FAQ: Ombudsman’s clarifications on pension fund payment confusion

Armenian Ombudsman Karen Andreasyan has published clarifications of his Office regarding the current situation with pension contributions mandated by law.

Under a number of provisions of the new pension law that became effective on January 1, 2014 all working citizens in Armenia born after 1973 must pay an additional five percent of their salaries to privately owned pension funds. But Armenia’s leading opposition parties filed an appeal against the law at the Constitutional Court that suspended its provisions envisaging sanctions until the verdict expected in late March.

The automated system used by Armenian tax authorities, however, appears to have left no option for employers not to deduct money from the salaries of their workers as in that case they run the risk of being penalized for improper accountancy.

Hundreds of citizens staged a protest march in the Armenian capital Yerevan on Thursday calling upon various government institutions, including the State Revenue Committee (SRC), to respect the decision of the Constitutional Court and stop forcing employers to make the payments.

In clarifications published on his official website on February 6 the ombudsman, in particular, says that in conditions of the continuing effect of the law and a simultaneous decision of the Constitutional Court suspending sanctions for not complying with its certain provisions the important thing is agreement between employers and their employees over the matter. “That is, they [employers] should enable every employee to independently decide whether to may the payment or not,” he wrote in the Frequently Asked Question section.

At the same time, the ombudsman notes that the SRC does not break the law with its earlier introduced automated computer-based system in which accountants are to fill in the blank space designated for pension contributions. He says, however, that the existence of this blank space becomes of a formal technical nature in conditions of the absence of penalties for not complying with the mandatory component of the law. “In other words, the payment is calculated, but it does not oblige the employer in any way to transfer the sum,” the ombudsman clarifies.

While there are various theories about whether the payments not being done today pending the Constitutional Court ruling will have to be made if the law is found constitutional, the Armenian ombudsman finds that citizens will not have to make payments for the months when sanctions were suspended in accordance with Armenia’s Constitution that says that the laws, including Constitutional Court decisions, cannot be applied retrospectively if they worsen citizens’ situation.