Hoppa yfir valmynd
Ministry of Finance and Economic Affairs

The Government Employees Pension Fund Act, No. 1/1997

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An Introduction

The Government Employees Pension Fund has been in existence since early in this century. The laws governing the Fund have been reviewed several times, with the last main review taking place in 1963. Since then it has become increasingly apparent that the Fund no longer met contemporary needs. Premiums to the Fund were insufficient to cover its pension payments. The Treasury, which is a guarantor of the Fund's commitments, had already assumed a considerable liability because of the mismatch between premium income and pension commitments.

A new Government Employees Pension Fund Act went into force at the beginning of 1997. Its main features were that:

  • The Fund was divided into two Departments, A and B. The existing Fund became Department B, and a new fund became Department A. All new employees were to join Department A and all existing employees could choose between membership in Department A or retaining their right to membership in Department B, which henceforth is closed to new members.
  • Members of Department B only pay premiums on the basis of their basic salary, not on their total pay. They acquire pension rights which principally are such that at retirement they receive a certain percentage of the basic pay for the post from which they retire. The pension is thereafter liked to the average rise in the pay of government employees. The percentage of retirement pay is based on the number of years of full-time service.
  • Members of Department A pay a premium on their total income and earn retirement rights on the basis of total premiums paid. The pension rights are linked to the consumer price index. Their rights to a pension are bound by law and employers must periodically adjust their premiums so as to ensure that the Fund's premium income matches its commitments.

With this change the Fund is henceforth made self-sustaining and no longer accumulates a negative balance between premiums and commitments which eventually must be made up by the Treasury.

The Act is divided into four chapters in addition to several temporary provisions.

Chapter I contains general provisions on the Fund's management and the rights of members to membership in either of its two departments.

Chapter II deals with the new Department A, its premiums and pension rights.

Chapter III contains the provisions for Department B, essentially the existing Fund. Several changes have been made to previous provisions, for instance on retirement rights, the pension of the disabled, surviving spouses and children.

Chapter IV contains miscellaneous provisions where the new Act is aligned with existing laws.


The Government Employees Pension Fund Act, No. 1/1997

CHAPTER I
General Provisions
Article 1

The name of the Fund is the Government Employees Pension Fund. Its domicile and venue is in Reykjavík. The role of the Fund is to ensure that pensions are available to its members, their surviving spouses and children in accordance with the provision of this Act.

The Government Employees Pension Fund operates in two financially independent departments, Department A and Department B, which divide the costs of operation between them in proportion to the volume of each Department in the total operation of the Fund according to rules set by the Fund's Board of Directors.

Article 2

According to this Act, Fund members are those individuals who pay a premium to the Fund, those who receive an old age or disability pension from the Fund and those individuals who through payments of premiums have acquired rights towards the Fund although they no longer pay premiums and have not begun receiving benefits from the Fund.

Article 3

Fund members in Department A shall be all government employees having reached 16 years of age who are not members of Department B according to Articles 4 and 5 and receive pay on the basis of collective bargaining agreements according to Act no. 94/1986 on Public Employee Pay Agreements, or on the basis of pay decisions pursuant to Act no. 120/1992 on the State Salaries Arbitration Court and the Pay Terms Determination Committee. Nonetheless it shall be permitted to agree in a collective bargaining agreement that a particular group of government employees who fulfill these conditions pay into other pension funds.

The employees of employers other than the Treasury, who have a right to membership in Department B of the Fund pursuant to Paragraphs 2 and 3, Article 4 of this Act, shall have the right to membership in its Department A, should they choose to use the option of Paragraph 4, Article 4 in which case employers shall pay premiums on their behalf to the Fund according to Article 13. The same applies to those nurses who have been obligated to pay premiums to the Nurses' Pension Fund who prefer to opt for Department A of the Government Employees Pension Fund, and the same duty shall apply to employers in respect of premium payments to the Fund.

Members of associations belonging to the Federation of State and Municipal Employees, associations belonging to the Confederation of University Graduates and the Teachers' Association of Iceland, who are not members of the Fund pursuant to Paragraphs 1 and 2, shall also be permitted to pay premiums to Department A of the Fund, provided that employers in question have agreed to the membership and its concomitant commitments. This membership shall further be specified in the Statutes of the Fund.

The Board of Directors of the Fund may admit other members than the above to Department A of the Fund, as long as they are not obligated to pay to another fund and the employer in question has agreed to the membership and its concomitant commitments. Further stipulations regarding membership in Department A of the Fund shall be laid out in its Statutes.

Those employers who paid a premium to the Government Employees Pension Fund in 1996 for their employees may insure those employees with Department A of the Fund who are not members of its Department B according to Article 4. The same applies to the employees of these employers who accumulated rights without payment of a premium in 1996.

Article 4

Premium payments and the accumulation of rights of Fund members up to the end of 1996 shall be kept in Department B of the Fund.

Fund members who paid a premium to the Fund or accumulated rights without payment of a premium at the end of 1996 shall have the right to a membership in Department B of the Fund whilst they are employed by the government, provided they are appointed, temporarily appointed or hired for a period no less than one year or hired with a notice period of at least three months and their post is no less than half-time. The same applies to those teachers and school principals at primary schools who were employed at the end of 1996 as long as they are employed at primary schools operated by municipalities, provided their employment terms fulfill the same conditions as regards the hiring term and post proportion.

Those who are employed with primary schools at tasks other than teaching and administrative supervision, those who are employed in school offices and with the Reykjavík Hospital and were members of the Fund at the end of 1996 shall have the same right to membership in Department B of the Fund whilst they are employed in those posts.

Should a Fund member to whom Paragraphs 2 and 3 apply prefer to pay a premium to Department A of the Fund, he/she shall nonetheless be so permitted, provided he/she has conveyed his/her decision before 1 December 1997. His/her right to pay a premium to Department B of the Fund is thereby abolished. A Fund member to whom this Paragraph or Paragraph 5 applies and pays a premium to Department B of the Fund after 1 December 1997 can only begin payment to Department A if he/she changes posts, provided his/her new post fulfills conditions for memberships to the Fund or if his/her premium payments have been abandoned for other reasons for a period of twelve months or longer.

Employers who had been authorised before the end of 1996 to pay premiums to the Fund for their employees shall continue to have the same authorisation to pay a premium to Department B of the Fund for those employees and other Fund members who pay a premium to the Fund before the end of 1996. Should a Fund member have completed the payment of premiums before the end of 1996 and continue to accumulate rights without premium payment due to employment with a employer referred to in this Paragraph, he/she shall retain his/her right to accumulate rights with Department B of the Fund. Should a Fund member, to whom this Paragraph applies, rather choose to pay a premium to Department A of the Fund he/she shall nonetheless be so authorised, subject to the agreement of his/her employer. The Fund member shall convey his/her decision before 1 December 1997. His/her right to pay to Department B of the Fund shall expire at the same time.

An individual who has been admitted to continuous membership in the Government Employees Pension Fund before the end of 1996 due to the elimination of a post or occupation shall have the same authorisation to pay a premium to Department B of the Fund.

Article 5

A Fund member, who did not pay a premium to the Fund at the end of 1996, although his/her formal employment relationship with the employer has not been severed, shall have the same right to membership in Department B as those individuals who come under Paragraphs 2, 3, and 5, Article 4.

If premium payments to Department B cease for reasons other than specified in Paragraph 1, for instance because the Fund member in question ceases employment or changes posts, the Fund member retains the right to membership in Department B as long as he/she recommences working in a post that entitles him/her to membership in the Department within twelve months from the time premium payments ceased. If premium payments, on the other hand, cease for a period of twelve months or longer, or the accumulation of rights cease for an equal period, the individual in question no longer retains the right to membership in Department B of the Fund.

Fund members, who paid a premium to the Government Employees Pension Fund or accumulated rights with the Fund without payment of a premium in 1996, although they have not been employed where they acquired a right to membership in the Fund at the end of that year, shall have the right to membership in Department B of the Fund if they resume employment as referred to in Paragraphs 2 and 3, Article 4 in 1997, provided their employment fulfills the conditions of Paragraph 2, Article 4 in respect of the period of hire and part-time proportion. The same authorisation to premium payment is accorded to employers in respect of their employees who come under Paragraph 5, Article 4.

Article 6

The Board of the Fund shall consist of eight members. The Minister of Finance appoints four members, the Board of the Federation of State and Municipal Employees appoints two members, the Board of the Confederation of University Graduates appoints one member and the Board of the Teachers' Association of Iceland appoints one member. The same entities shall appoint an equal number of alternate members. The period of appointment of members is three years. The Board elects a chairman amongst its members for one year at a time.

Article 7

The Board of the Fund is in charge of its activities. The Board shall take all major decisions regarding the Fund's policy and operations. It shall ensure that sufficient oversight is maintained over the accounting and handling of the resources of the Fund. The Board shall formulate an investment policy and invest the Fund's resources with a view towards the best terms on offer at each time, having regard to a yield and risk. The Board of the Fund sets its Statutes in accordance with the provision of this Act and other Acts on pension funds as applicable. The Statutes of the Fund shall state how the Fund's resources shall be invested.

The Minister of Finance confirms whether the Statutes of the Fund and changes therein are in accordance with this Act and other Acts on pension funds, after having received the comments of the Financial Inspectorate. Act no. 84/1998, Article 11 which enters into force on 1 January 1999.

Article 8

The Board of the Fund shall convene an annual meeting before the end of June each year. All Fund members have the right to attend the annual meeting.

At the annual meeting, the Board shall present an annual report, annual accounts, actuarial assessments, explain its investment policy and changes in the Statutes of the Fund.

Article 9

The Board of the Fund decides upon the transactions of the Fund.

The accounting year of the Fund is the calendar year. The accounts of the Fund shall be audited by the National Audit Bureau without a special fee.

Article 10

The Board of the Fund shall call for an actuarial assessment of the Fund each year. Detailed rules on the implementation of the assessment shall be included in the Statutes of the Fund.

Article 11

Pension claims according to this Act may not be endorsed or mortgaged, and they may not be seized, attached or distrained. No collector in the estate of a deceased person or a bankrupt estate has the right to abridge the claims in any manner, and pensions may not be withheld for payment of official imposts.


CHAPTER II
Department A of the Fund
Article 12

Department A of the Fund pays an old age pension and a disability pension to its members and their surviving spouses, children and, as the case may be, to co-habitants, a pension in accordance with the following provisions. The provisions of Article 13 to 21 apply especially to the Department in addition to the provisions of this Article.

Article 13

The premium base for Department A of the Fund shall be the same as provided in the Act on mandatory insurance of pension rights and on activities of pension funds. Article 1, Act no. 142/1997.

Fund members pay 4% of pay according to Paragraph 1 as a premium to Department A of the Fund. The employer is obligated to withhold the premium from the pay of the Fund member and remit to the Fund within two weeks from the date of payment.

Pension Fund members and their employers are not responsible for the commitments of the Department except with their premiums.

Employers pay no less than 6% of the pay the Fund members receive from them, cf. Paragraph 1 of this Article, as a premium to Department A of the Fund which shall be remitted at the same time as the premiums of Fund members. If an actuarial assessment concludes that the premium of Fund members along with the countercontribution of employers is insufficient to pay the commitments of the Fund, the Board of the Fund shall increase the contribution of the employer in accordance with the conclusions of the assessment. When deciding upon the employer premium in excess of 6% of the pay of the Fund member, the principle shall be used that the net value of Department A of the Fund for the payment of pensions plus the discounted present value of future premiums to Department A shall at each time be equal to the discounted present value of expected pensions in respect of premiums already paid and future premiums. The estimate for future premiums and estimated pensions shall be based upon Fund members at the time that the actuarial assessment covers.

The premium of the employer according to Paragraph 4 shall be reviewed annually, and a decision on its increase shall be made no later than on 1 October for the following calendar year.

Provisions may be added to the Statutes of the Fund to the effect that the Fund may accept a supplemental premium in excess of the premium according to Paragraphs 2 and 4, cf. Paragraph 5, and that this supplemental premium may be used to acquire rights from the Fund pursuant to further rules in the Fund's Statutes and in accordance with actuarial proposals.

Article 14

The total premiums of a Fund member in Department A shall each calendar year be converted into points that form the basis for his/her pension rights.

The calculation of points shall be based on the total base pay of the calendar year. Base pay, based on January 1996, shall be 49,084 krónur and shall change in proportion to the consumer price index from 174.2 points.

The points for each year shall be calculated in such a manner that the total pay of the Fund member of which a premium is paid (i.e. the 4% premium according to Paragraphs 1 and 2 of Article 13 multiplied by 25) is divided by the base pay for the year according to Paragraph 2.

The points for the year shall be calculated with three decimal points.

Points shall not be calculated after the end of the month when a Fund member reaches 70 years of age, since Fund members do not pay a premium to the Fund after having reached that age.

Article 15

Each Fund member who has paid a premium to Department A of the Fund has the right to a pension from the beginning of the next month following his/her 65th birthday.

The amount of the old age pension is a percentage of the base pay in effect at each time, and the percentage amounts to the total number of points of the Fund member according to Article 14 multiplied by 1.90.

A Fund member of Department A may commence receiving a pension before he/she turns 65, although not until the beginning of the month following his/her 60th birthday. The amount of the pension shall then be reduced from the provision of Paragraph 2 by 0.5% of the uncut, acquired pension right for each month or part thereof which is needed to reach 65 years of each when the receipt of a pension commences.

A Fund member of Department A may postpone receiving a pension after having reached 65 years of age. The amount of old age pension in respect of rights acquired up to the age of 65 shall then increase from the level in Paragraph 2 by 0.5% for each month or fraction thereof that the commencement of receiving the old age pension is postponed beyond the age of 65, although no longer than up to the age of 70.

In the case where a Fund member in Department A continues to acquire rights after having commenced receiving an old age pension, his/her points shall be recalculated when he/she has reached the age of 70. Rights acquired after a Fund member has commenced receiving a pension shall be calculated without the increase according to Paragraph 4. In spite of the provisions of Paragraph 2, the points according to this Paragraph shall be multiplied by 0.95 when calculating an old age pension.

Article 16

A Fund member who suffers a 40% disability or more and who has acquired no less than 2 points of rights is entitled to a disability pension from the Fund in accordance with acquired points up to the time of occurrence of the disability.

The right to a disability pension is only established if the Fund member has suffered a cut in income due to the disability. The total of a disability pension and child allowance according to Article 18 shall never exceed the loss of income demonstrably suffered by the Fund member because of his/her disability.

The percentage and timing of a disability shall be decided after having received information on the past health history and work ability of the applicant. The Chief Physician of the Social Security Institute shall assess the percentage of disability and its timing. For the first five years following the onset of the disability the assessment shall mainly be based on the impaired ability of the Fund member to perform in the post he/she has had and is associated with his/her Fund membership. After that period the disability percentage shall be redetermined with respect to the impaired ability of the Fund member to perform general tasks.

The condition may be imposed, after having received the opinion of the Chief Physician of the Social Security Institute, that the payment of a disability pension shall take place with the stipulation that the Fund member undergoes a rehabilitation that could improve his/her health.

When the conditions of Paragraph 1 and this Paragraph are fulfilled, the maximum disability pension, shall be based on acquired pension rights according to Article 15 plus the pension corresponding to the number of points that the Fund member would have acquired up to the age of 65, calculated in accordance with the provisions of Paragraph 9, multiplied with 1.90, provided the Fund member has:

paid premiums to the Fund for no less than three of the preceding four calendar years and accumulated no less than 0.5 points in each of those three years.

paid a premium to the Fund for no less than six months in the preceding twelve months.

not suffered a disability that can be attributed to the abuse of alcohol, pharmaceuticals or illicit drugs.

a. paid premiums to the Fund for no less than three of the preceding four calendar years and accumulated no less than 0.5 points in each of those three years.
b. paid a premium to the Fund for no less than six months in the preceding twelve months.
c. not suffered a disability that can be attributed to the abuse of alcohol, pharmaceuticals or illicit drugs.

If a Fund member has simultaneously a right to a disability pension from another Fund, he/she shall only have a right to an adjustment in this Fund if he/she last paid premiums to it.

Although the Pension Fund has concluded an agreement with other pension funds on the transfer of rights according to an authorisation in Article 20, the right to adjustment is not established in this Fund if a Fund member has changed posts and for that reason commenced the payment of premiums to that Fund in the last 24 months before incurring a disability, and the change in posts may be attributed to deteriorating health which led to the disability. Should a Fund member, to whom this Paragraph refers, not have the right to an adjusted disability pension from another pension Fund, such an adjustment of benefit shall nonetheless be calculated from this Fund, provided that the disability of the Fund member according to Paragraph 1 occurred, in the view of the Chief Physician of the Social Security Institute, after the Fund member commenced paying premiums to this Fund.

If there are special reasons, such as the age of the Fund member, his/her residence abroad or study, led to his/her not having been able to fulfill the time conditions mentioned in Paragraph 5, Point a, the Board of the Fund may shorten the required period to the two previous calendar years, provided that it is assured that the cause of the disability is not attributable to a point in time prior to the occurrence of the disability.

Should a Fund member, who has not reached the age of 65 when the disability occurs, have a right to an adjustment of points according to Paragraph 5, said adjustment shall be calculated on the basis of an average of points of the Fund member for the three years prior to the occurrence of the disability. If the Board deems this three year average to be unfavourable for the Fund member because of absence due to sickness or unemployment it is authorised to base the average of points on a greater number of years in the past and exclude the poorest calendar year from the calculation.

If the Fund member suffered a partial disability before he/she commenced the payment of a premium to the Fund and his/her impairment may be assessed to be 50% or more, an average of his/her points shall be calculated for all the years he/she has paid a premium to the Fund. In such instances, the adjustment shall be based on such an average.

In the case where payments of a premium to the Fund have been so intermittent that they have been discontinuous or been less than 0.5 points a year for more than one calendar year following the end of the year when the Fund member reached the age of 25, and it is deemed probable that a lack of health, the perusal of alcohol, pharmaceuticals or illicit drugs played a role in discontinuous payment, the period of adjustment shall be shortened in proportion between the number of calendar years when annual points have been less than 0.5 and the number of calendar years from the age of 25 up to the time of loss of disability. The same applies if intermittent premium payments are due to an evasion from the duty to pay to pension funds.

If the annual average on which an adjustment is based according to Paragraphs 9 or 10 exceeds six points, the average shall count for up to ten years, and thereafter up to the age of 65 the calculation shall be based on six points per year in addition to one-half of the points in excess thereof.

If the illnesses that cause the disability of the Fund member are traceable as far back as the equivalent of half of the calendar years from the end of the year when the Fund members reached the age of 16 to the time when the disability is deemed to have occurred, the number of adjusted points shall never be greater than the number of points that the Fund member has acquired prior to the disability.

The disability pension is the same percentage of the maximum disability pension as the disability is assessed, yet cf. Paragraph 1.

A disability pension is only paid if the disability and loss of income lasts for three months or longer.

A Fund member, who applies for a disability pension from the Fund or receives such a pension, is obligated to provide the Board with all information related to his/her health and income from employment necessary to determine his/her pension rights.

The Board shall reduce or eliminate the disability pension of those members who regain their ability to work in part or in full. In the same manner, it must increase the disability pension if the disability increases significantly from previous assessments, provided the Fund member has from the time the disability increased not been employed in a post that provided him/her with pension rights in another pension Fund.

A disability pension ceases at the age of 65. An old age pension shall then be determined in such a manner that, in addition to acquired points, points shall be calculated based on the percentage of disability used to determine a disability pension for the Fund member up to the age of 65. Such an addition to acquire points shall never be greater than the total number of points for each calendar year than generally customary in the profession of the Fund member in question.

Article 17

In the case when a Fund member dies, who received an old age or disability pension from the Fund, if he/she has paid a premium to the Fund for no less than six months over the past twelve months and is survived by a spouse, the surviving spouse has a right to a pension from the Fund. A full spouse's pension shall be paid for at least 36 months and 50% of a spouse's pension for a further 24 months.

If a Fund member is survived by one or more children under the age of 22 years whom he/she had by the surviving spouse, a full spouse's pension shall be paid up to the age of 22 of the youngest child, provided it is supported by the spouse. An adopted child provides the same right as children according to this Article. If the adoption took place after the Fund member reached 60 years of age, after he/she suffered a disability or within a year before he/she died, the Board of the Fund shall determine whether the surviving spouse shall be paid a pension according to this Article.

If a spouse is at least with a 50% disability, a spouse's pension shall be paid as long as the disability exists, provided the spouse is below the age of 67 at the time of the death of the Fund member.

Article 18

In the case when a Fund member dies after having paid premiums to the Fund or received a disability pension for no less than six months in the past twelve months, his/her surviving children and adopted children have a right to a pension from the Fund until they are 22 years old. If the death of the Fund member also provides the children with a right to a pension from another pension Fund, the payment of pension from this Fund is subject to the condition that premiums were last paid to this Fund.

A full children's pension due to the death of a Fund member is 10,000 krónur for each child for each calendar month. This amount changes in proportion to the change in the base amount, cf. Paragraph 2, Article 14. A full children's pension is paid if the annual points, as estimated in accordance with Paragraph 6, Article 17 are at least one point. If the number of estimated points is less, the children's pension from the Fund declines proportionately and is eliminated if the annual number of points is less than 0.5.

If a Fund member who fulfills the conditions of Points a and b of Paragraph 5, Article 16 is accorded a disability pension from the Fund on account of a 100% disability, his/her children, who are born before the disability occurs or in the next twelve months thereafter, as well as children adopted before the disability occurs, shall have the same right as the children of a deceased Fund member according to Paragraph 2 with the exception that the amount of a full children's pension for each calendar month is 7,500 krónur for each child. If the disability according to Article 16 is assessed as less than 100%, the children's pension shall be proportionately lower. A children's pension paid due to the disability of the Fund member does not cease although the Fund member reaches pension age.

Foster children and stepchildren, whom the Fund member has largely or fully supported, shall have a right to a children's pension. The payments of benefits by the Fund to such children shall be the same as in the case of natural or adopted children.

A children}s pension is paid to the supporter of the child up to the age of 18 and to the child thereafter.

Article 19

Periods of time when payments of premiums having demonstrably been suspended due to illness or unemployment shall not count when determining whether conditions with respect to premium payment time have been fulfilled.

The right to an old age, disability or spouse's pension does not cease although the Fund member ceases paying premiums. In that case, the right is only based on already acquired points, yet cf. Paragraph 1.

Article 20

Provisions on agreements with other pension funds on the arrangement of the transfer of rights may be included in the Fund's Statutes.

Article 21

A pension is paid monthly in arrears, for the first time in the month following the month when the right to a pension was created and for the last time in the month when the right to a pension ceases. A pension Fund member who commences receiving a pension in direct continuation of his/her retirement and has received his/her salary in advance shall nonetheless receive a pension in advance.

In cases where the accumulated pension right does not come to an amount corresponding to at least one point and it is apparent that the right is not going to be merged with other rights, the Board may remit the payment in one sum according to rules in accordance with the proposal of actuaries.


CHAPTER III
Department B of the Fund
Article 22

Department B of the Fund pays an old age, disability, spouse's and children's pension to Fund members and, depending on circumstances, to co-habitants, in accordance with provisions below. In additions to the provisions of this Article, the provisions of Articles 23 and 24 apply to the Department in particular.

Article 23

Fund members pay 4% of their basic pay for daytime work, a personal supplement and a holiday supplement as a premium to the Fund. The employer is obligated to withhold the premium from the pay of the Fund member and remit to the Fund within two weeks from payday.

Fund members are not responsible for the commitments of the Fund except with their premiums.

Employers pay 6% of basic pay for day-time work, a personal supplement and a holiday supplement that the employee receives from them as a premium to the Fund; the payment shall be remitted to the Fund at the same time as the premium of the Fund member.

When a Fund member has paid premiums to the Fund for a total of 32 years, his/her premium payments shall cease. In the case when a Fund member has, for a longer or shorter period, been employed part-time, he/she may continue to pay a premium to the Fund of his/her basic pay for day-time work up to the equivalent of premium payments for a full-time post for 32 years. The employer shall in that case be obligated to pay a premium of his/her part, cf. Paragraph 3 of this Article. After the premium payments of the Fund member cease according to this Paragraph or Paragraph 4, Article 24, the employer pays 10% of the pay as specified in Paragraph 3 of this Article as premium to the Fund.

An employee below the age of 16 does not pay a premium to the Fund, since he/she does not begin to accumulate rights until he/she has reached said age.

In the case when a Fund member is not paid in accordance with collective bargaining agreements or other determination of salary based on the collective bargaining agreements of public employees, the decision of the State Salaries Arbitration Court, the State Salaries Commission or collective bargaining agreements of municipalities on the basis of Act on Collective Bargaining Agreement of Public Employees, the Board of the Fund shall decide upon the reference level of payment of which premiums are paid; such a decision shall be taken with reference to salary determinations effective for state employees according to Act no. 94/1986 on Collective Bargaining Agreements of Public Employees and Act no. 120/1992 on the State Salaries Arbitration Court and the State Salaries Commission.

Article 24

Each Fund member who has paid a premium to the Fund is entitled to a pension from the beginning of the next month after his/her 65th birthday, provided he/she has ceased employment in a capacity which entitled him/her to membership in the Fund.

The amount of pension is a percentage of the base pay for day-time work, a personal supplement and a holiday supplement in accordance with collective bargaining agreements which refer to the full-time post which the Fund member occupied last. The percentage is based on the time that premiums were paid and the post proportion of the Fund member and is 2% for each year in a full-time post for which premiums have been paid, and proportionately lower for a lower post proportion. For each full man-year after the payment of premium ceases until the Fund member acquires the right to retire and receive a pension, 1% of base pay for a full-time post is added and 2% for each full man-year after the cessation of premium payments and he/she has acquired the right to a pension.

After the receipt of a pension has begun, the changes in pension payments shall be decided in accordance with the average changes in the base pay of public employees for day-time work, cf. Paragraph 2, and the Statistical Office of Iceland shall make such a calculation each month.

When the sum of a Fund member's age and the period of premium payment has reached 95 years, he/she is 60 years of age and retires, he/she has a right to a pension from the Fund. A Fund member who takes advantage of this rule shall pay a premium to the Fund until the 95-year rule is fulfilled. His/her pension right shall be 2% for every full-time working year for which premiums have been paid, and proportionately lower for a shorter period of employment and less than a full work proportion, yet not exceeding 64% when the 95-year goal is achieved. The obligation to pay premiums ceases when the 95-year rule is fulfilled. A Fund member who fulfills the 95-year rule after reaching the age of 64 can not utilise the rule of this Paragraph.

The pension right of those who have a right to a calculation according to Paragraph 4 shall increase by 2% for each year of full-time employment from the time the obligation of premium payment ceases until the receipt of a pension commences, and proportionately lower for a shorter period of employment and a lower work proportion.

If a Fund member has had a higher-paid post or posts for at least ten years earlier in his/her period of membership in the Government Employees Pension Fund, the pension shall be based on the highest paid post, provided he/she had the post for at least ten years; otherwise the calculation shall be based on a higher paid post which he/she held in addition to a still higher paid post for at least ten years.

The Board of the Fund may pay pensioners aged 65 to 67 years a supplemental pension up to the social security pension for a single person. The condition for such a supplement is that the Fund member is no longer capable to perform in his/her post. As proof the Fund member concerned must supply a certificate from his/her superior regarding his/her ability to work and a certificate from the Chief Physician of the Social Security Institute regarding his/her health.

A Fund member who is employed in a post that fulfills the membership conditions according to Paragraph 4 has no right to a pension in addition to pay as long as he/she is employed in that post. The same applies to those who receive full pay related to the post after having retired from it.

Despite the provision of Article 7, Act no. 46/1965 on the Pension of Members of the Althing, a member of the Althing has no right to a pension as long as he/she receives payment for being a member of the Althing or severance pay.

Article 25

Shift workers, i.e., those Fund members whose working hours rotate in a regular manner, shall have the right to a supplemental pension (old age, disability and spouses' pension) from the Government Employees Pension Fund, since they must pay a premium of supplemental shift pay to the Fund.

The same applies to night watchmen and other staff with working hours only at night, i.e. during the hours from 22.00 to 09.00, in which case the pay supplement shall be included in the base for premiums and pension rights.

The Fund member pays 4% of the shift supplement as a premium and the employer 6%.

The Board of the Fund decides at each time what the monthly reference salary shall be on which the pension is paid and upon which the premium is assessed.

If the Board of the Fund changes the monthly reference salary, it shall simultaneously decide whether and how the acquired pension rights of previous years shall be converted.

The premium payments of a shift supplement shall each year be assessed for the purpose of pension rights in such a manner that the premium payments for the year are converted into a number of month equivalents of reference salary.

For the equivalent of each twelve months of premium a right to an old age and disability pension is acquired corresponding to 2% of reference salary and a right to a spouse's pension corresponding to 1% of reference salary.

Article 26

Each Fund member who has paid premiums to the Fund has a right to a disability pension if he/she suffers a disability that the Chief Physician of the Social Security Institute assesses as being 10% or more. The disability assessment shall mainly be based on the lack of ability of the Fund member to perform in the post that he/she had had and is associated with his/her membership in the Fund. Despite a disability, no-one has a right to a disability pension as long as he/she keeps a full basic pay for the post he/she performed in, or receives equally high pay for another post which comes with pension rights, and the disability pension shall never be higher than the loss of income that the Fund member has demonstrably suffered on account of his/her disability.

The maximum disability pension shall be based on the acquired pension right according to Article 24. If the Fund member has paid a premium to the Fund for the preceding three calendar years and at least for six of the preceding twelve months, the maximum disability pension shall be based on the acquired pension right according to Article 24 in addition to the personal pension from the Social Security Institute. If the disability can be mainly attributed to the post held by the disabled person, the acquired pension right shall be calculated as if the Fund member had held his/her post until the age of 65, and the acquired pension rights shall be based on the salary held last by the Fund member as it is at each and every time.

If the disability of the Fund member is between 10% and 50%, the disability pension shall be the same percentage of the maximum disability pension as the disability is assessed. If the disability is assessed at 50% to 75%, the disability pension shall be 50% of the maximum in addition to 2% for each 1% that the disability is assessed in excess of 50%. If the disability is assessed at 75% or more, the maximum disability pension shall be paid, less the disability pension from the Social Security Institute.

A disabled person who applies for a disability pension from the Fund or receives the same, shall furnish the Board of the Fund with all information relating to his/her health that is necessary to determine his/her right to a disability pension.

The Board of the Fund has the right to reduce or eliminate a disability pension of those disable persons that regain their ability to work in part or in full.

In the same manner the Board of the Fund shall increase the disability pension if the disability increases significantly without fault of the disabled person from the time it was previously assessed, provided the disabled person has not, since the time the disability increased, been in the service of others than those that insure their staff in the Fund.

Article 27

In the case where a Fund member dies and is survived by a spouse, the surviving spouse has a right to a pension from the Fund.
The amount of a spouse's pension shall be one-half of the acquired old age pension right of the deceased Fund member. The spouse's pension shall then increase by 20% of the reference pay if the Fund member was engaged in a full-time post at the time of his/her employment termination, whereas the increase shall be proportionately smaller if the Fund member has held a lower post proportion at the time of his/her employment termination. This supplemental pension shall only be paid if the deceased Fund member has fulfilled one of the following three conditions:

  1. He was employed in a post that provided him/her with a membership in the Fund at the time of death.
  2. He had begun receiving a pension before his/her death and the beginning of receipt of a pension was in direct continuation of the post that provided him/her with membership in the Fund.
  3. He has paid premiums to the Fund equivalent to a full-time post for 15 years or more and not paid a premium to another Fund after the payment of premiums to this Fund were terminated.

If a Fund member has married after having reached the age of 60 years, or during the time he/she received a pension from the Fund or when he/she had entered into the terminal stage of his/her life, the Board of the Fund shall determine whether his/her surviving spouse shall receive a pension or not.

The right to a pension according to this Article ceases if the surviving spouse marries again, but shall be reinstated if the latter marriage is dissolved, provided the latter marriage does not provide a right to a pension from the Fund. If the latter marriage also provides a right to a pension, the surviving spouse may choose whether he/she accepts a pension after the former or latter spouse.

If a marriage had ended in divorce, the calculation of a spouse's pension shall be based on the time when the deceased Fund member was a member of the Fund when the marriage ended. A supplemental pension according to Paragraph 2 shall not be paid in this instance.

When a Fund member, who has been married twice, dies and is survived by a spouse and a former spouse, the spouse's pension is divided so that the right of the ex-spouse is determined according to the rule of Paragraph 5 above, and the right of the spouse is counted from the date of termination of the former marriage. A paralell rule shall apply when the holders of a right to a spouse's pension are more than two.

If a Fund member was not married at the time of death and his/her single mother, an unmarried sister or another unmarried person has demonstrably taken care of his/her household for a number of years prior to his/her death, although no less than five years, the Board of the Fund may pay a spouse's pension to that person, as if she were a widow or he/she a widower. The Board of the Fund may, in the same manner, pay a co-habitant a pension if the Fund member is survived by a child less than 18 years of age that he/she had by the surviving co-habitant. The Board of the Fund may also pay a pension to a co-habitant for 24 months, even if the condition if the first sentence regarding the period of co-habitation is not met, or if the co-habitant is disabled by 50% or more.

Article 28

In the case when a Fund member postpones the receipt of an old age pension and at the same time accepts another post from an agency that provides admittance to the Fund, which is lower paid than the post he/she had before, the pension shall be calculated on the basis of the higher-paid post.

The same applies when a Fund member must vacate his/her post for health reasons and instead accepts a lighter and less paid post which provides admittance to the Fund. In the instance cited in this Paragraph, the Fund member may purchase rights in respect of the time elapsed. The Board of the Fund may demand a certificate from the Chief Physician of the Social Security Institute as proof that the Fund member must resign for reasons of health.

When pension payments shall be based on a higher paid post than the final post according to Paragraphs 1 and 2 or according to Paragraph 6, Article 24, the calculation of the pension shall be based on the average increases in the pay of public employees for day-time work according to Paragraph 2, Article 24 from the time when the employee resigns from his/her higher-paid post until the receipt of the pension commences.

If the employee has resigned from the higher-paid post before the end of 1996, the change in the pension shall nevertheless be based on changes in the pay associated with the post up to the end of 1996. After that, the rule of Paragraph 3 applies.

Article 29

The natural and adopted children who survive a Fund member upon his/her death and are below the age of 18 shall receive an annual pension from the Fund until they are fully 18 years old, provided the deceased has provided for their support in part or in full. The same applies to natural and adopted children surviving the Fund member who received an old age or disability pension from the Fund upon death.

If the child has natural or adoptive parents alive that provide for his/her support, the sum of the pension from the Social Security Institute and this Fund shall be 50% higher than the children's pension from the Social Security Institute. Otherwise the pension shall be double the children's pension of the Social Security Institute.

The same right is accorded to the natural and adopted children of Fund members who receive an old age or disability pension from the Fund, but with the stipulation that the children's pension from the Fund to natural or adopted children shall be an equal percentage of a full children's pension as his/her disability pension is a percentage of a maximum disability pension

Foster children, whom the Fund member has supported to a large extent or in full, shall enjoy the same right as natural and adopted children are accorded above.

Article 30

In the case where a Fund member resigns from a post, that provided him/her with access to the Fund, for reasons other than old age or disability, his/her right and duty to pay future premiums shall then cease. His/her old age pension, disability pension and the pension of a surviving spouse shall then be based on his/her time of employment and the pay he/she received when he/she resigned his/her post that provided him/her with access to the Fund and it shall be subject to the same changes as the pension of others after the receipt of the pension commences. If the Fund members has acquired rights with the Fund in respect of a period of three years or a longer payment period, the pension shall nevertheless be calculated according to the rule of Paragraphs 3 and 4, Article 28. If he/she has been on the post for less than 32 years the pension of his/her children shall be so calculated that the full sum according to Article 29 shall be multiplied with the proportion of the old age pension he/she has gained a right to and the old age pension he/she would have gained a right to if he/she had been on the post for 32 years.

If a post a Fund member has held ceases to exist, he/she retains the right to continue in the Fund and pay a premium based on the salary associated with his/her post when it ceased to exist and from that time the premium payments shall then change in accordance with the average changes in the fixed pay of public employees for day-time work, cf. Paragraph 3, Article 24.

Article 31

In the case where an employee who has been a member of the Government Employees Pension Fund moves to a post which provides admittance to another pension Fund that has been established by law, all premium payments that have been paid to the Fund on his/her account may be refunded with interest. This refund takes place on the condition that the proceeds go towards the purchase of pension rights for the person concerned in the Fund to which he/she transfers. Nevertheless, a higher sum than necessary to purchase rights in the new Fund corresponding to the time of employment that the Fund member had acquired may no be refunded.

The Board of the Fund may use the same refund rule when the Fund member transfers to another Fund that is certified by the Ministry of Finance or purchases a pension from an insurance company or an institution which operates according to rules agreed to by the Ministry of Finance, provided that the same rules on repurchases and the payment of pension apply as decided upon in this Act.

The Board of the Fund may, in the same manner, provided the Minister of Finance agrees, receive Funds on account of a person who becomes a member in this Fund that may be refunded from a Fund, an insurance company or institution as above and provide him/her with rights accordingly.

The Board can, in special cases, and with the agreement of the Minister of Finance, permit the purchase of rights retroactively, although this would not involve the transfer of rights from elsewhere. Such a purchase of rights may inter alia take place on the condition that it is recommended by the head of the agency where the employee work, that the purchase of rights be completed within a year from the time the employee is hired and the employee is older than 35 years when he/she gains admittance to the Fund.

A premium may be refunded to foreign citizens who emigrate, provided that this is not in violation of international agreements to which Iceland is a party.

Article 32

The Treasury guarantees the payment of a pension according to this Act, and it shall be paid with 1/12 of the annual pension in advance each month.

Article 33

In the case where a previously determined old age, disability or spouse's pension increases due to a general increase in the salary of public employees, the Treasury and other employers who insure their employees in the Fund refund the increase which thus takes place in pension payments. In the case where a Fund member has paid a premium to the Fund on account of posts with more than one employer, the division of commitments between employers is calculated according to the pay on which a calculated right is based and in proportion to the acquisition of rights with each employer.

If the changes have been made within a year before the receipt of a pension commences in the fixed salary for day-time work of a particular Fund member, and these changes are in excess of general changes in the pay of public employees, the commitments of the employers according to Paragraph 12 shall be calculated on the basis of pay as it was prior to this increase.

The Board of the Fund may, having received the agreement of the Ministry of Finance, accept a debenture in payment of accrued commitments …. Article 2, Act no. 142/1997. according to Paragraph 1 of this Article, provided the debt is adequately secured. The commitment thus settled shall be based on an actuarial assessment as at the settlement date. An employer who has settled his/her commitment with the issue of a debenture in accordance with this Paragraph, shall have no further responsibility for the Fund's commitments according to Paragraph 13 in respect of the period and those employees to which the settlement applies.

The Board of the Fund may, having received the agreement of the Minister of Finance, negotiate premium payments from employers in excess of their premium according to Article 23 in order to meet future commitments, cf. Paragraph 1. The premium of each employer shall accordingly be so calculated that the discounted present value of his/her future premiums to Department B of the Fund shall correspond to the future commitments according to an actuarial assessment. The Board of the Fund may in the same manner, having received the agreement of the Minister of Finance, receive a debenture for the payment of future commitments according to Paragraph 1 on account of members of the Fund who are members according to the authorisation of Paragraph 2 of Article 30, provided the debt is adequately secured. This settlement shall be based on an actuarial assessment of future commitments at the date of settlement. An employer, who settles his/her future commitments according to this Paragraph, shall have no further responsibility for the commitments of Department B of the Fund according to Paragraph 1 in respect of the period or those employees to whom the settlement applies.

The Fund may accept a special premium that the Treasury or other employers who pay to Department B of the Fund decide to pay as part of their refund according to Paragraph 1. This premium shall be so calculated that it, together with the premium to the Department according to Paragraphs 1 and 3, Article 23, is equal to the premium to Department A as calculated according to Paragraph 4, Article 13, cf. also Temporary Provision II. The income of the Fund from a special premium each year shall be subtracted from the refund of employers in respect of increases in pensions according to Paragraph 1 or to unsettled commitments in respect thereof. Article 2, Act no. 142/1997.

Article 34

In spite of the provisions of Paragraph 1, Article 33, the Treasury shall refund the increase there provided in respect of teachers and school administrators of elementary schools that are members of Department B of the Fund. Income from a special premium according to Paragraph 2 of this Article shall be subtracted from the refund of the Treasury according to the same provision. The Minister of Finance can also decide that agencies that receive appropriations over the budget pay a supplemental premium to Department B of the Fund, 9.5% of the premium base, and the income of the Fund from the supplemental premium each year shall be subtracted from the refund of the Treasury due to increases in pensions according to Paragraph 1, Article 33. Article 3, Act no. 142/1997.

In addition to the employer premium according to Article 23, employers shall pay a 9.5% premium to Department B of the Fund for day-time work, a personal supplement and a holiday supplement of teachers and school administrators who are members of the Fund, acquire pension rights with Department B of the Fund and are employed at schools operated by municipalities according to the Elementary School Act.

The Board of the Fund may, having received the agreement of the Minister of Finance, negotiate a premium from employers in addition to their premium according to Article 23 for settlement of new commitments according to Paragraph 1, Article 33. An employer, who pays an additional premium according to this Article, shall have no further responsibility for the commitments of Department B of the Fund in respect of the period or those employees to whom the additional premium applies.5


CHAPTER IV
Entry into force and
provisions relating to other Acts of law
Article 35

Fund members, who commence the receipt of a pension in direct continuation of employment and those who receive pension payments from the Fund at the time this Act enters into force, may, despite the provisions of Paragraph 3, Article 24 of the Act and Paragraph 1, Article 34 of Act no. 141/1996, choose whether the pension payments they receive will change in accordance with changes in salary which at each time is paid for the post they last occupied, or, as the case may be, in accordance with changes in the pay of a higher paid post according to the provisions of Paragraph 6, Article 24 and Paragraph 1 or 2, Article 28 of the Act, or whether they shall change according to the provision of Paragraph 3, Article 24 of the Act. Further provisions shall be included in the Statutes of the Fund regarding the method of choice of the Fund member and within what time periods the Fund shall be informed of this decision.

Article 36

In spite of the provisions of Paragraph 1, Article 30, the pension of those Fund members who have paid for less than three years to the Fund shall be so calculated when they commence payment of premiums to Department A that they shall be based on the average increases in the pay of public employees for day-time work from the time an employee ceases to pay premiums to Department B of the Fund until the receipt of a pension commences according to the rules of Paragraph 3, Article 28 and Paragraph 3, Article 24, provided that the sum of the premium payment period to Department A and B is no less than three years.

Article 37

Fund members who have the right to pay a premium to Department B of the Fund according to Article 4 but prefer to pay to Department A shall not have the right to receive a pension from Department B as long as they are employed in a post which fulfills the membership conditions of Article 4.

In other respects, provisions shall be included in the Statutes of the Fund to prevent the elimination of rights or a double assurance of rights when a Fund member transfers from Department B to Department A.

Article 38

If a Fund member, who is deceased as this Act enters into force has been married more than once and is survived by a spouse and ex-spouse, the right to a pension between more than one holder of rights to a spouse's pension shall be determined according to older Acts. The right of a spouse's pension may be divided between an ex-spouse and a subsequent co-habitant following the entry into force of this Act according to the provisions of Paragraph 6, Article 27.


Temporary provisions
I

Members of unions, who according to the provisions of the Government Employees Pension Fund Act no. 29/1963 and the Nurses' Pension Fund Act no. 16/1965, were obligated to membership in these funds, shall have the right to membership in Department A of the Fund until Fund membership for these employees has been negotiated, with the condition that the provisions of Paragraph 1 and 2 of Article 3 of the Act do not apply to them, and their employers shall pay a premium on their behalf to the Fund according to the provisions of Article 13 of the Act.

II

In sprite of the provisions of Paragraphs 4 and 5, Article 13 of this Act, the premium of employers shall be 11.5% in the years 1997-1999.

III

No later than five years after entry into force of this Act, the Board of the Fund shall determine a new percentage increase according to Paragraph 4, Article 15 of the Act in accordance with actuarial proposals, although no higher than 0.8%. The additional cost due to the transfer of Fund members from department B of the Fund to Department A according to Paragraphs 4 and 5, Article 4 of the Act shall in the formulation of this proposal be calculated and assessed for the change of a percentage otherwise determined.

IV

Those employees of the State Hospital who are members of the Fund at the end of 1996 and are employed in posts that are transferred to the Reykjavik Hospital and who keep those posts shall have a right to a continued membership in Department B of the Fund with an uninterrupted acquisition of rights.



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Disclaimer: This section of the site details available translations on legislation relating to the Government Offices in Iceland. In case of any discrepancies between the translations and the original text in Icelandic, the original text as published in the Icelandic Legal Gazette prevails.

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