Amended rules on supplementary pension entitlements.
The rules governing the acquisition, retention and withdrawal of supplementary pension reserves are currently regulated by the Belgian Supplementary Pensions Act [Wet op de Aanvullende Pensioenen – WAP] of 2004. However, in April 2014, the European Parliament voted in favour of a Directive aimed at improving the mobility of workers, including the accrual and retention of their supplementary pensions, the so-called ‘Portability Directive’. This Directive provides that workers who go to work in another Member State do not lose their accrued pension entitlements. The conditions for accruing pension entitlements, such as the length of the vesting period and minimum age, will also be adjusted. Belgium therefore has had to do its homework and bring the WAP into line with this Directive within the specified period.
After consulting with the parties concerned, this Directive was transposed into an amendment to the WAP voted on in the Chamber of Representatives on 21 June 2018.
What will change in practice and how will your pension plan have to be adapted?
- The conditions for participating in a pension plan allowed for an age condition of 25 to be imposed on new workers. As from 1 January 2019, this minimum age of 25 for participation will be abolished: ‘all workers covered by the plan become participants immediately.’ (amendment to Article 13(1) WAP)
- It is currently possible to definitively grant the participant the accrued pension entitlements only after one year of service. This exception will also be abolished and the participant will ‘immediately lay claim to the acquired reserves and benefits as stipulated in the pension regulations.’ (amendment to Article 17 WAP). In sectoral pension plans, ‘retirement’ moreover refers only to someone who departs from the sector and not from a specific employer/undertaking. For sectors with many periods of employment shorter than one year, such as cleaning or the hotel and catering industry, this allows for the succession of many small acquired pension entitlements for each participant.
- Finally, the last paragraph of Article 17, which allows the pension organiser to join employees with fixed-term employment contracts only once they have been given an open-ended contract, has also been abolished.
If your pension plan includes one of the above ‘recruitment conditions’, it will have to be amended and every condition will be deemed fulfilled as of 1 January 2019. Any worker, regardless of their age or type of employment contract, will immediately be entitled to supplementary pension on the commencement of their employment. The accrued pension entitlements of workers already employed will also be granted by no later than 1 January 2019.
Our concern is this legislative amendment will involve a significant administrative burden/cost for undertakings with a high staff turnover and very young population. The legislator has tried to alleviate this with the amendment of Article 32 WAP on the allocation of the reserves when someone ceases to be a participant of the pension plan. The aim is to deviate from the prescribed procedure if the pension reserve on the date of leaving the plan amounts to €150.00 or less (indexed): these reserves must remain with the pension institution. Where applicable, an exit form must not be sent out, but the participant then also has no option of converting to death cover. A transfer to the pension institution of a new employer is therefore impossible, unless stipulated otherwise in the regulations.
Unlike the Netherlands and United Kingdom, Belgium does not offer the option of commuting such small pensions.
The Belgian legislator has implemented this Directive strictly without considering economic reality, while Europe has still allowed several openings to limit the budgetary and administrative impact for all parties involved.