Belgian Parliament has voted an act which will amend the Workplace Pensions Act (“WAP” in Dutch) on two important points.
As a consequence of the amending act (“the Act”):
- employees will have to be affiliated to the pension plan as soon as they meet the conditions of the plan, whereas until now, affiliation could be postponed until the employee reaches the age of 25;
- employees’ rights in the plan will vest immediately, whereas until now, the plan rules could provide that entitlements only vest after one year of affiliation to the plan.
Depending on what your plan rules currently provide, both measures can have a considerable impact, both in terms of administrative burdens and financial consequences. If your plan currently provides that pension rights only vest after one year of affiliation for example, but the employee leaves the company sooner, his pension rights are transferred to the plan’s financing fund and could be used for a so-called contribution holiday for the company in a later stage.
A study by the Catholic University of Leuven indicates that for industry-level pension schemes, this amendment of the law will increase the potential number of employees with dormant rights in industry-level schemes by 55.000 per year (i.e. the number of employees who leave the sector within the first year of employment) .
Rationale behind the changes
The amendments to the Act are the Belgian implementation of the Portability Directive 2014/50/EU, but the amendments go much further than required by the Directive. The Minister of Pensions, Mr. Bacquelaine, has defended this choice, which is critized in the industry, as necessary to further develop and democratize work-place pensions in Belgium. We see that the changes are also in line with developments on the topic in other Member States.
Do you need to take action ?
If your pension plan rules need updating as a consequence of the Act, it is recommended to do so for transparency reasons.
But even if the plan rules are not adjusted, the changes will apply automatically:
- to all employees who join the company after the entry-into-force of the Act (see below);
- as from 1 January 2019 for employees who joined before the entry-into-service:
→ they will have to be affiliated from this date onwards, even if they have not yet reached the age of 25;
→ their pension rights will vest (as from the date of affiliation), even if they have not been affiliated for one year.
The Act was voted in Parliament on 21 June 2018 but is still to be published in the Belgian State Gazette.
