In 1981, the Chilean government established a new "private insurance" system that
is State-regulated, but administered by the private sector. Under the private insurance
system, employees contribute to individual capitalization accounts. Pension Fund Administrators
are private investment companies that manage these accounts. Chile bases benefit amounts
on the investment yield of individual accounts. The private insurance system became
mandatory for all workers entering the labor force after 1982. Workers covered under
the social insurance system in 1982 had the option to remain in the old pay as you
go system. While the private system covers the vast majority of active workers, both
systems continue to operate side-by-side until Chile phases out the old system.