site.btaParliament's Budget and Finance Committee Approves 2015 Public Social Insurance Budget Bill, Giving Insured Persons Choice of Second Pillar Institution

Parliament's Budget and Finance Committee
Approves 2015 Public Social Insurance Budget Bill,
Giving Insured Persons Choice of Second Pillar Institution


Sofia, December 16 (BTA) - The National Assembly Budget and
Finance Committee Tuesday approved on second reading the 2015
Public Social Insurance Budget Bill, including a motion entered
by GERB, according to which persons born after December 31, 1959
will be able to choose, on a single occasion within one year,
whether to have their supplementary retirement insurance handled
by the National Social Security Institute (NSSI) or by a
private universal fund.

Reacting to comments that the motion creates prerequisites for
nationalization of private pension funds, Budget and Finance
Committee Chair Menda Stoyanova said that the idea is just the
opposite: to grant the ensured persons a right of choice.
Stoyanova noted that at present the pension funds receive "on a
silver platter" the contributions of the persons who have not
made an express choice of an insurer.

Dimiter Glavchev MP of GERB commented to journalists that the
motion gives people a chance to choose a model for their
supplementary retirement insurance: a fully funded model at
pension funds or a pay-as-you-go model at the NSSI. "If they
don't exercise their option within one year, they will be
insured at the NSSI by default," Glavchev explained.

According to Kornelia Ninova MP of BSP-Left Bulgaria, the NSSI
budget deficit can be reduced by raising the monthly
contributory income threshold to 3,000 leva. This will bring
another 130 million leva to the NSSI as higher income earners
will pay more for social insurance. The Left has entered this
motion. "Another possibility to cut the NSSI deficit is to
create jobs but, unfortunately, the unemployment rate set in
next year's budget is the same as this year's and this will not
work," Ninova said.

Bulgaria without Censorship (BWC) leader Nikolai Barekov will
alert European Commission President Jean-Clause Juncker about
the pension funds, his party said in a press release.

"The Bulgarian people should be aware that the incumbent
power-holders are readying a huge plundering," Barekov pointed
out. In his words, the planned legal amendments will lead to
"hidden nationalization and draining of 7,000-8,000 million
leva."

"If what the media report is correct, all retirement insurance
accounts of people who don't confirm the opposite will be
automatically transferred from the private to the public
pensions fund, this implies that the billions amassed by people
on personal accounts will go into the 'common pot' of the NSSI,
where they will no longer be private property," the BWC leader
commented.

Pros and Cons

The motion was opposed by the employers' organizations and
supported by the trade unions.

Ivan Boykov of the Confederation of Employers and Industrialists
in Bulgaria said that the Stock Exchange operates on the basis
of the pension funds and that an outflow of capital from them to
the NSSI will affect adversely the capital market. Dimiter
Brankov of the Bulgarian Industrial Association said that
last-minute changes are being voted through without any public
debate, which is why the adoption of these provisions should be
postponed until March 31, 2015. This idea was backed by MPs of
BSP-Left Bulgaria, but ultimately GERB motion was carried.

Podkrepa Confederation of Labour President Konstantin Trenchev
argued that the change, set in the memorandum between the
Government and the trade unions, enabling people to choose, as
from next year, whether to keep having their supplementary
retirement insurance at a universal pension fund or remit the
entire amount of the contribution to the NSSI, is "democratic
and necessary".

"Let the people have a choice. If I want to be at a pension
fund, nobody can force me to go to the NSSI. If I want to be at
the NSSI, why force me to be at a pension fund," Trenchev
commented to journalists. In his words, workers should have an
alternative to choose who will manage their money better. "Let
the funds motivate people, they are reasonable beings and will
chose what is better for them," he added.

NSSI Governor Biser Petkov told journalists that statistics show
that half of the people now do not choose a supplementary
retirement insurance institutions and are automatically
allocated to a pension fund. If the motion approved today is
adopted by the full house and enters into force, this would mean
that as from next year such people would automatically be
allocated to the NSSI and will no longer be able to opt for some
of the ten private pension funds. Petkov specified that the
provisions approved on Tuesday apply only to people whose
insurance obligation arises now, who will have one year to
choose a destination of their 5 per cent second pillar
contribution. Those who are currently insured at a universal
pension fund get an option, if they wish, to transfer their
assets to the Public Social Insurance Fund, the NSSI Governor
explained. In such case, when they retire they will get their
full pension from Public Social Insurance, and if they continue
their social insurance with a private pension fund, they will
receive part of their pension from Public Social Insurance and
the rest from the private fund.

Petkov commented that the idea is not that the NSSI should start
functioning as an 11th pension fund but to continue to operate
according to the pay-as-you-go system, where the money is not
invested but the proceeds from the contributions, complemented
by a State budget subsidy, go for payment of all pensioners'
pensions.

Another motion by Stoyanova was also approved, changing the
minimum monthly contributory income of registered agricultural
producers and tobacco growers to 300 leva, instead of 420 leva
as initially proposed.

The Transitional and Final Provisions of the Public Social
Insurance Budget Bill as approved by the Committee will also
amend the Penal Code, making the non-reporting and non-payment
of public social insurance contributions or health insurance
contributions a criminal offence punishable by up to five years'
imprisonment and a maximum fine of 2,000 leva.

* * *

At the same meeting, the Budget and Finance Committee approved
conclusively the 2015 National Health Insurance Budget Bill, a
bill to ratify an agreement between Bulgaria's Ministry of
Economy and Germany's Federal Ministry of Economics and Energy
on settlement by mutual consent of the damages in the case of
Cemeko OOD, and a bill to ratify an agreement between Bulgaria's
Ministry of Economy and Kloesters Beteiligungsgesellschaft mbH
of Kempen, Germany. VI, PK/LG