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Participation of Non-State Pension Funds in the Social Security Reform of the Russian Federation

Inspectorate of Non-State Pension Funds of the Ministry of Labour and Social Development of the Russian Federation. Participation of Non-State Pension Funds in the Social Security Reform of the Russian Federation. Viacheslav Vladimirovich Bataev

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Participation of Non-State Pension Funds in the Social Security Reform of the Russian Federation

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  1. Inspectorate of Non-State Pension Funds of the Ministry of Labour and Social Development of the Russian Federation Participation of Non-State Pension Funds in the Social Security Reform of the Russian Federation Viacheslav Vladimirovich Bataev Head of the NPF Inspectorate of the Ministry of Labour and Social Development of the Russian Federation Moscow May 2004

  2. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Structure of the Presentation • Main indicators of the development of the system of Non-State Pension Funds (NPF) • Legal basis of the participation of the NPF in the Mandatory Social Security Insurance (MSI) • Degree of preparation required of the NPF in order to take part in the MSI • Place of the NPF in the Russian social security system.

  3. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Trends and General Characteristics of the Activity of Non-State Pension Funds in the Russian Federation By 01.01.2004there were 284 Non-State Pension Funds in existence in the Russian Federation • The own funds of the NPF are over125 thousand million roubles, including their social security resources which amount to90 thousand million roubles • The total number of members of the NPF is 5.3 million people, in other words, 7.2% of the economically active population • 426 thousand people are receiving the additional non-state pension, in other words, about 1.35% of all pensioners • The average amount of the non-state pension is over 640 roubles per month On 01.01.2004 the Non-State Pension Funds began their activity as insurers of the Mandatory Social Security Insurance.

  4. Number of funds with currently valid licence at the beginning of the year Number of NPF

  5. 1. Own net worth; 2 Social security reserves 3. Resources for carrying out the activity envisaged in the By-laws Net worth of the NPF, in thousands of roubles.

  6. Social security contributions in the year Development of Social Security Contributions, thousands of roubles.

  7. 1. Number of members in NPF at year end2. Including those who receive the non-state pension Growth in Membership of the NPF

  8. 1. State papers-10%, 2 Bonds – 10%, 3. Bank Deposits – 20%, 4.Bills of exchange – 19%, 5. shares – 49% Portfolio Structure of the NPF

  9. The financing of the additional pension is achieved with the social security contributions of the employerand/or workerto the NPF Area of NPF activities Amount of pension depends on sum saved Additional Pension The financing of the work pension is achieved with a singlesocial tax and with contributionsto the Russian Pension Fund Capitalized part of the work pension Insured part of the work pension Basic part of the work pension Average amountof the pensions is30-40% of the average wage In the country In the year2003 (году) the averageamount of the work pension was1830 roubles per month Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Russian Social Security System

  10. Non-State Pension Funds Russian Pension Fund Inspec-torate of NPF Минтруд России Russian Ministry of Finance State Administration Company Non-state Pension Fund Administration Company Administration Companies Specialized Depositary of the Non-state Pension Fund Specialized Depositary Russian Federal Securities Comission Organization of Competition Contractual Relations Consultation to the Regulatory Authority Notice of non-compliance Control Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации The Current System of State Regulation,Control and Supervision of the Mandatory Social Security Insurance Activity

  11. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Administrative Reform(decree issued by the President of the Russian Federation on 9.03.04 № 314) Functions of the Organisms of State Power - Approval of legal structures; • Control and supervision; • Application of laws; • Administration of state assets; • Provision of state services

  12. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Administrative Reform(decree issued by the President of the Russian Federation on 9.03.04 № 314) • Federal Ministries • Legal regulation in the area established • Coordination and control of subordinate federal services and agencies • Coordination of activity of state funds outside the normal budget • Federal Services • Control and supervision in the area established • Publishing of individual legal rulings A Federal Service may be subordinate to the Government of the Russian Federation • Federal Agencies • Provision of state services in the areas established • Publishing of individual legal rulings, • Maintenance of records, registrations and surveys The federal agency is not entitled to carry out legal regulation and control and supervisory functions

  13. Non-State Pension Fund Russian Pension Fund State Administration Company Non-State Pension Fund Administration Company Contractual Relations Notice of Non-compliance Control Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Administration Company Specialized Depositary of the Non-State Pension Fund Specialized Depositary Russian SFRF System of State Regulation, Control and Supervision of the MSI Activity(after implementing the stipulations of decree № 314) Russian Ministry of Finance

  14. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Legal basis of the participation of the Non-State Pension Funds in the MSI • Federal Law № 167-ФЗ «Mandatory Social Security Insurance» dated17.12.2001 • Federal Law № 75-FZ «Non-State Pension Funds» dated 7.05.1998 (publishing of Federal Law № 14-FZ dated 10.01 2003 ) • Federal Law № 111-FZ «Investment of Resources to Finance the Capitalized Part of the Work Pension of the Russian Federation» dated 24.07.2002 • Government Resolutions of the Russian Federation, published in compliance with Federal Law № 14-FZ dated 10.01 2003 • Regulatory documents of the Authorized Federal Organism, in compliance with Federal Law № 14-FZ dated 10.01 2003

  15. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Legal Basis of the Participation in the MSI(resolutions of the Government of the Russian Federation) Organization Chart(GK-P12-6004, dated 23.05.2003) stipulates the development of 23 draft resolutions of the Government of the Russian Federation By 15.04.2004 г. the following resolutions had been passed: on4.11.2003 № 669Authorized Federal Organism on5.12.2003 № 735Approval of the Resolution regarding licenses for the activity of the NPFs. on30.12.2003 № 798Approval of the Rules regarding information on the new MSI agreements on22.01.2004 № 30Approval of the Calculation Rules for the Indicators of the Composition and Structure of the Investment Portfolio, for Control Purposes on6.02.2004 № 55Approval of the Rules for Transferring Social Security Savings from one NPF to another or from the NPF to the RPF, and the calculation of their value.

  16. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Legal Bases of the Participation in the MSI (resolutions of the Government of the Russian Federation)- continued on6.02.2004 № 60Approval of the standard Agreements of the MSI and statements of transfer to the NPF, or from the NPF to the RPF on9.02.2004 № 67Additional investment limits for social security resources on13.02.2004 № 77Approval of standard insurance regulations for the NPFs The Government resolutions still missing should regulate: • Investments of social security savings (3 documents); • Additional requirements for administration companies (AC) and specialized depositaries (2 documents); • Subjects dealing with the accounting systems of the NPFs and press announcements (2 documents); • Liquidation of the NPF, actuarial assessments and codes of professional ethics (4 documents). Three documents in the organization chart lost their relevance as a result of the approval of Decree Nº 314 by the President of the Russian Federation on 9.03.2004

  17. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Legal Basis of the Participation in the MSI(resolutions of the Authorized Federal Organism)(AFO) New wording of the Federal Law «Non-State Pension Funds» contains 26 rules within the sphere of competence of the AFO. These rules require the preparation of 5 regulatory AFO documents on MSI subjects. For 23.04.2004 • Resolution Nº 17 of the Russian Ministry of Labour, dated 16.02.04 was approved and registered in the Russian Ministry of Justice, specifying the regulation of registration of NPFs as insurers or the MSI and the publication of information regarding that registration. • Resolution Nº 42 of the Russian Ministry of Labour, dated 05.04.2004 was approved and registered in the Russian Ministry of Justice, approving the instructions for filling in declarations of transfers to NPF and from NPF to RPF. • Resolution Nº 46 of the Russian Ministry of Labour, dated 15.04.2004 was approved and registered in the Russian Ministry of Justice, regarding the enactment of the regulations for registering the social security and insurance rules of the NPF. • The form for notifying agreements entered into with the MSI needs to be approved Two pending documents of the AFO are dedicated to information about the funds in the press and the approval of the codes of professional ethics which are awaiting the corresponding Government resolutions. Their absence does not prevent the NPFs being registered as insurers nor MSI agreements being entered into by the funds.

  18. Основная сумма Russian Pension Fund Non-state Pension Fund Employer Administration Company Annual information of the insurance payments that are paid in Half-yearly insurance payments on the capitalized part of the work pension Current payments Investment of Social Security Savings Payment of the capitalized part of the work pension Federal Taxation Service Annual information about the state of the social security account of the capitalized part of the work pension Insured person Monetary flows Information Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Scheme of movement of information and monetary resources (during the formation of the capitalized part of the work pension in the NPFs)

  19. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Activity of the NPFs as insurers of MSI (preliminary measures) • Development and registration in the AFO of the rules for underwriting the Fund • Preparation of the materials for registering as a MSI insurer • Copies of the foundation documents of the Fund and information about its registration; • Rules for underwriting the Fund; • Information ratifying the fact that the Fund complies with the indicators stipulated by the law. • Accounting balance and results of the actuarial assessment of the past two years • Presentation to the AFO of a statement regarding the intention to execute the activity of mandatory social security insurance in the role of an insurer. • Development of technologies and computer programs to record the activity of the Fund as an insurer of the MSI, in accordance with the standards for personified records.

  20. 1 Implementation of a publicity campaign, also providing information for the persons insured 2 Signing of mandatory social security insurance agreements 3 Opening of the social security accounts for the capitalized part of the work pension 4 Allocation of investment income, depending on the investment results 5 Record of social security contributions Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Activity of the NPFs as MSI insurers(capitalization period) Necessary conditions Actions depending on results Registration as an MSI insurer Notify AFO and RPF of the agreements signed. AFO – within two weeks RPF – within one month Send the RPF versions or copies of the agreements, legalized before a notary Existence of a notification form approved by the AFO Notify the AFO regarding the signing of a trust administration agreement (TA) within three working days. On 1st February at the latest, transfer the resources to the AC. On 1st July at the latest, notify the insured persons of the state of their social security accounts. Transfer of the resources of social security savings from the RPF to the current account of the NPF Signing of a Trust Administration agreement (TA) with the administration company (AC) Transfer the resources to the AC within one month of their being recorded in the personal account.

  21. 4 Allocation of investment income, depending on the investment results Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Activity of the NPF as MSI insurer(reception of the insured’s resources from the other NPF) Actions depending on results Necessary conditions 1 Signing of the mandatory social security insurance agreement Notify AFO and RPF of agreements signed. AFO – within two weeks RPF – within one month Send the RPF versions or copies of the agreements, legalized before a notary Receipt from the RPF of the notice of modifications in the Single Register of Insured Persons 2 Opening of social security accounts for the capitalized part of the work pension Pass the resources to the AC by 1st February at the latest. Transfer of the main amount of the social security savings to the current account of the NPF Recording of social security savings reflected after the transfer of the main sum Transfer the resources to the AC during the month following their registration in the account 3 Transfer of social security resources reflected after the transfer of the main amount to the current account of the NPF Notify insured persons of the state of their social security accounts by 1st July at the latest. Pass the resources to the AC during the month following their registration in the account. 5 Registro de cotizaciones previsionales

  22. Инспекция негосударственных пенсионных фондовпри Министерстве труда и социального развития Российской Федерации Activity of the NPF as MSI insurer(transfer of insured’s resources to another NPF or to the RPF) Necessary conditions Activities depending on results Receipt from the RPF of notice of the modification of the Single Register of Insured Persons Transfer the resources before 31st December of the year in question. Deliver a summary to the insured person showing the state of his/her social security account and indicating the sum that is liable to be transferred. 1 Transfer to another NPF (RPF) of the main sum of social security savings 2 Transfer to another NPF (RPF) of the social security savings reflected in the social security account after the transfer of the main sum (income from investments and social security contributions) Receipt of social security savings resources from the AC or RPF in the current account of the NPF Transfer the resources within one month at the latest after these are reflected in the social security account

  23. Inspectorate of Non-state Pension Funds of the Ministry of Labour and Social Development of the Russian Federation Contacts Address: 109074, Moscow, Plaza Slavianskaya, ed. 4, building 1 Phones: (095) 925 8500, 298 1825 Fax: (095) 925 8500 E-mail: sekr_insp@mintrud.ru WWW: http://npfinsp.mintrud.ru

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