SSEK Legal Consultants partner Fahrul S. Yusuf and Maria Yudhitama, an associate at the firm, have contributed the Indonesia chapter of the new Practical Law global guide to pension schemes. The following is an excerpt.
In relation to supplementary pension schemes, are these generally funded or unfunded? If funded, are there any solvency requirements on the sponsoring employer or provider? Funded or unfunded
The employer must pay the normal and additional contributions (if any) in order to maintain the solvency level of the pension fund.
Solvency requirements for funded schemes
Under Minister of Finance Regulation No. 510/KMK.06/2002 regarding Funding and Solvability of DPKK, as amended (PMK No. 510/KMK.06/2002), the founder of the pension fund is responsible for maintaining the assets of the pension fund at no less than the Actuary Obligation (Sufficient Fund). The regulation defines the Actuary Obligation as the calculation of a pension fund's obligation with the assumption that the pension fund will remain active until its obligations to the members and entitled persons are fulfilled.
There are three funding levels for pension funds:
- First level. Sufficient Fund level (see above).
- Second level. Where the assets are less than the Actuary Obligation but not less than the Solvability Obligation. The Solvability Obligation is defined as the calculation of a pension fund's obligations with the assumption that the pension fund will be liquidated at the level as calculated by the actuary.
- Third level. Where the assets are less than the Solvability Obligation (see above).
In addition, Minister of Finance Regulation No. 199/PMK.010/2008 regarding Pension Funds Investment (PMK 199/PMK.010/2008), as amended, provides the investment instruments that can be placed by pension funds. These include state commercial paper, savings at banks, time deposits at banks, on call deposits at banks and Bank of Indonesia Certificates (SBI).
PMK 199/PMK.010/2008 also provides both the procedures and requirements for placing each of the permitted investment instruments. The accounting procedures for pension funds are provided in Bapepam-LK Regulation No. PER05/BL/2012 regarding Preparation of Financial Statement and the Basis of Investment Calculation for Pension Funds.
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