On November 19, the Polish president approved a law that introduces new defined contribution occupational pension plans called Employee Capital Plans (Pracownicze Plany Kapitałowe, or PPKs). The law is effective January 1, 2019, and the first PPKs will become operational in July 2019. Employers will be required to offer a PPK to their employees unless they already offer (and continue to offer) a qualified pension plan through the voluntary Employee Pension Program (Pracownicze Programy Emerytalne, or PPE). According to the government, the new law is intended to increase retirement savings and is expected to cover around 11.5 million workers.

Key details of the new law include:

• Phase-in: Employers will be required to offer a PPK to their employees starting in July 2019 (for employers with more than 250 employees), January 2020 (for employers with 50 to 250 employees), July 2020 (for employers with 20 to 49 employees), or January 2021 (for all other employers).
• Enrollment: All employees aged 19 to 55 with at least 3 months of service will be automatically enrolled in their employer’s PPK but can opt out. Those who choose to opt out will be automatically reenrolled every 4 years. Employees aged 56 to 69 will only be enrolled at their request.
• Contributions: Employers will contribute 1.5 percent of gross wages and employees will contribute 2 percent; additional voluntary contributions of up to 2.5 percent from employers and 2 percent from employees will be possible. Employees with total income less than 1.2 times the monthly minimum wage will contribute 0.5 percent of gross wages. (The monthly minimum wage will be 2,250 zloty [US$595.75] in 2019.) The government will provide a one-time grant of 250 zloty (US$66.19) plus an additional 240 zloty (US$63.55) per year to all PPK participants.
• Investments: Each employer will choose, in consultation with trade union or employee representatives, a financial institution to manage its PPK assets. Assets will be invested in life-cycle funds that adjust the participants’ portfolios to an age-based risk profile.
• Fees: Financial institutions may charge PPK participants an annual administrative fee of up to 0.5 percent of net assets under management. An additional 0.1 percent may be charged if certain performance standards are met.
• Withdrawals: Upon reaching age 60, a participant may withdraw up to 25 percent of the account balance as a lump sum with the remainder paid as programmed withdrawals over at least 10 years. Early withdrawals before age 60 will be allowed under certain conditions, including if the participant, a spouse, or a dependent child becomes seriously ill.
• Survivor benefits: If the participant dies, 50 percent of the account balance will be paid to the widow(er) and the rest to other eligible survivors.

In addition to the PPE and PPK, Poland’s pension system consists of a public notional defined contribution program and voluntary privately managed individual accounts.

Source: SSA