Voluntary Participation (IPS) Auto Enrollment System (AES) Funds Legislation Data Center

Employers Information Guide

1. Employers' obligation to enter employees in the Automatic Entry System (AES)

Employers shall be obligated to enter employees in the Automatic Enrollment System (AES) pursuant to the provisions on automatic participation of the Individual Pension Savings and Investment System Law No. 4632, which entered into effect on January 1, 2017. Accordingly, employers shall send to the system at least three percent of the premium-based earnings and of the pension deduction-based salary for the private sector and the public sector, respectively. Employees shall have the right to stay in this system for as long as they wish.

The AES shall apply to Turkish citizens or Blue Card holders who have not turned age 45 and who work as a salaried employee in the public or private sectors (employees that fall within the scope of articles 4a and 4c of the Social Insurance and General Health Insurance Law No. 5510 and that participate in the funds established as per supplementary article 20 of the Social Security Law No. 506).

If you are an employer that falls within the scope of the automatic participation program, you shall be obligated to identify at least one pension company and enter into a contract with it for your employees. As part of the contract, your employees shall be entered into the system with the certificate issued in their names. It shall be up to the employee to decide on the funds for the contributions to be invested in. The system offers interest and non-interest fund choices. A maximum of an 0.85-percent annual fund management fee deduction rate shall apply for all funds offered to the employees. No other deduction other that the fund management fee deduction shall apply in the AES.

The contributions that you, as their employer, deduct from their salary and transfer to their automatic participation account in the pension company shall be invested in the pension mutual funds without being subject to any deduction. Portfolio managers shall manage the fund portfolio. Istanbul Settlement and Custody Bank Inc. shall keep the assets in the fund portfolio in a secure manner. Employees can keep instant track of their accumulations from the pension company with which the contract was drawn up or from the Istanbul Settlement and Custody Bank Inc.

The following gradual transitions shall apply when automatically including the private sector employees in the system:

Transition Schedule to Include Private Sector Employees in Automatic Participation
Number of Employees (*) Inclusion Date
1.000 and over 01.01.2017
Between 250 and 999 01.04.2017
Between 100 and 249 01.07.2017
Between 50 and 99 01.01.2018
Between 10 and 49 01.07.2018
Between 5 and 9 01.01.2019

(*) When determining the number of employees for employers with multiple businesses, the total number of employees at all businesses shall be counted. 

For company structures consisting of a combination of multiple independent companies, the number of employees can be evaluated individually or collectively for each company. In addition, the number of employees included in the latest monthly premium and service document or workplace declaration, which must be submitted to the Social Security Institution (SSI) before the last date the employee must be included in the plan within the scope of the enrollment schedule, is taken into account when determining the number of employees.

As an employer, you are advised to implement the following steps to decide properly when to enter your employers in the AES:

Step 1: According to the transition schedule above, the number of employees on these dates is important: January 1, 2017, April 1, 2017, July 1, 2017, January 1, 2018, July 1, 2018, and January 1, 2019. You must enter the AES within the date ranges in the transition schedule that coincides with the number of employees you have in the last SSI statement (Monthly Premium and Service Document) before the said dates.

(For instance; you wish to learn whether you are included in the AES on January 1, 2017. The main source to check for this is the Monthly Premium and Service Document you submit to the SSI. The most current SSI document you had drawn up before this date is the one you submitted to the SSI in December 2016 for November 2016. If you have stated 1,000 or more employee in this document, you must be included in the AES by January 2017. Accordingly, you are required to deduct at least three percent contribution based on your employees’ January 2017 salaries, and then transfer it, on behalf of your employees, to the pension company by the end of the business day following the payment date agreed on the contract drawn up with the pension company. You must repeat the same process in the following months for as long as your employees wish to remain in the AES.)

Step 2: After determining the date to be included in the AES, then you must select your pension company. When making the selection, you are advised to be informed about many aspects such as the pension company's quality of service, technological resources, as well as the fund structure of the pension companies because your employees' preference of funds with or without interest is important.

Step 3: You must contact the company officials once you decide on the pension company. Click to view the company list.

Step 4: You must sign a contract with the pension company you have chosen. Details are explained in the following sections.

Gradual transition for the public sector:

Transition Schedule to Include Public Sector Employees in Automatic Participation
Public Institutions/Organizations Inclusion Date
The public administration institutions stated in tables (I), (II), (III) and (IV) of the appendix to the Law No. 5018 on Public Finance Management and Control Law 01.04.2017
Local administrations, State Economic Enterprises, Municipality-owned Enterprises, and Other Public Institutions and Organizations 01.01.2018
  • What if the number of your employees changes after entering the AES?

You remain in the system, if the number of your employees changes at a date after you enter the AES.

After January 1, 2019, all businesses with five or more employees shall be included in the system automatically.

Employees that are not Turkish citizens shall not be entered into the AES.

But, employees that are not Turkish citizens but hold a Blue Card shall be entered into the AES.

The insureds that fall within the scope of article 5(g) of the Law No. 5510, for instance; the Turkish employees that you bring to put to work in a country with no social security agreement with Turkey, shall not be included in the system.

  • What are your obligations as an employer?

Selection of the pension company: Pursuant to the Law No. 6740, if you do not fall within the scope of the AES as per the Regulation, which is the appendix to the relevant Cabinet decision, you shall be obligated to draw up a pension contract with at least one pension company. You may draw up contracts with multiple pension companies.

The following list of Ministry of Treasury and Finance-approved pension companies operate in the Automatic Entry System:

Pension Companies Available for Contract in the Automatic Entry System:
Pension Company Contract Address (Logos)
Aegon Emeklillik ve Hayat A.Ş.
Allianz Hayat ve Emeklilik A.Ş.
Allianz Yaşam ve Emeklilik A.Ş.
Anadolu Hayat ve Emeklilik A.Ş.
Avivasa Emeklilik ve Hayat A.Ş.
Axa Hayat ve Emeklilik A.Ş.
Bereket Emeklilik ve Hayat A.Ş.
BNP Paribas Cardif Emeklilik A.Ş.
Cigna Finans Emeklilik ve Hayat A.Ş.
Fiba Emeklilik ve Hayat A.Ş.
Garanti Emeklilik ve Hayat A.Ş.
Groupama Emeklilik A.Ş.
Halk Hayat ve Emeklilik A.Ş.
Katılım Emeklilik ve Hayat A.Ş
Metlife Emeklilik ve Hayat A.Ş
NN Hayat ve Emeklilik A.Ş.
Vakıf Emeklilik ve Hayat A.Ş.
Ziraat Hayat ve Emeklilik A.Ş.

When deciding on the pension company, you must take into account service quality, employee demands, employee benefits, the fund expense fee total rate, and the performance of the pension company and the funds. In this phase, you, as the employer, shall not gain any advantages, including commissions, from the company due to the selection of company.

As an employer, you may receive service from private- or public-capital pension companies, regardless if you operate in the private or public sector.

You may change the pension company you receive services from. In other words, you may transfer your employees' accounts from the current pension company into another one. If you were transferred to your current pension company from a previous pension company after remaining in the said previous pension company for at least two years as of the effective date of the contract you signed with the pension company you had chosen when you first entered the AES, you may transfer to other pension companies after staying in the relevant pension company for at least one year from the transfer date.

Setting authorized officials for the AES transactions: As an employer, you are required to estabish your authorized department and officials to perform the AES-related transactions.

These authorized officials or department shall be responsible to fulfill your responsibilities as an employer in accordance with the AES and conveying your employees' pension account-related requests to the pension company. Accordingly, they shall carry out tasks, including selection of the pension company, signing a contract with the company, conducting all communication and information activities, calculation and payment of contributions, and informing the pension company about the employees' requests for withdrawal from or leaving the system, suspension of contribution payments, changes in the fund distribution or type, or contribution amount, as well as other similar tasks.

In accordance with operational requirements, you may hand over all of these obligations (e.g. selection of the funds) as per the AES, except for selection of the pension company and deduction of the contributions, to the pension companies.

Selection of the Funds: As an employer, you are required to ask the employees to select a fund with or without interest, or make the selection for them, if they do not do so. Accordingly, the contributions shall be invested in an initial fund with or without interest for one year based on the selection. Your employees may select any fund they wish at the end of one year. In the absence of a fund selection by the employees, these employees' contributions shall be continued to be invested in standard funds, depending on the fund choice (with or without interest) at the time of entering the system. Your employees may change their fund distribution a maximum of six times a year for each contract year.

Payment of contribution: You must deduct the contributions from your employees and transfer to the pension company fully and on time.

You must deposit into the pension company's bank account the deductions you make from your employees' salaries at the latest on the business day following the salary payment date set forth by the contract you drew up with the pension company. The distribution of the lump-sum amount you will send to your employees' automatic participation accounts shall be calculated based on the information you will send to the pension company.

You shall be liable for the losses in your employees' accumulations that arise from any incorrect information you send to the pension company. As an employer, you shall be liable for the financial losses in your employees' accumulations that arise from the incomplete or late information you send to the pension company, or from your failure to send it.

Sanctions that will be implemented if you fail to fulfill your obligations as an employer:

The Ministry of Labor, Social Services and Family shall impose an administrative fine of 100 Turkish lira for each breach of your obligations as per the AES.

Employer's responsibilities at the time of entry to the AES

As an employer, you shall sign an agreement with the pension company that details the parties' obligations. The contract shall

  • set forth the contribution payment date. You must deposit into the pension company's bank account the deductions you make from your employees' salaries at the latest on the business day following the salary payment date.
    The contribution shall be at least three percent of your employees' premium-based earnings. You shall also pay contribution for any premiums, bonuses or benefits you may have paid to an employee.
  • An agreement process shall be established. You shall inform the pension company about the contribution amount you deduct from your employee's salaries, as well as about the collection information that shows how much contribution must be deposited to which employee's account. It is important that the contract sets forth the process about matching the contribution amount you send to the company and the collection data, and the course of action to take in case of discrepancy.
  • A collection method shall be established for the employees' requests. The pension contract shall set forth who, you as the employer, or the pension company, will collect the employees' requests for withdrawal, suspension of payments, change of contribution rates, retirement and so on.

Circular Appendix-2 No. 2016/39 dated December 30, 2016, provides information on the minimum requirements of the contract.

(*) The employee may exercise the two-month right of withdrawal from the system within this period or anytime after. The contributions are guaranteed not to lose value within the withdrawal period.

Meeting employee requests

  • What are your employees' rights in the AES?

Only the employer may determine the pension company. Employees cannot determine the pension company. In other words, so long as your they are your employees, they shall not be allowed to transfer their automatic participation certificates to another pension company.

If an employee, who is in the AES and has worked for another employer, has been employed by you after leaving that job, you must include that employee in the pension plan of the pension company you have a contract with.

Your employees shall have the right to change the fund distributions regarding the pension mutual funds in which the contributions you will pay the pension company on their behalf will be invested.

Your employees may request suspension of contribution payments unless they are in the initial (first two-month) period.

Also, your employees may increase contributions above the legal minimum deduction rate (three percent) by informing you, or decrease the rate, provided that the rate does not go below the deduction rate of three percent set forth by the Law.

In addition, in the event that your employees who leave the system by exercising their right of withdrawal and leaving the system request to be re-entered in the system; if the employee has not turned 45 as of the first day of the relevant calendar year on the date of the request, you must deduct the second fee payment following the date of the latest request and include the contribution amount in the system by transferring it to the company.

  • You are recruiting a new employee; Are you required to enter the employee in the AES?

Is your workplace in the system? Your new employee's age (*) Your new employee's status in the AES What course of action do you need to pursue?
Yes Under age 45 Included in the AES at previous workplace and currently in the system You must include your employee in the system again
Included in the AES at previous workplace but currently not in the system due to leaving You must include your employee in the system again
Over age 45 Included in the AES at previous workplace and currently in the system You must include your employee in the system again
Included in the AES at previous workplace but currently not in the system due to leaving You shall not include your employee in the system again
No Under age 45 Included in the AES at previous workplace and currently in the system Your new employee may continue to make payments to the pension plan that he/she was entered at their previous workplace, exercise the right of withdrawal, or remain in the system. Until your workplace is included in the AES, you will not need to do anything else for that employee.
Included in the AES at previous workplace but currently not in the system due to leaving You shall not include your employee in the system again until your workplace is included in the AES
Over age 45 Included in the AES at previous workplace and currently in the system Your new employee may continue to make payments to the pension plan that he/she was entered at their previous workplace, exercise the right of withdrawal, or remain in the system. Even after your workplace is included in the AES, you will not need to do anything else for that employee.
Included in the AES at previous workplace but currently not in the system due to leaving You shall not include your employee in the system again

(*) In determining whether the employees are over 45 years of age, if the schedule on which the employee is to be included in the pension plan is before December 27, 2018, the schedule shall be based on January 1, 2017, and if the schedule on which the employee is to be included in the pension plan is after December 27, 2018, the schedule shall be based on the first day of the year in which the employee is to be included in the system.

Everything You Want to Know about the AES

Click for details on your employees' rights and other matters in the Automatic Entry System.

2. Motivation of employees by the employer with the Noncontributory Group Contract (Voluntary) and benefiting from tax advantages

  • You can enjoy tax advantages by paying contributions to the individual pension contracts you set up for your employees

You can enter your employees in the Individual Pension System (IPS) through noncontributory group contracts. In this case, the contributions paid on behalf of your employees shall be recorded as expenses when calculating business income without associating them with the salary. You determine the vesting period, not to exceed seven years, for the accumulations arising from contributions paid for your employees and from their earnings. This is a good way to achieve employee motivation and loyalty to the company.

  • If, as an employer, you make contribution payments on behalf of your employees, they shall have vesting periods for the amounts accumulated in the account.

Vesting period is the period of time stated in the contract for your employee to become vested for the contributions paid by you for all or part of the contribution revenues. This period shall not exceed seven years. The minimum entitlement rates to be applied depending on the years are as follows:

Minimum Entitlement Rate by Contract Year (%)

Which Year of the Contract Is Your Employee In?
Duration Set Forth in the Contract for Your Employee to Qualify for all of the Accumulations (Year) <1 1. 2. 3. 4. 5. 6. 7.
0 100
1 0 100
2 0 0 100
3 0 0 0 100
4 0 0 0 75 100
5 0 0 0 60 80 100
6 0 0 0 60 70 80 100
7 0 0 0 50 60 70 80 100

In the event that your employee leaves employment or is removed from the non-contributory group contract, the pension company shall make payment to your employee according to the vesting period and rate decided by you. The employee may transfer the vested amount to another current or newly drawn up individual or group individual contract at another pension company. The pension company shall pay you the unvested part of the accumulations saved in your employee's account.