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Middle East - Israel

New pension program approved

On December 30, 2007, the government ratified a collective agreement that will ensure pension benefits for many employees who do not now have pension coverage. Employers and employees will contribute to the new program, which takes effect on January 1, 2008.

The Histadrut labor federation and the Manufacturers Association of Israel signed an agreement in July 2007 that led to the new pension coverage.

The program will apply to all employees who are without occupational pension plan coverage and who have worked for their employer for nine months and had no previous pension coverage with a prior employer. This period will be amended to six months beginning in January 2009. Employees who had occupational pension coverage in their prior job would qualify for the new pension program after three months on the job. To be eligible, employees must be older than 21 for men or older than 20 for women. Under the program, employees would choose among defined contribution providers, including insurance companies, pension funds and funds managed by financial institutions.

The plan will be implemented in phases, with employers and employees together contributing 2.5 percent of the employee’s salary in the first year. This will increase gradually until it reaches 15 percent by January of 2013. The 15 percent would be divided, with employers contributing 10 percent and employees contributing 5 percent. This is less than the 17.5 percent to 20 percent that employers and employees contribute to pension plans that already exist at companies.

The salary covered will be capped at the national average earnings, which was ILS 7,537 (USD 1,969) per month as of September 2007.

December, 2007

The information included in this report is general information only and should not be relied upon without further review by the appropriate professional advisers. Watson Wyatt is not a law firm or an accounting firm and is not engaged in providing legal, accounting or tax services or advice.