China’s Labour Ministry Overhauls Enterprise Annuity Rules
On 18 December 2017, the Ministry of Human Resources and Social Security published the Enterprise Annuity Measures ("Annuity Measures”) to further encourage the voluntary adoption of an annuity scheme by employers as a supplementary pension insurance system with contributions from both employers and employees, taking effect from 1 February 2018.
The Annuity Measures superseded the Trial Enterprise Annuity Measures published in 2004. The main changes introduced by the Annuity Measures are as follows:
- lowering of the upper limit of the employer’s contribution and the aggregate contribution of the employer and employee per year, i.e. the employer’s contribution has decreased from one-twelfth to 8% of the total gross wages of all employees;
- the aggregate contribution by employers and their employees has changed from one-sixth to 12% of the total gross wages of all employees;
- More flexibility has been granted in the implementation of the annuity scheme to incentivize employers’ participation, for instance, termination of an annuity plan is permissible in special circumstances such as dissolution, revocation, bankruptcy of an enterprise or the occurrence of a force majeure event. Additionally, contributions to the annuity scheme may be suspended where an employer suffers business losses or undergoes a restructuring or merger/acquisition, provided that such contributions are resumed and made up after the reason for the suspension no longer exists.