Technical Standards for the Management of the Special Guarantee Contribution and Investments of Pension Fund Administrators

NSP-76
E INVESTMENTS OF PENSION FUND ADMINISTRATORS
Approval: 26/01/2023
Validity: 26/01/2023

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

CONSIDERING:

I. That through 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 77 of the Comprehensive Law of the Pension System establishes that each Administrator must constitute and maintain a Special Guarantee Contribution whose purpose is to back the minimum profitability of the Fund it administers, and that the respective regulation must be issued for its application.

III. That Article 159 of the Comprehensive Law of the Pension System establishes that the Central Bank of Reserve of El Salvador must issue the relevant Technical Standards for the application of the legal provisions of 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 MANAGEMENT OF THE SPECIAL GUARANTEE CONTRIBUTION AND INVESTMENTS OF PENSION FUND ADMINISTRATORS

CHAPTER I
GENERAL PROVISIONS

Object
Art. 1.- These Standards aim to establish the procedures that Pension Fund Administrators must follow for the Management of the Special Guarantee Contribution and Investments with own resources, in Quotas of the Pension Fund, in accordance with what is provided in the Comprehensive Law of the Pension System and in the Regulation that governs the Management of the Special Guarantee Contribution.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Standards are the Pension Fund Administrators.

NSP-76
E INVESTMENTS OF PENSION FUND ADMINISTRATORS
Approval: 26/01/2023
Validity: 26/01/2023

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Real Fund Asset: Item that groups asset accounts less Accounts Receivable, Previsional Titles, and the AEG Account from the Balance Sheet of the Pension Fund; b) AEG: Special Guarantee Contribution; c) AFP: Pension Fund Administrator; d) Central Bank: Central Bank of Reserve of El Salvador; e) Fund: Pension Fund; f) SP Law: Comprehensive Law of the Pension System; g) Superintendency: Superintendency of the Financial System; and h) Previsional Titles: Securities that include Transfer Certificates, Complementary Transfer Certificates, Previsional Investment Certificates, Previsional Obligation Certificates, and Transition Financing Certificates.

CHAPTER II
ON THE SPECIAL GUARANTEE CONTRIBUTION

Art. 4.- The AEG aims to back the minimum profitability of the Fund it administers. This guarantee must be equivalent to a percentage of the Real Fund Asset administered, without exceeding three percent of the Fund.

Constitution of the AEG
Art. 5.- The AEG may be constituted with the AFP's own resources, as well as through the contracting of guarantees, bonds, or other financial instruments that allow it to back the required percentage.

The constitution of the AEG may be composed, in a combined manner, through the contracting of financial instruments and through own resources in quotas, provided that there is no deficient backing of the percentage required for the AEG.

When the AEG is constituted with the AFP's own resources, it will be invested in fund quotas, and the number of these will be established based on the quota value in effect on the day of the contribution, being registered as a Liability account in the Fund's accounting.

When the AEG is guaranteed with bonds, these will be contracted with the AFP's own resources, with financial entities registered in the Public Registry of the Financial System and that have the minimum rating determined for issuances subject to being acquired with Fund resources.

Previsional Titles will be excluded from the calculation of the Special Guarantee Contribution.

NSP-76
E INVESTMENTS OF PENSION FUND ADMINISTRATORS
Approval: 26/01/2023
Validity: 26/01/2023

Art. 6.- For the constitution of the AEG with the bonds described in the fourth paragraph of the previous article, contracting with companies belonging to the financial conglomerate to which the AFP belongs may not be carried out.

Art. 7.- The AEG will be unseizable for obligations other than those incurred with the Fund, nor will it be guaranteed by the Minimum Profitability established in Article 77 of the SP Law.

Determination and Profitability of the AEG
Art. 8.- The amount of the AEG will be calculated daily, taking into account the simple average value of the Real Fund Asset of the last fifteen days, excluding the day of operations.

The profitability of the AEG obtained on the day of calculation will not be considered as part of the same.

The required AEG will be equal to the amount resulting from multiplying the average value of the Real Fund Asset by 0.25%.

Art. 9.- The AFP must report daily to the Superintendency the value of the AEG at the start of the day of operations.

Art. 10.- The value of the AEG for the amount of bond to be contracted will be calculated based on the projected size of the Real Fund Asset for a one-year period, which may be adjusted monthly based on the estimated size of said asset at the close of each month, with the AFP being responsible that the backed amount is not lower than the daily AEG requirement calculated.

Art. 11.- The bond contract signed with the insurer must guarantee the extension of automatic coverage of at least three months, after the date of its annual expiration, in order to maintain coverage in the case, while the contract for the following year is signed.

Disposal of AEG Excesses
Art. 12.- The excess of the AEG to be withdrawn by the AFP must be reclassified to accounts receivable, in the AFP's accounting, applying the proportion of the principal to the account related to Accounts and documents receivable for own operations, being able to establish an analytical account for such purpose; and the part of the return will be applied in the account related to Returns receivable for Special Guarantee Contribution.

Art. 13.- To establish the withdrawal amount corresponding to the principal and return, the distribution base will be the total balance of the AEG of the previous day, with respect to the date on which said excess is registered.

NSP-76
E INVESTMENTS OF PENSION FUND ADMINISTRATORS
Approval: 26/01/2023
Validity: 26/01/2023

Accounting Treatment of the AEG
Art. 14.- The account to be used to control the AEG bond will be the account related to Bonds to back the Special Guarantee Contribution, within the item of Control Accounts of the Pension Fund.

Art. 15.- In the AFP, the amount of the premium will be accounted for in the account related to Prepaid Expenses, specifically, in the analytical account related to Premiums for Bonds to back AEG.

Art. 16.- When registering it in the period's results, it will be accounted for as an expenditure in the account related to Expenses for Administration of Pension Funds, in the sub-account related to Premiums for Bonds to back AEG.

CHAPTER III
ON INVESTMENTS IN QUOTAS OF THE ADMINISTERED FUND

Art. 17.- AFPs may invest their resources in quotas of the administered Pension Fund. These do not enjoy the profitability guarantee referred to in Art. 77 of the SP Law.

Placement of AFP Investments with Own Resources in Fund Quotas Art. 18.- The voluntary contributions of the AFP in fund quotas will be managed in a Liability account of the Fund's accounting, related to Quotas of the AFP.

Withdrawal of AFP Quotas
Art. 19.- AFP quotas may be used to replenish AEG deficiency. Additionally, the AFP may dispose of its investments, in Fund Quotas, when they are used to absorb minimum debts of affiliates or employers, as well as to cover profitability and other accounts receivable from collectors and employers, in favor of the Pension Fund, in accordance with the policies established by each AFP, duly approved by the Superintendency; in this sense, automatic charges may be made to the Liability account where such investment is controlled; while there is a balance.

Art. 20.- The policies established by the AFP must be communicated in writing to the Superintendency for authorization, and must be previously approved by the Board of Directors of the AFP. These policies must indicate at least:
a) The amount of debt that the AFP will apply automatically, resulting from insufficiencies or default by affiliates, employers, or due to application errors by collectors or other clearly defined concepts; b) Amount that will be assumed as an expense or that will be managed as an account receivable in the AFP;

NSP-76
E INVESTMENTS OF PENSION FUND ADMINISTRATORS
Approval: 26/01/2023
Validity: 26/01/2023

c) Maximum term that accounts receivable of this nature will remain in collection management by the AFP; and d) Settlement mechanism.

Accounting Treatment of AFP Quota Withdrawals
Art. 21.- Transfers made from the AFP's Investments in Fund Quotas to the AEG or vice versa, will be registered in the AFP's accounting, taking into consideration the proportion of the principal and the return of the total AEG balance with respect to the day before the transfer. The registration of applications may be accumulated monthly, with a reconciliation with the records of the Pension Fund being carried out at the end of each month.

Art. 22.- For the registration of the withdrawal of the AFP's investments in quotas, as absorption of debts, the accounting applications will be:
a) In the Pension Fund, charge in the sub-account related to Quotas of the AFP and a credit in the sub-account related to Contributions to be Credited; b) In the AFP, charge in the account related to Accounts Receivable for Fund Administration and the respective sub-accounts, and credit in the sub-account related to Voluntary Investments in Fund Quotas, when the AFP decides to collect the debt. In case the AFP decides to absorb it as an expense, the charge will be applied in the corresponding expenditure sub-account, such as the one related to Surcharges for collector operations or the one related to Surcharges for coverage of insufficiencies.

CHAPTER IV
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 23.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Comprehensive Law of the Pension System.

Repeal
Art. 24.- Management of the Special Guarantee Contribution and (SAP 03/2006) approved on March 17, 2006 by the Superintendency of Pensions whose Organic Law was repealed by Legislative Decree No. 592 which contains the Law on Supervision and Regulation of the Financial System, published in the Official Journal No. 23, Volume No. 390, dated February 2, 2011.

Unforeseen Aspects
Art. 25.- Aspects not provided for in the regulatory matter in these Standards will be resolved by the Central Bank through its Committee of Standards.

NSP-76
E INVESTMENTS OF PENSION FUND ADMINISTRATORS
Approval: 26/01/2023
Validity: 26/01/2023

Validity
Art. 26.- These Standards will enter into force from January 26, two thousand twenty-three.