Information for HR and pension funds – what if if the parliament were to decide again in March 2023 to change the amount of the retirement pension with retroactive effect from January 2023?
With the information on the pension increase as of 1.1.2023, it was announced in passing that three motions are pending in the Federal Parliament that would demand a full inflation adjustment of the AHV and IV pensions as well as the supplementary and bridging benefits. And further: “In addition, the motions provide for a lowering of the inflation threshold for an annual pension adjustment. The responsible commissions of both chambers still have to discuss the motions. If the motions are passed in the winter session, the necessary legislative amendments for the additional increase in the aforementioned benefits could presumably be implemented in the spring session 2023 using the urgent procedure and the benefits could be paid retroactively to 1 January 2023.”
This decision could go in both directions, insofar as a reduction in inflation by the end of the year could also result in a reduction in the retirement pensions already communicated.
What does this mean for companies?
The AHV pension is the basis for a wide variety of limits in their social security schemes. This could mean that, depending on the decision of Parliament and the Federal Council, companies would be challenged to make retroactive adjustments to January 2023 in the spring of 2023. One must always imagine that by then there will already be employees who have left the company and thus a retroactive adjustment cannot be implemented without problems. This could be a difficult undertaking in the case of retroactive deductions, e.g. in the pension fund for employees who have already left the company, and it would probably not be possible to implement this without problems with the insurance companies.
Following are some key figures linked to the old-age pension, which are particularly relevant for employers.
The maximum basic old-age pension per month will be CHF 2,450 per month or CHF 29,400 per year from January 2023. As mentioned, another change is still open.
Occupational Pension Act (BVG) / pension funds
The decided BVG benchmarks for 2023 due to the currently planned AHV pension increase are as follows:
BVG entry threshold: This amounts to 75% of the maximum basic retirement pension = CHF 22,050.00
BVG maximum income / BVG upper limit is three times the maximum simple retirement pension = CHF 88,200.00
The BVG coordination deduction is 87.5% of the maximum basic retirement pension = CHF 25,725.00.
BVG minimum insured salary is 12.5% of the maximum basic retirement pension = CHF 3,675.00
If the pension amount were to change now, the consequence would be that, in accordance with the previous adjustments, precisely these benchmarks would change again, which would most likely have an influence on the employee and employer pension fund deductions depending on the pension fund design.
However, the following article of the law shows that the Federal Council can determine these benchmarks. Therefore, according to the following wording, it is up to the Federal Council to determine that the benchmarks of the pension fund/BVG will not be adjusted again despite a change in the retirement pension amount.
Art. 9 BVG Adjustment to the AHV/OASI
The Federal Council may adjust the limit amounts mentioned in Articles 2, 7, 8 and 46 to the increases in the basic minimum old-age pension of the OASI. In the case of the upper limit of the coordinated salary, the general salary trend may also be taken into account.
In this case, it would be desirable for the Federal Council to decide on another adjustment of the BVG benchmark only for the next calendar year 2024 in order to ease the burden on employers and insurers.
However, various pension fund regulations have included the direct reference to the AHV pension amount in their wordings. The Board of Trustees would have to consider whether a wording adjustment should be made in order to avoid the aforementioned challenges on the assumption that the Federal Council will persuade itself to remain on the existing communicated benchmarks from 2023 in the BVG.
Income replacement regulations / EO
The Federal Council has also made daily allowance adjustments in the area of EO daily allowances due to the pension increase in the AHV. In this area, too, it is authorised under the following article of the law to determine the amount and consequently to maintain the decided and published values for 2023.
Art. 11 EOG Art. 11 EOG Calculation of compensation
1 The basis for determining the average earnings before service is the income from which contributions are levied in accordance with the OASI Act. The Federal Council shall issue regulations on the assessment of compensation and shall have the Federal Social Insurance Office draw up binding tables with rounded-up amounts.
Minimum salary for entitlement to a whole family allowance
The salary level for entitlement to a full family allowance is directly linked to the AHV pension. In this case, no exception can be made according to the following article of the law.
Art. 13 FamZG Entitlement to family allowances
Par. 3 Only whole allowances shall be paid. Entitlement to allowances is granted to anyone who pays AHV contributions on an annual income from gainful employment that corresponds to at least half the annual amount of the minimum full AHV retirement pension.
In industries with a lot of part-time wages, the threshold (from 2023 CHF 14,700.00/2=7,250.00 annually or 612.50 monthly) may be decisive. Retroactive adjustments to the entitlement to a family allowance cannot be avoided either way.
Other benchmarks linked to the AHV pension, which have no direct influence for employers
The Federal Council may set the level of OASI contributions for voluntary insurance, for self-employed persons and for contributions for persons not in gainful employment.
Pillar 3 a
The maximum contributions for Pillar 3 a are set at CHF 7056.00 (8% of the upper BVG limit) as of 2023 for gainfully employed persons who are affiliated to a pension fund. The amount without a pension fund is CHF 35,280.00 (40% of the upper BVG limit).
According to the following article, the Federal Council, together with the cantons, has the option of not making a new adjustment:
Art. 33 Art. 33 DBG (Direct Federal Tax Act)
Para. 1 e
Deposits, premiums and contributions for the acquisition of contractual entitlements from recognised forms of fixed personal pension provision; the Federal Council, in cooperation with the cantons, shall determine the recognised forms of pension provision and the amount of the deductible contributions;
Conclusion: re-adjustments are a political decision. However, it should be shaped in such a way that the administrative burden on those affected, such as companies and insurers, is minimised as far as possible. The Federal Council has considerable influence on this. Let us hope that it is aware of this and makes business-friendly follow-up decisions.
The boards of trustees of pension funds should review the wording regarding the coordination deduction amount in their regulations and adapt it to the benchmarks set by the Federal Council instead of directly referring to the AHV pension amount.
Note:
On 9.1.2023 from 5.00 p.m. to 6.30 p.m., a wide variety of topics will be covered at the turn of the year.: Actualities for employers in Switzerland at the turn of the year 2022/2023 https://www.zulaufgmbh.ch/en/course/actualities-for-employers-in-switzerland-at-the-turn-of-the-year-2022-2023/
Or take a look at the full range of our seminars at: https://www.zulaufgmbh.ch/en/events-and-workshops/
