Ordinance No. 70 of 29.06.2021 on Requirements for Payment Funds

ORDINANCE No. 70 of 29.06.2021 on the requirements for payment funds Pub. - State Gazette, No. 60 of 20.07.2021; am. and add., No. 82 of 14.10.2022, effective from 14.10.2022; am., No. 20 of 11.03.2025, effective from the date of introduction of the euro in the Republic of Bulgaria Adopted by Decision No. 222-N of 29.06.2021 of the Commission for Financial Supervision

Section I
General Provisions

Art. 1. This Ordinance defines the requirements for the formation and maintenance of funds for the payment of lifetime pensions and funds for deferred payments, the calculation of the required amount of funds therein and the surplus thereof, the replenishment of the funds and the release of funds from them.

Section II
Funds for the Payment of Lifetime Pensions

Art. 2. (1) Upon its creation in accordance with Art. 192a, para. 1 - 5 of the Social Insurance Code (SIC), the fund for the payment of lifetime pensions is formed from the funds of persons insured in the universal pension fund with whom pension contracts have been concluded by the end of the third working day after the registration of the fund for the payment of lifetime pensions in the BULSTAT register.

(2) The funds in the individual accounts of the persons referred to in para. 1, after their replenishment if necessary in accordance with Art. 131, para. 2 - 5 of the SIC, are accrued as a liability of the universal pension fund to the fund for the payment of lifetime pensions on the day of conclusion of the pension contract with the respective person at the value of one share, valid for the working day preceding the conclusion of the contract.

(3) The accrued funds under para. 2 are transferred to the fund for the payment of lifetime pensions within three working days after its registration in the BULSTAT register.

(4) The funds in the individual accounts of persons insured in the universal pension fund with whom pension contracts are concluded after the third working day after the registration of the fund for the payment of lifetime pensions in the BULSTAT register, after their replenishment if necessary in accordance with Art. 131, para. 2 - 5 of the SIC, are transferred to the fund for the payment of lifetime pensions on the day of conclusion of the pension contract with the respective person or no later than on the next working day after that date. When the funds in the individual account of the person are transferred on the next working day after the conclusion of the pension contract, they are replenished if necessary in accordance with Art. 131, para. 2 - 5 of the SIC and are accrued as a liability of the universal pension fund to the fund for the payment of lifetime pensions on the day of conclusion of the contract at the value of one share, valid for the working day preceding the conclusion of the contract.

(5) The funds on the basis of which pensions are recalculated are transferred from the individual accounts of the persons referred to in Art. 127, para. 6 and 7 of the SIC to the fund for the payment of lifetime pensions on the date referred to in Art. 169g, para. 2 of the SIC, and when it is a non-working day - on the first working day after that date.

Art. 3. (Suppl. - SG, No. 82 of 2022, effective from 14.10.2022.) (1) The following are reflected in the analytical account under Art. 192a, para. 11 of the SIC:

1. the income with which the amount of payments to pensioners and their heirs in accordance with Art. 169v, para. 1 and 2 and para. 4, first sentence and Art. 170, para. 6 of the SIC has not been increased;
2. the period to which the undistributed income under item 1 refers;
3. the amount used from the analytical account in accordance with Art. 169v, para. 4, second sentence of the SIC;
4. the period in connection with which the amount under item 3 was used;
5. the operations carried out for the allocation of funds under item 1 and the use of funds under item 3 and their dates;
6. the balance of the analytical account.

(2) The income under para. 1, item 1 amounts to the excess of the realized yield from investing the funds of the fund for the payment of lifetime pensions, which has not increased payments, over the technical interest rate, equalized on the same basis, expressed in euros.

(3) The amount under para. 1, item 3 amounts to the reduction of the realized yield from investing the funds of the fund for the payment of lifetime pensions, which has not decreased payments, below the technical interest rate, equalized on the same basis, expressed in euros.

(4) (Suppl. - SG, No. 82 of 2022, effective from 14.10.2022.) The realized yield under para. 2 and 3 is calculated depending on the period to which it refers and is the value of Ra, which satisfies the following formula:

[Formula Image/Text Placeholder]

where:
Ra is the achieved yield in percent for the period to which it refers; n - number of days in the period; i - sequential day during the period; A0 - net assets at the end of the previous period; An - net assets at the end of the period; Fi - net cash flow in the fund for day i (with sign + or -); Fi = Ii - Mi - Ni; Ii - funds received from individual accounts for the purpose of payments from the fund (including under Art. 170, para. 9, items 1 and 3 of the SIC), as well as funds received in accordance with Art. 192a, para. 16 and Art. 192b, para. 7 of the SIC during the i-th day of the period; Mi - the amount of accrued liabilities during the i-th day of the period, excluding liabilities to persons receiving payments from the fund, the expenses incurred under Art. 192a, para. 9 of the SIC at the expense of the fund, and the accrued fee under Art. 201, para. 1, item 3 of the SIC; Ni - funds paid during the i-th day of the period to persons receiving payments from the fund.

(5) The balance under para. 1, item 6 is equal to the difference between the amounts under para. 1, items 1 and 3 and cannot be less than zero.

(6) The pension insurance company submits to the Commission for Financial Supervision a report on the analytical account according to the form in Appendix No. 1 by the 20th day of the month following the month in which the update was carried out.

Art. 4. (1) The required amount of funds in the fund for the payment of lifetime pensions as of 31 December of each year is equal to the liabilities to pensioners and their heirs as of that date.

(2) Liabilities to pensioners and their heirs are equal to the present value of the payments due to pensioners and their heirs after their last update in accordance with Art. 169v, para. 1, 2 and 4 and Art. 170, para. 6 of the SIC and the last recalculation of pensions under Art. 169g of the SIC.

(3) The present value of liabilities to pensioners is determined on the basis of:

1. the technical interest rate used for calculating the initial pension of the respective person;
2. the mortality table and average remaining life expectancy used for calculating the initial pension of the respective person;
3. the remaining periods of guaranteed payment of pensions under Art. 167, para. 4, item 2 of the SIC;
4. the remaining periods of deferred payment of pensions under Art. 167, para. 4, item 3 of the SIC;
5. the age of pensioners as of the date of calculation of the present value of liabilities to them, in whole years, rounded up if six or more months have passed since the last whole year.

(4) The present value of liabilities to heirs of deceased pensioners is determined on the basis of:

1. the technical interest rate used for calculating the initial pension of the deceased pensioner;
2. the remaining periods of guaranteed payment of pensions under Art. 167, para. 4, item 2 of the SIC from the dates of death of the respective pensioners;
3. the remaining periods of deferred payment of pensions under Art. 167, para. 4, item 3 of the SIC from the dates of death of the respective pensioners.

(5) The calculation of the required amount under para. 1 is carried out before submitting the report of the fund for the payment of lifetime pensions under Art. 186a of the SIC for the month of December of the year to which the calculation refers.

Art. 5. The surplus under Art. 192a, para. 15 of the SIC is equal to the positive difference between the net assets of the fund for the payment of lifetime pensions as of 31 December of the respective year and the liabilities under Art. 4, para. 2.

Art. 6. (1) When the difference between the net assets of the fund for the payment of lifetime pensions as of 31 December of the respective year and the amount of liabilities under Art. 4, para. 2 is negative, the pension insurance company replenishes the difference in accordance with Art. 192a, para. 16 of the SIC within a period until 31 March of the following year.

(2) When the surplus under Art. 5 exceeds 5 percent of the amount of liabilities under Art. 4, para. 2, the pension insurance company may take a decision to release funds from the fund for the payment of lifetime pensions. The decision specifies the specific amount of funds that are released from the fund.

(3) The released funds in accordance with para. 2 are reflected in a separate account, accounting for the reduction of the net assets of the fund for the payment of lifetime pensions as a result of the transfer of funds to the reserve for guaranteeing the payment of lifetime pensions, and are not reflected on the balance of the analytical account under Art. 192a, para. 11 of the SIC.

(4) The release of funds under para. 2 and the restoration of funds under Art. 192a, para. 17 of the SIC are carried out within a period until 31 March of the year following the year for which the surplus was calculated.

(5) When replenishing the difference under para. 1, the funds transferred to the fund for the payment of lifetime pensions from the reserve for guaranteeing the payment of lifetime pensions with source receipts under para. 2 from previous periods are reflected in the account under para. 3.

Section III
Funds for Deferred Payments

Art. 7. (1) Upon its creation in accordance with Art. 192b, para. 1 and 5 in conjunction with Art. 192a, para. 2 - 5 of the SIC, the fund for deferred payments is formed from the funds of persons insured in the universal pension fund with whom contracts for deferred payment under Art. 167a, para. 1 of the SIC have been concluded by the end of the third working day after the registration of the fund for deferred payments in the BULSTAT register.

(2) The funds in the individual accounts of the persons referred to in para. 1, after their replenishment if necessary in accordance with Art. 131, para. 2 - 5 of the SIC, are accrued as a liability of the universal pension fund to the fund for deferred payments on the day of conclusion of the contract for deferred payment with the respective person at the value of one share, valid for the working day preceding the conclusion of the contract.

(3) The accrued funds under para. 2 are transferred to the fund for deferred payments by the analytical accounts of the respective persons within three working days after the registration of the fund in the BULSTAT register.

(4) The funds in the individual accounts of persons insured in the universal pension fund with whom contracts for deferred payment under Art. 167a, para. 1 of the SIC are concluded after the third working day after the registration of the fund for deferred payments in the BULSTAT register, after their replenishment if necessary in accordance with Art. 131, para. 2 - 5 of the SIC, are transferred by their analytical accounts to the fund for deferred payments on the day of conclusion of the contract with the respective person or no later than on the next working day after that date. When the funds in the individual account of the person are transferred on the next working day after the conclusion of the contract for deferred payment, they are replenished if necessary in accordance with Art. 131, para. 2 - 5 of the SIC and are accrued as a liability of the universal pension fund to the fund for deferred payments on the day of conclusion of the contract at the value of one share, valid for the working day preceding the conclusion of the contract.

(5) The funds on the basis of which deferred payments are recalculated are transferred from the individual accounts of the persons referred to in Art. 127, para. 6 and 7 of the SIC by their analytical accounts to the fund for deferred payments on the date referred to in Art. 169g, para. 2 of the SIC, and when it is a non-working day - on the first working day after that date.

Art. 8. (Am. - SG, No. 82 of 2022, effective from 14.10.2022.) (1) The following are reflected in the analytical account under Art. 192b, para. 3, item 2 of the SIC:

1. the income with which the amount of deferred payments under Art. 167a, para. 1 of the SIC and of the heirs of persons with such payments in accordance with Art. 169v, para. 1 and 3 and para. 5, first sentence and Art. 170, para. 6 of the SIC has not been increased;
2. the period to which the undistributed income under item 1 refers;
3. the amount used from the analytical account in accordance with Art. 169v, para. 5, second sentence of the SIC;
4. the period in connection with which the amount under item 3 was used;
5. the operations carried out for the allocation of funds under item 1 and the use of funds under item 3 and their dates;
6. the balance of the analytical account.

(2) The income under para. 1, item 1 amounts to the part of the yield from investing the funds of the fund for deferred payments, with which payments have not been increased, expressed in euros.

(3) The amount under para. 1, item 3 represents the negative yield from investing the funds of the fund for deferred payments, with which payments have not been decreased, expressed in euros.

(4) (Am. - SG, No. 82 of 2022, effective from 14.10.2022.) The yield under para. 2 and 3 is calculated by applying Art. 3, para. 4 correspondingly, as the indicator Ni denotes the funds paid to persons receiving payments from the fund during the i-th day of the month, and the funds transferred under Art. 170, para. 9, item 3 of the SIC.

(5) The balance under para. 1, item 6 is equal to the difference between the amounts under para. 1, items 1 and 3 and cannot be less than zero.

(6) The pension insurance company submits to the Commission for Financial Supervision a report on the analytical account according to the form in Appendix No. 2 by the 20th day of the month following the month in which the update was carried out.

Art. 9. (1) The required amount of funds in the fund for deferred payments as of 31 December of each year is equal to the liabilities to persons receiving deferred payments under Art. 167a, para. 1 of the SIC, and to their heirs as of that date.

(2) Liabilities to persons receiving deferred payments under Art. 167a, para. 1 of the SIC, and to their heirs are equal to the payments due to persons receiving deferred payments under Art. 167a, para. 1 of the SIC, and to their heirs after their last update in accordance with Art. 169v, para. 1, 3 and 5 and Art. 170, para. 6 of the SIC and the last recalculation of deferred payments under Art. 169g of the SIC.

(3) The calculation of the required amount under para. 1 is carried out before submitting the report of the fund for deferred payments under Art. 186a of the SIC for the month of December of the year to which the calculation refers.

Art. 10. The surplus under Art. 192b, para. 6 of the SIC is equal to the positive difference between the net assets of the fund for deferred payments as of 31 December of the respective year and the liabilities under Art. 9, para. 2.

Art. 11. (1) When the difference between the net assets of the fund for deferred payments as of 31 December of the respective year and the amount of liabilities under Art. 9, para. 2 is negative, the pension insurance company replenishes the difference in accordance with Art. 192b, para. 7 of the SIC within a period until 31 March of the following year.

(2) When the surplus under Art. 10 exceeds 5 percent of the amount of liabilities under Art. 9, para. 2, the pension insurance company may take a decision to release funds from the fund for deferred payments. The decision specifies the specific amount of funds that are released from the fund.

(3) The released funds in accordance with para. 2 are reflected in a separate account, accounting for the reduction of the net assets of the fund for deferred payments as a result of the transfer of funds to the reserve under Art. 193a, para. 1 of the SIC, and are not reflected on the balance of the analytical account under Art. 192b, para. 3, item 2 of the SIC.

(4) The release of funds under para. 2 and the restoration of funds under Art. 192b, para. 8 from the surplus under Art. 192b, para. 6, item 2 of the SIC are carried out within a period until 31 March of the year following the year for which the surplus was calculated.

(5) When replenishing the difference under para. 1, the funds transferred to the fund for deferred payments from the reserve under Art. 193a, para. 1 of the SIC with source receipts under para. 2 from previous periods are reflected in the account under para. 3.

Transitional and Final Provisions

§ 1. The Commission for Financial Supervision brings the register of companies for additional social insurance, the funds managed by them and the professional schemes in accordance with the requirements of this Ordinance within a period until 31.08.2021.

§ 2. Persons included before the entry into force of this Ordinance in the list under Art. 7, para. 1, item 2 of Ordinance No. 64 of 29.11.2018 on the requirements for persons under Art. 344, para. 2, item 2 of the Social Insurance Code and the procedure and manner of their appointment (SG, No. 102 of 2018) may be appointed to carry out asset valuations of payment funds without submitting new applications for inclusion in the list.

§ 3. In Ordinance No. 15 of 5.05.2004 on the keeping and storage of registers by the Commission for Financial Supervision and on the circumstances subject to registration (Pub., SG, No. 54 of 2004; am., No. 15 of 2005; am. and add., No. 12 and 53 of 2006, No. 22 of 2007, No. 63 and 68 of 2008, No. 13 of 2009; am., No. 49 of 2010; am. and add., No. 68 and 90 of 2014, No. 95 of 2017, No. 101 of 2018, No. 41 and 55 of 2019 and No. 30 and 61 of 2020) the following amendments and additions are made to Art. 28:

1. In para. 2:
   a) in the main text after the word "funds" the words "for additional social insurance" are added; b) in items 4 and 5 the words "securities" are replaced with "financial instruments".
2. Para. 3 is created:
   "(3) For each of the payment funds managed by pension insurance companies, the following are registered:
3. the name, as well as data on changes in the name, if any have occurred after the registration of the fund in the register;
4. the decision of the commission for the registration of the fund in the register;
5. the rules of the fund;
6. EIK by BULSTAT;
7. the name, EIK, date and number of the license (permit) of the custodian bank, with which the pension insurance company managing the fund has concluded a contract for custodian services;
8. the name of each investment intermediary with which the pension insurance company has concluded a contract for carrying out transactions with financial instruments related to the management of the fund's assets;
9. the names of the investment consultant, respectively - the name of the management company, with which the pension insurance company has concluded a contract for investment consultations regarding financial instruments;
10. the annual financial report of the fund and the auditor's report under Art. 190, para. 1 of the SIC;
11. the transformation of the fund."

§ 4. In Ordinance No. 19 of 8.12.2004 on the procedure for the creation of pension reserves by pension insurance companies that manage a universal pension fund and/or a fund for additional voluntary pension insurance (Pub., SG, No. 110 of 2004; am., No. 18 of 2018) the following amendments and additions are made:

1. The name of the Ordinance is changed as follows:
   "Ordinance No. 19 of 8.12.2004 on pension reserves and reserves for guaranteeing the payment of lifetime pensions."
2. Article 1 is changed as follows:
   "Art. 1. This Ordinance defines:
3. the procedure for the creation of pension reserves by pension insurance companies that manage a fund for additional voluntary pension insurance, hereinafter referred to as voluntary pension fund;
4. the requirements for the formation, calculation and maintenance of reserves for guaranteeing the payment of lifetime pensions, their replenishment and the release of funds from them by pension insurance companies that manage a universal pension fund."
5. The following amendments and additions are made to Art. 2:
   a) the current text becomes para. 1 and after the words "payment of" the words "granted from voluntary pension funds" are added; b) para. 2 is created:
   "(2) The funds of the reserves for guaranteeing the payment of lifetime pensions are used only to cover the deficit in the funds for the payment of lifetime pensions."
6. Article 3 is repealed.
7. In Art. 4, para. 2, item 2 the words "SIC" are replaced with "from the Social Insurance Code (SIC)".
8. The following amendments and additions are made to Art. 5:
   a) in para. 1 and 2 the words "each pension reserve" are replaced with "the pension reserve"; b) new para. 3 is created:
   "(3) The assets with which the reserve is covered are accounted for through separate accounting accounts or through separate sub-accounts to the respective accounting account."; c) the current para. 3 becomes para. 4 and in it the words "Art. 170, para. 3 and" and "Art. 3, para. 2, item 2 and" are deleted, and the words "the respective pension reserve" are replaced with "the pension reserve".
9. The following amendments are made to Art. 6:
   a) in para. 1 the words "the respective pension reserve" are replaced with "the pension reserve"; b) in para. 2:
   aa) in the main text the words "the respective pension reserve" are replaced with "the pension reserve"; bb) item 1 is repealed; c) in para. 3 the words "separately for universal and for voluntary pension fund" and the comma after them are deleted.
10. In Art. 7 the word "respective" is deleted, and at the end the words "from the voluntary pension fund, which manages" are added.
11. The following amendments are made to Art. 8:
    a) in para. 2 the words "1 March" are replaced with "31 March"; b) para. 3 is repealed.
12. The following amendments are made to Art. 9:
    a) para. 1 is changed as follows:
    "(1) The maximum amount of the formed pension reserve at the end of the year cannot be greater than 110% of the amount calculated in accordance with Art. 6."; b) in para. 2 the words "Art. 3, para. 2, item 1" are deleted, and the words "1 March" are replaced with "31 March"; c) in para. 3 the words "Art. 3, para. 2, item 2 and" are deleted.
13. The following amendments are made to Art. 10:
    a) para. 1 is changed as follows:
    "(1) The pension insurance company submits to the Commission for Financial Supervision a report on the state of the pension reserve according to the form in Appendix No. 1 simultaneously with the submission of the annual financial reports of the company and the voluntary pension fund."; b) para. 2 is repealed.
14. Section III "Administrative and Penal Liability" with Art. 11 is repealed.
15. Section IV "Reserves for guaranteeing the payment of lifetime pensions" with Art. 12 - 16 is created:
    "Section IV
    Reserves for guaranteeing the payment of lifetime pensions

Art. 12. (1) Every pension insurance company managing a universal pension fund creates a reserve for guaranteeing the payment of lifetime pensions from the beginning of the year following the year of conclusion of the first pension contract for the payment of additional lifetime old-age pension.

(2) When the pension insurance company has not created a fund for the payment of lifetime pensions, it creates a reserve for guaranteeing the payment of lifetime pensions and transfers to it the funds under Art. 170, para. 9, item 1 or 3 of the SIC within a period of one month from the date of establishment of the conditions for their transfer.

Art. 13. (1) The pension insurance company accounts for the reserve for guaranteeing the payment of lifetime pensions through a separate accounting account.

(2) The sources forming the reserve are accounted for through separate sub-accounts to the respective accounting account.

(3) The assets with which the reserve is covered are accounted for through separate accounting accounts or through separate sub-accounts to the respective accounting account.

Art. 14. (1) The reserve for guaranteeing the payment of lifetime pensions is in the amount of 1 percent of the present value of liabilities to pensioners and their heirs under Art. 4, para. 3 of Ordinance No. 70 of 29.06.2021 on the requirements for payment funds (SG, No. 60 of 2021) (Ordinance No. 70) as of 31 December of the reporting year.

(2) The maximum amount of the reserve is 2 percent of the present value of liabilities to pensioners and their heirs under Art. 4, para. 3 of Ordinance No. 70.

Art. 15. (1) The pension insurance company recalculates every year the amount of the reserve for guaranteeing the payment of lifetime pensions as of 31 December of the previous year.

(2) When the value of the assets with which the reserve is covered is less than the amount under Art. 14, para. 1, the pension insurance company replenishes the deficit with funds under Art. 192, para. 3, items 1 and/or 2 of the SIC."