The Law Related To Automatic Enrollment in Private Pension Insurance Has Been Released
A new law numbered 6740 with the title: “Law on Changes to be made on the Individual Pension Savings and Investment System Law”, has been announced in the Official Gazette dated August 25, 2016.
With the release of the aforementioned law, the law numbered 4623 entitled “Law on The Individual Pension Savings and Investment System Law” has had an additional article added to it.
The new article states that it is obligatory for employees to be automatically enrolled in a pension fund. Below are the conditions related to employees who will be considered within the framework of the new law:
- Employees that are covered by a form of national insurance through either the SSI (SGK) or State Retirement (Bag-Kur is kept out of scope.)
- Employees that are Turkish citizens, or those within the scope of law numbered 5901; “Turkish Citizenship Law” Article 28.
- Employees that are younger than the age of 45.
The scope and guidelines of the private pension plan to which automatically enrollment will be applicable shall be as follows
- The employee contributions towards the pension fund can be up to 3% of the employee’s social security base within the related month. (The Council of Ministers may double the required employee contribution, reduce it to 1%, or assign a fixed value).
- Contributions are required to be paid to the account of the pension company no later than 1 day following the salary payment date of the employee.
- The employer shall be solely responsible for applying accurate and timely deductions to employee salaries and paying these deducted amounts to the pension companies in accordance with the regulations. Failure to comply with the requirements shall result in a 100 TRY penalty for each instance of noncompliance.
- Employees are entitled to a 2-month period within which they may opt out of the pension plan. However, employees who do not opt out at the end of the 2-month period will receive a contribution from the government to the pension plan in the amount of 1000 TRY.
- Fund management fees are the only deductions which may be legally applied by the pension companies.
- In the event that the fund goes bankrupt or is seized, the employee will be considered a preferred creditor.
- Employers will be audited by the Ministry of Labor and Social Security in light of the additional article which defines their obligations.
- The new law will be put in practice as of January 01, 2017.
You may access the full Turkish text of law number 6740 here .
Although the specific implementation and many other aspects of this new law remain uncertain, it has been indicated that such information shall be released by the Undersecretary. It is anticipated that not all companies will be within the initial scope when the details of the application are eventually released, and that the scope of companies will likely be contingent on the number of employees they employ. It is also anticipated that an upper limit on contributions may be applied. A separate notification shall be released by us regarding this new law once the details of its implementation and application have been confirmed by the relevant authorities.
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