Obligatory private pension savings: Additional obligations for employers
A new law on Employee Capital Pension Plans will apply from 1 January 2019. It is the last chance for employing entities to evaluate whether they would like to seek an exemption by creating a voluntary Employee Pension Plan, which is a solution that is of interest to many employers. However, the applicable procedures are time-consuming, require the participation of employee representatives and the deadlines to implement it are fast approaching.
The Employee Capital Pension Plans are designed as a private system for the long-term accumulation of pension savings under the third pillar, based on contributions from employed individuals, employing entities and the state. Participation in the Employee Capital Pension Plans will be obligatory in principle for all employing entities. Exemptions from the obligation will apply to employers who have established a voluntary Employee Pension Plan under specified conditions and within the prescribed time.
In principle, all employed individuals (as defined by the law) including employees (under the age of 55 and with an employment record of at least 3 months at the employer) as well as some other individuals performing work, including certain individual contractors, will be automatically enrolled. They will have a possibility to withdraw within predetermined times.
The law specifically sets out a procedure for the establishment of an Employee Capital Pension Plan. In particular, an agreement should be entered into with a financial institution for the management of the Plan. Representatives of the employed individuals will be obligatorily involved in the process of the Plan’s establishment and in the choice of a financial institution.
Employing entities will be obliged to calculate and withhold contributions on the side of both the employer and the employed individual. The basic contribution payable by the entity will amount to 1.5% of the employed remuneration. Any additional voluntary contribution by the employing entity may be paid to a maximum amount of 2.5% of the employed individual’s remuneration. The employed individual will finance a contribution amounting to 2% of his/her remuneration. An additional 2% may be paid by the individual as a voluntary contribution. These contributions will increase the costs of labour in Poland.
The accumulated funds within the Plans will constitute the private property of the employed individuals and will be paid out when the participant reaches the age of 60.
The regulation will apply as of 1 July 2019 to the biggest employing entities with at least 250 employed individuals, as of 1 January 2020 to entities with at least 50 employed individuals and 1 July 2020 for firms which employ at least 20 individuals. The law will apply to all other entities as of 1 January 2021.