Beginning June 1, new rules for employer-sponsored voluntary pension (APVC) plans will go into effect that aim to encourage more employers to set up those type of plans and more employees to participate. APVC plans are intended to supplement the mandatory individual accounts managed by pension fund management companies (AFPs). Since October 2008, when these defined contribution plans were introduced, the take-up rate has been extremely low, with only five companies offering APVC plans to a total of 188 workers (as of February 2011). The new APVC rules will make several changes, including the following:

- For an APVC plan to be put into place, the minimum percentage and number of employees in one company that must sign up will be lowered to 15 per cent of a company's employees or 100 workers, whichever is lower. Currently, the minimum figures are 30 per cent or 300 workers, respectively.

- Vesting requirements (rights to permanently own the money an employer contributes to an account) will change from 24 consecutive months of contributions to 24 months within 60 months of employment with the same company.

- Both the process for setting up a plan and for enrolling employees will be streamlined.

APVC plans must be set up by agreement between an employer and an institution authorized to administer the plans, such as AFPs, banks, insurance companies, mutual fund administrators, and investment fund administrators. Employers must contribute to all participants' accounts; the amount of the contribution depends on the terms of the specific plan. (Employer contributions are tax exempt.)

As another incentive to promote voluntary savings, the government provides an annual subsidy of 15 per cent of the total amount employees contribute to all types of voluntary retirement savings: (1) APVC plans; (2) voluntary employee contributions to mandatory individual accounts, managed by AFPs; and (3) separate retirement savings accounts with an AFP. The maximum annual subsidy is currently CLP 229,038 (USD 497) per employee. To be eligible for the subsidy, employees must be contributing regularly to a mandatory individual account, and their total voluntary retirement contributions cannot exceed 10 times their mandatory contributions per year. However, employees have to return the subsidy to the government if they withdraw any of their voluntary contributions before retirement (age 65 for men and age 60 for women).

Source: "Recent Changes to the Chilean System of Individual Accounts," Social Security Bulletin, 2001/2002; "Chile," International Update, October 2008, US Social Security Administration; "Número de Contratos Vigentes Según Actividad Económica," Superintendente de Pensiones, el 28 de febrero de 2011; "Norma de Carácter General Número 305," Superintendencia de Pensiones, Superintendencia de Bancos e Instituciones Financieras, and Superintendencia de Valores Y Seguros, el 12 de abril de 2011; "Reguladores Modifican Normative Sobre Ahorro Previsional Voluntario Colectivo," Superintendiente de Pensiones, el 12 de abril de 2011.

Implementation date: 06.2011