ANNEX 1
COMPLEMENTARY SOCIAL SECURITY HANDBOOK FOR FOREIGN REPRESENTATIONS
(Law no. 252 of 5 December 2005)
All employees are required to choose the placement of their accruing severance settlement (TFR). This means their future TFR, and not those funds accrued as of 31 December 2006, which will continue to be reassessed in accordance with the provisions in force and be paid to the employee in a lump sum upon cessation of the contract.
Employees will have to make this choice:
§ by 30 June 2007 if they were already employed as of 31 December 2006; or
§ within 6 months of their hiring date if they began working after 31 December 2006.
The choice is to be expressed using the special forms drafted by the Ministry of Labour and Social Security in accordance with Ministerial Decree of 30 January 2007, which each employer must, in accordance with article 1, paragraph 1, of that same Decree, make available to employees.
Once the option on the placement of the TFR has been expressed the employer is obligated to issue a signed copy of the same to the employee as a receipt.
The possible choices are as follows:
Formula 1 - to assign the TFR totally or in part to a complementary pension scheme that, in the absence of contractual or closed end schemes, will be an open end fund or else an individual pension scheme; it must be pointed out that partial assignment is only possible in the case of employees enrolled in obligatory pension schemes dating back to before 29 April 1993, in as much as they can decide to assign between 50 and 100% of their accrued TFR to complementary schemes.
Formula 2 - leave the TFR to mature under the administration of the employer.
Formula 3 – not express any intention by remaining silent.
If the employee opts for Formula 1, assigning the TFR to a complementary pension scheme, the employer will provide for transfer of the TFR that accrues starting with the month subsequent to this choice, while the TFR that has accrued up to that moment will continue to be reassessed according to the parameters of Law no. 297/82 (1.5% plus 75% of the ISTAT index of the cost of living increase calculated for families of labourers and employees) and to be paid out upon cessation of contract. The retired employee will receive a public pension paid out by the institution in whose obligatory pension scheme he/she is enrolled, and a supplementary pension paid out by the scheme to which he/she has chosen to assign the TFR, calculated on the basis of the funds paid in as a result of this assignment and of the eventual additional contributions the employee may choose to make to the fund.
It would be well to note that the employee may ask his/her chosen scheme to pay out only 50% of the accrued capital in the form of a pension and the remaining 50% in a lump sum.
If the employee chooses Formula 2, expressing the desire to leave the TFR under the administration of the employer, the TFR will remain under the administration of the employer if the number of employees does not exceed 49; if the number of employees is at least 50 the accruing TFR must be transferred by the employer to the INPS Treasury Fund entitled “Fund for the payment of TFR to private sector employees in accordance with article 2120 of the Civil Code”.
Opting for Formula 3, i.e. remaining silent on TFR placement, triggers the principle of “silent consent” by which the entire accrued TFR goes to a special Residual INPS Fund known as FONDINPS, which administers its assignment to complementary pension schemes.