Technical Standards for the Granting of Old Age Monetary Benefits in the Public Pension System

CNBCR-01/2023 NSP-77 TECHNICAL STANDARDS FOR THE GRANTING OF OLD AGE MONETARY BENEFITS IN THE PUBLIC PENSION SYSTEM Approval: 01/26/2023 Validity: 01/26/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 1 of 16

THE NORMS COMMITTEE OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:

I. That by Legislative Decree No. 614, of December 20, 2022, published in the Official Journal No. 241, Volume No. 437 of December 21 of the same year, the Comprehensive Pension System Law was approved. II. That Article 149 of the Comprehensive Pension System Law 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 creation laws. III. That Article 152 of the Comprehensive Pension System Law establishes that from the validity of said Law, Administrators and Public Institutes will calculate the benefits to be granted in accordance with what is established in said Law. Likewise, it is stipulated that for affiliates referred to in Article 184 of Legislative Decree No. 927 of December 20, 1996, and its respective modifications, the pension will be calculated in accordance with what is established in Article 201 of said Decree; likewise, for affiliates included within Article 186 of Legislative Decree No. 97 mentioned above, their pension will be calculated in accordance with what is established in Article 198 of said legal body. IV. That Article 159 of the Comprehensive Pension System Law establishes that the Central Reserve Bank of El Salvador will issue the necessary Technical Standards that allow the development of what is established in said Law.

THEREFORE, by virtue of the regulatory powers conferred by Article 99 of the Law on Supervision and Regulation of the Financial System, AGREES to issue the following:

TECHNICAL STANDARDS FOR THE GRANTING OF OLD AGE MONETARY BENEFITS IN THE PUBLIC PENSION SYSTEM

CHAPTER I OBJECTIVE, SUBJECTS, AND TERMS

Objective Art. 1.- These Norms aim to establish the procedures to be followed by the Salvadoran Institute of Social Security and the Salvadoran Institute of Pensions regarding benefits and other old age benefits in the Public Pension System.

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

Terms Art. 3.- For the purposes of these Norms, the terms indicated below have the following meaning: a) Affiliate: Worker registered in one of the Disability, Old Age, and Death Regimes, administered by the Salvadoran Institute of Social Security, the National Institute of Pensions of Public Employees, or the Salvadoran Institute of Pensions, who participated or participates in the financing of one or both Regimes, through contributions; a) Central Bank: Central Reserve Bank of El Salvador; b) CCI: Disability Assessment Commission; c) CIAP: Individual Savings Account for Pensions; d) Identity Document: May be the Unique Identity Document, Minor's Card, Passport, or Resident Card, as applicable; e) Legal Age: Completed age that enables an affiliate to opt for an old age benefit, according to what is established in Article 96 of the Comprehensive Pension System Law; f) IBC: Contribution Base Income; g) INPEP: National Institute of Pensions of Public Employees prior to the entry into force of the Law Creating the Salvadoran Institute of Pensions; h) Previsionary Institute: Salvadoran Institute of Social Security or Salvadoran Institute of Pensions; i) ISSS: Salvadoran Institute of Social Security; j) SAP Law: Law of the Pension Savings System, repealed by Legislative Decree No. 614, of December 20, 2022, published in the Official Journal No. 241, Volume No. 437, of December 21 of the same year; k) SP Law: Comprehensive Pension System Law; l) INPEP Affiliation Number: Number granted by the National Institute of Pensions of Public Employees to its affiliates, prior to the entry into force of the Law Creating the Salvadoran Institute of Pensions; m) ONEC: National Office of Statistics and Censuses; n) EMRP Regime: Disease, Maternity, and Occupational Risks Regime administered by the ISSS;

CNBCR-01/2023 NSP-77 TECHNICAL STANDARDS FOR THE GRANTING OF OLD AGE MONETARY BENEFITS IN THE PUBLIC PENSION SYSTEM Approval: 01/26/2023 Validity: 01/26/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 2 of 16

o) IVM Regime: Disability, Old Age, and Death Regime, administered by the ISSS or by the INPEP; p) SAP: Pension Savings System; q) SBM: Monthly Base Salary, used as a basis to determine benefits of the IVM regime in the ISSS; r) SBR: Basic Regulator Salary; s) SBR-INPEP: Basic Regulator Salary, used for the calculation of benefits of the IVM Regime in the INPEP; t) SP: Pension System; u) SPP: Public Pension System; and v) Superintendence: Superintendence of the Financial System.

CHAPTER II ON OLD AGE BENEFITS IN THE SPP

Old Age Pension Art. 4.- It is a monetary benefit granted to affiliates of the SPP who have reached sixty years of age for men and fifty-five years of age for women, and who have a registered contribution time of twenty-five years or more, whether continuous or discontinuous, since their affiliation with the ISSS or the INPEP.

Old Age Allowance Art. 5.- It is a monetary benefit granted to affiliates of the SPP, who having reached the legal age to obtain the old age pension, do not meet the requirement of twenty-five years of continuous or discontinuous contribution time established in Article 4 of these Norms. This benefit will be granted provided that the affiliate declares before the corresponding Previsionary Institute their inability to continue contributing. The minimum number of contributions that an insured person requesting this benefit must register is twelve contributions, whether registered in the ISSS or in the INPEP, or in both.

Minimum Old Age Pension Art. 6.- It is a monetary benefit granted when the amount of the calculated old age pension is below the minimum amount established in the SP Law. The granting of said pension will proceed provided that affiliates of the SPP have met the requirements established in Article 4 of these Norms.

On Contribution Time Art. 7.- Contribution time must be considered in exact years and fractions of a year.

Periods contributed to the ISSS can be accumulated with times contributed to the INPEP and vice versa, when the independent times in each of the Previsionary Institutes are insufficient to grant a pension. In the case where there are periods in which contributions were made simultaneously to both Previsionary Institutes, these will be counted only once. When the times registered in the ISSS or in the INPEP are sufficient for the granting of an old age pension, the accumulation of periods that the affiliate registers in the other Previsionary Institute will not be used. This provision will give rise to the generation of two independent benefits, a pension in one Previsionary Institute and an allowance in the other, prior to compliance with requirements. In these cases, the insured person must request the respective benefits independently.

Regarding the service times provided to the State prior to the date of creation of the INPEP, whether by affiliates of the ISSS or of the INPEP, they will be recognized and accumulative provided they meet the following provisions: a) If it concerns affiliates, contributors, and non-contributors, not yet pensioned, who ceased providing services to the State after the date of creation of the INPEP without having the right to pensions or allowances, the recognition of service times will be carried out when they have made contributions to said Institute for at least one year. Additionally, the worker must have made said contributions in their capacity as an obligatory contributor; b) If it concerns former public employees, not yet pensioned, who ceased prior to the date of creation of the INPEP, the recognition of said times will be carried out when they meet the following requirements: i) That they have re-entered or will re-enter active service as public employees in the future; and ii) That they have contributed to the INPEP for a certain number of years, based on the time of service provided prior, as follows:

1. Up to ten years of service provided prior, a minimum of ten years contributed in the INPEP;
2. More than ten years and less than twenty years of service provided prior, a minimum of five years contributed in the INPEP; or
3. More than twenty years of service provided prior, a minimum of two and a half years contributed in the INPEP. In the case of re-entry as public employees referred to in roman i) of this letter, who for any reason ceased in their employment, without having completed the respective contribution periods indicated in roman ii), they may continue contributing voluntarily, to complement said periods, thereby obtaining the recognition of said times.

CNBCR-01/2023 NSP-77 TECHNICAL STANDARDS FOR THE GRANTING OF OLD AGE MONETARY BENEFITS IN THE PUBLIC PENSION SYSTEM Approval: 01/26/2023 Validity: 01/26/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 3 of 16

Periods corresponding to voluntary contributions are also accumulative to those corresponding to obligatory contributions made to the SPP. To facilitate each Previsionary Institute's determination of participation in the financing of a benefit in the SPP, and to determine contributions in arrears or pending backlogs to be resolved, each Previsionary Institute must carry out a process of follow-up and verification regarding contributions and payments effectively made during their stay in the SPP, in order to inform the affiliate of said situation, so that they can settle it and not affect the counting of their contribution periods.

CHAPTER III ON THE PROCESSES PRIOR TO COMPLIANCE WITH THE REQUIREMENTS TO ACCESS AN OLD AGE BENEFIT

Art. 8.- Regardless of the old age pension procedure that the affiliate must carry out upon meeting any of the requirements to retire due to old age, each Previsionary Institute must determine and identify, within the Labor History System, affiliates who become candidates to obtain an old age pension within the next nine months, that is, those affiliates who are close to reaching the legal old age and twenty-five years of contribution, whether independently or by accumulation of periods in both Previsionary Institutes. This search must be carried out on the last business day of each month. Art. 9.- After having identified affiliates close to meeting the requirements to access an old age benefit, the Previsionary Institute must prepare a list of said affiliates for the purpose of carrying out and informing the following actions: a) At least six months before the affiliate meets the legal age or the years of contribution required to retire due to old age, the Previsionary Institute must send the affiliate a report regarding the accredited service and/or contribution time and the periods registered without contributions, requesting said insured person to clarify each of them, and thus complete all information that is pending up to that moment; b) That the compliance with the legal age and the years of contribution required generates the right to an old age pension whose administrative and payment responsibility will be borne by the Previsionary Institute in which the last contributions are being made on the date they meet the requirements; c) That to access the right, it is necessary to present to the Previsionary Institute an Application for Old Age Monetary Benefit; d) That if they retire and continue in a labor subordination, they must contribute to the SP, for which they must affiliate with an AFP; e) The importance of updating beneficiary data and the inconveniences that may occur from not declaring all of them.

Art. 10.- For those affiliates who are receiving disability pensions granted through the first ruling by the CCI and who are close to reaching the legal age to opt for an old age pension, they must be informed on the payment dates of each of the last three pensions that they must request the second advance ruling in order to grant them said pension. Art. 11.- Likewise, those affiliates who are receiving a partial disability pension through a second ruling and who are close to reaching the legal age to opt for an old age pension must be informed that they will have the right to have the amount of their disability pension recalculated when converting it into an old age pension.

CHAPTER IV ON THE APPLICATION AND MANAGEMENT OF THE OLD AGE MONETARY BENEFIT PROCEDURE

Applications Art. 12.- Applications for the Old Age Monetary Benefit procedure must be available to affiliates in the offices of the Previsionary Institutes or through the electronic means they define for such purposes. The content of the Old Age Monetary Benefit Application remains at the discretion of each Previsionary Institute. Art. 13.- The presentation and signing of the Old Age Monetary Benefit Application, as well as the follow-up of the procedure, is non-delegable. However, in cases where the affiliate is incapacitated to do so or is abroad, they may carry out the aforementioned through their legal representative. Art. 14.- If the applicant affiliate has already reached the legal old age age and has at least twelve contributions, they must be informed that they have the right to an old age allowance. If the insured person expresses that they can no longer continue contributing and wish to receive this benefit, the Old Age Monetary Benefit Application must be made available to them to initiate the procedure. Art. 15.- When the insured person presents their application to a Previsionary Institute different from the one making contributions on the date they meet the requirements by accumulation of periods, they must be informed to which Institute they must go to process the respective benefit. Art. 16.- When the affiliate presents the Application containing incorrect or erroneous information, such circumstance must be communicated to them at the moment they present it or within a maximum of five business days in cases where they present it electronically, for the purpose of making the respective corrections so that this does not constitute an obstacle within the process of granting their benefit. In these cases, a record will be drawn up with the inconsistencies and missing documents identified, and a period of twenty business days is granted to the affiliate to rectify the observations to continue with the benefit procedure process. Art. 17.- When the affiliate presents themselves to the Previsionary Institute to sign the application, the Previsionary Institute must set the date for the realization of an interview, whether this is in person or through the electronic means the Institute enables for such purposes. Likewise, their receipt will be recorded in the Pension Applications Register, which may be kept electronically, noting the following information: a) The date of receipt of the Application; b) The Application Number; c) The Number that identifies the receiving office (In the case of regional offices); d) The official of the Previsionary Institute who received it. e) Electronic medium by which the application was received, in case the presentation is electronic. Art. 18.- The affiliate must attend the interview referred to in Article 17 of these Norms to continue with the process of granting the benefit, in order to be informed about the duration of the procedure, the antecedents that have been established, about the benefit to which they are entitled based on contribution time, and other information considered important, according to the case presented. The interview must be attended bringing the following documentation: a) Certification of the affiliate's birth certificate, only in the case that there is doubt about the identity of the affiliate or their civil status, for the purpose of confirming the same, which must be issued no more than six months ago; (1) b) Identification documents, established by the Previsionary Institute; c) Savings or checking account of the financial entity in the name of the affiliate. In case that on the date of the realization of the interview the affiliate foresees that the required documentation will not be complete, they must inform the corresponding Previsionary Institute at least five business days in advance, for the purpose of rescheduling said interview until the date on which the affiliate completes the documentation. Art. 19.- In all cases of old age monetary benefit applications, the Previsionary Institute responsible for the pension procedure must verify that the information

CNBCR-01/2023 NSP-77 TECHNICAL STANDARDS FOR THE GRANTING OF OLD AGE MONETARY BENEFITS IN THE PUBLIC PENSION SYSTEM Approval: 01/26/2023 Validity: 01/26/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 4 of 16

recorded in the application is true and correct.

CHAPTER V OLD AGE PENSION CALCULATION PROCEDURE

Art. 20.- The Previsionary Institute must complete the information required to carry out the calculation of the old age pension, with the information contained in the Labor History System. The procedure to determine the amount of an old age pension will be as follows: a) Determine the exact contribution time registered by the affiliate. For these purposes, the number of days contributed to the SPP must be established, whether in a single Previsionary Institute or in both, as the case may be; b) When the affiliate has registered contribution time in both Institutes, to determine the total exact time, the following procedure will be followed: i. If there are no simultaneous times, the number of days contributed to each of the Institutes will be obtained and added. Once added, the equivalence of said time in years and fractions of years must be obtained, taking into consideration that one year is equivalent to 365.25 days; ii. If there are simultaneous times, the total number of days contributed to each of the Institutes and the simultaneous time, in days, will be obtained. To the sum of the days contributed in both Institutes, the simultaneous time will be subtracted. Then, the conversion to contributed years must be made, using said time with two significant decimal figures. c) Once the time is calculated, in years and fractions of years, it proceeds to select the salaries that will serve for the calculation of the SBR based on the applicable legislation, as follows: i. In the case of affiliates who opted to remain affiliated with the SPP, the last 120 IBCs will be identified to calculate a single SBR. In case they register less than 120 salaries in total, all will be selected, for the purpose of calculating the SBR; ii. In the case of affiliates who remained in the SPP, in accordance with what is established in Article 186 of the SAP Law, and in the case of those affiliates who on the date the SAP began operations had 31 years or more of contributions, in addition to identifying the last 120 IBCs, as detailed in the previous roman numeral, the last 36 or 60 contributed salaries will be identified, to calculate the SBM or SBR-INPEP, as the case may be. d) Once said salaries have been calculated, the next step is to establish the percentage of pension to be granted to an affiliate, as follows: i. Affiliates who opted to remain affiliated in the SPP. The monthly old age pension will be determined as a percentage of the SBR based on the time of service contributed, granting thirty-five percent of this for the first ten contributed years and increasing by one percent for each additional year of contributions up to a ceiling of fifty-five percent of the SBR, provided that the resulting pension does not exceed an amount of two thousand United States dollars; ii. If it concerns an affiliate of the ISSS with mandatory permanence in the SPP, two calculations will be made for them, granting them the amount that results more favorable, between:

1. Thirty percent of the SBR, for the first three contributed years, increasing by one point seventy-five percent, for each additional year of contributions; or
2. Forty percent of the SBM; plus the one point twenty-five percent of the

CNBCR-01/2023 NSP-77 TECHNICAL STANDARDS FOR THE GRANTING OF OLD AGE MONETARY BENEFITS IN THE PUBLIC PENSION SYSTEM Approval: 01/26/2023 Validity: 01/26/2023 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 5 of 16

SBM, for the years of contributions subsequent to the first three, up to a maximum of thirty years of contributions, provided that the resulting pension does not exceed an amount of two thousand United States dollars; iii. If it concerns an affiliate of the INPEP with mandatory permanence in the SPP, two calculations will be made for them, granting them the amount that results more favorable, between:

1. Thirty percent of the SBR-INPEP, for the first three contributed years, increasing by one point seventy-five percent, for each additional year of contributions; or
2. Forty percent of the SBR-INPEP, for the first three contributed years, increasing by one point twenty-five percent, for each additional year of contributions, up to a maximum of thirty years of contributions, provided that the resulting pension does not exceed an amount of two thousand United States dollars; iv. If it concerns an affiliate who opted to remain affiliated in the SPP, and who had 31 years or more of contributions on the date the SAP began operations, two calculations will be made for them, granting them the amount that results more favorable, between:
3. The calculation established in numeral i) of this letter;
4. The calculation established in numeral ii) or iii) of this letter, as applicable. e) Once the percentage of pension to be granted has been established, the next step is to calculate the amount of the pension by multiplying the SBR, SBM, or SBR-INPEP by the percentage established in the previous numeral. f) If the resulting pension is less than the minimum established in the SP Law, the minimum amount will be granted.

CHAPTER VI ON THE GRANTING OF THE BENEFIT

Granting of the Benefit Art. 21.- Once the calculation of the old age pension has been completed, the Previsionary Institute must notify the affiliate of the result, indicating the amount of the pension, the date from which it will be paid, and the payment method. Art. 22.- The old age pension will be paid monthly, in advance, on the dates established by the Previsionary Institute. Art. 23.- The old age pension is inalienable and non-transferable. Art. 24.- The old age pension will be adjusted annually, in accordance with what is established in the SP Law.

CHAPTER VII ON THE TERMINATION OF THE BENEFIT

Termination of the Benefit Art. 25.- The old age pension will terminate in the following cases: a) Death of the beneficiary; b) Loss of nationality; c) Loss of residency; d) Fraud in the granting of the benefit. Art. 26.- In the case of death of the beneficiary, the old age pension will be transferred to the heirs in accordance with what is established in the SP Law. Art. 27.- In the case of loss of nationality, the old age pension will be terminated, unless the beneficiary has acquired the nationality of a country with which El Salvador has a social security agreement. Art. 28.- In the case of loss of residency, the old age pension will be terminated, unless the beneficiary has acquired residency in a country with which El Salvador has a social security agreement. Art. 29.- In the case of fraud in the granting of the benefit, the old age pension will be terminated, and the amounts paid will be recovered in accordance with what is established in the SP Law.

CHAPTER VIII FINAL PROVISIONS

Final Provisions Art. 30.- These Norms will enter into force on the date of their approval. Art. 31.- The Previsionary Institutes must adapt their internal regulations to these Norms within a period of ninety (90) days following their entry into force. Art. 32.- The Central Reserve Bank of El Salvador will supervise the compliance with these Norms.

San Salvador, January 26, 2023.

THE NORMS COMMITTEE OF THE CENTRAL RESERVE BANK OF EL SALVADOR

President Vice President Members