Technical Standards for the Treatment of Backlogs in the Pension System

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 1 of 41 CNBCR-11/2022 NSP-65 TECHNICAL STANDARDS FOR THE TREATMENT OF BACKLOGS IN THE PENSION SYSTEM Approval: 30/12/2022 Validity: 30/12/2022

THE COMMITTEE OF STANDARDS 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, 2022, the Comprehensive Pension System Law was issued, thereby creating the Pension System for workers in the private, public, and municipal sectors. II. That Article 6 of the Comprehensive Pension System Law establishes that every person must individually and freely choose the Administrator to which they wish to affiliate by signing a contract and opening an Individual Savings Account for Pensions. III. That Article 21 of the Comprehensive Pension System Law establishes that contributions must be declared and paid by the employer, the independent worker, or the entity paying disability subsidies for illness, as applicable, to the Administrator in which each worker is affiliated. IV. That Article 159 of the Comprehensive Pension System Law establishes that the Central Reserve Bank of El Salvador will issue the Technical Standards and Resolutions necessary to allow the development of what is established in the present Law. V. That within the process of declaring and paying contributions, there may be errors in the transfer and payment of the same to another Administrator or corresponding Pension Institutes for workers who do not have an affiliation relationship with the respective institutions, which is why it is necessary to establish a procedure that guarantees the transfer of funds to the Pension Institution where they are effectively affiliated.

THEREFORE, in 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:

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TECHNICAL STANDARDS FOR THE TREATMENT OF BACKLOGS IN THE PENSION SYSTEM

CHAPTER I OBJECT, SUBJECTS, AND TERMS

Object Art. 1.- These Standards aim to establish the procedures and formats for information exchange necessary for the identification, compensation, and crediting of backlogs, originating from the institutions that make up the Pension System, composed of the Public Pension System and the Pension System; as well as for the transfer of contributions sent incorrectly to the Salvadoran Institute of Pensions and the Salvadoran Institute of Social Security, corresponding to workers who should be affiliated with the Pension System.

Subjects Art. 2.- The subjects obligated to comply with the provisions established in these Standards are: a) Pension Fund Administrators (AFPs); b) Salvadoran Institute of Pensions (ISP); and c) Salvadoran Institute of Social Security (ISSS).

Terms Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning: a) AFP: Pension Fund Administrator; b) Destination AFP: that to which the affiliate is transferred; c) Origin AFP: that from which the affiliate is transferred; d) Central Bank: Central Reserve Bank of El Salvador; e) Compensation Calendar: that in which the AFPs, the Salvadoran Institute of Pensions, and the Salvadoran Institute of Social Security jointly establish the dates on which files will be transferred, in order to guarantee compensation for the respective month; f) CIAP: Individual Savings Account for Pensions; g) Compensation: process by which the net monetary balances to be transferred between the AFPs, the Salvadoran Institute of Pensions, and the Salvadoran Institute of Social Security are determined, for concepts of backlogs and undue contributions; h) Duplicate Contribution: contribution paid in duplicate between the AFPs, the Salvadoran Institute of Pensions, and the Salvadoran Institute of Social Security, under the concept of backlogs or undue contributions; i) Undue Contribution: contribution sent to the Pension Institutes,

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 3 of 41 CNBCR-11/2022 NSP-65 TECHNICAL STANDARDS FOR THE TREATMENT OF BACKLOGS IN THE PENSION SYSTEM Approval: 30/12/2022 Validity: 30/12/2022 corresponding to workers who should be affiliated with the AFPs, or vice versa; j) Legislative Decree No. 927: Legislative Decree No. 927 of December 20, 1996, published in the Official Journal No. 243, Volume No. 333, of the 23rd of the same month and year, through which the Law of the Pension Savings System was issued; k) Identity Document: It may be the Unique Identity Document, Minor's Card, Passport, or Resident's Card, as applicable; l) DUI: Unique Identity Document; m) IBC: Contribution Base Income; n) Pension Institution(s): refers to the Pension Fund Administrators, the Salvadoran Institute of Social Security, and the Salvadoran Institute of Pensions; o) Pension Institutes: refers to the Salvadoran Institute of Pensions and the Salvadoran Institute of Social Security; p) ISP: Salvadoran Institute of Pensions; q) ISSS: Salvadoran Institute of Social Security; r) IPSFA: Social Security Institute of the Armed Forces; s) SP Law: Comprehensive Pension System Law; t) NIT: Tax Identification Number; u) INPEP 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; v) NUP: Unique Pension Number; w) Backlog: Pension contribution of a worker, paid to a Pension Institution different from the one to which they are or were affiliated, which may correspond to an AFP for the commission and to another for the contribution, or both, depending on the month of accrual of the contribution; x) Backlogs originated from compensations: are contributions that, although identified and compensated, do not correspond to the Pension Institution where the backlog record was transferred, thus requiring them to be submitted again to the compensation process repeatedly; y) Backlog to be collected: Backlog identified by the Superintendence, sent to the Pension Institution to which said backlog belongs, informing which Pension Institution reports it; z) Backlog to be paid: Backlog identified by the Superintendence, sent to the Pension Institution that reported said backlog, informing to which Pension Institution it belongs; aa) Pension System: System composed of the Public Pension System and the Pension System composed of the Pension Fund Administrators; bb) SP: Pension System; cc) SPP: Public Pension System; and dd) Superintendence: Superintendence of the Financial System.

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CHAPTER II IDENTIFICATION OF BACKLOGS

Backlog identification procedure Art. 4.- Each Pension Institution must send to the Superintendence the detail of the backlogs and undue contributions received, through electronic files with extension CCI, named "Unidentified Contributions File". The Superintendence will send, to the sending Pension Institution, the electronic file with extension CRN named "Resolution Report of Backlogs to be Paid", and to the Pension Institution to which the contributions correspond, the electronic file with extension CRF named "Resolution of Backlog to be Collected". For those contributions identified with a closed CIAP in the AFP, the Superintendence will send to the sending Pension Institution, the electronic file with extension CCN named "Report of Contributions with Closed CIAPs to be Paid", indicating to whom said contributions must be delivered, and to the AFP identified with the last linkage with the affiliate, it will send the electronic file with extension CCF named "Report of Contributions with Closed CIAPs to be Collected", to process their recovery and subsequent return to the affiliate. In case the Superintendence detects inconsistencies during the identification process, it will inform the sending Pension Institution, through the electronic file with extension CRI named "Impropriety in Resolution of Backlogs to be Paid". The sending of information for the realization of the backlog identification process will be done, in accordance with what is established in Annex No. 1 of these Standards.

Valid combinations to determine the correspondence of a contribution to an affiliate Art. 5.- A contribution will be considered to correspond to an affiliate, provided that the information contained in the fields of the records of the CCI file complies with one of the combinations shown in the following table:

NUP	ISSS	INPEP Number	ID Doc	NIT Employer
NUP	X
ISSS		X
INPEP Number			X
ID Doc				X
NIT Employer

A field from the first column of the above table, combined with another from the first row, belonging to the same person. Each combination is exclusive, therefore, more than one should not be used in each record of the CCI file. In cases where the backlog comes from a subsidy payroll; the AFPs may use, in addition to the combinations described in the first paragraph, the name and date of birth of the affiliate to whom the contribution corresponds.

CHAPTER III COMPENSATION

Art. 6.- In the case that two Pension Institutions have agreed to carry out a bilateral compensation, both must carry out the following procedure: a) Exchange information on the amounts owed to each other; and b) Carry out the calculation of the compensation independently, subsequently exchanging their respective results. If they agree with the calculations, they must manifest such situation through the file designed for such effect and then proceed to the transfer of funds; otherwise, they must communicate with each other to determine the reason for the difference.

Insufficiencies of backlogs Art. 7.- When a Pension Institution identifies an insufficiency, they must be covered with the foregone profitability up to the amount they manage to cover. The sending of information for the realization of the backlog insufficiency identification process in the case of the Pension Institutes will be done in accordance with what is established in Annex No. 4 of these Standards. When the Pension Institution recovers the insufficiencies referred to in the previous paragraph, it will send to the AFP where the affiliate is located, the uncovered part of the insufficiency, and the rest will be credited to the profitability of the Pension Fund that recovered it, on the date of crediting said insufficiencies.

Commission rate to be used for the compensation of backlogs accumulated until June 30, 2001, between AFPs Art. 8.- The backlogs accumulated in the AFPs, from 1998 until June 30, 2001, will be compensated using an average rate, weighted by periods, in concept of commission and contributions, identified as follows:

Period	CIAP	Weighted Average Commission	Total
1998 Jun-Dec	64.3931%	35.6069%	100.00%
1999 Jan-Mar	70.4731%	29.5269%	100.00%
1999 Apr-Dec	70.1506%	29.8494%	100.00%
2000 Jan-Aug	72.7107%	27.2893%	100.00%
2000 Sep-Dec	73.2959%	26.7041%	100.00%
2001 Jan-Jun	76.1523%	23.8477%	100.00%

Commission rate to be used for the compensation of backlogs accumulated after June 30, 2001, between AFPs Art. 9.- The backlogs accumulated after June 30, 2001, will be compensated through the procedure established in these Standards, using the real commission rate of the AFP that received the payroll with affiliates belonging to another AFP.

Procedure to be followed for the exchange of backlog information Art. 10.- By the fifth business day of each month at the latest, the Pension Institution must send to the Superintendence the agreed calendar of the backlog compensation process, which must end, at the latest, on the last business day of the current month, carrying out the following procedure: a) The Pension Institution will send to the others the electronic file SBP, which will contain the information with the Preliminary Gross Balances owed; this information serving as a projection of funds to be transferred; b) The Pension Institutions that receive this SBP file will verify the information, comparing it with the files with extensions CRF and/or CCF sent by the Superintendence. The balances must consider profitability, taking into account what is established in these Standards. For the use of the reference quota value for the Use of Reference Quota Value for Outgoing Cash Flows of the NSP-63) approved by the Central Bank through its Committee of Standards; c) The Pension Institution will communicate with the others in case the information contained in the electronic file SBP presents inconsistencies in relation to what was identified in the files with extensions CRF and CRN and/or CCN and CCF sent by the Superintendence, in order to correct the information and exchange new files until they are definitively cleaned up, leaving evidence of said inconsistencies; d) The Pension Institution, according to the date established in the compensation calendar of the respective month, will send a file of conformity with the preliminary information (CIP) to the others that sent it Preliminary Gross Balance information, indicating disagreement with the information recorded in the cleaned SBP file; e) The Pension Institution, by the last business day of the month at the latest, will send the information of the Gross Balances to be Transferred in the SBT files to those with which it will carry out bilateral compensation; f) The Pension Institution will proceed to payment, exchanging that day the net balance, by certified check or bank transfer of funds. The Pension Institutions involved will exchange the receipt described in Annex No. 3 of these Standards. The balances must consider profitability and for the use of the reference quota value, the provisions contained in the (NSP-63) previously cited; g) The Pension Institution will send to the Superintendence by the next business day, the records of compensated backlogs or undue contributions, using the h) The Pension Institutions will compensate the identified backlogs corresponding to contributions from supplementary payrolls for insufficiencies of transferred affiliates, on the days cited in the respective compensation calendar. It will not be necessary for this information to be sent to the Superintendence for its identification, unless the controls of the Pension Institutions do not allow its identification. Nevertheless, they must inform the Superintendence of their compensation, in an electronic file CCS; i) In cases where insufficiencies have been identified, and the respective Pension Institution has covered them with profitability and has sent the contribution to another as part of the backlog compensation process, subsequent recoveries of those insufficiencies must be registered as part of the profitability obtained by the Fund, on the date of their crediting; and j) In the case of transfers of affiliates between AFPs, when backlogs of contributions whose accrual corresponds to the Origin AFP are collected, it will credit the contribution to the Solidarity Guarantee Account and the commission as applicable, sending to the Destination AFP the mandatory contributions with their respective profitability and the record referred to in Technical Standards for Administration and Management of NSP-44). These contributions will be treated in the Destination AFP as backlogs to be collected without right to charge commission. Similarly, it will proceed when only the contribution corresponds to it, transferring to the Destination AFP the commission and the amount corresponding to the contribution of the Solidarity Guarantee Account with its corresponding profitability. In the case that it is impossible to carry out the timely cleaning referred to in letter c) of this article, the transfer of these funds contained in the questioned records will be carried out in the next compensation period, in order to comply with the deadlines established in the compensation calendar of the current month, having to inform the Superintendence of this situation, on the business day prior to the transfer of the SBT.

In the case that the payrolls had been paid outside the legal period established in the SP Law, the reference quota value of the next business day of payment of the corresponding accrual month will be taken as the base for the calculation of the backlogs to be transferred; except for what is established in the corresponding regulation regarding subsidy payrolls.

Procedure to be followed for the compensation of undue contributions Art. 11.- In case undue contributions are identified, the Pension Institutions must proceed according to the following: a) Once the undue contributions are identified, they will proceed to transfer the information related to them, using electronic files with extension SBT, which will not include record type 5, Transaction Summary; b) The Pension Institution will have five business days, after the above, to make the payment of these contributions, which will be done at nominal value by check in the name of the respective Pension Fund or bank transfer of funds. The Pension Institution that receives the funds will issue the compliance receipt to Annex No. 3 of these Standards; c) The backlogs generated in the SP, by compensation of undue contributions, must also be submitted to the backlog identification and compensation process, established in these Standards. The same treatment will be received by the backlogs of contributions collected in an AFP, which correspond to workers who incorporated into the SP, after the expiration of the deadlines established by Legislative Decree No. 927 for such purpose, and whose accrual periods belong to said system. For the identification and compensation of this type of backlogs of the SP, the Contribution Type codes used for the transfer of undue contributions will be used. In the process, the IBC received in the SBT file or the IBC declared in the payroll will be reported, as applicable, and in addition to the contributions, the profitability generated by said contributions in the Pension Fund that collected them will be transferred. For the use of the reference quota value, the provisions contained in Technical Standards for the Use of Reference Quota Value for Cash Flows NSP-63) approved by the Central Bank through its Committee of Standards will be taken into account; d) The contributions of own affiliates that are collected in an AFP, whose accrual periods correspond to the SP, but belong to periods prior to the date of affiliation, must not be submitted to the identification process established in these Standards, because the AFP knows that the contributions belong to one of its affiliates; and e) The AFP will credit the contributions referred to in the previous letters, as described in Chapter IV, of these Standards.

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Suspension of the backlog information exchange process Art. 12.- If at any time during those indicated in Article 10 of these Standards, the information is not received within the established deadlines, the Pension Institution that did not receive the information must understand that the process has been interrupted, of which it will notify the Superintendence, on the business day following the suspension, having to send a copy to the Pension Institution that failed to meet the deadline. Without prejudice to the above, the Pension Institution that failed to meet the indicated deadlines must notify this fact to the Superintendence on the business day following, explaining the problems that caused the failure. It must send a copy to the Pension Institution to whom it did not deliver the information on time. This last notification must be signed by the legal representative of the infringing Pension Institution. The process must be restarted in accordance with what is established in these Standards.

Solutions for structure problems and information restrictions in fields Art. 13.- In case any of the Pension Institutions involved in the backlog information exchange process detects problems in the structure of the exchanged files or in the information restrictions defined for the fields, it must reject the file or the records that present problems, as applicable. The rejection must be notified to the sending Pension Institution, with a copy to the Superintendence, specifying the reasons for the rejection, requesting at the same time the resending of the corrected files. Files with inconsistencies between the number of records reported and the quantity of records contained in them must also be rejected. The rejection of the SBP must be corrected within the established deadlines, without its correction