Question 10. Who are considered to be the Funded Pillar Participants starting from January 1st, 2014?

The funded pillar participants are: 

1. employees, individual entrepreneurs and notaries born on or after January 1st, 1974 in case they make targeted social contributions, 

2. employees, individual entrepreneurs and notaries born before January 1st, 1974 in case they have taken over the responsibility for making targeted social contributions based on their pension fund selection application, 

3. self-employed individuals irrespective of age, in case they have taken over the responsibility for making targeted social contributions based on their pension fund selection application 

Question 11. Is it possible to deny making targeted social contributions?

A person born on or after January 1st, 1974 has the right to give up the responsibility for making targeted social contributions until July 1st, 2017 by submitting the application of system refusal to the tax body. 

An employer may submit the application of system refusal on behalf of an employee. 

A person may submit the application of system refusal until December 25, 2014. 

Question 12. Who cannot waive funded pillar participation?

Funded pillar participation is obligatory for:

1. All state employees born on or after January 1st, 1974. Moreover, if those employees are included in the social package program they have the right to transfer their social package amount to personal pension account (except for 52 000 AMD intended for healthcare);


2. All individuals born on or after January 1st, 1974 who have entered the labor market starting from July 1st, 2014 and haven’t worked as of July 1st, 2014.

If a person was born on or after January 1st, 1996 and has entered the labor market starting from July 1st, 2014 (has not worked as of July 1st, 2014) the social contribution amount he makes till July 1st, 2017 will be reduced from the participant’s income tax amount. 

Question 13. Who are considered to be state employees?

Who are considered to be state employees in the frames of funded pillar scheme? 

1. Public servants (except for republican executive bodies of the RA Defense, Police, National Security and command and non-command staff officers of the Rescue Service of Armenia, correctional officers and bailiffs); 

2. individuals who get income either by Employment Contract and/or Service Contract in the State Government Institutions, Community Government Institutions, their structural and separate departments, Non-Profit State Associations, Community Based Non-Profit Organizations, the RA Central Bank. 

Question 14. Why is funded pillar participation compulsory for those born on or after January 1st, 1974?

The threshold of funded pillar compulsory participation has been set taking into account pension reform targeted indicators, i.e. the objective of reaching those targeted indicators as soon as possible. 

In particular, compensation coefficient has been set nearly 45-50% as a targeted indicator, i.e. pension amount should comprise nearly 45-50% of salary. 
In the funded pillar frames pension amount calculation depends on the savings amount which in its turn, among other factors, is conditioned by how long one has saved. The calculations made showed that it will take minimum 20-25 years to save up for the above-mentioned indicator provision. 

In case of raising the threshold of participation age (in case of saving for lesser period of time) the system will not be efficient (it will not be possible to provide the pension reform targeted indicator, i.e. provide 45-50% compensation coefficient). 

On the other hand, they predict increase in number of pensioners in the coming future which is due to the fact that the generation of 50-80’s (the birth rate being rather high at that time) is hitting the retirement age from 2015-2045. 

Question 15. Who doesn’t take part in the funded pillar scheme?

Military servants and persons having an equal status (RA Armed Forces, RA National Security Service workers, policemen, correctional officers and bailiffs, Rescue Service workers), irrespective of their age are not considered to be funded pillar participants.      

Question 16. Will the fixed period servicemen, students and women on maternity leave take part in the funded pillar scheme?

According to the RA Law “On Funded Pensions” funded pillar participation is mandatory for hired employees, notaries and individual entrepreneurs. The unique feature of this pension pillar is that personal pension allocations are made from participant’s base income. It means that during some period in life when a person does not get base income, he doesn’t make social contributions. And these very periods are when a participant is unemployed, a student, a military servant, a woman on maternity leave until child gets three years old and so forth. 

Question 17. What about the regulation of an individual’s participation who does not have base income?

In case a person doesn’t have base income he doesn’t make targeted social contributions. However, these individuals will be eligible to benefit from State pension system and at time they get 65 years old they will receive Social pension (benefit). If a person has 10 and more eligible years of service he will get Employment pension.

Question 18. Does a foreigner or a person with no citizenship but working in the Republic of Armenia take part in the funded pillar scheme?

In the Republic of Armenia a person with permanent residence or with no citizenship but working in Armenia is considered to be a funded pillar participant on a general basis; permanent residents and non-residents are liable to income tax once they get base income. 

Thus, if the above-mentioned foreigner or a person with no citizenship was born on or after January 1st, 1974 he joins the funded pillar on mandatory principle (he makes accumulative payments from his base income), and in case one is born prior to 1974 he can become a funded pillar participant on voluntary principle. 

Question 19. How does the funded pillar compulsory participation tell on a person who hasn’t got base income as of January 1st, 2014 but later becomes an employee, an individual entrepreneur or a notary?

Funded pillar participation on mandatory principle is correlated to an individual’s date of birth. So, if a person was born on or after January 1st, 1974 he gains the status of a funded pillar participant from the very moment he becomes an employee, an individual entrepreneur or a notary. 

Question 20. How is funded pillar participation regulated in case a person is a proprietor of agricultural lands?

Irrespective of the fact they are born before or after 1974, the owners of agricultural lands are considered to be self-employed and can choose voluntary funded pillar participation. They are not obliged to make targeted social contributions in case they haven’t joined the funded pillar on voluntary principle. If they choose voluntary funded pension system they will make contributions at 5% rate but no funded payments will be transferred to their personal pension accounts from the Stat Budget. 

Regardless of the fact they are funded pillar participants or not, these individuals will get Social pension (benefit) from the Sate budget.  
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