A cabinet meeting of June 4, 1997 decided to set the upper earnings limit on the employer's 30 percent share of social security contributions at 3 or 3.5 times the average salary from the autumn of 1997. The government believes that later the upper salary limit will later have to be lowered to 2 or 2.5 times the average salary. "This is a step we at LFMI have been advocating for a long time. With this provision in effect, the tax burden for the work force will be lowered, and people and companies will have less incentive to hide real wages" - LFMI's President Elena Leontjeva said.

The cabinet also endorsed two types of pension funds, cooperative and profit-seeking joint stock companies. As Prime Minister Vagnorius noted that "non-profit" banks have taught us a lesson, so we must not repeat past mistakes." Head of LFMI's social security programme Audron? Mork?nien? said that a shift from a vague system of pension fund organisation to one based on explicit and clear principles of interests and needs was a positive step. "I am happy that the government has approved the provisions that were proposed by LFMI over a year ago," the policy analyst said.

The Vagnorius administration instructed the lawmakers to set clear property relationships, i.e. who and how one can become the owner of a pension fund, and to ensure that the assets of pension fund members be used only for accumulating pension contributions and disbursing pensions benefits. As noted during the cabinet meeting, it is crucial to establish clear principles by which pensions will be paid to pension fund members, eligibility criteria for pension benefits, and insurance principles that will govern the disbursement of future pensions.

In commenting on the policy-drafting process, Elena Leontjeva pointed out that the matter was scrutinised thoroughly because conceptual provisions, rather than a long technical text of law, was presented to the cabinet meeting, a practice proposed by LFMI when the new administration took over. "Consideration of concepts is much more effective since it becomes virtually impossible to conceal behind empty words the inability to understand the essence, as is often the case with laws," LFMI's president said. LFMI believes that this first success should encourage the government to cultivate a new tradition of drafting legislation.