Israeli Regulations Restrict Enrollees in Managers’ Insurance Plans

The Knesset Finance Committee recently approved an amendment to regulations designed to restrict new enrollees in managers’ insurance plans. This amendment will come into effect on September 1, 2023, and is likely to affect, inter alia, the drafting of employment agreements for new employees and their pension rights.

Managers’ Insurance Plans – What Now?

Will managers’ insurance policies now be cancelled?

No. Pension insurance plans through managers’ insurance will not be canceled, but restricted. Namely, as of September 1, 2023, an employee may deposit only the part of his or her salary that exceeds twice the average wage in Israel in managers’ insurance, while depositing the remainder (below twice the average wage in the economy) in another type of provident fund. Employees earning less than twice the average wage in the economy will not be able to enroll in managers’ insurance plans as new insurees.

What is the average wage in the economy?

As of January 1, 2023, the average wage in the economy for pension insurance purposes was ILS 11,730.

What is the reason for the amendment?

Employers have been obligated to make monthly contributions to their employees’ pension insurance since 2008. Furthermore, every employee may choose the pension instrument relevant to him or her, whether a pension fund or managers’ insurance, subject to the provisions of the Supervision of Financial Services Law.

A pension insurance plan through managers’ insurance is an insurance plan approved by the Commissioner of the Capital Market, Insurance and Savings Authority. Such a plan operates according to the rules of provident funds and receives the same tax benefits when depositing and withdrawing savings.

However, unlike other types of pension instruments, the savings a managers’ insurance plan guarantees to employees are lower than the pension they would have saved through other pension instruments, inter alia, due to the higher management fees and higher insurance coverage costs in manager’s insurance.

Considering these circumstances, and with the goal of ensuring adequate pensions for employees (when the time comes), the amended regulations restrict enrollment in managers’ insurance and set an enrollment threshold at wages exceeding twice the average wage in the economy.

As stated, due to the amendment to the regulations, employers must re-examine the wording of their employment agreements for new employees whose salaries do not exceed twice the average wage in the economy and who were not insured under a managers’ insurance policy prior to the amendment. Employers should also update the provisions of their employment agreements accordingly, if necessary.

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Barnea Jaffa Lande’s Employment Department is at your service to answer any questions.

Adv. Netta Bromberg is a partner and heads the firm’s Employment Department.

Adv. Shani Kolton is an associate in the Employment Department.