Eutopian Pension Investment Corporation
Preamble
The Eutopian Retirement Pension system, up until the present, has been a ‘pay-as-you-go’ system whereby contributions from current employees and their employers approximately funded payments to current retirees, with any surplus or deficit being treated as current government revenues or expenditures. Changing demographics (lower population growth, higher longevity) have created trends that under the current system will lead to substantially higher required contributions in the future, which would have significant negative implications for Eutopian competitiveness and employment, which would reduce future contributions, with a risk of exacerbating the situation. To avoid such undesirable events, the legislative branch of the Eutopian Federal Government enacts the follow reform of the retirement pension system:
Section I. EPIC
The Eutopian Pension Investment Corporation, (“EPIC”) a government corporation is hereby established to manage or oversee the management of investments to fund future retirement pension payments from the Eutopian Government Pension System. The Ministry of the Economy, Resources, and Labor (“MERL”) shall appoint the director, who shall serve as administrator and chairman of the investment policy board. The investment policy board shall consist of three persons, the director, one elected by the current pension beneficiaries, and one elected by those currently contributing.
(OOC: The director could be RPed by a player character with other two being NPC’s whose votes always cancel each other unless the director is really going off the reservation, in which case the mod’s could intervene. Or if the number of players increases, all three roles could be players.)
Section II. Service Prior to Term X
Under the supervision of MERL, an actuarial analysis of the current defined benefit retirement pension scheme shall be conducted, to determine the unfunded pension obligation relating to liabilities for pension benefits based on years worked prior to the start of Term X. Using standard pension benefit calculations, an annual funding amount will be determined such that by the prudent diversified investment of that amount every year for 21 years (seven terms) the unfunded pension obligation relating to years worked prior to the start of Term X will be extinguished. At the time of approval of every subsequent budget, the annual funding amount with be reviewed and adjusted to reflect updated investment returns and changes in other assumptions. The government will transfer the annual funding amount to EPIC annually.
Section III. Service after Term IX
At inception and every term thereafter, EPIC will, using actuarial analysis and standard assumptions about investment returns, inflation, mortality, and work force participation, calculate the required level of combined employee and employer contributions to maintain fully funded status, or if not fully funded due to lower investment returns than projected or other reason, to return to fully funded status within nine years (three terms), for the years worked after Term IX, and set the combined level of employee and employer contributions at that level. The retirement pension contributions received by the government will be transferred to EPIC.
Section IV. Pension Payments
EPIC shall make all pension payments starting the year it receives the annual funding amount.
Section V. Borrowing Authority
EPIC shall have the right to borrow from the Federal Government at the same cost as the average interest rate on Federal indebtedness, but only for the purpose of meeting any deficit between the annual funding amount and other income and the pension payments. EPIC may not use this borrowing authority to fund investments. EPIC borrow from other sources, by providing investment holdings as collateral, in accordance with prudent investor practices, such as obtaining a mortgage on a commercial real estate investment, but shall not guarantee the borrowings of others.
Section VI. Investment Management
The investment policy board has the responsibility for setting investment allocations within the prudent investment allocation limits set forth below. The board can determine whether to contract with outside investment managers or hire individuals to work for EPIC to manage investments.
Section VII. Investment Allocation Limits
Foreign 20% to 50%
Domestic (including St. Esprit, Tilapia and any future CAFTA members) 50% to 80%
Active 0% to 30%
Passive 70% to 100%
Equity 30% to 70%
Fixed Income 20% to 50%
Real Estate 0% to 10%
Venture Capital 0% to 10%
Other (Alternative Investments: Hedge Funds, Commodities) 0% to 10%
Section VIII. Supplementary Defined Contribution Option
Retirement plan participants may wish to supplement their retirement income by saving more than the required contribution towards retirement. Up to 50% over the required contribution can invested pre-tax, either with EPIC or with privately run approved pension plans (“PRAPPs”). Any such investments with EPIC will be managed as a defined contribution plan, where the investment returns, net of expenses are credited to the account of the participant, with taxable withdrawals without penalty being permitted starting at age 55, and being required to start at age 75. EPIC will establish standards for licensing companies wishing to offer PRAPPs.
For each ducat contributed to an EPIC defined contribution plan or a PRAPP in a given year, the participant may direct that up to two ducats of his defined benefit pension plan contributions can be directed to the same EPIC defined contribution plan or PRAPP in that year, with the number of years of service used to calculate the defined contribution reduced by the fraction of the contribution to the defined benefit contribution for that year that was redirected.
Section IX: Reporting
Audited financial reports and actuarial projections must be published every term.
