The USAID Labor Market Project (LMP) has provided continuous technical assistance for the implementation of a brand new, three-pillar pension system. A new legislative framework was adopted for the implementation of a three-pillar pension system combining the public, pay-as-you-go system (pillar I) with two private, fully-funded, pension provisions based on mandatory contributions (pillar II) and voluntary contributions (pillar III).
A pension regulator - the State Insurance Supervision Agency (SISA) was established to supervise the new three-pillar pension system and the LMP was actively involved in:
(1) the process of licensing of private pension companies;
(2) development of key regulations;
(3) on-the job and formal training of the SISA staff;
(4) developing and implementing on- and off-site supervision practices; and
(5) the training of pension industry experts in management, marketing, financial analyses and
accounting, international accounting standards, and investments.
Further, the LMP has helped the Government of Bulgaria (GOB) educate the general public on the new aspects of social insurance and the benefits of participating in the new pension system through brochures, posters, TV and radio programs, interactive web-sites, and direct contacts with communities.
The LMP has developed the software underpinning the new pension system needed for the start and development of occupational and universal pension funds. Currently 1.8 million people participate in mandatory universal pension funds, 500,000 people are insured with voluntary pension funds and the amount of assets managed by private pension companies is BGN 500 million with an average annual return of 11% for both mandatory and voluntary funds. By the end of 2005, the amount of assets is expected to double and reach BGN 1 billion.
In 2003, the LMP assisted the consolidation of the social security legislation into a comprehensive Social Insurance Code, covering all pillars of the pension system, eliminating certain imperfections observed during the first years of implementation, and ensuring greater flexibility in pension fund investment.
After the merge of the pension regulator into a new unified regulatory body - the Financial Supervision Commission - the LMP continued to provide substantial advisory support. Key regulations were adopted with the support of the LMP, i.e. regulation on the terms and procedure for switching, regulation on asset valuation and unit values, and regulation on the minimum rate of return needed for the long-term sustainability of the system, for a high level of disclosure and transparency of the system. All these measures were necessary due to the increasing number of participants in pillar II funds and the growing amount of pension assets.