Employee Capital Plans - the most important information
The legislative process with regard to the Act of 4 October 2018 on Employee Capital Plans has been completed and the Act has already been published in the Journal of Laws (Dz.U. of 2018 item 2215).
The Employee Capital Plans (Pracownicze Plany Kapitałowe - PPK) are aimed at systematic collection of savings by a PPK participant to be paid out after their reaching of the age of 60 and for other purposes specified in the Act.
Generally, the funds collected by PPK participants are their private property.
The Act introduces two types of contracts:
- PPK management contract
- PPK operation contract.
PKK management contract
The employing entity concludes a management contract for PPK, if there is at least one employee on whose behalf it is obliged to conclude the contract for the operation of PPK. Such a contract should be concluded not later than 10 business days before the date on which the employing entity is obliged to conclude the contract for the operation of PPK with respect to the first employee.
The employing entity concludes the management contract for PPK with target date funds managed by one investment fund company, PTE, employee pension management company or the social insurance institution.
The management contract is subject to entry in the PPK register.
PPK operation contract
The employing entity also concludes a contract for the operation of PPK. Such a contract is concluded for and on behalf of individuals employed in the employing entity. The list of PPK participants is enclosed to the contract for the operation of PPK.
Before conclusion of the contract for the operation of PPK the employing entity may inform the employed individuals about the conditions of participation in PPK and about the obligations and rights of the employing entity. Such an obligation, on the other hand, is imposed on the financial institution with which the contract for the operation of PPK was concluded.
The employer will be obliged to enrol in PPK all employees aged between 18 and 55 for whom old-age and disability pension contributions are paid. In the case of an employee over 55 and under 70, the employing entity may conclude the contract for the operation of PPK at the request of such a person only. However, the employer is obliged to inform the employees about the possibility of submitting such a request. On the other hand, the employing entity does not conclude the contract for the operation of PPK with a person who became 70 on the first day of employment at the latest.
According to the new regulations the employing entity will conclude the contract for the operation of PPK for and on behalf of the employee after the lapse of the third month of employment in the employing entity, not later than by the 10th day of the month following the month of the lapse of 3 months of employment, unless before the lapse of this period the employee declares non-payment for PPK, based on a written declaration filed with the employing entity, or stops being the employee of that employing entity.
Participation in PPK is voluntary. A PPK participant may resign from contributions to PPK based on a declaration submitted to the employing entity in writing. Apart from the details of the employing entity and the PPK participant the declaration also includes statements of the PPK participant on their being familiar with the consequences of its submission.
Every 4 years, until the last day of February of a given calendar year, the employing entity informs the PPK participant who filed the resignation from contributing to PPK about resumption of payments for that participant. Every 4 years starting from 1 April the employing entity makes contributions on behalf of the PPK participant, unless the participant resigns from making contributions to PPK (based on a written declaration).
Contributions made to PPK
The employing entity and the PPK participant make basic payments with their own funds. Both entities may also declare issuance of additional contributions.
The basic payment financed by the employing entity amounts to 1.5% of remuneration. The employing entity may declare in the PPK management contract an additional payment of up to 2.5% of remuneration.
Additional payments may vary depending on the term of employment in the employing entity or based on the provisions of the remuneration rules or the collective labour agreement applicable in the employing entity.
The employing entity may change the amount of the additional payment or resign from it by amending the PPK management contract. The changed amount of the additional payment applies starting from the month following the month in which the change was made.
The financial payments made by the employing entity are not included in remuneration constituting the basis for assessment of obligatory old-age and disability pension contributions.
The basic payment financed by the PPK participant amounts to 2% of remuneration. It may constitute less than 2% of remuneration, but not less than 0.5% of remuneration, if remuneration received by the PPK participant from different sources in a given month does not exceed an amount corresponding to 1.2-fold minimum remuneration. The PPK participant may declare an additional payment of up to 2% of remuneration.
The PPK participant may in the form of a written declaration change the amount of the basic, lowered or additional payment, or resign from making the additional payment. The changed amount of the additional payment or resignation from it applies starting from the month following the month in which the PPK participant filed the change of the declaration.
The payments financed by the PPK participant are deducted from remuneration after its taxation.
The adopted Act provides for an incentive encouraging individuals to collect funds as part of the Employee Capital Plans in the form of the so-called welcome payments and annual additional payments. The welcome payment will be a one-off benefit of PLN 250 financed from the Labour Fund. Then, each year the 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 employing entities running Employee Pension Schemes (PPE) and charging and remitting basic contributions in the meaning of the Act of 20 April 2004 on Employee Pension Schemes to PPE in the amount of at least 3.5% of remuneration (in the meaning of the Act), if at least 25% of the individuals employed in a given employing entity joined PPE.
Pursuant to Article 134 (subject to Article 134 clause 4 and Article 137 of the Act) the Act applies to:
- Employing entities which employ at least 250 individuals employed as at 31 December 2018 – starting from 1 July 2019
- Employing entities which employ at least 50 individuals employed as at 30 June 2019 – starting from 1 January 2020
- Employing entities which employ at least 20 individuals employed as at 31 December 2019 – starting from 1 July 2020
- Other employing entities – starting from 1 January 2021.
It is important to know that both in the context of the above time limits for PPK implementation as well as persons eligible to enrol, the law refers to the “employed persons” and not only to employees within the meaning of the Labour Code. According to the PPK-related legislation, the employed persons subject to obligatory retirement and disability pension insurance are:
- employees within the meaning of the Labour Code (except for employees on miner’s leaves and on leaves for employees of mechanical coal processing plant and young workers),
- natural persons aged more than 18, performing work under agency contract or mandate contract or other service contract to which the provisions on mandate contract apply in accordance with Article 750 Civil Code,
- natural persons performing outwork aged more than 18,
- members of agricultural manufacturing cooperatives or cooperative societies of farmers,
- members of supervisory boards who receive remuneration for performing these functions.
Non-fulfilment of the obligation to conclude the contract for the operation of PPK for and on behalf of the employee, non-fulfilment of the obligation to make payments for PPK, failure to provide data required by the Act or provision of untrue data, or failure to keep documentation related to calculation of PPK payments on the part of the employing entity will be subject to a fine of between PLN 1 000 and PLN 1 000 000. Performance of the obligation of PPK creation and operation will be monitored by the State Labour Inspectorate.
This bulletin has been prepared to Contract Administration clients with general information about legal issues and is not intended to be relied upon as professional advice. Please refer to your adviser for formal advice before taking any decision or action with respect to information contained herein.
Director of Personnel Department