Regulation of Pension Schemes in Indonesia: Business Transfers

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.

Is there any legal protection of employees' pension rights on a business transfer?

The transfer of business (either by way of a merger or spin-off) can only be completed if there is certainty that an employer will be responsible for any obligations related to the time of service of the employees as provided in the pension fund rules.

Other protection for pension rights

Arrangements for the pension benefits accrued by employees while in employment with the transferring employer will be provided in the pension fund rules.

Can the following participate in a pension scheme established by a parent company in Indonesia:

• Employees who are working abroad?
• Employees of a foreign subsidiary company?

Employees working abroad

Employees working abroad can participate in a pension scheme established by a parent company in Indonesia.

Employees of a foreign subsidiary company

Employees of a foreign subsidiary company can participate in a pension scheme established by a parent company in Indonesia.

Is there any protection provided for pension scheme benefits where the sponsoring employer becomes insolvent? If so, who provides the protection, and how does this operate? If the scheme itself is underfunded, are there any funding obligations on connected or associated legal entities?

If the employer is the founder of the pension fund and is insolvent and in the process of liquidation proceedings, the pension fund will also be liquidated. The liquidation will be based on a decision by the Financial Services Authority (Otoritas Jasa Keuangan) (OJK), which will also appoint a liquidator. The liquidator will then determine the pension benefit entitlements of members or their eligible heirs on approval from the OJK. Until the liquidation process is completed, the employer will remain responsible for the payable contributions until the pension fund is dissolved.

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