The State Council has recently released the Circular on Establishing the Central Adjustment System for the Basic Pension Insurance Fund for Enterprise Employees (the "Circular"), deciding to institute a central adjustment regime for the basic pension insurance fund. This Circular will enter into force from July 1, 2018.
The Circular details provisions in the following aspects. First, the central adjustment fund is made up of funds handed over from the pension insurance fund of each province, and the handed-over amount shall be computed on the basis of 90 percent of the average employee salary in each province and the number of in-service staff members who should join the basic pension insurance scheme, and account for a weight of three percent which will become increasingly higher. Second, the central adjustment fund is subject to the principle of determining expenditures based on revenues, and the funds solicited in the current year will be all allocated to local regions based on the designated quota per capita. Third, the central adjustment fund shall be covered under the special fiscal account for the central-level social security fund, with expenditures and revenues managed independently; the fund shall be used only for fixed purposes but not for the balance of the financial budget. Fourth, the existing policies concerning central government subsidies, as well as the ways to grant these subsidies, will remain unchanged, and provincial governments shall practically undertake the subject responsibility for ensuring that the basic pension is distributed in full on schedule and covering the gap in the pension insurance fund.