Technical Standards for the Calculation of the Annual Additional Benefit for Pensioners of the Public Pension System

NSP-80
ANNUAL FOR PENSIONERS OF THE PUBLIC PENSION SYSTEM Approval: 26/01/2023 Validity: 26/01/2023

THE COMMITTEE OF STANDARDS OF THE CENTRAL BANK OF RESERVE OF EL SALVADOR, CONSIDERING:

I. That by Legislative Decree No. 614, dated December 20, 2022,
published in the Official Journal No. 241, Volume No. 437, of the 21st of the same month and year, the Comprehensive Law of the Pension System was issued.
II. That article 2 letter m) of the Comprehensive Law of the Pension System establishes that
the benefits established in said Law will be applicable to affiliates of the Public Institutes.
III. That article 149 of the Comprehensive Law of the Pension System establishes that the
Public System, which includes the Pension Unit of the Salvadoran Institute of Social Security and the Salvadoran Institute of Pensions, must provide benefits in accordance with said Law and its own Laws of creation.
IV. That article 153 of the Comprehensive Law of the Pension System establishes that
pensioners of the Public Pension System will have an annual additional benefit in the month of December of each year with a limit equal to that which the Central Government establishes as Annual Complementary Salary in the concept of Christmas bonus for employees of the public sector.
V. That article 159 of the Comprehensive Law of the Pension System establishes that the
Central Bank of Reserve of El Salvador, will issue the Technical Standards necessary that allow the development of what is established in the referred Law
VI. That article 99 first paragraph of the Law of Supervision and Regulation of the
Financial System, establishes that the Central Bank of Reserve of El Salvador, by virtue of said Law, is the institution responsible for the approval of the technical regulatory framework that must be issued in accordance with this Law and other laws that regulate the supervised entities. In fulfillment of this responsibility, the Central Bank of Reserve of El Salvador must ensure that the regulatory framework applicable to the financial system is reviewed periodically, seeking its timely update.
VII. That article 101 fourth paragraph of the Law of Supervision and Regulation of the
Financial System, establishes that the powers to approve, modify and repeal technical standards that must be complied with by the members of the financial system and other supervised entities and that were attributed to the Superintendencies or to the Boards of Directors of the Superintendencies whose laws organic have been repealed by the same Law.

NSP-80
ANNUAL FOR PENSIONERS OF THE PUBLIC PENSION SYSTEM Approval: 26/01/2023 Validity: 26/01/2023 THEREFORE, by virtue of the regulatory powers conferred upon it by article 99 of the Law of Supervision and Regulation of the Financial System,

AGREES, to issue the following:

TECHNICAL STANDARDS FOR THE CALCULATION OF THE ANNUAL ADDITIONAL BENEFIT FOR PENSIONERS OF THE PUBLIC PENSION SYSTEM

CHAPTER I
OBJECT, SUBJECTS AND TERMS

Object
Art. 1.- These Standards have as their object to establish the procedure to be followed by the obligated subjects to comply with these standards for the calculation of the Annual Additional Benefit to which pensioners of the System are entitled Public Pension, as established in article 153 of the Law of the Comprehensive Pension System.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in the present Standards are:
a) Salvadoran Institute of Pensions; and b) Salvadoran Institute of Social Security.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) B.A.A.: Annual Additional Benefit; b) ISSS: Salvadoran Institute of Social Security; c) INPEP: National Institute of Pensions of Public Employees prior to the entry into force of the Law of Creation of the Salvadoran Institute of Pensions; d) Pension Institute: Salvadoran Institute of Social Security or Salvadoran Institute of Pensions; e) Pensioner: Insured person who enjoys a pension for disability or old age in the System of Public Pensions; and f) Survivor Pensioner: The Beneficiary, whether by widowhood, orphanhood, ascendance or cohabitation, who has obtained a pension in the Institute Salvadoran Social Security or in the Salvadoran Institute of Pensions.

CHAPTER II
ON THE METHOD OF CALCULATION OF THE B.A.A. FOR PENSIONERS

Art. 4.- When the pensioner receives a monthly pension, equal to the minimum pension established, he/she will receive in the concept of B.A.A., 100% of the minimum pension.

Art. 5.- When the pensioner receives a monthly pension that exceeds the minimum pension, up to the equivalent of two minimum pensions, he/she will receive in the concept of B.A.A. the equivalent to the minimum pension plus seventy-five percent of the difference of his/her pension and the minimum pension, in accordance with the following calculation:
a) Subtract from the Assigned Monthly Pension the Minimum Pension, PMA - PM = Difference Where:
PMA: Assigned Monthly Pension
PM: Minimum Pension b) The Difference obtained in letter a) of this paragraph, must be multiplied by the seventy-five percent Difference * 0.75 = Product c) The value of the Minimum Pension must be added to the Product obtained in letter b) of this paragraph PM + Product = B.A.A. d) The result of letter c) will be the one corresponding to him/her as B.A.A.

Art. 6.- When the pensioner receives a monthly pension greater than the equivalent of two minimum pensions, he/she will receive in the concept of B.A.A. the equivalent to 1.75 times the minimum pension, plus fifty percent of the difference of his/her pension and 1.75 times of the minimum pension, in the following way:
a) Multiply the value of the Minimum Pension by one point seventy-five PM * 1.75 = Product1 b) To the Assigned Monthly Pension, subtract Product1 obtained in letter a) of this paragraph PMA - Product1 = Difference c) The Difference obtained in letter b) of this paragraph, must be multiplied by the fifty percent Difference * 0.50 = Product2

d) Product1 obtained in letter a) of this paragraph must be added to Product2 obtained in letter c) of this paragraph. Product1 + Product2 = B.A.A. e) The result of letter d) of this paragraph will be the one corresponding to him/her as B.A.A.

In none of the cases mentioned above, the B.A.A. referred to in these Standards, shall not exceed the limit fixed by the Central Government, as Annual Complementary Salary in the concept of Christmas bonus for employees of the Public Sector.

Art. 7.- When it comes to pensioners with partial disability, who earn a pension equal to 70% of the minimum pension, they will be entitled to 100% of their pension, in the concept of Christmas bonus.

CHAPTER III
ON THE METHOD OF CALCULATION OF THE B.A.A. FOR SURVIVOR PENSIONERS

Art. 8.- In the case of survivor pensioners, the B.A.A. will be determined, starting from the reconstruction of the deceased's pension, this reconstruction will be carried out starting from the pension received by the beneficiary, through a simple rule of three, taking into consideration that said pension represents a percentage of the pension to which the deceased would be entitled if he/she were alive. The mechanism to carry out the reconstruction is illustrated below:
PS ------------------- %
PC ------------------ 100%
Where:
PS: sum of the current survivor pensions generated by a deceased person, at the date on which the B.A.A. is to be calculated. PC: Pension of the deceased, to which he/she would be entitled, if alive. %: sum of the current percentages of pension corresponding to the same decedent, in accordance with the regulations with which it was granted and according to the type of beneficiary. When there is only one beneficiary, the value of the pension percentage that corresponds to him/her, attending the considerations above mentioned. To find PC, the following operation will be applied:

PC = PS * 100 %
%

Art. 9.- In cases where, even after having reconstructed the deceased's pension, it is lower than the minimum pension, the latter will be taken as reference. After having reconstructed it, the B.A.A. that would correspond to the deceased if he/she were alive will be calculated, applying the provisions contained in Chapter II of these Standards, taking into account that the amount of the reconstructed pension will be taken as Assigned Monthly Pension.

Art. 10.- Once the B.A.A. of the deceased has been calculated, it will proceed to distribute it among the beneficiaries, in the percentages indicated below, depending on the case:
a) 60% for the spouse, for the cohabitant, when there are no children with right to pension; b) 50% for the spouse or for the cohabitant, with children who have the right to pension. This percentage will increase to 60% when said children cease to have right to pension; c) 25% for each of the children with the right to pension; and d) 20% for the father and 20% for the mother, or 30% if only one of them exists. When there is no spouse or cohabitant with the right to pension, the percentage established in letter b) will be distributed among the children with the right to pension. When there is no spouse, cohabitant, or children with the right to pension, the percentages established in letter d), will be 40% for the father and 40% for the mother, or 80% if only one exists with the right to pension. In no case will the sum of the reference pensions exceed 100% of the reference pension of the deceased affiliate; in case of exceeding said percentage, it will be weighted based on the percentages established in this article.

CHAPTER IV
ON THE GRANTING OF THE B.A.A. WHEN THE OLD AGE, DISABILITY OR SURVIVOR PENSION WAS GENERATED IN A COORDINATED ISSS-INPEP MANNER

Art. 11.- For the payment of a B.A.A. corresponding to a pensioner or beneficiary, who is receiving a coordinated ISSS-INPEP pension, the following provisions must be taken into consideration:
a) Each Pension Institute must identify in its Pensioner Databases for old age, disability and survivorship, those to whom the pension is paid in a coordinated manner. In case it cannot do so, it must cross the information contained in its databases, with that of its counterpart, and by mutual agreement, establish the universe of pensioners for old age, disability and survivorship who are in this category. b) Once the universe of pensioners to whom the B.A.A. will be paid by coordination is established, 100% of each pension must be obtained by adding the partial amounts that each Institute is paying. To facilitate this action, the Institutes must exchange, in electronic media, the following information:
i. The amount of the pension that each institute is paying.
ii. The percentage that said pension represents in relation to 100%.
iii. Any other information that each institute considers pertinent.
With respect to letter i), when it comes to survivor pensions, they must exchange the information related to the sum of the current survivor pensions in each Institute and the type and number of beneficiaries to whom they are being paid. With respect to letter ii), it must be taken into account that each Institute must know in what proportion it is participating in the financing of a coordinated pension, since the date of its granting. The amount that represents 100% of the pension must be the same in the two pension institutions. Likewise, the percentages that represent the concurrence of each Institute must add up to 100%. For the case of survivor pensions, the partial amounts will be summed, for each type of beneficiary and obtain the deceased's pension through a rule of 3. c) Once each Institute has established 100% of the amount of the pension for old age, disability and of those corresponding to the deceased of survivor pensions, the B.A.A. of the pensioner will be calculated, or, if applicable, the B.A.A. that the deceased would have had right to if he/she were alive, taking into consideration what is provided in Chapter II and III of these Standards. In case it is determined that only one of the institutes is paying the pension and that, in the other, the pension is still in process, the reference will be taken as 100% of the total amount of the pension, regardless of whether the other institute is not yet paying its respective concurrence. Then the corresponding B.A.A. will be obtained applying what is provided in Chapter II depending on the case, after calculating the amount of the Annual Additional Benefit to be paid, taking into account only its concurrence. The other portion of the B.A.A. will be paid by the

NSP-80
ANNUAL FOR PENSIONERS OF THE PUBLIC PENSION SYSTEM Approval: 26/01/2023 Validity: 26/01/2023 Corresponding Pension Institution on the date it makes the first payment of the pension. In the case of survivor pension, the deceased's pension will be reconstructed, taking as reference 100% of the pension generated by the deceased and the Annual Additional Benefit will be calculated, applying the provisions of Chapter II and III of these Standards. d) Once the B.A.A. is calculated, it will proceed to determine the coordinated financial responsibility applying the same percentages in which the coordinated pension was granted. e) In the case of the B.A.A. corresponding to survivor pensioners, once determined the amount that each Institute will finance, it will proceed to distribute said amount among the beneficiaries, applying the current percentages according to the number and type of beneficiaries.

CHAPTER V
OTHER PROVISIONS AND VALIDITY

Art. 12.- The B.A.A. corresponding to those survivor pensioners who, for any cause, had their pension suspended during the period between the month in which the Institute prepares the B.A.A. payroll until the month of December of the same year, will be paid up to the date on which the pensioner recovers the right to the pension.

Art. 13.- The results of all operations performed must be expressed with two decimal places, rounding the second decimal to the immediate higher value if the third decimal is equal to or greater than 5. Notwithstanding the above, the operations performed in the obtaining of percentages, must be carried out using 5 decimal places, rounding in the manner related in the previous paragraph.

Art. 14.- In no case, the amount of the B.A.A. to be paid to a pensioner for old age, disability or survivorship, may be greater than the amount of his/her pension. For this reason, in case the calculation of the same results in higher, the amount of the respective pension must be granted in the concept of B.A.A.

Art. 15.- For the purposes of calculating the B.A.A. of the beneficiaries referred to in Chapter IV of these Standards, the deceased's pension will be reconstructed taking into consideration only the pensions that are current in both Institutes.

Art. 16.- For affiliates and beneficiaries who on the date of payment of the B.A.A., had a pension in process, whose start date is prior to the year in which the B.A.A. is to be paid, they will be entitled to receive the B.A.A. retroactively, calculated in accordance with what is established in these Standards.

Sanctions
Art. 17.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law of Supervision and Regulation of the Financial System.

Repeal
Art. 18.- These Standards repeal the Instruction "Calculation of the Annual Additional Benefit for Pensioners -002/2000), approved on September 18, 2000 by the Superintendency of Pensions, whose Law Organic was repealed by Legislative Decree No. 592 which contains the Law of Supervision and Regulation of the Financial System, published in Official Journal No. 23, Volume No. 390, dated February 2, 2011.

Unforeseen Aspects
Art. 19.- The aspects not provided for in regulatory matters in these Standards will be resolved by the Central Bank of Reserve of El Salvador through its Committee of Standards.

Validity
Art. 20.- These Standards will enter into force as of January twenty-six, two thousand twenty-three.