not apply to the employer but rather to the pension funds, which operate under the supervision of the Authority. The Authority has access to all data and information on the pension funds that it considers necessary for supervision. The Authority can order the board of directors of a pension fund to obtain an actuarial assessment of the fund’s financial situation based on assumptions other than those used in the fund’s regular actuarial assessments if the Authority is of the opinion that the fund’s financial situation provides cause for this. The Authority may provide a pension fund with a suitable period to correct funding problems under the Pension Act, except in the case of serious violations. The Authority may also exercise its powers under the Act on Public Supervision of Financial Activities, such as imposing daily and administrative fines, and engaging in the search and seizure of data to gather information and carry out supervision as provided for under the Pension Act. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Employer pension contributions through social security taxes and employer contributions to occupational pension funds are required by statute, and contributions to voluntary private pension funds are required by collective labor agreements and cannot be unilaterally altered by the employer (see question 5 above on the ability of the trade unions and the employer federations to alter the collective labor agreements). Alterations to individual contribution arrangements are governed by contract law and generally cannot be unilaterally altered by the employer either. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employer contributions to the state pension system and occupational pension funds are required by statute and cannot be withdrawn or terminated by the employer. Employer contributions to voluntary private pension funds are required under collective labor agreements and cannot be withdrawn or terminated by the employer (see question 5 above on the ability of the trade unions and the employer federation to alter the collective labor agreements). 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Occupational pension fund contributions are non-transferable. Upon changing jobs, an employee can generally continue to pay into the same occupational pension fund unless a specific occupational pension fund is required by the collective labor agreement or employment contract for the new job. Iceland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 To begin receiving pension funds on retirement, it is sufficient for an employee to apply to the pension fund to which he or she last contributed; that pension fund is then responsible for contacting any other pension funds to which the employee has contributed. Whether voluntary private pension fund contributions can be transferred depends on the terms of the particular fund. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Under the Pension Act, pension payments must be index-linked. Based on a 40-year contribution period, the minimum benefits provided by a pension fund must amount to 56% of the monthly wages in respect of which the contribution was paid. Iceland Contributed by: Ólafur Eiríksson hrl. & Hildur Hjörvar, LOGOS Legal Services A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Italy Contributed by: Quorum Studio Legale e Tributario Associato Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? The Italian government provides a state pension funded by employer and employee social security contributions which are deducted from payroll and paid to the Istituto Nazionale Previdenza Sociale (“INPS”). Upon retirement, individuals receive monthly payments from the Italian government of an amount determined by a statutorily prescribed formula. There is an optional pension system, the so-called “supplementary pension” (Previdenza Complementare). The supplementary pension is an opportunity for retirement saving where the state grants tax benefits that other forms of saving do not receive. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are required to participate in supplementary pension schemes set out in collective bargaining agreements and those chosen by employees. There are four types of supplementary pension scheme: • Bargaining pension funds (fondi pensione negoziali) – These are supplementary pension schemes set up on the basis of national, sectoral and company collective bargaining agreements. Territorial pension funds also fall into this category; these funds are created on the basis of agreements between employers and employees in a given territory or region. • Open pension funds (fondi pensione aperti) – These are complementary pension schemes set up by banks, insurance companies, management companies, and similar entities. • Individual insurance pension plans (piani individuali pensionistici di tipo assicurativo) – These are supplementary pension schemes set up by insurance companies. • Pre-existing pension funds – These are pension funds that were established before Legislative Decree No. 124 of 1993, which regulated the supplementary pension system for the first time. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Since 1 January 2007, supplementary pension schemes have been governed by Legislative Decree No. 252/2005. This Legislative Decree governs the possible ways to sponsor such schemes. The Legislative Decree also governs payment of accrued statutory severance packages, the Trattamento di Fine Rapporto (“TFR”), as contributions to supplementary pension schemes. The TFR is a sum accrued each year on the company balance sheet and is calculated on the basis of the employee’s annual remuneration divided by 13.5 (in practice, equal to 7.4% of gross annual salary) for each year of service. Employees can choose to pay the TFR that they accrue each month into a supplementary pension scheme. The law provides for, among other things: • establishment of supplementary pension schemes; • establishment and authorization of pension funds; • participation in and responsibilities of administrative and controlling bodies; Italy A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • the benefit system and management models; • funding; • operation of supplementary pension schemes; • the tax regime applicable to supplementary pension schemes; and • the duties of COVIP (the Supervisory Commission on Pension Funds). 4. What are the key features of the tax framework that applies to retirement plans/schemes? Contributions paid to supplementary pension schemes in accordance with Legislative Decree No. 252/2005 are deductible from the employee’s total income up to a maximum of EUR 5,164.57 and are subject to certain conditions and limits set out in that Legislative Decree. The employer deducts employee contributions from the employee’s pre-tax salary. Pension investment returns are taxed at 20% compared to the usual rate of 26% that applies to most investments. Income from some securities held by supplementary pension schemes, such as government bonds, is taxed at a fixed rate of 12.5%. Payments from supplementary pension schemes are taxed very favorably. The tax rate is reduced in proportion to the number of years of participation in the supplementary pension system. A rate of 15% applies for the first 15 years, but from the sixteenth year of participation, this rate is reduced by 0.3% for each year of participation, up to a maximum of 6%. As such, once an individual has 35 years of participation, the tax rate falls to 9%. Employers can deduct from their business income an amount equal to 4% (6% for employers with less than 50 employees) of the amount of the TFR paid annually to supplementary pension schemes or to the state pension fund managed by INPS. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Employer contributions are only required if the agreement establishing the supplementary pension scheme provides that both employer and employee contributions to the scheme are required. Where an employer offers a supplementary pension scheme pursuant to a collective bargaining agreement, the employer is obliged to match employee contributions to the scheme. Italy A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Supplementary pension schemes must comply with statutory prudential rules that take account of the fact that such schemes are designed for social security rather than speculative investments. For example, investments must be adequately diversified, and investment limits apply to certain financial instruments considered high-risk. In bargaining pension funds, investment management is handled by professional operators under an agreement that sets out the criteria with which these operators must comply. In open pension funds and individual insurance pension plans, investments are managed directly by the fund/plan provider (bank, insurance company, etc.). Assets held in open pension funds and individual insurance pension plans are legally separate assets. This means that in the event of employer financial difficulties, the pension savings cannot be accessed by the employer’s creditors. Pre-existing pension funds can either entrust the management of their assets to professionals or manage the investments directly. Assets entrusted to professional management are deposited with a bank, known as a custodian bank, specially licensed by the Bank of Italy to carry out pension asset management. The custodian bank is responsible for verifying that the investment manager complies with the law, statutes, or rules governing the particular supplementary pension scheme. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employers are subject to certain disclosure requirements. On commencement of employment, the employer must provide the employee with appropriate information about pension investment choices available for TFR payments. Supplementary pension schemes must provide the following information to employees joining the fund: • An information note which explains the main characteristics of the scheme (for example, arrangements for the payment of contributions, investment options, costs, and past investment yields) and the conditions of membership. • A personalized projection of the estimated supplementary pension that the employee will receive on retirement, calculated based on assumptions about the level of contributions, the duration of the employee’s scheme membership, and investment yields. • The scheme’s governing document(s) (the statute in the case of a bargaining pension fund, the regulations in the case of an open pension fund, and the regulations and general terms and conditions in the case of an individual insurance pension plan). Italy A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Supplementary pension schemes are required to send members an annual communication setting out key information on the member’s pension savings, such as the value of the member’s individual savings, the level of contributions paid during the year, investment returns achieved during the year, and costs incurred during the year. In addition, members must be sent personalized projections of their estimated supplementary pension amount calculated on the basis of their personal data, accrued pension savings, salary history, and chosen investment options. COVIP supervises these supplementary pension schemes. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Employers cannot change the rules of supplementary pension schemes established pursuant to collective bargaining agreements or chosen by employees. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers can only terminate a supplementary pension scheme if the employee’s employment terminates or at the employee’s request. If an employer withdraws from or terminates the scheme in any other circumstances, it will be liable for unpaid contributions. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? If an employee is a member of a group pension scheme and changes work sectors, the employee can transfer to that new sector’s supplementary pension scheme. In any event, after two years of membership, employees obtain a right to transfer their accrued pension savings to another supplementary pension scheme. The transfer right cannot be restricted in any way. For the purposes of determining the employee’s years of participation in the supplementary pension system, the employee’s participation is deemed to have started when he or she first joined the system, not when he or she transferred to the new scheme. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No, although some plans voluntarily provide for such an increase. Italy Contributed by: Francesco D’Amora, Quorum Studio Legale e Tributario Associato A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Kuwait Contributed by: Mayer Brown LLP 1. Does the state provide a pension, retirement income or social security program of some type? The state administers a social security scheme under Kuwait’s Social Security Law for all Kuwaiti nationals, including nationals who are self-employed. This scheme includes basic and supplementary state pension components, and is funded jointly by the government of Kuwait and from employer and employee contributions. A separate social security scheme is also administered for citizens of the countries comprising the Gulf Cooperation Council (“GCC”) (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE). A Global Guide to Retirement Plans & Schemes Tom Thraya Partner, Dubai E: [email protected] T: +971 4 375 7161 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 There is no social security scheme for non-GCC nationals. However, depending on the circumstances of the termination of their employment, non-GCC nationals are entitled to payment of a form of severance pay referred to as an end of service indemnity which is calculated based on their remuneration and length of service with the employer. Kuwaitis and GCC nationals are also entitled to the end of service indemnity. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Participation in the social security scheme under the Social Security Law is mandatory, as is the obligation to pay an end of service indemnity (unless termination is for cause for one of the specified breaches set out in the Labor Law). Employers may, however, establish a retirement plan/scheme in addition to those required under Kuwaiti law (i.e., the social security scheme and the end of service indemnity). In such cases, employers are typically advised to take care to ensure that social security and end of service indemnity entitlements are offset against benefits provided to employees under the voluntary retirement plan/scheme offered by the employer. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? For Kuwaiti nationals: The social security scheme is governed by the following: • Amiri Law Decree No. 61 of 1976, the Social Security Law – this sets forth the basic state pension scheme. • Law Decree No. 128 of 1992 on Supplementary Insurance – this introduced the supplementary scheme. • Law No. 25 of 2001 “Altering some of the provisions of the Social Security Law and providing for an increase of pension”. • Law No. 9 of 2011 “Altering some of the provisions of the Social Security Law”. Kuwait A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The table below illustrates the qualifying conditions for social security benefits under the Social Security Law: Pension Type Qualifying Conditions Old age pension At age 50 with 15 years of contributions for both men and women. At any age with 20 years of contributions for employees in arduous work. Early pension Employees aged 46 to 49 with 20 years of contributions for men or for unmarried women with no children. The old age pension under the basic state pension scheme is equal to a base payment of 65% of the individual’s most recent monthly earnings plus 2% for each year of contributions beyond 15 years, capped at a maximum of 95% of the individual’s last monthly earnings. If the pensioner is under age 65, he or she may request partial payment in the form of a lump sum. The old age pension under the supplementary scheme is calculated on the basis of contributions, age and average covered earnings. Part of the pension may be paid as a lump sum at the pensioner’s request. For GCC nationals: If a Kuwaiti citizen: • works for an employer based in a GCC state (other than Qatar) that is subject to the civil retirement and social security laws and systems of that GCC state; and • the employer is a government body, or is covered by the civil service laws/systems or is subject to the labor laws of that GCC state, the employee and the employer are subject to Law No. 44 of 2007 “Concerning the Extension of Security Protection to GCC Citizens Working Outside of their own Countries in any Member State” (“Law 44/2007”). Kuwait A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 If covered under Law 44/2007, the employee is required to pay his or her contributions pursuant to the laws of the GCC state where he or she works (the “host country”), and the employer is required to take the initiative to register the employee with the social security authorities in accordance with the applicable rules and procedures in the host country. It should be noted that if the contributions in the host country are less than the required rates in Kuwait, the employee must pay the difference. The employer in the host country is also required to deduct the monthly required contributions and any other amounts due on the employee’s monthly salary, and deposit them in the bank account of the Kuwaiti Public Institution for Social Security (“PIFSS”) in the host country, in addition to the employer’s share of the contributions. The employer must also submit the documents required by the PIFSS to ensure the employee’s continued membership of the Kuwaiti social security scheme. Provided the Kuwaiti national and his or her GCC employer comply with the requirements of Law 44/2007, the Kuwaiti national will continue to be a member of the Kuwaiti social security scheme and will be entitled to benefits from the social security scheme. For Kuwaitis, GCC nationals and non-GCC nationals: Under Law No. 6 of 2010 “the Private Sector Labor Law” (the “Labor Law”), employees in the private sector are generally entitled to payment of an end of service indemnity upon termination of employment, unless the employee is disqualified from receiving it under the Labor Law. The same entitlement applies to employees in the oil and public sectors (i.e., who work for the government). However, since Kuwaitis are already entitled to benefits under Kuwait’s social security laws, their end of service indemnity is adjusted – they are generally entitled to the portion of the indemnity applicable to their salary on termination that is in excess of KWD 2,750. We expect that these adjustments would also be applied for nonKuwaiti GCC nationals applying their particular social security regimes. 4. What are the key features of the tax framework that applies to retirement plans/schemes? There is currently no income tax regime for Kuwaiti or foreign nationals. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Under Kuwait’s Social Security Law, employers and their employees who are Kuwaiti nationals are currently required to make contributions at the following rates based on the employees’ salary up to KWD 2,750: Kuwait A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Basic demand Supplementary Insurance Unemployment Benefit Bonus/ Renewal Total Employee 5% 2.5% 0.5% 2.5% 10.5% Employer 10% 1% 0.5% N/A 11.5% Total 15% 3.5% 1% 2.5% 22% If an employee voluntarily adopts a separate retirement plan/scheme, the employer can determine whether it will make contributions. Employee contributions would have to be agreed by the employee. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Please see above. Employers are subject to penalties for (i) failure to register their Kuwaiti and GCC employees/workers, (ii) failure to give notice of termination of service, and (iii) payment of incorrect contribution amounts based on salary. Penalties are imposed at the discretion of the Kuwaiti authorities. As regards the end of service indemnity, if a Kuwaiti court found that the employer had willfully refused or failed to pay monies due to an employee, the court could award additional compensation of 1% of the amount of the monies due for each month of delayed payment. Under the Social Security Law, an Investment Committee was formed to determine the rules and programs for investing the Kuwaiti social security scheme’s funds and issuing related investment resolutions. The Committee’s resolutions and discussions are confidential and are reported only to the Board of Directors of the Kuwaiti social security authority, i.e., the Public Institute for Social Security. The financial status of the organization is examined every three years by experts appointed by the Board of Directors. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? There are no applicable reporting, disclosure or employee consultation rules that apply specifically to retirement plans/ schemes in Kuwait. That said, as set out above, employers are obliged to register and make the required contributions in respect of Kuwaiti and GCC employees under the relevant social security scheme. Kuwait A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Subject to the terms agreed by the parties, employers may alter terms of a voluntary retirement plan/scheme to the extent that it does not reduce the benefits awarded to the employee(s) in question or impose additional obligations on the employee(s). 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Subject to the terms agreed by the parties, employers may terminate a voluntary retirement plan/scheme so long as they provide equivalent compensation to the affected employees (usually in the form of end of service gratuities). 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Generally, yes, in the case of Kuwaiti and GCC nationals who are covered by social security regulations. With respect to the end of service indemnity, the right to receive this from an employer generally crystallizes upon termination of employment. Unless agreed otherwise or in special circumstances (e.g., on a merger or sale of a business), end of service indemnity rights are not generally transferrable to a new employer. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Adjustments and increases to pension benefits under Kuwait’s Social Security Law are subject to the specific provisions of the Social Security Law and other regulations implementing that law. Increases and adjustments after retirement are generally legislated for and/or issued by Amiri decree. Kuwait Contributed by: Tom Thraya & Jad Taha, Mayer Brown LLP A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Netherlands Contributed by: Loyens & Loeff Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? All residents of the Netherlands are automatically insured under the General Old Age Pensions Act (“AOW”). Everyone who pays Dutch wage tax and/or income tax and who has not yet reached state pension age pays the AOW contribution. Employers are required to deduct the AOW contribution due from their employees’ employment income and pay it to the tax authorities on a monthly basis. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? In addition to the AOW, employees generally receive an occupational pension benefit from their employer. Although there is no statutory obligation for employers to offer a retirement plan/scheme, there may be an obligation to do so (a) pursuant to a collective labor agreement, (b) pursuant to mandatory participation in an industry-wide pension fund, or (c) following a transfer of undertaking. In all other cases, the employer and the employee are free to negotiate pension terms as well as the level of pension contributions to be paid by the employer and the employee. Employers who wish to, or who are required to offer a retirement plan/scheme, must arrange for such pensions via a pension provider. This structure ensures that the pension assets are protected should the employer suffer from any financial difficulties. The employer is obliged to pay pension contributions (including any employee contributions) to the pension provider. There are five different types of pension funds: • mandatory or non-mandatory industry-wide pension funds (for a specific sector, such as the civil service, the construction industry, the hotel and catering industry, and the retail sector); • corporate pension funds (for a single company or corporate group); • general pension funds (“APF”); • premium pension institutions (“PPI”); and • pension funds for independent professionals such as medics and dentists. Mandatory industry-wide pension funds – Under the Act on Mandatory Industry-wide Pension Funds 2000 (“Wet Bpf 2000”), the Minister of Social Affairs and Employment can issue a decree that all employees working within a specified industry sector must participate in a designated industry-wide pension fund under the rules and regulations set out in the ministerial decree and the pension fund rules referred to in that decree. This type of ministerial decree will be issued at the request of a representative number of employer and employee organisations in the relevant industry sector. In certain circumstances, employers can be exempted from participation in a mandatory industry-wide pension fund, for example, if a company already had a retirement plan/scheme (before the Minister’s decree was issued) that is at least as favorable. Netherlands A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 There are two main types of retirement plans/schemes in the Netherlands: (i) Defined benefit schemes – The level of pension depends on the number of years worked and the employee’s salary. These schemes can be divided into final salary schemes and average salary schemes. (ii) Defined contribution schemes – The ultimate pension benefits depend on the level of contributions and the investment return achieved with those contributions. There is no guarantee of the final benefit amount. A maximum premium table applies. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Dutch Pensions Act is the main law governing occupational retirement plans/schemes. Among other things, it provides terms and conditions for employer-employee pension agreements. This pension agreement usually forms part of the employment contract. Since occupational retirement plans/schemes must always be operated by a pension provider – rather than the employer – there is a triangular relationship between the parties: (i) the employer and the employee have a pension agreement; (ii) the employer and the pension provider have an administration agreement; and (iii) the pension provider has various obligations towards the employee under the Dutch Pensions Act. The Dutch Pensions Act also sets out the Financial Assessment Framework (“FTK”). The FTK sets out the statutory funding requirements for pension funds. Pension providers are monitored and supervised by the Dutch Central Bank (“DNB”) and the Netherlands Authority for the Financial Markets (“AFM”). The DNB monitors the financial position of pension providers and assesses whether they are financially sound and able to fulfill their future obligations. The DNB is also responsible for deciding the regulatory requirements that will be imposed on pension providers. The AFM monitors the conduct of pension funds – in particular, the performance of obligations to provide information to members. In addition, the AFM monitors pension providers with respect to their duty of care – for example, pension providers who offer participant-directed pension accounts must provide investment support to their customers. The Dutch Pensions Act, the Dutch Civil Code and several equal treatment laws require employees and members of retirement plans/schemes to be treated equally. This legislation prohibits, for example, discrimination on the grounds on age, nationality, gender, or type of employment contract (temporary or permanent). In addition, employers offering a retirement plan/scheme must include employees aged 21 and over. Netherlands A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 4. What are the key features of the tax framework that applies to retirement plans/schemes? Participants in retirement plans/schemes that comply with the Dutch Wage Tax Act 1964 (“Wet op de Loonbelasting 1964”) enjoy tax advantages. Contributions are tax-exempt, as are capital gains and investment returns, and then pension benefits are taxed upon distribution. This is known as the “reversal rule.” On January 1, 2015, the “Wet aanpassing Witteveenkader 2015” came into force. This reduced the extent of taxadvantaged pension accrual by increasing the retirement age from 65 to 67 (effective 2014) and introducing a maximum pensionable salary of EUR 100,000 minus the “franchise.” From January 1, 2018, the minimum retirement age will be 68. The franchise is that element of salary that is expected to be replaced by the state pension and in respect of which there is therefore no tax-advantaged pension accrual. For 2017, the maximum pensionable salary is EUR 103,317 minus the franchise of EUR 14,850 (final salary scheme) or EUR 13,123 (average salary scheme). 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Whether employer contributions are required will depend on the nature of the pension agreement (i.e., whether it promises a defined pension benefit, a capital sum, or a defined contribution level). The Dutch Pensions Act does not contain any statutory rules regarding the level of employer contributions. However, such rules may be included in other regulations. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Pension fund assets, together with expected investment income, must be sufficient to cover the fund’s accrued pension obligations under the fund’s bylaws. For example, pension funds must have a minimum asset coverage ratio of 105% of the scheme’s technical provisions and an asset buffer of around 20%-30% of the technical provisions. This funding level must be met at all times. If it is not, the pension fund must prepare a recovery plan and submit it to the DNB, specifying the steps that the pension fund will take in order to reach the required funding level within a period of 10 years. To achieve this, the pension fund will need to take some or all of the following measures: • increase the level of employer pension contributions; • require additional payments from the employer (either voluntary or obligatory depending on the administration agreement); and/or • limit the indexation of pension benefits. Netherlands A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 If the required funding level is not reached in the recovery period, pension benefits must be reduced. In the event of a breach of the Pensions Act, the DNB can (among other things) impose fines and issue instructions. The DNB can also decide to publish details of a breach or can publish the imposition of a fine. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Depending on the type of retirement plan/scheme, some employers are required to quantify the financial risks associated with the plan/scheme and include them on the employer’s balance sheet. If the plan/scheme is a defined benefit scheme, this can have negative accounting consequences, for example, if there is an obligation to pay additional pension contributions. Where a pension scheme is a defined contribution scheme, no balance sheet disclosure obligations arise. Under the Pensions Act, employers must inform employees in writing within one month after commencement of employment whether or not the employer will offer a pension agreement and, if so, the period within which the offer will be made and who the pension provider will be. If the employer does not comply with this requirement, it will be deemed to have made an irrevocable offer to the employee to enter into a pension agreement if the employee belongs to a group of employees to whom the employer has already made an offer. If an offer for a pension agreement is made, the employee must be sent the applicable retirement plan/scheme rules or a document containing certain minimum required information. The pension provider is required to properly inform members about their rights under the fund. For example, members must be given information about the fund upon joining, as well as an annual statement. Since 2011, pension providers have also been required to establish and maintain a joint register of pensions. This register is designed to enable members, deferred members and former partners to access information about their pension entitlements via the internet. The rights of works councils with regard to retirement plans/schemes are set out in question 8. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Because retirement benefits are considered terms and conditions of employment, changes to a retirement plan/scheme require individual employee consent. Individual consent is not required, though, when the employment contract contains a clause that allows the employer to unilaterally make changes when there is a “substantial interest” that outweighs the employee’s interests. In addition, the Works Councils Act requires employers to obtain the works council’s consent to the establishment, alteration or withdrawal of a retirement plan/scheme. Employers cannot implement decisions in this regard without the approval of the works council. If the works council does not grant approval, employers can apply to the sub-district Netherlands A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 court for substitute approval. Obtaining the consent of the works council does not remove the need to obtain individual employee consent, but doing so will strongly signal to employees that the change is necessary. Employers must notify the works council as soon as possible of the proposed entry into, amendment of, or termination of an administration agreement (i.e., the agreement between the employer and the pension provider). In principle, works councils do not have any right of veto over the content of the administration agreement. However, where an aspect of the administration agreement directly influences employment conditions, the works council has a right of veto. Works council consent is also required for provisions regarding the way in which contributions are calculated, the criteria for and conditions under which supplements are granted, and the use of certain pension providers, including pension institutions, in another EU member state or an insurer established abroad. In the absence of a unilateral amendment clause in the employment contract, employers can only amend those terms of the employment contract relating to the retirement plan/scheme on the grounds of (i) standards of “good employer/ good employee” practices or (ii) the principles of reasonableness and fairness. Employers can also apply to the court for amendment of the employment contract on the grounds of unforeseen circumstances, but courts do not readily grant such applications. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Upon entering into or amending a pension agreement with an employee, the employer may reserve the right to reduce or to terminate its obligation to make pension contributions in the event of a drastic change of circumstances. A “drastic change of circumstances” includes, for example, where: • the employer has financial problems and can no longer make contributions; • employees are required to participate in an industry-wide pension fund; or • there is a change in legislation that results in a significant increase in employer pension costs. Where an employer unlawfully reduces or terminates its pension contributions, employees can obtain damages and specific performance of the pension agreement. Netherlands A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Employees who change jobs can request the transfer of their accrued pension rights from their previous retirement plan/scheme to their new retirement plan/scheme. The pension provider is required to implement the transfer. This transfer right does not apply if and for as long as the transferring or recipient pension provider is a pension fund that has insufficient technical provisions (in general, an asset coverage ratio below 105%). The transfer right then reactivates as soon as the pension fund does have sufficient funding. A similar rule applies to insurance companies. In certain cases, employees can also choose to leave their accrued pension rights with their previous employer. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Under the FTK, pension funds must clearly state whether or not pension rights will be indexed and under what conditions indexation will apply. Indexation is almost always conditional. In the Netherlands, there is an element of risk sharing in pension funds by virtue of discretionary indexation and contribution increases. Pension funds are not required to hold additional reserves to cover future indexation. However, pension funds must report to the supervisory authority on their funding level and the degree to which the benefits paid to members meet expectations. The fund’s indexation label indicates the degree to which pension commitments keep up with inflation under normal conditions and what happens in a worst-case scenario. Contributed by: Hermine Voûte, Loyens & Loeff Netherlands A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Poland Contributed by: Sołtysiński Kawecki & Szlęzak Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? The Polish state provides social security benefits funded by employer and employee contributions. Employers are required to withhold these contributions from employees’ salaries and remit them with corresponding employer contributions to the Social Security Institution (“ZUS”). On retirement, individuals receive monthly retirement pension payments, the amount of which is linked to the level of contributions made over the individual’s working life. A portion of the contributions may also be transferred by ZUS to private pension funds and later returned to the state prior to the relevant individual’s retirement age, but this is not a major feature of the system. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Other than participation in the social security system, maintenance of a retirement program by employers is entirely voluntary. Employers can introduce a statutorily regulated employee pension scheme which may take one of the following forms: (i) a retirement fund; (ii) an agreement to remit employee contributions to an investment fund; or (iii) an employee group life insurance policy. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Employee pension schemes are governed by the Employee Pension Schemes Act of 2004. The Act imposes various requirements relating to, among other things: (i) agreements between the employer and employee representatives; (ii) agreements between the employer and the financial institution managing the scheme; (iii) registration obligations; (iv) disclosure and reporting obligations; (v) dispute resolution requirements; and (vi) scheme termination rules. Polish pension schemes are generally managed by external financial institutions. As such, employee pension schemes are also subject to regulation and supervision by the Polish Financial Supervision Authority (“KNF”). 4. What are the key features of the tax framework that applies to retirement plans/schemes? As a general rule, any expenses incurred by the employer in maintaining an employee pension scheme are tax-deductible. Poland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Additionally, employer contributions to employee pension schemes do not count towards the salary amount used for calculating employer social security charges. Employer contributions to an employee pension scheme are an employee benefit (constituting income from the employment relationship) and are therefore taxable to the employee. On the other hand, certain types of pension investment income and withdrawals from the pension scheme may receive favorable tax treatment (exemption) under certain conditions. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Under the Polish employee pension scheme model, employers are required to pay a basic contribution to the scheme for each employee. The basic contribution may not exceed 7% of salary. The level of the basic contribution can be determined as: (i) a percentage of employee salary; (ii) a fixed amount for each employee; or (iii) a specific percentage of employee salary subject to a cap on the maximum contribution amount. Employees can also choose to pay contributions. If an employee decides to contribute to the scheme, the employee can subsequently change the level of his or her voluntary contributions or can decide to discontinue voluntary contributions altogether. The amount of voluntary employee contributions remitted to the scheme in a given calendar year may not exceed four times the employee’s average projected monthly salary in a given year. Employers are responsible for calculating and remitting the basic contribution to the scheme and must do so within a statutory timeframe. If employees are paying voluntary contributions, the employer is also responsible for calculating, deducting and remitting those contributions. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The external financial institution that manages an employee pension scheme is responsible for investment of the scheme’s assets. Legislation gives the financial institutions broad investment powers, but also requires them to observe wide-ranging statutory requirements. Poland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The KNF supervises the performance of employer obligations relating to maintenance of an employee pension scheme. Should the KNF be informed of suspected irregularities, the KNF is entitled to order the disclosure of any pertinent information, documents or statements. If a breach of statutory employer duties has occurred, the breach is punishable by a fine of up to PLN 50,000 for each violation. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? When establishing an employee pension scheme, employers must consult employee representatives. Employees are represented by the trade unions operating at the company. If there is no trade union presence at the company, employee representatives must be selected for these purposes. The consultation procedure concludes with an agreement on the establishment of an employee pension scheme which sets out the scheme’s material terms. Once the employee pension scheme has been established, the employer must inform employees of the scheme’s terms, as well as of any changes to those terms. The employer is also required to file an annual report with the KNF on implementation of the employee pension scheme. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Any alteration of the terms of an employee pension scheme requires amendment of the agreement between the employer and the financial institution managing the scheme as well as amendment of the agreement between the employer and the employee representatives. As such, in order to change the terms of the scheme, the consent of employee representatives is required. However, legislation allows employers to unilaterally decide to suspend payment of employer contributions or to temporarily restrict the employer contribution level in certain circumstances. Further suspension of contributions or further restriction of the employer contribution level may be agreed with the employee representatives if the suspension/restriction is justified by the employer’s financial situation. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers can decide to terminate an employee pension scheme in the following circumstances: (i) if an agreement is reached with employee representatives for termination of the pension scheme; or (ii) if the employer unilaterally decides to terminate the scheme, provided that the employer gives twelve months’ notice if the payment of basic contributions to the scheme has been suspended or limited for at least three months. Poland A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Polish law does not impose any conditions which must be met in order for an employer to suspend/limit the payment of basic contributions nor is any justification for the suspension/limitation required. However, the overall period of suspension/limitation may not exceed three months in any twelve consecutive calendar months. Polish law does not require the employer to give employees notice of its intention to suspend/limit the payment of basic contributions. If an employer terminates an employee pension scheme in breach of the statutory requirements, the employer may be liable for civil damages. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? If an employee changes jobs, he or she may transfer his or her accrued funds in the former employer’s pension scheme to another employee pension scheme of which the employee is a member. Alternatively, the employee can transfer the accrued funds to an individual retirement account. An immediate withdrawal of the accrued funds is not possible. If the accrued funds are not transferred, they remain in the former employer’s pension scheme and are paid out once the employee reaches retirement age. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No. Poland Contributed by: Roch Pałubicki, Sołtysiński Kawecki & Szlęzak A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Russia Contributed by: Secretan Troyanov Schaer SA Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 1. Does the state provide a pension, retirement income or social security program of some type? The social security system of the Russian Federation consists of four compulsory social insurance programs: • pension insurance covering retirement, disability and survivors, administered by the State Pension Fund; • social insurance covering temporary work incapacity and maternity, administered by the Social Insurance Fund; A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • social insurance covering accidents at work and work-related illnesses, likewise administered by the Social Insurance Fund; and • compulsory medical insurance, administered by the Compulsory Medical Insurance Fund. All four systems are funded by payroll taxes. With very limited exceptions, all employers are required to pay social security taxes calculated as a percentage of employees’ gross salaries. The pension insurance rate is 22%. The payments are not part of the payroll, meaning that they are not withheld from employees’ salaries by the employer – they must be met fully at the employer’s expense. In certain situations (e.g., in industries with dangerous or harmful working conditions), employers need to pay higher social security taxes. In these cases, employees are normally entitled to early retirement. Prior to 2017, employer social security taxes were remitted to the relevant government social security fund. Beginning in 2017, the taxes are collected by the Federal Tax Service on behalf of the government social security funds. These funds are off-budget funds, meaning that their budget is segregated from the general government spending budget. Upon retirement, individuals receive monthly pension payments from their regional division of the State Pension Fund, in an amount determined by a statutorily prescribed formula. The Russian pension system was reformed at the start of the millennium. Today, employee state pension benefits consist of a fixed pension, an individual pension and a savings pension. Currently the 22% payment to the social security system is split into two or three parts, depending on the employee’s date of birth and the option chosen by the employee. A 6% solidarity payment is used to fund the pension system as a whole and to provide the fixed pension. The remaining 16% payment is used to fund the employee’s individual pension. Employees born after 1965 can opt to split this 16% so that 6% is paid towards pension savings and only 10% is paid to fund their individual pension. The annual gross salary in respect of which this 16% payment must be made is capped at RUB 876,000 (2017 level – the cap is subject to annual indexation); any salary in excess of this amount is not subject to the compulsory 16% payment. However, the 6% solidarity payment to the fixed pension is increased on salary above the cap to a rate of 10%. The amount of an individual pension depends on the level of payments made in respect of the employee (i.e., the 16% or 10% payment referred to above). In 2017, an employee would receive the highest individual pension if his or her annual salary was RUB 876,000 or more (approximately USD 15,000-16,000). The level of the employee’s benefits upon retirement from the savings pension (where the employee has chosen this option) will depend on the investment return on contributions. Due to underfunding of the pension system, the savings option has been suspended since 2014 (currently until 2019). If an employee contributed to the savings pension prior to 2014, he or she could either leave the savings capital under the administration of the State Pension Fund or opt for that capital to be invested by a fiduciary management company selected by the State Pension Fund or the government or by a non-government pension fund (“NGPF”) of his or her choice. If an employee selects the fiduciary management company Russia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 option, he or she can choose between different investment portfolios. The original idea was to increase the savings component of the state pension system step by step, but this has largely failed. Currently, the savings component is insignificant, and only comes into play if the individual employee has made a conscious choice to make use of the savings option. A program of government pension reform is currently in progress, provoking uncertainty as to payments to and benefits from the system. One fundamental problem with the current system is the low retirement age (55 for women and 60 for men). However, the issue of the retirement age has been under discussion for many years, and the current government has not published any specific plans in this respect. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Other than participating in the government state pension scheme, maintenance of a retirement program by an employer is entirely voluntary. Employers can make additional (voluntary) payments to the government scheme. Alternatively, employers can take out voluntary pension insurance or participate in a pension scheme offered by an NGPF. Employers do not receive any tax benefits for offering these types of pension benefits (although employer pension contributions are tax-deductible within certain limits – see question 4), but payments for the benefit of employees are, as a general rule, tax-exempt for the employees (see question 4). Employers can also pay retirement benefits out of their own funds. Such payments are not regulated and raise tax issues. They are normally made for a specific purpose and are usually discretionary in nature (e.g., a one-time payment upon retirement). Such payments are normally not tax-deductible for the employer. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal statutes are as follows: • Federal Law of 16 July 1999 No. 165-FZ “On the Principles of the Compulsory Social Insurance” sets out the principles governing the social security system as a whole. • Federal Law of 29 December 2006 No. 255-FZ “On the Compulsory Social Insurance Against Temporary Incapacity to Work and in Relation to Maternity” governs social insurance covering temporary work incapacity and maternity. • Federal Law of 24 July 1998 No. 125-FZ “On the Compulsory Social Insurance Against Accidents at Work and Professional Illnesses” governs social insurance covering accidents at work and work-related illnesses. Russia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Russia • Federal Law of 29 November 2010 No. 326-FZ “On the Compulsory Medical Insurance in the Russian Federation” governs compulsory medical insurance. • Federal Law of 15 December 2001 No. 167-FZ “On the Compulsory Pension Insurance in the Russian Federation” governs state pensions. • Federal Law of 30 April 2008 No. 56-FZ “On Additional Insurance Payments to the Pension Savings and State Support for the Formation of Pension Savings” governs additional (voluntary) employer payments to the state pension system. • Federal Law of 1 April 1996 No. 27-FZ “On the Individual (Personalized) Account in the Compulsory Pension Insurance System” regulates how payments and benefits in respect of each individual are recorded within the state pension system. • Several laws (Federal Law of 28 December 2013 No. 400-FZ “On the Insured Pensions;” Federal Law of 28 December 2013 No. 424-FZ “On the Savings Pension;” Federal Law of 24 July 2002 No. 111-FZ “On the Investment of Funds for the Financing of the Savings Pension in the Russian Federation;” Federal Law of 28 December 2013 No. 422-FZ “On the Guarantee of the Rights of Insured Persons of the Compulsory Pension Insurance of the Russian Federation upon the Formation and Investment of the Pension Savings, the Appointment and Payment of the Benefits from the Pension Savings;” and Federal Law of 30 November 2011 No. 360-FZ “On the Method of Financing the Benefits from the Pension Savings”) determine how retirement funds are administered and invested and how benefits are calculated and paid. • Federal Law of 7 May 1998 No. 75-FZ “On Non-State Pension Funds” governs NGPFs. Social security payments before 2017 were governed by Federal Law of 24 July 2009 No. 212-FZ “On Insurance Payments to the Pension Fund of the Russian Federation, the Social Security Fund of the Russian Federation and the Compulsory Medical Insurance Fund of the Russian Federation.” Beginning in 2017 these payments are governed by the Tax Code, in particular Chapter 34, with the exception of social insurance covering accidents at work and work-related illnesses, which will remain structured as insurance. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Compulsory employer payments to the state social security system, and employer payments to a voluntary pension insurance arrangement, to a voluntary medical insurance arrangement, or to an NGPF for the benefit of an employee are currently exempt from personal income tax and social security payments. Additional (voluntary) payments made by the employer to the state pension scheme are also exempt, up to a maximum of RUB 12,000 a year (approximately USD 200) per employee. A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Within certain limits, employers can deduct the above payments from their taxable profits. In order to qualify for deduction, payments to private pension schemes must entitle the individual employee to benefits for at least five years or for life after the employee reaches official retirement age. Payments to a voluntary pension insurance arrangement must entitle the employee to a pension for life at the official retirement age. The total payments (additional payments to the state pension scheme, payments to a voluntary life insurance arrangement or voluntary pension insurance arrangement, and payments to NGPFs) are deductible up to 12% of the total payroll. Tax exemptions are granted for payments to NGPFs provided the NGPF holds a license granted by the Central Bank of Russia. Benefits paid by the state pension scheme are tax-exempt. Benefits paid by voluntary pension insurance arrangements and NGPFs are not tax-exempt if the contributions were paid by the employer. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? An employer wishing to offer a retirement plan/scheme would need to enter into a contract with a licensed NGPF. The level of employer contributions would be governed by this contract. Alternatively, the individual can join a retirement plan/scheme or enter into a voluntary pension insurance arrangement and ask the employer to make contributions. However, those contributions would normally be withheld from the employee’s salary, and their tax treatment is different from the situation where the employer pays the contributions. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? NGPFs are fully regulated and subject to the supervision of the Central Bank of Russia. NGPFs must be incorporated as joint stock companies and must apply for registration through the Central Bank. The minimum share capital is RUB 120 million (increasing to RUB 150 million from 2020), and NGPFs must hold the same minimum level of net assets. The law sets out a number of requirements in relation to the members of an NGPF’s board of directors, an NGPF’s executive board, and its general manager, chief accountant and chief internal controller. The general manager and chief controller must hold a professional qualification certificate as NGPF specialists and must have the required professional experience. The general manager, chief accountant and chief controller must be approved by the Central Bank. The NGPF must also approve rules setting out how it operates and register them with the Central Bank. Legislation and the Central Bank impose requirements in relation to these rules and in relation to the contracts between the NGPF and the person making payments to the NGPF. Legislation and the Central Bank also regulate the list of authorized investments for NGPFs. With very limited exceptions, investment in foreign securities and funds is not allowed. NGPFs can use an independent fiduciary management company to make investments. NGPFs must use a regulated specialized custodian whose role is, among other things, to verify that the restrictions on investments are observed. NGPFs must retain an actuary to evaluate their assets on an annual basis. An NGPF’s accounts are subject to an annual independent Russia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 audit. Failure to satisfy these regulatory requirements can result in withdrawal of the NGPF’s license and liquidation of the NGPF. NGPFs are structured similarly to insurance arrangements. NGPFs may combine voluntary retirement plans/schemes and investment of the savings pension elements of the compulsory state pension scheme. If they do so, they must adhere to regulation by the Deposit Insurance Agency. Voluntary pension insurance is contracted with a licensed insurer. The employer’s relationship with an NGPF or insurance company and the employer’s financial liability in relation to these arrangements would be governed by a contract. Additional (voluntary) payments to the state pension scheme are merged with the compulsory payments to the savings element of the state pension scheme. Benefits in relation to these payments are calculated according to the same rules as for the savings pension. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Disclosure and employee consultation requirements essentially depend on whether an employer enters into any specific obligations towards its employees. Such obligations can arise under the individual employment contract, under a collective bargaining agreement, or under the employer’s internal company regulations. If the employer’s internal company regulations provide for employer pension contributions, amendments to those provisions would require consultation with employee representatives, provided such representatives exist at the employer. Representatives may exist in the form of a trade union or may be elected by the employees. Internal company regulations and collective bargaining agreements must be disclosed to employees. Other than these situations, and general financial and tax reporting rules, no reporting requirements exist. An employer’s internal company regulations can also contain a general clause which, for example, makes employer pension contributions dependent on the employer’s financial capabilities. In practice, voluntary payments are not normally considered part of an employee’s salary, but rather are seen as part of an employer’s general “social obligations”. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? The employer’s ability to alter the terms of a voluntary retirement plan/scheme would depend on the terms of the contract with the NGPF (and on its rules). The same would be true for a voluntary pension insurance arrangement. Russia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Alterations may result in the loss of tax benefits if the altered plan/scheme no longer fulfills the conditions for the tax exemption. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Termination of a voluntary retirement plan/scheme would be subject to the same principles as alteration (see question 8). There would be no employer liability arising from such termination unless the employer has entered into specific obligations towards the employees either collectively or on an individual basis. Employers do not incur joint liability with an NGPF or with the insurance company in relation to benefits under a voluntary retirement plan/scheme. Employees can claim the benefits directly from the NGPF or insurance company under the terms of the pension scheme. However, they can surrender the plan/scheme and receive a surrender value or transfer the plan/scheme to another NGPF only if this is permitted by the NGPF rules, the contract with the NGPF or the law. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? The employee’s benefits are not affected by a change of employment. The employee can surrender the plan/scheme, continue it in his or her own name, or transfer his or her savings to another NGPF depending on what is permitted under the NGPF’s rules, the contract with the NGPF or the law. The employer’s obligations would normally end with the termination of the employment. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? The individual’s benefits will be governed by the contract with the NGPF and the rules of the NGPF. These can offer the individual certain options, e.g., to postpone payment of the benefits. Contributed by: Markus Schaer, Secretan Troyanov Schaer SA Russia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Saudi Arabia Contributed by: Mayer Brown LLP 1. Does the state provide a pension, retirement income or social security program of some type? There are two mandatory pension systems in Saudi Arabia: (i) The pension system administered by Saudi Arabia’s Public Pension Agency, which covers Saudi civil servants and military personnel (the “Civil and Military Schemes”). This pension system is regulated by the Civil Service Retirement Law and the Military Retirement Law. (ii) The pension system administered by Saudi Arabia’s General Organization for Social Insurance (“GOSI”), which covers Saudi and certain non-Saudi workers in the private sector and in specific areas of the public sector (see question 5 below for further information about employer and employee contributions). A Global Guide to Retirement Plans & Schemes Tom Thraya Partner, Dubai E: [email protected] T: +971 4 375 7161 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? In addition to the mandatory system administered by GOSI, employers must maintain a private retirement scheme, except in respect of the following employees: (i) Government employees who are already enrolled under the Civil and Military Retirement Schemes. (ii) Foreign workers who are working in a diplomatic or military role. (iii) Agricultural workers, forestry workers, pastoral seamen and fishermen – however they must not be working for the private sector that is subject to the Labor Law. (iv) Domestic servants. (v) Foreign workers who are working on a project that takes no more than three months to complete. (vi) Self-employed artisans. (vii) Family members working within an exclusively family-operated business. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Retirement plans are governed by the Social Insurance Law issued by Royal Decree M/22 in 1969, as amended, in addition to other related implementing regulations which are enforced by GOSI. 4. What are the key features of the tax framework that applies to retirement plans/schemes? There is currently no income tax levied on Saudi or foreign employees. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Yes, employer contributions to the mandatory pension system administered by GOSI are required. Employers are required to make annuity contributions to GOSI in respect of their Saudi employees equivalent to 9% of those employees’ monthly salaries. (Such employees must actually be employed by the employer and must also contribute 9% of theirmonthly salaries to GOSI.) This contribution requirement applies in respect of the following categories of employees: • Saudi workers who have entered into an employment relationship with an employer to work in Saudi Arabia for wages, Saudi Arabia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 irrespective of the nature of the employment contract, its duration, or the amount paid to the worker. (Note that workers over age 60 who have not previously been registered with GOSI cannot be registered with GOSI.) • Saudi workers who are working abroad for an employer headquartered in Saudi Arabia. • Saudi workers who are employed by quasi-government organizations that are regulated by the Labor Law. Please note that employers are also required to contribute 2% of their employees’ monthly salaries in accordance with the requirements of the Occupational Hazards branch of GOSI. Employers are only required to contribute to any private retirement plan/scheme that they offer if the documentation governing the plan/scheme requires this. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? GOSI imposes penalties for violation of the GOSI rules in relation to the payment of contributions (including nonpayment). Generally, penalties for first-time violations of the GOSI rules cannot exceed SAR 10,000. Repeat violations are subject to a maximum penalty of SAR 10,000. Please note that the fines above are multiplied by the number of employees involved (but cannot exceed SAR 50,000 in total). GOSI exercises broad discretion relating to the investment of the assets it holds (employees typically are not given the option to choose the types of investments). Employers manage the assets of any private retirement plan/scheme that they offer (potentially through a third-party service provider). Employers are not subject to any investment restrictions as to employee pensions under Saudi Arabian labor law, but must comply with any restrictions set out in the employee’s employment contract(s) or related employment documents. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employers must disclose their employees’ employment information to GOSI in order to obtain a fulfillment certificate from GOSI. The relationship between employer and employee is monitored by GOSI electronically, and no additional disclosure requirements on behalf of the employer apply. Employees have online access to their account with GOSI and can review the information given by their employer. If any information given is not correct, employees can ask the Saudi Arabia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 employer to correct it or can contact GOSI directly to correct it. Generally, employees have no duty to report to GOSI, unless they receive notice of non-registration with GOSI. Employers are required to disclose any change in legal status to GOSI, in addition to employee information, including the status of each employee and the number of workers employed. If the employer fails to comply, it is likely to be fined by GOSI. Employers are usually required under the employee’s employment contract(s) or related employment documents to provide a general description of any private retirement plan/scheme that they offer and the benefits that it provides. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? An employer may not alter the terms of a retirement scheme without GOSI’s approval, or its own retirement scheme (if offered) without employee approval if offered under an employment contract. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? An employer can terminate a private retirement plan/scheme upon: • death of a sole establishment owner; • declaration of bankruptcy of the establishment owner or the issuance of an insolvency verdict; • entry of the company into liquidation or merger with another company; and • any act of company abandonment taken by the company’s shareholder(s). In the event of termination of the employer’s business activities, the employer must not have any debts and must not be subject to any active claims in order to terminate its retirement plan/scheme. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes, all workers covered by the mandatory state pension scheme will be able to take their benefit entitlements with them if they change employment. The extent to which an employee can take his or her benefits under a private retirement plan/scheme when changing jobs will depend on the terms of his or her employment contract(s) and/or the terms governing the plan/scheme. Saudi Arabia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No. Saudi Arabia Contributed by: Tom Thraya & Jad Taha, Mayer Brown LLP A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contributed by: Edward Nathan Sonnenbergs Inc. 1. Does the state provide a pension, retirement income or social security program of some type? The South African government provides an old age pension to citizens or permanent residents who: • are 60 years or older; • live in South Africa; • do not earn any other type of social grant; South Africa A Global Guide to Retirement Plans & Schemes Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • are not cared for in a state institution; • do not earn more than ZAR 69,000 per year or own assets worth more than ZAR 990,000 if they are single; and • do not have a combined income of more than ZAR 138,000 per year or have assets worth more than ZAR 1,980,000 if they are married. The maximum pension income payable is ZAR 1,520 a month. Employees employed by the state (in its various government departments and entities) also have a separate Government Employees Pension Fund which operates like a normal retirement fund. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required by law to maintain retirement plans or schemes. However, employers are required to comply with all laws relating to retirement schemes if they establish such schemes. There are two types of retirement funds that employers can maintain: (1) pension funds, and (2) provident funds. These may be either defined benefit or defined contribution funds. The main difference between the two is that under a pension fund at least two-thirds of the final benefit must be paid as a pension for the rest of the pensioner’s life and a maximum of one-third of the final benefit may be taken as a lump sum cash payment. Under a provident fund, in contrast, the full amount of the benefit available at retirement may be taken as a lump sum cash payment, irrespective of whether this benefit is calculated on a defined benefit or a defined contribution basis. The pension fund type may also be subdivided into two categories: (1) defined contribution funds, and (2) defined benefit funds. Defined contribution and defined benefit funds Defined contribution funds are funds where the contribution to be paid by the employer and the member is specified, but the amount of the retirement benefits is not guaranteed or specified. The retirement benefits are dependent on the value of the contributions paid by the employer and the member until the member retires, the investment performance of the fund, and the annuity rate at the time of retirement. Defined benefit funds, on the other hand, offer the retiring member a defined benefit according to a formula which usually considers three factors: the member’s salary near or at retirement, the number of years of membership in the fund, and the accrual or pension factor. South Africa A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 There are further types of retirement funds that are not necessarily workplace funds: (1) exempt and non-exempt funds, (2) contributory and non-contributory funds, and (3) retirement annuities. Exempt and non-exempt funds These are funds that were previously categorised as underwritten or private funds. These funds are valuation-exempt and were previously described as audit-exempt, but, because all funds now have to be audited, that description is no longer applicable. Contributory and non-contributory funds Any of the above funds can be contributory or non-contributory. A contributory fund is one where members contribute to the fund (usually in the form of a deduction from their salary) and their employer also contributes on their behalf to make up the total contribution. A non-contributory fund is a fund where only the employer contributes to the fund on behalf of the members, and the members make no contribution to the fund. Retirement annuities These are designed for the self-employed and are normally categorised as a private pension. Although they are technically retirement funds, they operate with individual endowment-type contracts and can be likened to individual policies. A distinguishing feature of retirement annuities is that members are not allowed access to their money prior to the age of 55, whilst in a pension or provident fund, members can have access to their benefits when they resign and terminate membership. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Pension Funds Act 24 of 1956 (“PFA”) is the main legislation governing retirement funds. However, there are other statutes that also play a significant role including, among others, the Financial Services Board Act of 1990, the Income Tax Act 58 of 1962, the Long-term Insurance Act of 1998, the Friendly Societies Act of 1956, the Financial Institutions (Protection of Funds) Act of 2001, the Inspection of Financial Institutions Act of 1998, and the Financial Advisory and Intermediary Services Act of 2002. Material requirements that are applicable to retirement funds are as follows: • all retirement funds must be registered in accordance with the terms of the PFA prior to commencing any pension fund business; South Africa A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • all registered retirement funds must have a registered office in South Africa; • every fund must have a board consisting of at least four board members, at least 50% of whom the members of the fund shall have the right to elect; • every registered fund must have a principal executive officer who is resident in South Africa; • every registered fund must appoint an auditor within 30 days of registration and such appointment must be approved by the Registrar of Pension Funds; • every registered fund which is required to have its financial condition investigated and reported upon by a valuator, must appoint a valuator; • no registered fund may carry on any business other than the business of a pension fund; • subject to the provisions of the PFA, the rules of a registered fund are binding on the fund and the members, shareholders and officers thereof, and on any person who claims under the rules or whose claim is derived from a person so claiming; • notwithstanding any provision in the rules of a registered fund to the contrary, the employer or any member of such a fund must pay to the fund in full any contributions that, under the rules of the fund, are to be deducted from the member’s remuneration and any contributions for which the employer is liable under those rules; and • every registered fund must provide minimum benefits to members that leave the fund before retirement. 4. What are the key features of the tax framework that applies to retirement plans/schemes? The state provides individuals and employers with tax incentives to encourage private retirement provision. Retirement funds are taxed in terms of the cash flow principle, i.e., deductions are allowed in respect of the contributions payable, the build-up of assets is exempt from tax, and the benefits are taxable. Pension funds, retirement annuity funds and provident funds (i.e., all retirement funds) are treated alike for contributions. Contributions to, and benefits from, all such funds are taxed in exactly the same way. Employer contributions made to a fund are deemed to be a fringe benefit to the employee and are deemed to have been made by the employee. South Africa A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 In respect of pension funds specifically: • Deductible employer contributions of up to 20% are allowed, but a greater percentage can be negotiated. Employee contributions of up to 7.5% (with a minimum of ZAR 1,750) are deductible. • Asset build-up is free of income tax, capital gains tax and dividend withholding tax. • Pensions are taxable at marginal rates of tax. Lump sum commutations are taxable in terms of withdrawal, retirement and death tax tables. • Only one-third of the benefit may be commuted by way of a cash lump sum. Provident funds are taxed substantially the same way, but no deductions are allowed in respect of employee contributions, although employers typically agree to make contributions on behalf of employees on the basis of a salary sacrifice. As such, the entire contribution that includes the employee contributions is fully deductible to the employer as long as it does not exceed 20%. In respect of retirement annuity funds, contributions equal to 15% of non-pensionable income are allowed as a deduction subject to a minimum of ZAR 3,500, but benefits are taxed in substantially the same way as pension fund benefits. The state allows a “life-time exemption” that applies to one lump sum only that a member may receive from retirement funds. This exemption is applied to the initial one-third of the lump sum amount (capped at ZAR 500,000), which ultimately becomes tax-free. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? This depends on the rules of the retirement scheme adopted by the employer. Section 13A of the PFA provides that if the rules of the retirement fund require the employer to pay contributions to the retirement fund, the employer must pay such contributions. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The PFA requires each retirement fund to have its own rules and, as such, each retirement fund is primarily governed by its own rules, which must comply with the PFA. The PFA Regulations prescribe the format, form and substantive requirements that must be followed by the rules of a retirement fund. The liability which may attach for non-compliance with a retirement fund’s rules is usually prescribed in the rules themselves. The PFA provides that the rules of a retirement fund are binding on all its members, beneficiaries, board members and principal officers. South Africa A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? The PFA Regulations require that all retirement funds prepare financial statements reflecting the fund’s financial position, performance, and changes in the fund’s financial position. The Regulations stipulate the way in which such financial statements should be prepared and the content they should contain. These financial statements must be submitted annually to the Financial Services Board and are the responsibility of the board of trustees of the retirement fund. These financial statements are, in turn, published on the Financial Services Board’s website. In the event that a retirement fund fails to comply with its reporting requirements, the fund may be liable for a penalty not exceeding ZAR 1,000 or any greater amount prescribed for every day that the failure continues. With regard to employee consultation, this may be required under the rules of the retirement fund. However, a Circular on Good Governance of Retirement Funds provides guidelines on how retirement funds should communicate aspects of the operation of the retirement fund such as having a communications policy. These guidelines are, however, not mandatory. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? The terms of a retirement fund may be altered subject to the rules of the fund and the PFA, which stipulates how the rules of the fund may be changed. The PFA provides that a retirement fund’s rules may only be amended if: • the amendment(s) will not affect or reduce the claims of creditors; • the amendment(s) will not reduce accrued benefits; • the amendment(s) are submitted for approval by the Registrar of Pension Funds within 60 days of their adoption; and • the amendment(s) will not affect the financial soundness of the retirement fund. Generally, altering the terms and conditions of employment in relation to the retirement scheme will only be effective if the employee consents to the alteration(s). 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Under the PFA, a retirement fund may be terminated – in whole or in part – in the circumstances (if any) specified in the fund’s rules and in the manner provided by those rules. Upon the fund’s termination, all claims of its creditors must be met and any balance remaining thereafter may be distributed in accordance with the rules of the fund. South Africa A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes, employees may take their retirement benefits with them, subject to the rules of the retirement fund. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? For defined contribution retirement funds, adjustments of the benefit(s) will be necessary at retirement. South Africa Contributed by: Ross Alcock, Muzi Khoza & Nomampondo Banzi, Edward Nathan Sonnenbergs Inc. A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contributed by: Pérez-Llorca 1. Does the state provide a pension, retirement income or social security program of some type? In Spain, the state social security system covers retirement income, survivor benefits, and disability benefits. Contributions to the social security system are calculated as a percentage of salary up to the maximum contribution base for 11 different categories of worker. Of these, workers under age 18 have the lowest contribution base, and engineers and university graduates have the highest; the maximum annual contribution base for 2017 was EUR 45,014.40. This threshold is usually subject to annual indexation. The employer contribution rate is 23.6%, while the employee contribution rate is 4.7%. Employers are also required to contribute 6.3% in respect of unemployment and other benefits (the employee contribution is 1.65%), plus an additional contribution in respect of occupational risk coverage. Spain A Global Guide to Retirement Plans & Schemes Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The contribution rate for the latter is determined by the specific risks of a particular occupation. Two caps apply to the social security system. The first is the maximum annual contribution base referred to above. Salary amounts in excess of this cap are not taken into account when calculating contributions or when determining benefits. The second cap applies to benefits; beyond a certain amount no benefits are paid. For employees with salaries below the maximum annual contribution base, though, social security benefits amount to a relatively generous proportion of final salary (in many cases around 75% to 80%). 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Establishment of a retirement plan/scheme in addition to the social security system is completely voluntary for employers unless otherwise required under a collective bargaining agreement. Under the Royal Decree of 1999, pension promises to employees can be met through group insurance contracts and/or the creation of a pension plan. Pension plans typically must be financed through pension funds, which have no independent legal status or purpose other than to implement pension plans. Pension arrangements can also, in exceptional circumstances, be implemented through the establishment of book reserves. Arrangements implemented through group insurance contracts and book reserves are not referred to as pension plans and are not subject to pension plan legislation. Originally, most pension arrangements were defined benefit plans with very high income replacement levels (with combined pension and social security benefits ranging from 80% to 100% of final earnings). Benefits were frequently based on final salary and did not depend on years of service, although once in payment, benefits were not indexed. Since the mid-1980s, many defined benefit plans have closed to new participants, and in many cases have been substituted by defined contribution plans. Employee pension plans are now typically defined contribution plans. Around one-third of plan members participate in hybrid plans that combine defined benefit and defined contribution elements. A small portion of plan members belong to plans that are exclusively defined benefit. Defined benefit plans are typically final average pay plans, funded solely by the employer. Defined contribution plans are now the norm, and employers typically pay 65% to 80% of the contributions to these plans, with employees paying the rest. It is becoming increasingly typical to link employer contribution levels to employee contribution levels. In such cases, the plan offers employees a choice of contribution levels (minimum, medium and maximum), and provides an employer match commensurate with the level of contribution chosen by the employee. It is important to note that most defined contribution plans pay a lump sum on retirement rather than an annuity. Spain A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Various pieces of legislation govern pension plans/schemes. Generally speaking, pension plans/schemes are subject to the following principles and requirements: (a) Non-discrimination – Pension plans must open participation to all employees with two years’ service, regardless of whether the employment contract is indefinite or permanent. (b) Capitalization – Pension plans must be implemented using a financial or actuarial system of capitalization. As a result, benefits from the plan will be paid strictly in accordance with the calculations made by these systems. (c) Irrevocability of contributions – Employer contributions to pension plans are always irrevocable. (d) Employee rights – Employer contribution amounts and benefit calculation formulas under the plan create rights (enforceable by the employee) to particular benefit amounts. (e) Externalization to a pension fund – All employer liabilities arising from pension plans must be externalized to a pension fund. Employer and employee contributions to pension plans are statutorily capped at EUR 8,000 (in 2017) in the aggregate. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Employer and employee contributions to a pension plan are tax-free for employees up to the smaller of: • 30% of the employee’s net income from labor and economic activities; and • EUR 8,000. Benefits paid to employees from pension plans are taxed as income. To encourage employees to take their benefits in the form of an annuity, the tax advantages associated with lump sum payments have been recently removed. Employer contributions are also tax-deductible for the employer provided certain conditions are met. Spain A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Employer contributions must be made according to the terms of the plan/scheme. Depending on the nature of the plan/ scheme, the employer contribution will consist of either a fixed contribution (for defined contribution plans) or a variable contribution calculated according to the plan/scheme’s terms as well as actuarial reports (for defined benefit plans). Failure to pay required contributions or to meet minimum funding requirements can result in the employer being fined by both the labor and pensions authorities. Moreover, employee representatives and/or individual employees can bring actions in the labor courts for payment of outstanding contributions. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Good governance of occupational pension plans is the responsibility of three different bodies: (i) the plan’s managing body (“Entidad Gestora”), which is responsible for investment of the plan’s assets; (ii) the plan trustee (“Entidad Depositaria”), which acts as a custodian to safeguard the plan’s assets; and (iii) the plan’s supervisory board (“Comisión de Control”), made up of an equal number of employee and employer representatives. Legislation gives the supervisory board very broad powers, including: (i) representation of the plan (for example, in the case of proceedings in the labor courts); (ii) monitoring the plan’s compliance with certain obligations and supervision of the managing body’s activities; (iii) replacement of the managing body or the trustee; (iv) vetoing agreements or actions that are against the plan’s interests; (v) approval of annual accounts; and (vi) setting the plan’s investment criteria. Many of the functions carried out by the managing body are delegated to it by the supervisory board, such as setting investment criteria. In the event of breach of its duties, the supervisory board can incur civil and, in the most extreme cases, criminal liability. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? The Ministry of Economy, through the General Directorate of Insurance and Pension Funds, oversees the proper management of pension plans. The General Directorate of Insurance and Pension Funds requires managing bodies, trustees, and supervisory boards of pension plans to carry out extensive reporting and to comply with specific disclosure requirements. In the event of Spain A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 noncompliance, the General Directorate of Insurance and Pension Funds may utilize a number of enforcement powers, including the power to issue compliance notices and fines. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Amendments to the terms of a retirement plan/scheme must be carried out in accordance with any specific procedures and rules set out in the plan. In such cases, amendments must be adopted directly by the plan’s supervisory board. If, however, the plan does not contain any amendment provisions, amendments are governed by general employment law rules. In these cases, amendment of the terms of a retirement plan/scheme could qualify as a substantial change of employee working conditions under Spanish labor law. Employers can make substantial changes to employee working conditions provided that there are economic, organizational, production, or technical reasons that justify the change(s). Spanish labor law provides a procedure that employers must follow, depending on the number of employees that will be affected by the proposed change(s) in a period of 90 days: • if less than 10% of employees are affected, then employees and employee representatives must be given 15 days’ prior notice; and • if 10% of employees or more are affected, then consultation with employee representatives is also required. In addition, employees are entitled to terminate their employment contracts as a result of any substantial changes, with severance pay equivalent to 20 days’ salary per year of service, up to a maximum of nine months’ pay. However, if the plan has been established as a result of a collective bargaining agreement, the employer must follow a specific opt-out procedure called a “descuelgue.” This opt-out procedure requires a period of consultation with employee representatives and, if no agreement is reached, will end in an arbitration award. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Unilateral withdrawal from or termination of a pension plan is only permitted in the event of a liquidation of the employer. In all other circumstances, the unilateral withdrawal from or termination of a retirement plan/scheme would qualify as a substantial amendment to employees’ working conditions, and the employer must follow the procedures outlined in question 8 above. Spain A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Prior to termination of a retirement plan/scheme, it is a legal requirement that all employees’ individual pension entitlements are guaranteed and transferred to another plan. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Employees are not entitled to transfer their pension entitlements to another pension plan upon termination of employment unless the rules of the pension plan expressly permit this. But if the rules of the pension plan so allow, employees who have left the employer are entitled to continue making voluntary contributions to the plan provided that they have not previously transferred their pension entitlement to a different plan. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No, not unless the rules governing the retirement plan/scheme require otherwise. Spain Contributed by: Daniel Cifuentes, Pérez-Llorca A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contributed by: DAB Law Firm 1. Does the state provide a pension, retirement income or social security program of some type? The Turkish government provides a state pension through the mandatory social security pension system. Under this system, all employees employed by one or more employers under an employment contract, and thus subject to the Turkish Labour Code (Law No. 4857) (the “Labour Code”), must be registered with the Social Security Institution of Turkey (the “Institution”). Article 4 of the Social Security and General Health Insurance Law (Law No. 5510) (the “Social Security Law”) sets out all categories of individuals who are covered. These include (a) individuals employed by one or more employers under an employment contract, (b) village headmen, (c) certain self-employed individuals who are not subject to an employment contract, including shareholders of joint stock companies who are also board members, and Turkey A Global Guide to Retirement Plans & Schemes Mayer Brown International LLP London Office 201 Bishopsgate, London, EC2M 3AF, United Kingdom E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (d) individuals who work for public administrators (under certain conditions). Article 6 of the Social Security Law specifies which individuals are not covered by the system. Under the state pension system, there are mandatory employer and employee contributions. Article 81 of the Social Security Law sets out the contribution rates, which differ depending on the type of insurance. The current contribution rates are set out below: Social Security Contribution Rates Type of Insurance Employee contribution Employer contribution Total contribution Long-term insurance (for disability, old age, and death) 9% 11% 20% Short-term insurance (for work accidents, occupational diseases, other diseases, and maternity) – 2% 2% General health insurance 5% 7.5% 12.5% Unemployment insurance 1% 2% 3% TOTAL 15% 22.5% 37.5% Contributions are based on employees’ gross monthly salary and are paid to the Institution. The mandatory social security system provides, among other benefits, unemployment pay, work accident pay, maternity pay, death benefits, pensions, sick pay, and disability pay. Employers are required to deduct mandatory employee social security contributions from pay on the employees’ behalf. Turkey A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The level of contributions made towards long-term insurance (disability, old age, and death) determines the level of retirement payments that will be made to the employee upon retirement. Eligibility for retirement is based on the commencement date of employment, length of contribution history, gender (women are eligible to retire at a younger age than men), and age. Employees who are entitled to retire under the statutory requirements are also entitled to a severance payment. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? As set out in question 1, employers are required to participate in the state social security system under which employees are covered by different types of insurance (i.e., long-term and short-term insurance, etc.). Beginning in 2017, Turkish law is phasing in a mandatory private pension enrollment rule for employers. Private insurance companies offer these private/individual pension plans. Under the Law on Individual Pension Savings and Investment System No. 4632 (“Law 4632”), participation in the private pension system can take the form of (a) an individual private pension contract between a pension company and a participant employee, or (b) a group pension contract between (i) a pension company and an employer, or (ii) a pension company and an organization. In addition to the mandatory private pension enrollment rule for employers, there are also employer group pensions arising under the employment relationship where the contributions are paid by the employers on behalf of the employees. In other words, some international and multinational companies provide their employees, or at least their directors and managers, with discretionary private pensions and set up a private pension plan on top of the state pension provided by the applicable social security regime. Employer group pension contracts which are discretionary are normally further governed by individual employment contracts. If providing a discretionary employer group pension contract, an employer can pay contributions on behalf of participant employees directly to the pension company. The employer can determine any vesting period, which should be specified in the employer group pension contract and cannot be more than seven years. 2017 pension reform Recent legislation materially amended Law 4632 effective January 1, 2017. Under these changes, all employees who are Turkish citizens and under the age of 45 must be automatically enrolled in a private pension plan chosen by their employer, known as “automatic private pension participation.” The pension company that the employer chooses must be approved by the Undersecretariat of Treasury. Under the “Regulation on Principles and Procedures Regarding the Automatic Participation of Employees in the Pension System Through Their Employers,” which came into force on January 1, 2017, employees of private companies will Turkey A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 gradually become subject to the new requirements based on the size of the employer. For example, employers with 1,000 or more employees must automatically enroll their employees in a private pension plan on January 1, 2017, while employers with 5-10 employees need not do so until January 1, 2019. Where an employer has more than one workplace, the number of employees across all workplaces is aggregated when determining the applicability date. Employees are required to contribute a minimum of 3% of their earnings to the mandatory private pension plan. However, the Council of Ministers is authorized to double this contribution rate, lower it to 1%, or set it at a fixed amount (any adjustments made by the Council of Ministers would be uniform for all employees, irrespective of industry, business sector or other factor). Employees can also direct their employer to deduct more than the minimum amount. (Also, as noted below, even with the new system of mandatory enrollment, employees may withdraw from participation in a plan within certain timeframes.) Employee contributions must be transferred to the pension company by the business day after the employee’s salary payment date. If the employer fails to meet this deadline, it will be responsible for any forgone earnings on those contributions. Participant employees can withdraw from the system within two months of the date on which they are notified by the employer of their inclusion in the pension plan. If an employee does so, the accumulated contributions and investment income, if any, must be refunded within 10 business days. Employees can still leave the pension plan after this two-month period has expired, but if they do so before eligibility for retirement under Law 4632, they will forgo certain benefits under Law 4632, such as the state subsidy referred to below. Under the Circular Regarding Automatic Participation in the Private Pension System, employers must enter into at least one pension contract with an authorized pension company and must appoint directors who are authorized to execute pension contracts on behalf of the employer. In addition, employers must allow employees to choose between interestbearing and non-interest-bearing investment funds, and, for any employees who do not make a choice, employers must choose between such funds on their behalf. If an employee participates in a pension plan, the government will provide a one-off state subsidy of TRY 1,000. When the employee retires, if he or she elects to receive his or her savings in the form of an annuity for at least 10 years, the government will provide a further state subsidy equal to 5% of the employee’s savings in his or her private pension account. Turkey A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal statutes that regulate retirement plans in Turkey are the Social Security Law and Law 4632. The Social Security Law sets out procedures and principles governing social insurance and universal health insurance, while Law 4632 covers the private pension system. Under the state pension scheme, retirement eligibility depends on the length of an employee’s participation, his or her age, gender and the contribution history. The individual retirement system was voluntary until January 1, 2017. As a result of the amendments to Law 4632 that came into force on January 1, 2017, under the automatic private pension participation regime, participants are not tied to a single plan and have the right to choose among different plans, based on how much they wish to contribute and how much they want to receive at retirement. Previously, a 2013 amendment to Law 4632 required the state to provide a contribution of 25% of the contributions paid to a private pension plan by the employee. In order to receive the state contribution, employees must have participated in the individual pension system for a certain amount of time: • at least 3 years in order to receive 15% of the state contribution; • at least 6 years in order to receive 35% of the state contribution; and • at least 10 years in order to receive 60% of the state contribution. Employees entitled to retire under the terms of their individual retirement plan and employees who stopped contributing to the plan due to death or disability were entitled to receive the entire state contribution. Please refer to question 2 for details of the eligibility requirements and contribution rates that apply from 2017. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Under the Stamp Tax Law (Law No. 488) (published in the Official Gazette dated July 11, 1964, No. 11751), any documents – including, but not limited to, agreements, undertakings, and receipts – evidencing a monetary value are subject to stamp tax. However, an exemption is provided for insurance, reinsurance, and co-insurance agreements, individual private pension contracts, group private pension contracts, employer group pension contracts, and other documents relating to the payment of insurance premiums and private pension contributions. The Income Tax Law (Law No. 193) governs the extent to which the earnings of Turkish-resident individuals are subject to income tax. Under Article 25 of the Income Tax Law, old age and death benefits are exempt from tax unless their amount Turkey A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 exceeds a statutory threshold, in which case the excess is treated as taxable salary. Employer social security contributions are tax-deductible. Under Article 40 of the Income Tax Law, employer contributions to the private pension system are also tax-deductible, subject to certain conditions, including: • the tax-deductible amount of the contribution cannot exceed 15% of the employee’s gross monthly salary and cannot exceed the annualized statutory minimum wage; and • the contributions have been paid to a pension company that has a license under Law 4632. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Please refer to questions 1 and 2. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Under the state pension system, employers must pay mandatory statutory contributions determined according to each employee’s salary. In the event of breach of the rules of the social security regime, there are administrative, legal and criminal sanctions. The sanction differs depending on the type of breach. With regard to the automatic private pension participation regime, Article 22/D of the Regulation on the Individual Pension System sets out the provisions that pension contracts must contain as a minimum. These include the rights and obligations of the parties, the salary payment date, notification procedures, and refund, payment, and employee data retention guidelines. Save for the obligation to select a pension company and to transfer contributions to the pension company which must remain the responsibility of the employer, the parties can agree that the pension company will assume all other obligations under the automatic private pension participation regime. In addition to the above, there are stringent corporate audit mechanisms in place. Pension companies are all required by law to maintain internal audit systems. The Undersecretariat of Treasury and the Capital Markets Board can regularly audit pension companies, and pension companies are also subject to mandatory independent external auditing. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employers must report and pay mandatory social security contributions to the Institution each month. The Social Security Law contains a wide range of reporting obligations and imposes various administrative fines on parties who do not comply. Officers of the Institution also carry out regular company audits. Turkey A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 In the private pension system, pension companies have many reporting and disclosure obligations as they are subject to audit by the Undersecretariat of Treasury, the Capital Markets Board, and independent external auditors. Pursuant to Law 4632, the Undersecretariat of Treasury has appointed a privately held company to serve as the Pension Monitoring Centre, which operates to ensure the efficient and secure operation of the private pension system. Companies, entities and persons covered by Law 4632 are required to provide certain information and documents to the Pension Monitoring Centre as a compliance measure. In addition, pension companies are regularly required to provide information to employees such as information on assets in the fund portfolio, performance of the fund, and financial statements. Furthermore, the pension contract must explicitly set out any entrance fees, management expense deductions, and total fund expense deductions and show how these fees and deductions are applied. During negotiation of the pension contract, pension companies are required to provide the employer with information about the pension system such as the rights and obligations of the various parties, technical information, and any other material issues. Pension companies must also inform employees about any issues that may affect their decision to participate in the individual private pension system. The Undersecretariat of Treasury will specify the information that must be provided to the parties as a minimum. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Employers cannot alter the terms of the mandatory state pension scheme since those terms are strictly regulated by laws such as the Social Security Law. Moreover, under the Regulation on the Individual Pension System, regardless of whether an employer has entered into a discretionary employer group pension contract or has entered into a pension contract under the automatic private pension participation regime, the allocation of savings and contributions between funds can be changed by the individual up to six times a year. However, a pension plan can only be changed a maximum of four times in a year. With respect to the automatic private pension participation regime, only employers can change the pension plans. As a rule, under both individual and group pension contracts, the rights arising under the contract are enforceable by the employee. However, it is also possible for such contracts to provide that those rights, other than the right to leave the system and the right to pension benefits on retirement, will be exercised by the employer. Moreover, with respect to employer group pension contracts, the employer has the right to change fund allocations and the pension plan and to transfer the accumulated savings until the vesting date stated in the employer group pension contract. Employers can transfer the right to decide fund allocations to the individual employees by including a provision to this effect in the pension contract. If the employee consents, the rights described in this paragraph can be exercised by the employer even after the vesting date. If no vesting date is stated in the pension contract, the rights arising under the contract are exercisable by the employee. Turkey A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 However, where the pension contract has been entered into under the automatic private pension participation regime, the pension plan can only be changed by the employer. The employee cannot switch pension plans other than when he or she changes jobs or chooses to move from an interest-bearing fund to one that is not (or vice versa). Where an individual/private pension plan is provided by an employer as an employee benefit, the provisions of the Labour Code must be strictly observed if the employer wishes to alter the terms of the plan. Employers and employees can amend the working conditions and terms at any time by mutual agreement. Under Article 22 of the Labour Code, material amendments can only be made to employee working conditions (as set out in the employment contracts or the employer’s personnel regulations) by informing the employees in writing. Any amendments that are not made in this way and that are not accepted in writing by employees within six business days are not binding upon those employees, and employment terms and conditions cannot be amended retroactively. If an employee does not accept the proposed amendment within this period, the employer can terminate the employment contract, provided that it complies with the notice period and explains in writing that the amendment is justified or that there are other justified grounds for termination. In the event of such termination, the employee may file suit under the Labour Code. In light of the above, employers should ensure that any changes to the terms of a private plan/scheme do not breach the terms of any other employment agreement, and employers should also obtain written consent from affected employees. Note, however, that where discretionary group pension contracts are concerned, employers can reserve the right to alter the terms of the private pension plan. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers cannot withdraw from or terminate the mandatory state pension scheme. Employers are required to notify the Institution if an employee’s employment is terminated, at which point the employer ceases to be liable to make social security contributions in respect of that employee. With respect to private pension plans, an employer group pension contract is between the pension company and the employer. In the case of a discretionary employer group pension contract, if: (i) an employee’s employment contract is terminated by the employer without justified grounds; (ii) an employee resigns on justified grounds stipulated in the Labour Code or due to a compulsory reason such as disability; or Turkey A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (iii) the employer terminates the group pension contract (without transferring participants to another pension contract), is declared bankrupt, or reaches a “concordatum” with creditors, then the employee becomes entitled to all contributions paid by the employer on his or her behalf plus the investment returns derived from those contributions without having to wait for the end of the vesting period. In addition, under the automatic private pension participation regime, employees have the right to withdraw from a private pension plan within two months of joining, but employers do not have any withdrawal rights. Finally, if contributions are not paid within three months of their due date, this is deemed a suspension of the pension contract. Moreover, under the automatic private pension participation regime, the employee can ask to suspend his or her contributions for a period of up to three months. If the employee does not make another suspension request, the employer will recommence deduction of the employee’s contributions for the automatic private pension with effect from the end date of the suspension period. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? An employee’s new employer will be liable for his or her social security contributions under the mandatory state pension system. The employee should be registered under the new employer’s payroll with the Institution. With regard to private pension plans under Law 4632, if an employee’s employer changes and the new employer has a pension plan in accordance with Law 4632, the employee’s accumulated savings and pensionable service gained in the former employer’s plan will be transferred to the new employer’s plan. If the new employer does not have a pension plan, the employee can choose to remain a member of the former employer’s plan and continue paying contributions to be determined by reference to the statutory annual minimum wage and under the contract arranged with the former employer. However, the employee always has the right to choose not to continue paying contributions, in which case the pension contract respecting that employee will be terminated. The employee is required to inform the pension company of his or her choice by the end of the month following the change of employment. In addition, in the case of a group pension contract, participant employees can transfer their vested savings under that employer group pension contract to any other individual or group pension plan held by the same or a different pension company. The employee’s vested savings can also be paid out to the employee after any necessary deductions. Turkey A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Under the Social Security Law, calculation of the state pension amount differs depending on the date on which social security contributions commenced. However, in terms of the individual pension system, Circular No. 2015/47 on Pension Plans issued by the Treasury on November 25, 2015 states that individual pension plans should use the annualized Wholesale Price Index or Consumer Price Index, foreign exchange rates, or a fixed rate for indexation purposes. Turkey Contributed by: Irmak Dirik, Melis Buhan & Sezin Akoglu Duzenli, DAB Law Firm A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contributed by: Mayer Brown LLP 1. Does the state provide a pension, retirement income or social security program of some type? There is a state pension fund for UAE citizens (see question 5 below for further information about employer and employee contributions). Expatriates are not entitled to any retirement/pension benefits under the state pension fund. However, private companies can offer a private retirement plan/scheme to their employees (both UAE citizens and expatriates) at their discretion. United Arab Emirates A Global Guide to Retirement Plans & Schemes Tom Thraya Partner, Dubai E: [email protected] T: +971 4 375 7161 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required under the law to maintain a retirement plan/scheme but may choose to do so at their discretion. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Under Article 141 of the UAE Labor Law, if an employer chooses to maintain a pension or social security scheme or similar scheme, employees who would be eligible to participate in that scheme may choose between (i) membership in that scheme or (ii) certain statutory end-of-service gratuities, whichever is greater. The statutory end-of-service gratuities are calculated as follows: • 21 days’ remuneration for each of the first five years of employment (excluding any probationary period); plus • 30 days’ remuneration for each additional year of employment. The total gratuity may not exceed two years’ remuneration (for the purposes of end-of-service entitlement calculations, remuneration would be based on basic salary excluding any allowances). Employers are not subject to any restrictions or requirements regarding the type of benefits that must be offered by any retirement plan/scheme that they choose to maintain or regarding the terms of any such plan/scheme. Employees can file a complaint with the Ministry of Labor if the employer fails to comply with any obligations relating to compensation, including those relating to a retirement plan/scheme. 4. What are the key features of the tax framework that applies to retirement plans/schemes? There is currently no comprehensive income tax regime in the UAE. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Under Federal Law No. 7 of 1999 Concerning the Issuance of the Law on Pensions and Social Security, all employees who are UAE citizens must make monthly contributions to the state pension fund of 5% of their monthly salary. The employer must deduct this contribution from the employee’s monthly salary and must also make a matching monthly contribution to the state pension fund of 12.5% of the employee’s monthly salary. United Arab Emirates A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Where private retirement plans/schemes are concerned, employer contributions are not necessarily required. Employer contributions may be required if an employer adopts a retirement plan/scheme that provides for such contributions. In other words, employer contributions are not required by law, but they may be required under contract based on the terms of the plan offered by the employer. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? There are no rules specifically governing retirement plan/scheme investments in the UAE. Retirement plans/schemes provided at the discretion of the employer are governed by the terms set out in the plan’s/scheme’s governing documentation. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? There is currently no works council representation in the UAE, and there are generally no employee consultation rules in the UAE. Employers would disclose the terms of any retirement plans/schemes that they choose to maintain to their employees as part of their employment contract and related documents. No other disclosures are required. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? The employer is free to alter the terms of a retirement plan/scheme at its discretion, to the extent that the scheme is provided by the employer, subject to any employee consent requirements under an employee’s employment contract(s). Employers must, however, inform their employees in writing of any such changes and must continue to make the statutory contributions to the state pension fund required in respect of UAE citizens (see question 5 above). However, please note that amendments or deductions to pension payouts to UAE citizens are not directly addressed under UAE law. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? An employer may withdraw from a retirement plan/scheme at its discretion, subject to any terms and conditions on termination in the underlying employment agreement or the retirement plan/scheme documentation. In addition, the same restrictions outlined in question 8 above would apply to the reduction of benefits. United Arab Emirates A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? For members of a retirement plan/scheme provided by the employer, this would depend on the terms set out in the documentation governing the plan/scheme. Pension rights under the UAE pension fund are not tied to a particular employer, and would remain following any transfer of employment. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Only to the extent that such arrangements are set out in the documentation governing a plan/scheme provided by the employer. United Arab Emirates Contributed by: Tom Thraya & Jad Taha, Mayer Brown LLP A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contributed by: Mayer Brown International LLP 1. Does the state provide a pension, retirement income or social security program of some type? The UK government provides a state pension. Until April 2016, the state pension comprised a basic flat-rate element and an earnings-related top-up. From April 2016, this has been replaced by a single-tier flat-rate pension. The state pension is funded by employer and employee contributions referred to as “National Insurance contributions.” Both employer and employee contributions are a function of an individual’s earnings and, in the case of employee contributions, are deducted from the individual’s salary. An individual’s eligibility for the state pension and the amount of pension paid depend on the number of years in which National Insurance contributions have been paid in respect of the individual. United Kingdom A Global Guide to Retirement Plans & Schemes Jay Doraisamy Partner, London E: [email protected] T: +44 20 3130 3000 F: +44 20 3130 3001 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Under what is known as “automatic enrollment,” employers are required to: • enroll certain employees (known as “eligible jobholders”) into a “qualifying scheme” (described below); • give certain other employees (known as “non-eligible jobholders”) the right to join a “qualifying scheme”; and • give all other workers the right to join a “registered pension scheme” (see question 4 for more information on registered pension schemes), though not necessarily one to which the employer contributes. The automatic enrollment duty applies to an employer from its “staging date” – a date between 2012 and 2017 (the larger the employer’s April 2012 payroll, the earlier the staging date). Jobholders who have been automatically enrolled have a statutory right to opt out within one month. Pension schemes in the UK can be set up under either trust or contract. Trust-based pension schemes are established by an employer for the benefit of its employees, and are governed by a trust deed and rules. Trustees are appointed to administer the trust and are the legal owners of the trust’s (i.e., the pension scheme’s) assets. The trustees hold the assets for the purposes of the scheme (i.e., chiefly in order to fund the benefits promised to the scheme members), rather than for their own personal benefit. Trustees are subject to a wide range of legal duties. A trust-based pension scheme may have more than one participating employer, in which case the scheme is known as a multi-employer scheme. The participating employers in a multi-employer scheme are usually connected to one another e.g., forming part of the same corporate group, or part of the same industry. A multi-employer scheme will typically have one “lead” employer, known as the principal employer – this employer will have wider powers under the scheme’s trust deed and rules than the other employers. Contract-based pension schemes are an individual contract between the member and the pension provider (normally an insurance company). The pension provider is responsible for administering the scheme. Employers can set up a group contract-based pension arrangement by selecting a pension provider – each employee will then have an individual contract with that provider. There are two main types of pension scheme in the UK – defined benefit (“DB”) and defined contribution (“DC” or “money purchase”) schemes. In a DC scheme, employers and employees contribute a set amount each year to a member’s retirement account, which is then invested – DC schemes do not promise members a particular level of benefit or guarantee the size of the account when the member retires. DB schemes in the UK typically offer one of three types of defined benefit – final salary (where members are promised a percentage of their final salary for each year of pensionable service); career-average revalued earnings (which is similar to final salary, but calculated by reference to the United Kingdom A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 member’s average salary over the period of their pensionable service); and cash balance (where members are promised a retirement pot of a pre-defined amount for each year of pensionable service). Trust-based schemes can provide DB or DC benefits. Contract-based schemes generally only provide DC benefits. As well as promising retirement benefits, both DB and DC schemes typically provide survivors’ benefits when a member dies before or after retirement. Employers may use DB or DC schemes to meet their automatic enrollment duties. However, in order to be a “qualifying scheme” for automatic enrollment purposes, a scheme must meet certain “quality requirements” prescribed under UK pension law (see question 3 below). There are different quality requirements for DB and DC schemes. Broadly speaking, DB schemes must satisfy either prescribed minimum benefit accrual requirements or a prescribed test as to the cost of funding future accruals, while DC schemes must satisfy one of four prescribed minimum contribution structures. Qualifying schemes must also generally be registered pension schemes – see question 4 for more information. (Registered pension schemes do not have to be qualifying schemes.) 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Pension schemes in the UK are subject to a number of pensions-specific statutes, as well as numerous regulations made under those statutes. The Pensions Act 2008 sets out the requirements that a plan must satisfy in order to be a qualifying scheme for purposes of the automatic enrollment requirements described in question 2. The Finance Act 2004 sets out the requirements that “registered pension schemes” must meet (registered pension schemes benefit from favorable tax treatment) – see question 4 for more information. The Finance Act 2004 and the Income Tax (Earnings and Pensions) Act 2003 govern the tax treatment of contributions to, and payments from, pension schemes. The other principal statutes include the Pension Schemes Act 1993, the Pensions Act 1995, and the Pensions Act 2004 which between them impose a wide range of requirements on trust-based schemes including: • investment restrictions; • minimum scheme funding requirements (for DB schemes); • protection for early leavers; • disclosure and reporting obligations; • dispute resolution requirements; and • scheme termination rules. United Kingdom A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The Pensions Act 2004 also establishes the Pensions Regulator (the “Regulator”), which is responsible for the regulation of pension schemes used by employers, and the Pension Protection Fund (the “PPF”), which acts as a “lifeboat” for underfunded DB schemes whose employers became insolvent (see question 9 for more information). In addition, the Equality Act 2010 imposes non-discrimination requirements regarding entry to, and the terms of membership of, pension schemes. Employers and trustees of trust-based pension schemes are also subject to fiduciary duties. In the trustees’ case, these include a requirement to exercise their powers for the purpose for which they were conferred (sometimes described as a duty to act in the best interests of the scheme’s members). For employers, the key fiduciary duty is less stringent but requires them, when exercising their rights and powers under the employment contract and under the pension scheme, not to undermine the relationship of mutual trust and confidence that should exist between employers and employees. In certain circumstances, where one company in a corporate group has participated in a DB pension scheme, the Regulator can require other companies in the same group to contribute to the scheme or provide it with other financial support. Providers of contract-based schemes are regulated by the Financial Conduct Authority (the “FCA”) and are therefore subject to rules and regulations made by the FCA. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Pension schemes that are “registered” with HM Revenue & Customs (“HMRC”) are accorded favorable tax treatment under the Finance Act 2004, including tax relief on employee and employer contributions and on investment income and capital growth. Employer contributions are also exempt from National Insurance contributions. However, as a quid pro quo for the favorable tax benefits conferred on them, registered pension schemes are subject to a number of restrictions, including the following: • There are annual and lifetime limits on the level of tax-relieved pension savings that can be made by a member of a registered pension scheme. • A registered pension scheme cannot generally pay benefits to a member before age 55 (unless the member is suffering from ill-health), and payments from a registered pension scheme may only be made in certain prescribed ways. Benefits taken from a registered pension scheme are generally subject to income tax, but up to 25% of an individual’s benefits can be taken as a tax-free lump sum. United Kingdom A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Unregistered pension schemes do not receive the tax advantages available to registered schemes, but are not subject to the restrictions imposed on registered schemes. As a result of the unattractive tax treatment of unregistered schemes, employers rarely use such schemes. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? If a DC scheme is a qualifying scheme for automatic enrollment purposes, statutory minimum employer contribution rates apply – the scheme must satisfy one of four prescribed contribution structures. If an employer maintains a DC scheme that is not a qualifying scheme for automatic enrollment purposes, the employer is not required to contribute to the scheme (i.e. contributions are discretionary). Employers who maintain such arrangements do, however, typically make monthly contributions, which are usually expressed as a percentage of the employee’s salary. Statutory scheme funding requirements apply to DB schemes. Schemes are required to have sufficient and appropriate assets to cover the value of their liabilities as calculated by the scheme actuary on a prudent (not merely a best estimate) basis. They must carry out a valuation of the scheme’s assets and liabilities every three years, and if that valuation shows that the scheme is in deficit, a recovery plan must be put in place, including a schedule of contributions which will set out (i) the level of employer deficit reduction contributions to be made to remove the deficit, and (ii) the level of employer and member contributions to fund any future service benefits – these are usually expressed as a percentage of the members’ salaries. A one-off employer contribution, which may be very substantial, is typically also required when an employer withdraws from a DB scheme, when the scheme terminates or on an employer’s insolvency – see question 9 for more information. Employers are responsible for deducting member contributions from their salaries and must pay those contributions (and any employer contributions) over to the scheme within a statutory timeframe. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? In a trust-based scheme, the trustees are responsible for the investment of the scheme’s assets. Legislation gives trustees wide investment powers, but also requires them to take into account a broad range of factors when making investment decisions and imposes a number of restrictions, including on employer-related investments. Trustees are also subject to fiduciary duties under trust law including a duty to invest assets in members’ best financial interests. In addition, trustees must comply with any investment restrictions set out in the scheme’s trust deed and rules. Legislation prevents the employer from exercising any power of investment over the assets of a trust-based scheme, but the trustees must consult the employer on the scheme’s investment strategy. In a DB trust-based scheme, members will have no involvement in scheme investment. In a DC trust-based scheme, the trustees will be responsible for selecting the United Kingdom A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 range of investment funds available under the scheme and for keeping the range under review, while members will be responsible for directing the investment of their account balances among the different funds. If trustees breach their statutory investment duties, in most cases the breach is punishable by a civil fine. However, in some cases, the breach is a criminal offense punishable by a fine, imprisonment or both. In the event of breach of a fiduciary duty or of the scheme’s trust deed and rules, a court can order that compensation be paid that is designed to put the claimant in the position that he or she would have been in had the breach not occurred. In a contract-based scheme, the pension provider determines the range of investment funds on offer and the member is responsible for selecting from that range. The employer may work with the provider to select a bespoke range of funds for the scheme from the wider range offered by the provider. There is no duty on the employer to monitor the scheme’s performance, but some employers choose to do so. The provider must comply with FCA rules in the investment options that it makes available to members. In the event of breach of those rules, the FCA has a number of enforcement powers including fines, prohibition or suspension of individuals/firms, and criminal proceedings, depending on the breach. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Trustees of trust-based schemes must report certain information to HMRC and the Regulator. They are also required to disclose certain prescribed information to members and, as set out in question 8, to consult with members when certain changes to the scheme are proposed. In the event of breach of these reporting, disclosure and consultation obligations, the Regulator has a range of enforcement powers including compliance notices and fines. Employers are also subject to reporting, disclosure and, as set out in question 9, employee consultation obligations. They must report certain breaches of the law to the Regulator and, where they have a DB scheme, the occurrence of specified “notifiable events”. Employers must also provide a declaration of compliance with their automatic enrollment duties to the Regulator every three years. In addition, employers must provide employees with a written statement of employment terms that includes any terms and conditions relating to pensions, and also with certain prescribed information about automatic enrollment. In the event of breach of the employer reporting, disclosure and consultation obligations, the Regulator has a range of enforcement powers including compliance notices and fines. Providers of contract-based schemes are also subject to requirements to disclose certain prescribed information to members under both legislation and FCA rules. In the event of breach of these requirements, the Regulator and the FCA have a number of enforcement powers including compliance notices and fines. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Three main types of restriction apply where an employer or trustees wish to make changes to a trust-based pension scheme. First, any changes must comply with the terms of the scheme’s amendment power. Usually, this will require United Kingdom A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 the consent of both the employer and the trustees to the proposed change. The amendment power may also impose additional restrictions. Second, legislation restricts changes to accrued benefits that would or might make the accrued benefits less generous – these can be made only with member consent, or (in some cases) consultation with the members plus certification that the benefits before and after the change are actuarially equivalent. Lastly, certain changes to future benefits require member consultation – these include closing the scheme to new members and increasing the level of member contributions. Where the scheme is a contract-based scheme, the changes that an employer can make are generally limited to the level of employer and member contributions and closing the scheme. As with a trust-based scheme, certain changes require member consultation. Whether the scheme is a trust-based or contract-based scheme, employers also need to ensure that any changes made do not breach any pensions-related terms in the affected employees’ employment contracts or, alternatively, obtain the affected employees’ consent to the change to their employment contracts. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? The rules of a trust-based scheme will generally give the employer the power to terminate the scheme or, in the case of a multi-employer scheme, to withdraw from the scheme, as and when the employer wishes by giving notice to the trustees. On termination of a trust-based scheme, the members’ benefits will generally be secured by annuity purchase and the scheme will be wound up. Where the scheme is a DC scheme, the employer’s only liability will be to pay any outstanding employer contributions and any expenses which the scheme’s trust deed and rules requires it to pay. Where the scheme is a DB scheme, the same obligations will apply if the scheme is well enough funded to secure its liabilities via annuity purchase. However, if a DB scheme is in deficit, withdrawal or termination may trigger an obligation on the employer to pay an amount into the scheme that is sufficient to enable the scheme’s liabilities to be secured by annuity purchase (or, in the case of withdrawal from a multi-employer scheme, an amount sufficient to enable the employer’s share of the scheme’s liabilities to be secured by annuity purchase). As the cost of buying annuities usually exceeds even the prudent level of funding required for ongoing schemes (see question 5), the cost can be substantial. (In some circumstances, a withdrawing employer’s liability share can be apportioned to other continuing employers without being payable immediately.) If the employer is insolvent and is unable to make the required payment, the scheme will enter what is known as a “PPF assessment period” during which the PPF will assess whether the level of funding in the scheme qualifies the scheme for United Kingdom A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 entry to the PPF (taking into account any distribution received by the scheme under the statutory corporate insolvency order of priority). A PPF assessment period will be triggered automatically by an employer’s insolvency, whether or not it formally withdraws from or terminates the scheme. Should the scheme be accepted into the PPF, the PPF will take over responsibility for the scheme and will pay compensation to the scheme’s members that is based on the benefits payable under the scheme, subject to a statutory cap. If the scheme is in deficit, but is too highly funded to be eligible for PPF entry (essentially where it has sufficient assets to buy annuities that exceed PPF compensation levels), the scheme will generally be terminated and wound up, with reduced benefits secured for members in accordance with the statutory order of priority. Where the scheme is a contract-based scheme, the employer cannot terminate it as such, because the contractual relationship is between the provider and the member. The employer can, however, generally choose to cease contributing to the scheme (subject to any notice period required by the provider). The contract between the provider and the member will continue and, if the provider permits, the member can continue making contributions. If continued contributions are not permitted, the member’s funds remain invested as he or she directs until such time as the member chooses to take his or her benefits or transfers them to another pension scheme. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? A member of a pension scheme has a statutory right to transfer his or her benefits to another pension scheme. Where the transferring scheme is a registered pension scheme, the receiving scheme must also be a registered pension scheme. Depending on the type of benefits held by the member, additional requirements may apply. This statutory transfer right expires: • in the case of salary-related benefits, one year before the scheme’s normal retirement age; and • in the case of other types of benefit, once those benefits are put into payment in some way or are used to purchase an annuity. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Legislation generally requires pension schemes to provide minimum inflation-related increases on DB pensions earned since April 1997, and (usually) on a part of the pension earned between 1988 and 1997. Many DB schemes’ rules require increases that exceed the statutory minimum. Schemes may also be required to pay increases on DC pensions earned after April 1997 that came into payment before April 2005. No increases are required on DC pensions that come into payment after April 2005. United Kingdom Contributed by: Jay Doraisamy & Katherine Carter, Mayer Brown International LLP A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Australia Hong Kong India Indonesia Japan Macau Malaysia Myanmar New Zealand Pakistan PRC Philippines Singapore South Korea Taiwan Vietnam STEP 2 – Select a Country/Jurisdiction Selected: ASIA Contents A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Australia Contributed by: Corrs Chambers Westgarth Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? The Australian government makes provision for an Age Pension pursuant to the Social Security Act 1991 (Cth). The Age Pension is a scheme which pays out a regular income to eligible Australians, or in the case of those with significant income and/or assets, a supplement to help them meet the costs of living. To be eligible for the Age Pension, an applicant must be 65 years of age or older (“Qualifying Age”). From 1 July 2017, the Qualifying Age for the Age Pension will be 65 years and 6 months. The Qualifying Age then increases by 6 months every 2 years, until it reaches 67 from 1 July 2023 (as shown in the following table): A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Date of Birth Qualifying Age 1 July 1952 to 31 December 1953 65 years and 6 months 1 January 1954 to 30 June 1955 66 years 1 July 1955 to 31 December 1956 66 years and 6 months From 1 January 1957 67 years In addition to the Qualifying Age, to qualify for the Age Pension an applicant must satisfy: (a) residency requirements; (b) an income test; and (c) an assets test. The amount of Age Pension that an individual will receive depends on his or her income, assets and other circumstances, including whether the individual is single or not. Residency Requirements The applicant must be an Australian resident and physically present in Australia on the day the claim for the Age Pension is submitted. Furthermore, the applicant must have been living in Australia continuously for a period of ten years. If the applicant has lived in Australia intermittently over a period of time, then the total of all such periods of residence must be equal to or more than ten years, with at least one period being five years or more. Income Test Applicants will be exempt from the income test if they are permanently blind and receive Disability Support Pension and do not receive rent assistance. There are different income cut-off points applicable, depending on whether the applicant is single, married, disabled, or if her or she has any dependents. Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 If an applicant’s fortnightly income exceeds the cut-off point, the Age Pension is reduced to zero, as summarized below: Applicant’s family situation Fortnightly Income Cut-off Point Single AUD 1,909.80 Couple (combined) AUD 2,922.80 Illness separated (couple combined) AUD 3,783.60 Transitional rate pensioners - Single AUD 2,005.00 Transitional rate pensioners - Couple (combined) AUD 3,261.00 Transitional rate pensioners - Illness separated (couple combined) AUD 3,974.00 If an applicant’s income is below these limits, then the amount of pension he or she receives will depend on his or her level of income. Asset Requirements As assets can earn income, there are limits to the amount of assets an applicant can own when receiving the Age Pension. Like the income test, the applicable limit of assets will depend on whether the applicant(s) is/are single, a couple, a couple separated by illness, or a couple where only one person is eligible for the pension. For every AUD 1,000 that an asset is worth over the limit, the Age Pension will be reduced by AUD 1.50 per fortnight. Generally, assets include cash, gifts, real estate, businesses, farms, vehicles and life insurance policies. The asset limits are updated each year in January, March and September; updated limits can be found via the link below Australia . https://www.finder.com.au/australian-age-pension-eligibility-requirements A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Superannuation Guarantee Scheme The Superannuation Guarantee (Administration) Act 1992 (Cth) and the Superannuation Guarantee Charge Act 1992 (Cth) are the primary statutes in this area, setting out the responsibilities of employers and administrative arrangements for the operation of the Superannuation Guarantee Scheme (“SGS”). Introduced in 1992, the SGS is a compulsory system required to be maintained by employers for employees. Under the SGS, up to 1 July 2013, employers paid 9% of the ordinary time earnings of their employees (including parttime and casual employees), aged 18 and over and earning AUD 450 (before tax) per month or more, into a compliant superannuation fund or retirement savings account. For the 2013/2014 financial year, the rate of compulsory employer superannuation contributions increased to 9.25%; and for 2014/2015, it increased to 9.50%. The Australian government announced in the Federal Budget on 13 May 2014 that the rate of employer contributions would remain at 9.50% until 30 June 2018. The rate will then increase by 0.50% each year until it reaches 12% from 1 July 2022. Under the SGS, an employer must make the minimum superannuation contributions at least four times a year, by the quarterly due dates. These dates are as follows: Quarter Period Payment due date 1 1 July – 30 September 28 October 2 1 October – 31 December 28 January 3 1 January – 31 March 28 April 4 1 April – 30 June 28 July If the due date falls on a weekend or public holiday, the payment can be made on the following working day. Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Superannuation Guarantee Charge If an employer fails to pay the minimum amount on time and into the correct fund, they may be liable to pay the superannuation guarantee charge (“Charge”). The Charge is made up of: (a) the superannuation guarantee amounts calculated on the employee’s salary or wages; (b) 10% p.a. interest on those amounts; and (c) an administration fee of AUD 20 per employee, per quarter. The director of a corporate employer that fails to pay the Charge by the due date will automatically become personally liable for a penalty equal to the unpaid amount. Employer superannuation contributions are paid into a complying superannuation fund or retirement savings account. These funds/accounts must meet specific requirements and obligations under various federal laws (see further responses below). Accessing Superannuation Benefits Access to superannuation benefits is generally restricted to fund members who have reached their “preservation age”. A person’s preservation age ranges from 55 to 60, depending on their date of birth, as summarized below: Date of birth Preservation age Before 1 July 1960 55 1 July 1960 – 30 June 1961 56 1 July 1961 – 30 June 1962 57 1 July 1962 – 30 June 1963 58 1 July 1963 – 30 June 1964 59 After 30 June 1964 60 Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Types of Superannuation Funds There are six main types of superannuation funds in Australia: (a) MySuper accounts MySuper accounts are a new type of superannuation account and will soon become the default superannuation option when an employee has not chosen a superannuation fund. In general, these accounts have low fees and simple features. (b) Industry superannuation funds Industry superannuation funds are often restricted to employees from a specific industry, however larger industry superannuation funds are open to the public. In general, industry superannuation funds are not-for-profit, so the fund directs all of the returns back to members. (c) Retail superannuation funds Retail superannuation funds are run for profit, usually by financial institutions (banks) or corporate investment firms. In general, these accounts have a large number of investment options and have medium to high fees. (d) Corporate superannuation funds Corporate superannuation funds are organized by employers for their employees. These funds may be operated by larger retail or industry funds or, alternatively, they can be operated by the employer under a board of trustees. (e) Public sector superannuation funds Public sector superannuation funds were established for employees of federal and state government departments/ agencies. In general, membership of these funds is only open to government employees, and they are run on a notfor-profit basis and have low fees. (f) Self-managed superannuation funds (“SMSFs”) SMSFs are superannuation funds managed by their members. SMSFs may have up to four members, all of whom are trustees (or directors if there is a corporate trustee) and are responsible for the decisions of the fund. Unlike the mainstream funds which are regulated by the Australian Prudential Regulation Authority (“APRA”), SMSFs are subject to reporting and other requirements overseen by the Australian Taxation Office (“ATO”). Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Choice of Fund Employers are required to allow employees to choose the superannuation fund into which they would like contributions to be paid, by completing a ‘standard choice form’ within 28 days of commencing employment. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal statutes governing superannuation funds in Australia are the: (a) Superannuation Act 1976 (Cth); (b) Superannuation (Resolution of Complaints) Act 1993 (Cth); (c) Superannuation Industry (Supervision) Act 1993 (Cth); and (d) Superannuation Industry (Supervision) Regulations 1994 (Cth). The superannuation system is regulated by several key government agencies: (a) ATO, which administers the relevant legislation for SMSFs; (b) Australian Securities Investment Commission (“ASIC”), which regulates financial services to protect consumers; and (c) APRA, which supervises superannuation funds other than SMSFs and reviews compliance with the Superannuation Industry (Supervision) Act 1993 (Cth). Under the SGS, the material requirements for employers include mandatory employer contributions, offering employees a choice of superannuation funds, providing the standard choice form in a timely manner, and refraining from influencing or coercing an employee to choose a particular fund. For superannuation funds and trustees, the material requirements include holding a Registrable Superannuation Entity Licence issued by APRA, fee and cost disclosure requirements, and stringent reporting and disclosure requirements. Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 4. What are the key features of the tax framework that applies to retirement plans/schemes? The tax that is payable on superannuation contributions will depend on whether the contributions were made before or after income tax was paid; whether the superannuation contributions cap has been exceeded; and the employee’s income. Pre-tax superannuation contributions These contributions, also known as “concessional contributions”, are contributions made towards an employee’s superannuation fund before any tax is paid on them. These contributions can include: (a) the compulsory superannuation guarantee payments made by the employer; (b) salary sacrifice contributions; (c) costs paid by the employer on the employee’s behalf such as administration fees; and/or (d) personal contributions claimed as a tax deduction by a self-employed person. In general, these contributions are taxed at 15%. However, this concessional tax only applies for contributions below the level of the contribution caps. The applicable cap will depend on the individual’s age, as summarized below for the 2016/17 financial year: Cap Applicable tax rate if the cap is exceeded AUD 30,000 (if under 49 years of age in the 2016/17 financial year) Amounts over AUD 30,000 will be added to the person’s assessable income and taxed at their marginal tax rate (plus excess concessional contributions charge) AUD 35,000 (if 49 years of age or older in the 2016/17 financial year) Amounts over AUD 35,000 will be added to the person’s assessable income and taxed at their marginal tax rate (plus excess concessional contributions charge) Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 After-tax superannuation contributions These contributions, which are made after tax has been paid on them and are generally not subject to further taxation, can include: (a) contributions an employee or his or her employer make from after-tax income; (b) contributions an employee’s spouse makes to the employee’s superannuation fund; and (c) personal contributions by an employee that are not claimed as an income tax deduction. The applicable contribution caps are summarized below: Financial Year Non Concessional Cap Tax on amounts over cap 2016–17 AUD 180,000 47% (plus 2% budget repair levy) 2015–16 AUD 180,000 47% (plus 2% budget repair levy) 2014–15 AUD 180,000 47% (plus 2% budget repair levy) 2013–14 AUD 150,000 46.5% Please note that the Australian government announced on 15 September 2016 that the annual non-concessional contributions cap will be lowered from AUD 180,000 to AUD 100,000, with effect from 1 July 2017 (although legislation is yet to be passed by federal Parliament implementing this change). Division 293 tax for high-income earners Division 293 tax is an additional tax on superannuation contributions if an individual’s annual income exceeds AUD 300,000. Division 293 tax is charged at the rate of 15% of the taxable concessional contributions above the AUD 300,000 threshold. Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The government has indicated that the income threshold for Division 293 tax will be reduced from AUD 300,000 to AUD 250,000 from 1 July 2017. Taxation of superannuation benefits Superannuation benefits, both lump sums and income streams, paid from a taxed superannuation fund to individuals 60 years of age or older are tax-free and not included as assessable income. If an individual is over their preservation age, but under 60, superannuation benefits are included as assessable income. However, the individual is entitled to a 15% offset on the taxable component of any payments received from superannuation income streams. Lump sum amounts are tax-free up to the low rate cap amount. The low rate cap amount for the 2016/2017 financial year is AUD 195,000. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Superannuation funds are generally made up of employer contributions, employee contributions and, in certain circumstances, additional government contributions. These funds are invested by the superannuation fund’s trustee with the objective of growing the account while the employee is still working. Employer Contributions As indicated above, under the SGS, employers are required to make superannuation contributions (presently, 9.5% of income) on behalf of all their eligible employees. These contributions are paid directly to each employee’s nominated superannuation fund. Employee Contributions Under the SGS, there is no obligation on employees to make minimum personal contributions to their superannuation fund. However, employees are free to make personal contributions to their own or their spouse’s superannuation fund. These employee contributions are in addition to the compulsory contributions to be paid by the employer, and do not include contributions made through a salary sacrifice arrangement. Personal contributions are paid by an employee from their after-tax income and are non-concessional. They will contribute to the non-concessional cap (discussed above) unless the employee has claimed a tax deduction for them. Salary sacrifice, also known as salary packaging or total remuneration packaging, facilitates an arrangement between Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 an employer and employee where the employee agrees to forego part of their future entitlement to salary or wages, in return for the employer providing them with superannuation benefits of a similar value. Government Contributions – low income superannuation contribution The low income superannuation contribution (“LISC”) scheme is a federal government initiative to help low-income earners save for retirement. Individuals who earn AUD 37,000 or less per year may be eligible to receive an LISC payment of up to AUD 500 for the financial year. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? A regulated superannuation fund, approved deposit fund or a pooled superannuation trust (collectively, “Entities”) must comply with relevant provisions of the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation Industry (Supervision) Regulations 1994 (Cth). Entities which fail to comply with applicable provisions of the above legislation may lose their complying fund status and their entitlement to tax concessions. In addition, civil penalties of up to AUD 360,000 may be imposed on any person who contravenes, or is involved in the contravention of, these statutory requirements. In some instances, contravention of the provisions may result in the imposition of criminal sanctions (including imprisonment). The main duties and obligations of trustees and investment managers of the above Entities, in relation to superannuation investments, include: (a) engaging in investments on an “arm’s length” basis; (b) not engaging in misleading or deceptive conduct; (c) maintaining the superannuation fund in accordance with the “sole purpose test”, i.e., the sole purpose of providing retirement benefits to fund members (or their dependents); (d) complying with covenants (the fund’s general governing rules), such as acting honestly in all matters, exercising the same degree of care and diligence as a prudent superannuation trustee would exercise in relation to making investments, and allowing the beneficiaries (i.e., employees) to access any prescribed information or documents in relation to the fund and the investments; (e) formulating, reviewing regularly and giving effect to investment strategies for the whole of the fund, and for each investment option offered, having regard to a range of factors such as the risks, likely returns, diversification and liquidity issues; Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (f) avoiding conflicts of interests and managing those conflicts appropriately; and (g) ensuring that records and accounts relating to investments are properly kept and are maintained for at least five years. These records include minutes outlining investment decision making, fund review strategies and consideration of insurance. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employment records and pay slips Under the Fair Work Act 2009 (Cth) and Fair Work Regulations 2009 (Cth), employers are required to maintain records that contain information about the superannuation contributions made on behalf of employees under the SGS. Similar information must be provided on pay slips which are required to be provided to employees on a regular basis. This information will generally include: (a) the amount of each contribution that the employer actually made during the period to which the employee record/ pay slip relates, and the name of the fund to which the contributions were made; or (b) the entitlements to superannuation that accrued for the employee during the period, and the name of the fund to which the contributions will be made. Product Disclosure Statements A Product Disclosure Statement (“PDS”) is a document issued by a financial product provider in relation to the offer of that financial product. It gives information about the issuer, benefits, risks and costs of the product and other information. The PDS provisions in Part 7.9 of the Corporations Act 2001 (Cth) apply to all superannuation entities and retirement savings account providers. Generally, this requires the disclosure of all relevant information that investors and their professional advisers would reasonably require to make an informed assessment of the rights and liabilities attaching to the products; and of the assets and liabilities, financial position and performance, profits and losses and prospects of the body offering those products. Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? An employer is not able to alter the requirements to make mandatory superannuation contributions on behalf of eligible employees under the SGS. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Employers are not permitted to withdraw from or terminate the SGS. Under the SGS, an employer is exempt from making superannuation contributions in very limited circumstances, and penalties apply when an employer fails to make those contributions for eligible employees. Employees not eligible under the SGS Employers are not obliged to make superannuation contributions under the SGS for: • non-resident employees for work they do outside Australia; • some foreign executives who hold certain visas or entry permits; • employees paid under the Community Development Employment Program; • members of the army, navy or air force reserve for work carried out in that role; and • employees temporarily working in Australia who are covered by a bilateral superannuation agreement. Furthermore, if an employer is a non-resident for taxation purposes, there is no obligation to make superannuation contributions under the SGS for resident employees for work performed outside of Australia. Choice of fund and other liabilities employers may face Under the SGS (as indicated above), employers are required to give employees a choice of superannuation funds. If an employer fails to do so, they are liable for the Charge. Employers may breach this obligation if they: (a) fail to provide employees with the standard choice form on time; Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (b) fail to pay contributions to the nominated account; or (c) charge a fee for implementing the employee’s choice of fund. Other potential liabilities under the SGS include: (a) failing to keep adequate records; (b) failing to pass on a Tax File Number; and (c) arrangements to avoid SGS obligations. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Generally, when an employee changes jobs, they can transfer their accrued benefits between different superannuation funds. The accrued benefits made by an employee and their previous employer are held in an account selected by the employee (original fund). When an employee changes jobs, they may treat their accrued benefits in one of the following ways: (a) transfer the accrued benefits from the original fund to a new superannuation fund of their choice and direct their new employer to continue making contributions to this new superannuation fund; or (b) retain the original fund and direct their new employer to continue making contributions. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Superannuation Guarantee Scheme See question 2 above regarding the applicable “preservation age” for accessing superannuation benefits. The ability of workers aged over 65 to continue making superannuation contributions (e.g., if working part-time after retirement) is subject to satisfying a “work test”, i.e., performing paid work for at least 40 hours in any 30-day period in the relevant financial year. Age Pension Currently, certain pensions including the Age Pension are indexed twice each year, by the greater of the movement in the Consumer Price Index (“CPI”) or the Pensioner and Beneficiary Living Cost Index (“PBLCI”). Indexing the Age Pension in this way maintains the real value of pensions over time. Australia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The CPI is a measure of changes in the prices paid by households for a fixed basket of goods or services. The PBLCI measures the effect of changes in prices on the out-of-pocket living expenses experienced by the age pensioner and other households whose main source of income is a government payment. Australia Contributed by: John Tuck, Corrs Chambers Westgarth A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Hong Kong Duncan Abate Partner, Hong Kong E: [email protected] T: +852 2843 2203 F: +852 2103 5066 Contributed by: Mayer Brown JSM Hong Tran Partner, Hong Kong E: [email protected] T: +852 2843 4233 F: +852 2103 5070 1. Does the state provide a pension, retirement income or social security program of some type? The Hong Kong government does not provide a statutory pension, except for specified categories of civil servants, judicial officers and teachers in government-subsidized schools. The government has instead enacted the Mandatory Provident Fund Schemes Ordinance (“MPFSO”) (Chapter 485, Laws of Hong Kong), which provides the statutory framework for a system of privately-managed retirement savings schemes, called Mandatory Provident Fund (“MPF”) schemes, for employees to accrue financial benefits for retirement. The MPF system is a compulsory retirement savings program whereby employees and employers are required to make monthly contributions into retirement protection schemes. MPF schemes are created and managed by MPF trustees. In general, employers must select a MPF trustee, join its MPF scheme and enroll its employees into that scheme. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Under normal circumstances, an employee can only access and withdraw his or her accrued benefits under his or her MPF scheme account upon the age of 65. However, there are specific circumstances where accrued benefits may be withdrawn earlier (see response to question 2 for details). An MPF scheme is required by the MPF legislation to be managed under trust by an approved trustee. Under a trust structure, the trustee is the legal owner of the funds under the relevant MPF scheme but holds those funds for the benefit of others, namely, members of the MPF scheme. An investment manager is responsible for managing the investment of the funds of the MPF scheme, and, therefore, accrued benefits in an employee’s scheme account will consist of employer and employee contributions, as well as investment returns. The Hong Kong government provides certain social security benefits for citizens who are in need through various assistance programs, including the Comprehensive Social Security Allowance Scheme (the “CSSA Scheme”) and the Social Security Allowance Scheme (the “SSA Scheme”). To be eligible for assistance under the CSSA Scheme, an applicant must satisfy residence requirements and pass financial tests. The SSA Scheme is designed to provide a monthly allowance for Hong Kong residents who are 65 years of age or above or who are severely disabled to meet special needs arising from old age or disability. Under the SSA Scheme, different types of allowance are paid at a flat rate to eligible applicants. These include the normal old age allowance, higher old age allowance, normal disability allowance and higher disability allowance. Except for the normal old age allowance, the allowances paid under the SSA Scheme are non-means-tested. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? In general, an employer is required to enroll an employee who is at least 18 but under 65 into an MPF scheme. Certain types of employees are exempted. These include those who are members of an MPF-exempt ORSO scheme that is subject to the regulation of the Occupational Retirement Schemes Ordinance (“ORSO”) (Chapter 426, Laws of Hong Kong). While both types of schemes (MPF and ORSO) are retirement protection schemes for employees, MPF schemes are compulsory in nature while ORSO schemes are set up voluntarily by employers. The rules of MPF schemes (for example, rules governing the amount of contributions, whether employees have to contribute and the investment choices) must follow the provisions prescribed in the MPFSO and the related regulations. An employer has more discretion in the design of an ORSO scheme and the rules of such a scheme. That said, the employer and the trustee of the ORSO scheme are required to comply with the provisions of the ORSO. MPF schemes MPF schemes are defined contribution schemes. There are three types of MPF schemes: master trust schemes, employer-sponsored schemes and industry schemes. Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 1. Master trust schemes are the most common type of MPF scheme and are open to employees of the participating employers, self-employed persons and persons with accrued benefits transferred from other schemes. This type of scheme is especially suitable for small and medium-sized enterprises. By pooling together contributions from various employers and their employees, master trust schemes have a high degree of efficiency in terms of scheme administration due to economies of scale. 2. Employer-sponsored schemes are set up by employers, and participation is limited to employees of that single employer who runs such a scheme and its associated companies. This type of scheme is only practical for companies with a large number of employees. 3. Industry schemes are schemes specifically established for employees of the catering and construction industries, particularly casual employees (i.e., workers employed on a day-to-day basis or for a fixed period of less than 60 days). Features are set up to minimize the costs involved in transferring accrued benefits when workers change employment within the same industry (for example, casual employees do not need to change schemes when they change jobs, so long as their previous and new employers have registered with the same industry scheme). Under the MPFSO, benefits have to be preserved within the MPF System until the scheme members meet the MPF Retirement Criteria. The MPF Retirement Criteria are when a member reaches his or her 65th birthday (or 60th birthday if he or she retires early), dies, is diagnosed with terminal illness, is in total incapacity or is permanently leaving Hong Kong. ORSO schemes ORSO schemes are established by an employer for employees of that employer and its associated companies. Generally, ORSO schemes can be divided into two types: defined contribution schemes and defined benefit schemes. • Defined contribution schemes are commonly known as provident funds under which the benefits are determined solely by reference to the contributions paid, the declared return, and, where appropriate, the qualifying service and age of the employee. • Defined benefit schemes include all other schemes that are not defined contribution schemes. Generally, they are schemes under which the benefits are determined by a formula that takes into account the years of service and final salary of the scheme member. Schemes that contain elements of both the defined contribution scheme and the defined benefit scheme are to be classified as defined benefit schemes. An ORSO scheme may be MPF-exempted or not MPF-exempted. • If an ORSO scheme is not MPF-exempted, its members are still required by law to be enrolled in an MPF scheme that provides the mandatory and most basic level of retirement savings according to MPFSO. The ORSO scheme simply acts as a top-up scheme to provide additional voluntary contributions by the employer above and beyond the MPF savings. Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • An ORSO scheme that has received MPF exemption acts as an alternative to the MPF scheme. An employer that wishes to operate an MPF-exempted ORSO scheme must provide its employees with a one-off choice whether to join the ORSO scheme or the MPF scheme. Benefits are normally paid to the scheme member upon retirement or termination of employment. However, as ORSO schemes are set up voluntarily by employers, an employer and the trustee may agree on the governing rules of the ORSO scheme, including when benefits are payable and the conditions of payment. For the members who joined an MPF-exempted ORSO registered scheme after December 1, 2000, part of their accrued benefits under the ORSO scheme will be subject to the preservation, portability and withdrawal requirements under the Mandatory Provident Fund Schemes (Exemption) Regulation (“MPF Exemption Regulation”). This means that, when the member becomes entitled to receive benefits under the ORSO scheme, a portion of the benefits representing the minimum MPF benefits (which is determined pursuant to the MPF Exemption Regulation) shall be preserved and can only be withdrawn when he or she meets the MPF Retirement Criteria (see above). 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The MPFSO provides the statutory framework for the MPF system, and the Mandatory Provident Fund Schemes Authority (“MPFA”) is the government authority regulating and supervising the operation of the MPF system. Under the MPFSO, material requirements applicable to MPF schemes include employers’ and employees’ mandatory contributions to an MPF scheme (see response to question 5 for details), the duty of self-employed persons to become scheme members, separation of assets from employers and MPF trustees, rules regarding vesting and investment regulations, stringent approval and registration criteria for MPF trustees and intermediaries, reporting and disclosure requirements of MPF trustees and intermediaries, and the requirement for MPF trustees to take out professional indemnity insurance to indemnify scheme members in the event of misfeasance or illegal conduct by the trustee (or other service provider to which the trustee delegated its duties). For ORSO schemes, the ORSO imposes affirmative requirements on employers that voluntarily choose to operate ORSO schemes. Requirements include registration and exemption criteria for ORSO schemes, separation of assets from the employer or administrator of the scheme, investment restrictions, the duty of an employer to fund the scheme to meet both its aggregate vested liability and aggregate past service liability, and reporting and disclosure requirements. MPFexempt ORSO schemes are also subject to the requirements under the MPF Exemption Regulation. Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 4. What are the key features of the tax framework that applies to retirement plans/schemes? Contributions made to retirement schemes The Hong Kong government grants certain tax concessions on the mandatory contributions made by employees and employers under the Inland Revenue Ordinance (“IRO”) (Chapter 112, Laws of Hong Kong). Generally, the following tax deductions are available: (a) an employee can claim tax deductions (from salaries tax) for his or her mandatory contributions to an MPF scheme, subject to the maximum amount per year as prescribed in the legislation. The maximum deduction from 2015/2016 onward is HKD 18,000, and this is subject to change. Any contributions made exceeding 5% of an employee’s relevant income or HKD 1,500, whichever is more, would be considered as voluntary contributions and not tax deductible. (b) an employer can claim tax deductions (from profits tax) for the mandatory and voluntary contributions made by it to an MPF scheme to the extent they do not exceed 15% of the employee’s total annual emoluments; and (c) an employee can claim tax deductions for his or her contributions to an MPF-exempted ORSO scheme. The maximum amount deductible in any year of assessment should be the lower of the following three amounts: • his or her contributions to the MPF-exempted ORSO scheme in the year of assessment; • the amount of the mandatory contributions that he or she would have been required to pay if he or she had contributed as an employee to an MPF scheme; or • the maximum deductible amount (see subparagraph (a)) for the relevant year of assessment. Withdrawal from retirement schemes Whether an employee’s withdrawals (or deemed withdrawals) from a retirement scheme are taxable depends on the nature of the contributions and the circumstances in which the withdrawals are made. Generally, an employee’s withdrawal from an MPF scheme of his or her accrued benefits attributable to both employer and employee mandatory contributions is not assessable to tax. Withdrawals of accrued benefits from an MPF scheme are taxable only in the case of termination of employment where the employee’s service is less than 10 years and the employer has made voluntary contributions. Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Generally, for both MPF schemes and recognized ORSO schemes (i.e., MPF-exempted), when an employee receives benefits upon termination of service and the period of employment is less than 10 years, any amount in excess of the “proportionate benefit” (as defined in the tax legislation) is taxable. The employer contribution portion of any amount received from a registered ORSO scheme not due to termination of service, death, incapacity or retirement of the employee (such as payment of benefits during employment) is subject to tax. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? MPF schemes Under the MPFO, an employer must make a minimum monthly contribution of an amount equal to 5% of an employee’s relevant income (currently capped at HKD 30,000 per month). An employee (except for one whose monthly relevant income is less than HKD 7,100) must contribute a minimum of 5% of his or her monthly relevant income (currently capped at HKD 30,000 per month) to the scheme. The obligation on an employer to pay the monthly contributions arises if the employee is in continuous employment for more than 60 days. Conversely, no contributions would be payable if the employee is in continuous employment for less than 60 days. However, an employer could not evade its obligations by intentionally breaking up an employee’s employment into periods of less than 60 days each; an employer must still make the necessary contributions if evidence indicates that the employment relationship lasts for 60 days in total or more. An employer commits an offense if it fails to make mandatory contributions to an MPF scheme in respect of an eligible employee. ORSO schemes Under a defined contribution scheme, an employer is required to contribute in accordance with the governing rules in the trust deed constituting the scheme. For defined benefit schemes, employers would need to contribute at a level necessary to fund the benefits on an ongoing basis. In practice, this means that the employer must implement the recommendations of the actuary regarding funding and periodical actuarial reviews. The MPFA may impose on the employer of an MPF-exempted ORSO registered scheme a surcharge on the amount of contribution arrears. An employer will also need to pay a fee to the MPFA in respect of each period of 12 months during which the scheme continues to be a registered scheme and beginning on the first or any subsequent anniversary of its registration and part of such period. This fee shall be paid to the MPFA not later than one month after the first day of the period in respect of which it is payable. If the fee is not paid by each such deadline, the MPFA could additionally impose on the employer a surcharge. The MPFA could also initiate legal proceedings to recover any contributions in arrears, the financial penalty and/or contribution surcharge as a debt due. Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? MPF schemes An employer has the choice as to which MPF scheme it will offer to an employee. Once enrolled in an MPF scheme, the employee has the right to choose the investment options within the MPF scheme. Relevantly, the legislation is changing such that from April 1, 2017 onwards each MPF scheme has to offer a Default Investment Strategy (the “DIS”). If, for any reason, scheme members do not give their scheme trustees an investment instruction for their MPF benefits, their MPF benefits will be invested automatically in accordance with the DIS. Investments under MPF schemes are subject to strict regulations to safeguard the interests of scheme members. MPF investments must only be made by investment managers who are recognized by or licensed to carry on regulated activities by the relevant regulatory authorities (e.g., the Securities and Futures Commission (“SFC”)). Both MPF trustees and investment managers are bound by the duties and powers as set out in the law regarding the administration and investment of the funds under an MPF scheme. MPF investments must be “permissible investments” as prescribed in the MPFSO and are subject to general restrictions, such as the spread of the investments, borrowing and lending of securities, and currency exposure. Scheme trustees are required by the MPFA to provide details of the schemes they operate to enable participating employers and members to make appropriate decisions according to their own needs. Trustees are obliged to have a standardized fee table for disclosure of fees and charges; have fund fact sheets to summarize key information in relation to the particulars and performance of a fund; provide a fund expense ratio that shows the total level of fund expenses as a percentage of the fund value; and provide an annual benefit statement that confirms the scheme and membership details. Non-compliance with the above disclosure requirements would attract sanctions imposed by the MPFA. Additionally, scheme trustees must report an employer’s default in paying mandatory contributions to the MPFA, and the MPFA will accordingly take action against the employer. ORSO schemes Under the ORSO, in relation to MPF-exempted ORSO schemes, not more than 10% of the assets of the scheme should consist of “restricted investments” as defined by the ORSO. Also, save to the extent allowed under the ORSO, no asset of the scheme should consist of investments in the share capital of a body corporate which is neither listed on a recognized stock market as defined in the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong) (the “SFO”) nor publicly listed on a specified stock exchange. Further, under the MPF Exemption Regulation, trustees and investment managers of the scheme must ensure that derivatives are not used in a way that results in the assets of the scheme being leveraged. They must also ensure that money is not borrowed for any purpose of a scheme except to pay accrued Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 benefits in respect of scheme members, or to settle transactions involving the acquisition or disposal of securities or other investments relating to the scheme. Any loan to the relevant employer of a scheme or to its associate from the assets under the scheme is strictly prohibited. Employers are required to disclose to scheme members details including: the criteria and conditions of membership, how members’ and the employer’s contributions are calculated, what benefits are payable under the scheme, how such benefits are calculated, the conditions on which the benefits are paid, which benefits (if any) are payable on a discretionary basis, any amendment made to the scheme particulars, termination of the scheme, and when a member ceases employment, the particulars of his or her accrued benefits under the scheme. Furthermore, employers must provide each scheme member with an annual statement of his or her benefit entitlement under the scheme. Under the ORSO, each scheme member or a consultative committee of a scheme formed by election among scheme members has the statutory right to request the above information from the relevant employer and to inspect relevant documents. The SFC and the MPFA monitor the compliance of both MPF and ORSO scheme trustees and investment managers with the above requirements and may impose sanctions in the event of non-compliance. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? The Mandatory Provident Fund Schemes (General) Regulation sets out the requirements on reporting and disclosure obligations on MPF trustees. The MPFA has published a Code on MPF Investment Funds and various Guidelines that provide guidance and elaborate on these requirements. General reporting requirements include the filing of monthly returns, quarterly and annual statements and financial reports to the MPFA. To ensure that employers and scheme members are provided with adequate information to enable them to make informed investment decisions, the MPFA has issued a Code on Disclosure for MPF Investment Funds to give guidance to trustees and other service providers about the disclosure of information on MPF schemes and constituent funds and information about fees, charges and performance. These include but are not limited to: • Fee Table - a standardized table for disclosure of fees and charges, as may be updated from time to time when there is any change in fees. • On-going Cost Illustration - a figure that illustrates the total effect of fees and charges payable in dollar terms by converting the latest Fund Expense Ratio figure into dollars and adding that to any direct charges that a scheme member might pay, such as a contribution charge or offer spread. • Fund Fact Sheet (“FFS”) - a summary of key information including particulars, e.g., fund size, investment objectives and performance of a fund. At least two FFS will be issued to scheme members for each financial period, one reporting as at the end of the financial period and the other as at a date six months after the end of the financial period. Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • Fund Expense Ratio (“FER”) - a ratio that measures the expenses incurred in investing through a fund expressed as a percentage of fund size. The FER is calculated based on data from the latest completed financial period. It is not necessary for funds with less than two years of history to show an FER. • Annual Benefit Statement - an historical record of the member’s account at a point in time. It confirms scheme membership and membership details, the status and the number of accounts held by the member. It also allows scheme members to check the income and expenditure of their accounts (including contributions, transfers and transactions), account balance and accruals, the extent to which they are vested, and the gains and losses associated with their accounts over the relevant financial period. The MPFA is empowered to regulate and monitor the operation of the MPF system and the MPF scheme trustees’ compliance with statutory requirements. If the MPFA finds any of the approved trustees is breaching any statutory requirements, the MPFA may take enforcement measures, such as imposing fines or issuing warnings so that remedial actions can be taken. If the breach is of a serious nature, an audit on the trustee may also be conducted. The SFC is involved in the regulation of MPF products as well but only to the extent that their offering documents and marketing materials are required to be authorized by the SFC prior to their issue or publication in Hong Kong. The issue of any unauthorized advertisement, invitation or document to the public in Hong Kong to participate or invest in MPF schemes or pooled investment funds may amount to an offense under section 103(1) of the SFO. The SFC is empowered under section 105(1) of the SFO to authorize any advertisement, invitation or document referred to in section 103(1) and to impose any corresponding authorization conditions as it considers appropriate. Notably, as of January 30, 2015, the MPFSO and ORSO were amended to allow disclosure of information by administrators and employers to foreign tax authorities, such as the United States Internal Revenue Service under the Foreign Account Tax Compliance Act. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? MPF schemes Generally, an employer has a rather passive role in the administration and operation of an MPF scheme which is a master trust scheme. MPF schemes are administered by MPF trustees and their delegates. Generally it will be the trustee that has the power of amendment. Depending on the rules of the particular schemes, participating employers may have the right to be consulted for any amendments to the terms of the MPF scheme. The position may be different for an employer-sponsored scheme. An employer tends to have more control over the operation of such scheme and that may include the power to amend the terms of the scheme. Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 ORSO schemes The ability of the employer to amend or alter the terms of the ORSO scheme will depend on the Trust Deed governing the scheme. In some cases, either the employer or the trustee has the power to amend. In other cases, the power of amendment needs to be exercised jointly by the employer and the trustee. The ORSO also sets out certain restrictions on the power of amendment. The ORSO requires that the terms of the ORSO scheme: (i) do not enable any person, without the consent of the scheme member concerned, to alter to the member’s detriment either his or her accrued rights under the scheme or his or her vested benefits, unless such alteration is consequential upon an amendment to the terms of the scheme consented to by not less than 90% of the members of the scheme; and (ii) provide that where an alteration described in sub-subparagraph (i) occurs, any vested benefit which the member concerned is entitled to receive as of the date of such alteration under the terms of the scheme as if the condition precedent (if any) of such entitlement had been satisfied shall, if he or she so elects, become payable to him or her. The MPF Exemption Regulation contains further restrictions applicable to MPF-exempt ORSO schemes. It provides that: “The governing rules of a relevant scheme shall provide for the situation that, where the relevant employer decides to reduce any member’s future benefits or rights under the scheme, the member is given an opportunity to become a member of a registered scheme.” 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? MPF schemes Generally, an employer may terminate its participation in an MPF scheme which is a master trust scheme by giving notice to the trustee of the MPF scheme. There is a statutory process which the employer can adopt. The employer will also need to comply with the terms of the MPF scheme in ceasing its participation, e.g., by giving the necessary notice. Where there is an employer-sponsored scheme, the employer may have the power to terminate the scheme, and it needs to exercise that power in accordance with the terms of the scheme. Such termination may give rise to the right of employees to switch their accrued benefits between schemes. Hong Kong A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 ORSO schemes An employer may have the power to terminate an ORSO scheme under the Trust Deed governing the scheme. An employer must give notice of the termination of the scheme to the MPFA shortly afterwards. On termination, the employer (and the trustee of the ORSO scheme) will have other obligations such as to apply for cancellation of ORSO registration or MPF exemption where this is relevant. An employer will remain liable to pay any periodic fee due before the effective termination date of the scheme. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes. Generally, employees can transfer their accrued benefits between MPF accounts. The MPF contributions made by an employee and their previous employer are held in a contribution account under the MPF scheme selected by the previous employer (i.e., the original scheme). When an employee changes jobs, he or she may treat the accrued benefits (i.e., the accumulated contributions and investment returns) in one of the following ways: • transfer the accrued benefits from the contribution account in the original scheme to a personal account in any other master trust scheme or industry scheme held by the employee; or • transfer the accrued benefits from the contribution account in the original scheme to the contribution account in the scheme of the new employer. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No. Typically, benefits under an MPF scheme or an ORSO scheme are paid out upon a member’s termination of employment (including upon retirement). Upon such payment, the member ceases to have any right under the scheme. Pension schemes are rare in Hong Kong. Hong Kong Contributed by: Duncan Abate & Hong Tran, Mayer Brown JSM A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 India Contributed by: Trilegal Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? The state provides a pension, retirement and social security program for government employees. However, these programs do not cover private sector employees. With respect to employees in the private sector, the mandatory social security requirement is provided under the Employees’ Provident Funds and Miscellaneous Provisions Act 1952 (“EPF Act”) – and the government authority under the EPF Act is the Employees’ Provident Fund Organisation (“EPFO”). Under the EPF Act, there is a requirement to make monthly contributions on behalf of both the employer and the employee at 12% of the relevant components of the employee’s wages. As a member of these funds, the employee would later be able to avail various benefits under the EPF Act. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Yes, employers in the private sector are required to maintain retirement plans/schemes. These requirements arise from the EPF Act under which employers covered under the EPF Act are required to make contributions in respect of the eligible employees to the Employees’ Provident Fund Scheme 1952 (“EPF Scheme”) and the Employees’ Pension Scheme 1995 (“EPS”). 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The EPF Act is the principal social security statute that governs the EPF Scheme and the EPS. The EPS was framed for the purpose of providing for a superannuation pension, retiring pension or permanent total disablement pension along with a widow/widower’s pension, children pension and orphan pension to the beneficiaries of eligible employees. The EPF Act applies to factories engaged in industries listed in Schedule I to the EPF Act employing 20 or more persons and other establishments with 20 persons or more as notified by the Central Government. Further, the Central Government may, by providing two months’ notice or upon receiving a specific request from a majority of the workers, extend the applicability of the EPF Act to establishments employing less than 20 persons. An employee is entitled to the benefits under the EPF Act if his or her basic wages are not more than INR 15,000. However, if the employee has been a member of the fund, he or she will continue to remain a member regardless of any change in the salary (i.e., even if the basic wages cross the threshold). Over and above the mandatory contributions required under the EPF Act, the employer and/or the employee can also choose to make contributions to the National Pension Scheme (“NPS”) as a voluntary investment option. There are two types of sub-accounts under the NPS account. The Tier-I account is a non-withdrawable retirement account which can be withdrawn only upon meeting certain prescribed exit conditions. The Tier-II account is a voluntary savings facility available as an add-on to any Tier-I account holder. 4. What are the key features of the tax framework that applies to retirement plans/schemes? With respect to the employer’s contribution to the statutory provident fund under the EPF Act, such contribution amount is fully exempt from tax. With respect to the employee’s contribution to the statutory provident fund, the employee can also claim this amount as a deduction for the purposes of tax. Further, the payment that the employee receives at the time of retirement or termination of service is also fully exempt from tax. With respect to the voluntary contributions made to the NPS, deduction for the purposes of tax can be availed by an India A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 employee up to a maximum amount of INR 50,000. When a contribution is made directly to the NPS by the employer, this contribution is considered a part of the employee’s perquisite compensation – which is treated as part of the employee’s salary for the purpose of tax. However, to the extent that the employer’s contribution does not exceed 10% of the “eligible salary”, the employee would be allowed a deduction equivalent to the amount contributed by the employer. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Yes. Under the EPF Act, in addition to the employee’s contribution of 12% calculated on the basic wages, dearness allowance and retaining allowance, the employer is also required to contribute a total of 13.36% on these components which is split into: (a) 8.33% towards the employee’s pension account (subject to a maximum of INR 1,249.50); (b) 3.67% towards the employee’s provident fund account; (c) 0.5% towards the Employee’s Deposit Linked Insurance account (subject to a maximum of INR 75); and (d) 0.86% over administrative charges. The contribution is managed by the EPFO unless otherwise exempted. However, for domestic employees, the employer is under no legal obligation to make contributions on the amount in excess of INR 15,000. That said, it is relevant to note that the contribution for international workers should be made on their entire global salary. An employee working for an establishment in India (to which the EPF Act applies) and holding a foreign passport would fall within the definition of an “international worker” under the EPF Act and contributions would need to be made in respect of such employees, except in limited instances. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Paragraph 52 of the EPF Scheme and Paragraph 26 of the Employees’ Pension Scheme 1995 require the EPFO to deposit all the monies contributed in the Reserve Bank of India or the State Bank of India or in any other Scheduled Bank approved by the Central Government or invest in the securities listed under section 20(a) to (d) of the Indian Trusts Act 1882, subject to the directions of the Central Government. Where an employer is exempted from the EPF Act as a result of the employer operating a provident fund scheme that is more beneficial than that stipulated under the EPF Act, the Board of Trustees (“BoT”) appointed to manage such India A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 provident fund is required to make investments of the contributions to such fund as directed by the Central Government. Whoever contravenes such directions around the investment of the fund is liable to be punished with imprisonment ranging from one to six months and a fine of up to INR 5,000. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? While the EPF Act does not mandate any employee consultation, there are various records, registers and filings that are required to be maintained and submitted by an employer under the EPF Act. These requirements are enforced by the EPFO. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Under the EPF Act, it is mandatory for the employer to follow the terms of the EPF Scheme and the EPS and an employer does not have the ability to alter the terms of the EPF Scheme and the EPS. However, section 17 of the EPF Act exempts certain establishments from the schemes laid down under the EPF Act and allows employers to maintain their own provident fund and pension schemes. This exemption is subject to certain conditions, such as, the rules of such provident fund with respect to the rates of contribution should not be less favorable than those specified under the EPF Act, and the employees should be in enjoyment of other provident fund benefits which, on the whole, are not less favorable to the employees than the benefits provided under the EPF Act or any scheme in relation to the employees in any other establishment of a similar character. Such an exemption is provided if the appropriate government after consultation with the Central Board is satisfied with the provisions of the alternate schemes maintained by the employers. In such cases, the employer is required to establish a BoT for the administration of the provident fund consisting of such number of members as may be specified in the Scheme. This BoT is required to maintain detailed accounts to show the contributions credited, withdrawals made and interest accrued in respect of each employee, submit such returns to the Regional Provident Fund Commissioner or any other officer as the Central Government may direct from time to time, invest the provident fund monies in accordance with the directions issued by the Central Government from time to time and transfer, where necessary, the provident fund account of any employee. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? An employer is mandated to contribute towards the provident fund and pension under the EPF Act and cannot withdraw or terminate the same. In case the employer is exempted under section 17 and is managing its own provident fund or pension scheme through the BoT, such exemption could be cancelled if the conditions of the exemption are not complied India A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 with. Further, where the conditions are not followed, a penalty with imprisonment ranging from one to six months and a fine of up to INR 5,000 may also be applicable. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes, employees can take their pension/retirement benefit entitlement under the EPF Act with them when they change jobs. Where a member of the provident fund moves to another job, he or she can ask for the balance of the provident fund in his or her previous account to be transferred to his or her new account in the new establishment. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No, there are no such requirements under the EPF Act. India Contributed by: Ajay Raghavan, Trilegal A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Indonesia Contributed by: SSEK Indonesian Legal Consultants Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? In 2011, the Indonesian government reformed its National Social Security System and passed Law No. 24 on the Social Security Organizing Body (Badan Penyelenggara Jaminan Sosial or “BPJS”) (the “BPJS Law”) to help meet the basic needs of the country’s population. The types of social security programs mandated under the BPJS Law are as follows: • Health Care Security; A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • Work Accident Security; • Old Age Security; • Pension Security; and • Death Security. BPJS of Health Health Care Security is managed by BPJS of Health and is intended to cover all employees and residents (including foreign residents after working in Indonesia for six months) under a single health care system. BPJS of Employment Employment Security, including work accident, old age, pension, and death benefits, is managed by BPJS of Employment. All employees in Indonesia were required to register with BPJS by January 1, 2015. Everyone else must register by January 1, 2019. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are required to enroll employees in the old age security and pension programs under BPJS of Employment. Also, employees are entitled to enhanced statutory minimum termination benefits upon reaching the retirement age. No other retirement plans/schemes are required. Given the mandatory old age security and pension programs under BPJS of Employment, and the additional generous statutory minimum termination benefits upon reaching the retirement age, supplementary private pension plans are not commonly provided by employers in Indonesia. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The principal statute governing the BPJS program is Law No. 40 of 2004, dated October 19, 2004, regarding the National Social Security System. Indonesia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Old age security The main benefits of BPJS of Employment include old age security, which is a cash benefit paid when participants reach retirement age, pass away, suffer a permanent total disability, or leave Indonesia permanently. If the participant passes away, the benefits will be paid to his or her legal heirs. Pension security Another benefit is pension security, which provides regular payments to participants or participants’ beneficiaries after participants retire, suffer a permanent total disability, or pass away. Initially, the pension benefit paid to a participant will be between IDR 300,000 and IDR 3,600,000 per month, or between USD 23 and USD 272 at current exchange rates. The benefit is payable until the participant passes away. Participants can begin receiving payments only after they have: (i) been enrolled in the program for at least 15 years, or 180 months; and (ii) reached retirement age. Retirement age is currently 56, but will rise to 57 beginning January 1, 2019. The retirement age will then gradually increase by one year every three years until it reaches 65. If an employee has reached retirement age but has not been enrolled in the pension security program for 15 years, the employee is entitled to the total accumulation of contributions paid with its additional yield (if any). Contributions Employers and employees, by payroll deduction, must make mandatory contributions to BPJS of Employment for the old age security and pension security plans, as discussed further under question 5. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Income received in the form of pension benefits, old age allowance, or old age security that is paid in a lump sum is subject to a final employee income tax at progressive rates ranging from 0% to 25%. Payments made in installments over a period of more than two years are subject to non-final employee income tax at progressive rates ranging from 0% to 30%. Indonesia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Old age security The contribution for the mandatory old age security program is 5.7% of the employee’s monthly compensation of which 3.7% is paid by the employer and 2% by the employee by way of payroll deductions. The monthly compensation consists of base salary plus fixed allowance(s), if any. Pension security The contribution for the mandatory pension program is 3% of the employee’s monthly compensation of which 2% is paid by the employer and 1% by the employee by way of payroll deductions. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Companies in Indonesia are required to register employees in the Indonesian government’s employment social security programs. Employers that fail to register employees in the programs will be subject to warning letters, fines and will not be eligible to receive certain services from the government, including the issuance and renewal of necessary business licenses, approvals to employ foreign nationals, and building permits. Individuals who fail to register with BPJS will be unable to obtain a driver’s license, land certificates, vehicle ownership certificates, and passports. Investments under BPJS are subject to strict regulations to safeguard the interests of participants. Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or OJK) and National Social Security Council (Dewan Jaminan Sosial Nasional or DJSN) monitor the BPJS for compliance. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Employers must register new employees with BPJS within 30 days from the commencement of employment. If there are any changes to the data of a participant or his or her family, the changes must be reported to the employer and the employer must report those changes to BPJS. Participants who change jobs must show their new employer their BPJS membership card. Employers collect program contributions from employees by way of payroll deduction and must transfer such contributions together with the employer contributions to BPJS. Employers are subject to a fine in the amount of 2% per month for delayed remittance of the employer and employee contributions. BPJS is required to provide participants with information on their balance sheet once a year. Indonesia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? The above noted BPJS Health and Employment social security schemes, which include work accident, old age, pension and death benefits, are based upon legislation, are mandatory and cannot be altered by the employer. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? As indicated above, employers are required to participate in the BPJS social security program and withdrawal or termination of such participation is not possible. If an employer does not enroll employees in the BPJS pension security or old age security program, BPJS of Employment may impose the following progressive sanctions: written warnings, fine, and the withdrawal of certain public services under the prevailing laws. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes. In the event a participant changes jobs, the participant is required to report their BPJS membership to the new employer by showing their BPJS card. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? There is no such requirement under BPJS of Employment. Indonesia Contributed by: Richard D. Emmerson, SSEK Indonesian Legal Consultants A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Japan Contributed by: Anderson Mori & Tomotsune Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? In Japan, there are three types of pension programs providing various levels of coverage. These are: (a) the National Pension Program (“kokumin-nenkin”) (the “NPP”) for all persons who are living in Japan and who are at least 20 but under 60 years of age; (b) the Employee Pension Insurance Program (kosei-nenkin hoken) (the “EPIP”) for employees working at private sector enterprises, the Mutual Aid Pension Program (kyosai-nenkin) (the “MAPP”) for public servants and teachers in private schools, and the National Pension Fund (kokumin-nenkin kikin) (the “NPF”) for others; and A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (c) the corporate pension programs voluntarily established by individual companies to provide benefits in addition to (a) and (b). Level 3 Corporate Pension Program Level 2 Employee Pension Insurance Program Mutual Aid Pension Program National Pension Fund Level 1 National Pension Program Employees of a Company Employees of the Japanese Government Other Among these pension programs, the NPP and the EPIP are administered by the Japanese government. The NPP is a public pension program established under the National Pension Act, which provides basic benefits, such as old age basic pension, disability basic pension and survivors’ basic pension, to all eligible persons in Japan. In principle, every person who is living in Japan and at least 20 but under 60 years of age must enroll in the NPP. According to their status, the insured are categorized as (a) Category 1 insured persons (i.e., the insured persons except Category 2 or 3 insured persons. For example, agriculture, forestry, or fishery business operators, self-employed persons and students fall within this category); (b) Category 2 insured persons (i.e., persons enrolled in the EPIP or MAPP); and (c) Category 3 insured persons (i.e., Category 2 insured person’s dependent spouse). Category 1 insured persons must pay NPP premiums to the NPP by themselves. By contrast, Category 2 and 3 persons are not required to pay NPP premiums by themselves; instead, the EPIP or MAPP makes the contributions to the NPP on their behalf. The EPIP is a public pension program established under the Employees’ Pension Insurance Act (the “EPIA”), which provides additional benefits, such as old age employees’ pension, disability pension and survivors’ employees’ pension, to employees working at private sector enterprises in Japan. Any employer who falls into one of the following categories (the “EPIP Employer”) must enroll in the EPIP: (a) an individual person who hires five or more employees and conducts any of the businesses listed in the EPIA in Japan; (b) a company employing one or more employees in Japan; or (c) an owner of a ship employing one or more paid crew member(s) in Japan. Employees of an EPIP Employer are obliged to become participants of the EPIP as a condition of their employment. EPIP Japan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 premiums are borne equally by the EPIP Employer and its employee, although it is the EPIP Employer who is obliged to pay the entire premium. The EPIP premiums to be borne by the employee are usually withheld from the employee’s wages. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are not required to, but may voluntarily, establish corporate pension and retirement programs. Popular corporate pension and retirement programs include an internally reserved type retirement allowance plan (the “RAP”), a Defined Contribution Pension Plan (kakuteikyoshutsu nenkin) (the “DCPP”) and a Defined Benefit Pension Plan (kakuteikyufu kigyo-nenkin) (the “DBPP”). RAP A RAP is a retirement allowance plan established by an employer. Unlike DCPPs and DBPPs, there is no law which provides the statutory framework for RAPs. An employer may establish its own RAP at its discretion. An employee who satisfies requirements for eligibility under the RAP governing rules may participate in his or her employer’s RAP. An employer is not required to make periodic contributions. Retirement allowances will be paid from the employer’s assets. Accordingly, funds for a RAP are not segregated from the employer’s assets. The amount of retirement allowance under a RAP is determined by formulae stipulated in the retirement allowance regulations. Accordingly, in principle, the amount of retirement allowance under a RAP is guaranteed. DCPP A DCPP is a pension plan established under the Defined Contribution Pension Act (the “DCPA”). An employer who falls within a category of an EPIP Employer may establish its own DCPP or participate in an existing DCPP, if the governing rules of such existing DCPP allow. An employee who is working in Japan and satisfies requirements for eligibility under the DCPP governing rules may participate in his or her employer’s DCPP. Once an employee becomes a participant of a DCPP, his or her employer is required to make a monthly contribution regarding such employee in accordance with the DCPP governing rules. If the DCPP governing rules allow, participants may make a monthly contribution themselves. Japan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Funds reserved for each participant are segregated from the employer’s assets and managed by a DCPP trustee in accordance with each participant’s investment instructions. The amount of pension benefits under a DCPP is varied depending on any profits or losses resulting from the management of the reserved funds for each participant. Accordingly, there is no guaranteed amount of pension benefits. DBPP A DBPP is a pension plan established under the Defined Benefit Pension Act (the “DBPA”). An employer who falls within a category of an EPIP Employer may establish its own DBPP or participate in an existing DBPP, if the governing rules of such existing DBPP allow. An employee who is working in Japan and satisfies requirements for eligibility under the DBPP governing rules may participate in his or her employer’s DBPP. An employer participating in a DBPP must make contributions at least once a year in accordance with the DBPP governing rules. If the DBPP governing rules allow, participants may make contributions themselves. The amount of contributions must be determined based on actuarial review and reviewed at least every five years. Reserved funds are segregated from the employer’s assets and managed by a DBPP trustee in accordance with the employer’s instructions. The amount of pension benefits under a DBPP is determined by formulae stipulated in the DBPP governing rules. Accordingly, in principle, the amount of pension benefits under a DBPP is guaranteed. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? RAP Unlike DCPPs and DBPPs, there is no law which provides the statutory framework for RAPs. DCPP The DCPA provides the statutory framework for the DCPP system and the Ministry of Health, Labor and Welfare (the “MHLW”) is the government authority regulating and supervising the operation of the DCPP system. Under the DCPA, material requirements include, but are not limited to, the establishment of governing DCPP rules, employers’ mandatory contribution to a DCPP (see question 5 for details), the separation of assets from employers, the Japan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 appointment of DCPP plan administrators and DCPP trustees, the fair and appropriate selection of investment products and the provision of investment education to participants. DBPP The DBPA provides the statutory framework for the DBPP system, and the MHLW is the government authority regulating and supervising the operation of the DBPP system. Under the DBPA, material requirements include, but are not limited to, the establishment of governing DBPP rules, employers’ mandatory contribution to a DBPP (see question 5 for details), the periodical actuarial review, the separation of assets from employers, the appointment of DBPP trustees, and the disclosure of financial conditions of the DBPP. 4. What are the key features of the tax framework that applies to retirement plans/schemes? RAP Retirement allowances under a RAP will be recognized as retirement income and deduction for retirement income will apply. DCPP and DBPP At the time of contribution, no tax is imposed. All amounts of contributions made by employers can be included in deductible expenses. All amounts of contributions made by participants are deductible from his or her income. Old pension benefits will be recognized as other income, and deduction for public pension will apply. Lump sum benefits will be recognized as retirement income, and deduction for retirement income will apply. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? RAP The employer is required to come up with the necessary funds to pay retirement allowances to eligible employees under the program. However, the employer is not obliged to periodically make contributions. DCPP Once an employee becomes a participant of a DCPP established by an employer, the employer is required to make a monthly contribution regarding such employee in accordance with the DCPP governing rules. A monthly contribution per DCPP participant may not exceed (if the employer has a DBPP in addition to the DCPP) JPY 27,500 and (if the Japan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 employer does not have a DBPP) JPY 55,000. The employer will also need to pay periodic administration fees to financial institutions that administer a DCPP. DBPP An employer who has a DBPP must make contributions at least once a year in accordance with the DBPP governing rules. The amount of contributions must be determined based on actuarial review and reviewed at least every five years. An employer will also need to pay periodic administration fees to financial institutions that administer a DBPP. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? RAP There are no applicable rules. DCPP Investments under DCPP schemes are subject to strict regulations to safeguard the interest of scheme members. Employers must appoint licensed DCPP plan administrators and DCPP trustees. DCPP trustees must be financial institutions such as trust banks, life insurance companies or general insurance companies. Both DCPP plan administrators and DCPP trustees are bound by the duties and powers as set out in the DCPA. DCPP investments must only be made by DCPP trustees in accordance with each participant’s instructions. DCPP plan administrators are required to select appropriate financial products in which participants may make an investment and provide to participants appropriate information regarding such financial products to enable participants to make appropriate investment decisions according to their own needs. DBPP Employers must appoint DBPP trustees that manage and administer funds for a DBPP. DBPP trustees must be financial institutions such as trust banks, life insurance companies and licensed investment advisers. DBPP trustees must follow the investment principle of the DBPP established by employers and adequately spread investments to reduce associated risks. Japan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? RAP If an employer establishes or amends the governing RAP rules, the employer must obtain an opinion of the employee representative. The employee representative means a labor union to which the majority of employees belong or (if there is no such labor union) an employee/employees representing the majority of employees. Thereafter, the employer must submit the governing RAP rules/the amended governing RAP rules together with an opinion of the employee representative to the competent Labor Standards Inspection Office (the “LSIO”). There are no reporting and disclosure requirements. DCPP If the employer establishes or amends the governing DCPP rules, the employer must obtain the consent of the employee representative. Thereafter, the employer must submit the governing DCPP rules/the amended governing DCPP rules together with the consent of the employee representative to the MHLW and get approval of the MHLW. To enable DCPP participants to make informed investment decisions, in accordance with the relevant guidelines, the employer must provide investment education, and DCPP plan administrators must provide adequate information regarding financial products in which DCPP participants may make an investment. DBPP If the employer establishes or amends the governing DBPP rules, the employer must obtain the consent of the employee representative. Thereafter, the employer must submit the governing DBPP rules/the amended governing DBPP rules together with the consent of the employee representative to the MHLW and get approval of the MHLW. The employer is encouraged to provide employees, at least once a fiscal year, with information on its DBPP such as the standard amount of pension benefits, the number of participants, and those who receive pension benefits and their financial situation. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Procedural requirements RAP The employer must first amend the governing RAP rules and obtain an opinion of the employee representative regarding Japan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 such amendments. Thereafter, the employer must submit the amended governing RAP rules together with the opinion of the employee representative to the competent LSIO. DCPP & DBPP The employer must first amend the governing DCPP/DBPP rules and obtain the consent of the employee representative regarding such amendments. Thereafter, the employer must submit the amended governing DCPP/DBPP rules together with the consent of the employee representative to the MHLW and get approval of the MHLW. Requirements under the Labor Contract Act Further, under the Labor Contract Act, in the absence of reasonable grounds and strong justifications, any change to the governing RAP/DCPP/DBPP rules that is disadvantageous to the existing employees does not bind an existing employee who does not agree to such disadvantageous change. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? In the absence of reasonable grounds and strong justifications such as insolvency, the termination of RAP/DCPP/DBPP does not bind an existing employee who does not agree to the termination. In other words, the employer will be liable to pay such employee the retirement allowance or pension benefits under the RAP/DBPP as if it were not terminated or compensate damage if he or she was a DCPP participant. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? In principle, with respect to a RAP and DBPP, employees may not take their pension and retirement benefit entitlement with them. By contrast, employees may transfer DCPP funds reserved for them from the DCPP of their previous employer to the DCPP of their new employer. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? There is no such requirement for RAPs, DCPPs and DBPPs. Japan Contributed by: Nobuhito Sawasaki, Anderson Mori & Tomotsune A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Macau Contributed by: MdME Lawyers Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? The Macau government has a specific social security program for civil servants and a social security system for non-civil servants (“Social Security Fund”). The Social Security Fund operates under the principles of social insurance and pay-as-you-go. Its financial income comes mainly from the defined contribution of the beneficiaries enrolled in this system (employees, employers, and arbitrary system contributors) and 1% appropriation from the recurrent income of the government budget and appropriation from gaming. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The Social Security System is composed of an obligatory contribution system and an optional contribution system. Employees and employers who have employment relations are required to make obligatory contributions to the Social Security Fund, and other residents who comply with the relevant legal requirements can make contributions by enrolling in the arbitrary system. The Social Security Fund, however, does not provide its beneficiaries with a pension or retirement income but, rather, benefits like old age pension, disability pension, unemployment allowance, funeral allowance, marriage allowance, birth allowance and compensation for respiratory occupational disease. As such, it only provides basic social security to the residents. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are required solely to enroll their employees in the Social Security Fund and make the monthly social security fund contribution and retention and the quarterly payments. Employers are required to make a MOP 60 monthly payment, while employees pay MOP 30 a month for the Social Security Fund. Additional retirement plans or schemes are entirely up to the discretion of the employer, and their setting up, management and winding up is regulated under Decree Law 6/99/M, which was later revised by Law 10/2001. According to the above regulations, private pension plans are programs that provide for the right to pecuniary payments as a result of (a) early retirement, (b) old age retirement, (c) permanent incapacity for work, or (d) death. Pension plans may also provide for the right to pecuniary payments as a result of (a) serious illness, (b) long-term unemployment, or (c) final departure from the territory of Macau. Pension funds are autonomous assets created solely for the purpose of financing one or more pension plans. According to the type of guarantees provided, pension plans are classified as: (a) Defined benefit plans – wherein the pecuniary payments payable to the beneficiaries (individuals entitled to the pecuniary payments provided for in the pension plans) are predefined, and the contributions made are calculated so as to guarantee the respective payments; (b) Defined contribution plans – wherein the contributions are predefined and the pecuniary payments payable to the beneficiaries are determined according to such contributions; and (c) Mixed plans – which have the features of the two plans mentioned above. Macau A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Based on the form of financing, pension plans are classified as: (a) Contributory plans – wherein participants (individuals whose rights enshrined in the pension plans are defined according to personal and professional circumstances, regardless of whether or not they contribute to the respective financing) make contributions; (b) Non-contributory plans – wherein the financing is done exclusively by the associates (corporate entities whose pension plans are financed by pension funds). Pension funds can be either closed or open funds: (a) A pension fund is regarded as closed when the respective plan concerns only one associate or, if there are several founder members, there is a link in terms of business, association, profession or of a social nature between them and their consent is necessary for new associates to be included in the plan financed by the fund. Closed pension funds are established at the initiative of a company or groups of companies, associations, namely social or professional associations, or by agreement between employer and employee associations. (b) A pension fund is regarded as open when there is no requirement for any link between the various members of the respective plan, and joining such fund depends only on acceptance by the management company of the relevant fund. Open pension funds are established at the initiative of any entity authorized to manage pension funds, and their total net value is divided into units of participation represented by certificates. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Law 4/2010, “Social Security System”, which entered into force on January 1, 2011, sets the legal framework for the social security regime, which is executed by the Social Security Fund – the public entity in charge of the management of the social security in Macau. Decree Law 6/99/M, which was later revised by Law 10/2001, establishes the legal framework for private pension funds and private pension funds that are managed by insurers authorized to transact life insurance in Macau and supervised by the Macau Monetary Authority. Social Security System Under Law 4/2010, the material requirements applicable to the Social Security System include the differentiation of mandatory and optional regimes, registration of employees and employers in the Social Security Fund, employers’ and employees’ mandatory and optional contributions to the Social Security Fund, and rules regarding social security benefits (requirements, amounts, attribution). Macau A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Obligatory System The obligatory system applies to any Macau SAR resident who works under the authority and direction of an employer in return for remuneration. All employers, who employ workers under their direction in return for remuneration, must register with the Social Security Fund in the contribution month that immediately follows the commencement of the employment. Registration is required only once, and the employer will be assigned a permanent registration number. Any employer who establishes labor relations with an employee for the first time must enroll the employee and pay contributions for him or her in the contribution month that immediately follows the commencement of such relations. Enrollment is required only once and the enrolled person will be assigned a lifetime beneficiary number. The contributions of the preceding calendar quarter are payable quarterly in January, April, July and October, but contributions for casual workers are paid in the month that immediately follows the working month of the employee. Employers are required to pay a late payment interest if the contributions are paid within 60 days after the statutory payment period. If the contributions remain unpaid after 60 days from the statutory payment period, a fine that is calculated quarterly and not exceeding half of the amount of unpaid contributions will be charged on top of the late payment interest, but the minimum fine is MOP 500. Any employer who attempts to improperly appropriate all or part of the social security system contributions that he or she deducted according to law from the employee’s wages and fails to remit the money to the FSS within 60 days after the expiration of the statutory payment period may be subject to three years’ imprisonment or a fine. If the offender is a legal person, he or she may be subject to a fine of up to 360 days’ pay. Lack of registration of the employer or enrollment of the employee is punishable with a fine ranging from MOP 200 to 1000 per employee affected by the infraction. Optional System The optional system is applicable to: • employees who are married to their employer, or who have a de facto marital relationship with their employer, or who are a relative up to the second degree of relationship living and sharing meals with their employer; employees with relations established under a contract of apprenticeship training or through a vocational training system that aims to integrate the trainees into the employment market; Macau A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • civil servants who are already enrolled in the government social security program; and • other Macau SAR residents. Applicants can enroll at any time, except for other Macau SAR residents, who can only enroll if they stayed in Macau for at least 183 days during the 12 months preceding the application for enrollment. The contribution amount is MOP 60 per month. The contributions of the preceding calendar quarter are payable quarterly in January, April, July and October, and the full amount of contributions is to be paid by the beneficiaries themselves. If the beneficiary fails to pay the contributions within the statutory payment period, he or she cannot rectify the default contributions unless contributions are paid with a late payment interest within two months after the expiration of the statutory payment period or if the reason for failing to pay contributions within the statutory payment period is attributable to a force majeure situation accepted by the Administrative Committee of the Social Security Fund. There are no liabilities under the optional regime. Private Pension Funds Under Decree Law 6/99/M, the material requirements applicable to pension funds and pension plans include the financing obligations, the acquired rights, the method of paying benefits, the definition of the concepts that give rise to the right to receive the benefits and the documentation necessary to support the right to receive the benefits. They also include the types, constitution, joining and leaving of pension funds; the actuarial valuation of liabilities; the duration, closure and liquidation of pension funds; the rules governing pension funds’ assets; and the rules regarding management and deposit of pension funds. Private pension funds must be authorized by the Macau Monetary Authority. Authorization to constitute closed pension funds is granted based on the joint petition from the management companies and the founder members. The petition is submitted together with a draft of the deed of constitution, an actuarial valuation of the liabilities to be guaranteed by the fund, in the case of pension plans with defined benefits or mixed plans, and the respective financing plan. Authorization to constitute open pension funds is granted based on the petition from the management company duly accompanied by a draft of the management regulations. Macau A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 4. What are the key features of the tax framework that applies to retirement plans/schemes? The Macau tax system only grants tax concessions for the benefits arising out of the governmental social security schemes, but not the contributions per se. As such, contributions to the Social Security System are taxable, but the benefits that are received by the beneficiaries as a result of the enrollment in such schemes are considered nontaxable income. Pension plans and pension funds are exempt from all taxes, rates or duties in relation to: (i) all juridical acts inherent in their respective constitution and subscription from third parties; (ii) the initial assets that form the respective patrimony, including their applications and the income generated therefrom; (iii) the contributions made by the associates, participants and contributors; and (iv) the installments paid on its account, with the exemption applicable both to the payer and the beneficiary of such installments. Also, the contributions made to the pension plans and pension funds are considered revenue expenses of the year. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Under the Social Security System, employer contributions are mandatory and the employer must make a monthly contribution of MOP 60. In relation to private pension schemes, although the law classifies pension plans based on the form of financing in contributory plans and non-contributory plans (see question 2 above), the law does not specify whether employer contributions are mandatory and what their amount should be. In practical terms, however, employers are always required to contribute, but the amounts are established on a case-by-case basis in accordance with the conditions of the constitution of the funds/plans. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Patrimonial autonomy The assets of a pension fund can only be utilized for the execution of pension plans in respect of their beneficiaries. The only exceptions to this are related to the obligations arising directly from management or deposit expenses and those related to the payment of certain types of insurance. The pension plans contained in the respective deed of constitution, management regulations or membership contract can only and exclusively be funded through the fund’s assets or by its respective share in the total. The value of the said assets will be the maximum amount available to the management company, without prejudice to the liability of Macau A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 associates, participants and contributors to pay their contributions and the eventual minimum income guaranteed by the management company. Excess of financing If, during five consecutive years, the value of the pension fund corresponding to the financing of a defined benefit plan exceeds, by more than 20%, the value of total liabilities inherent in the plan, the respective contributions may be temporarily suspended or reduced. No money shall be returned to the associate if the excess value of the fund has resulted from an alteration in the pension plan. Financial, technical and actuarial management The assets, contributions and pension plans must at all times be balanced in accordance with actuarial systems for capitalization, which permit the establishment of equivalence between assets and expected income of the pension fund on the one hand and, on the other hand, future payments to beneficiaries and future charges for management and deposits. Pension funds that finance defined benefit plans may effect insurance to cover the risks of death and permanent incapacity for work and insurance for lifetime income, where the same is included in the pension plans. Funds financing defined contribution plans are obliged to have individual accounts for each participant. The technical, actuarial and financial plan must be reviewed at least once every three years. The management company can make payment of the installments due only if the amount accumulated in the fund is equal to or more than the total current value of such installments. Actuary in charge At the time of submission of the request for the constitution of the fund, the management company shall indicate the actuary responsible for each closed pension fund to be so constituted. Composition of assets The nature of the assets that make up the patrimony of pension funds and their respective percentage limits, including the general principles of congruence and valuation of these assets, is established by notice of the Macau Monetary Authority. There are no provisions concerning the failure to satisfy the above requirements. Macau A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? The company managing the pension fund must inform the participants of the pension plan contained in the deed of constitution or of the collective membership contract, and the said management company shall bear the burden of proof in respect of compliance with this requirement. In the case of contributory pension plans, failure to comply with the obligation referred to in the preceding paragraph results in the associate being liable to bear the participant’s share of the contribution, without any loss of guarantees for the participant, until the obligation is fulfilled. In closed pension funds and in the case of collective membership of open pension funds, the management company must provide, at the request of the participants, all the information necessary for a complete understanding of the contract. In closed pension funds that finance contributory plans, and in the case of individual membership of open pension funds, the contributors and the participants are entitled to receive from the management companies, at least once a year, information on the amount of contributions made by them or in their favor and in their name, and on the value of their shares in the total value of the fund. The law does not set out any penalties for the lack of compliance with duty of information. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Any amendment to the deed of constitution or to the pension fund management regulations, including the transfer of pension fund management between management companies, shall be subject to the Macau Monetary Authority’s approval. The amendments cannot reduce the amounts of pecuniary payments already fixed, nor affect the acquired rights of the beneficiaries. Where the amendments to the deed of constitution affect the pension plan, the respective petition for authorization must include, in addition to the new text, the actuarial valuation of the new liabilities that will be guaranteed by the pension fund and the respective financing plan, taking into account the number of participants and beneficiaries covered, the basis and method of financing utilized, and any other information that the Macau Monetary Authority deems necessary for a complete understanding of the financing plan of the respective pension plan. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? The law does not specifically establish the situations under which an employer may withdraw from or terminate a plan/ scheme. Macau A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Pension funds are wound up if: (i) there are no participants or beneficiaries; (ii) the respective object of the fund, for whatever reason, becomes redundant; (iii) the associates fail to pay the contributions to which they have committed themselves and the situation is not rectified and, within a period of one year, an adequate plan to rectify the situation is not submitted to the Macau Monetary Authority that is acceptable to this entity; and (iv) the pecuniary payments are not being duly financed. The law is silent about eventual liabilities in connection with withdrawal or plan/scheme termination. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes. If the working relationship between the associate and the participant ceases for reasons other than the conditions for the formation of the right to pecuniary payments, the participants can either receive the pecuniary payments to which they are entitled (payments made to the pension plans, plus the product of the respective capitalization less management charges, according to the terms set out in the respective pension plan) or transfer the same to a new pension fund. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? As a general rule, payment to beneficiaries of the pecuniary payments provided for in the pension plans is made in the form of a lump sum payment, unless another form has been expressly indicated in the respective pension plan. As such, the eventual need and provision of adjustment/increase of benefit payments after retirement would have to be determined in the pension fund contract. Macau Contributed by: Isolda Brasil, MdME Lawyers A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Malaysia Contributed by: Shearn Delamore & Co. Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? The Malaysian government provides the following types of scheme: (a) Employment Provident Fund (“EPF”) which provides retirement funds for employees who are employed in Malaysia; and (b) Social Security Fund (“SOCSO”) which provides social security for employment injury contingencies in favor of employees who are employed in Malaysia. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? It is compulsory under the EPF schemes for employers to make contributions according to the prevailing statutory rates of contributions. Please note that EPF is applicable to all employees except the following categories: (a) Nomadic aborigines; (b) Domestic servants, unless employed by a society, cooperative, business or a corporation; (c) Outworkers; (d) Any person detained in prison or other place of detention; (e) Non-Malaysian citizens; and (f) Persons over the age of 75. Although the above categories of persons are not legally obliged to contribute to the EPF, they may elect to do so. In addition, casual workers or independent contractors or self-employed persons who are not employees are not required to make contributions to the EPF. The contributions to the EPF scheme are credited to the individual employee account which is managed by the EPF Board. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The EPF scheme is governed by the Employees Provident Fund Act 1991 (the “EPF Act”). The material requirements under the said Act are the mandatory requirements required from employers and employees, the rate of contribution, the maintenance of a register by employers and the time period for payment. 4. What are the key features of the tax framework that applies to retirement plans/schemes? EPF contributions are tax deductible up to a maximum of MYR 6,000. An EPF member is also exempted from paying income tax for monies withdrawn from the EPF savings withdrawal schemes. Furthermore, returns from EPF investments are also tax-exempted. Malaysia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 5. If an employer adopts a retirement plan/scheme, are employer contributions required? It is compulsory for the employer to participate in/adopt the EPF. Accordingly, the employer is required to make contributions towards the EPF in line with the prevailing statutory rates. Section 45 of the EPF Act creates a statutory duty on the employer to pay monthly contributions payable both by itself and also for the employee into the individual employee accounts under the EPF. In relation to the mode of payment, section 43 of the EPF Act stipulates that every employee and employer within the meaning of the EPF Act shall be liable to pay monthly contributions on the amount of wages for the month at a rate set out in the 3rd Schedule of the EPF Act. The current employer contribution rate is 12% for employees earning above MYR 5,000 and 13% for employees earning MYR 5,000 and below. In respect of the employees’ monthly statutory rates, this has been reduced from 11% to 8% for members below the age of 60 and from 5.5% to 4% for members age 60 and above, effective March 2016 until December 2017. However members can opt to maintain the current contribution rates of 11%. Please note that the term “members” refers to employees who are members of the EPF. An employer who contravenes section 43 of the EPF Act shall be guilty of an offense and shall be liable to imprisonment for a term not exceeding three years or to a fine not exceeding MYR 10,000 and also liable to pay dividends accrued on such contributions had it been paid within the stipulated period. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Section 26(1) of the EPF Act, amongst others, provides how monies belonging to the fund are to be invested by the Board such as: (a) a deposit with Bank Negara, banks or financial institutions; (b) in shares of any public listed company listed on the stock exchange established in Malaysia and buying new shares, the issue or sale of which has been approved under the Securities Industry Act 1983; (c) in debentures of any public company; (d) in bonds or purchasing of mortgage papers, commercial notes, banker’s acceptances, money market papers, certificates of deposits, private debt securities, promissory notes and bills of exchange within the meaning of the Bills of Exchange Act 1949 and other negotiable instrument of similar nature; (e) in accordance with the provisions of the Trustee Act 1949; Malaysia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (f) to provide loans to the Government of Malaysia or the State Government; (g) by participating in or by carrying out dealings in any derivative instruments; or (h) to provide loans to members of the Fund subject to such terms and conditions as may be determined by the Board for the purpose of purchasing or building a house. Section 26(2) of the EPF Act, further provides that the Board may, with the written approval of the Minister, invest monies belonging to the Fund in the following manner: (a) to be deposited in any bank or financial institution established by or under any written law; (b) to be invested in any joint venture; (c) by participating in any privatisation program; (d) to provide loans to any company incorporated under the Companies Act 1965 or any corporation established by or under any written law; (e) by investing in any investment outside Malaysia; or (f) investing in any other form of investment. In the event the member of the Board fails to discharge his or her duties as per the EPF Act, the Minister of Finance can revoke the appointment without assigning any reasons. Furthermore, the EPF Act provides that a disciplinary committee of the Board shall be responsible for matters relating to discipline of the officers and servants of the Board. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? An employer is required to keep a register containing the information as required by the EPF Rules, and such register must be available for inspection for up to six years. A person or body who ceases to be an employer must inform the EPF. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? EPF is a scheme governed by statute. Hence, employers are not permitted to alter the terms of the schemes. Malaysia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? A company is not permitted to withdraw from or terminate the EPF and SOCSO schemes, unless the company has ceased to be an employer of the employee. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Where employees change jobs, the employees can take the contributions made by the previous employer with them. The new employer will be liable to continue making the contributions as prescribed under the statutes. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? All benefit payments to EPF are subject to the prevailing contribution rates at any material time. Malaysia Contributed by: Sivabalah Nadarajah & Wong Kian Jun, Shearn Delamore & Co. A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Myanmar Contributed by: Rajah & Tann NK Legal Myanmar Company Limited Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? Currently, the only pension or retirement income programs in place are provided for under the Political Pension Law 1980 (subsequently amended in 1994, 2000 and 2001) and the Public Servant Law 2013. These apply only to retirees from the government and public service. In addition to the above, several social security programmes have been implemented; these are instituted under the Social Security Law 2012 (the “SSL”). Under Section 11(a) of the SSL, it is compulsory for all establishments with the prescribed minimum number of employees (currently set as five employees) or more to register with the relevant township social security office and to make the stipulated contributions to the social security fund. Under Section 13 of the SSL, the Social Security Board (the “SSB”) is tasked to manage and keep the following categories of social security systems: A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (a) Health and Social Care Insurance System; (b) Family Assistance Insurance System; (c) Invalidity Benefit, Superannuation Pension Benefit and Survivors’ Benefit Insurance System; (d) Unemployment Benefit Insurance System; and (e) Other Social Security Systems which: (1) provide for the right of insured persons to live, hire and live, purchase, own or use the Social Security Housings established under housing plans in accordance with the stipulations; and/or (2) provide for compulsory registration and contribution specified by notification issued by the Ministry of Labor, in coordination with the SSB, with the approval of the Union Government, or other social security systems of voluntary contribution. However, only two of the five social security systems set out above have been implemented to date, namely, the Health Care and Social Care Insurance System and the Family Assistance Insurance System. In addition to these systems, an Employment Injury Benefit scheme, separately provided for under Chapter 6 of the SSL, has also been implemented. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are currently not required to maintain any retirement plans/schemes for their employees, although they are free to institute such retirement plans/schemes if they wish to do so. The SSL does envisage a superannuation pension benefit scheme being implemented. However, no further details have been provided on the nature of this scheme to date. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? As stated above, the SSL envisages the implementation of certain retirement plans/schemes, but no retirement plan/ scheme has been implemented to date. These plans/schemes, when implemented, will be managed by the SSB. 4. What are the key features of the tax framework that applies to retirement plans/schemes? The only provision under the current tax framework which pertains to retirement plans/schemes is Section 33(e) of the Myanmar A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Union Tax Law 2015, which states that income received in the form of pension and gratuity when a civil servant retires is exempt from income tax. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? There are currently no mandatory contribution requirements for retirement plans/schemes. However, if and when the envisaged superannuation pension benefit scheme under the SSL is implemented, employers will be required to pay contributions for such a scheme pursuant to Section 15(b) of the SSL. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Although no retirement plan/scheme has been implemented to date, Section 35(a) of the SSL sets out the following basic parameters for superannuation pension benefits: (a) If contributions had been paid for 180 months prior to the date of the superannuation pension being granted, the employee would have the right to enjoy 15 times the average monthly wage obtained within the period of contribution of that employee, in installments or as a lump sum, as the employee so chooses; (b) If contributions had been paid for more than 180 months, relating to such period of contribution in excess, the right to enjoy in addition to benefit contained in clause (a) in accordance with the stipulations; (c) If contributions had been paid for between 12 to 180 months, the right to enjoy 40% of the contributions paid by the employer and contributions of the employee together with interest in accordance with the stipulations; and (d) If contributions had been paid for less than 12 months, the right to withdraw the money contributed by that employee as a lump sum. In addition, Section 35(b) of the SSL states that where an employee receives superannuation pension benefit, the employer has the right to 25% of his or her personal contribution paid to the fund under Section 15(a)(3) of the SSL for 12 months and above, together with interest in accordance with specifications. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Under Rule 66(a) of the Social Security Rules, every employer must, on a monthly basis, file a form with the relevant township social security office containing a list of the incomes of all its employees and relevant social security fund contributions payable. Myanmar A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? There is currently no mandatory retirement plan/scheme in place. However, if and when the envisaged superannuation pension benefit scheme under the SSL is implemented, employers will have to follow the parameters for superannuation pension benefit schemes set out under Section 35(a) of the SSL. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? An employer may withdraw from or terminate a plan/scheme provided that (i) such a plan/scheme is not stipulated as mandatory under the SSL and (ii) if such a withdrawal or termination results in the employee’s contract conditions becoming less favorable, the employee gives his or her explicit consent to the withdrawal or termination. A withdrawal from or termination of a plan/scheme which is mandatory under the SSL may render the employer liable under Section 94(a) of the SSL to a penalty of a jail term of up to one year as well as a fine. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Retirees from the government or public service may take their pension/retirement benefits with them if they take jobs in the private sector after retirement. However, if they change jobs prior to retirement, they will be required to forego their pension/retirement benefit entitlement. Other employees who are not from the government or public service may apply, when changing jobs, to the SSB to retain their former SSB registration numbers. Upon a successful retention of their SSB registration numbers, any pension/ retirement benefit entitlements will also be retained. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? The existing laws do not provide for any adjustment or increase in pension/retirement benefit payments after retirement. Myanmar Contributed by: Chester Toh, Dr Min Thein & Lester Chua, Rajah & Tann NK Legal Myanmar Company Limited A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 New Zealand Contributed by: Simpson Grierson Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? The New Zealand government offers a form of pension, called New Zealand Superannuation (“NZ Super”). The people who are eligible for NZ Super must meet the following criteria: • be 65 years or older; • be a permanent resident or citizen of New Zealand and usually reside in New Zealand; and • have resided in New Zealand for at least 10 years since turning 20 years of age (including five years since they turned 50 years old). A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The last requirement above may not be applicable to migrants to New Zealand coming from a country that has a social security agreement with New Zealand. The rates for NZ Super payments depend on certain circumstances. These circumstances include, for example, the person’s relationship status, whether their partner (if any) receives NZ Super or any other benefit, their living situation (e.g., whether they live alone, live with dependent children, share accommodation with others), whether they receive overseas benefits or an overseas pension, whether they have other sources of income, or whether they receive accident compensation payments. In addition to NZ Super, the government has enacted a regime for privately-managed retirement savings schemes, called KiwiSaver. KiwiSaver schemes are managed by private sector companies called KiwiSaver providers. Contributions to a person’s KiwiSaver account can be made by the person, their employer, and the government. A person’s KiwiSaver account will be made up of both contributions and any investment earnings arising from investment of the contributions by KiwiSaver providers. To be eligible to join KiwiSaver, the person must be under 65 years of age, live in New Zealand, and be a New Zealand or Australian citizen or have permanent residence in New Zealand. Generally, people will have to wait until they are 65 years of age (or for five years after becoming a member of KiwiSaver if the person joined KiwiSaver after 60 years of age) before they can access their KiwiSaver savings. However, in some circumstances, people may be able to access their KiwiSaver fund early if they are buying their first home, moving overseas permanently, suffering significant financial hardship or are seriously ill. Receiving benefits from KiwiSaver does not affect a person’s eligibility or level of entitlements to NZ Super. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? NZ Super is managed by the state. Employers are not required to make contributions to, nor maintain plans/schemes separately from, NZ Super. In regard to KiwiSaver, employers, with some exceptions, must automatically enroll eligible new employees into KiwiSaver. However, while enrollment into KiwiSaver for new employees is mandatory, employees can opt-out if done so between 13 and 55 days of starting the new employment. In addition, existing employees can opt-in to KiwiSaver. For that reason, KiwiSaver is ‘voluntary’ from the employees’ perspective. New Zealand A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Employers, with a few exceptions, are required to make contributions into employees’ KiwiSaver accounts when the employee is: • aged 18 years or over; and • under 65 years (or if the employee is aged over 65 and has not been a member of KiwiSaver for five years, then after five years of membership). KiwiSaver uses the pay-as-you-earn (“PAYE”) employee payroll tax system for collecting contributions from employees and employers. Employers are required to contribute the equivalent of at least 3% of the employee’s salary; however, employers may contribute more. Employers must also deduct employee contributions from the employee’s salary to contribute into the KiwiSaver account (with some exceptions, for example, contributions holidays). Employees can choose to contribute 3%, 4% or 8% of their before-tax salary or wages. In addition to KiwiSaver, employers may establish private superannuation schemes for their employees. A superannuation scheme is a scheme that is not a KiwiSaver scheme, but is established principally to provide retirement benefits, and must be registered under the Financial Markets Conduct Act 2013 (“FMCA”). 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? NZ Super is primarily governed by the New Zealand Superannuation and Retirement Income Act 2001. As discussed above, NZ Super is managed by the state and there are no obligations on employers in respect to contributions or enrollments. KiwiSaver is primarily governed by the KiwiSaver Act 2006 (“KiwiSaver Act”) and the FMCA. The KiwiSaver Act regulates the material requirements including membership into the scheme, employer enrollment, certain exemptions, and contributions. Private superannuation schemes were primarily governed by the Superannuation Schemes Act 1989 (“SS Act”). The SS Act has been repealed, and superannuation schemes that were registered under the SS Act must have either wound up or have complied with the FMCA by no later than November 30, 2016. The FMCA provides a general framework for the regulation of financial products and applies to superannuation schemes. New Zealand A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 4. What are the key features of the tax framework that applies to retirement plans/schemes? NZ Super NZ Super payments are taxable and included in recipients’ annual gross income. The income of individuals is taxed at the following graduated scale rates: Graduated income tax rates Income range (annualized salary, wages and extra pay) Tax rate NZD 0 – NZD 14,000 10.5% NZD 14,001 – NZD 48,000 17.5% NZD 48,001 – NZD 70,000 30% NZD 70,001 and over 33% KiwiSaver KiwiSaver and other registered superannuation schemes are taxed on a “taxed-taxed-exempt” basis in New Zealand. Employee contributions are calculated on the employee’s before-tax salary or wages and deducted through the PAYE system from the employee’s after-tax salary or wages. For example, if an employee’s KiwiSaver contribution rate is 4% and they have a 30% blended effective tax rate based on the scale above, for every NZD 100 of salary and wages there will be a NZD 4 KiwiSaver contribution, which will be deducted from the employee’s after-tax income of NZD 70 (i.e., the employee will receive NZD 66 in the hand after deduction of tax and KiwiSaver). In addition, an employer superannuation contribution tax (“ESCT”) is deducted on all employer contributions made into an employee’s KiwiSaver account. The rate of ESCT for a particular employee is a blended rate having regard to the employee’s earnings and the employer contributions and ranges between 10.5% and 33%. Most (if not all) KiwiSaver schemes are portfolio investment entities (“PIEs”) for income tax purposes. The tax on the investment income of the PIE is calculated by reference to the prescribed investor rates (“PIR”) of members. The PIR is New Zealand A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 based on the employee’s taxable income from all sources over the last two income years and ranges between 10.5% and 28%. Withdrawals from or distributions by PIEs are free of income tax. Non-KiwiSaver Registered Superannuation Schemes Employer contributions to non-KiwiSaver registered superannuation schemes are subject to ESCT (as above). In addition, such schemes are generally taxed as PIEs (as above). Superannuation Schemes not registered under the FMCA Employer contributions to non-registered superannuation schemes are subject to fringe benefit tax (“FBT”). Generally, FBT is imposed at the rate of 49.25% on the taxable value of the fringe benefit (i.e., the gross employer contribution). FBT is deductible to the employer, so the net after-tax cost for the employer for contributions to an unregistered scheme should be similar to equivalent contributions to registered schemes. Non-registered superannuation schemes are generally treated as “unit trusts” for tax purposes (and usually as managed investment schemes under the FMCA). Unit trusts are deemed to be companies for tax purposes. However, some nonregistered superannuation schemes will qualify as PIEs for tax purposes, with tax consequences on individual income and distributions similar to KiwiSaver and registered superannuation schemes that are PIEs. In the absence of PIE status, a unit trust’s (deemed company’s) net income will be taxed at the 28% corporate tax rate. Tax paid by the unit trust will give rise to imputation credits that will wholly or partially remove any secondary layer of taxation on distribution of tax paid earnings to members. Pension Schemes Traditional pension schemes are now largely absent from the New Zealand market although some immigrants to New Zealand receive benefits under overseas pension schemes. Pensions are taxed as income. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? KiwiSaver Employers are required to make contributions (at a rate equal to 3% of the person’s salary or wages) to employees’ KiwiSaver accounts, if the employee is a KiwiSaver member and making employee contributions. However, an employer is not required to make contributions: • where the employer is making contributions into a registered superannuation scheme which was established prior to May 17, 2007 and where the employee became a member of that scheme prior to April 1, 2008; New Zealand A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 New Zealand • the employee is under 18 years of age; • the employee is over 65 years of age (and has also been a KiwiSaver member for more than five years); or • the employee is not making employee contributions (for example, where the employee is on a “contributions holiday”). Private superannuation schemes If the superannuation scheme is approved as a complying superannuation fund (and certain other requirements are met), then employer contributions are compulsory (subject to the comment below). Contributions can be made to complying superannuation funds instead of, or in conjunction with, contributions to KiwiSaver schemes. Employer contributions made to existing private superannuation schemes reduce the amount of compulsory employer contributions to KiwiSaver in certain circumstances. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Under the FMCA, registered superannuation schemes and KiwiSaver schemes are treated as managed investment schemes. The requirements that apply to managed investment schemes vary depending on factors such as whether they are open to new members and whether membership is restricted. The types of requirements that may apply under the FMCA and Financial Markets Conduct Regulations 2014 include: • The governing document of the scheme is required to cover a range of matters, such as: - transferability, redeemability, acquisition, and disposal of membership/funds; - entry and exit; - contributions; - valuation methodology; - determination and payment of benefits; - fees and expenses; - certain indemnification rights; A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 - supervisor appointment and removal; - winding up; - other matters that materially affect scheme management, operation, rights and duties; and - any other matters required by regulations. • For restricted membership schemes, a requirement to appoint a licensed independent trustee (or independent licensed director if the trustee is a company). The trustees will be bound by fiduciary-type obligations to the members, and the independent trustee will also be bound by certain reporting duties to the Financial Markets Authority (“FMA”). • For KiwiSaver schemes, a requirement to have a licensed manager. • Scheme property must be held by an independent supervisor, a corporate trustee, corporate nominee or another independent custodian. • The schemes are bound by certain registration and disclosure obligations, including: - producing a statement of investment policy and objectives (which sets out things such as the types of investments, proportions, limits and performance measurements); - (if the scheme is open to new members) producing a product disclosure statement (which describes how the scheme works and key terms and risks of the investment); - producing an annual report (including audited financial accounts) and distributing copies to members; - lodging amendments of governing documents with the FMA and getting prior FMA approval to those amendments; - publishing regular fund updates on performance of investments; and - lodging information and documents on the Disclose register and/or with the FMA. • There are certain restrictions on related party transactions. • There must be the ability for members to transfer between schemes. • There are whistleblowing duties on certain people, including investment managers, auditors and custodians. New Zealand A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 New Zealand • The funds will be generally locked in until the age of retirement, being 65 (or for other limited reasons such as significant financial hardship, serious illness or for buying a first home). The FMCA provides for an enforcement and liability regime, which covers civil liability, criminal liability and other enforcement options. The civil remedies range from declarations of contraventions through to pecuniary penalties of up to NZD 5 million for entities, as well as compensation and other orders. Criminal offenses range from “speeding ticket” type offenses through to large fines, or imprisonment (in the case of individuals). In addition, the KiwiSaver Act and the FMCA provide specific requirements for KiwiSaver schemes, including: • fees must not be unreasonable, and the scheme must give notice to the FMA when fees increase; • the manager of the fund must ensure that the full benefit derived by the member’s accumulation from their KiwiSaver account is credited to his or her KiwiSaver account; • compulsory contributions from employers and employees; and • the member meets certain New Zealand criteria (i.e., at the time of becoming a scheme participant the member normally lived in New Zealand or was a permanent resident or citizen). 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? In addition to the reporting and disclosure obligations that apply to registered superannuation schemes and KiwiSaver (listed above), employers are bound by certain obligations with respect to KiwiSaver. These include: • checking whether new employees are eligible to join the KiwiSaver scheme and whether they should be automatically enrolled; • providing the Inland Revenue document: Your introduction to KiwiSaver - employee information (KS3) to: - new employees who qualify for automatic enrollment; and - existing employees who want to opt-in; • automatically enrolling new members who are eligible; • providing information to the Inland Revenue about: - new employees who are automatically enrolled; and A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 New Zealand - eligible employees who have opted-in to KiwiSaver; • if the employer has an employer-chosen scheme, providing new employees with a written statement of the scheme, including the scheme’s product disclosure statement; • deducting employee contributions and making employer contributions and forwarding them to the Inland Revenue with the employer’s PAYE payments; and • acting on employees who decide to opt-out or request a contributions holiday. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? There are strict requirements for amending governing documents of registered superannuation or KiwiSaver schemes under the FMCA. These include: • amendments must be made with the consent of the supervisor or, if there is no supervisor, the FMA; • the supervisor or the FMA must not consent to an amendment to the governing document unless the amendment has been approved by, or is contingent on, approval by scheme participants (or if the supervisor or FMA is satisfied that the amendment has no material adverse effect on participants); • in the case of the supervisor, the supervisor (or lawyer) must certify that the above has taken place. The governing document must contain certain mandatory provisions (highlighted under question 6 above), which cannot be altered. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? An employer may cease contributing to a private superannuation scheme in accordance with the terms of the scheme trust deed. However, employers are always required to pay the minimum statutory employer contribution to the KiwiSaver scheme. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? It is possible to transfer between KiwiSaver schemes at any time. KiwiSaver providers are required by the KiwiSaver Act to permit members to transfer their contributions to a different KiwiSaver scheme. A person who wishes to do so needs to A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 New Zealand Contributed by: Stephen Ward, Barney Cumberland, Carl Blake, Lincoln Matthews and Luke Strom, Simpson Grierson contract directly with a provider of a different KiwiSaver scheme to become a member of that scheme before the transfer can be made. It may also be possible to transfer between registered superannuation schemes, but this would be unusual. A benefit is usually paid to the member by the superannuation scheme when the member leaves the employment of the sponsoring employer. A benefit paid from a registered superannuation scheme can usually be transferred by the member to a KiwiSaver scheme or another registered superannuation scheme that the member joins. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? As noted above, the rate of New Zealand Superannuation varies depending on individual circumstances. The rate is currently set as equal to 66% of the average net wage. The government passed legislation in 2011 tying the rate to the CPI, excluding the rise in tobacco excise tax. The payment of benefits from a registered superannuation scheme, including adjustments to the amount of benefits payable, will be governed by the terms of the scheme trust deed. For a KiwiSaver member, he or she will become eligible to withdraw all of his or her savings as a lump sum upon qualification for NZ Super (currently at the age of 65), as long as he or she has been a KiwiSaver member for a minimum of five years. A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Pakistan Contributed by: Meer & Hasan Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? Pensions are provided to regular employees of the government and semi governmental organizations. In general, employees of private organizations employed in skilled or unskilled manual or clerical jobs (“Workmen”) are entitled to old age pensions and disablement pensions (see answer to question 3 below for more detail). 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? The main liability of a private employer is to pay gratuity at the end of services. However, the employer, at its discretion, may instead opt to establish a Provident Fund or Pension Fund in which case it will not be required to pay gratuity. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? Besides the voluntary/optional Pension Fund created by an employer under Industrial and Commercial Employment (Standing Orders) Ordinance 1968, Workmen are entitled to a pension under the following statutes: (i) Employees’ Old Age Benefits Act 1976 • A Workman who is over 60 years (55 years in the case of a woman), in respect of whom contributions have been paid for not less than 15 years, is entitled to receive an old age pension. • 5% of wages of eligible employees is contributed by the employer, 6% is contributed by the government and 1% is contributed by the employee. • Contributions are paid to the Employees Old Age Benefits Fund. (ii) Employees’ Social Security Ordinance 1965 • Persons receiving more than PKR 18,000 per month are not considered employees. • The employer is required to contribute 6% of the wages of eligible employees. • The contribution is made to the Employees Social Security Fund. • Under this law, Disablement Pension or Survivor Pension is paid to employees or their dependents when disablement or death occurs due to injury sustained in the course of employment. 4. What are the key features of the tax framework that applies to retirement plans/schemes? The contributions made to the Funds by employers and employees are tax deductible, whereas income of the Funds is exempted from taxes. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? An employer is primarily liable to pay gratuity only; however, it may opt to establish a Provident Fund or Pension Fund instead. If it establishes a Provident Fund or Pension Fund, it is required to make contributions to the same. Pakistan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The material points concerning the employer have been mentioned in question 3 above. The Funds are managed by statutory institutions established under respective statutes. The statutes also contain provisions governing utilization/ investment of the Funds. If an employer fails to pay its contributions, an enhanced amount will be recovered from it as a penalty. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? There is a governing body appointed under each statute and any violation can be reported to it. The institution established under the Employees’ Social Security Ordinance 1965 is required to maintain accounts of its income and expenditures and of its assets and liabilities and shall submit its Annual Report to the government. The Annual Report, together with the audited accounts, is published for the public. Similarly, the affairs of the Employees Old Age Benefits Institution are controlled by the Board of Trustees with the assistance of its Chairman under the Employees’ Old Age Benefits Act 1976. The institution is required to submit its report to the federal government, together with its works and activities. There are no rules regarding employee consultation. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Employers cannot deviate from the terms of statutory pension plans. The terms of approved voluntary pension funds may be altered with the permission of relevant authorities. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? An employer can withdraw from a statutory pension plan if it ceases to be governed by the relevant laws e.g., it does not employ the required number of employees. As long as the provisions of relevant statutes remain applicable, it cannot withdraw from the plan. In relation to voluntary pension funds, an employer can withdraw or terminate the same, in which case it will have to pay gratuity to the employees. Pakistan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? If an employee changes job, he or she may get a certificate from his or her previous employer certifying the payment of contributions toward the period he or she worked in that establishment. The contributions made by the new employer will be added to his or her account with the Fund. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Since the Funds are managed by the government, it may in its discretion increase the pension rate but the increase will be borne solely by the government and employers will not be affected by this increase. Pakistan Contributed by: Zeeshan Ashraf Meer, Meer & Hasan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 PRC Contributed by: Jingtian & Gongcheng 1. Does the state provide a pension, retirement income or social security program of some type? In 1997, the PRC government established a unified basic pension system (“UBPS”) for employees of enterprises in the PRC. Both employee and employer are mandatorily required to make contributions to the pension fund in a broader government administered social security fund. Employees are required to contribute up to 8% of their individual wages. Employers are required to contribute at a percentage ranging from 19% to 22% of the total wages paid to their workforce. For Beijing, it is 20%, for Shanghai, before May 1, 2016, it is 21%. However, according to the Circular on Reducing Social Insurance Premium Rates in Stages dated April 14, 2016, enacted jointly by the Ministry of Human Resources and Social Security (“MOHRSS”) and the Ministry of Finance, in case any provincial government provides the rate of contribution by employers is higher than 20%, the said provincial government may reduce the said rate of the A Global Guide to Retirement Plans & Schemes Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 employers’ contribution to 19%-20%. For Shanghai, it may be reduced to 20%, and for the other 20 provinces, it may be reduced to 19%. An employee’s contribution is paid into their respective personal account opened by PRC competent social security authorities. Upon the employee’s retirement, the balance in the said personal account along with the accruing interest will be divided into 120 installments and paid to the employee in monthly installments over a period of 10 years. As long as the relevant employee contributes to the pension fund of the PRC social security fund for 15 consecutive years or more, the employee will receive payment from his or her personal account, and also receive general pension payments from the PRC social security fund from retirement until death. These general pension payments are funded by the employer’s contributions to the social security fund. The amount of the general pension payments for an employee depends on the number of years of employment, the average wage in the locality, and life expectancy. Under the current schemes, in case of any shortfall, the relevant government will cover the said shortfall. In the past, there was a separate pension system for civil servants and other government employees such as teachers, who were not required to pay their own pension contributions, but were entitled to a generous government-subsidized pension on retirement from the social security fund that was mainly contributed by the enterprises and their employees. This kind of dual system would cause a big shortfall of the social security funds. Thus in January 2015, the State Council in its Decision on the Reform of the State Employee Pension System planned to integrate the UBPS and that separate pension system for public sector employees, which means public sector employees must also make their own contributions to the pension fund. Currently, the statutory retirement age of employees employed in the enterprises is 60 for men and 50 for women. However, for women civil servants working with governmental departments, the statutory retirement age is 55. Now because the UBPS funds would be in shortfall, the government is planning to extend the retirement age. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Except for the UBPS, an employer is not mandatorily required to maintain any other extra retirement plans/schemes. However, according to Trial Measures for Enterprise Pension and Trial Measures for the Administration of Enterprise Pension Funds, in addition to participation in the UBPS, the enterprises and their employees may participate in a supplementary pension insurance system, that is, the Enterprise Annuity Fund (“EAF”). Where an EAF is established, the enterprise and its employees must jointly contribute to the EAF. The enterprise must pay not more than one-twelfth of the total wages of its workforce and the employees must pay not more than one-sixth of the total wages of the workforce. PRC A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The PRC Labour Law enacted in 1994 and the PRC Labour Contract Law in 2008 provide for mandatory obligations for enterprises and employees to participate in the UBPS. In 2011, the PRC Social Insurance Law was enacted which integrated those regulations/clauses for the social insurance system into a comprehensive framework. Since the enactment of the PRC Social Insurance Law, all employees, including rural migrant workers, should be covered by UBPS. Employees become entitled to pension benefits when they reach the statutory retirement age and also only when they have participated in the scheme for at least 15 consecutive years. If any employee reaches the retirement age but has not participated in the pension system for at least 15 consecutive years, the employee shall delay retirement and continue to pay pension contributions to the pension fund until the employee has paid pension contributions for 15 consecutive years. 4. What are the key features of the tax framework that applies to retirement plans/schemes? The payments contributed by employers and employees to UBPS may be tax-deductible. For the contribution paid by the employers to EAF, only the part of the said contribution being less than 14% of the total wages of the workforce is taxdeductible in terms of enterprise income tax. It is tax exempted for the part of the contribution paid by the employers to EAF that is credited for the employees’ personal account. For the contribution paid by the employees to EAF, only the part of the said contribution being less than 4% of the taxable income of employees is tax-deductible in terms of personal income tax. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? An employer must pay contributions to UBPS. For EAF, once the employer sets up the EAF, the employer must pay contributions according to the Trial Measures for Enterprise Pension. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The relevant PRC governmental authority will determine the investment of the social security fund under UBPS according to relevant PRC laws and regulations. According to the Circular of the State Council on Issuing the Administrative Measures for Investment with Basic Endowment Insurance Funds dated August 17, 2015, the social pension fund may be invested in: bank deposits, bills of the central bank, and interbank certificates of deposit; national debts, policy and development bank bonds, financial bonds with credit ratings above the investment grade, enterprise (corporate) bonds, local government bonds, convertible debentures (including bonds with detachable warrants), short-term financing bills, medium-term notes, asset-backed securities, and bond repurchase; pension products, securities investment funds PRC A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 tradable in the market, stocks, equities, stock-index futures and treasury bond futures. Furthermore, the social pension fund may be invested in major national engineering works and projects through appropriate ways and used in equity investments in the restructuring and listing of key state-owned enterprises, which enterprises are limited to central enterprises and their first-tier subsidiaries, as well as local industry leading enterprises with core competitiveness, such as state-owned and state-controlled enterprises funded by the departments of finance or the state-owned assets administration departments at the provincial level. There are also amount limitations for investment of the social pension fund. According to the Circular of the State Council on Issuing the Administrative Measures for Investment with Basic Endowment Insurance Funds, the limitations are as follows: (a) The proportion of investment in current deposits, term deposits with a term of one year or less, bills of the central bank, national debts whose residual maturity is within one year, bond repurchase, monetary pension products and monetary market funds may not be lower than 5% of the net value of the endowment fund assets in total. The clearing excess reserves, securities clearing accounts and funds for subscription of securities on the primary market shall be deemed as liquid assets. (b) The proportion of investment in term deposits with a term of more than one year, contracted deposits, interbank certificates of deposit, national debts whose residual maturity is over one year, policy and development bank bonds, financial bonds, enterprise (corporate) bonds, local government bonds, convertible debentures (including bonds with detachable warrants), short-term financing bills, medium-term notes, asset-backed securities, fixed-income pension products, and hybrid pension products may not be higher than 135% of the net value of the endowment fund assets in total. The fund balance of bond repurchase on each trading day may not be higher than 40% of the net value of the endowment fund assets. (c) The proportion of investment in stocks, stock funds, hybrid funds and stock-related pension products may not be higher than 30% of the net value of the endowment fund assets in total. The endowment funds shall not be used to provide loans and guarantees for any other person, or directly invested into warrants, but in case of warrants derived from investment in stocks, bonds with detachable warrants and other types of investments, such warrants shall be sold within 10 trading days as of the date when they are tradable. (d) The proportion of investment in equities of major national projects and key enterprises may not be higher than 20% of the net value of the endowment fund assets in total. Where the proportion of investment exceeds the corresponding limit set out above passively due to market fluctuations, transfer of funds and other factors, the adjustment of the investment proportion of endowment funds should be completed within the trading days as prescribed in the contract. PRC A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 According to the Measures for the Administration of Enterprise Annuity Fund dated April 30, 2015, and the Circular on Expanding the Investment Scope of Enterprise Annuity Funds dated March 19, 2013, the EAF is limited to domestic investment with the scope of bank deposit, national bonds, central bank bill, bond repurchase, universal insurance products, unit-linked insurance products, securities investment funds, stocks, and financial bonds, corporate bonds (debentures), convertible bonds (including detachable convertible bonds), short-term financing bills and medium-term notes, the commercial banks’ finance products, trust products, infrastructure debt investment plans, specific assets management plans and stock index futures, and other financial products with credit rating no lower than investment grade. And also, there are limitations on the proportion of investment value that the EAF invests in each product. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? UBPS funds Trustors and trustees of the investment with UBPS funds shall conclude an entrusted investment contract, and the trustees shall conclude a custody contract with custody institutions, and an investment management contract with the management institutions of the investment with UBPS funds (“investment management institutions”). The rights and obligations of the trustors, trustees, custody institutions and investment management institutions will be agreed in the entrusted investment contract, custody contract and investment management contract with respect to UBPS funds in accordance with the Measures for the Administration of Enterprise Annuity Fund: (a) Trustors: the people’s governments of provinces, autonomous regions and municipalities are the trustor of UBPS funds investment; (b) Trustees: the trustees refer to management institutions of the endowment funds established by the State and authorized by the State Council; (c) Custody institutions: the custody institutions refer to commercial banks that have experience in the custody of national social security funds and EAF, or have good fund custody performance and social reputation, and are entrusted by the trustees of UBPS funds to safely keep the UBPS fund assets; (d) Reporting and disclosure: the trustees shall conduct the information disclosure and reporting of the relevant matters in compliance with the following requirements: • announcing to the public the financial conditions including assets and earnings of the UBPS funds once a year; • submitting the financial accounting report and the reports on investment assets, earnings and other aspects regarding the UBPS funds to the trustors and the relevant competent department under the State Council on a quarterly basis; PRC A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • submitting the annual audit report on the UBPS fund assets to the trustors, as well as the relevant competent department and the comprehensive economic department under the State Council; and • in the event of any major event related to the UBPS funds, immediately reporting the event to the relevant trustors and the relevant competent department under the State Council, and preparing an interim report, and announcing the report upon approval. There is no employee consultation rules arrangement in respect of the investment of the UBPS funds. EAF According to the Measures for the Administration of Enterprise Annuity Fund, the enterprise and its employees are the trustors, who will enter into the entrusted management contract with the EAF council or trusted institution with legal person status (“Trustee”). The Trustee shall respectively enter into trust management contracts with the account management institution of the EAF (“Account Manager”), the EAF custodian institution (“Custodian”) and the investment management institution of the enterprise annuity fund (“Investment Manager”). (a) Trustor: refers to the enterprise with EAF and its employees; (b) Trustee: refers to the pension management company and other entrusted institutions with legal person status or EAF council that are entrusted to manage EAF and meet the relevant requirements of the state. Enterprises with EAF plans shall elect a legal person entrusted institution or establish an enterprise annuity council to be the Trustee by means of deliberation and discussion through the general meeting of employees or the general meeting of employee representatives; (c) EAF Council: The enterprise annuity council may consist of enterprise representatives, employee representatives and other members, or hire non-employee professionals. The number of employee representatives shall not be less than one-third under each circumstance. The council shall be staffed with a certain number of full-time personnel. The employee representatives and non-employee professionals of the enterprise annuity council shall be elected in a democratic way by the general meeting of employees, the general meeting of employee representatives or other means. Enterprise representatives shall be hired by the enterprises. The tenure of a director of the council shall be determined in the Articles of Association of the enterprise annuity council, provided that it may not exceed three years. One may serve another term if he or she is re-elected at the end of the tenure; (d) Beneficiary: refers to the employees of an enterprise that have participated in the EAF and are entitled to beneficial interests; (e) Account Manager: refers to the professional institution that accepts the entrustment of the Trustors to manage the EAF account; PRC A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (f) Custodian: refers to the commercial bank that accepts the entrustment of the Trustee to take custody of the EAF property; (g) Investment Manager: refers to the professional institution that accepts the entrustment of the Trustee to invest and manage the EAF property; and (h) Reporting and disclosure: • The Trustee shall submit the EAF management quarterly report to the Trustors within 30 days upon the ending of each quarter; and shall submit the annual EAF management and financial accounting report to the Trustors within 60 days upon the ending of each year. • The Account Manager shall submit the EAF account management quarterly report to the Trustee within 15 days upon the ending of each quarter; and shall submit the annual EAF account management report to the Trustee within 45 days upon the ending of each year. • The Custodian shall submit the EAF custody and financial accounting quarterly report to the Trustee within 15 days upon the ending of each quarter; and shall submit the annual EAF custody and financial accounting report to the Trustee within 45 days upon the ending of each year. • The Investment Manager shall submit the EAF portfolio quarterly report with financial management data confirmed by the Custodian within 15 days upon the ending of each quarter, and shall submit the annual EAF investment management report with financial management data confirmed by the Custodian within 45 days upon the ending of each year. Except that the EAF council shall consist of enterprise representatives, employee representatives and other members, there are no employee consultation rules for EAF investment matters. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? Not applicable. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Not applicable. PRC A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? (i) For UBPS, the pension/retirement benefit entitlement will belong to the relevant employee and would not change upon the employee changing his or her job. When the employee changes his or her job and still works within the same province or the same municipality directly under the Central Government, the employee just needs to transfer his or her social insurance relationship to his or her new employer. If the employee leaves to work in another different province or municipality directly under the Central Government, the employee shall transfer his or her social insurance relationship to the relevant social security authorities of another different province or the municipality directly under the Central Government. (ii) For EAF, if an employee changes his or her job, and the employee’s new employer has also established an EAF plan, then the equity and interest of the employee in his or her individual account of the EAF plan of his or her previous employer shall be transferred to the EAF plan of the new employer. If the new employer has not established the EAF plan, the equity and interest of the employee in his or her individual account of the EAF plan of his or her previous employer may be still with the EAF plan of his or her previous employer. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Yes. The adjustment range is subject to the then policy/notice to be promulgated by the competent governmental authorities at the provincial level. PRC Contributed by: Deng Youping, Jingtian & Gongcheng A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Philippines Contributed by: Romulo Mabanta Buenaventura Sayoc & de los Angeles Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? The Philippine government provides for laws providing pension, retirement income and social security programs. The two main state pension fund agencies are the Social Security System (“SSS”) and the Government Service Insurance System (“GSIS”). The SSS and GSIS are laws that establish a provident fund for members that will consist of voluntary contributions of employers and/or employees and their earnings for the payment of benefits to such members or their beneficiaries. The difference between SSS and GSIS is that SSS pertains to employees and employers in the private sector while GSIS pertains to government employees. A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Philippine law provides that any employee may be retired upon reaching the retirement age of 60 years unless otherwise established in the collective bargaining agreement or other applicable employment contract. The mandatory retirement age is 65 years of age. SSS Scheme Retirement pay is equivalent to at least “one-half month salary” for every year of service, with a fraction of at least six months being considered as one whole year. One-half month salary shall mean 15 days plus one-twelfth of the 13th month pay and the cash equivalent of not more than five days of service incentive leaves or a total of 22.5 days’ pay. Retail, service and agricultural establishments or operations employing not more than 10 employees or workers are exempted from the coverage of the SSS law. GSIS Scheme All employees in the government are compulsory members, provided they have not reached the compulsory retirement age, except members of the Armed Forces of the Philippines, Philippine National Police, and contractuals with no employee-employer relationship with the agencies that they serve. The retiree must have rendered at least 15 years of service, attained the age of at least 60 years at the time of the retirement and not be receiving a monthly pension benefit from permanent total disability. The GSIS provides for lump sum payments for their retirement benefits, which are payable upon retirement plus an old age pension benefit payable monthly for life, upon expiration of the five-year guaranteed period of the lump sum, or a cash equivalent of up to 18 months of his or her basic monthly pension plus monthly pension for life payable immediately with no five-year guarantee. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? The purpose of Republic Act No. 7641 (“RA 7641”) or the Retirement Pay Law is to prescribe minimum retirement benefits to be paid by the employer to its qualified employees. It does not require the setting up of formal retirement plans by employers. The law simply provides for the retirement pay to qualified private sector employees in the absence of any retirement plan in the employer establishment. As mentioned above, the minimum retirement pay provided under RA 7641 to any qualified retiring employee is “onehalf month salary” per year of service, which means the equivalent of 15 days plus one-twelfth of the 13th month pay, and the cash equivalent of not more than five days’ service incentive leave or a total of 22.5 days’ pay per year of service. This is without prejudice to the employer’s discretion to provide its employees with better retirement benefits. The Philippines A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 coverage includes all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Labor Code of the Philippines, otherwise known as Presidential Decree No. 442 that was issued in 1974, is the principal statute governing retirement plans/schemes. It was amended in 1993 by RA 7641, otherwise known as the New Retirement Law, to provide for a retirement age and for the minimum retirement benefits that companies in the private sector must provide to their employees in the absence of any private retirement plan in the establishment. Republic Act No. 1161, as amended by Republic Act No. 8282, provides for the Social Security System of the Philippines, while Presidential Decree No. 1146, as amended by Republic Act No. 8291, provides for the Government Service Insurance System, which provides for social security to government employees. (See questions 1 and 5 for the requirements.) Republic Act No. 8799 provides for voluntary personal pensions funds offered by pre-need and life insurance companies. The Philippine Insurance Code allows insurance companies to offer endowment and annuity contracts that are availed of by those who want guaranteed retirement income. Republic Act No. 6948, as amended by Republic Act No. 7696, provides for pension and benefits for military veterans and their dependents. RA 7641, the Home Development Mutual Fund, or “Pag-IBIG Fund,” provides retirement funds by way of forced contributions or savings from employers/employees, and housing loans. Company membership to this law was made mandatory unless the company had a retirement program and a housing loan facility. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Generally, benefits received under a retirement plan do not constitute compensation subject to withholding tax if such plan complies with the following requirements: (a) The benefit plan has been approved by the Bureau of Internal Revenue; (b) The retiring employee must have been in the service of the same employer for at least 10 years and is not less than 50 years of age at the time of retirement; and Philippines A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (c) The retiring employee shall not have previously availed of the privilege of the withholding tax exemption under a retirement plan of the same or another employer. Under Republic Act No. 4917, retirement benefits of employees of private firms who retire with at least 10 years of service and are not less than 50 years of age shall not be subject to attachment, levy, execution or any tax whatsoever. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Neither the Labor Code nor RA 7641 requires the employer to put up a private retirement plan, the adoption thereof being subject to the sound discretion of the employer. Should the employer adopt one, it may do so and put up either a “defined benefit” plan or a “defined contribution” plan. In a defined benefit plan, the employer is obliged to make the necessary contributions to the retirement fund in full, whereas in a defined contribution plan, both the employer and the employee are obliged to contribute their respective shares to the retirement funds. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The management of private retirement plan funds is normally entrusted to a retirement trustee, usually a bank, who may, subject to the prior approval of the employer or the employer appointed retirement committee and in accordance with the plan implementing rules, invest the plan funds in various retirement schemes. Such investment should not, however, affect an employee’s right to the full measure of his or her retirement benefits in the event of failure of the investments to achieve their purpose or objective. Failure to pay the employee his or her retirement benefits in full when they accrue would violate the Labor Code’s prohibition against the elimination or diminution of employee benefits, which is punishable under the Code with fine or imprisonment or both, such fine and imprisonment being at the discretion of the court. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? The reporting, disclosure and employee consultation rules regarding a private retirement plan are governed by the plan rules. Such rules are enforced by the employer or by the retirement committee appointed by the employer. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? A private retirement plan partakes of a contract, with the employer and the employee as the contracting parties. Once entered into, it is subject to all applicable laws, including the prohibition against the unilateral diminution or elimination of employee benefits. Accordingly, the employer may not alter the terms of an accepted retirement plan/scheme without the consent of the employees. Moreover, any approved alteration or subsequent renegotiation of the retirement plan must not fall below the minimum requirements or benefits prescribed by law. Philippines A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? The employer may terminate a private retirement plan in accordance with its terms in good faith and for valid reasons recognized by law, e.g., the employer has suffered a financial or business setback that materially prevents it from continuing with its contributions to the plan funds. In such an event, the employer may be excused from continuing with the private retirement plan/scheme but must comply with the provisions of the Labor Code regarding retirement benefits. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Private retirement plans invariably provide that in case of the employee’s voluntary resignation or termination for cause, his or her entitlement to retirements benefits are automatically forfeited. However, for a pension or retirement scheme provided by the Social Security System, Republic Act No. 7699 (“RA 7699”) or the Portability Law allows portability of pension or retirement benefits thereunder. Portability under RA 7699 refers to the transfer of funds for the account and benefit of a worker who transfer from one system to the other, i.e., from the private sector (administered by the SSS) to the government sector (administered by the GSIS) or vice versa. In accordance with the aforementioned law, all creditable services or periods of contributions made continuously or in the aggregate of a worker under either the SSS or GSIS shall be added up and considered for purposes of eligibility and computation of benefits. All services rendered or contributions paid by a member personally and those that were paid by the employers to either system shall be considered in the computation of benefits, which may be claimed from either or both systems. However, the amount of benefits to be paid by one system shall be in proportion to the services rendered/ periods of contributions made to that system. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Pension or retirement benefits under a private retirement plan are by law based on the last pay of the employee. Once paid, the private retirement plan ceases to have any further obligations to the employee post-retirement. For pension or retirement benefits under the SSS or the GSIS, the laws governing both systems provide that the monthly pension of all pensioners in the government or private sector, including all those receiving survivorship pension benefits, may be periodically adjusted as may be recommended by the SSS/GSIS actuary and approved by the SSS/GSIS Board in accordance with the rules and regulations prescribed by the law. Philippines Contributed by: Enriquito J. Mendoza, Romulo Mabanta Buenaventura Sayoc & de los Angeles A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Singapore Contributed by: Rajah & Tann Singapore LLP Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? The Singapore government does not provide a statutory pension scheme. However, since July 1, 1955, the Singapore government has established a statutory social security system that is known as the Central Provident Fund (“CPF”). This social security system is governed primarily by the provisions of the Central Provident Fund Act (Cap. 36) (“CPF Act”), and is administered by the Central Provident Fund Board (“CPF Board”), which is a statutory body operating under the Ministry of Manpower. The CPF is a compulsory savings scheme whereby employers of employees (who are Singapore Citizens or Permanent Residents) are required to make monthly contributions into the CPF accounts of such employees. In addition to the contributions by employers, employees are similarly statutorily required to make monthly contributions into their respective CPF accounts. As a general rule, when the employee reaches 55 years old, he or she is able to withdraw all the monies in his or her CPF account, after setting aside an amount that is known as the Basic Retirement Sum or the Full A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Retirement Sum, which are currently SGD 83,000 and SGD 166,000 respectively. The Basic Retirement Sum or the Full Retirement Sum will then be used for the purposes of making monthly payouts to the employee once he or she turns 65 years old, for a period of approximately 20 years. Without prejudice to the above, an employee may also withdraw all the monies in his or her CPF account in certain limited circumstances, such as where the employee is terminally ill or is suffering from an illness, which has either rendered the employee permanently unfit from ever continuing in any employment or has caused the employee to have a severely reduced lifespan. Apart from saving for the purposes of retirement, the monies contained in the employee’s CPF account can also be used for housing and healthcare purposes. On this, the CPF Board administers a number of schemes that allows individuals to use the monies in their respective CPF accounts to purchase public and private property, as well as to subsidize their medical expenses or that of their immediate family. These schemes include the Public Housing Scheme, Private Properties Scheme, Medisave and MediShield. Supplementary Retirement Scheme In addition to the CPF scheme, the Singapore government has also put in place a Supplementary Retirement Scheme (“SRS”), which is a voluntary scheme for all Singaporean Citizens or Permanent Residents and foreign nationals who are at least 18 years of age, are not undischarged bankrupts and who are mentally able to manage themselves and their affairs. The SRS is meant to complement and not derogate from the CPF scheme. Under the SRS, an eligible individual may contribute up to SGD 15,300 (for Singaporean Citizens or Permanent Residents) and SGD 35,700 (for foreign nationals) per annum into his or her SRS account. This contribution can be made up to any age until the individual makes his or her first withdrawal from the SRS account or if there are applicable medical grounds. Unlike the CPF scheme, the SRS contribution by the individual can be made at any time so long as the cap for contributions is not reached. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Pursuant to the provisions of the CPF Act, all employers in Singapore are statutorily required to make contributions into the CPF accounts of all Singapore Citizens and Permanent Residents who have entered into a contract of service with the employer and earn more than SGD 50 in a given month. This includes executive directors, part-time employees and temporary employees. The contributions made by the employer are a percentage of all payments made by the employer to the said employee, which includes the fixed monthly salary, bonus payments, sales commissions, as well as other allowances (such as Singapore A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 transport allowances, mobile phone allowances and attendance allowance), made to the employee. Without prejudice to the foregoing, no contributions will need to be made in respect of genuine reimbursements and termination payments. The contribution rates are dependent on the age of the employees and are updated frequently by the CPF Board. As of January 1, 2016, the applicable contribution rates for employers are as follows: Employee’s Age Contribution by employer (% of wage) 55 and below 17 Above 55 to 60 13 Above 60 to 65 9 Above 65 7.5 The employer’s portion of contribution to the CPF is further subject to a ceiling, which is dependent on whether the payments made to the employee is classified as Ordinary Wage (“OW”) or Additional Wage (“AW”). The CPF Act defines OW as being wages due wholly and exclusively for your employment in a (named calendar) month and are payable before the due date for payment of CPF contributions for that (named calendar) month. For a particular payment to fall within the ambit of being OW (i.e., for the OW ceiling of SGD 6,000 per month to apply), both conditions will need to be met. A common example of OW is the fixed monthly salary paid to an employee. On the other hand, AW is simply defined as wages that are not granted wholly and exclusively for your employment in the (named calendar) month. In short, any payment made to the employee that does not meet the conditions of being OW will be classified as being AW. A common example of AW is bonus payments. The current AW ceiling is SGD 102,000 less the total OW subject to CPF for the period from January 1 to December 31. Finally, the employer’s portion of contribution to the CPF is in addition to the employee’s wages. In other words, the employer’s portion of contribution cannot be deducted from the employee’s monthly wages. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The CPF Act and its subsidiary legislation sets out the statutory framework applicable to the CPF scheme. Singapore A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 The material requirements applicable to the CPF scheme are that there are mandatory contributions by both employers and employees (see response to question 2 for details) and that such contributions are made within the period of 14 days after the end of a named calendar month (i.e., the contributions for January 2016 must be made by February 14, 2016). 4. What are the key features of the tax framework that applies to retirement plans/schemes? Corporate Tax As a general rule, contributions made by an employer to the CPF accounts of its employees who are Singaporean Citizens or Permanent Residents are deemed to be deductible expenses. In other words, they can be removed from the taxable income of an employer. However, it should be noted that the deductions are capped at the maximum statutory amount of contributions that must be made by the employer concerned (i.e., any contributions made by the employer that are in excess of the statutory contributions are non-deductible). Individual Income Tax Apart from the employer, the employee is also eligible for relief from income tax for the employee’s contribution to his or her individual CPF account. Similar to that for the employer, the total amount of relief is capped at the statutory contributions (i.e., voluntary contributions made by the employee in excess of his or her statutory contributions are not eligible for relief from personal income tax). Under the SRS, the individual is able to obtain tax relief from all amounts that he or she contributes into his or her SRS account. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Yes. Pursuant to the provisions of the CPF Act, employers are statutorily required to make contributions into the CPF accounts of their employees who are Singaporean Citizens or Permanent Residents. More details are set out in our response to question 2 above. Apart from contributions made by the employer, the CPF Act also mandates that employees who are Singaporean Citizens or Permanent Residents contribute to their individual CPF accounts. Such employee contributions are automatically deducted from the employee’s monthly salary or other payments made by the employer to the employee. In addition to mandatory contributions to their respective CPF accounts, employees are also required to make monthly contributions to the one of the following Self-Help Group Funds: Singapore A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • Chinese Development Assistance Council (CDAC) Fund • Eurasian Community Fund (ECF) • Mosque Building and Mendaki Fund (MBMF) • Singapore Indian Development Association (SINDA) Fund The amount of contribution to Self-Help Group Funds listed above is dependent on the employee’s monthly wages, and the applicable fund into which contributions are to be made is dependent on the employee’s ethnic background or religion. The amount of contributions is deducted automatically by the employer from the employee’s wages each month. Under the SRS, an individual may authorize his or her employer to make contributions into his or her SRS account. However, such contributions made by the employer are taxable in the hands of the individual, as such contributions are viewed as remuneration on the part of the individual. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The material rules governing the CPF scheme are contained in our response to question 2 above. A failure to make the mandatory contributions or a failure to pay the CPF contributions on time is a criminal offense under the CPF Act, and the employer concerned may be subject to the following: • A fine of between SGD 1,000 and SGD 5,000 per offense and/or a term of imprisonment of up to 6 months for the first offense; and • A fine of between SGD 2,000 and SGD 10,000 per offense and/or a term of imprisonment of up to 12 months for subsequent convictions. Alternatively, the CPF Board may make a composition offer to the defaulting employer of up to SGD 1,000 per offense. In addition to the criminal penalties set out above, a defaulting employer is still required to make the relevant CPF contributions into its employee’s CPF account, and late payment interest of 18% per annum will be applicable to such payments. As a general rule, the CPF Board does conduct regular audits on employers in Singapore, and such audits have resulted in a number of employers being found to have infringed the relevant provisions of the CPF Act. The CPF Board states that Singapore A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 its computerized system detects defaulting employers and lists them each month for follow-up action by Investigations Officers. A notice is sent by registered post to the employers informing them that legal action will be taken unless CPF contributions, interest and composition amounts are paid within the notice period. CPF Investment Scheme The CPF Investment Scheme allows individual employees to invest in a wide range of investment products if the individual employee is at least 18 years of age, is not an undischarged bankrupt and has at least SGD 20,000 in his or her Ordinary Account. The types of investment products that the individual can invest in include unit trust, endowment policies, fixed deposits, and exchange traded funds. While there may be a wide range of investment products available to individual employees, these investment products must have obtained prior approval of the CPF Board, and can only be bought from service providers who have been approved by the CPF Board, which include banks, investment administrators, insurance companies and fund management companies. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Under the CPF scheme, it is compulsory for all employers that intend to hire employees to register with the CPF Board. Upon registration, the employer will receive a CPF Submission Number (“CSN”), which is the number that employers must reference when transacting with the CPF Board. One such transaction is the monthly submission of CPF contribution details by employers to the CPF Board. The details that must be provided to the CPF Board include the total CPF contribution for a given month, deductions for payment made to the Self-Help Group Funds, as well as the amount of OW and AW for a given month. Such submission can be made either electronically or through a hard copy payment advice. However, if the submission is made by way of a hard copy payment advice, a processing fee of SGD 7 per employee per month will apply for employers that have more than 10 employees. Where the employee falls within the ambit of the Employment Act (i.e., where the employee is not employed in a managerial or executive position and does not earn a fixed monthly salary that exceeds SGD 4,500), the employer is statutorily required to provide the employee with an itemized payslip within three working days from the date payment is made to the employee for a given month. One item that must be contained in the itemized payslip is the amount of money that is deducted as a result of the employee’s contribution to his or her CPF account for the said month. In addition to providing such payslips to employees, the employer also has an obligation to retain the payslips for a period of at least two years. Singapore A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Save as set out above, there is no statutory obligation on employers to disclose to or consult their employees on matters related to the CPF scheme. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? As the CPF scheme is a statutory scheme, the employer cannot alter the CPF scheme. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? As the CPF scheme is a statutory scheme, the employer cannot withdraw from the CPF scheme. As mentioned in our response to question 6, the failure to comply with the statutory requirements in the CPF Act is a criminal offense that may be punishable by a criminal fine and/or term of imprisonment. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Yes, the entitlement to payouts under the CPF scheme is tied to the individual employee and a change of jobs will have no effect on such payouts. The new employer will also be required under the CPF Act to make the relevant contributions. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No, there are no adjustments or increments to retirement benefits payments after retirement under the CPF scheme. However, once an individual attains 55 years of age, the individual is able to withdraw the amounts contained in his or her CPF account after setting aside a minimum sum in his or her CPF account. The minimum sum that must be retained is dependent on whether the individual owns a property with sufficient property charge or pledge. If this is the case, the individual can withdraw all amounts contained in his or her CPF account after setting aside SGD 83,000. If the individual does not own a property, he or she can withdraw all amounts contained in his or her CPF account after setting aside SGD 166,000. Without prejudice to the foregoing, if the individual has SGD 5,000 or less in his or her CPF account upon attaining 55 years of age, the individual is not required to retain any monies in his or her CPF account and can withdraw all amounts. In addition to the withdrawal of monies contained in the individual’s CPF account at the age of 55 years, the CPF scheme also provides for monthly payouts to be made to individuals once the individual attains the age of 65 years. These monthly payments are made pursuant to two schemes – the CPF Lifelong Income For the Elderly Scheme (“CPF Life”) and the Retirement Sum Scheme. Singapore A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 CPF LIFE CPF LIFE provides a monthly payout to an individual once he or she attains the payout eligibility age, which is currently 65 years for members who were born in 1954 or later. These monthly payouts will be made to the individual until the individual’s death. The amount of payouts will be dependent on a number of factors, including the amount of monies standing in the individual’s CPF account and the amount of monies that the individual chooses to set aside for his or her beneficiaries upon his or her demise. Currently, all Singapore Citizens or Permanent Residents who attain 55 from May 1, 2016 and have at least SGD 60,000 in their CPF accounts are automatically enrolled in CPF LIFE. Retirement Sum Scheme If the individual does not meet the eligibility criteria for CPF LIFE, he or she will be placed on the Retirement Sum Scheme which provides a monthly payout to the individual once he or she attains the payout eligibility age, which is currently 65 years for members who were born in 1954 or later, for a period of approximately 20 years. SRS Under the SRS, an individual may make a withdrawal at any time. However, if a withdrawal is made before the individual attains his or her statutory retirement age, a 5% penalty is imposed unless such withdrawal is made on the grounds of death, medical reasons, bankruptcy and the individual has maintained his or her SRS account for a period of 10 years from the date of the first contribution. Singapore Contributed by: Kala Anandarajah, Rajah & Tann Singapore LLP A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 South Korea Contributed by: Kim & Chang Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? In relation to retirement and pension programs in Korea, there exist (i) a National Pension, which is a nationwide social insurance system; and (ii) a retirement benefits scheme, which employers are required to have for their employees, pursuant to the Employee Retirement Benefit Security Act (“Retirement Benefits”). National Pension Employers and employees are required to make equal contributions totaling 9% of the employee’s monthly standard salary. The employee’s contribution (i.e., 4.5%) is directly deducted from the employee’s monthly standard salary. The A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 employer’s contributions are fully deductible under the Korean Corporation Tax Law (Article 45(1) of the Presidential Decree of the Corporation Tax Law). Benefits received can take the form of a retirement annuity, a disability pension, a survivors’ pension or a lump sum refund (Article 49 of the National Pension Act). Retirement Benefits With regard to Retirement Benefits, an employer is required to adopt a severance payment plan (“Statutory Severance Plan”), or a retirement pension plan that may be in the form of a defined benefit plan (“DB Plan”) or defined contribution plan (“DC Plan”). Employers with less than 10 employees have the option of establishing an individual retirement pension (“IRP”) rather than adopting a Statutory Severance Plan or the DB or DC Plan. In Korea, an employee who has one or more consecutive years of service with an employer and works on average 15 or more hours per week is entitled to receive Retirement Benefits within 14 days of separation from the employer, regardless of the cause of separation (whether it be due to unilateral termination, voluntary resignation or retirement). There was a recent amendment to the Employee Retirement Benefit Security Act (“ERBSA”) in order to encourage a shift away from the Statutory Severance Plan (which was the only Retirement Benefits scheme available before ERBSA was enacted). As such, employers established after July 26, 2012 must, within one year of their establishment, implement either the DB or DC Plan. That said, an employer (established after July 26, 2012) that fails to implement either a DB or DC Plan is not subject to any penalties but will be deemed to have adopted the Statutory Severance Plan. If an employer delays payment of Retirement Benefits for longer than 14 days to an employee whose employment relationship has ended, the employer shall pay deferral interests for the unpaid Retirement Benefits at an annual rate of 20%. However, if the employer and the employee have agreed, within the 14 days, to extend the grace period to a particular date, the employer may delay the payment until that date. Other Social Security Programs In addition to the National Pension, there are three other statutory insurance programs in Korea, which are National Health Insurance, Employment Insurance and Industrial Accident Compensation Insurance. 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Yes, employers with one or more employees are required to enroll employees under the National Pension and to provide Retirement Benefits, which may be in the form of a Statutory Severance Plan, DB Plan, DC Plan or IRP (in the case of an employer with less than 10 employees). South Korea A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Labor Standards Act (“LSA”) and ERBSA (which incorporates the relevant provisions of the LSA) are the principal statutes in Korea. The LSA is Korea’s fundamental labor law regulating the minimum working conditions for employees and prescribing the basic legal framework for labor relations between employers and employees. Furthermore, the LSA generally applies to all workplaces employing five or more employees, with some variations depending on the number of employees in the workplace. Please note that an employer’s requirement to enroll its employees under the National Pension and to provide them the Retirement Benefits applies regardless of the employee headcount. ERBSA provides for a comprehensive retirement benefit system consisting of several different plans, in addition to the current severance system, available to the employer and the employee. The stated purpose of ERBSA is to provide employees with a stable income after retirement by encouraging conversion to a corporate pension over the statutory severance scheme, which otherwise applies by default. The legal minimum separation payment obligation for employers is 30 days’ average wage for each consecutive year of service. For purposes of calculating separation payments, “average wage” includes all wages paid by the employer to the employee for the three-month period prior to the date of resignation or termination, divided by the total number of days during the same period. Statutory Severance: In the case of Statutory Severance, the employee is entitled to Retirement Benefits equalling at least 30 days’ average wage for every year of consecutive service. DB Plan or DC Plan: Here, the employer entrusts an outside financial institution to manage a fund from which the employee will receive an annuity or lump sum payment upon separation. In the case of a DB Plan, the amount of the Retirement Benefits payable to the employee is predetermined, while the contribution to be made by the employer may vary depending on how the fund performs. The amount of the Retirement Benefits that must be paid is the same as Statutory Severance (i.e., at least 30 days’ average wage for every year of consecutive service). In the case of a DC Plan, the employer’s contribution is predetermined, while the amount of Retirement Benefits payable to the employee may vary depending on how the fund performs. The employer’s contribution amount is 1/12 of the employee’s total annual wage. In both the DB Plan and DC Plan, the Retirement Benefits are paid as an annuity or as a lump sum payment. South Korea A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 IRP: An IRP requires funds to be placed in an IRP account for which funds are managed by a qualified retirement pension manager. If an employer selects and adopts an IRP, then the employer will be deemed to have established a Retirement Benefits scheme as required under ERBSA. Here, too, the Retirement Benefits paid to the employee must equal at least 30 days’ average wage for every year of consecutive service. 4. What are the key features of the tax framework that applies to retirement plans/schemes? Under Korean tax laws, when an employee (a) makes an employee contribution per the National Pension Act or (b) pays the employee (insurance) contribution per the National Health Insurance Act, Employment Insurance Act or Act on LongTerm Insurance Care for the Elderly, the entire contribution amount shall be deemed tax deductible from the employee’s income. Similar to (a) and (b), when an employer makes an employer contribution per the National Pension Act or pays the employer (insurance) contribution per the National Health Insurance Act, Employment Insurance Act or Act on LongTerm Insurance Care for the Elderly, the entire contribution amount shall be deemed a tax-deductible expense. With regard to Retirement Benefits, when an employee makes an additional contribution to his or her employee contribution (“Additional Contribution”), the Additional Contribution, as well as other contributions to the IRP amounting to up to KRW 7,000,000, shall be tax deductible from the employee’s income. As for any such employer contribution to Retirement Benefits, the full amount shall be a tax-deductible expense. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? For the National Pension, employers and employees are both required to make equal contributions totalling 9% of the employee’s monthly standard salary. With respect to Retirement Benefits, only employer contributions are required. For additional information on the employer contributions, please see our comments under questions 1 and 3. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Under ERBSA, a retirement pension trustee shall operate and manage the retirement pension in accordance with the methods and standards prescribed under the Presidential Decree to ERBSA (e.g., diversified investment, operating similar to a bank deposit/savings account as defined under the Banking Act, operating similar to an insurance contract as defined under the Insurance Business Act, etc.) in order to ensure mid- and long-term stable operation of reserves. In addition, a retirement pension trustee of a DC Plan shall suggest at least three operating methods with different risks and return structures at least once every half year, and shall supply information required by a participant to choose a method of operating reserves (e.g., information on the probability of making profits and losses for each operating method). South Korea A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Before adopting a DB Plan or DC Plan, the employer should (i) obtain the consent from the employee representative (i.e., a representative elected by the majority of employees) or majority labor union (i.e., a union in which a majority of employees are members) if such union exists, (ii) draw up the rules of the DB Plan or DC Plan and (iii) report it to the competent labor office. The rules of the DB Plan or DC Plan should be set up autonomously by the employer and employees within the limits of statutory standards. Furthermore, the employer should sign a contract with a DB Plan or DC Plan provider (financial institution) which will operate the DB Plan or DC Plan (e.g., manage the fund). Any financial institution falling under any of the following subparagraphs that wishes to be a retirement pension trustee shall register itself with the Minister of Employment and Labor after meeting certain requirements (e.g., financial soundness, personnel and physical resource requirements). • An investment trader, investment broker, or collective investment business entity under the Financial Investment Services and Capital Markets Act • An insurance company under subparagraph 6 of Article 2 of the Insurance Business Act • A bank under Article 2 (1)2 of the Banking Act • The National Credit Union Federation of Korea under subparagraph 2 of Article 2 of the Credit Unions Act • The Korean Federation of Community Credit Cooperatives under Article 2(3) of the Community Credit Cooperatives Act • The Korea Workers’ Compensation and Welfare Service under Article 10 of the Industrial Accident Compensation Insurance Act (the objects of the retirement pension business of the Korea Workers’ Compensation and Welfare Service shall be limited to businesses employing less than 30 ordinary workers) 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? Reporting Requirements: As noted under question 6, the rules of a DB Plan or DC Plan must be reported to the competent labor office. Consent Requirements: When an employer is establishing a DB Plan or DC Plan or changing an existing Retirement Benefits scheme (e.g., from a Statutory Severance Plan to a DC Plan), the employer must obtain consent from the employee representative (i.e., a representative elected by the majority of employees) or the majority labor union (i.e., a union in which a majority of employees are members) if such union exists. South Korea A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Consultation/Consent Requirements: When an employer intends to change the details of a Retirement Benefits scheme, the employer must consult (i.e., seek the opinion of) the employee representative or majority labor union. Furthermore, if the intended change would be an adverse change for the employees, the employer must obtain consent thereon from the employee representative or majority labor union. An adverse change that was implemented without the required consent from the employee representative or majority labor union is void and without effect. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? As noted in question 7, when an employer intends to change the details of a Retirement Benefits scheme, the employer must consult (i.e., seek the opinion of) the employee representative or majority labor union. If the intended change would be an adverse change for the employees, the employer must obtain consent thereon from the employee representative or majority labor union. An adverse change that was implemented without the required consent from the employee representative or majority labor union is void and without effect. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? An employer is free to withdraw from a Retirement Benefits scheme and to change to a different type of Retirement Benefits scheme for any reason, as long as the employer has obtained consent from the employee representative or majority labor union (hereinafter “Requisite Consent”). A change in Retirement Benefits scheme that is implemented without Requisite Consent is void and without effect. Because employers are required to have a Retirement Benefits scheme, it is not possible for an employer to withdraw from a Retirement Benefits scheme without adopting another type of Retirement Benefits scheme. As discussed under question 1, employers established after July 26, 2012 must, within one year of their establishment, implement either the DB Plan or DC Plan, and, upon an employer’s failure to do so (while there are no penalties), the employer will be deemed to have adopted the Statutory Severance Plan. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? No, it is not possible for an employee to take the Retirement Benefits that he or she accrued and was provided by the former employer to a new employer. When an employee starts employment with a new employer, he or she will begin to accrue (new) Retirement Benefits with this employer, provided the employee works on average 15 hours per week or more and has one or more consecutive year of service. South Korea A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? No, there is no such requirement. South Korea Contributed by: Hoin Lee & Sun-Ha Kweon, Kim & Chang A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Taiwan Contributed by: Lee, Tsai & Partners, Attorneys-at-Law Mayer Brown JSM Hong Kong Office 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong E: [email protected] T: +852 2843 2211 F: +852 2845 9121 1. Does the state provide a pension, retirement income or social security program of some type? Yes. Employees are eligible for a labor pension and a labor insurance old age benefit. (1) Pension Schemes There are two concurrent pension schemes in place. In general, employees who are Taiwan citizens hired on or after July 1, 2005 are subject to the Labor Pension Act (“LPA”) pension scheme, and those hired before that date may choose between the Labor Standards Act (“LSA”) pension scheme and the LPA pension scheme. However, even for employees hired before July 1, 2005 who choose the LPA pension scheme, the LSA pension scheme still applies to their seniority calculated under the LSA, as their seniority prior to their transferring to the LPA pension scheme is still recognized. (Note: Employees who are not Taiwan citizens should apply different rules. Please refer to question 3.) A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Under the LPA pension scheme, an employer shall contribute, on a monthly basis, no less than 6% of an employee’s monthly wages to the personal pension account of the employee, which is managed by the Labor Insurance Bureau. Employees who are 60 years old (or older) may claim pension payments under the LPA pension scheme. Under the LSA pension scheme, employers shall deposit funds ranging from 2% to 15% of the total monthly wages of their employees and deposit such amount in a designated “pension reserve fund” account. This pension reserve account is managed by the Bank of Taiwan as entrusted by the Bureau of Labor Funds of the Ministry of Labor. When the employee retires, he or she would claim his or her pension from the employer. The criteria for payment shall be two “bases” for each full year of the employment service. Those having worked over 15 years are given one base for each full year of service and the total number of bases shall be no more than 45. Length of employment service is calculated as a half year when it is less than six months and as one year when it is six months or more but less than one year. (2) Labor Insurance Old Age Benefit System Employers shall enroll employees in the labor insurance program and, in general, both the employers and the employees shall pay the insurance premiums every month. Once the employee meets the requirements under the Labor Insurance Act, he or she may claim for the old age benefit. Besides the above, there are also separate pension systems for veterans, public officials and teachers, as well as an old age benefit system for the general population (i.e., unemployed). 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Employers are required to maintain the pension schemes as described under question 1 above and shall enroll employees in the labor insurance program and pay the insurance premiums every month. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? (1) The two statutory pension schemes are governed by the LSA and the LPA respectively, and the labor insurance old age benefit is governed by the Labor Insurance Act. (2) For the LSA pension scheme, the LSA requires the employer to make monthly deposits for its employees who are (a) Taiwan nationals or (b) foreign nationals who do not engage in (i) marine fishing, (ii) domestic assistant/nursing or (iii) occupations designated by the central competent authority in response to key infrastructure projects or economic/ social development needs. Under the LPA pension scheme, the LPA requires the employer to make monthly Taiwan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 contributions to its employees’ personal pension accounts if the employee is (a) a Taiwan national (if the employee is employed on or after July 1, 2005 or is employed before July 1, 2005 and has chosen to follow the LPA pension scheme) or (b) a Mainland China, Hong Kong or Macau national or a national of any other country who has married or later divorced a Taiwan national and has been granted permission to reside and work in Taiwan. (3) According to the Labor Insurance Act, all employees between the ages of 15 and 65, regardless of nationality, who are employed by a company with five employees or more, shall be enrolled in the labor insurance program by the employer. The employee may apply for old age benefit according to the following rules: (a) An employee who is at least 60 years old and has at least 15 full years enrolled in labor insurance, or an employee who is at least 55 years old and has worked at least 15 years in an occupation that is considered dangerous and requiring a high level of physical fitness, is entitled to request annual old age benefit upon his or her resignation and withdrawal from the insurance plan. (b) An employee who is at least 60 years old but does not yet have 15 full years enrolled in labor insurance is entitled to receive a one-time lump sum old age benefit upon his or her resignation and withdrawal from the insurance plan. (c) The one-time lump sum old age benefit is also available to the following employees who have seniority under the labor insurance program prior to January 1, 2009: (i) an employee who is at least 60 years old (or a female employee who is at least 55 years old) and who has accumulated at least one year of seniority under the labor insurance program, (ii) an employee resigning at 55 years old with 15 full years enrolled in labor insurance, or (iii) a resigning employee who has at least 25 years enrolled in labor insurance under the same employer/ organization. 4. What are the key features of the tax framework that applies to retirement plans/schemes? (1) The employee does not include the employer-contributed pension amount in his or her income tax for the year that the contribution is made; the income tax is assessed only when the employee starts withdrawing from the pension in the future, thereby turning it into retirement income. (2) According to the LPA, employees may voluntarily contribute up to 6% of their monthly wage to the personal pension account. The amount of labor pension voluntarily contributed by the employee may be deducted from his or her gross consolidated income for the year. Taiwan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 (3) According to the Income Tax Act, the employer may list as its expenses its contributions under either the LSA pension scheme or the LPA pension scheme for up to 15% of the wages paid in that year. (4) In terms of tax exemptions on retirement income, the Ministry of Finance announced in 2016 that: For a one-time lump sum retirement income payment, if the amount is no more than “NT$175,000 multiplied by the seniority”, it is considered tax-exempt; the taxable income for any portion between “NT$175,001 to NT$351,000 (multiplied by the seniority)” is one-half of that amount; and any amount beyond “NT$351,000 (multiplied by the seniority)” is fully taxable income. For retirement income payment paid in installments, the taxable income would be based on the total amount received that year minus NT$758,000. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? Yes. Please refer to question 1. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? The Regulations for the Labor Pension Act on Labor Pension Fund Management/Utilization and Profit/Loss Allocation and the Regulations for Revenue, Expenditure, Safeguard and Utilization of the Labor Retirement Fund both contain rules on how the LPA pension fund and the LSA pension reserve, respectively, may be used and invested. For example, both the LPA pension fund and the LSA pension reserve may only be deposited in a domestic or foreign financial institution or invested in the items specified under the said regulations, such as domestic or foreign listed/OTC or private placement equity securities, or domestic or foreign real-estate based security products. Article 45 of the LPA provides that investment of the LPA pension accounts outside the enumerated scope may be fined between NT$2 million and NT$10 million, and the central competent authority would require payment of interest accrued within a certain deadline. However, as the LSA pension reserve is managed by the Bank of Taiwan as entrusted by the Bureau of Labor Funds, and the LPA pension accounts are managed by the Bureau of Labor Funds itself or its designated trusts, the employer would never be held liable because the employer does not have access to use or invest those funds. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? LSA pension scheme (1) Under the LSA, the employer’s setting aside of the pension reserve shall be monitored by a pension reserve supervising committee formed by the employees and the employer. Representatives of employees must make up at least two-thirds of such a committee. Any changes contemplated by the employer regarding the percentage to be set Taiwan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 aside for the pension reserve shall require the approval of the aforementioned committee and later reported to the local competent authority for review. (2) According to the Regulations for the Allocation and Management of the Employee Pension Reserve Funds, a contemplated use of the pension reserve shall also require the review of the committee and subsequently signed off by the employer with the committee chair and committee vice-chair. (3) According to the Regulations for the Allocation and Management of the Employee Pension Reserve Funds, the accounting books of the pension reserve shall be submitted to the committee for review within one month of the end of every fiscal year. (4) The failure to establish a supervising committee would cause employees to be unable to receive pension payments entirely, as withdrawals from the pension reserve require the signatures of the committee chair and committee vice-chair. The failure to receive the approval of the committee for any changes to the contribution percentage to the pension reserve, thereby causing the proposal to be unable to be submitted to the local competent authority for review, would affect the amount of expenses the employer may claim on its tax return (the pension reserve percentage is one of the factors considered by the tax authority in recognizing a company’s expenses). LPA pension scheme According to the LPA, an employee who discovers noncompliance by his or her employer, such as a failure to contribute to the pension account according to the LPA, may submit a complaint to the employer, the Ministry of Labor, agencies responsible for labor inspections or the competent authority. The employer may not impose retaliatory measures against an employee who makes such a complaint. 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? LSA pension scheme As mentioned above, changes to the employer’s percentage contribution to the pension reserve will require the approval of the pension reserve supervising committee and submission to the local competent authority for further approval. LPA pension scheme (1) Pursuant to the LPA, the employer may not stipulate any other pension scheme in place of the statutory labor pension scheme. (2) As mentioned above, the LPA requires the employer to contribute at least 6% of the employee’s monthly wages to Taiwan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 the pension account. If the employer is currently contributing more than the minimum 6% but desires to move down to the statutory level, depending on the provisions under the employment agreements, employee consent may be required. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? LSA pension scheme The Regulations for the Allocation and Management of the Employee Pension Reserve Funds provide for three circumstances under which an employer may withdraw from the pension reserve fund managed by the Bank of Taiwan: (1) The employer and the employee have settled the seniority under the LSA pursuant to law and found that there is no need to pay the employee the pension under the LSA pension scheme. (2) The employer no longer has any employees who follow the LSA pension scheme. (3) The employer is dissolved and does not owe severance or pension to its employees. Employers found in violation of the above rule may be fined between NT$20,000 and NT$300,000. As mentioned in (1) of question 1 above, for employees hired before July 1, 2005 who choose the LPA pension scheme, the LSA pension scheme still applies to their seniority calculated under the LSA, as their seniority prior to their transferring to the LPA pension scheme is still recognized. Such employees may reach an agreement with the employer to pay off the accrued LSA seniority with terms no lower than the pension calculation bases provided under the LSA. After the payoff, the employee will no longer remain under the LSA pension scheme (since they do not have any LSA seniority). Finally, the employer may stop depositing funds in the pension reserve fund account for the employee after termination of the employment relationship with the employee. LPA pension scheme The personal pension account is the employee’s property. Thus, the employer does not have the power to “withdraw” or “terminate” the pension account upon the termination of the employment relationship; the employer may simply stop contributing to the employee’s personal pension account. Taiwan A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? LSA pension scheme An employee’s seniority is limited to a single employer. A change of jobs would thus reset the seniority and affect the individual’s rights in applying for pension payment upon retirement. LPA pension scheme As an employee’s employer is required to contribute a certain amount to the employee’s personal pension account, it does not matter who the employer is, and the pension amount will not be affected by the employee’s change of jobs. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? There is no such requirement under the LSA and the LPA. Taiwan Contributed by: Chung-Teh Lee, Elizabeth Pai, Ankwei Chen & Emily Chueh, Lee, Tsai & Partners, Attorneys-at-Law A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Contributed by: Mayer Brown JSM (Vietnam) 1. Does the state provide a pension, retirement income or social security program of some type? The state provides a statutory framework for social insurances covering pension schemes under the Labour Code No. 10/2012/QH13 dated June 18, 2012 (the “Labour Code”) and the Law on Social Insurance No. 58/2014/QH13 dated November 20, 2014, of the National Assembly of Vietnam (the “Law on Social Insurance”). Social insurance is contributed on a monthly basis by employers and employees. Subject to applicable retirement conditions, an employee is entitled to pension insurance upon reaching the age of (i) 60 for men and 55 for women if they have been working under normal working conditions or (ii) 55 to 60 (men) and 50 to 55 (women) if they have 15 years working under hazardous or arduous working conditions or in certain geographic regions. Hoang Anh Nguyen Partner, Hanoi E: [email protected] T: +84 4 3266 3113 F: +84 4 3825 9776 Vietnam A Global Guide to Retirement Plans & Schemes A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 2. Are employers required to maintain retirement plans/schemes, and what types of retirement plans/ schemes are employers permitted or required to maintain? Contribution to pension schemes is mandatory for both employers and employees. The Labour Code and the Law on Social Insurance provide that, except for exceptional cases, an amount equal to 8% of the employee’s wages must be contributed by the employee to the pension schemes. Employers have an obligation to contribute to the compulsory pension schemes in amounts ranging from 14% to 22% of the employees’ wages. The percentage of the employer’s contribution is subject to the type of job (Article 86 – the Law on Social Insurance). The salary used to calculate the social insurance contribution is the salary stated in the labor contract. If such salary is higher than the 20 months’ statutory pay rate, then the monthly salary used to calculate the social insurance contribution is equal to the 20 months’ statutory pay rate. 3. What are the principal statutes governing retirement plans/schemes that cover a broad cross-section of the workforce and what are the material requirements applicable to such plans/schemes? The Labour Code and the Law on Social Insurance provides the statutory framework for retirement schemes, and the Management Board of Vietnam Social Security is the government authority responsible for directing and supervising the operation of social insurance agencies and giving advice on pension insurance policies. Under the Law on Social Insurance, the responsibility for making pension contributions is on both the employer and the employee. Failure to make the required contributions may result in penalties for administrative violations against regulations on social insurance ranging from 12% to 18% of the compulsory social insurance premium at the time the administrative violation is recorded ((i) not exceeding VND 75,000,000 – approximately USD 3,400 (if the employer is an individual) and not exceeding VND 150,000,000 – approximately USD 6,800 (if the employer is a corporation) and (ii) from VND 500,000 to VND 1,000,000 – approximately USD 22 to USD 44 applicable to the employee) (Article 26 – Decree 95/2013/ND-CP dated August 22, 2013, as amended). 4. What are the key features of the tax framework that applies to retirement plans/schemes? Pursuant to Vietnamese laws, mandatory contributions made by employee and employer are not subject to taxation. 5. If an employer adopts a retirement plan/scheme, are employer contributions required? It is mandatory for both employer and employee to contribute to a pension fund as discussed in question 2. The obligation on an employer to pay the monthly contributions arises if the employee is in continuous employment for one month. Conversely, no contributions would be payable if the employee is in continuous employment for less than Vietnam A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 one month. The Labour Code and the Law on Social Insurance are silent on whether an employer can avoid its obligations by breaking up an employee’s employment into periods of less than one month each. 6. What are the material rules governing retirement plan/scheme investments, and what liabilities attach for failure to satisfy those requirements? Under the government’s Decree No. 30/2016/ND-CP dated April 28, 2016, investment in social insurance, health insurance and unemployment insurance funds is subject to the following order of priority: (i) Purchase of government bonds; (ii) Provision of loans to the state budget; (iii) Making of deposits, purchase of bonds, promissory notes, bills or deposit certificates at high performance commercial banks rated by the State Bank of Vietnam; (iv) Provision of loans to Vietnam Development Bank and Vietnam Bank for Social Policies in the form of purchase of government-guaranteed bonds that are issued by these banks; and (v) Investment in important projects under the Prime Minister’s decisions. The investment in the two forms specified in paragraphs (iv) and (v) shall only be applied to the unemployment insurance funds. At the proposal of the Director General of Vietnam Social Security, the Management Board of Vietnam Social Security shall decide upon and take responsibility for the types and structure of the proposed investment. The Ministry of Finance shall supervise the implementation of such investments. At this stage, there are no specific regulations covering the liabilities for failure to comply with requirements for such types of investments. 7. What reporting, disclosure and employee consultation rules apply and how are they enforced? The government and Ministry of Labour Invalids and Social Affairs (MOLISA) have issued various requirements and guidelines on the reporting obligations of employers. General reporting requirements are the monthly, quarterly, semiannual and annual reports on the status of the mandatory contributions to the relevant social insurance agencies. Among others, these include: • Semi-annual report: publicly provide information on employees’ contribution payment of social insurance premiums at the request of employees or trade union organizations Vietnam A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 • Extraordinary report: any changes in information of employees in social insurance 8. What restrictions apply if the employer wishes to alter the terms of a retirement plan/scheme? As discussed in questions 2 and 3 above, contribution to the pension fund made by the employer is mandatory as required by the Labour Code and the Law on Social Insurance. The employer does not form the retirement scheme and therefore cannot alter these schemes. 9. Under what circumstances may an employer withdraw from or terminate a plan/scheme, and what liabilities may arise in connection with such withdrawal or plan/scheme termination? Under no circumstances may an employer withdraw from or terminate a plan/scheme. 10. Can employees take their pension/retirement benefit entitlement with them if they change jobs? Under the applicable laws, if an employee pays social insurance premiums in interrupted periods, his or her period of social insurance premium payment is the total of such periods. In other words, if an employee changes his or her job, he or she can take the pension benefit entitlement with him or her. 11. Do pension/retirement benefit payments need to be adjusted/increased after retirement? Subject to the state’s policy from time to time, retirement benefit payments may be adjusted. In practice, such adjustment, if any, would be applicable to those who are entitled to retirement benefit payments. Vietnam Contributed by: Hoang Anh Nguyen & Huong Nguyen, Mayer Brown JSM (Vietnam) A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Argentina Joaquin E. Zappa J.P. O’Farrell Abogados, 498 Del Libertador Av., 12th Floor, Buenos Aires, Argentina +54 11 4515 9200 [email protected] www.jpof.com.ar/cvs/joaquin_emilio_zappa_eng.pdf Bolivia Luis Perez FERRERE, Zona Equipetrol Norte, Calle 1, 170, Santa Cruz, Bolivia +591 3 341 9565 [email protected] en.ferrere.com/who-we-are/attorneys/luis-enrique-perez Brazil Eduardo Soto Tauil & Chequer Advogados in association with Mayer Brown LLP, Av. Juscelino Kubitschek, 1455 - 5º, 6º e 7º andares, Vila Nova Conceição - 04543-011, São Paulo, Brazil +55 11 2504 4202 [email protected] www.mayerbrown.com/people/Eduardo-Soto/ A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Brazil João Ribeiro Bastos Cunha Tauil & Chequer Advogados in association with Mayer Brown LLP, Rua Teixeira de Freitas, 31 - 9º andar, Centro, 20021-350, Rio de Janeiro, Brazil +55 21 2127 4278 [email protected] www.mayerbrown.com/people/Joao-Ribeiro-Bastos-Cunha Canada Paul Boniferro McCarthy Tétrault LLP, Box 48, Suite 5300, Toronto Dominion Bank Tower, Toronto, Ontario, M5K 1E6, Canada +416 601 8200 [email protected] www.mccarthy.ca/lawyer_detail.aspx?id=2518 Canada Margaret Gavins McCarthy Tétrault LLP, Box 48, Suite 5300, Toronto Dominion Bank Tower, Toronto, Ontario, M5K 1E6, Canada +416 601 8200 [email protected] www.mccarthy.ca/lawyer_detail.aspx?id=8408 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Chile Fernando Arab Verdugo Morales & Besa, Av. Isidora Goyenechea 3477, Las Condes, Santiago, Chile +56 2 2472 7000 [email protected] moralesybesa.cl/eng/abogados/fernando-arab-v/ Colombia Catalina Santos Brigard & Urrutia Abogados, Calle 70A, No. 4-41, Bogotá, Colombia +571 346 2011 [email protected] bu.com.co/en/attorneys/catalina-santos-angarita Ecuador Dr. Patricio Peña R. Noboa, Peña & Torres, Av. República de El Salvador N36-230 y Av. Naciones Unidas, Edificio Citibank, Piso 2, Quito, Ecuador +593 2 2970 193 [email protected] www.legalecuador.com/en/team/lawyer/13#Patricio Peña Romero A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Mexico David Puente-Tostado Sánchez Devanny, Paseo de las Palmas 525 Piso 6, Col. Lomas de Chapultepec, México, D.F., 11000 México +52 55 5029 8500 [email protected] www.sanchezdevanny.com/nuestros-abogados.php?lang=en&id=39 Mexico Alfredo Kupfer-Dominguez Sánchez Devanny, Paseo de las Palmas 525 Piso 6, Col. Lomas de Chapultepec, México, D.F., 11000 México +52 55 5029 8500 [email protected] www.sanchezdevanny.com/nuestros-abogados.php?lang=en&id=55 Panama Jorge Federico Lee Aleman Cordero Galindo & Lee, Humboldt Tower, 2nd Floor, 53rd East Street, Panama City, Panama +507 269 2620 [email protected] www.alcogal.com/index.php/lawyers/jorgelee A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Paraguay Marysol Estigarribia FERRERE, Torres del Paseo, Torre I - Nivel 25, Avda. Santa Teresa N° 2106, Asunción, Paraguay +595 21 318 3000 [email protected] en.ferrere.com/who-we-are/attorneys/marysol-estigarribia Peru José Antonio Valdez Estudio Olaechea, Bernardo Monteagudo 201, San Isidro, Lima, Peru +511 219 0400 [email protected] http://www.esola.com.pe/en/our-team/partners.html A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA United States Maureen Gorman Mayer Brown LLP, NY 1221 Avenue of the Americas, New York, NY 10020-1001, United States PA Two Palo Alto Square, Suite 300, 3000 El Camino Real, Palo Alto, CA 94306-2112, United States NY +1 212 506 2679 PA +1 650 331 2015 [email protected] https://www.mayerbrown.com/en-US/people/Maureen-J-Gorman/ United States James E. Crossen Mayer Brown LLP, 71 S. Wacker Drive, Chicago, IL 60606, United States +1 312 701 7481 [email protected] www.mayerbrown.com/people/James-E-Crossen A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Uruguay Verónica Raffo FERRERE, Juncal 1392, Montevideo, Uruguay +598 2 900 1000 [email protected] http://en.ferrere.com/who-we-are/attorneys/veronica-raffo Venezuela Jaime Martínez Estévez Rodner Martínez & Asociados, Av. Venezuela, Torre Clement, Piso 2, El Rosal, Caracas, Venezuela +58 212 951 38 11 [email protected] www.rodnermartinez.com/site/p_index.php?ids=2&idss=12 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Belgium Nicolas Simon Van Olmen & Wynant, Avenue Louise 221, 1050 Brussels, Belgium +32 2 644 05 11 [email protected] http://www.vow.be/team.html Czech Republic Jan Koval Havel, Holásek & Partners, Na Florenci 2116/15, Recepce A, 110 00 Prague 1 – Nové Město, Czech Republic +420 255 000 740 [email protected] www.havelholasek.cz/en/team/partners/12-partneri/6-jan-koval Denmark Tina Brøgger Sørensen Kromann Reumert, Sundkrogsgade 5, 2100 Copenhagen OE, Denmark +45 70 12 12 11 [email protected] https://en.kromannreumert.com/People/Tina-Broegger-Soerensen A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Denmark Bitten Elizabeth Hansen Kromann Reumert, Sundkrogsgade 5, 2100 Copenhagen OE, Denmark +45 70 12 12 11 [email protected] https://en.kromannreumert.com/People/Bitten-Elizabeth-Hansen Egypt Khaled Sherif Shalakany Law Office, 12 El Maraashly Street, Zamalek, Cairo, Egypt +20 2 272 88 888 [email protected] www.shalakany.com Finland Seppo Havia Dittmar & Indrenius, Pohjoisesplanadi 25 A, FI-00100 Helsinki, Finland +358 9 681 700 [email protected] www.dittmar.fi/people/seppo-havia A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA France Régine Goury Mayer Brown, 20 Avenue Hoche, 75008 Paris, France +33 1 53 53 43 40 [email protected] www.mayerbrown.com/people/regine-goury/ Germany Dr. Guido Zeppenfeld Mayer Brown LLP, Friedrich-Ebert-Anlage 35-37, 60327 Frankfurt am Main, Germany +49 69 79 41 2241 [email protected] www.mayerbrown.com/people/dr-guido-zeppenfeld-llm/ Germany Dr. Nicolas Rößler Mayer Brown LLP, Friedrich-Ebert-Anlage 35-37, 60327 Frankfurt am Main, Germany +49 69 79 41 2231 [email protected] www.mayerbrown.com/people/dr-nicolas-roessler-llm/ A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Hungary Péter Szemán Bán, S. Szabó & Partners, H-1051 Budapest, József Nádor Tér 5-6, Hungary +36 1 266 3522 [email protected] www.bansszabo.hu/en/team/dr-peter-szeman Iceland Ólafur Eiríksson hrl. LOGOS Legal Services, Efstaleiti 5, 103 Reykjavík, Iceland +354 5 400 300 [email protected] https://en.logos.is/the-team/staff-member/olafur-eiriksson-hrl Iceland Hildur Hjörvar LOGOS Legal Services, Efstaleiti 5, 103 Reykjavík, Iceland +354 5 400 300 [email protected] https://en.logos.is/the-team/staff-member/hildur-hjorvar A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Italy Francesco D’Amora Quorum Studio Legale e Tributario Associato, Via Senato 37, 20121 Milan, Italy +39 02 87 21 32 37 [email protected] www.quorumlegal.com Kuwait Tom Thraya Mayer Brown LLP, Index Tower, Dubai International Finance Centre, Floor 11, Unit 1104, Dubai, United Arab Emirates +971 4 375 7161 [email protected] www.mayerbrown.com/people/Tahan-Tom-A-Thraya Kuwait Jad Taha Mayer Brown LLP, Index Tower, Dubai International Finance Centre, Floor 11, Unit 1104, Dubai, United Arab Emirates +971 4 375 7166 [email protected] www.mayerbrown.com/people/Jad-A-Taha A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Netherlands Hermine Voûte Loyens & Loeff, Fred. Roeskestraat 100, 1076 ED Amsterdam, Netherlands +31 20 578 57 85 [email protected] https://www.loyensloeff.com/en-us/our-people/hermine-voûte Poland Roch Pałubicki Sołtysiński Kawecki & Szlęzak, Jasna 26, 00-054 Warsaw, Poland +48 22 608 70 00 [email protected] http://www.skslegal.pl/team/roch-palubicki,item,62,150.php Russia Markus Schaer Secretan Troyanov Schaer SA, Ulitsa Usacheva 33, Bldg. 1, 119048 Moscow, Russia +74 95 232 03 01 [email protected] www.sts-law.ru/en/team_markus_schaer A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Saudi Arabia Tom Thraya Mayer Brown LLP, Index Tower, Dubai International Finance Centre, Floor 11, Unit 1104, Dubai, United Arab Emirates +971 4 375 7161 [email protected] www.mayerbrown.com/people/Tahan-Tom-A-Thraya Saudi Arabia Jad Taha Mayer Brown LLP, Index Tower, Dubai International Finance Centre, Floor 11, Unit 1104, Dubai, United Arab Emirates +971 4 375 7166 [email protected] www.mayerbrown.com/people/Jad-A-Taha South Africa Ross Alcock Edward Nathan Sonnenbergs Inc., 150 West Street, Sandton, Johannesburg, 2196, South Africa +27 11 269 7600 [email protected] www.ensafrica.com/lawyer/ross-alcock?Id=320&searchterm=ross%20alcock A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA South Africa Muzi Khoza Edward Nathan Sonnenbergs Inc., 150 West Street, Sandton, Johannesburg, 2196, South Africa +27 11 269 7600 [email protected] www.ensafrica.com/lawyer/Muzi-Khoza?SearchTerm=Muzi%2520Khoza&ost=khoza&Id=210 South Africa Nomampondo Banzi Edward Nathan Sonnenbergs Inc., 150 West Street, Sandton, Johannesburg, 2196, South Africa +27 11 269 7600 [email protected] www.ensafrica.com/lawyer/Nomampondo-Banzi?SearchTerm=Nomampondo%2520Banzi&personId=453 Spain Daniel Cifuentes Pérez-Llorca, Paseo de la Castellana, 50, 28046, Madrid, Spain +34 91 423 66 89 [email protected] www.perezllorca.com/en/Abogados/Pages/FichasAbogados/Daniel-Cifuentes.aspx A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Turkey Irmak Dirik DAB Law Firm, Sakayik Sok. Nisantasi Plaza No:38/2, K:4 D:19 Nisantasi Sisli, Istanbul, Turkey +90 212 234 44 25 [email protected] http://dablawfirm.com/pages/team/ United Arab Emirates Tom Thraya Mayer Brown LLP, Index Tower, Dubai International Finance Centre, Floor 11, Unit 1104, Dubai, United Arab Emirates +971 4 375 7161 [email protected] www.mayerbrown.com/people/Tahan-Tom-A-Thraya United Arab Emirates Jad Taha Mayer Brown LLP, Index Tower, Dubai International Finance Centre, Floor 11, Unit 1104, Dubai, United Arab Emirates +971 4 375 7166 [email protected] www.mayerbrown.com/people/Jad-A-Taha A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA United Kingdom Jay Doraisamy Mayer Brown International LLP, 201 Bishopsgate, London, EC2M 3AF, United Kingdom +44 20 3130 3031 [email protected] https://www.mayerbrown.com/people/Jay-Doraisamy/ United Kingdom Katherine Carter Mayer Brown International LLP, 201 Bishopsgate, London, EC2M 3AF, United Kingdom +44 20 3130 3901 [email protected] https://www.mayerbrown.com/people/Katherine-Carter/ A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Australia John Tuck Corrs Chambers Westgarth, 567 Collins Street, Melbourne, VIC 3000, Australia +61 3 9672 3000 [email protected] www.corrs.com.au/people/john-tuck Hong Kong Duncan Abate Mayer Brown JSM, 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong +852 2843 2203 [email protected] www.mayerbrown.com/people/duncan-a-w-abate Hong Kong Hong Tran Mayer Brown JSM, 16th - 19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong +852 2843 4233 [email protected] www.mayerbrown.com/people/hong-tran A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA India Ajay Raghavan Trilegal, The Residency, 7th Floor, 133/1, Residency Road, Bangalore 560 025, India +91 80 4343 4646 [email protected] www.trilegal.com/index.php/member-profile/ajay-raghavan Indonesia Richard D. Emmerson SSEK Indonesian Legal Consultants, 14th Floor Mayapada Tower, Jl. Jend. Sudirman Kav. 28, Jakarta 12920, Indonesia +62 21 521 2038 [email protected] www.ssek.com/lawyer/attorney_intro/our_firm/attorneys/3/11/richard_d._emmerson_ Japan Nobuhito Sawasaki Anderson Mori & Tomotsune, Akasaka K-Tower, 2-7, Motoakasaka 1-chome, Minato-ku, Tokyo 107-0051, Japan +81 3 6888 1102 [email protected] www.amt-law.com/en/professional/profile/ns A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Macau Isolda Brasil MdME Lawyers, Avenida da Praia Grande, 409 China Law Building, 21/F and 23/F A-B, Macau +853 2833 3332 [email protected] http://mdme.com.mo/main/employment-and-immigration/isolda-brasil Malaysia Sivabalah Nadarajah Shearn Delamore & Co., 7th Floor, Wisma Hamzah-Kwong Hing, No.1 Leboh Ampang, 50100 Kuala Lumpur, Malaysia +603 2027 2727 [email protected] www.shearndelamore.com/?id=43 Malaysia Wong Kian Jun Shearn Delamore & Co., 7th Floor, Wisma Hamzah-Kwong Hing, No.1 Leboh Ampang, 50100 Kuala Lumpur, Malaysia +603 2027 2727 [email protected] www.shearndelamore.com/?id=1087 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Myanmar Chester Toh Rajah & Tann NK Legal Myanmar Company Limited, Myanmar Centre Tower 1, Floor 07, Unit 08, 192 Kaba Aye Pagoda Road, Bahan Township, Yangon, Myanmar +959 7304 0763 [email protected] www.rajahtannasia.com/chester.toh Myanmar Dr. Min Thein Rajah & Tann NK Legal Myanmar Company Limited, Myanmar Centre Tower 1, Floor 07, Unit 08, 192 Kaba Aye Pagoda Road, Bahan Township, Yangon, Myanmar +959 7304 0763 [email protected] mm.rajahtannasia.com/ Myanmar Lester Chua Rajah & Tann NK Legal Myanmar Company Limited, Myanmar Centre Tower 1, Floor 07, Unit 08, 192 Kaba Aye Pagoda Road, Bahan Township, Yangon, Myanmar +959 7304 0763 [email protected] mm.rajahtannasia.com/ A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA New Zealand Stephen Ward Simpson Grierson, Level 27, Lumley Centre, 88 Shortland Street, Auckland 1010, New Zealand +64 9 358 2222 [email protected] www.simpsongrierson.com/people/stephen-ward New Zealand Barney Cumberland Simpson Grierson, Level 27, Lumley Centre, 88 Shortland Street, Auckland 1010, New Zealand +64 9 358 2222 [email protected] www.simpsongrierson.com/people/barney-cumberland New Zealand Carl Blake Simpson Grierson, Level 27, Lumley Centre, 88 Shortland Street, Auckland 1010, New Zealand +64 9 358 2222 [email protected] www.simpsongrierson.com/people/carl-blake A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA New Zealand Lincoln Matthews Simpson Grierson, Level 27, Lumley Centre, 88 Shortland Street, Auckland 1010, New Zealand +64 9 358 2222 [email protected] www.simpsongrierson.com New Zealand Luke Strom Simpson Grierson, Level 27, Lumley Centre, 88 Shortland Street, Auckland 1010, New Zealand +64 9 358 2222 [email protected] www.simpsongrierson.com Pakistan Zeeshan Ashraf Meer Meer & Hasan, 1-Farid Kot Road, Lahore 54000, Pakistan +92 42 3723 5812 [email protected] www.meerhasan.com/index.php/index.php?option=com_content&view=article&id=138&Itemid=533 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA PRC Deng Youping Jingtian & Gongcheng, 34/F, Tower 3, China Central Place, 77 Jianguo Road, Beijing 100025, China +86 10 5809 1033 [email protected] www.jingtian.com/eng/node/241 PRC Andy Yeo Mayer Brown JSM, Suite 4710, Tower I, Plaza 66, 1266 Nan Jing Road West, Shanghai 200040, China +86 21 6032 0266 [email protected] www.mayerbrown.com/people/andy-s-yeo Philippines Enriquito J. Mendoza Romulo Mabanta Buenaventura Sayoc & de los Angeles, 21st Floor, Philamlife Tower, 8767 Paseo De Roxas, Makati City 1226, Philippines +63 2 555 9555 [email protected] www.romulo.com/mendoza-enriquito-j/ A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Singapore Kala Anandarajah Rajah & Tann Singapore LLP, 9 Battery Road, #25-01 Straits Trading Building, Singapore 049910 +65 6 232 0111 [email protected] www.rajahtannasia.com/one-team/partners/kala-anandarajah-pbm South Korea Hoin Lee Kim & Chang, 39, Sajik-ro 8-gil, Jongno-gu, Seoul 110-720, Korea +82 2 3703 1114 [email protected] www.kimchang.com/frame2.jsp?lang=2&b_id=87&mode=view&idx=2315 South Korea Sun-Ha Kweon Kim & Chang, 39, Sajik-ro 8-gil, Jongno-gu, Seoul 110-720, Korea +82 2 3703 1114 [email protected] www.kimchang.com/frame2.jsp?lang=2&b_id=87&mode=view&idx=1738 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Taiwan Chung-Teh Lee Lee, Tsai & Partners, Attorneys-at-Law, 9F, 218 Tun Hwa S. Road, Sec. 2, Taipei 106, Taiwan +886 02 2378 5780 [email protected] www.leetsai.com/fyi/front/bin/ptdetail.phtml?Part=BS-E-LP-00001&Category=108212 Taiwan Elizabeth Pai Lee, Tsai & Partners, Attorneys-at-Law, 9F, 218 Tun Hwa S. Road, Sec. 2, Taipei 106, Taiwan +886 02 2378 5780 [email protected] www.leetsai.com/fyi/front/bin/ptdetail.phtml?Part=BS-E-LP-00007&Category=108212 Taiwan Ankwei Chen Lee, Tsai & Partners, Attorneys-at-Law, 9F, 218 Tun Hwa S. Road, Sec. 2, Taipei 106, Taiwan +886 02 2378 5780 [email protected] www.leetsai.com/fyi/front/bin/ptdetail.phtml?Part=BS-E-LP-00029&Category=108247 A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Directory Select a region: AMERICAS EMEA ASIA Taiwan Emily Chueh Lee, Tsai & Partners, Attorneys-at-Law, 9F, 218 Tun Hwa S. Road, Sec. 2, Taipei 106, Taiwan +886 02 2378 5780 [email protected] www.leetsai.com/fyi/front/bin/ptdetail.phtml?Part=BS-E-LP-00036&Category=107867 Vietnam Hoang Anh Nguyen Mayer Brown JSM (Vietnam), Suite 606, 6th Floor, Central Building, 31 Hai Ba Trung, Hoan Kiem District, Hanoi, Vietnam +84 4 3266 3113 [email protected] https://www.mayerbrown.com/people/hoang-anh-nguyen/ Vietnam Huong Nguyen Mayer Brown JSM (Vietnam), Suite 606, 6th Floor, Central Building, 31 Hai Ba Trung, Hoan Kiem District, Hanoi, Vietnam +84 4 3266 3113 [email protected] https://www.mayerbrown.com/people/huong-thi-nguyen/ A Global Guide to Retirement Plans & Schemes HOME REGIONS DIRECTORY SCROLL DOWN CONTINUE February 2017 Legal Statement Mayer Brown is a global legal services organization advising clients across the Americas, Asia, Europe and the Middle East. Our presence in the world’s leading markets enables us to offer clients access to local market knowledge combined with global reach. We are noted for our commitment to client service and our ability to assist clients with their most complex and demanding legal and business challenges worldwide. We serve many of the world’s largest companies, including a significant proportion of the Fortune 100, FTSE 100, CAC 40, DAX, Hang Seng and Nikkei index companies and more than half of the world’s largest banks. We provide legal services in areas such as banking and finance; corporate and securities; litigation and dispute resolution; antitrust and competition; US Supreme Court and appellate matters; employment and benefits; environmental; financial services regulatory and enforcement; government and global trade; intellectual property; real estate; tax; restructuring, bankruptcy and insolvency; and wealth management. Mayer Brown comprises legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown Mexico, S.C., a sociedad civil formed under the laws of the State of Durango, Mexico; Mayer Brown JSM, a Hong Kong partnership and its associated legal practices in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. Mayer Brown Consulting (Singapore) Pte. Ltd and its subsidiary, which are affiliated with Mayer Brown, provide customs and trade advisory and consultancy services, not legal services. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions. This publication provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek legal advice before taking any action with respect to the matters discussed herein. © 2017 The Mayer Brown Practices. All rights reserved. Attorney advertising. Prior results do not guarantee a similar outcome.
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