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Eurasian Economic Union: Mandatory pension for employed citizens

Total Rewards|Health and Benefits|Retirement
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By Michael Brough | March 16, 2021

The agreement aims to ensure the pension rights of workers in EAEU member states have the same terms as those of citizens of the state of employment.

Employer Action Code: Act

The Agreement on Pension Coverage of Employees in member states of the Eurasian Economic Union (EAEU) entered into force on January 1, 2021. The main purpose of the agreement is to facilitate the equitable movement of labor within the EAEU by requiring member states to provide pension accrual rights to workers who are citizens of EAEU member states on the same basis as for citizens of the state of employment. The EAEU is a free trade and economic cooperation zone formally established in 2015 (and preceded by various treaties since the 1990s) whose full members currently are Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia.

Key details

Under the Agreement, from January 1, 2021, a citizen of an EAEU member state who is employed in another EAEU member state must participate in the host country’s social security retirement system. Such employees will receive state retirement benefits based on all of their future service within the EAEU. The conditions for granting a pension, as well as the calculation of the pension, will be determined by the legislation of the member state of employment, and pensions will be payable by the member state where the employee carried out his or her work activities. The Agreement also envisions a mechanism for the transfer of pension savings between EAEU member states and entitles employees to eligibility for a disability or survivors’ pension if they have at least 12 months of full-time employment.

Employer implications

The impact on employer labor costs will vary across the member states depending on the composition of the workforce and on the applicable state pension system. State pension contribution rates and participation rules differ significantly among EAEU members. For example, in Kazakhstan, employers of foreign workers who are EAEU nationals are therefore now required to make the standard social security retirement contribution of 10% of salary (up to an annual earnings limit of KZT 2,125,000 ~ USD 5,040) to individual retirement accounts in the Kazakh government-run Unified Accumulative Pension Fund; employees do not contribute to the Kazakh retirement system. Previously, foreign workers participated in the Kazakh social security retirement program only if they had a resident permit. Also in Kazakhstan, it should be noted that a new mandatory retirement program based on notional defined contribution (NDC) accounts begins in 2023 (postponed from 2018 — see Global News Brief ), complementing the existing system. Kazakh employers will be required to contribute 5% of pay (10% for individuals employed under hazardous or dangerous conditions) to NDC accounts from January 1, 2023. Russia’s state retirement system already included foreign workers (who are in Russia at least 183 days in a tax year), and EAEU nationals working in Russia have been required to participate in the Russian social security system since 2015 when the EAEU was founded (without the 183-day minimum applied to them). Companies with operations in the EAEU should review the new requirements and any impacts on their labor costs and benefit plans.

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