The most important purpose of creating an Employee Capital Plan (ECP) is to ensure a common and, at the same time, voluntary saving system for employees. ECPs allow employed people to hold capital in individual accounts, mainly for use after the completion of their professional activities, while employers gain a tool to motivate employees. Equally importantly, the funds in the ECPs are invested on the capital market, due to which they will help accelerate investments and economic growth.
The detailed principles of ECP functioning are determined in the Act of 4 October 2018 on employee capital plans. Due to the transparent provisions, the programme is relatively simply for the employer and for employees, whereas the liability for its efficient functioning lies with the financial institutions. The main purpose of the ECP is to collect capital which may be used after the age of 60 years or – in exceptional cases – earlier. Speaking of the ECP, there are some important principles to consider that characterise its functioning:
Universality – due to having a designated institution, whose role was entrusted to PFR TFI, each employee has access to the ECP.
Voluntary character – an employee may choose whether they want to keep their savings in the ECP or whether they prefer to resign from it.
Tripartite character – savings held within the ECP include contributions paid by the Employee, the Employer and the State – which ensures the possibility of saving larger amounts more quickly.
Privacy – all funds held on ECP accounts belong to the participant and are inheritable. Due to this, each employee has full access to the information about their account and transaction history.
Contributions paid into the ECP accounts are invested in debt securities (e.g. bonds, treasury bills, mortgage bonds, deposit certificates or other transferable securities) and equity securities (e.g. shares, investment certificates and participation units in investment funds). Pursuant to the act, funds paid into the ECP accounts are invested in target-date funds, whose investment policy is adjusted to the age of the participant.
In PFR TFI, we created PFR PPK SFIO (PFR ECP Specialist Open Investment Fund) with separated subfunds. In the case of the younger ECP participants, the equity part will prevail in the investment fund's portfolio, whereas with the passage of time and approaching the moment of fund withdrawal the debt part will increase.
One of the main goals of the ECP is to ensure additional funds for employees after the completion of their professional activities. Therefore, the Participant may withdraw their funds once they reach the age of 60 years. The most favourable scenario assumes a one-time withdrawal of 25% of the funds and the withdrawal of 75% of the funds in monthly instalments for at least 10 years, as in the case where the income generated by the account is exempt from capital gains tax.
Nevertheless, the Act on employee capital plans also provides for situations in which earlier withdrawal of the funds is possible. The first of them is the purchase or renovation of a house or flat. An employee will be able to finance, from the funds held on the ECP account, their own contribution necessary in the case of taking out a loan. Then, the withdrawal will take place pursuant to the rules of an interest-free loan, which will have to be repaid no later than after 15 years from the withdrawal. The second case, in which earlier withdrawal of the funds from the ECP account is possible, is a serious illness of the participant or members of their immediate family (child or spouse). In such a case, it will be possible to withdraw 25% of the funds held without the necessity to pay them back to the account.
As all the funds held in the ECP are private, each participant will also have the possibility to resign from the programme and to withdraw the funds earlier, at any time. However, it is important to remember that in such a case the funds will be reduced by capital gains tax, 30% of your employer’s contributions (as they were exempt from pension insurance contributions) and the contributions paid to your account by the state.
Employees will be automatically registered for the ECP. Hence, your employer will take care of all the formalities connected with the registration.
The first step is the execution of the ECP management and operation agreement between your employer and a chosen financial institution. At the next step, the financial institution chosen by your employer will provide you with all necessary information concerning the use of the ECP account.
In the case of a change of job, a new account in the ECP will be established for you in the institution chosen by your new employer. Remember to inform your new employer about all ECP accounts established for you so far.
It is important that you do not have to worry about funds held. You have two possibilities: you can leave them in the previous institution, where they will continue to be managed as in the past, or you may transfer them to a newly established account to have all the funds in one place. The transfer of the funds to a new account does not entail any payments.
ECP accounts are established directly after the execution of the ECP operation agreement between your employer and a chosen financial institution. If your employer has signed an agreement with PFR TFI, we will inform you how you can log into your account and check the balance of the funds.
The first contributions to the account will be deducted from the first remuneration paid after the execution of the ECP operation agreement between your employer and the financial institution. For example: if you work for a company with 50 to 249 employees and it signs the ECP operation agreement by 11 May 2020, the first contributions to your ECP account will be deducted from your remuneration for June and will be credited to your ECP account in July.
The financial institutions managing the ECP are obliged to provide participants with access to information about the funds on them. If your employer has signed an ECP management agreement with PFR TFI, we ensure that from our website you have access to the iPPK application, where, after logging in, you can check the transaction history and your account balance. You will find access to the application in the “Participant Zone” tab. When your employer signs the ECP management and operation agreement with us, we will send you an e-mail with the most important information and instructions on how to use the application.
It is never too late to save. People who have turned 55 can join the ECP although in their case the registration into the programme is not automatic. If you are over 55 and you want to save in the ECP, you must submit to your employer a request for the execution of the ECP operation agreement.
The most important step to establish the ECP in a company is the choice of financial institution and the execution of the ECP operation and management agreement therewith.
It is worth preparing the company organisationally for the establishment of the ECP. Before implementing the programme, the company should make sure that the accounting system is updated, prepare for keeping and archiving documents in the proper manner as well as implementing appropriate procedures.
The deadline for establishing by employers the ECP in their companies depends on the employment level.
First – on 1 July 2019 – the provisions on the ECP became binding on the largest companies, those with at least 250 employees. These entities should have signed the ECP management agreement with a chosen financial institution by 12 November 2019.
Next, medium-sized companies with 50 to 249 employees will be obliged to establish the ECP. These companies will be bound by the provisions as of 1 January 2020, which means that they must sign the ECP management agreements by 11 May 2020 at the latest.
The third stage of the ECP implementation starts on 1 July 2020, and covers entities with 20 to 49 employees. These companies must sign the ECP management agreements by 27 October 2020.
The smallest companies, those with fewer than 20 employees and entities of the public finance sector, will be the last entities to join the ECP. The deadline for joining the ECP by these entities is 1 January 2021, whereas the deadline for the execution of the ECP management agreement is 23 April 2021 for enterprises and 26 March 2021 for entities in the public finance sector.
Each employer should inform their employees about their rights and obligations connected with the ECP and the principles applicable thereto. Remember that in choosing PFR TFI as the institution managing the ECP in your company you may count on the support of our team – including in the scope of communication with your employees.
The benefits of the ECP implementation are mentioned most frequently in the context of employees who save for their future pensions by participating in this programme. However, ECPs offer many opportunities for employers. The contributions paid by employers to their employees’ accounts in the ECP constitute a form of pay rise. Therefore, the Act on employee capital plans provides employers with a new tool for motivating employees, which is particularly relevant given the labour market conditions and growing expectations of employees towards employers. It is important that, in order to ease the financial burden imposed on employers, the legislator has guaranteed the possibility to include the ECP in the tax deductible expenses and to exempt the ECP from the contributions to the Social Insurance Institution.
Dyspozycje składane pisemnie do PFR TFI powinny być podpisane w obecności przedstawiciela PFR TFI lub poświadczone notarialnie.
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