New Period For Automatic Participation in Compulsory Individual Annuity Insurance 07 January 2019
We would like to remind you about the employees who were included in the compulsory individual annuity insurance on 1 January 2019.
As it is known, automatic participation in compulsory individual annuity insurance was reorganized through the "Law on Amendment of the Individual Annuity Insurance Savings and Investment System Law" numbered 6740 which was published in the Official Gazette dated 25 August 2016. With the new regulation, the individual annuity insurance was deemed compulsory for those who are under the age of 45 and insured under Articles 4/1-a and 4/1-c of Law 5510. Within the regulations;
· As of 1 January 2017: enterprises with 1000 employees or more,
· As of 1 April 2017: enterprises whose total number of employees are between 249 and 1000 and public institutions with local budget,
· As of 1 July 2017: enterprises whose total number of employees are between 100 and 249,
· As of 1 January 2018: enterprises whose total number of employees are between 20 and 100 and all local administrations,
· As of 1 July 2018: enterprises whose total number of employees are between 10 and 50,
were included in the scope of Automatic Participation in Compulsory Individual Annuity Insurance. Now, the same implementation is on the agenda for the employees who work for the employers with a total number of employees is between 5(inclusive) and 9(inclusive).
**** The obligation of automatic participation in the compulsory individual annuity insurance entered in force for the employees who work for an employer with 5 or more and less than 10 employees as of 1 January 2019. Therefore, it is necessary for these employers to complete the preparations to make a pension contract determined by the Under secretariat of Treasury with insurance companies, and then to present the retirement plans to the employees who are under 45 years old and subject to compulsory individual annuity insurance by law.
1) Is It Possible to Withdraw from The Compulsory Individual Annuity Insurance?
The employer is obliged to sign an “individual annuity contract” and to initiate the system for the employees who work at the workplaces subjected to the regulation. In other words; for the beginning, it will be out of the question not to make entrance to the system for the employees under 45 years old. However, the employee may come out of the system by using his/her right of withdrawal within two months if he/she would like so. That is to say, automatic participation to the system is obligated for the ones who are included in the system but it is optional to continue or not to continue.
2) When and How To Use The Right of Withdrawal?
According to the stated retirement plan, the system will be applied for this employee with the transfer of the first contribution deducted from the employee's salary to the "Automatic Participation Account" which will be opened by the retirement company on behalf of the employee. The insurance company will send a notice to the related employee about the automatic participation account (by mail or by means of secure electronic communication) on the first work day following this date. According to the Article 22/a of the Regulation on Amendment of the Individual Annuity Insurance Regulation, the employee will be entitled to the right of withdrawal within two months from the date of such notification.
3) Will The Employees Who Have Used His/Her Right Of Withdrawal Be Included Again In The Compulsory Annuity Plan?
According to the amendment on the “Regulation Determining The Principles Regarding The Automatic Inclusion Of The Employees To The Annuity Plan Through Their Employers” which was published in the Official Gazette numbered 30638 dated 27 November 2018, employees who have been included once in the Individual Annuity Insurance and then have used their right of withdrawal or have left the system somehow will be automatically included again in the system,
· in 3(three) years
· for one time only
within the scope of the principles which will be determined by the Ministry (The ministry is authorized to reduce this period to 1 year and increase it to 5 years.).
4) At What Amount Deduction Will Be Made From The Employee’s Salary?
First of all, there are not any additional financial obligation provided for the employer within the Compulsory Individual Annuity Insurance. Related contribution shall be deducted from the employee’s income dependent on social security contributions. According to the Law numbered 6740, the deduction rate that will be made by the employer in this context has been determined as 3% (The Council of Ministers is authorized to increase this ratio up to two times, to reduce it to one percent or to set the maximum limit for the contribution) of the employee’s income dependent on social security contributions(shall be determined pursuant to the Article 80 of the Law numbered 5510). Contribution payment lower than this amount shall not be made, yet, the employee may request from the employer in addition and in written for a higher amount than the amount specified in the pension contract concerning automatic participation. In this case, monthly or full payment that he/she will receive from the system will be higher.
5) Where Should The Employer Transfer The Deduction That Will Be Made From The Employee’s Salary To?
Employer shall transfer the deduction that he/she will be made at the rate stated above so as to be transferred to the employee’s compulsory automatic participation account at the latest the working day following the employee’s pay day.
If the employer does not transfer the contribution to the company on time or transfer deficient/late, he/she will be responsible for the monetary loss occurred, if any, in the accumulation of the employee. Within this scope, the employer has been held liable to make a contract on behalf of the employees with at least one pension company. Also, the minimum content of the pension contract between the employer and the pension company has been determined with the Regulation. According to this, parties’ rights and obligations, pay day and consensus process should be take part in the pension contract. Refund and payment basis, recording actual data belonging to the employee and notice procedure may be also determined within the pension contract.
6) What Will Happen If The Workplace of The Employee Changes?
As it is stated in the Regulation on Amendment of the Individual Annuity Insurance Regulation, the accumulation in the individual annuity account of the employee who has been previously included in the individual annuity insurance and also included as of the date the workplace has been changed and state contribution if it has been paid shall be transferred to the plan at the new work place if there is a pension plan available to new employees. The period of time that employee earned in the system based on retirement and the time to obtain the right of state subsidy shall be preserved exactly the same in the plan at the new workplace.
7) What Will Happen In Case of Resign?
The employee whose employment contract has been terminated may continue to pay the contribution at the rate 3 percent of the minimum gross wage to be applied in the first six months of the relevant calendar year pursuant to the procedures and principles determined by the Under secretariat. If the employee does not demand to continue to pay contribution, the related pension contract will be withdrawn. Besides that; employers, if they prefer to do so, may make contribution payment on behalf of the employee. Thus, employees will not be obliged to do any additional transaction in order to pay contribution
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