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CIRCULAR OF THE STATE COUNCIL ON DEEPENING THE REFORM OF THE OLD-AGE INSURANCE SYSTEM FOR EMPLOYEES OF ENTERPRISES (ABSTRACT)

    Since the issuance of the Decision of the State Council on the Reform of
the Old-Age Insurance System for Employees of Enterprises, the reform of the
old-age insurance system for employees of enterprises is being
enthusiastically carried out in each region and department concerned. Some
achievements have been made in such matters as expanding the coverage of
insurance, instituting a system of payment of premiums by employees
themselves, and conducting tests on combining the collection of insurance
funds from society with that of individual accounts. The reform has played an
important role in safeguarding the basic living standards of retired veteran
cadres and retired workers of enterprises, maintaining the stability of
society and promoting the development of the economy. But, as this reform is
still in the exploratory stage, the current system of the old-age insurance
for employees of enterprises cannot yet meet the requirements for the
establishment of the socialist market economic system; thus, a deepening of
reform is required for the next step. Pursuant to the spirit of the Decision
of the Central Committee of the Chinese Communist Party on Matters Concerning
the Establishment of the Socialist Market Economic System, and to
investigation, research and the opinion of the general public, a circular is
hereby issued concerning matters of deepening the reform of the old-age
insurance system for employees of enterprises:

    1. The aim of the reform of the old-age insurance system for employees of
enterprises is to, by the end of the century, basically establish an old-age
insurance system which will meet the requirements of the socialist market
economic system, which will apply to the employees of enterprises of all kinds
and individual laborers in cities and towns, have multiple financial resources
and categories of insurance, combine a collection of insurance funds from
society with individual accounts, balance the rights with the obligations and
adopt socialized management and service. Basic old-age insurance shall
gradually establish unified rules and unified standards for all kinds of
enterprises and laborers, and management and regulation of the insurance funds
shall be done in a centralized manner.

    2. The principle of deepening the reform of the old-age insurance system
for employees of enterprises shall be to adapt the level of insurance to the
development level of the social productive forces in our country as well as to
the affordability of different sectors, combine the mutual assistance of
society with individual insurance, and equality with efficiency, carry out
unified policies and institute a legal system for management, and separate the
administration of insurance from the management of insurance funds.

    3. Premiums for basic old-age insurance shall be paid by enterprises and
individuals together, and an overall collection of insurance funds from
society shall be combined with individual accounts. Based on sorting out the
distribution relations and speeding up the pace of paying individual income in
the forms of salaries and wages and paying salaries and wages in the form of
money, the proportion of payment by the individuals shall be gradually
increased. The extent for such increases shall be determined by the people's
governments of the provinces, autonomous regions and municipalities directly
under the Central Government, in the light of the increases in salaries and
wages of employees and other circumstances in the respective regions.
Two measures for the implementation of combining an overall collection of
insurance funds from society with individual accounts have been formulated to
suit the different circumstances in the different regions. Prefectures and
municipalities (not including municipalities at the county level) shall make
reports on their choice of them for the approval of the people's governments
of the provinces and autonomous regions directly under the Central Government;
for municipalities directly under the Central Government, its people's
government shall make such a choice, to be filed with the Ministry of Labor.
Each region may, in the light of its actual conditions, make modifications and
supplementations to the two measures.

    4. Each region shall institute a mechanism for the normal adjustment of
basic old-age pensions in order to safeguard the basic lifestyles of retired
veteran cadres and retired workers of enterprises. Basic old-age pensions may
be adjusted in proportion to the increased rate of the last year's average
wages and salaries of employees in the respective regions. The specific
measures shall be formulated under the guidance of the state policies by the
people's government of the provinces, autonomous regions and municipalities
directly under the Central Government.

    5. In addition to instituting basic old-age insurance to safeguard the
basic lifestyles of retired veteran cadres and retired workers, the state
shall encourage the institution of supplementary old-age insurance programs in
enterprises and individual old-age insurance programs in the form of savings
accounts. After paying premiums for basic old-age insurance as prescribed,
enterprises may, under the guidance of state policies and in the light of
their economic results, set up supplementary old-age insurance programs for
employees. Enterprises and individuals will select the institutions for
management of supplementary old-age insurance in enterprises and individual
old-age insurance in the form of savings accounts.

    6. Each region should understand fully that the reform of the old-age
insurance system is a major matter involving long-term considerations. Thought
should be given to the practical situation in our country: that the level of
productive forces is relatively low, the population is large and the problem
of an aging society is becoming more pressing day by day. Attention should be
paid to all interests, including those of the state, enterprises and
individuals, and to immediate interests as well as to long-term interests.
Then, depending on ample surveys, calculations, arguments and proofs,
comprehensive arrangements can be made in such matters as the proportion of
payment of old-age insurance premiums by enterprises to that by individuals,
the standards for distributing old-age pensions and the accumulation rate of
insurance funds. Strict control shall be maintained over the proportion of
payment of basic old-age insurance premiums and the level of distribution of
basic old-age pensions so as to lighten the loads of the state and enterprises.

    7. Budget administrative and financial accounting systems for basic
old-age insurance funds shall be instituted and strengthened in accordance
with relevant state stipulations. It is necessary to properly arrange basic
affairs such as records of payments and individual accounts, strictly control
the withdrawal and usage of management expenses, and adhere to the principle
of special purpose funds. Funds management should conscientiously be handled
so as to ensure the safety of funds and to achieve the hedging and
appreciation of the funds. At present, about 80 percent of the balance of the
old-age insurance funds after the payment of a full two months' expenses
should be used to purchase special bonds issued by the state to fixed
investors. No organization or individual may determine other uses for the
funds without authorization. The proceeds derived from the old-age insurance
funds shall be thrown into the funds as a whole and shall be exempt from taxes
and fees.

    8. Each region and department concerned should actively create conditions
to expand the extent of socialized management and service for old-age
insurance. Distribution of old-age pensions by social organizations should
gradually be adopted to supersede distribution by respective enterprises.
Regions with sound technical conditions and work bases may adopt direct
distribution by banks or post offices, and regions not meeting the
requirements at present may distribute pensions through institutions in charge
of social insurance. These institutions may also establish agencies in large
enterprises or use other methods to provide management and services for
retired veteran cadres and retired workers of enterprises. Moreover, the
initiative of different quarters should be fully brought into play in order to
gradually transform the administration by enterprises of retired veteran
cadres and retired workers into administration which depends upon communities.
Thus, the level of socialized management of insurance should be heightened to
conscientiously lighten the load of enterprises.

    9. It is necessary to establish a system in which the administration of
social insurance is separated from the management of insurance funds and the
enforcement institutions are separated from the supervisory institutions. The
principal tasks of the administrative department for social insurance are
formulation of policies and plans and strengthening supervision and guidance.
The management of social insurance funds is under the scope of duties of the
institutions in charge of social insurance. Each region and department
concerned should establish a supervisory committee on social insurance
composed of a government representative(s), an enterprise representative(s), a
labor union representative(s) and a representative(s) of retired veteran
cadres and retired workers. This committee would have the purpose of
strengthening the supervision of the enforcement of policies and regulations
concerning social insurance and funds management.

    10. Enterprises which, with approval of the State Council, participate in
the overall planning of old-age insurance funds directly organized by
departments or organizations under the State Council shall make reforms
pursuant to the principle of combining the overall planning of insurance funds
from society with individual accounts while retaining the overall plans
organized by their responsible departments or organizations under the State
Council.

    11. The Ministry of Labor shall be responsible for the guidance and
supervision of the nationwide task of establishing old-age insurance for
employees in urban enterprises, and for giving an impulse to deepen the reform
thereof. The State Commission for Restructuring the Economy should take an
active part in the reform. It may choose localities for experimenting with
deepening the reform, and should receive vigorous support from the Ministry of
Labor. The State Planning Commission, the State Commission of Economic
Relations and Trade, the Ministry of Finance, the People's Bank of China and
other relevant departments should, within their respective scopes of power and
duties, take co-ordinate and supporting activities to make the furthering of
reform successful.    

    Deepening the reform of the old-age insurance system for employees of
enterprises is a task of great importance, which is reflected in the goals of
perfecting the social insurance system and promoting the reform, development
and stability of our country. Each region and department concerned should pay
great attention to this task, conscientiously organize to carry it out and
make an active and steady effort to seek practical results. New circumstances
and problems found in the course of the reform should be earnestly and
promptly studied and resolved and major problems should be reported without
delay.