PM&P Achieved Unprecedented Success in the Fight Against the Reform in the Pension System, Adopted with one of the Latest Amendments of the Social Insurance Code

03 June 2016

Based on the solid argumentation of the PM&P’s appeal against the Regulation on the procedure for choice of social insurance provider, remittance of social insurance contributions, contributions to the fund “Guaranteed Claims of the employees” and for exchange of information, which regulates the transfer of the funds accumulated in the relevant individual accounts of the insured persons by the pension funds to the public state funds and vice versa, the Supreme Administrative Court (SAC) has introduced to the Bulgarian Constitutional Court the raised by us questions through court case No 12089/2015.

Such a result could be doubtlessly defined as unprecedented success, as in its whole history the SAC has exercised this prerogative only three times, which once again proves that the PM&P team has justified their appeal and statements in the most efficient manner.  

Within the court proceedings we acted as representatives of the four major pension funds in Bulgaria that manage assets in the amount of more than BGN 6 billion. The appealed by PM&P regulation was adopted in the course of the latest changes of the Social Insurance Code from December 2014 and August 2015, by which the lawmaker took a sharp turn in the regulatory frame of the pension insurance and opposed two incomparable by their nature insurance systems – the Pay-as-you-go (PAYGO or PAYG) and the payment on an individual account, for both of which the rules and principles of functioning are completely different. Thus, the lawmaker has distorted the established in 2000 three-pillar pension insurance model by adopting unclear and controversial legislation and regulation regarding the established mechanisms for transferring the public social savings, repealing the compulsoriness of the insurance in the universal and professional pension funds, creating actual risk of breach of property rights of the insured persons and liquidation of the second pillar of the pension insurance, as well as numerous other issues.  

The Supreme Court judges accepted our most important arguments, namely that the provisions of the Code “alter the model of the pension system”, “undermine the rule of law”, “create insecurity for the insured” and “infringe the law principle for guarantee and protection of the citizens’ property rights”. The court panel has also found sustainable our claim that citizens – insured persons from one and the same generation start their “labor” and “insurance” being within a certain model of pension insurance and its applicable expectations, whereby in the course of the implementation of that model though the latter undergoes changes and alters in a different one. Moreover, the court also favored our thesis that there is no legal mechanism which clearly deduces that the consent of the insured persons to transfer their social savings is an informed one and that the choice is freely made.       

The problems raised by PM&P are actually issues of ensuring and guaranteeing the constitutional order in the state and go far beyond the boundaries of this court proceeding. Now the constitutional judges should answer to what extent the changes in the Code are in line with the pension model in Bulgaria and whether the interests of the Bulgarian citizens are protected in the best way possible.

To achieve the outcome the lawyers assigned with the case have put their best efforts for 8 months and proved once again that PM&P is one of the most innovative legal firms in the country since 1990.