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Israel: Histadrut agrees to let treasury

manage union pension funds

By Haim Bior

Haaretz, May 16, 2003

Israel - A turnaround took shape last night in the Histadrut labor federation stance opposing the appointment of trustee managers for the veteran pension funds. Histadrut Chairman Amir Peretz said yesterday that he would agree "to transfer management of the funds to the state, on the condition that an agreement ensures the rights of the fund members."

The Finance Ministry has worked for years to appoint managers to the veteran pension funds, but has encountered stiff opposition from the Histadrut, and the dispute has even reached the courts. The appointment of managers is one of the central issues being negotiated by the treasury and the labor organization during the general strike.

The treasury has made the demand due to the actuarial deficits in the veteran pension funds, which amount to between NIS 60 billion (if the state issues special bonds for the funds with guaranteed 5.57 percent interest) and NIS 137 billion (if the state issues special bonds for the funds with guaranteed 3.55 percent interest). The heads of the treasury's financial markets division say the appointment of qualified managers is the first stage to rehabilitating the funds. So far the treasury has appointed managers for two of the veteran funds: Construction Workers Fund and Nativ.

"I am open to any arrangement that eases the management of the funds for the state, in parallel to resolution of the other disputes between us," Peretz told the Knesset Finance Committee yesterday. He said the primary conflict centers on the treasury's demand to stop issuing the special bonds to the pension funds and redirect public monies in the funds to investments in the financial markets - a move the Histadrut opposes.

Peretz suggested at the meeting that a neutral committee headed by Justice Meir Shamgar or any other prominent judge make the decision regarding the pension. "I promise to accept its decisions within 60 days," he said.

However, treasury officials rejected the idea. They said a public commission would work slowly, publishing recommendations in a year or two, while the crisis at the pension funds requires immediate action.

Peretz further stated that a condition for his agreement to transfer management of the pension funds to trustees is the state's commitment that if the actuarial deficits deepen, the state promises to fund members pension payments. "Insuring the value of the savings is at the top of our priority list, not, as the treasury would have you believe, keeping control of the pension funds." According to Peretz, "the actual management doesn't interest me. I am not looking for jobs to appoint five people to do."

In the negotiations between the treasury and the Histadrut on the pension issue, there is agreement in principal that employers and employees' increase their pension payments by 3 percent, but there is disagreement on how it should be implemented. The treasury suggests employees allocate an additional 2 percent of wages, and employers add 1 percent, while the Histadrut wants the majority of the burden on employers.

Regarding postponing retirement age, which is slated to help the pension funds, the treasury would like to gradually reach a stage where retirement age is the same for both men and women - 67. The Histadrut would like to see retirement age for men reach 67 years, while women would be allowed to retire at 62.