Law on the Accumulation of Occupational Pensions


Published: 2006-04-07

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Official translation
 
REPUBLIC OF LITHUANIA
LAW ON THE ACCUMULATION OF occupational PENSIONS
 
4 July 2006 No X-745 Vilnius
 
 
CHAPTER I
GENERAL PROVISIONS
 
Article 1. Purpose and Scope of the Law
1. This Law shall regulate the conditions of and the procedure for the organisation of the accumulation of occupational pensions in the Republic of Lithuania.
2. This Law has the objective of harmonising regulation of the accumulation of occupational pensions with the EU legal acts listed in the Annex to this Law.
3. This Law shall apply to all associations acting as associations of participants in occupational pension fund(s) (hereinafter referred to as a “pension association”) in the Republic of Lithuania. The Law on Associations shall apply to pension associations to the extent their status is not regulated by this Law.  Application of this Law in respect of activities of life assurance undertakings engaged in the accumulation of occupational pensions is provided for in Chapter VII thereof.
4. Any obligation assumed by a sponsoring undertaking concerning the accumulation of occupational pensions shall be discharged:
1) through a pension association operating in accordance with this Law or through an equivalent entity (hereinafter referred to as an “equivalent entity”) established in another Member State of the European Union;
2) by concluding a life assurance contract under which occupational pensions shall be accumulated in this life assurance undertaking.
5. The requirements specified in paragraph 4 of this Article shall not be applicable to obligations of a sponsoring undertaking discharged by paying contributions to a pension fund operating in accordance with the Republic of Lithuania Law on the Supplementary Voluntary Accumulation of Pensions and obligations of the sponsoring undertaking arising from insurance contracts that are not regulated by this Law.
6. Where a pension association or an insurance undertaking engaged in the accumulation of occupational pensions accepts contributions from a sponsoring undertaking that is under the jurisdiction of a Member State of the European Union, it shall comply with social security and labour legislation of that Member State applied in the field of occupational pensions and, where established, the investment rules applied in that particular Member State in respect of occupational pension funds of pension associations and equivalent entities of other states.
7. This Law shall not be applicable to pension funds operating in accordance with the Law on the Accumulation of Pensions and the Law on the Supplementary Voluntary Accumulation of Pensions.
 
Article 2. Definitions
1. Equivalent entity shall mean an entity equivalent to a pension association established for the same purpose in another Member State, irrespective of its legal form and how it is called in the home Member State.
2. Defined contributions occupational pension fund (hereinafter referred to as a “defined contributions pension fund”) shall mean an occupational pension fund, where the amount of pension benefits to be paid to the participants depends upon the contributions paid and the change in the value of assets, and the amount of a pension benefit is not guaranteed.
3. Defined benefits occupational pension fund (hereinafter referred to as a “defined benefits pension fund”) shall mean an occupational pension fund under the rules of which the return on investment of a certain amount or a pension benefit of a certain amount are guaranteed or where the amount of pension benefits to be paid to the participants does not depend upon the contributions paid and the change in the value of assets.
4. Unit of account shall be interpreted as defined in the Law on the Supplementary Voluntary Accumulation of Pensions.
5. Biometrical risks shall mean risks related to death, injury caused by an accident, work incapacity, disease and longevity of a participant.
6. Home Member State shall mean a Member State of the European Union in which a pension association or an equivalent entity has its registered office and its main administration or, if this entity does not have a registered office, its main administration.
7. European Union state (hereinafter referred to as a “Member State”) shall be interpreted as defined in the Law on Collective Investment Undertakings.
8. Sponsoring undertaking (a payer of contributions) shall mean any undertaking, agency or organisation, or a natural person who acts as an employer, or a self-employed person who pays pension contributions to an occupational pension fund(s) of a pension association, or has concluded a life assurance contract under which occupational pensions are accumulated.  
9. Life assurance undertaking (hereinafter referred to as an “assurance undertaking”) shall mean an undertaking established in the Republic of Lithuania and operating in accordance with the procedure set forth by the Law on Companies and the Law on Insurance or a branch of a life assurance undertaking of other Member States of the European Union established in the Republic of Lithuania and operating in accordance with the procedure set forth by the Law on Insurance.
10. Life assurance contract under which occupational pensions are accumulated shall mean an insurance contract concluded between a life assurance undertaking authorised to engage in the accumulation of occupational pensions and a sponsoring undertaking (policyholder) under which the sponsoring undertaking (policyholder) undertakes to pay a contribution in the amount specified therein and the employees of the sponsoring undertaking (policyholder) (or a self-employed person provided he himself pays pension contributions) become entitled to pension benefits in accordance with the procedure set forth by the insurance contract and this Law.
11. Net assets shall be interpreted as defined in the Law on the Supplementary Voluntary Accumulation of Pensions.
12. Beneficiary shall mean a person receiving pension benefits.
13. Investment derivative instruments shall be interpreted as defined in the Law on Collective Investment Undertakings.
14. Posted worker shall mean a person who is posted to work temporarily in another Member State and who, under the terms of Title II of Regulation (EEC)   No 1408/71, continues to be subject to the legislation of the Member State of origin.
15. Minimum period of participation shall mean a minimum period of participation in an occupational pension fund(s) of a pension association set in the Articles of Association of the pension association or the occupational pension fund(s) rules. This period shall not be longer than two years and it shall be considered that a person who has not completed this period does not gain any ownership rights to the share of pension assets accumulated on his behalf in the occupational pension fund, except for the exemptions specified in paragraph 7 of Article 23 and paragraph 2 of Article 26 of this Law.  The minimum period of participation, in the case of concluding a life assurance contract under which occupational pensions are accumulated, shall be a period, not longer than two years, set in the insurance rules and calculated since the moment of insuring the participant. Upon completion of this period, a sponsoring undertaking shall loose the right to be considered the beneficiary in respect of this participant or recover the surrender value accumulated from the contributions paid on behalf of the participant.   
16. Persons of good repute shall be interpreted as defined in the Law on Insurance and the Law on the Securities Market.
17. Pension annuity shall be interpreted as defined in the Law on Reform of the Pension System.
18. Pension association shall mean an association operating under this Law with the view to accumulating occupational pensions, established separately from a sponsoring undertaking (employer) or an organisation representing the interests of self-employed persons for the purpose of providing pension benefits, related to occupational activities, to the participants in its pension fund(s) pursuant to the agreement establishing a pension association. 
19. Participant in a pension fund (hereinafter referred to as a “participant”) shall mean a member of a pension association who has chosen an occupational pension fund of the association and his occupational activities entitle or will entitle him to receive pension benefits pursuant to the occupational pension fund rules.
20. Pension assets shall be interpreted as defined in the Law on the Supplementary Voluntary Accumulation of Pensions.
21. Management of pension assets shall mean:
1) adopting and implementing the investment decisions;
2) keeping of accounts, internal control of compliance to legal acts, valuation of the net assets, management of the list of participants in an occupational pension fund,  opening, managing and closing of pension accounts, carrying out of operations related to acceptance of pension contributions and payment of pension benefits (except for those performed by the custodian of pension assets), conversion of money into the units of account and conversion of the units of account into money, distribution of income, determination of the value of a unit of account, contract settlements, and keeping of records of completed operations;
3) marketing activities and provision of information in accordance with the procedure set forth in the asset management agreements;
4) other activities related to the activities specified in subparagraphs 1-3 above.
22. Periodic report shall be interpreted as defined in the Law on the Supplementary Voluntary Accumulation of Pensions.
23. Money market instruments shall be interpreted as defined in the Law on Collective Investment Undertakings.
24. Host Member State shall mean a Member State, other than the home Member State, whose social security and labour legislation regulating the accumulation of pensions in occupational pension funds is applicable to the relations between a sponsoring undertaking and the participants.
25. Occupational pensions (pension benefits) shall mean a benefit provided for in the occupational pension fund rules and paid to a participant of this fund upon reaching the pensionable age set out in the rules, or complying with other conditions laid down in the occupational pension fund rules and necessary for becoming entitled to the benefit which is related to occupational activities of the participant and which was, at least in part, accumulated from pension contributions paid by a sponsoring undertaking. Supplements and benefits specified in paragraph 3 of Article 23 and Article 29 of this Law shall not be considered pension benefits.      
26. Occupational pension fund (hereinafter referred to as a “pension fund”) shall mean pension assets belonging to the participants in the fund and, in the cases provided for by this Law, the payers of contributions by the right of common partial ownership.
27. Occupational pension fund rules (hereinafter referred to as the “pension fund rules”) shall mean a document approved in accordance with the procedure set forth by this Law defining the procedure for the payment of pension contributions and the investment of pension assets, and stipulating what pension benefits and on what conditions are paid to the participants in a pension fund, as well as other provisions required under this Law.
28. Self-employed persons shall be interpreted as defined in the Law on State Social Insurance.
29. Technical provisions shall mean the amount of assets, calculated in accordance with the procedure set forth by legal acts, corresponding to financial obligations of a pension association in respect of the participants arising from the rules of a defined benefits pension fund of a pension association.
30. Securities shall be interpreted as defined in the Law on Collective Investment Undertakings.
 
CHAPTER II
OPERATING PROCEDURES OF A PENSION ASSOCIATION
 
Article 3. Establishment of a Pension Association
1. A pension association shall operate in accordance with its founding documents, laws of the Republic of Lithuania, Government Resolutions and other legal acts.
2. A pension association shall be established by concluding an agreement establishing a pension association:
1) by the employer(s) and employees or their authorised representatives, or
2) by self-employed persons in compliance with legal acts of the home and host Member State.
3. The following information has to be specified in the agreement establishing a pension association:
1) the founders (full names, personal numbers and addresses of natural persons, business names and identification codes of legal entities, as well as their registered offices, full names or business names and personal numbers (identification codes) of their representatives);
2) the name of a pension association;
3) persons who have the right to represent the association, their rights and powers;
4) the date of concluding the agreement establishing the association.
4. The following information may also be specified in the agreement establishing a pension association:
1) property and non-property obligations of the founders, the procedure and terms for their discharge;
2) the procedure for compensating the founding costs;
3) the procedure for settlement of disputes between the founders;
4) the procedure for convening a founding meeting and the procedure for adopting decisions by the founding meeting;
5) other provisions that do not contravene with this Law and other laws.
5. The founders of a pension association shall prepare draft Articles of Association and convene the founding meeting prior to registering it in the Register of Legal Entities and including it in the List of Associations of Participants in Occupational Pension Funds, which are Authorised to Operate in the Republic of Lithuania (hereinafter referred to as the “List of Pension Associations”). The Articles of Association of the pension association shall be adopted and the management bodies shall be set up at the founding meeting.  
6. The founders of a pension association on whose behalf a sponsoring undertaking undertakes to pay pension contributions and/or who will pay their pension contributions themselves and sponsoring undertakings shall become members of the pension association as of the moment of concluding an agreement establishing the pension association.  Sponsoring undertakings and legally capable natural persons who have reached the age of 16, united by occupational characteristics or characteristics typical of a branch of economy wherein they are engaged in occupational activities, and who are participants in a pension fund(s) of this pension association may be members of the pension association.  The founders of the pension association, who are natural persons, shall loose their membership, if they failed to become participants in a pension fund(s) of the pension association within twelve months since the beginning of their membership.   
 
Article 4. Registration of a Pension Association and Commencement of its Activities
1. A pension association may commence its activities only after the approval from the Securities Commission, granted in accordance with the procedure set forth by it, of the Articles of Association of the pension association, the candidates for members of the management bodies, the pension fund rules, draft agreements on management of pension assets and custody of pension assets is received and the pension association is included in the List of Pension Associations. 
2. A pension association is authorised to commence its activities under the pension fund rules only after the approval from the Securities Commission is received and/or prior authorisation from the Securities Commission to accept contributions from a sponsoring undertaking located in another Member State under the pension fund rules drafted in compliance with the requirements of social security and labour legislation applicable to pension funds in another Member State is received in accordance with the procedure set forth in Article 57 of this Law.   Where social security and labour legislation of another Member State establishes different requirements for pension funds, a pension association that accepts contributions under the pension fund rules shall adhere to the requirements established for pension funds in social security and labour legislation of that Member State.    
3. After registration in the Register of Legal Entities, an association willing to engage in the activities of a pension association shall submit an application to the Securities Commission requesting to be included in the List of Pension Associations.  The following documents shall be submitted together with the application: the agreement establishing a pension association, the Articles of Association, the pension fund(s) rules of the pension association, information about the members of the management bodies, the chosen manager of pension assets, the custodian of pension assets, draft agreements on management of pension assets and custody of pension assets, the financing plan for each pension fund of the pension association with specified procedure for calculation of contributions and frequency of their payment, obligations assumed by the sponsoring undertaking, the forecast for the development of assets of the pension fund for five years taking into consideration the anticipated changes in the number of participants and beneficiaries and the anticipated profit forecasts, as well as other documents and data the list whereof shall be stipulated by the Securities Commission in the rules approved by it.  
4. The Securities Commission shall have the right to refuse to include the entity in the List of Pension Associations, if:
1) the provided documents or data do not comply with the requirements laid down in legal acts or the data submitted is not complete or is false;
2) members of the management bodies, the chosen manager or custodian of pension assets or the intended conditions of the activities of a pension association do not comply with the requirements laid down in this Law and other legal acts or the interests of members of the pension association;
5. The Securities Commission shall notify the applicant in writing about its decision within three months from the submission of all the documents and data. The time limit for consideration of the application shall be calculated from the date of the submission of the last documents or data. Refusal to satisfy the application shall be reasoned and may be appealed against to the court.
6. The words an “association of participants in an occupational pension fund” or any other combination of these words or their derivatives may only be used in the name of an entity which is included in the List of Pension Associations, or in its advertisement.
7. A pension association must have at least one pension fund.
 
Article 5. The List of Pension Associations
1. The Securities Commission shall manage the List of Pension Associations.  The Securities Commission shall publish the data about pension associations that are included in the List of Pension Associations, or about the ones that are removed from this List, in the supplement Informaciniai pranešimai to the official gazette Valstybės žinios.
2. The following data shall be contained in the List of Pension Associations:
1) the name, code, registered office and the date of commencing the activities of a pension association;
2) the latest version of the Articles of Association of a pension association;
3) information about the management bodies of a pension association and its members;
4) information about a pension fund(s) of a pension association;
5) information about the manager of pension assets;
6) information about the custodian of pension assets;
7) the list of the Member States, in whose jurisdiction are the sponsoring undertakings the contributions whereof can be accepted by a pension association in accordance with the procedure set forth in Article 57 of this Law, and the related information;
8) other data specified in the rules approved by the Securities Commission.
3. The Securities Commission shall have the right to remove a pension association from the List of Pension Associations, if:
1) a sanction to prohibit activities of a pension association and to remove the pension association from the List of Pension Associations is imposed in accordance with the procedure set forth by this Law;
2) a pension association failed to commence its activities within twelve months from the date of inclusion whereof in the List of Pension Associations;
3) upon the request of a pension association, provided it has discharged all the obligations in respect of the participants in a pension fund(s) or all the participants in a pension fund(s) have transferred to pension funds of another pension association or life assurance undertaking to continue the accumulation of occupational pensions under a life assurance contract, or terminated the participation in pension funds of the pension association;
4) a pension association is liquidated, reorganised,  or restructured.
 
Article 6. Articles of Association of a Pension Association
1. The Articles of Association of a pension association is a founding document and a pension association shall operate in conformity with it.  
2. The following information has to be specified in the Articles of Association of a pension association:
1) the name of a pension association (the words an “association of participants in an occupational pension fund” or any other combination of these words or their derivatives have to be in the name of the association);
2) legal form of a pension association (an association);
3) registered office of a pension association;
4) objectives and type of activities have to be clearly and explicitly defined;
5) general conditions for membership in a pension association and participation in its pension funds;
6) the procedure for transfer from one pension fund of a pension association to another pension fund of the association;
7) the conditions and the procedure for establishment and dissolution of pension funds;
8) general rights and duties of the participants in a pension fund(s);
9) the competence of the general meeting of the members of a pension association, the procedure for convening the general meeting and the decision-making process;
10) other bodies of a pension association, their competences, the procedure and time limits for their formation, election and removal from office of their members, as well as their rights, duties and responsibilities;
11) the procedure for the submission of documents of a pension association and other information to the participants in a pension fund(s), if it is not provided for in the Articles of Association that this procedure will be established in the pension fund rules;
12) the procedure for giving notifications of a pension association, if it is not provided for in the Articles of Association that this procedure will be established in the pension fund rules;
13) the procedure for amending the Articles of Association of a pension association and the procedure for the approval of and amendments to the pension fund rules;
14) the period of activities of a pension association, if it is limited;
15) the procedure for using the funds of a pension association as well as the procedure for the control of the activities of the pension association;
16) pension association liquidation procedure;
17) the financial year of a pension association, which has to coincide with the calendar year;
18) the date of signing the Articles of Association.
3. The Articles of Association of a pension association may also contain other provisions that do not contravene with this Law and other legal acts.
4. The Articles of Association of a pension association may be amended only after receiving a prior approval from the Securities Commission.
 
Article 7. Activities and Duties of a Pension Association
1. A pension association may not engage in activities that are not related to occupational pensions. A pension association shall operate in compliance with the principles of solidarity and equality of its members.
2. Persons subject to the provisions of legal acts of the Republic of Lithuania on social security and labour may participate only in the defined contributions pension funds.
3. In carrying out its activities, a pension association must:
1) act fairly in the interests of its members and market credibility;
2) act with care,  professionally and prudently;
3) have and apply the required measures and procedures;
4) adequately and appropriately reveal information related to membership in a pension association and participation in a pension fund to the participants;
5) try to avoid conflicts of interests and, in the case it is not possible to avoid them, ensure fair treatment of the participants;
6) ensure that pension association management procedures, the system for keeping the accounting records and the accounting system would be reliable and that it would be possible to see parties to all transactions, payers of contributions,  the amounts of contributions, the distribution of the share of the transaction between the sponsoring undertaking and the participant, that content of a transaction, its time and place and whether the assets are invested in compliance with the pension fund rules and the requirements laid down in other legal acts;
7) have mechanisms for internal control that are adequate for their activities;
8) keep the documents evidencing the  carried out transactions for at least ten years since the day they took place, unless other legal acts provide for a longer period of time;
9) ensure that persons responsible for decision-making would be of good repute and have qualifications and work experience as established by the Securities Commission.
 
Article 8. Specific Features of Reorganising or Restructuring of a Pension Association
1. A pension association may be reorganised or restructured provided this does not threaten the interests of the existing participants in a pension fund(s) and pension beneficiaries.
2. Upon the decision of the general meeting of members of a pension association, a pension association may be restructured only if it has transferred all its pension funds and the obligations arising from all pension fund rules to other pension associations and, respectively, the participants in pension funds become members of these pension associations, or if all pension funds are dissolved for the purpose of restructuring the pension association, and the authorisation from the Securities Commission specified in paragraph 3 of this Article is obtained.
3. Before taking a decision to reorganise or reconstruct a pension association, an authorisation from the Securities Commission has to be obtained. The Securities Commission shall take the decision on the authorisation to reorganise or restructure a pension association within thirty working days from the submission of all the required and properly executed documents. The following documents shall be submitted to the Securities Commission: a relevant application, the conditions of reorganisation of a pension association and draft Articles of Association of pension associations that will be operating after the reorganisation  (in the case of reorganisation); documents certifying transfer of all the pension funds and all the obligations arising from the pension fund rules to other pension associations or the dissolution of all the pension funds for the purpose of restructuring the pension association; draft founding documents of a legal entity of a new legal form into which the pension organisation will be restructured (in the case of restructuring) and other documents specified by the Securities Commission.
4. The conditions of reorganisation of a pension association have to provide the information required under the provisions of the Civil Code of the Republic of Lithuania and also the number of pension funds and their participants, the data about transferable and acceptable pension funds and the pension assets that they are composed of, the manager and the custodian of pension assets, as well as the conditions of and terms for transfer and acceptance of obligations of the pension association, property and non-property rights of the participants in a pension fund(s) after reorganisation and the conditions and terms of acquiring these rights and duties.   The conditions of the reorganisation must be approved by the general meeting of members of the pension association and the Securities Commission.
5. A pension association shall announce about reorganisation or restructuring in accordance with the procedure set forth by the Securities Commission.
6. Information about the process and terms of reorganisation or restructuring shall be provided to each member of a pension association, a participant in a pension fund or the Securities Commission upon their request.
 
Article 9. Specific Features of Bankruptcy of a Pension Association
1. Bankruptcy procedure of a pension association shall be carried out only in judicial procedures.
2. The Securities Commission shall have the right to file a petition with the court on initiating bankruptcy proceedings in respect of a pension association. In such case, the court shall, within fifteen days from the day of the receipt of the petition, make a ruling to initiate bankruptcy proceedings or to refuse to initiate it.    Having made the ruling to initiate bankruptcy proceedings, the court or the judge shall immediately notify thereof the Securities Commission.
3. Where a petition on initiating bankruptcy proceedings is filed with the court by other persons in accordance with the procedure prescribed by the laws, the court shall receive the conclusion of the Securities Commission on the insolvency of a pension association before making the decision to initiate bankruptcy proceedings.
4. The Securities Commission shall present the candidate to the post of bankruptcy administrator of a pension association to the court.
 
Article 10. Specific Features of Liquidation of a Pension Association
1. Upon the decision of the general meeting of members of a pension association, the pension association may be liquidated only if it has transferred all its pension funds and the obligations arising from all pension fund rules to other pension associations and, respectively, the participants in pension funds become members of these pension associations, or if all pension funds are dissolved for the purpose of liquidating the pension association and the authorisation from the Securities Commission to liquidate the pension association is obtained as well as the approval of the candidate to the position of a liquidator.    
2. The Securities Commission shall take a decision on the authorisation to liquidate a pension association and on the approval of a candidate to the position of a liquidator within thirty working days from the submission of all the required and properly executed documents. The following documents shall be submitted to the Securities Commission: a relevant application, documents certifying transfer of all the pension funds and all the obligations arising from the pension fund rules to other pension associations or the dissolution of all the pension funds for the purpose of liquidating the pension association, the data about a potential liquidator and other documents specified by the Securities Commission.
3. The Securities Commission and the manager of the Register of Legal Entities shall be notified in writing about the decision to liquidate a pension association within three working days from the general meeting of the members of a pension association in which the decision was taken and shall receive the data about the appointed liquidator.  
4. A pension association shall announce about the liquidation in accordance with the procedure set forth by the Securities Commission.  Information about the process and terms of liquidation shall be provided to each member of a pension association or a participant in a pension fund upon their request.
5. Liquidation of a pension association shall be enforced by decision of the court after receiving the conclusion of the Securities Commission on liquidation of the pension association. The Securities Commission shall present a candidate to the post of a liquidator to the court.
6. The liquidator of a pension association under liquidation shall be responsible for distribution of assets composing pension funds that were not transferred to other pension associations (when the obligations arising from the pension fund rules were not transferred to other pension associations).
7. A liquidated pension association shall be removed from the List of Pension Associations and the Register of Legal Entities immediately after the distribution of pension assets is completed.  
8. The Securities Commission shall have the right to receive all the data and explanations concerning the process of liquidation of a pension association.
 
CHAPTER III
MANAGEMENT OF A PENSION ASSOCIATION
 
Article 11. Bodies of a Pension Association
1. A pension association shall obtain civil rights, assume civil duties and fulfil them through their management bodies.
2. A pension association has to have a general meeting of members of a pension association and a collegial management body – the Board. Other bodies may be formed as well, including a one-man management body.
3. The general meeting of members of a pension association shall not be entitled to delegate the task of dealing with issues falling within its exclusive competence to other bodies of a pension association.
4. The management bodies of a pension association must act in the interests of participants in a pension association and its pension funds, and the beneficiaries, as well as act in compliance with laws and other legal acts, the Articles of Association of the pension association and the pension fund rules.
5. Minutes must be taken of all the general meetings of members of a pension association and the meetings of the Board.
 
Article 12. General Meeting of Members of a Pension Association
1. The general meeting of members of a pension association shall have an exclusive right:
1) to amend the Articles of Association of the pension association;
2) to elect and remove from office members of its management bodies;
3) to establish pension funds and adopt decisions on dissolution of a pension fund(s), unless the Articles of Association of the pension association provide otherwise;
4) to approve the annual financial statements of the pension association and the activity report of the pension association;
5) to adopt decisions on restructuring or termination (reorganisation or liquidation) of the pension association;
6) to approve and amend the pension fund rules, unless the Articles of Association of the pension association provide otherwise;
2. The decisions of the general meeting of members of a pension association specified in sub-paragraphs 1-5 of this paragraph shall be considered adopted, if at least 2/3 of members participating in the meeting vote for them.
3. The decision of the general meeting of members of a pension association to amend the Articles of Association of the pension association may be taken only after receiving a prior approval from the Securities Commission.
4. The ordinary general meeting of members of a pension association shall be held each year, but not later than within four months after the close of the financial year.
5. The Board and 1/10 of members of a pension association shall have the right of initiative to convene the general meeting of members of the pension association.
6. The general meeting of members of a pension association may be convened by decision of the court, if it was not convened in accordance with the procedure set forth by this Law and the Articles of Association and if the Securities Commission applied to the court for this matter. 
7. Members of the management bodies and other collegial bodies of a pension association who are not members of the pension association can participate in the general meeting of members of the pension association without the right to vote.
 
Article 13. The Board and the Formation thereof
1. The Board of a pension association shall be a collegial management body of the pension association.
2. The Board shall be formed in such way as to ensure proper and proportionate representation of interests of sponsoring undertakings and participants in pension funds.
3. Members of the Board, acting on behalf of a pension association and for its interests, shall act with proper care and qualifications, in conformity with this Law, other legal acts, the Articles of Association and the pension fund rules, in accordance with principles of justice, reasonableness and fairness and avoid conflicts of interest.
4. In the case when a pension association accepts contributions from a sponsoring undertaking located in another Member State, the Board shall ensure that the pension association complies with social security and labour legislation of that Member State applied in the field of occupational pensions.
5. The number of the members of the Board shall be set in the Articles of Association of a pension association. The Board must have at least three members.
6. Persons of good repute who have acquired higher education, know legal acts regulating the activities of pension associations and are aware of the basic investment principles may be elected as members of the Board.  The Articles of Association of the pension association may set additional requirements for persons to be elected as members of the Board. The Securities Commission has to approve in advance the candidates for members of the Board.
7. The Board shall be formed for a period no longer than five years. The same member of the Board may be elected only for two consecutive terms of office.
8. At least half of the members of the Board shall be elected from the participants in pension funds or their representatives and the others – from persons proposed by a sponsoring undertaking(s). When electing members of the Board from the participants in pension funds or their representatives, only the participants in pension funds (or their authorised representatives) may participate in the voting.  When electing the members of the Board from persons proposed by a sponsoring undertaking(s), only the sponsoring undertakings shall have the voting right.
9. A member of the Board may be dismissed before his term in office expires in accordance with the procedure under which he was elected. The Securities Commission shall have the right to request a dismissal of a member of the Board who has breached the duty of acting in the best interests of a pensions association and the participants in its pension funds.  
10. Where a member of the Board resigns or is dismissed before his term of office expires, a new member of the Board shall be elected for this post until the expiry of the term of office of the present Board.
11. The Board shall elect the Chairman from its members. The Chairman shall act on behalf of the Board.
 
Article 14. Competence of the Board and the Rules of Procedure
1. The Board of a Pension Association shall:
1) establish pension funds and adopt decisions on dissolution of a pension fund(s), if such right is stipulated in the Articles of Association of the pension association;
2) approve and amend the pension fund rules, if such right is stipulated in the Articles of Association of the pension association;
3) regularly revise the principles of the investment policy of a pension fund(s) of a pension association, and, where necessary, initiate the amendments thereof to meet the objectives of activities of the pension association;  
4) having agreed with the Securities Commission, select the manager of pension assets and conclude an agreement on management of pension assets with him; 
5) having agreed with the Securities Commission, select the custodian of pension assets and conclude an agreement on custody of pension assets with him;
6) select an audit company to audit the annual financial statements of the pension association and conclude an agreement with him;
7) ensure the provision of information provided for in this Law and other legal acts to the participants;
8) appoint the administrator and remove him from office (paragraph 4 of Article 21 of this Law);
9) perform other functions delegated to it in the Articles of Association or the decisions of the general meeting of members of a pension association.
2. The Board shall be responsible for timely convocation and organisation of the general meeting of members and also, within its competence, for compliance with other provisions of this Law.
3. The Board shall ensure that the alphabetical list of all the participants according to each pension fund of a pension association would be present in the registered office of the pension association (in the location of its permanent management body). This list shall be available to all the participants upon their request.
4. The meetings of the Board shall be convened by the Chairman.  The meetings can also be convened by the decision of at least 1/3 of the members of the Board.
5. The Board may adopt decisions when at least ½ of its members are present at the meeting. The members of the Board shall have equal rights. The Board shall adopt decisions by a simple majority vote of the members participating at the meeting. During the voting, one member shall have one vote. In the event of a tie, the Chairperson of the Board shall have a casting vote. In the case of deciding on the amendments to the pension fund rules, when such right is granted to the Board under the Articles of Association of a pension association, seeking to reduce the rights of the participants in pension funds or to increase their duties, the decision has to be adopted unanimously.
6. A detailed procedure for the formation of the Board, the rules of procedure and the requirements for the members of the Board have to be provided for in the Articles of Association of a pension association.
 
CHAPTER IV
A PENSION FUND
 
Article 15. The Pension Fund Rules
1. A pension association shall carry out pension accumulation activities in its pension funds under the pension fund rules.  
2. The pension fund rules may be amended only after receiving a prior approval from the Securities Commission in accordance with the procedure set forth by it.
3. The following information has to be specified in the pension fund rules:
1) a group of persons entitled to become recipients of pension fund benefits (participants);
2) a sponsoring undertaking(s);
3) the conditions of and the procedure for starting and terminating the participation in a pension fund, and the minimum period of participation, if applicable;
4) rights and duties of a sponsoring undertaking(s);
5) specific rights of the participants in a pension fund and the beneficiaries not covered in the Articles of Association of a pension association;
6) types of pension benefits, ways of payment thereof and the possibilities of choosing them, the procedure for payment of pension benefits including the age from which a person becomes entitled to pension benefits and the right of the participants in a pension fund to defer the time limit for the payment of pension benefits;   
7) the rules for and frequency of calculation of the net assets of a pension fund and the value of a unit of account, and the procedure for declaring the value;
8) the procedure for converting pension contributions and the funds belonging to a participant in a pension fund, which are being transferred to another pension fund of the same or another pension association or life assurance undertaking under a life assurance contract, into the units of account and also the procedure for converting the units of account into money;
9) the investment policy of a pension fund;
10) the procedure for transferring into another pension fund of the same or another pension association or a life assurance undertaking to continue the accumulation of occupational pensions under a life assurance contract; the procedure for transferring the funds belonging to a participant  who is transferring to another pension fund to that pension fund or life assurance undertaking to continue the accumulation of occupational pensions under a life assurance contract;
11) measures to be undertaken, if a sponsoring undertaking fails to fulfil its obligations;
12) the criteria for the selection of the manager of pension assets and the custodian of pension assets, the condition of and the procedure for their selection and replacement;
13) methodology for the calculation of the remuneration to the manager of pension assets and the custodian of pension assets, its maximum amount and the payment procedure, a finite list of other expenses covered from the pension fund assets and the procedure for their calculation, as well as maximum amounts; 
14) the procedure for the submission of the reports to the participants in the cases provided for by this Law and also the forms of, the procedure for and the fee for the delivery of other notifications to the participants in the pension fund (when this fee is collected from a participant in the pension fund in the cases provided for by this Law);
15) the procedure for amending the pension fund rules;
16) the conditions of and the procedure for dissolution of a pension fund, and the procedure for distribution of pension assets of the dissolved pension fund;
17) the procedure for publication of information;
18) other information prescribed by the Securities Commission.
4. The pension fund rules may also contain other provisions that do not contravene with this Law and other laws.
5. It shall be prohibited to provide for any restrictions in the pension fund rules in relation to the right of the participants to terminate their participation, to restrict the possibility for a participant to transfer the funds to a pension fund of another pension association or a life assurance undertaking to continue the accumulation of occupational pensions under a life assurance contract, except for the cases when the pension fund rules provide for a minimum period of participation.  It shall be prohibited to limit the participant’s right of ownership to the share of contributions paid by deducting them from the participant, and the share of the increment (loss) of investments in respect of these contributions.   
6. Before choosing a pension fund, a person shall receive copies of the Articles of Association of a pension association and the rules of all its pension funds.
7. The participants in pension funds may at any time get access to the Articles of Association of a pension association, the pension fund rules and the amendments thereof.
8. Each participant in a pension fund shall be notified in writing about the amendments made to respective pension fund rules not later than within one month after amending them. If, within two months from the receipt of such notification, a participant does not express any objections, it shall be considered that he agrees with the amendments. A participant who objects to the amendments made to the pension fund rules shall have the right to terminate the payment of contributions paid by him personally, but his participation in the pension fund continues.
 
 
Article 16. Pension Accounts
A pension account shall be opened for each participant in a pension fund. The units of account belonging to a participant of a pension fund shall be recorded in the account.
 
Article 17. Units of Account and their Conversion
1. Each pension fund shall have its units of account.
2. Units of account express the share of the pension fund assets calculated for a participant.
3. Pension contributions, as well as funds transferred from another pension fund, shall be converted into units of account and entered into a pension account. The conversion shall take place not later than on the next day after the receipt of funds into the pension fund account at the value of a pension fund account unit valid on the day of the receipt of funds.
4. Units of account (the parts thereof) do not have nominal value.  The value of a unit of account is expressed in Litas or Euros.  The value of a unit of account shall be established by dividing the net assets of a pension fund by the total number of the units of account of the pension fund. The total value of all the units of account of the pension fund shall always be equal to the value of the net assets of the pension fund.  The value of the units of account shall be expressed to four decimal places and rounded pursuant to the mathematical rounding rules.
5. Where the funds, or a part thereof, calculated for a participant have to be paid to the participant in the cases provided for in this Law and other legal acts, the units of account shall be converted to money. The funds shall be paid or transferred not later than within one month after the receipt of the respective document under which the payment has to be made, or after the arising of legal grounds for such payment.  The conversion shall take place at the value of units of account calculated on the day of converting the units of account.
 
Article 18. The Pension Fund Assets
1. The pension fund assets shall belong by common partial ownership to the participants of a pension fund and the beneficiaries, except for the cases when the minimum period of participation has not yet expired and therefore a participant has not yet acquired the ownership rights to the share of the pension assets accumulated in the pension fund on his behalf. Until the expiry of the minimum period of participation, the share of the pension assets accumulated on behalf of the participant in the pension fund from contributions paid by the sponsoring undertaking shall belong by the right of ownership to the sponsoring undertaking.  
2. The share of a participant or a beneficiary in the common ownership shall be established considering the share of assets expressed in units of account.
3. Management of a pension fund(s) of a pension association shall be delegated to the manager of pension assets, specified in Article 31 of this Law, who manages, uses and disposes of pension assets by holding the property in trust.
4. The assets of each pension fund of a pension association shall be accounted separately from those of other pension funds of the pension association and from own assets of the pension association. 
5. It shall be prohibited to divert the recovery according to obligations of the manager of pension assets, the custodian of pension assets, the sponsoring undertaking and the participants in a pension association and a pension fund to the pension fund assets.
6. Pension assets accumulated in a pension fund may be used only fore the purpose of covering the obligations assumed in respect of the participants in the pension fund.  In the case when a pension association accepts contributions from a sponsoring undertaking located in another Member State, the assets accumulated on the grounds of these contributions shall be accounted separately.
7. After a participant’s in a pension fund death, the share of pension assets belonging to him by the right of ownership shall be inherited in accordance with the procedure set forth by laws.
8. Only the transactions specified in this Law may be concluded in respect of the pension fund assets.
9. The value of the net assets of a pension fund shall be regularly, at least once per month, calculated in accordance with the procedure set forth by the pension fund rules to establish the value of a unit of account of the pension fund each time when pension contributions are paid or payments are made.
10. The Securities Commission shall establish the procedure for and the principles and periodicity of the calculation of the value of the net assets of a pension fund.    
11. The pension fund assets cannot be transferred to the members of the management bodies of a pension association, the manager of pension assets, the sponsoring undertaking, the supervisor of the manager of pension assets and the sponsoring undertaking, members of the supervisory board or the employees of the pension association (and their spouses).   It shall also be prohibited to acquire assets from persons specified in this paragraph using the funds from the pension fund.
 
Article 19. Deductions from Pension Assets
1. Remuneration for management and having the custody of pension assets, as well as other expenses related to the management of pension assets may be covered from pension assets.
2. Only the expenses that are related to management of pension assets and having the custody of them and whose finite list is provided for in the pension fund rules may be covered from pension assets. The total amount of these expenses cannot exceed the maximum amounts set in the pension fund rules.
 
Article 20. Specific Features of Pension Funds Managed in accordance with Social Security and Labour Legislation of other Member States
Pursuant to the requirements of social security and labour legislation of another Member State (the host Member State), Chapter IV and Chapter V shall not apply to pension funds of a pension association established in the Republic of Lithuania, if compliance with the requirements of these Chapters would mean breach of social security and labour legislation of the host Member State. In any case, the pension association shall immediately notify the Securities Commission about the changes in the pension fund rules, the terms and conditions and other equivalent documents.
 
Article 21. Dissolution of a Pension Fund
1. A pension fund may be dissolved by decision of a body authorised by a pension association or the court, if:
1) a sponsoring undertaking(s) fail to perform the assumed obligations;
2) the number of the participants in the pension fund has decreased to the extent that its further management does not comply with the interests of the remaining participants in the pension fund;
3) there are other serious reasons due to which further management of the pension fund does not comply with the interests of its participants.
2. A prior authorisation from the Securities Commission has to be obtained in order to dissolve a pension fund.
3. The Securities Commission shall have the right to apply to the court for the dissolution of a pension fund.
4. An entity, which has adopted the decision to dissolve a pension fund, shall appoint an administrator responsible for the sale of the pension assets of the dissolved pension fund and for  settlement with the participants.
5. The participants in the pension fund of this association, the sponsoring undertakings and the Securities Commission shall be notified in writing about the decision of the court, or the body authorised by the pension association, to dissolve the pension fund not later than within three days from adopting such a decision. 
6. Upon taking the decision to dissolve the pension fund, the date for dissolving the pension fund shall be set.  The date shall be not earlier than three months after taking the respective decision.   Upon taking the decision to dissolve the pension fund, the duty of the sponsoring undertaking to pay contributions shall cease from the day of entry into force (coming into effect) of the decision.  
7. The participants in a pension fund, which is to be dissolved, shall be notified hereof not later than one month prior to the dissolution of the pension fund and information about the possibilities of participating in other pension funds of the same or another pension association or accumulating occupational pensions in life assurance undertakings shall be provided.  Until the day when the pension fund is dissolved, a participant shall have a right to transfer to another pension fund established in accordance with this Law by transferring the share of the pension assets belonging to him or to transfer these funds to a life assurance undertaking and continue the accumulation of occupational pensions under a life assurance contract.
8. The assets of a pension fund, which is to be dissolved, shall be distributed to the participants in proportion to the value of the assets calculated for them according to the data of the day when the pension fund is dissolved. The pension assets of the pension fund shall be sold and the participants shall be paid in cash.  The pension assets of the pension fund, which is to be dissolved, shall be sold in the regulated market, or at the auction, in accordance with the rules set by the Securities Commission seeking the best result possible for the participants.
9. Not later than within two weeks after the dissolution of the pension fund, the administrator shall submit to the Securities Commission a report on the discharge of duties stipulated in this Article.
10. Where a pension association has only one pension fund, when making the decision on the dissolution of the pension fund, the issue of restructuring or liquidating the pension association has to be settled as well.
 
CHAPTER V
MEMBERSHIP IN A PENSION ASSOCIATION AND PARTICIPATION IN A PENSION FUND
Article 22. Beginning of the Membership in a Pension Association and Participation in a Pension Fund
1. Membership in a pension association and participation in a pension fund shall begin upon joining a pension association and selecting a pension fund of the pension association, as provided for in the Articles of Association or the pension fund rules.   A person may become participant in a pension fund of a pension association only if he becomes member of that pension association.
2. A pension association shall be responsible for proper selection and training of the persons providing information about the accumulation of pensions in occupational pension funds and/or concluding agreements with the participants in pension funds and it shall ensure that these persons have relevant qualifications.
3. If the task of providing information about the accumulation of pensions in occupational pension funds and/or concluding agreements with the participants in pension funds on behalf of the pension association is delegated to the manager of pension assets, the requirements laid down in paragraph 2 of this Article shall also apply in respect of the manager of pension assets.  The Securities Commission shall have the right to set qualification requirements for persons providing information about the accumulation of pensions in occupational pension funds and/or concluding agreements with the participants in pension funds on behalf of the pension association.
4. The Articles of Association and/or the pension fund rules may provide for a minimum period of employment relations with a sponsoring undertaking upon the completion of which a person is entitled to become member of the pension association and participant in the pension fund.  This period may not exceed twelve months.
5. The Articles of Association and/or the pension fund rules may provide for a minimum age requirement and a person who has not reached this age cannot become member of the pension association and participant in the pension fund.  This age cannot be more than twenty-one years.
 
Article 23. Protection of the Rights and Interests of the Participants in Pension Funds
1. It shall be prohibited to set in the Articles of Association of a pension association and the pension fund rules the terms and conditions for participation that contradict to the principle of equality between women and men.  It shall be considered that the principle of equality between women and men has been violated, if the following aspects were set on the grounds of gender:
1) persons who can participate in a pension fund;
2) compulsory or non-compulsory participation in a pension fund;
3) different rules concerning the age upon reaching of which a person may become participant in a pension fund or concerning the minimum period of participation;
4) different rules concerning the reimbursement of pension assets or retention of the right to a pension benefit in the case when an employee terminates the participation in the pension fund, except for the cases specified in paragraphs 8 and10;
5) different conditions for awarding pension benefits and restrictions concerning their receiving;
6) different pensionable age;
7) different establishment of the rights (their acquisition) to the share of the pension fund assets accumulated on behalf of the participants for the periods of maternity/paternity leave or any other special-purpose leave for family reasons, when the leave was granted in accordance with the laws or the contract and the employer is paying the contributions during the above-mentioned period;
8) different amounts of benefits, unless it is necessary to take into consideration the factors of actuarial calculation, which differ in the defined benefits pension fund according to gender;
9) different amounts of contributions of the participants, except for contributions for biometrical risks insurance when it is necessary to take into consideration the factors of actuarial calculation, which differ according to gender;
10) different amounts of contributions of a sponsoring undertaking except for the defined contributions pension funds where it is sought to make the amount of the final benefits as similar as possible for the participants of both genders and in the case of the defined benefits pension funds where the contributions of a sponsoring undertaking are used to ensure adequacy of funds required to cover the costs of guaranteed benefits.
2. The prohibition set in paragraph 1 of this Article shall not be applicable to the rules and the Articles of Association of pension funds where the pension accumulation is carried out solely from contributions voluntarily paid by its participants.  
3. The prohibition set in paragraph 1 of this Article shall not preclude from awarding a supplement to the pension benefit to persons who have already attained the pensionable age entitling them to receive the pension benefit under the Articles of Association of a pension association and/or the pension fund rules, but who have not yet attained the pensionable age entitling them to receive the old-age pension from the budget of the State Social Insurance Fund or the state budget.  If it is established in the Articles of Association of the pension association and/or the pension fund rules that men and women participating in the same pension fund under the same conditions have a right to choose from what age to receive pension benefits from the accumulated funds, it shall not be considered as a contradiction to the imperative provisions of paragraph 1 of this Article.
4. It shall be prohibited to set in the Articles of Association of a pension association and the pension fund rules the provisions under which an employee who changed the sponsoring undertaking and started to work in another Member State and consequently he (or his former employer) terminated the payment of contributions into the pension fund would lose the share of the pension assets belonging to him in this pension fund.   It shall be prohibited to set in the Articles of Association of a pension association and the pension fund rules the limitations for a participant who has decided to withdraw from the pension fund and to transfer the share of the pension assets belonging to him to a pension fund managed by an equivalent entity founded in the territory of another Member State. 
5. The payment of pension contributions on behalf of a participant who was posted by a sponsoring undertaking to another Member State shall continue for a period not exceeding the maximum period of posting set in the EU Council Regulation 1408/71/EEC and the participant shall be granted the right to pay contributions to the pension fund, if he was paying them before the business trip.
6. It shall be prohibited to set in the rules of pension funds managed in the Republic of Lithuania the provisions requiring that a posted worker sent by another Member State to perform work in Lithuania participated in a pension fund of a pension association registered in the Republic of Lithuania, if the duration of posting in the Republic of Lithuania does not exceed the maximum period of posting set in the EU Council Regulation 1408/71/EEC. 
7. Where a sponsoring undertaking becomes insolvent or bankruptcy proceedings have been initiated against it, the participants in a pension fund shall be entitled to the share of the pension assets accumulated on their behalf even if the minimum period of participation has not yet expired. 
 
Article 24. Secret Information and its Protection 
Information about the contributions, benefits, the status of the pension account of a participant and any other information related to the participant, the disclosure of which may do harm to this person, shall be considered secret.   This information may be provided only to the participant himself, a person authorised by him or state institutions that require it for the fulfilment of their functions, if the laws regulating their activities provide for a possibility of obtaining such information.  
 
Article 25. Pension Contributions
1. The obligation of a sponsoring undertaking concerning the payment of the pension contributions shall be executed in writing.
2. Pension contributions to be paid on behalf of the participants may be paid in cash only.
3. The contributions paid by a sponsoring undertaking shall become property of a participant in a pension fund as of the moment they are converted into the units of account and entered into the pension account, except for the cases when the pension fund rules provide for a minimum period of participation.
 
Article 26. Pension Benefits
1. The participants in a pension fund shall be entitled to a pension benefit only upon attaining the pensionable age specified in the pension fund rules. This age cannot be less than fifty five years.
2. A participant in a pension fund, recognised as a person with incapacity for work or partial incapacity for work by the Disability and Capacity for Work Establishment Office under the Ministry of Social Security and Labour, shall become entitled to pension benefits as of the day of the establishment of the capacity for work level, irrespective of the fact, whether or not the minimum period of participation in the pension fund has already expired.  
3. A participant in a pension fund shall have the right to defer the payment of pension benefits, if this is permitted in the pension fund rules.  Where a participant does not apply in writing for the payment of benefits, it shall be considered that he has exercised his right to defer the payment of benefits. A participant in a pension fund shall have the right to revoke in writing the deferment of the payment of pension benefits.  
4. The payment of pension benefits shall begin within three months from the submission of the documents certifying the right of a participant in a pension fund to pension benefits  (a document certifying the identity of a person indicating therein the birth date of the person or the capacity for work level certificate issued by the Disability and Capacity for Work Establishment Office under the Ministry of Social Security and Labour) and a written request to revoke the deferment of the payment of pension benefits (if the payment of pension benefits has been deferred) to the pension association.
5. Any discrimination in respect of pension beneficiaries on the grounds of their place of residence in a particular Member State shall be prohibited.  It shall be prohibited to establish in the pension fund rules additional deductions for the payment of pension benefits for a pension beneficiary residing in the territory of another Member State, except for the deductions related to the implementation of the tax laws of the Republic of Lithuania and actual deductions for financial transactions related to transfer of pension benefits to the beneficiary.
 
Article 27. Ways of and Procedure for Payment of Pension Benefits
1. Pension benefits may be paid in the following ways:
1) by purchasing a pension annuity in accordance with the procedure set forth by law in an insurance undertaking providing life assurance;
2) by paying a lump sum or periodic pension benefits, if such ways of payment of pension benefits are provided for in the pension fund rules.
2. A pension annuity shall be compulsory where the amount of the basic pension annuity calculated for a participant is not less than one half of the state social insurance basic pension. A pension annuity must be purchased in respect of all pension assets accumulated on behalf of a participant in a pension fund, except for the exceptions specified in this Article. The basic pension annuity shall be calculated in accordance with the procedure set forth in the Republic of Lithuania Law on the Accumulation of Pensions.
3. Where the amount of the basic pension annuity calculated for a participant is less than one half of the amount of the state social insurance basic pension, the participant shall be exempted from the obligation to acquire a pension annuity. This participant shall have the right to receive a periodic or lump sum pension benefit from the pension association.
4. Where the amount of the basic pension annuity calculated for a participant exceeds the amount of three state social insurance basic pensions, the participant shall be entitled to receive an accumulated share of the pension assets which exceeds a lump sum contribution for the acquisition of the basic pension annuity in the amount of three state social insurance basic pensions from a pension association in the form of a periodic or lump sum pension benefit.
5. Taking into consideration the provisions of this Law and the pension fund rules, a participant shall choose the way of payment of the pension benefit. A pension association shall timely notify a participant about the necessity of choosing the way of payment of the pension benefit and specify the life assurance undertaking, which will pay the pension annuity for him.
 
Article 28. Pension Annuity
1. Entitlement to a periodic or lump sum pension benefit according to the provisions of Article 27 of this Law shall not prohibit a participant from acquiring a pension annuity instead of a periodic or lump sum pension benefit.
2. A participant who has to acquire a pension annuity shall have the right to select a payer of the pension annuity. The pension annuity shall be acquired for the amounts calculated in the pension account of the participant upon signing an insurance contract with the payer of pension annuities.  The payer of pension annuities may be an insurance undertaking providing life assurance.
3. A participant shall conclude a pension annuity agreement on the payment of the pension annuity with a life assurance undertaking and, on the grounds of this agreement, the pension association shall pay for the purchase of a pension annuity to the insurance undertaking.
4. The Insurance Supervisory Commission of the Republic of Lithuania shall supervise the payment of pension annuities.
 
Article 29. Other Benefits
The pension fund rules may provide for other benefits of temporary nature like the assistance in case of sickness or poverty, but they cannot account for more than half of the pension assets accumulated on behalf of a participant on the day of applying for such benefit.  
 
 
Article 30. Termination of Participation in a Pension Fund
1. A participant shall have the right to withdraw from a pension association and to terminate his participation in a pension fund.
2. Upon termination of participation in a pension fund, the membership of the person in the pension association shall terminate as well, except for the cases when the pension fund is dissolved as a result of restructuring of the pension association and the person decides not to withdraw from the pension association. 
3. Participation in a pension fund shall terminate where:
1) all the obligations of a pension association arising from the pension fund rules in respect of a participant have been fulfilled;
2) a participant withdraws from the pension fund and does not transfer to another pension fund;
3) a participant transfers (the pension assets accumulated on his behalf are transferred) into another pension fund of the same or another pension association or a life assurance undertaking to continue the accumulation of occupational pensions under a life assurance contract;
4) a participant terminates his membership in the pension association;
5) a participant dies;
6) the pension fund is dissolved.
4. A person, who has terminated legal employment relations with the sponsoring undertaking (the employer), shall have the right to choose:
1) to terminate membership in the pension association and participation in the pension fund and to transfer the pension assets accumulated in the pension fund on his behalf into a pension fund of another pension association or a life assurance undertaking to continue the accumulation of occupational pensions under a life assurance contract;
2) to remain member of the pension association and participant in the pension fund and retain the pension assets accumulated in the pension fund on his behalf until he attains the pensionable age set in the pension fund rules or until the day when he is recognised as a person with incapacity for work or partial incapacity for work by the Disability and Capacity for Work Establishment Office under the Ministry of Social Security and Labour and establishes the capacity for work level, or to continue the accumulation of the pension by paying contributions himself. It shall be prohibited to set in the pension fund rules the requirement for a participant to continue, in such cases, the payment of pension contributions or the limitation to change a pension fund in this pension association.
5. Prior to terminating participation in the pension fund, the pension association shall notify in writing a participant in the pension fund about:
1) the conditions for acquiring the rights to the share of the pension assets accumulated on his behalf and the effect of terminating the employment relations and participation in the pension fund (and membership in the pension association) on these rights;
2) the conditions for retaining the acquired rights to the share of the pension assets accumulated on his behalf;
3) the conditions for transferring the acquired rights to the share of the pension assets accumulated on his behalf;
4) the conditions for receiving pension benefits.
6. Upon termination of participation in a pension fund, the amount of the pension fund assets accumulated on behalf of a participant received after the conversion of the units of account in his pension account into money shall be paid to him or transferred to a pension account in another pension fund, except for the cases when the minimum period of participation has not yet expired and therefore the participant has not yet acquired the ownership rights to the share of the pension assets accumulated in the pension fund on his behalf.
7. In the case when a participant transfers into a pension fund of another pension association or a life assurance undertaking to continue the accumulation of occupational pensions under a life assurance contract, the assets belonging to the participant shall be transferred thereto only when he submits to the pension association an agreement concerning his membership in another pension association or a life assurance contract or a written confirmation that he has entered into a life assurance contract under which occupational pensions are accumulated.  
8. It shall be prohibited for a sponsoring undertaking or any other persons to directly or indirectly limit the right of a participant to terminate his participation in the pension fund (membership in the pension association) or to transfer to another pension fund of the same or another pension association or a life assurance undertaking to continue the accumulation of occupational pensions under a life assurance contract, except for the cases stipulated in this Law. 
 
CHAPTER VI
MANAGEMENT AND PROTECTION OF PENSION ASSETS
 
Article 31. Management of Pension Assets and Pension Assets Management Agreement
1. Management of pension assets shall be delegated to one manager of pension assets under a pension assets management agreement after agreeing on its terms and conditions with the Securities Commission.   Investment managers who are established and operating in any Member State, and are duly authorised to act in compliance with the provisions of the EU Council Directives 85/611/EEC, 93/22/EEC, 2000/12/EC and 2002/83/EC, can become manager of pension assets of a pension fund of a pension association.
2. The custodian of pension assets cannot become manager of pension assets, except for the case provided for in Article 34 of this Law.
3. The following information has to be specified in a pension assets management agreement:
1) the name and the registered office of the manager of pension assets, the name of a pension association, names and surnames of its representative(s) and the grounds for granting  the powers;
2) the objectives and ways of investment activity and the maximum risk;
3) rights and duties of the manager of pension assets;
4) the methodology for the calculation of the remuneration to the manager of pension assets, its amount and payment procedure thereof;
5) a finite list of other pension assets management expenses and the methodology for their calculation;
6) the powers of the manager of pension assets in his relations with the custodian of pension assets and with other institutions;
7) the procedure for and time limits of information exchange;
8) the amount of pension assets to be managed, the composition of the investment portfolio and its market value;
9) liability for non-fulfilment of the assumed obligations;
10) the conditions of and the procedure for termination of the agreement;
4. A pension assets management agreement may be amended only after receiving a prior approval from the Securities Commission in accordance with the procedure set forth by it.
 
Article 32. Custody of Pension Assets
1. Custody of pension assets shall be delegated to one custodian of pension assets.
2. The custodian of pension assets shall have the right to delegate its functions, or a part thereof, to other custodians of pension assets who have the right to provide respective services, but this shall not relieve him of liability.
3. Entities that are established in a Member State and are duly authorised to act in compliance with the provisions of the EU Council Directives 93/22/EEC or 2000/12/EC, or acting as depository with a view to attaining the objectives set in the EU Council Directive 85/611/EEC can become custodian of pension assets.
4. The decision of the Securities Commission adopted on the basis of this Law to restrict or to prohibit the disposal of pension assets shall be binding to the custodian of pension assets as well.  In the case when the custodian of pension assets is operating in another Member State, the Securities Commission, having adopted the decision to restrict or to prohibit the disposal of pension assets, must address a supervisory institution of another Member State, in which the custodian of pension assets is operating, with a request to notify the custodian of pension assets about the requirement of the Securities Commission.
5. The Securities Commission shall have the right to notify the custodians of pension assets operating in the Republic of Lithuania, who have been assigned the function of having the custody of assets of equivalent entities, about the requirement of the supervisory institution concerning the restriction or prohibition to dispose of assets of an equivalent entity.
6. A pension assets custody agreement may be amended only after receiving a prior approval from the Securities Commission in accordance with the procedure set forth by it.
 
Article 33. Duties of the Custodian of Pension Assets
1. The custodian of pension assets must act for the benefit of the participants and:
1) ensure that the conversion of contributions into the units of account of a pension fund and the conversion of the units of account into money would be carried out in compliance with the requirements of legal acts and the pension fund rules;
2) ensure that the value of the units of account of a pension fund would be calculated in compliance with the requirements of legal acts and the pension fund rules;
3) follow the directions of the manager of pension assets, if they do not contravene the requirements laid down in legal acts, the Articles of Association of the pension association and the pension fund rules;
4) ensure that income received from transferred assets would be transferred, over a set period of time, to the account of the pension fund;
5) ensure that the income to pension funds would be used in compliance with the requirements of legal acts and the pension fund rules;
2. The custodian of pension assets shall notify the Securities Commission and the Board of the pension association about any violations of legal acts or the Articles of Association of the pension association or the pension fund rules.
3. The custodian of pension assets shall be held liable for damage caused to the interests of the participants in the pension fund or the beneficiaries if damaged was caused due to failure to perform his duties or improper fulfilment thereof.
 
Article 34. Transfer of Pension Assets Management to the Custodian of Pension Assets
If the right of the manager of pension assets to manage pension assets ceases to exist and the pension assets management is not transferred to another manager of pension assets, the custodian of pension assets shall temporarily take over this obligation. The manager of pension assets shall notify in writing the custodian of pension assets that his right to manage pension assets has ceased to exist.   In such case, the custodian of pension assets shall have all the rights and duties of the manager of pension assets, if not provided otherwise in laws, the Articles of Association of the pension association or the pension fund rules.  The custodian of pension assets shall transfer management to another manager of pension assets within three months from taking over management of pension assets. In case of failure to transfer management of pension assets to another manager of pension assets within three months, the pension association shall face compulsory liquidation.  The Securities Commission shall have the right to apply to the court for compulsory liquidation of a pension association.  
 
Article 35. Replacement of the Manager of Pension Assets and the Custodian of Pension Assets
1. The manager of pension assets and/or the custodian of pension assets shall be replaced only after receiving a prior approval from the Securities Commission in accordance with the procedure set forth by it.
2. If the manager of pension assets and/or the custodian of pension assets do not comply with the requirements set in legal acts, fail to perform or properly perform their obligations, the Securities Commission, seeking to protect the interests of the participants in pension funds, shall have the right to replace the manager of pension assets and/or the custodian of pension assets.
 
CHAPTER VII
SPECIFIC FEATURES OF LIFE ASSURANCE UNDERTAKINGS’ ACTIVITY OF THE ACCUMULATION OF OCCUPATIONAL PENSIONS
 
Article 36. Right of Life Assurance Undertakings to Engage in the Activity of the Accumulation of Occupational Pensions
1. A life assurance undertaking shall have the right to engage in the activity of accumulation of occupational pensions provided it holds a licence issued for the class of insurance of occupational pension accumulation activity within the life assurance branch.
2. The Law on Insurance shall apply to life assurance undertakings engaged in the activity of the accumulation of occupational pensions to the extent this Law does not provide otherwise.
3. The assets and liabilities of life assurance undertakings engaged in the activity of the accumulation of occupational pensions related to this activity shall be separated and administered separately from other activities of the undertaking. The Insurance Supervisory Commission shall set the rules for separate administration of the assets and liabilities related to the activity of the accumulation of occupational pensions.
4. Life assurance undertakings engaged in the activity of the accumulation of occupational pensions shall be subject mutatis mutandis to paragraph 3 of Article 7, paragraphs 4-8 of Article 15, except for the requirement to submit the Articles of Association, Articles 16 and 17, Articles 23-29, Chapter IX, Article 50 and Chapter XII of this Law.  The Insurance Supervisory Commission exercising supervision of life assurance undertakings engaged in the activity of the accumulation of occupational pensions shall perform the same function as the Securities Commission, which supervises the activities of pension associations established in the Republic of Lithuania and the activities of managers of pension assets and it shall be subject mutatis mutandis to Chapter XII of this Law.     
 
 
Article 37. Life Assurance Contracts under which Occupational Pensions are Accumulated
1. Information specified in the Law on Insurance shall be provided in the rules for life assurance contracts under which occupational pensions are accumulated, and also information specified, mutatis mutandis, in paragraph 3 of Article 15 of this Law to the extent it is not specified in the Law on Insurance or is different from the one specified therein. The Insurance Supervisory Commission shall have the right to request other information to be provided in the rules for life assurance contracts under which occupational pensions are accumulated.
2. Life assurance contracts under which occupational pensions are accumulated shall be included into the list of contracts administered by the Insurance Supervisory Commission.
3. Under life assurance contracts under which occupational pensions are accumulated, only the insured person may be beneficiary and in the case of his death, the insurance benefit shall be inherited in accordance with the procedure set forth by laws, except during the period of the minimum period of participation, if such is stipulated in the insurance rules. 
4. Life assurance contracts under which occupational pensions are accumulated shall be concluded, amended and terminated pursuant to the agreement concluded between the employees of the sponsoring undertaking and the sponsoring undertaking (the employer).  Where the sponsoring undertaking terminates a life assurance contract under which occupational pensions are accumulated during the minimum period of participation, if such is stipulated in the insurance rules, the surrender value shall be paid. Where the sponsoring undertaking terminates a life assurance contract under which occupational pensions are accumulated after the expiry of the minimum period of participation, the share of the technical provisions belonging to each insured person shall:
1) be transferred to the specified account of another economic entity entitled to engage in the accumulation of occupational pensions, if a new life assurance contract under which occupational pensions are accumulated is concluded, or if a person became member of a pension association, or 
2) be paid to the insured persons.
5. A life assurance undertaking shall not be entitled to unilaterally terminate life assurance contracts under which occupational pensions are accumulated. Where a sponsoring undertaking, or an insured person, if the insured person himself pays contributions, or a part thereof, fails to pay contributions, or a part thereof, for biometrical risks on the date specified in the life assurance contract, the life assurance undertaking shall notify the sponsoring undertaking or the insured person, if the insured person himself pays contributions, or a part thereof, in writing indicating that in the case of failure to pay the contribution, or a part thereof, within thirty days from the receipt of the notification, the insurance cover for biometrical risks shall be suspended and renewed only upon payment of the contribution, or a part thereof.   A time limit longer that the one specified in this paragraph may be stipulated in the life assurance contract under which occupational pensions are accumulated.
6. The words “occupational pensions”, “the accumulation of occupational pensions under a life assurance contract” or any other combination of these words or their derivatives may only be used in the name or advertisement of such life assurance contracts, which are included in the list specified in this Article.
 
Article 38. Insurance Benefits
Payment of insurance benefits, other than those provided for in Articles 27 and 29 of this Law may be stipulated in life assurance contracts under which occupational pensions are accumulated. Such insurance benefits shall be subject to the provisions of Chapter V of the Law on Insurance.
 
Article 39. Technical Provisions and Assets to Cover them
1. Life assurance undertakings engaged in the activity of the accumulation of occupational pensions shall be subject mutatis mutandis to the provisions of Articles 43-45 of this Law.  The Insurance Supervisory Commission shall set the procedure for the establishment of technical provisions for accumulation of occupational pensions.
2. Technical provisions for the accumulation of occupational pensions shall be covered by assets in accordance with the provisions of Article 35 of the Law on Insurance.
 
Article 40. Supervision of Life Assurance Undertakings Engaged in the Activity of the Accumulation of Occupational Pensions
1. Supervision of life assurance undertakings engaged in the activity of the accumulation of occupational pensions shall be carried out by the Insurance Supervisory Commission in accordance with the procedure set forth in the Law on Insurance.
2. In addition to other legal acts required for the implementation of this Law, the Insurance Supervisory Commission shall adopt the following legal acts:
1) a description of the procedure for including in and removal from the list of life assurance contracts under which occupational pensions are accumulated that are administered by the Insurance Supervisory Commission;
2) a description of the procedure for transfer of the rights and duties of life assurance undertakings arising from life assurance contracts under which occupational pensions are accumulated to other entities that have the right to engage in the activity of the accumulation of occupational pensions.
 
CHAPTER VIII
SPECIFIC FEATURES OF MANAGEMENT OF THE DEFINED BENEFITS PENSION FUNDS
 
Article 41. The Scope
1. This Chapter shall apply to pension associations established in Lithuania (where the home Member State is the Republic of Lithuania) that have obtained authorisation from the Securities Commission in accordance with the procedure set forth in Article 57 of this Law to manage the defined benefits pension funds located in other Member States in compliance with social security and labour legislation currently in force by accepting contributions to these funds from sponsoring undertakings located in other Member States.  
2. This Chapter shall apply to management of the defined benefits pension funds.
3. Where, under the pension fund rules, the payment of pension benefits is guaranteed by the sponsoring undertaking, the authorisation to manage such pension fund may be granted only if the sponsoring undertaking has undertaken to regularly pay contributions and explicit rules for such guarantee are set.  
4. Management and administration of the defined benefits pension funds has to be separated from management and administration of other pension funds.
5. The provisions of Chapters IV and V of this Law shall apply to management of the defined benefits pension funds to the extent they do not contradict legal requirements of the Member State, under whose social security and labour legislation the pension fund is managed, and the essence of the defined benefits pension funds. 
 
Article 42. Actuary
1. A pension association that manages a defined benefits pension fund must have an actuary (insurance mathematician). The actuary must:
1) ensure that pension contributions are calculated and technical provisions of the pension fund are established in accordance with principles and requirements set in or recognised by legal acts;
2) check whether the pension association is capable, at any time, of fulfilling its duties arising from the defined benefits pension fund rules and whether it satisfies other requirements laid down in legal acts regulating management of the defined benefits pension funds;
3) seek that coverage of technical provisions with assets corresponded with the type of the pension fund and met the requirements set in legal acts, and provide consultations to the Board of a pension association and the Board of the manager of pension assets on this issue;
4) submit, at least once per quarter, to the Board of a pension association and the Board of the manager of pension assets the reports in the form established by the Board of the pension association on the status of coverage of technical provisions with assets and the status of compliance with the requirements set in Article 45 of this Law;
5) submit to the Securities Commission the reports in the form established by it and in compliance with frequency and procedure set by it;
6) act in accordance with the Code of Professional Ethics approved by a professional organisation of actuaries.
2. Having identified a real threat that a pension association may no longer be capable, at any time, of fulfilling its duties arising from the defined benefits pension fund rules, an actuary shall immediately notify hereof the Board of the pension association and, in case it fails, without delay, to undertake actions to remedy the situation - the Securities Commission.
3. It shall be ensured that an actuary can get access to all the information and documents necessary for the fulfilment of his duties. 
4. Other rights, duties and responsibilities of an actuary shall be established in the rules of procedure of actuaries approved by the Board. 
 
Article 43. Technical Provisions
1. A pension association shall ensure that all the defined benefits pension funds managed by it have the required amount of assets corresponding to financial obligations arising from the rules of a defined benefits pension fund of the pension association.
2. A pension association which manages a defined benefits pension fund shall establish adequate technical provisions for all defined benefit pension funds managed by it.
3. Technical provisions shall be calculated annually.  Technical provisions can be calculated once per three years, if declaration or reports on re-calculation during the interim years are submitted to the Securities Commission. The declaration or report has to reflect an adjusted change in technical provisions and the changes in covered risks.
4. Calculation of technical provisions shall be performed and approved by an actuary or any other specialist in this field, including an auditor, on the basis of actuarial methods recognised by the Securities Commission and according to the following principles:
1) the minimum amount of technical provisions shall be calculated by a sufficiently prudent actuarial valuation taking into consideration all the obligations of a pension association arising from the rules of a defined benefits pension fund. This amount must be sufficient to continue the payment of pension benefits to beneficiaries and it has to reflect the obligations arising from the accrued rights of the participants to a pension benefit.  The economic and actuarial assumptions used for the valuation of the obligations shall also be chosen prudently, considering, if applicable, an appropriate margin for adverse deviation;  
2) the maximum rates of interest used shall be chosen prudently and determined in accordance with all the legal acts effective in the Republic of Lithuania.  These prudent rates of interest shall be determined by taking into account the yield on the investment of pension assets and the future investment returns and/or the market yields of high-quality or government bonds;
3) the biometric tables used for the calculation of technical provisions shall be based on prudent principles, take into consideration the main characteristics of the group of participants and of the defined benefits pension funds, in particular the expected changes in the relevant risks;
4) the method and basis of calculation of technical provisions shall usually remain the same from one financial year to another.  However, amendments may be justified, if legal, demographic or economic circumstances underlying the main assumptions change.
5. The Securities Commission may provide for additional and more explicit requirements for the calculation of technical provisions to ensure adequate protection of interests of the participants and beneficiaries.  
 
Article 44. Coverage of Technical Provisions
1. Technical provisions shall, at all times, be fully covered by assets in respect of the total scope of obligations of a pension association to the participants in a pension fund arising from the defined benefits pension fund rules.
2. If this requirement is not satisfied, the Securities Commission shall undertake the required measures in accordance with the provisions of Article 54 of this Law.
3. The share of assets and obligations related to each defined benefits pension fund shall be separated and shall be accounted separately.
 
Article 45. Regulatory Own Funds
1.  A pension association which manages a defined benefits pension fund, where it itself, not the sponsoring undertaking, assumes the liability to cover against biometric risk, or guarantees a given investment performance or a given level of benefits, shall hold on a permanent basis additional assets above the technical provisions to serve as a buffer.  The amount thereof shall reflect the type of risk and the asset base in respect of the total number of the defined benefits pension funds of the pension association.   These assets shall be free of all foreseeable liabilities and serve as a safety capital to absorb discrepancies between the anticipated and the actual expenses and profits.
2. The minimum amount of the additional assets shall be calculated in accordance with the procedure laid down in Article 39 of the Law on Insurance.  
 
CHAPTER IX
INVESTMENT RULES
 
Article 46. Investment Policy Principles
1. Investment policy principles of a pension fund of a pension association shall be revised at least once per year and, where necessary, amended.  The principles must be immediately amended, if material changes in the investment policy occur.  
2. Investment policy principles must provide for at least the following aspects:
1) the procedure for the investment of pension assets and the fields of investment;
2) risk assessment methods;
3) the applied risk management procedures and methods;
4) strategic distribution of pension assets in accordance with the nature and duration of the obligations arising from the pension fund rules.
 
Article 47. Basic Investment Rules
1. Pension assets shall be invested in accordance with the "prudent person" rule and, in particular, in accordance with the following requirements:
1) the assets shall be invested in the best interests of the participants and beneficiaries. In the case of a potential conflict of interest, the manager of pension assets shall ensure that the investments are made solely in the interests of the members and beneficiaries;
2) the assets shall be invested in such a manner as to ensure security, quality, liquidity and profitability of the portfolio as a whole. The assets of a pension association held to cover technical provisions shall also be invested in a manner appropriate to the nature and duration of the expected future pension benefits;
3) the assets shall be predominantly invested on regulated markets. Investment in assets that are not admitted to trading on a regulated financial market must in any event be kept to prudent levels;
4) investments in derivative instruments shall be possible insofar as they contribute to a reduction of investment risks or facilitate efficient portfolio management. They must be valued on a prudent basis, taking into account the underlying asset, and included in the valuation of pension assets.  Excessive risk exposure to a single counterparty and to other derivative operations shall be avoided.
5) the assets shall be properly diversified in such a way as to avoid excessive reliance on any particular asset, issuer or group of undertakings and accumulations of risk in the portfolio as a whole. Investments in assets issued by the same issuer or by issuers belonging to the same group shall not expose the pension fund to excessive risk concentration;
6) investments in the sponsoring undertaking shall be no more than 5 % of the portfolio as a whole and, when the sponsoring undertaking belongs to a group, investment in the undertakings belonging to the same group as the sponsoring undertaking shall not be more than 10 % of the portfolio. When a pension association is sponsored by a number of undertakings, investment in these sponsoring undertakings shall be made prudently, taking into account the need for proper diversification.
2. The Securities Commission shall have the right to approve recommendations for the application of the "prudent person" rule specified in paragraph 1 of this Article.
3. The requirements laid down in subparagraphs 5 and 6 of paragraph 1 of this Article shall not apply in respect of investments in the government securities.  
4. It shall be prohibited to borrow on behalf of a pension association, except for loans in the value of up to 10 % of the net assets of a pension fund and for a period of up to three months, and solely for liquidity purposes.  This shall not mean a prohibition to borrow foreign currency for which securities or money market instruments will be acquired, if an equivalent amount in another currency is given to the lender to secure the loan.
5. It shall also be prohibited to pledge the pension assets, use it as a guarantee or surety for the discharge of obligations of other persons.
6. The pension fund assets may not be used to conclude contracts on transfer of securities or money market instruments, which it does not own.
 
Article 48. Restrictions on Investment
1. Up to 70% of the assets covering technical provisions or of the whole portfolio of the pension funds whose participants bear the investment risks (paragraph 2 of Article 2 of this Law) may be invested in shares, negotiable securities treated as shares and corporate bonds admitted to trading on regulated markets.  A pension association shall have a right to decide on the relative weight of these securities in its investment portfolio.
2. The limit of 70% set in paragraph 1 of this Article may be increased with an authorisation granted by the Securities Commission, if, in such a case, the compliance with the “prudent person” rule specified in Article 47 of this Law is ensured and the interests of the participants and beneficiaries are not jeopardized.
3. Up to 30% of the assets covering technical provisions may be invested in assets denominated in currencies other than those in which the liabilities are expressed.  
4. It shall be prohibited to invest more than 30% of the net assets of a pension fund in shares and other securities treated as shares and in debt securities that are not admitted to trading on regulated markets and not less than 70% of the net assets of the pension fund - in shares and other securities treated as shares and in debt securities that are admitted to trading on regulated markets.
5. Not more than 5% of the net assets of a pension fund can be invested in shares and other securities treated as shares, bonds, debt securities and other money and capital market instruments issued by the same entity and also not more than 10% - in shares and other securities treated as shares, bonds, debt securities and other money and capital market instruments issued by entities belonging to the same group.
6. Not more than 30% of the net assets of a pension fund can be invested in assets denominated in currencies other than those in which the liabilities are expressed.
7. Pension assets can be invested in risk capital markets.
8. The Securities Commission shall have the right to set more stringent investment rules provided they are prudentially justified, in particular in the light of the liabilities entered into by a pension association.
9. In the event a pension association established in the Republic of Lithuania is engaged in cross-border activities, as referred to in Article 57 of this Law, and legal acts of the host Member State provide for special investment rules applicable in the case of cross-border activity, while pursuing its activities, the pension association shall adhere to these rules when investing the share of assets that corresponds to the volume of its cross-border activities. In such case, the assets, in respect of which special rules are applied, shall be separated from other assets.
 
 
CHAPTER X
DISCLOSURE OF INFORMATION
 
Article 49. Annual Financial Statements and Annual Activity Reports
1. A pension association shall draw up and, within four months from the end of the reporting financial year, announce in the national newspaper, specified in the Articles of Association, the annual financial statements and the annual activity report approved by the general meeting of the members of the pension association considering each and every pension fund of the pension association and, where applicable, the annual financial statements and the annual activity reports concerning each pension fund.
2. The procedure for accounting and drawing up financial statements of own assets and the pension assets of a pension association shall be laid down by the Government or an institution authorised by it.
3. The annual financial statements and the annual activity reports shall be drawn up to reflect a real and accurate situation of pension assets, the liabilities of a pension association and its financial status.  
4. Information provided in the annual financial statements and the reports has to be coherent, comprehensible, accurate and signed by the members of the Board of a pension association.  
5. The data contained in the annual financial statements must be audited.  The auditor’s report, including the reservations, shall be presented as a supplement to the report.  The auditor’s report must state, whether the value of the net assets is being calculated properly, whether the pension assets have been invested in accordance with the set rules, and enumerate all the violations of this Law and other legal acts that have been identified. Upon the request of the Securities Commission, the pension association and/or the auditor must submit to it the full report on audit as well as the explanations concerning own assets of the pension association and the financial statements of a pension fund.
 
Article 50. Information Provided to the Participants and Beneficiaries
1. Pursuant to the procedure set forth in the Articles of Association of a pension association and/or the pension fund rules, at least once per every calendar year, every participant in a pension fund must be informed in writing, or in any other manner requested by the participant, about the amount of contributions paid on his behalf (specifying the payer(s) of contributions), the distribution of the share of contributions and the amount of the pension assets calculated in his pension account (the number of the units of account and the value thereof), the annual return on investment, the amount of the deducted taxes and a brief description of the state of the pension association.
2. Upon the request of the participants, the beneficiaries or their representatives, the annual financial statements and the annual activity report specified in Article 49 of this Law and, where a pension association is managing more than one pension fund – a report related to a particular pension fund, the investment policy principles and the pension fund rules shall be submitted to them.
3. Upon the request of a participant, comprehensive and essential information about the following aspects shall be submitted to him:
1) if applicable, the anticipated amount of pension benefits;
2) the amount of benefits that he is entitled to receive, where the employment relations with the sponsoring undertaking are terminated;
3) where a participant assumes the investment risk – about the choice of investment possibilities, if applicable, and about the actual investment portfolio, as well as information about the probability of the risk and the expenses related to investments;
4) the terms and conditions applied in the case when a participant transfers into a pension fund of another pension association due to termination of employment relations.
4. A pension association shall properly inform the participants in a pension fund about their rights as of the participants in the pension fund.  Opportunities to receive comprehensive information that helps evaluate what impact on their right to pension benefits would have transfer to a new job in another Member State and transfer to another pension fund in that state shall be provided to the participants, as well as all the information, if available, about the alternatives (information about a possible fee for the participation in a pension fund of a pension association or a fee for transfer of the accumulated pension assets through a credit institution, and about the share of the pension assets belonging to them, which they would receive, if they acquired the right to the benefit on the day of application, and etc.). Information shall be submitted free of charge to a requesting participant within two months from the day of applying. If the participant has already applied for such information to the pension association over the last twelve months, it can request the applicant to pay a fee for provision of information in the amount set in the pension fund rules.  The fee, in all the cases, cannot exceed the amount of the compulsory expenses related to the submission of information.
5. Each person who retires or becomes entitled to benefits on any other basis shall receive information about the pension benefits that he is entitled to and the respective options.
 
Article 51.   Information Submitted to the Securities Commission
1. A pension association shall file with the Securities Commission, in accordance with the procedure set forth by it, the following periodic reports about its activities and financial status:
1) the annual financial statements and the annual activity report within four months after the end of the reporting financial year;
2) financial statements and a report for the first six months of each financial year (a half-yearly report) within two months after the end of the reporting half-year.
2. Upon the request of the Securities Commission, a pension association shall prepare financial reports for the indicated period.
3. The Securities Commission shall establish the requirements for the content of the periodic reports and other reports, as well as the procedure for their filing with the Securities Commission, and shall also have the right to request for other mandatory periodic reports and documents and to give a more detailed description of the procedure for filing them.
 
CHAPTER XI
SUPERVISION OF THE ACTIVITIES OF PENSION ASSOCIATIONS
 
Article 52.   Supervisory Institution
1. The Securities Commission shall supervise the activities of pension associations established in the Republic of Lithuania and the managers of pension assets and it shall also be responsible for cross-border activities specified in Article 57.
2. The Securities Commission shall perform supervisory functions in accordance with this Law and the Law on Securities Market and shall assume the rights and duties provided for in this Law and other laws.
3. Acts or omissions committed by the Securities Commission may be appealed against in accordance with the procedure laid down in the Law on Administrative Proceedings.
4. The Securities Commission shall perform the following functions:
1) draft, approve, amend or repeal legal acts provided for in this Law;
2) provide official explanations and recommendations on issues relating to the activities of pension associations;
3) include pension associations in the List of Pension Associations and remove them from this List;
4) monitor, analyse, inspect and supervise in any other way the activities of pension associations;
5) issue mandatory instructions on the elimination of violations of legal acts, and apply any other sanctions provided for in this Law and other laws;
6) perform other functions established by this Law and other laws.
5. The Securities Commission, acting in the interests of the members of a pension association, shall have the right to apply to the court for the protection of the public interest.
6. The Securities Commission, when exercising supervision of the activities of pension associations shall have the following rights:
1) to receive from natural or legal persons the information and explanations required for the fulfilment of supervision functions;
2) to receive from a pension association, or persons authorised to act on behalf or for the account of the pension association, any information on issues related to the activities of the pension association;
3) to supervise interrelations between a pension association and other persons, where certain functions of the pension association have been delegated to these persons, if this influences the financial status of the pension association or is directly related to efficient supervision;
4) to regularly receive from the pension association and the manager of pension assets the information about the investment policy principles of a pension fund, the annual financial statements and the annual activity reports, as well as other documents and reports required for supervision;
5) to carry out on-site inspections in the premises of the pension association and of the delegated functions with a view to establishing whether the activities have been undertaken in compliance with the requirements laid down in legal acts;
6) for performing their functions, to use the services of competent persons and grant them the required powers;
7) to impose sanctions on persons responsible for management of the pension association, including administrative and financial ones, that are adequate and necessary for preventing violations that jeopardize the interests of the participants and beneficiaries, or for eliminating the already committed ones.
7. The Securities Commission, when carrying out supervision of pension associations that manage the defined benefits pension funds shall consult and cooperate with the Republic of Lithuania Insurance Supervisory Commission.
8. The Securities Commission, when performing the functions stipulated in Article 57 of this Law and providing information about the effective social security and labour legislation applicable in the field of occupational pensions in Lithuania, shall cooperate with the Ministry of Social Security and Labour. The Ministry shall provide information about the requirements of social security and labour legislation the compliance with which is mandatory for equivalent entities operating in other Member States, which accept contributions from a sponsoring undertaking located in the Republic of Lithuania, and shall notify thereof the Securities Commission.   The Ministry of Social Security and Labour shall also notify the Securities Commission about all the significant amendments introduced in social security and labour legislation in the field of occupational pensions.
 
Article 53.   The Right of the Securities Commission to Carry out Inspections
1. The Securities Commission, with a view to determining compliance of pension associations and other persons with this Law and subordinate legal acts adopted on its basis, shall have the right to organise and carry out inspections.
2. During an inspection, the employees of the Securities Commission shall have the right:
1) to receive explanations, orally or in writing, from persons involved in the violations under investigation and request them to arrive at the office premises of the employee carrying out the inspection to give explanations;
2) upon producing their certificate of employment and a reasoned decision of the Securities Commission, or an employee authorised by it, to carry out an inspection/audit, freely enter the premises of a pension association, the manager of pension assets, the custodian of pension assets, and other legal entities related to the alleged violations, inspect the documents, record books, and other sources of information needed for the inspection and, on the basis of the collected evidence, to receive expert opinion from appropriate institutions;
3) to require copies of accounting documents, agreements, orders and other documents which are considered by the Securities Commission important for the investigation;
4) to temporarily seize documents of the pension association, the manager of pension assets, the custodian of pension assets undergoing inspection that may be used as evidence of violations, leaving a motivated decision for taking the documents and a list of documents that have been taken;
5) upon producing a motivated decision of the Securities Commission, to obtain from banking institutions data, certificates and copies of documents of financial operations related to the entity under investigation.
3. For the purpose of exercising the rights stipulated in paragraph 2 of this Article, the Securities Commission shall have the right to be accompanied by police officers.
 
Article 54.   Sanctions that can be Imposed on Pension Associations
The Securities Commission shall have the right to impose the following sanctions on pension associations:
1) to warn about the shortcomings and violations of their activities and to set a deadline to eliminate them;
2) to impose administrative penalties on managers or employees;
3) to impose fines provided for under this Law;
4) to limit the activities of a pension association;
5) to prohibit the activities of a pension association and to remove it from the List of Pension Associations;
6) to restrict or prohibit the disposal of pension assets;
7) to impose an obligation to replace the manager of pension assets and/or the custodian of pension assets;
8) with a view to protecting the interests of the participants in pension funds and the beneficiaries, to restrict all, or a part of, the powers of the persons who manage the pension association and to delegate these powers that have been granted to them by law to a special authorised representative.
 
Article 55.   Basis for Imposing Sanctions
1. The sanctions provided for in this Law may be applied where at least one of the following grounds exists:
1) a pension association has provided false information to the Securities Commission;
2) the information or documents necessary for supervision have not been provided to the Securities Commission;
3) the conditions under which the authorisation to operate has been granted are no longer met;
4) the laws or other legal acts of the Republic of Lithuania have been violated;
5) the pension association has failed to properly protect the interests of the participants in pension funds and the beneficiaries;
6) the conditions for the activities of the pension association are no longer met;
7) the pension association materially breaches its duties;
8) in case of cross-border activities, where a pension association fails to meet the requirements of social security and labour legislation of the host Member State applied in the field of occupational pensions.
2. The choice of a sanction shall depend on the character of a violation for which it is applied, the impact of the violation and the consequences of the application of the sanction on the pension association, on the interests of the participants and beneficiaries and the security of the financial system. The issue of the imposition of sanctions shall be considered following a prior notice to the pension association, which has to have a possibility to present explanations. Failure of the representative of the pension association to appear to the hearing of the issue, or to provide explanations, shall not preclude from taking the decision to impose sanctions.
3. Any decision to impose sanctions shall be reasoned and a pension association shall be notified thereof.
4. A decision to impose sanctions may be taken provided that no more than two years have passed from the date when the violation was committed, while in the cases of a continuing violation – no more than two years have passed from the date the violation became known.
 
Article 56.   Fines for Violating the Law
Pursuant to the procedure set forth in Article 62 of the Law on Securities Market, the Securities Commission shall have the right to impose fines on:
1) legal entities not included in the List of Pension Associations or for those that have been removed from the List, but are operating as pension associations – up to LTL 100 000.
2) legal entities, if they are operating as managers of pension assets without the authorisation granted by the Securities Commission – up to LTL 100 000;
3) natural persons (members of the management bodies, a liquidator, actuary, auditor) who have violated this Law – up to LTL 20 000;
4) persons who fail to follow the lawful instructions given by the Securities Commission – up to LTL 30 000.
 
CHAPTER XII
CROSS-BORDER ACTIVITIES AND COOPERATION
 
Article 57.   Cross-border Activities
1. Sponsoring undertakings of the Republic of Lithuania shall have the right to pay contributions to equivalent entities that have been granted an authorisation to operate in another Member State in compliance with the provisions of paragraph 2 of this Article and social security and labour legislation of the Republic of Lithuania.
2. A pension association established in the Republic of Lithuania shall have the right to accept contributions from sponsoring undertakings located in the territory of other Member States, if prior authorisation from the Securities Commission has been obtained.
3. When applying for prior authorisation to accept contributions from sponsoring undertakings located in the territory of other Member States, a report containing the following information has to be submitted to the Securities Commission:
1) the host Member State for a Member State(s) in the territory(ies) whereof entities from which contributions (financing) are to be accepted are located;
2) the name of the sponsoring undertaking;
3) the main specific features of a pension fund into which the sponsoring undertaking will be paying contributions;
4. Upon receiving the notification specified in paragraph 3 of this Article, provided there are no reasons to doubt whether the administrative structure, or financial situation of a pension association, or good repute, professional qualification or experience of persons who manage the pension association is compatible with the activities offered to be undertaken in the host Member State, the Securities Commission shall, within three months from the receipt of all the information specified in paragraph 3 of this Article, transfer it to a competent supervisory institution of the host Member State and notify thereof the pension association.
5. The Securities Commission shall manage the List of Pension Associations, where information about the Member States in which cross-border activities are allowed is compiled.
6. If a competent supervisory institution of another Member State, which has received such notification from the Securities Commission, within two months informs the Securities Commission about the requirements of social security and labour legislation effective in that particular Member State and applied in the field of occupational pensions, and in accordance with which a pension fund, to which sponsoring undertakings located in the territory of that Member State will pay contributions, has to be managed, the investment rules applicable in that Member State in respect of pension funds of pension associations or equivalent entities of other Member States, the requirements for the provision of information to the participants and beneficiaries, the Securities Commission shall immediately forward this information to the representatives of the pension association. 
7. Having received the notification specified in paragraph 6 of this Article, or where no notification is received from the Securities Commission upon the expiry of the period specified in paragraph 6 of this Article, a pension association may commence management of a pension fund sponsored by a sponsoring undertaking in the host Member State in compliance with the requirements of social security and labour legislation effective in the host Member State and applied in the field of occupational pensions, and all the rules that are applied in that Member State in respect of investment made by pension funds of pension associations or equivalent entities of other Member States, as well as in respect of the provision of information to the participants and beneficiaries.  
8. Where the Securities Commission receives a notification from a competent supervisory institution of another Member State about the intention of an equivalent entity registered in that Member State to accept contributions from a sponsoring undertaking of the Republic of Lithuania, it shall, within two months from the receipt of such notification, inform the competent supervisory institution of that Member State about the requirements of social security and labour legislation applied in the field of occupational pensions, in compliance with which a pension fund, into which contributions are paid by sponsoring undertakings of the Republic of Lithuania, must be managed, and about the investment rules that are applied in respect of pension funds of equivalent entities in Lithuania, as well as the requirements for the provision of information to the participants and beneficiaries.
9. The Securities Commission must notify competent supervisory institutions of the home Member State of an equivalent entity about any substantive amendments to the requirements of social security and labour legislation effective in that particular Member State and applied in the field of occupational pensions that may have impact on the characteristics of pension funds to the extent this is related to management of pension funds financed by a sponsoring undertaking of the Republic of Lithuania, and about any amendments to the rules concerning investment and the provision of information to the participants and beneficiaries.
10. The Securities Commission, acting in cooperation with the Ministry of Social Security and Labour, shall continuously supervise whether the activities of equivalent entities which manage pension funds financed by sponsoring undertakings of the Republic of Lithuania meet the requirements of social security and labour legislation, as well as the requirements for the provision of information to the participants and beneficiaries.  
11. If the Securities Commission, while carrying out supervision specified in paragraph 10 of this Article, identifies violations, it shall immediately notify thereof a competent supervisory institution of the home Member State of an equivalent entity, which, coordinating its actions with the Securities Commission, shall undertake measures to ensure that the equivalent entity would terminate the identified violation of social security and labour legislation. 
12. The Securities Commission, coordinating its actions with a competent supervisory institution of the host Member State, shall also immediately undertake all the measures required to ensure that a pension association registered in the Republic of Lithuania, which manages a pension fund and accepts contributions from a sponsoring undertaking located in the territory of another Member State, would terminate violations about which the competent supervisory institution of that Member State has informed the Securities Commission.
13. If, despite the measures undertaken by a competent supervisory institution of the home Member State, or where the home Member State lacks relevant measures, an equivalent entity continues to violate the requirements of social security and labour legislation applied in the field of occupational pensions, the Securities Commission, having notified thereof the competent supervisory institution of the home Member State, may undertake measures necessary for preventing further violations, or those used to punish for violations, including, where necessary, to prevent the equivalent entity from operating in the Republic of Lithuania.    
 
Article 58. Final provisions
1. This Law shall enter into force 3 months after the date of the publication thereof in the official gazette Valstybės žinios.
2. The Government of the Republic of Lithuania, or an institution authorised by it, the Securities Commission and the Insurance Supervisory Commission shall draft, prior to the entry into effect of this Law, and approve legal acts required for the implementation of this Law.   
3. Budgetary institutions may assume obligations concerning the accumulation of occupational pensions, regulated by this Law, for their employees only if they have the appropriations allocated for this purpose.
 
I promulgate this Law passed by the Seimas of the Republic of Lithuania.
 
 
 
 
 
 
 
 
president of the republic                                                 VALDAS ADAMKUS
                                                                                    Annex to the
Republic of Lithuania Law
On the Accumulation of Occupational                                                                                               Pensions
 
 
 
IMPLEMENTED EU LEGAL ACTS
 
1. Council directive of 20 October 1980 on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer (OJ 2004 Special edition, Chapter V, Volume 1, p. 217).
2. Council directive of 86/378/EEC on the implementation of the principle of equal treatment for men and women in occupational social security schemes (OJ 2004 Special edition, Chapter V, Volume 1, p. 327).
3. Council directive 96/97/EC of 20 December 1996 amending Directive of 86/378/EEC on the implementation of the principle of equal treatment for men and women in occupational social security schemes (OJ 2004 Special edition, Chapter V, Volume 3, p. 232).
4. Council directive 98/49/EEC of 29 June 1998 on safeguarding the supplementary pension rights of employed and self-employed persons moving within the Community (OJ 2004 Special edition, Chapter V, Volume 3, p. 323).
5. Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision (OJ 2004 Special edition, Chapter V, Volume 02, p. 350).