Workshop 4: “Basic Principles of Pension Schemes” Workshop Leaders: Pascale Ernst (France) and Carol A. Weiser (USA) EXECUTIVE SUMMARY by PASCALE ERNST and CAROL WEISER “Basic Principles of Pension Schemes” – An examination of the basic rules applicable to private retirement programs (i.e., employer- or industry- based plans, rather than government- provided or individual savings arrangements) in various jurisdictions. The discussion will focus on a comparison of the basic laws governing employer-provided or industry-based pension programs in selected, addressing the following topics, among others: The extent to which coverage is mandated; The extent of, and basic requirements for, tax favored treatment of the contributing employer, any assets used to fund the arrangement, and/or the participants, including: o Eligibility rules; o Nondiscrimination requirements; o Vesting (nonforfeiture) requirements; o Required timing of payment; o Applicable compensation or benefit limits; and o Accrual requirements; Whether the schemes are primarily for employees of a single employer or cover multiple employers and whether there are or may be differences for collectively bargained employees; Whether the retirement schemes provide defined benefits (with or without cost of living adjustments) or are defined contribution arrangements; Whether contributions are made by the employer or participants or both, and if contributions are made by participants, whether the participant contributions are voluntary or mandatory; The extent to which benefits are portable when a participant moves to a new employer; Whether benefit payments are in lump sum or annuity form and the manner in which benefits are taxed; The manner in which benefits may or must be funded (such as trust, fiduciary contracts or through insurance products); The manner in which assets must be invested and who directs the investment of assets: e.g., the employer, the participants, the trustee(s), an investment adviser, the insurance company, or a committee; The basic principles of governance which apply to these retirement programs; The disclosure requirements applicable to the retirement schemes; and Whether there is a government-based or backed insurance program for any of the programs. Generally, the discussion leaders will summarize the basic rules applicable in their home countries. For France, which is a State member of the European Union, the presentation will include a review of the impact on national pension legislation of the implementation of the Institutions for Occupational Retirement Provisions (“IORP”) directive. Workshop attendees will be invited to participate in key areas of the discussion, regarding the rules applicable in their home countries or other jurisdictions with which they are familiar.