As of January 1, 2010 Russia's social security financing system has been amended as follows: (i) the Single Social Tax system was replaced by a flat-rate employer contribution, (ii) the collection process was changed, (iii) the contribution rate was increased, and (iv) a ceiling for employer contributions was introduced. It is expected that the increase in employer contributions will allow for future increases in pension benefits.

The newly introduced flat-rate employer contribution is of 26% in 2010 and will increase to 34% from 2011 onwards. The ceiling is annually indexed in accordance with the average wage. Employers have to pay the contributions directly to the three funds. In 2010, the combined contribution rate is allocated as follows: 20% to the Pension Fund, 2.9% to the Social Insurance Fund, and 3.1% to the Compulsory Medical Insurance Fund. The increase in the combined contribution rate will primarily benefit the Pension Fund by increasing its allocation to 26%, the allocation to the Social Insurance Fund will remain at 2.9% and the allocation to the Compulsory Medical Insurance Fund will increase to 5.1%. In addition to employer contributions to individual accounts, workers are allowed to make voluntary contributions that will be partially matched by the government for ten years once the worker begins contributing.
The Pension Fund covers old-age, permanent disability, survivors benefits and family allowances; the Social Insurance Fund covers temporary disability, sickness, and maternity benefits; and the Compulsory Medical Insurance Fund covers medical benefits.
Old-age benefits consist of (i) a flat-rate minimum pension, (ii) a notional account, and (iii) an individual account. Participation in individual accounts is restricted to workers born after 1967.
Article with courtesy of Social Security Online
Sources: Social Security Programs Throughout the World: Europe, 2008; "Replacement of Unified Social Tax (UST) by Insurance Contributions," Ernst and Young, July 2009; "Russia Passes Tax Hike to Boost Pensions," Reuters News, July 17, 2009; "Prezident Rossii Dmitrij Medvedev Podpisal Zakony, Sovershenstvujushhie Pensionnuju Sistemu," Pensionnyj Fond Rossijskoj Federacii, July 24, 2009.
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