Technical Standards for the Use of Reference Share Value for Outgoing Cash Flows of Pension Funds

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
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CNBCR-11/2022
NSP-63
TECHNICAL STANDARDS FOR THE USE OF REFERENCE SHARE VALUE FOR OUTGOING CASH FLOWS OF PENSION FUNDS 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 Official Diary 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 2 of the Comprehensive Pension System Law establishes that the System will have the characteristic that its affiliates will have the right to the granting and payment of pensions determined in the aforementioned Law, that individual savings accounts for pensions will be administered by Pension Fund Administrators, and that affiliates will have freedom to choose and transfer between Administrators.
III. That Article 4 of the Comprehensive Pension System Law establishes that the Central Reserve Bank of El Salvador, through its Standards Committee, will be responsible for issuing the corresponding technical regulations to facilitate the application of said Law.
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.
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:
TECHNICAL STANDARDS FOR THE USE OF REFERENCE SHARE VALUE FOR OUTGOING CASH FLOWS OF PENSION FUNDS

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the procedure to homogenize the recording of flows generated by obligations of Pension Funds with affiliates or their beneficiaries.

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

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) AFP or Administrator: Pension Fund Administrators; b) Central Bank: Central Reserve Bank of El Salvador; c) CIAP: Individual Savings Account for Pensions; d) Outgoing cash flows: Those arising from inconsistencies due to unidentified contributions, as well as the closure of the CIAP in the Administrator due to transfers between AFPs, contract cancellations, balance returns, payment of the excess of free availability, annual return of CIAP balances to pensioned affiliates, as well as payment by inheritance; e) SP Law: Comprehensive Pension System Law; f) Superintendence: Superintendence of the Financial System; and g) Share Value: Value in United States dollars of the share of a Pension Fund.

CHAPTER II
PROCEDURE TO HOMOGENIZE THE RECORDING OF FLOWS GENERATED BY OBLIGATIONS OF PENSION FUNDS TO AFFILIATES OR BENEFICIARIES

Art. 4.- The AFPs must apply, in the case of outgoing cash flows from the pension fund they administer, the following procedure:
a) At the time of making the outgoing cash flow, the AFP must establish as the reference share value the current share value, seven days prior to the transaction; or b) In the case of a new pension fund, where the share value of the day is not available at the time the cash flow occurs, the AFP to establish the reference share value of literal a) of this article, must proceed as follows:
i. At the time of executing the transaction, the movement must be registered in the mechanized system, as well as in the auxiliary records of the AFP;
ii. The accounting recording of the outgoing cash flow must be made with the current share value on the day of the transaction, and its recording cannot exceed seven calendar days subsequent to the date on which the outgoing flows occurred;
iii. The profitability differential generated in the outgoing cash flow due to the variation of the share value corresponding to the day of the transaction and the reference share value used, must be settled against account 331.01.
iv. The provision applies to the accounting recording in the pension fund's accounting and in the AFP's accounting, in those accounts that serve as a link between the two.

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 5.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

Repeal
Art. 6.- Technical Standards for the Use of Reference Share Value for Outgoing Cash Flows of Pension Funds (NSP-28), approved by the Standards Committee of the Central Reserve Bank of El Salvador, in Session No. CN-10/2019, of May 29, 2019.

Unforeseen Aspects
Art. 7.- Unforeseen aspects regarding regulation in these Standards will be resolved by the Central Bank through its Standards Committee.

Validity
Art. 8.- These Standards will enter into force as of December 30, two thousand twenty-two.