On 1 January 2019, the Employee Capital Plans Act of 4 October 2018 (the “Act”) came into force (Dz.U.2018.2215). The Act introduces, an obligatory for employers and voluntary for employees, universal, long-term saving system under the third pension pillar.
Employee Capital Plans (,,PPK”) will operate alongside the employee pension schemes (“PPE”) introduced by the Employee Pension Schemes Act of 20 April 2004 (Dz.U.116.1207, as amended).
PPK, created by employers and managed by external financial institutions, is a group collection of savings by a PPK participant, to be paid out after their reach the retirement age of 60.
All employees aged between 18 and 55 will be automatically enrolled to the system and the employer will conclude PPK operation contracts for them. In the case of employees over 55 and under 70, the employer may conclude the contract for the operation of PPK at the request of such persons only. Joining the PPK will be voluntary and an employee will be able to opt-out from paying contributions at any time by signing an opt-out declaration.
The employer must create PPK even it employs only one person eligible to join PPK. Generally, the entities obliged to create PPK are employers i.e. entities employing individuals under employment contracts, employment relationship established on the basis of appointment, election or nomination or under co-operative employment contracts. But the Act obliges also other entities to create PPK, for example, contracting parties or outwork employers. As a result of such a broad range of entities being obliged to create PPK, individuals over 18 years of age who perform work under contract of mandate, agency contract or other service contract will also be eligible to joint PPK.
Although the law entered into force on 1 January 2019, an obligation to conclude PPK management contracts will be introduced gradually:
The new legislation provides for concluding two types of contracts:
A key responsibility of an employer will be to select a financial institution that will open accounts for PPK participants, sign a PPK management contract with such institution and operate accounts for PPK participants. The employer will also need to pay contributions to PPK in the amount of 1.5% of the employee’s salary (obligatory contribution). The employer may voluntary increase it by an additional 2.5%.
Employees who decide to join PPK will have to pay obligatory contributions of 2% of their salary with the possibility of voluntarily increasing this by additional 2%.
The adopted Act provides for an incentive encouraging individuals to collect funds in PPK in a form of a welcome contribution and annual additional payments to the PPK account. Welcome contribution is a one-off payment of PLN 250 financed from the public budget (Labour Fund). In addition, an employee will receive an annual additional payment for participation in PPK, after fulfilment of the conditions set out in the Act.
The provisions of the Act do not apply to employers who already have a PPE established under the Employee Pension Schemes Act of 20 April 20014 provided that the employer paid contributions at a rate of no less than 3.5% of the employee’s remuneration (within the meaning of the Act) and at least 25% of the individuals employed by this employer joined a PPE.
Failure to comply with the obligation to conclude the contract for the operation of PPK on behalf of an employee or the obligation to make payments to PPK account or failure to provide data required by the Act or providing untrue data, or failure to keep documentation related to calculation of PPK payments will be subject to a fine of between PLN 1 000 and PLN 1 000 000. Compliance with the obligation to create and operate PPK will be monitored by the State Labour Inspectorate.
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