Did You Work at a Privatized State Institution? Your Retirement Status (4/a or 4/c) May Differ From Your Pension Fund

Since the 1990s, many large-scale state economic enterprises in Turkey have been privatized, and thousands of personnel employed at these institutions have faced a new social-security equation. Employees who began working as insured members under the Pension Fund (Emekli Sandığı, "4/c") but for whom it later became unclear whether they were required to transfer to the Social Security Institution (SGK, "4/a") coverage after privatization face serious uncertainty at retirement. In this article, we examine, in light of Council of State (Danıştay) case law, how social-security status is determined after privatization, what the well-known "1,261-day rule" means, and the legal avenues for maximizing a retirement pension.

Summary of the Situation

A client who worked for many years at a large state economic enterprise (an airline company) that was later privatized claims that no choice regarding social-security status was offered to them during the privatization process, or that they were not informed, or were misled. Upon becoming eligible for retirement, a pension was granted under the 4/c (Pension Fund) status, but the client believes this status is disadvantageous and is requesting a transfer to 4/a (SGK) status. It is further claimed that, due to the client's title within the technical-services class and past duties, their additional-indicator (ek gösterge) and compensation rights were also calculated incorrectly.

The Legal Issue

Two separate legal matters are intertwined in disputes of this kind:

1. The status-determination problem: which social-security institution (4/a or 4/c) an employee of a privatized institution is subject to at retirement.
2. The administration's duty to inform: whether the personnel were properly offered the right to choose during the privatization process, and whether the failure to do so constitutes a "service fault."

Because these two matters produce different legal consequences, they must be assessed separately.

What Do the Council of State and the Court of Cassation Say?

The "Last 1,261 Days" Rule: The Key to Determining Status

Under Article 8 of Law No. 2829, where periods of service are combined, retirement status is determined according to which institution covered more than half of the insured person's last seven years of actual service (2,520 days), i.e. 1,261 days. The Council of State, 12th Chamber (E. 2022/225, K. 2022/2289, 2022) has confirmed the general applicability of this rule.

An important point of confusion: the Constitutional Court's decision annulling the condition in Article 12 of Law No. 2829 requiring that a person be "last subject to the Pension Fund" (E. 2005/40, K. 2009/17, 2009) is frequently — and incorrectly — interpreted as meaning that "the 1,261-day rule has been annulled." In fact, that annulment decision merely broadened the condition for entitlement to the retirement bonus (emekli ikramiyesi); it did not eliminate the 1,261-day rule used to determine status. In other words, under the current legislation, it remains difficult for a person whose last 1,261 days were spent under 4/c coverage to transfer directly to 4/a status.

Where the Administration's Duty to Inform Has Been Violated

Under Additional Article 71 of Law No. 5434, whether the personnel of a privatized institution retain their connection to the Pension Fund depends on the person's written request. The administration is required to inform personnel of this optional right and to obtain their preference in writing. If this notification was not made, or if misleading information was given, this may be asserted as a service fault. However, the principle of "administrative stability" also comes into play here: reversing a finalized retirement determination made long ago requires concrete proof of a grave fault on the part of the administration.

Additional-Indicator and Compensation Reflection Rates: The More Reliable Path

While a transfer to 4/a status requires a risky legal battle, there is a much clearer legal basis for maximizing the pension within 4/c status itself:

• The additional-indicator increase brought by Law No. 7417: under the regulation that entered into force in 2023, additional indicators for many titles were raised to 3,600. The Council of State, 12th Chamber (E. 2021/5419, K. 2022/829, 2022) has emphasized that the pension must be granted on the basis of the additional indicator earned according to the length of service and the person's placement status.
• Additional indicator for prior duties: under Additional Article 48 of Law No. 5434, if the additional indicator for a duty the insured person previously held is higher than that of their current duty, the higher indicator must be applied at retirement (Council of State, 12th Chamber, E. 2018/6000, K. 2021/6031, 2021).
• Compensation reflection rates: under Additional Article 70 of Law No. 5434, an increase of the additional indicator to 3,600 or above also raises the compensation reflection rates.

Points to Watch

• Assess the 1,261-day rule realistically. If the greater part of your last seven years of service was spent under 4/c coverage, your request to transfer to 4/a carries a risk of being rejected by the courts.
• Gather evidence of a breach of the duty to inform. The general administrative practices of the period, witness statements, and the absence from the file of a written "preference document" can be used as means of proof.
• Do not neglect your additional-indicator and compensation rights. In most cases, the path that yields a far more certain result than a status-change lawsuit is correcting the additional-indicator and compensation rates to which you are entitled within your current status.
• Do not skip the administrative-application requirement. A written application to SGK (the General Directorate of Retirement Services) is mandatory before filing suit.
• Direct the claim against the correct party. Because the correction of social-security status and monetary losses arising from privatization may be separate disputes, the lawsuit may need to be directed against both SGK and the relevant institution.

Conclusion: What Should You Do?

If you are not satisfied with your retirement status following privatization, you should first apply to SGK requesting both a status correction and a revision of your additional indicator/compensation. If your application is rejected, you may file an "action for annulment and full remedy" before the Administrative Court, seeking both the annulment of the administrative act and compensation for the resulting loss of pension. As a realistic strategy, however, given the risk involved in a request to transfer to 4/a, making it your priority to maximize the additional-indicator and compensation reflection rates within your 4/c status will, in most cases, produce a faster and more certain result. In complex social-security disputes of this kind, obtaining support from an administrative/social security law attorney is of great importance in preventing both wasted time and potential loss of rights.