1e pension plans represent a modern pension fund solution in the supplementary pension field that offers advantages for both members and employers.
Starting at an annual salary of CHF 127,980, employee benefits institutions can offer their members a choice of investment strategy for the salary components above this threshold (non-mandatory portion). Based on Article 1e of the Ordinance on Occupational Old-age, Survivors’ and Disability Benefit Plans (Verordnung über die berufliche Vorsorge, BVV 2), such employee benefits solutions are generally known as 1e pension plans.
In terms of organisation, companies may choose to operate either one or several employee benefits institutions. Many companies, especially bigger ones, set up a pension fund which covers salaries up to the maximum BVG salary of CHF 85,320, or up to the maximum LOB Guarantee Fund threshold of CHF 127,980. For salaries in excess of these thresholds, companies establish one or several supplementary institutions which are often referred to as executive or “bel etage” solutions.
Advantages for members
1e pension plans allow members to choose an investment strategy that suits their personal risk profile. The GEMINI Collective Foundation, for instance, offers a choice of six different investment strategies, from the low-risk 100% money market strategy to the higher-risk 50% equity strategy. With members fully participating in the development of the chosen strategy, they have the opportunity to generate higher returns if they are willing to take a higher risk. At the same time, they also assume the risk of a negative performance.
Despite this flexible approach, BVG principles such as collectivity and insurance rules, which apply to all pension funds, must be observed. The supreme executive body still shares responsibility for the security of the investments. This means that members must be advised of the opportunities and risks associated with the available investment strategies. To help them choose the right strategy, members answer a list of questions which determines their risk capacity and risk affinity.
Advantages for employers
1e pension plans are also interesting solutions for employers. Firstly, employers can offer their executives an attractive, modern employee benefits solution in the supplementary pension field. These days, this is a compelling argument when it comes to competing for and retaining top employees. Secondly, in reducing the restructuring potential, 1e solutions are also suitable for de-risking, allowing employers who report according to IFRS or US-GAAP to reduce pension liabilities on their balance sheets.