LAW ON RETIREMENT AND DISABILITY

INSURANCE

of the Republic of Macedonia

Promulgated on

27 December, 1993

Skopje

1. INTRODUCTORY PROVISIONS

Article I

This Law shall regulate mandatory pension and invalid insurance of employees and other physical persons engaged in work, and special requirements by which particular insured categories shall fulfill their pension and invalid insurance rights.

Article 2

Pension and invalid insurance of individuals whose insurance is not mandatory according to this Law, and the insurance of a larger portion of pension and invalid rights of individuals whose insurance is mandatory according to this Law, may be certified as voluntary insurance in

compliance with this Law.

Article 3

Through mandatory pension and invalid insurance based on employment and according to the principle of social equity, the ensuing rights shall be fulfilled in cases of old age, reduction and loss of working ability, death and physical injury.

Article 4

Pension and invalid insurance rights are acquired depending on the length and amount of funds invested in pension and invalid insurance under the conditions set forth in this Law.

Article 5

Rights incurred from pension and invalid insurance shall entail:

1) The right to old age pension;

2) The fight to disability pension;

3) The right to reassignment of employment; the right to corresponding employment- the right to vocational training or improvement of skills; and the right to appropriate money

allowances;

4) The right to family pension;

5) The right to money allowance for physical injury; and

6) The right to the lowest pension level.

Article 6

Rights acquired through pension and invalid insurance are inalienable, personal and material rights, that can not be transferred to other individuals.

Rights acquired through pension and invalid insurance can not become obsolete with the exception of overdue and unpaid pension amounts and other money receipts in instances defined by this Law.

The use of pension and invalid insurance rights acquired in compliance with this Law may terminate or be restricted only in instances and under conditions designated in this Law.

Article 7

Insured parties and employers shall provide the required funds for the fulfillment of rights on pension and invalid insurance.

The State shall provide funds for pension and invalid insurance in instances and under conditions determined in this Law.

Funds required for the fulfillment of pension and invalid insurance rights shall be obtained by insured parties as funds for personal consumption.

A.rticle 8

Funds for pension and invalid insurance and ensuing rights shall be fulfilled and effected by the Pension and Invalid Insurance Fund of Macedonia (hereinafter: Fund)

The status of the fund is that of a legal entity.

The head office of the Fund is located in Skopje.

Article 9

The operation of the Fund shall be of public interest.

Article I 0

Fulfillment of pension and invalid insurance rights shall necessitate a two-sided procedure in the Fund, i.e., with the employer and with the legal protection of rights.

11. INSURED PARTIES

Article I I

Insured parties under mandatory pension and invalid insurance are:

1) Employees of enterprises and other legal entities engaged in

business activities, institutions and other legal entities

employed in public services, in state organs, units of the local self-government and in

domestic and foreign legal

entities (hereinafter: employer)-,

2) Individuals employed in the armed forces of the Republic of Macedonia (soldiers under contract, junior officers, officers and civilians in the Army service);

3) Elected and appointed holders of public and other functions receiving either a salary for that function or other compensation for the performance of that function;

4) Citizens of the Republic of Macedonia employed by foreign and international bodies, organizations and institutions, foreign diplomatic and consular n-tissions or in

the personal service of foreign diplomatic and consular rnissions on the territory of the Republic of Macedonia, unless otherwise designated by an international agreement;

5) Citizens of the Republic of Macedonia employed abroad if they have not been insured during their employment with the foreign insurer;

6) Citizens of the Republic of Macedonia employed by foreign employers in countries in which they are mandatorily insured, but in which pension and invalid rights determined in this Law can not be fulfilled nor utilized outside that particular

country,

7) Physical persons performing an activity;

8) Private farmers - tax payers of income on agricultural activities who

are engaged solely in an agricultural profession;

9) Unemployed individuals receiving money allowances;

10) Disabled workers waiting on vocational training, improvement of skills, on reassignment of employment or corresponding employment;

I 1) Self-supporting artists who have acquired such status in accordance with the standards, procedures and respective act assigned by the Minister of Culture- and 12) Sportsmen, who in compliance with the standards of the Union of

Sport Associations of the Republic of Macedonia, have acquired the status of leading sportsmen-amateurs according to this Law, unless otherwise insured.

Article 12

Employees specified under article I 1, paragraph 1, items I and 3 of this Law appointed to work abroad shall be subject to mandatory insurance unless they have been insured in accordance with the regulations of the foreign country during the period of employment, or unless otherwise resolved through an international agreement.

Citizens of the Republic of Macedonia who are employed by employers operating aborad shall be subject to mandatory insurance.

Article 13

Foreign nationals and individuals without citizenship on the territory of Macedonia shall be subject to mandatory insurance in the following instances:

1) When provided with a job by an employer;

2) When employed by foreign nationals or foreign legal entities unless otherwise designated by an international agreement-, and

3) When employed by international organizations and institutions, and foreign diplomatic and consular rnissions, unless insurance has been stipulated by an international agreement.

Article 14

Mandatory pension and invalid insurance based on disability and physical impairment caused by injury at work or occupational illness shall be provided for:

1) Pupils and students in organizations of vocationally directed education engaged in practical work;

2) Individuals serving sentences in prisons, juvenile prisons and in juvenile reformatory schools during the period of regular work while serving the sentence-7

3) Members of youth cooperatives during the period of work;

4) Health workers with higher education acquiring working experience for specialist examinations; and

5) Unemployed individuals during professional training, vocational retraining and improvement of skills.

The provisions under paragraph I item I of this article, shall also apply to citizens of the Republic of Macedonia, who in compliance with the regulations in force, have been sent abroad for education.

The provisions under paragraph I item I of this article, shall also apply to foreign nationals receiving education in the Republic of Macedonia under condition that the same treatment is provided for citizens of the Republic of Macedonia in the respective foreign country unless otherwise determined by an international agreement.

Article 15

Mandatory pension and invalid insurance shall be provided based on disability and physical impairment caused by injuries which have occurred during participation in:

1) Actions of rescue or protection against natural disasters and accidents;

2) Organized youth and other types of working campaigns;

3) Training by request of the defense authorities;

4) Providing assistance to police authorities in fulfilling

their official duties;

5) Cultural and artistic manifestations and contests organized by cultural and other types of associations; and

6) Sport and technical tournaments organized by sports and other types of associations.

Article 16

A general act of the Fund shall regulate the procedure whereby entities specifies in articles 14 and 15 are to fulfill pension and invalid insurance rights.

111. ACQURING AND DETE G RIGHTS

1. Old Age Pension

Article 17

Insured parties shall acquire the right to old age pension having turned either 63 years of age (men) or 60 years of age (women), and a minimum of 20 years working experience.

During the transitional period from January 1, 1994 till December 31, 1998 (men) and December 31, 2002 (women), the age limit for acquiring old age pension shall increase gradually as follows:

Year Men Women

01.01.1994 till 31.12.1994 60,5 55,5

01.01.1995 till 31.12.1995 61,0 56,0

01.01.1996 till 31.12.1996 61,5 56,5

01.01.1997 till 31.12.1997 62,0 57,0

01.01.1998 till 31.12.1998 62,5 57,5

01.01.1999 till 31.12.1999 63,0 58,0

01.01.2000 till 31.12.2000 58,5

01.01.2001 till 31.12.2001 59,0

01.01.2002 till 31.12.2002 59,5

01.01.2003 till 31.12.2003 60,0

Insured parties who have not completed 20 years of working experience shall acquire the right to old age pension having turned 65 years of age (men) and 63 years of age (women), and with a minimum of 15 years insurance.

During the transitional period from January 1, 1994 till December 31, 1998 the age limit for women shall increase gradually as follows:

Year Women

01.01.1994 till 31.12.1994 60,5

01.01.1995 till 31.12.1995 61,0

01.01.1996 till 31.12.1996 61,5

01.01.1997 till 31.12.1997 62,0

01.01.1998 till 31.12.1998 62,5

01.01.1999 till 31.12.1999 63,0

Insured parties shall acquire the right to old age pension having completed a working period of 40 years (men) and 35 years (women), regardless of their age.

Reduction of Age Limit

Article 18

The age limit for acquiring the right to old age pension shall be reduced for insured parties whose period of insurance has increased depending on the level of the expanded work period in the scope of one year.

1) For every seven years of service, 12 months of effective work shall be estimated as 13 months of work for insurance;

2) For every six years of service, 12 months of effective work shall be estimated as 14 months of work for insurance;

3) For every five years of service, 12 months of effective work shall be estimated as 15 months of work for insurance;

4) For every four years of service, 12 months of effective

work shall be estimated as 16 months of work for insurance;

5) For every three years and six months of service, 12 months of effective work shall be estimated as 17 months of work for insurance;

6) For every three years of service, 12 months effective work shall be estimated as 18 months of work for insurance-,

Pension Base

Article 19

Old age pension is determined from the average monthly salary earned by the insured party during the entire period of insurance starting from January 1, 1970 (hereinafter: pension base).

Old age pension for insured parties specified in article I I item 2 shall be determined from the pension base, i.e., from the average monthly salary earned by the insured party during the entire period of insurance starting from April 1, 1992 earliest.

The calendar year in which the insured party earned a salary or compensation for a minimum of six months insurance shall be used to determine the pension base.

With the exception of paragraph 3 of this article, the salary or compensation earned in the year in which the insured party acquired the right to old age pension shall not be used to determine the pension base.

Article 20

The pension base shall be determined according to the base defined in the general act of the Fund for insured parties and individuals who have not earned salaries or compensations after January 1, 1970.

Article 21

Salaries, money allowances and insurance basis, which the insured party earned in accordance with the general act of the employer in conformity with the collective agreement and the Law, shall be used to determine the pension base.

Article 22

The average monthly salary earned by the insured party during full working hours shall be used to determine the pension base.

Salaries earned for work exceeding or under full working hours shall be computed with the average monthly amount corresponding to the salary for full working hours.

The salary of insured parties working shorter hours and simultaneously for more than one employer during the calendar year shall be computed by adding the total earned salaries and the working hours spent with all employers as full work time.

Salaries earned for work exceeding the full working hours shall be used to determine the pension base under condition that such work had been performed in cases designated in the regulations on labor relations.

Article 23

When determining the pension base, the total salary earned through full time work or work longer or shorter than the full working hours during one year, shall be deduced to the average monthly amount which corresponds to the salary for full working hours.

The amount that corresponds to the full time salary specified in paragraph I of this article shall be computed in such a way that the total amount of estimated salaries used to determine the pension base and earned by the insured party during one year is divided by the number of full time, shorter and longer hours. The received amount per hour is multiplied by the average number of full time hours per month in the period in which the salary was earned. The received amount shall be used to determine the pension base.

Article 24

When determining the pension base for the period in which insured parties received salary compensation according to the regulations on heath insurance, the average salary amount shall be used to determine the pension base according to the salary earned in the calendar year prior to the year in which the temporary impediment occurred, computed with the valorization rate assigned for that respective year.

If insured parties did not earn a salary in the previous year, the average salary earned in the last year of insurance prior to the occurrence of temporary impediment, shall be used as a salary to determine the pension base computed with the valorization rate assigned for that respective year.

Article 25

When determining the pension base for unemployed workers receiving money allowances, for disabled workers waiting on vocational retraining, improvement of skills, reassignment of employment or corresponding employment, the base shall be used to determine the money

allowance.

The basis used to determine the money allowance is valorized with the coefficient that valorizes the salaries which are used to determine the base.

Article 26

When determining the pension base for disabled workers receiving money allowances for reduced working hours or money allowances for small salaries, in addition to receiving a salary, money allowances shall also be received that are to be computed with the valorization rate assigned for the year in which the allowance was earned.

Article 27

When determining the pension base for insured parties specified in article I I paragraph I item 3 of this Law, the salary or compensation paid for the performance of that function shall be used as a base for payment of pension and invalid insurance.

Article 28

The salary and insurance base used for payment of pension and invalid insurance contributions shall be used when determining the pension base of insured parties specified in

article 12 of this Law.

Article 29

The insurance base used for payment of pension and invalid insurance contributions shall be used when determining the pension base of insured parties specified in article I I paragraph I items 4, 5 and 6 and article 13 of this Law.

Article 30

The pension base for workers hired by employers shall be determined from the salaries earned in accordance with the agreement for employment.

The pension base for private farmers shall be determined from the insurance base.

The pension base for physical persons perfo@ng an activity, self-sporting artists and leading sportsmen-amateurs, shall be determined from the base used for computation and payment of contributions for pension and invalid insurance.

Article 3 1

Compensation earned on the basis of innovation, rationalization and other types of creativity at work that are in compliance with the general act of the employer and in conformity with the collective agreement and the Law, shall be used to determine the pension base if pension and invalid insurance contributions have been paid.

When determining the pension base, the compensation specified in paragraph I of this article shall be evaluated for the year in which the compensation was paid.

A.rticle 32

Salafies from previous years which serve to determine the pension base are valofized by the rates computed on the basis of the salaries of all employees on the territory of the Republic of Macedonia.

The valorization of salaries from previous years, which serve to determine pensions, shall be estimated according to the average salaries in the last calendar year prior to the year in which the insured party acquired the fight to pension.

The valorization rates on salaries from previous years shall be determined every year identically for all wages based on statistical data on the incomes of all employees on the territory of the Republic of Macedonia.

The valorization rates shall be assigned by the Fund through a general act.

Old Age Pension Levels

Article 33

Old age pension shall be determined according to the pension base in percentages depending on the length of the years of service:

Years of Service Men % Women %

15 years 35 40

15 years and 6 months 35.9 41.3

16 years 36.8 42.6

16 years and 6 months 37.7 43.9

17 years 38.6 45.2

17 years and 6 months 39.5 46.5

18 years 40.4 47.8

18 years and 6 months 41.3 49.1

19 years 42.2 50.4

19 years and 6 months 43.1 51.7

20 years 44.0 53.0

20 years and 6 months 44.9 53.9

21 years 45.8 54.8

21 years and 6 months 46.7 55.7

22 years 47.6 56.6

22 years and 6 months 48.5 57.5

23 years 49.4 58.4

23 years and 6 months 50.3 59.3

24 years 51.2 60.2

24 years and 6 months 52.1 61.1

25 years 53.0 62.0

25 years and 6 months 53.9 62.9

26 years 54.8 63.8

26 years and 6 months 55.7 64.7

27 years 56.6 65.6

27 years and 6 months 57.5 66.5

28 years 58.4 67.4

28 years and 6 months 59.3 68.3

29 years 60.2 69.2

29 years and 6 months 61.1 70.1

30 years 62.0 71.0

30 years and 6 months 62.9 71.9

3 1 years 63.8 72.8

31 years and 6 months 64.7 73.7

32 years 65.6 74.6

32 years and 6 months 66.5 75.5

33 years 67.4 76.4

33 years and 6 months 68.3 77.3

34 years 69.2 78.2

34 years and 6 months 70.1 79.1

35 years 71.0 80.0

35 years and 6 months 71.9

36 years 72.8

36 years and 6 months 73.7

37 years 74.6

37 years and 6 months 75.5

38 years 76.4

38 years and 6 months 77.3

39 years 78.2

39 years and 6 months 79.1

40 years 80.0

The level of old age pension may not exceed 80% of the pension base

Lowest Old Age Pension Level

Article 34

Insured parties who meet the requirements for acquiring old age pension rights are entitled to the lowest level of old age pension.

The lowest level of old age pension shall be assigned by the Fund through a general act form the average salary earned in the Republic of Macedonia in the previous year as follows:

- A minimum of 60% for pension beneficiaries who have completed 3 5 years of service (men) and over 30 years of service (women).

- A minimum of 55% for pension beneficiaries who have completed 25 years of service (men) and over 20 years of service (women) and

- A minimum of 50% for pension beneficiaries who have completed up to 25 years of service (men) and up to 20 years of service

(women).

Throughout the year, pensions specified in paragraph 2 of this article shall be brought into line with the percentage under which other pensions are reconciled.

Article 35

Insured parties who have acquired a portion of their pension through an international agreement, shall be entitled to the lowest pension level if the pension amount assigned by this Law and the foreign pension estimated at the current foreign exchange rate are smaller than the amount used to determine the lowest pension level specified in article 34 of this Law.

When determining the percentage of the lowest pension level, the years of insurance abroad shall not be taken into account.

Highest Pension Level

Article 36

The highest pension level may not exceed 80% of the average salary earned in the

Republic of Macedonia in the year prior to acquiring the pension right increased by four times

Adjustment of Old Age Pension

Article 37

Adjustment of old age pension