Employee capital plans – What do you need to know ?

Yesterday (28 November 2018), the legislative Act of 4 October 2018 regarding employee capital plans was published in the Journal of Laws under item 2215.

The coming months promise to be busy ones for the Polish Development Fund and for the financial institutions putting in place the foundations of the employee capital plans, or PPK, system. This time will be equally busy for employers, on whom it is now incumbent to learn about the new rules and to provide for operation of employee capital plans in their budgets and plans. In this and subsequent editions of our firm’s Newsletter, GESSEL experts will endeavour to provide a succinct introduction to PPKs as well as some pointers on how to prepare for the coming changes.

So what are employee capital plans anyway (their essence) ?

The employee capital plans have been devised as a mechanism for consistent saving by their participants (including employees). The system will be general in character – employing establishments will be bound by law to contract with financial institutions for management and operation of PPKs. The essence of the employee capital plan will comprise gathering funds from basic and additional contributions remitted by the employing establishment and by the participants themselves:

The PPK Act also provides for a welcome contribution of PLN 250 and for an annual PLN 240 contribution from the Labour Fund upon fulfilment of certain conditions.

Funds assembled within the PPKs will be invested by financial institutions and disbursed to participants once they have attained 60 years of age. In some cases, funds assembled under an employee capital plan can also be applied towards other purposes.

The above components will be elaborated upon in consecutive Newsletters.

Are PPKs for employees only ?

No. Workers to whom the new PPK rules apply are as follows:

1. Employees (excluding juveniles);
2. Persons performing piecework labour (aged 18 and older);
3. Members of agricultural production cooperatives and agricultural union cooperatives;
4. Natural persons (aged 18 and older) performing labour pursuant to an agency agreement, commission agreement or another contract for provision of services;
5. Members of Supervisory Boards receiving remuneration for their service

– who are subject to mandatory pension and disability insurance.

Once the PPK Act has been phased in, retaining persons from even one of the above categories may result in a legal duty to establish an employee capital plan by the employer.

PPKs shall not, meanwhile, apply to the self-employed (sole traders). For this category of workers, the legislature has envisaged an increased limit of contributions to individual pension accounts (IKZE) – up to 1.8 time the average projected monthly remuneration (up from the present limit of 1.2 times).

When does the PPK Act begin to apply in practice ?

Employee capital plans will be implemented gradually, beginning with the largest entities which have at least 250 employees – these must establish PPKs already in 2019. The implementation time frame is as follows:

NB: The date on which the PPK Act begins to apply, as specified above, is not tantamount to the date as of which contributions towards the employee capital plans must be remitted. Rather, it is the date on which the employing entity should execute contracts for management and operation of PPKs with the selected financial institution (for more about execution of such contracts, please refer to future Newsletters), and actual contributions towards the plans will become mandatory only later. To take the example of an entity employing at least 250 persons, the timeframe will be as follows:

In our next Newsletter, we will summarise the basic structure of the contracts for management and operation of employee capital plans and describe the terms for remitting contributions and for foregoing contributions.

Contact: