1. No new members will be accepted

Subject to Section 7 below, the pension fund may not accept new members. Members who joined the pension fund as of 1.1.95 will be considered new members for this purpose.

Furthermore, the pension fund may not insure new wage components of a member, beyond those which were insured up to 1.1.95.

The above Government decision determines that all the new members will be insured in new pension funds which are approved by the Supervisor and which will operate according to rules to be promulgated. Thus, new members will be added only to new pension funds, which will be subject to the directives for the establishment and management of new pension funds which were issued by the Supervisor on 20.9.95.

A fund which accepted new members in the interim period defined in these directives (see Chapter 3 of the directives), will ensure that all accounts and assets of new members are transferred to the newly-established pension fund. A fund which did not establish a new pension fund will transfer these members to any other new pension fund decided upon by the members and/or their employers, as required by law.

If these members elected not be become members of a pension fund, they may transfer their balances to a provident fund or insurance fund in accordance with the conditions defined in the Income Tax Regulations (Rules for the Approval and Management of Provident Funds) (Emergency Instructions), 5757-1997.



2. Rights of Fund Pensioners

Pension fund pensioners who retired or will retire by 30.9.97 will continue to receive their pension as determined in the fund constitution and/or in the pertinent agreements, without the changes made in the Government decision and in these directives. The fund may not introduce any change in the calculation of the pension as to the date of its payment or the manner of linkage.

3. Calculation of the pension

Directives concerning the pension, including calculation of the determining wage, will be issued separately.

4. Payments to the fund - contributions

The fund will continue to collect the payments to the fund at the rates determined in its constitution and/or in the relevant agreements.

A fund which, according to its constitution or a binding agreement to which it is a signatory, collects contributions at a rate lower than 17.5% for a comprehensive pension or lower than 11.5% for a basic pension, will notify the Supervisor of the rates it collects and the arrangements for their collection.

The fund will continue to act to collect debts of members and/or employers to the fund.

5. Formula for reimbursement

The withdrawal of money from the pension fund not by way of a pension will be made according to the formula for redemption values in Regulation 41(29) of the Income Tax Regulations (Rules for the Approval and Management of Provident Funds), 5724-1964 (in the amendment to the regulations which was published in the Collection of Regulations on 7.9.95).

A fund whose constitution contains a redemption values formula which differs from the above formula, may act accordingly only with the prior written approval of the Supervisor, and subject to any changes required in the formula, if any, at the discretion of the Supervisor.

6. Management fees and management expenses

The pension fund may deduct from the fund's assets only management fees. Nothing therein shall prevent the fund from deducting also the payments required in respect of making transactions in investments of the funds money and reinsurance premium, all subject to the limitations and rules as determined by the Supervisor.

Management fees for 1997 will be at the following rates: (The management fee ceiling for 1996 will be as per the previous draft for these directives dated 6/12/95.)

(1) From the payments to the fund (contributions) - not more than 4%.

(2) From the payments of the fund to members - not more than 2.5%.

(3) At most, NIS 20 per year from each member who has frozen his assets in the fund, and starting only from the end of one year after he ceased transferring payments to the fund.

At the end of the above period, the above management fee rates will be re-examined, and if necessary, they will be reduced further.

Funds with an approved actuarial balance mechanism (Atudot, Atidit, Yozma, Amit and H.E.L.) can continue to collect their regular management fees, subject to the Supervisor's approval.

7. Interruption of membership and continuity of rights between the veteran funds

A member of a veteran pension fund who ceased his payments to the fund for a period of not more than 24 months but did not withdraw any money from the fund, may join another veteran fund, the last one in which he was insured or another, provided that whoever was a member of a pension fund with an actuarial balance mechanism (Atudot, Atidit, Yozma, Amit and in H.E.L.) members who joined as of 5.90), may not join a fund which does not have an actuarial balance mechanism.

Accordingly, continuity arrangements in place between the veteran funds only, will remain in place in respect of a member as aforesaid.

For the removal of doubt, it is clarified that members who are insured in an unfunded pension, are not considered veteran members and may not join a veteran pension.

8. Continuity of rights between the veteran and new funds

A veteran pension fund may enter into a continuity of rights agreement with a new pension fund, which will apply only to members who switch from a veteran pension fund to a new pension fund, subject to the agreement being approved by the Supervisor.

9. Qualification period

Members of a pension fund who are not entitled to continue to deposit money in the fund as veteran members, will be entitled to receive a pension from the fund even if they did not accumulate the qualification period as per the constitution of the fund, provided that the amount of the monthly pension to which they will be entitled from the fund in respect of the rights accrued therein, will be not less than a sum equal to 5% of the national average wage as published from time to time by the National Insurance Institute.

10. One-time deposits

A veteran pension fund may not accept one-time deposits to the fund except in case of arrears, capitalization of future rights with the prior written approval of the Supervisor and in accordance with the rules which will be promulgated, or renewal of membership, all subject to the conditions in Section 7 above and Regulation 41(25) of the Income Tax Regulations (Rules for the Approval and Management of Provident Funds), 5724-1964.



11. Basic pension

A veteran member or group of members who are insured for a basic pension only, may not switch to a comprehensive pension and increase the rate of contributions from 11.5% to 17.5%, without first obtaining the written approval of the Supervisor.

Such members will be able to join a comprehensive pension without changing the rate of the contributions, provided that the old age pension, the disability allowance and the survivors' pension is calculated, subject to the limitations mentioned in Section 3, in the same was as an old age pension is calculated in a comprehensive pension, and multiplied by the proportional part of the rate of the contributions which are paid for the basic pension, as opposed to the rate of the contributions which are paid in a comprehensive pension (11.5/17.5).

In transferring to a comprehensive pension as aforesaid, the member shall be subject to all the conditions set forth in the fund's constitution with reference to accumulation of a qualification period and these directives, from the date of transfer to the comprehensive pension.

12. Board of directors of the pension fund

a. For the matter of this section, "director from the public" - as defined in Section 96B of the Companies Ordinance [New Version], 5743-1983 (hereinafter: the Companies Ordinance).

b. On the Board of Directors of a pension fund which is a company, at least two directors from the public shall serve who are not members of the fund.

In a pension fund which is a cooperative association, at least two directors from the public shall be appointed to the Association Committee, who are not members of the fund.

c. Meetings of the Board of Directors or the Association Committee shall convene at least once every three months.

d. Directors from the public shall be subject to the provisions of Sections 96C to 96E, 96H(a), 96J, 96L and 96N(a) of the Companies Ordinance.

e. A director from the public shall cease to serve in his office prior to the end of the term for which he was appointed, if one of the following obtains:

(1) he resigned by delivering a letter of resignation, stating reasons, to the fund and to the Supervisor;

(2) he was absent from three consecutive meetings of the Board of Directors or the Association Committee, as the case may be, or from five meetings within a period of one year;

(3) one of the conditions which disqualify a person from serving as a director from the public - applies to him.



13. Issue of designated bonds (5.5%) - Transition instructions

Until completion of the audit of all the funds and preparation of a detailed recovery plan for each fund, the issue of "Meron" designated bonds shall continue for the veteran members of all the veteran funds. The funds shall not be entitled to purchase "Arad" designated bonds.

14. Reinsurance

A pension fund may not insure its liabilities with reinsurance. Any fund which made reinsurance agreements in the past, shall submit to the Supervisor full information of the agreement and its terms by 30.4.97.

15. Amendment of the fund's constitution

Each fund shall submit to the Supervisor, within 60 days of publication of these directives, the amendments required in its constitution for implementation of these directives.

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