Employee
Capital Plans (Polish acronym: PPK) – what is it all about?
Sebastian GOSCHORSKI
Accounting & Payroll Partner at RSM Poland
On Monday, 1 July,2019 the Employee Capital Plans
were rolled out. Organisations employing more than 250 persons were the first
to join the scheme, and they automatically enrolled their employees aged 18-55
in the PPK. What are PPKs and what should you know about them? I encourage you
to read my article.
What is a PPK?
A PPK is a private long-term saving system
aimed at boosting the financial security of Poles. The money paid to the PPK is
supposed to come from several sources, i.e. the employee, the employer and the
state budget in the form of a subsidy. The fact that the system is private
means that every participant may withdraw their funds at any time and opt out
from making further savings.
As there are many concerns among our fellow
countrymen concerning the level of pensions and the replacement rate is
decreasing at an alarming rate, the government has decided to introduce this
new form of saving for your retirement. Since 1 January 2019, the Act of 4
October 2018 on Employee Capital Plans has been in force, pursuant to which
employers are under obligation to introduce the PPK in their organisation
within defined deadlines, the timetable for joining the PKK depending on the
company’s size and type. This means that every employer will have to
take action in line with the provisions of the act: the largest companies
will go first, whereas small entrepreneurs and entities from the public finance
sector will be the last to join.
Scheme
participants
An employer is obliged to enrol its employees
for the PPK according to the following rules:
- employees aged 18-55: compulsory;
- employees aged 55-70: upon an employee’s individual
request, provided that their length of service with a given employer is a
minimum of 3 months over the last 12 months;
- employees over 70 years of age: cannot be enrolled.
The underlying assumption of the PPK is that
it covers not only persons with a permanent full-time job, but also those
working part-time and employees on contracts of mandate, as long as they pay
contributions to the Social Insurance Institution. From the perspective of the
act, it does not matter if the employee is on a parental or maternity leave.
Everyone has the right to opt out or join the scheme.and distract you from your priorities?
Stages of PPK implementation
In accordance with the act, the process of PPK
implementation shall have the following schedule:
- preliminary works, being primarily about including the
additional burden for the company in its financial plan and defining a
potential list of financial institutions that will cooperate with the
company in question;
- choice of a financial institution that will manage the
PPK (the list of registered institutions is in the public domain). This
choice must be consulted either with a representative of the employees or
a representative of the trade unions. In this stage, a letter of intent
shall be signed with the chosen financial institution if it has not been
registered yet;
- conclusion of the contract for managing and running the
PPK (the company actually signs two contracts with the chosen financial
institution:
- contract for PPK management,
- contract for running the PPK for and on behalf of
employees).
PPK
administration
Every employer shall be under obligation to
administer the PPK, i.e. to properly calculate and make contributions to the
scheme. What is more, the employer will have to ensure that PKK participants
can make requests, such as to change the beneficiary, change the allocation of
the premium, opt out from the scheme in writing, etc. In addition, the employer
will be obliged to submit pre-defined information on PPK operation to employees
and the financial institution with which the employer has concluded a contract
for PPK management and running.
Level of
contributions
The basic contribution financed by the
employee shall amount to 2 per cent of their gross salary. Any PPK participant
may also decide to make an additional contribution up to 2 per cent of their
salary, which means that funds financed by the employee may amount to a maximum
of 4 per cent (basic and additional contribution). In turn, the employer shall
pay a contribution in the amount of 1.5 per cent of the employee’s obligatory
contribution, increased by 2.5% of the voluntary contribution calculated on the
basis of the salary. As a result, a maximum contribution to the PPK per one
employee may amount to 8 per cent of the salary being the basis for calculating
retirement and disability contributions of the scheme member. Savers will also
receive a welcome payment of PLN 250 and a payment of PLN 240 each year (the
assumption being that this subsidy is in the discretion of persons responsible
for the state budget, and its payment hinges upon meeting a number of
conditions).
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