The program for pension system reform launched at the beginning of 1997 in Poland was called by its authors “Security through Diversity” (Security 1997). This title emphasizes that pension reform – which is designed to ensure security for the insured – must combine a pay-as-yougo (PAYG) pillar, a second, fully funded pillar, and a third, voluntary component. The program was prepared in the second half of 1996 by a team of experts appointed by Andrzej Baczkowski, who at that time was minister of labor and social policy and also the government plenipotentiary for social security reform. In the course of ten months or so, the government prepared and passed through the Parliament a legislative package consisting of three Acts, which laid the foundations of the new pension system:

1. The Law of August 28, 1997, on the Organization and Operation of Pension Funds.

2. The Law of August 22, 1997, on Employee Pension Programs.

3. The Law of June 25, 1997, on Applying the Revenues from Privatization of a Portion of State Treasury Assets for Purposes Connected with Reforming the Social Insurance System.

This package specified how revenue from privatization would be used to bridge the financial gap that had appeared, and will continue to widen, in the present PAYG pension system. In addition, it initiated reform of this system and launched a second (mandatory) and developed a third (voluntary) funded pillar of pension insurance. It also fully regulated the organization and operation of second-pillar pension funds.