Vesting of Occupational Benefit Plan: Key Legal Change in 2024
Switzerland, known for its stability and precision, is introducing a significant legal amendment that will impact the vesting of occupational benefit plans, a fundamental component of the 2nd pillar of the pension system. These changes may affect your financial retirement strategy, especially if you are on the cusp of retirement. In this blog post, we will delve into the impending regulatory alterations in detail.
Current Regulation for Vesting of Occupational Benefit Plans
Until now, Swiss legislation has granted individuals approaching retirement a degree of flexibility in managing their occupational benefit plans. They could keep their funds in the pension scheme for up to five years after reaching the reference age. This provision allowed for some financial flexibility and planning certainty.
However, starting January 1, 2024, this regulation is undergoing revision. The Federal Council has approved an amendment to Article 16 of the Occupational Benefit Plans Ordinance (OBPO), tightening the conditions for the disbursement of occupational benefit plan benefits. Here is the relevant legal text:
Art. 16 Deferral of Vesting Benefits
1 Individuals who would need to receive their vesting benefits between 2024 and 2029 because they
a. have reached the reference age or
b. have already exceeded the reference age
and are no longer employed can defer the disbursement of these benefits until December 31, 2029, but for a maximum of five years beyond reaching the reference age.
2 As of January 1, 2030, identical rules apply to Pillar 3a savings and occupational benefit plan funds.
3 The requirement for the actual continuation of gainful employment is met if the insured person provides proof, for example, in the form of a salary statement, an employment contract, or an employer's confirmation. If the insured person engages in self-employment, they can provide, for instance, a business account. The law does not stipulate a minimum employment rate.
In brief, individuals wishing to access their vesting benefits between 2024 and 2029, having either reached or exceeded the reference age, can postpone the disbursement until no later than December 31, 2029, but not beyond five years after reaching the reference age. From January 1, 2030, the same rules will apply to Pillar 3a savings and occupational benefit plan funds.
It's important to note that the requirement for the actual continuation of gainful employment must be substantiated through various documents such as salary statements, employment contracts, or employer confirmations. Self-employed individuals can present a business account as proof, and there is no minimum employment rate stipulated by the law.
Background on Occupational Benefit Plans
Occupational benefit plans serve as a vital tool to maintain retirement provisions during periods of employment interruption, relocation abroad, or self-employment. Originally designed as a temporary solution, these accounts often persist until retirement age. This can offer tax advantages and facilitate flexible retirement planning.
If you anticipate a temporary interruption in your gainful employment, splitting your pension fund into two occupational benefit plan accounts may be advantageous. Consult your pension advisor to determine if this approach suits your situation and for guidance on the necessary steps.
The upcoming legal change in 2024 necessitates a thorough evaluation of your individual retirement provisions and, if necessary, an adjustment to your financial planning. We recommend seeking information from experts early to make informed decisions regarding your retirement.