The Histadrut labor federation is trying to cut the rights of workers insured in its old pension funds by limiting the salary for which pension will be paid.
The boards of directors of the Histadrut's funds will be convened to special meetings in the next few days to approve the revision.
Directors who represent large pressure groups, like the Israel Aircraft Industries and Mekorot, are expected to object and the Histadrut will probably apply all its weight to push the move through.
If the change is approved, any annual salary raise in excess of the Consumer Price Index (CPI) plus 2 percent shall not be covered by the old pension funds. Employees can make separate contributions for the surplus to another pension plan, also run by the same fund, that will be actuarially balanced.
According to estimates, the 500,000 workers insured in the old pension funds will lose NIS 14 billion in total. Since 1999, for example, wages have gone up 7 percent a year on top of the CPI.
In this move, the Histadrut is implementing an agreement it signed with the government in 1995, which has not been activated since because of pressure from the unions that are insured by the Histadrut's old funds. Since the agreement was entered, workers can no longer join the old funds, and new funds that guarantee reduced benefits have been opened.
The cut is designed to substantially reduce the actuary deficit of the funds, which, according to the treasury, amount to NIS 56 billion - 37 percent of the total sum that the funds are to pay beneficiaries. An actuary deficit means the total assets of the fund are insufficient to enable the fund to pay out what it owes in the future.
Another goal that the Histadrut hopes to accomplish is to ward off the treasury's intention to appoint its own managers to run the old funds, which would, in fact, mean the funds are nationalized. So far, the government has only appointed a manager for one of the Histadrut's pension funds, the one insuring construction workers. Deputy finance minister, Yitzhak Cohen, and the outgoing supervisor of the capital market, Tsippi Samet, have recently spoken in favor of appointing managers for the Histadrut's other funds as well. The Histadrut has so far failed to take any measures to balance the funds and in some cases chosen managers for these funds for purely political reasons, the treasury said.
The actuary deficits of pension funds are considered a ticking bomb both in Israel and in other Western countries. Pension contributions that were made by today's pensioners 20 or 30 years ago, were calculated based on a shorter life expectancy.
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