Employee Capital Plans

Recently, the draft of the Act on Employee Capital Plans has been published on the website of the Government Legislation Center. The project is currently at the stage of reviewing and public consultations.

The rationale for introducing solutions planned in the project is to solve such problems as, among others, a low rate of individual savings and a gap in income between the period of work and retirement. Proposed solutions are to create a legal framework for the universal saving system designed for covering financial needs arising after retirement.

Basic assumptions of the draft act

Employee Capital Plans (ECP) are to constitute a private long-term saving system, which is to be obligatory for employers and voluntary for employees.

ECP participants are to be persons who are under 55 years of age and perform work on the basis of employment agreement, as well as, among others, persons performing work under a contract of representation, mandate contract or other contract for the provision of services within the meaning of the Civil Code, as well as members of the supervisory board remunerated for performing these functions. They will be registered to the PPK automatically, but they will have the right to submit a statement on withdrawal from participation in the system. Persons between 55 and 69 years old will entitled to join the system voluntarily.

Contributions are to be calculated and paid to the investment funds selected by employers. Investment funds will be responsible for managing the money collected. The savings will consist of capital transferred by the employer and employee:

• the employee’s contribution, deducted from his net remuneration, will amount to a minimum of 2% of remuneration, with the possibility of increasing it to a total of 4%,
• the employer will be obliged to pay an additional 1.5% of remuneration with the possibility of voluntary payment increase up to 4%.

Amounts funded by the employer will not be the basis for calculating social security contributions. In addition, government subsidies are foreseen in the form of an additional payment of PLN 240 per year and a one-off welcome contribution in the amount of PLN 250. These payments will be free of personal income tax.

One of the forms of getting back the funds collected within the ECP will be receiving installment after reaching the age 60. The money will also be the subject to inheritance.

Entry into force

The obligation to create the ECP will include employers which employ

• at least 250 people – from January 1st, 2019
• from 50 to 249 people – from July 1st, 2019
• at least 20 people – from January 1st, 2020
• other employers and units of the public finance sector – from July 1st, 2020.

However, the obligation to create the ECP will not apply to those employers who, at the date of entry into force the ECP Act, will have Occupational Pension Programs under which they will already pay basic contributions for employees, amounting to at least 3.5%.