Eutopian Pension Plan Reform Act (EPPRA)
Preamble
The Eutopian Pension Plan system, up until the present, has generally followed the ‘Prudent Man’ rule with respect to individual investments, which was prevailing wisdom at the time it was established. This had led to generally conservative investments, providing safe but modest returns. Current worldwide practice in pension fund investment has evolved to follow the ‘Prudent Investor’ rule, where individual investments are reviewed in the context of the entire portfolio, which tends to permit inclusion of certain investments that would be excluded by the ‘Prudent Man’ rule. Additionally, current required contributions do not always permit the pension payments to build up to an adequate level for retirement, requiring supplementary social aid. A feature that would allow some additional voluntary contributions could reduce this problem.
Section I. Control Board
The Ministry of the Environment and Social Affairs (“MESA”) shall appoint the director of the Eutopian Pension Plan (EPP), who shall serve as administrator and chairman of the control board. The control 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. Investment Policy
The Eutopian Pension Plan Control Board is hereby directed to manage investments and instruct hired investment managers to manage investments in accordance with the ‘Prudent Investor’ rule. The control board has the responsibility for setting investment allocations within the prudent investment allocation limits set forth below by the beginning of Term XIII. The board can determine whether to contract with outside investment managers or hire individuals to work for EPP to manage investments.
Section III. 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 IV. 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 EPP or with privately run approved pension plans (“PRAPPs”). Any such investments with EPP 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. EPP will establish standards for licensing companies wishing to offer PRAPPs.
For each ducat contributed to an EPP defined contribution plan or a PRAPP in a given year, the participant may direct that up to two ducats of his EPP pension plan contributions can be directed to the same EPP 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.
If the combined value of an individual’s investments in all supplementary defined contribution plans, including any PRAPPs does not exceed the actuarial value of what the redirected investments (not including the supplement) actuarially would have been worth had they been left in the standard EPP program, then that individual’s supplementary would be liquidated and the funds returned to the standard EPP program. As the supplementary program starts out at least 50% ahead, this would only occur due to relatively poor investment management of the supplementary and redirected investments. This clause assures that poor performing PRAPPs could not lower the individual’s retirement income below the level that would have been provided by standard EPP participation.
Section VIII: Reporting
Audited financial reports and actuarial projections must be published every term.
Budgetary Impact: Negligible
