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EUROPE: "France Proposes Stricter Rules on Disclosure of Major Shareholdings"

EUROPE: "France Proposes Stricter Rules on Disclosure of Major Shareholdings". 4-page article by David F. Freedman, Baker & McKenzie.

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back to index backEUROtalk March,  2016


Belgium: New Retirement Plan Rules Have Immediate Implications for Employers

EMPLOYER ACTION CODE: ACT

The government has passed a new law impacting company pension plans, effective January 1, 2016. It changes guaranteed minimum interest rates applicable to retirement accounts of defined contribution and cash balance plans, and aims to improve retirement plans’ sustainability and social character, and closely link the timing of plan payouts with social security.

KEY DETAILS

Beyond the change to the guaranteed minimum interest rate, the main new provisions affecting employer plans are:

Benefit Commencement Timing

It has been common for employer plans to permit payment of retirement benefits (lump sums or pensions) as early as age 60, independent of when a member starts the social security retirement benefit. Subject to a transition for members already close to early retirement eligibility, the new law provides in principle that, effective January 1, 2016, the payment of benefits from an employer-provided plan must occur at the same time as the member’s (possibly early) legal retirement and start of the social security pension.

However, the new law does permit the plan member to request and commence payment from the employer plan once conditions for (early) legal retirement under social security (provided the plan rules permit this) are met, even if a decision is made to continue to work and defer receipt of the social security pension.

Early Retirement Benefits

In many company-provided retirement plans, the plan rules have permitted participants to receive benefits upon early retirement (i.e., earlier than the plan’s stated normal retirement age) under favorable terms (e.g., a slightly reduced or even full benefit amount). From January 1, 2016, all participants will be prohibited from such favorable terms for determination of early retirement benefits, with the exception of those who reach age 55 by December 31, 2016.

Normal Retirement Age

Currently, the rules of many company-provided retirement plans specify a normal retirement age lower than that under social security (i.e., age 65, increasing to 66 in 2025 and 67 in 2030). Starting in 2016, the new law prohibits this for new plans and for any plan where an amendment is made to the retirement age. This change in normal retirement age also applies to all plans for employees hired on or after January 1, 2019. Plans will still be permitted to set early retirement ages, although they will be subject to the other provisions of the new law as described above.

Death Benefits

Plan members who terminate employment from January 1, 2016, and leave their vested reserves in the retirement plan (i.e., deferred pensioners) must be given the option to elect death coverage within the plan, up to the amount of their vested reserves. The members will need to be presented with a one-time election at termination, after which they will have 12 months to opt for this death coverage. The cost of the coverage will be charged to the vested reserves of the employee, resulting in a lower deferred benefit at retirement age.

EMPLOYER IMPLICATIONS

Although formal amendments to plan documents to reflect the new laws will not be required until the end of 2018, the changes may have immediate implications for plan administration, benefit calculation, communication with plan members and valuations of plan benefit obligations. Employers should analyze how the new provisions affect their plans and implement appropriate actions needed for compliance.

Source: Towers Watson - GAI





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