Country Profiles

Austria

Country Profiles

Austria

Complementary pensions (Voluntary)

Updated: 31 December 2018

2018: Pension Companies Act; Transposition of IORP II Directive.

2016: Insurance Supervision Act; regulates the establishment, operation and supervision of insurance companies.

2006: Regulations relaxing investment limits for Pensionskassen were passed.

2005: Pension Companies Act; Transposition of IORP I Directive.

2004: The Harmonisation of Austrian Pension Systems Act reformed the state pension system.

2002: The Act on Corporate Staff Provision (amended in 2006) introduced the new severance pay system. It regulates the setting-up and management of staff provision funds (investment limits, capital requirements).

1990: Company Pensions Act; authorizes different types of plans, regulates minimum requirements concerning vesting and transferability of accrued rights and prohibits arbitrary discrimination in coverage.

1990: Pension Companies Act; regulates the establishment, operation and supervision of single and multi-employer pension funds, includes rules concerning asset management, minimum funding and accounting.

1988: Income Tax Act; sets limits to plan design by regulating the taxation of contributions, investment income and benefits and defines financial rules for book reserve plans.

Plan sponsors

Single employers may, on a voluntary basis, establish a complementary occupational pension plan for their employees.

Pension plans must be based on agreements negotiated collectively with the company work council or, if there is no work council in a company, individually with each employee.

Pension plans implemented through the establishment of a pension fund (see section on Types of plans) may also be established by groups of employers and must in this case be based on a collective agreement with the sector union.

Types of plans

Plan sponsors may choose between five types of plans. These types are structured in accordance with the five financing methods allowed by the Company Pensions Act.

Participation in a plan is voluntary for covered employees.

Pension funds: Single employer and multi-employer plans may be implemented through the establishment of single employer and multi-employer pension funds respectively.

The establishment of a pension fund is subject to the authorization of the Financial Market Authority (Finanzmarktaufsichtsbehörde - FMA). The FMA must ensure that the articles of association of a pension fund are in compliance with principles of sound and efficient pension fund management.

A pension fund has to manage pension plans for at least 1,000 members.

Pensionskassen invest the contributions paid into the fund. To do this, these contributions are pooled in what is referred to as "investment and risk sharing groups" (IRGs), each comprising at least 1 000 individuals. This results in several advantages:

•Balancing of technical risks: Employees' assets are invested jointly so as to balance any risks (longevity risk, mortality risk, risk of occupational disability).
•Joint investment: The Pensionskasse usually follows a separate investment strategy for each IRG. In this strategy, Pensionskassen are obliged to consider the factors of security, profitability and the availability of the funds contributed. Risk diversification can be achieved more cost effectively due to the greater investment volume of the contributions. Risk management ensures that risks will be appropriately addressed.
•The assets belonging to an IRG represent special funds. Such assets are protected in the event that the Pensionskasse files for bankruptcy, which means that beneficiaries' claims are not forfeited.
Pension funds must establish a business plan outlining its actuarial and technical provisions. The business plan must be reviewed by an independent external actuary and approved by the FMA.

The operation of a pension fund is based on a contract between the pension fund and the sponsoring employer(s). This contract must regulate the following issues in line with the collective or individual agreements which constitute the basis of the pension plan:

- benefit provisions;
- employer and employee contribution rates;
- a framework for the investment policy;
- information obligations for the sponsoring employers; and
- administrative charges.

Direct insurance: Sponsoring employers may take out individual life insurance policies with a life insurance company to implement the pension plan.

The establishment of a life insurance company is subject to obtaining a licence from the FMA.

Occupational group insurance: Sponsoring employers may execute a contract with a life insurance company to implement a pension plan. This contract must regulate the same issues as a contract between a pension fund and the sponsoring employer(s).

Book reserve: Pension promises defined in the plan may be financed by allocating funds to internal reserves.

Fifty per cent of the value of internal reserves must be covered by external assets (see section on Protection of rights - subsection on Financial and technical requirements / Reporting).

Support funds: Plans may be implemented through support funds.

No authorization is required to establish a support fund.

Support funds are neither regulated nor supervised and play only a minor role in complementary occupational pension provision.

 

Pension funds: Pension funds manage the contribution and benefit administration. Pension funds are independent legal entities separate from the sponsoring employer(s). They must take the legal form of joint-stock companies and must have their headquarters in Austria.

The Financial Market Authority (FMA) must be notified if a shareholder of a pension fund holds more than 10 per cent of the share capital. It must also be notified if a shareholder holding more than 10 per cent of the share capital increases its participation to more than 20 per cent, 33 per cent or 50 per cent respectively. The FMA may take appropriate measures if such participation has an adverse impact on the soundness of the pension fund administration.

Each pension fund must have a supervisory board consisting of at least five members in the case of single employer funds and of between 10 and 22 members in the case of multi-employer funds. Members of the board of directors must not have any criminal record or be subject to any criminal investigation. The appointment of members of the board of directors is subject to the approval of the FMA.

Members of the board of directors of a single employer pension fund are required to hold a management position with the sponsoring employer. The directors of a multi-employer pension fund must prove professional experience in the area of pension fund management, banking or insurance and must have been in a management position for at least three years.

A board of directors consisting of at least two members is responsible for the daily management of the pension fund.

Unless regulated differently in the articles of association, the representatives of the fund shareholders must outnumber the representatives of the fund members (legally defined as employees covered by the plan, former employees receiving pension benefits from the fund, persons receiving widow pensions and persons with deferred pension rights) by two in the case of multi-employer funds and by one in the case of single employer funds.

A consultative committee, consisting of an equal number of representatives of the fund management and of fund members, may be established within a pension fund. The consultative committee has the right to obtain certain information and to make proposals to the supervisory board.

Direct insurance: The life insurance company manages the contribution and benefit administration.

Occupational group insurance: The life insurance company manages the contribution and benefit administration.

A consultative committee consisting of four members may be established, with the right to obtain certain information and to make proposals to the supervisory board.

Book reserve: The sponsoring employer manages the contribution and benefit administration.

The company's work council has the right to obtain information and to control the partial external financing (see section on Protection of rights - subsection on Financial and technical requirements / Reporting).

Support funds: Support funds are legal entities separate from the sponsoring employer.

There are no further regulatory restrictions.

Expand

All plans: Private-sector employees.

The self-employed may only contribute on their own behalf if they employ at least one employee for which they sponsor or co-sponsor a pension plan implemented through a pension fund. Civil servants and public-sector employees may only be covered by a pension plan implemented through a pension fund.

A Federal Pension Fund covers civil servants and public workers working for the federal government. Many local governments have also established pension funds.

Discrimination in coverage is prohibited if it is based on arbitrary criteria such as, for example, gender. The number of hours worked is not considered an arbitrary criterion as such and the coverage of part-time workers depends on plan rules.

Sources of funds

All plans: Total contributions are limited by tax rules (see section on taxation of employer contributions).

Employee contributions

All defined benefit plans: While employee contributions to defined benefit plans are not formally prohibited, employees do not normally contribute.

Pension funds, direct insurance and occupational group insurance: Employee contributions are voluntary and, in the case of pension funds, employee contributions in a year must not exceed employer contributions for the year.

Employees can cease contributing at any time or interrupt their contributions for at least two years.

Contributions are paid on the total salary, with the contribution rate by employers usually ranging between 1 per cent and 3 per cent of salary below the social security ceiling (EUR 4,980 a month - for 2017) and between 5 per cent and 15 per cent of salary above the ceiling.

Book reserve and support funds: Employees do not contribute.

Employer contributions

All plans: Employer contributions are compulsory and are limited by tax rules (see section on taxation of employer contributions).

In the case of defined contribution plans, contributions are paid on the total salary, with the contribution rate usually ranging between 1 per cent and 3 per cent of salary below the social security ceiling (i.e. EUR 4,980 a month - for 2017) and between 5 per cent and 15 per cent of salary above the ceiling.

In the case of defined benefit plans, the contribution rate depends on the benefit structure and thus varies from plan to plan.

Other sources of funds

All plans: None.

Methods of financing

Pension funds, direct insurance, occupational group insurance and support funds: Funded.


Book reserve:
This is a special system of financing (internal accounting for pension liabilities within the accounts of the sponsoring company). The value of internal reserves must be partially covered by external assets (see section on Protection of rights - subsection on Financial and technical requirements / Reporting).

Asset management

Pension funds:
The management board shall ensure that the investment of assets allocated to an investment and risk-sharing group is performed by persons who hold suitable professional qualifications to do so, and who in particular are able to prove their corresponding professional experience in the fields of portfolio management, risk management as well as asset liability management and that appropriate technical resources are available for investment. The investment of the asset allocated to an investment and risk-sharing group (i.e. single- and multi-employer plans) must be conducted in accordance with the prudent person rule and taking into consideration the other provisions in this federal act, and in so doing shall in particular observe the following:
1. assets are to be invested in the best long-term interests of beneficiaries (entitled and recipients) as a whole;
2. in the case of a potential conflict of interest, the investment decisions are to be made in the sole interest of beneficiaries (entitled and recipients);
3. assets are to be invested in such a manner as to ensure the security, quality, liquidity and profitability of the assets allocated to an investment and risk-sharing group as a whole;
4. assets are to be invested by type and duration in a manner that corresponds to the expected future pension provision benefits;
5. securities and money-market instruments must predominantly be
     a) listed or traded on a regulated market pursuant to Article 1 no. 2 BörseG 2018; or

     b) traded through a multilateral trading facility (MTF) pursuant to Article 1 no. 24 of the Securities Supervision Act of 2018 (WAG 2018;       Wertpapieraufsichtsgesetz 2018) published in Federal Law Gazette I No. 107/2017, or an organised trading facility (OTF) pursuant to Article 1 no. 25 WAG 2018; or
      c) officially listed on a securities exchange in a third country (Article 2 no. 8 BWG) or on another securities exchange in a third country that is recognised, regulated, open to the public and functioning in an orderly manner;
Investments in assets, that are not admitted to trading on regulated markets, must be included in the declaration regarding the investment policy rules and must in any event be kept to prudent levels;
6. derivative products pursuant to Article 73 of the Investment Funds Act of 2011 (InvFG 2011), which have not been acquired for the purpose of hedging of price risks, shall only be allowed to be acquired, where they contribute to the reduction of investment risks or for the purpose of simplifying an efficient management of the assets allocated to an investment and risk-sharing group; the concentration of risks in relation to a single counterparty or other risk concentrations in derivative products are to be avoided;

7. the assets are to be properly diversified and a concentration of risks avoided;
8. The acquisition of assets from one and the same issuer or issuers belonging to the same group of undertakings, shall not be allowed to lead to an excessive concentration of risks;
9. under the prudent person rule the potential long-term effects of the investment of an asset allocated to an investment and risk-sharing group may take into account the relevant environmental, social and governance factors.
(2) Investments made back into employers making contributions to the investment and risk-sharing group is to be restricted, with the exception of investments in government debt securities issued by the Federal Government (Bund), a Province (Bundesland), another EEA Member State or constituent state of another Member State to a maximum of 5 % of the assets allocated with investment and risk-sharing group.

(3) Taking into consideration the nature, scope and complexity of the activities of Pensionskassen, the FMA shall monitor the adequacy of procedures of Pensionskassen for the assessment of creditworthiness, shall assess the application of references to ratings that have been issued by credit ratings agencies as defined in lit. b of Article 3(1) of Regulation (EC) No. 1060/2009 on Credit Rating Agencies, OJ L 302, 17.11.2009, p. 1, with regard to the investment policy of the investment and risk-sharing group and shall if notified encourage the mitigation of the effects of such references, in order to counteract the exclusive and automatic recourse to such ratings.
(4) To ensure that the conditions stipulated pursuant to paras. 1 to 3 are fulfilled, the Pensionskasse shall draw up and implement guidance in writing about the investment of assets allocated to an investment and risk-sharing group, which where applicable must at least cover the following areas:
      1. investment objectives taking into account the commitments arising from Pensionskasse contracts;
      2. criteria for the security, quality, liquidity, profitability and availability of the entire assets allocated to the investment and risk-sharing group;
      3. strategic asset allocation, suitable parameters for deviation from such an allocation and the respective rules for determining such parameters;
      4. Definition of the investment universe in according with the following investment categories:
         a) cash at banks,        
         b) loans and credits,         c) securities representing money claims,
              aa) from regional or local authorities,
              bb) from credit institutions,
              cc) from other undertakings,
         d) shares and other equity securities,
         e) real estate,
         f) other assets,

Investments in unit certificates in investment funds, real estate funds and Alternative Investment Funds (AIFs) are to be split up according to the investment categories;

     5. Investment procedures with regard to the selection, mixture and diversification of assets;
     6. Determination of an appropriate limit system with quantitative investment thresholds with regard to para. 1 no. 7, at least with regard to the investment categories pursuant to no. 4 for both issuers and counterparties;
     7. Criteria for the look through of investments in unit certificates of investment funds, real estate funds and AIFs for thresholds for issuers and counterparties pursuant to no. 6 including the general defining of materiality thresholds;
     8. Conditions for the investment in
         a) assets pursuant to para. 1 no. 5,
         b) derivative products pursuant to para. 1 no. 6, as well as
         c) securities lending and securities repurchasing transactions;

     9. description of the escalation processes in the event that the determined thresholds are exceeded;
     10. criteria for the cancelling of the dedication of securities as held-to-maturity investments (Article 23 para. 1 no. 3a).

Direct insurance and occupational group insurance: Assets are managed by the life insurance company.
In accordance with Art. 300 VAG (1) insurance undertakings shall establish a Deckungsstock in the amount of the cover requirement pursuant to Article 301 VAG, with the exception of reinsurance acceptances, where the undertakings pursue:

1. life assurance, as far as it does not fall under nos. 2 to 6;
2. occupational pension group insurance;
3. unit-linked life assurance;
4. index-linked life assurance;
5. investment-oriented life assurance, where the policyholder is at least entitled to the invested premiums guaranteed by the insurance undertaking;
6. state-sponsored retirement provision pursuant to Articles 108g to 108i EStG 1988, unless allocated to a different Deckungsstock group;
7. health insurance, as far as this is operated in a manner similar to life assurance; or
8. accident insurance, as far as this is operated in a manner similar to life assurance.

(2) The Deckungsstock shall be managed separately from the other assets. Where an insurance undertaking pursues several of the types of insurance referred to in nos. 1 to 8, a separate Deckungsstock group shall be created for each, with the provisions of this federal act on the Deckungsstock applying separately in each case. The FMA shall be notified immediately of the establishment or release of a separate group of the Deckungsstock.

Special provisions apply for Deckungsstock investments as laid down in the insurance undertakings investment regulation (Art. 12 and Art. 13):

Article 12. (1) In order to ensure that assets to cover the technical provisions are invested in the best interest of all policyholders and those entitled to benefits in accordance with Article 124 para. 1 no. 3 VAG 2016, only the following assets may be held to meet the cover requirement in accordance with Article 301 VAG 2016:

1. investments pursuant to Article 144 para. 2 items B.I., B.II. and B.III.1 to B.III.7 VAG 2016; other loans pursuant to Article 144 para. 2 item B.III.6 VAG 2016, however, only to the extent that these are loans that can be utilised once pursuant to Article 13 no. 3;

2. proportional interest and rents pursuant to Article 144 para. 2 item E VAG 2016, only to the extent that this involves proportional interest;

3. cash at bank in current accounts, cheques and cash in hand pursuant to Article 144 para. 2 item F.II VAG 2016, only to the extent that this involves current cash at bank and cash in hand;

(2) Without prejudice to para. 1, the following assets may not under any circumstances be held to meet the cover requirement pursuant to Article 301 Insurance Supervision Act 2016:

1. assets that are used for securities coverage pursuant to Article 14 para. 5 and para. 7 EStG 1988;

2. securities issued by the undertaking itself;

3. shares in undertakings to which critical or important operational functions or activities have been outsourced in accordance with Article 109 VAG 2016 (1);

4. shares in undertakings for whose obligations the insurance undertaking is liable as a personally liable partner or whose profits and losses are assumed by the insurance

Article 13. The following basic principles must be observed in order to ensure that assets that are held to meet the cover requirement pursuant to Article 301 VAG 2016 are invested in the best interest of all policyholders and those entitled to benefits pursuant to Article 124 para. 1 nos. 3 and 4 VAG 2016:

1. Unless any debt securities held to meet the cover requirement pursuant to Article 301 VAG 2016 are merely negligible in scope, the majority of these debt securities must at a minimum have a high credit quality for the purposes of the credit risk assessment pursuant to Article 8.

2. Shares in an AIF may only be held to meet the cover requirement pursuant to Article 301 VAG 2016 at a prudent level; this restriction does not apply to

a) special funds pursuant to Article 163 InvFG 2011 or those managed by an asset management company domiciled in another EEA Member State and which feature the characteristics in accordance with Article 163 InvFG, and

b) real estate funds pursuant to Article 1 of the Real Estate Investment Fund Act, Federal Law Gazette I No. 80/2003, in the version of the Federal Act in Federal Law Gazette I No. 115/2015, and real estate funds that are similar to these that are managed by an asset management company domiciled in another EEA Member State and which are subject to public supervision.

3. Loans may only be held to meet the cover requirement pursuant to Article 301 VAG 2016 at a prudent level, and only if they can only be utilised once and are not subordinated. They must also at a minimum be of a high credit quality for the purposes of the credit risk assessment pursuant to Article 8 or have adequate collateral. In the case of mortgage loans, the property must be located in Austria or in another EEA Member State and be adequately insured against natural hazards and the market value of the property may be mortgaged at up to 60%.

4. Derivative instruments pursuant to Article 11 para. 1 no. 2 may only be held to meet the cover requirement pursuant to Article 301 VAG 2016 at a prudent level. Derivative instruments pursuant to Article 11 para. 1 no. 1 must relate to risk exposure in the same Deckungsstock group pursuant to Article 300 VAG 2016.

5. Structured debt securities may only be held to meet the cover requirement pursuant to Article 301 VAG 2016 at a prudent level.


Book reserve: Assets covering internal reserves (see section on Protection of rights - subsection on Financial and technical requirements / Reporting) must be invested in domestic corporate (subject to certain restrictions) or government bonds or in units of investment funds investing in corporate or government bonds.

There are no restrictions regarding who may be responsible for the management of these assets and this may be done by the sponsoring employer.

Support funds: No restrictions.

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(1). All English translation of the authentic German text is unofficial and serves merely information purposes. The official wording in German can be found in the Austrian Federal Law Gazette (Bundesgesetzblatt; BGBl.). All translations have been prepared with great care, but linguistic compromises had to be made. The reader should also bear in mind that some provisions of these laws will remain unclear without certain background knowledge of the Austrian legal and political system. Please note that these laws may be amended in the future and check occasionally for updates.

Acquisition and maintenance of rights

Waiting period

All plans: No restrictions.

Older defined benefit plans usually require a minimum service period of between five and ten years.

Vesting rules

Pension funds: Employee contributions vest immediately. Employer contributions vest after a maximum of three years, but plans may provide for a shorter vesting period.

Direct insurance and occupational group insurance: Employee and employer contributions vest immediately.

Book reserve: If vesting is regulated in the pension plan, pension promises must vest upon termination of employment after a maximum of three years.

However, promises are never vested if the employee terminates the employment or if dismissal is attributable to the employee's behaviour.

Support funds: There is no vesting of employer contributions.

Preservation, portability, transferability

Pension funds: Upon termination of employment before retirement, a vested benefit amount must be calculated which equals at least 95 per cent of the cash value of the accrued rights.

The employee may choose between the following options:

- the vested benefit amount may be converted into a deferred pension right;
- the vested benefit amount may be transferred to the plan of the new employer if implemented through a pension fund, occupational group insurance or direct insurance; or
- the benefit accrual may be continued on the basis of the employee's own contributions if contributions have already been paid for at least five years.

If the employee does not make a choice within six months of termination of employment, the vested benefit amount is automatically converted into a deferred pension right. If the vested benefit amount is less than EUR 12,600 (since 1.1.2019), the employee may request a lump-sum payment immediately on terminating employment.

There are no legal requirements for deferred pension rights to be indexed and this depends on plan rules.

Direct insurance: Upon termination of employment before retirement, the insurance policy remains the property of the employee and a vested benefit amount must be calculated equal to the accumulated capital.

The employee may choose between the following options:

- the insurance policy may be transformed into a paid-up policy with deferred pension rights which are further increased by investment returns;
- the vested benefit amount may be transferred to the plan of the new employer if implemented through a pension fund or direct insurance; or
- benefits may continue to be accumulated on the basis of insured's own contributions.

If the employee does not make a choice within six months of the termination of employment, the vested benefit amount is automatically transformed into a deferred pension right. If the vested benefit amount is less than EUR 12,600 (since 1.1.2019), the employee may request a lump-sum payment immediately on terminating employment.

There are no legal requirements for deferred pension rights to be indexed and this depends on plan rules.

Occupational group insurance: Upon termination of employment before retirement, a vested benefit amount must be calculated that equals the accumulated capital.

The employee may choose between the following options:

- the insurance policy may be transformed into a paid-up policy with deferred pension rights that are further increased by investment returns;
- the vested benefit amount may be transferred to the plan of the new employer if implemented through a pension fund or direct insurance; or
- benefits may continue to be accumulated on the basis of insured's own contributions.

If the employee does not make a choice within six months of the termination of employment, the vested benefit amount is automatically converted into a deferred pension right. If the vested benefit amount is less than EUR 12,600 (since 1.1.2019), the employee may request a lump-sum payment immediately on terminating employment.

There are no legal requirements for deferred pension rights to be indexed and this depends on plan rules.

Book reserve: Upon termination of employment before retirement, a vested benefit amount must be calculated based on the age of the member upon joining the plan, the retirement age in the plan and a legally prescribed technical interest rate.

The employee may choose between the following options:

- the vested benefit amount may be converted into a deferred pension right; or
- the vested benefit amount may be transferred to the plan of the new employer if implemented through a pension fund or direct insurance.

If the employee does not make a choice within six months of the termination of employment, the vested benefit amount is automatically converted into a deferred pension right. If the vested benefit amount is less than EUR 12,600 (since 1.1.2019), the employee may request a lump-sum payment immediately on terminating employment.


There are no legal requirements for deferred pension rights to be indexed and this depends on plan rules.

Support funds: There is no portability and no transferability. If benefits are paid, equal treatment is required for persons who have worked in the company for at least five years. Therefore, rights are only conditionally preserved.

Retirement benefits

Benefit qualifying conditions

All plans: There are no regulatory requirements.

Retirement age was usually 60 for men and 55 for women. Following decisions by the European Court of Justice, an equal retirement age of 65 for both men and women has recently been introduced in most plans, together with the possibility of early retirement with an actuarially reduced pension. If an early partial pension is taken in the social security scheme, an employee must retire from the occupational pension plan.

Benefit structure / formula

Pension funds: Defined benefit or defined contribution. A lump-sum benefit may be paid if the vested benefit amount at retirement is less than EUR 12,600 (since 1.1.2019). Otherwise a pension is provided for life.

Defined benefit plans usually provide for pension accrual at a constant rate of between 0.1 per cent and 0.3 per cent for salary up to the social security ceiling (i.e. EUR 4,980 a month - for 2017) and between 1 per cent and 2 per cent for salary above that ceiling. Benefits are integrated with social security benefits and the total target replacement rate, including social security benefits, is usually 70 per cent of final earnings. The Income Tax Act prohibits a total target replacement rate above 80 per cent of final earnings.

Direct insurance: Defined contribution. A lump-sum benefit may be paid if the vested benefit amount at retirement is less than EUR12,600 (since 1.1.2019). Otherwise a pension is provided for life.

Occupational group insurance: Defined benefit or defined contribution. A lump-sum benefit may be paid if the vested benefit amount at retirement is less than EUR 12,600 (since 1.1.2019). Otherwise a pension is provided for life.

Book reserve: Defined benefit with similar benefit structures as defined benefit plans implemented through pension funds. A lump-sum benefit may be paid if the vested benefit amount at retirement is less than EUR 12,600 (since 1.1.2019). Otherwise a pension is provided for life.

The sponsoring employer can interrupt the payment of one-half of the benefits if provided for in the pension plan or if a continuation of payment would endanger the continued existence of the company.

Support funds: Defined benefit plans provide flat-rate benefits.

Benefit adjustment

Pension funds: There are no regulatory requirements.

Plans usually provide for discretionary increases in line with adjustment of social security benefits.

Direct insurance and occupational group insurance: There are no regulatory requirements.

There is usually no benefit adjustment.

Book reserve: If not otherwise regulated in the pension plan, pensions in payment must be increased in line with adjustment of social security benefits.

Support funds: There are no regulatory requirements.

There is usually no benefit adjustment.

Survivors

Pension funds: Survivorship benefits must be provided. There are no regulatory requirements concerning eligibility and benefit structure.

A widow(er)'s pension of 60 per cent and an orphan's pension of 10 per cent of the deceased member's actual or projected retirement benefit are usually paid.

Direct insurance and occupational group insurance: There are no regulatory requirements.

A lump sum of two or three times the deceased member's annual salary is usually paid to the widow(er).

Book reserve: There are no regulatory requirements.

A widow(er)'s pension and an orphan's pension, of 60 per cent and 10 per cent respectively of the deceased member's actual or projected retirement benefit, are usually paid.

Support funds: There are no regulatory requirements.

A flat-rate pension is usually paid to both the widow(er) and orphans.

Disability

All plans: There are no regulatory requirements.

Plans usually provide for the payment of disability benefits.

 

Pension funds: The protection of rights is mainly secured through the supervision by the FMA - Financial Market Authority who, for all pension funds, must approve, and may require changes to, the following issues:

- Business plan (contains the actuarial basis);
- The members of the board of directors who must be sufficiently experienced and of good character;
- The actuary (every pension fund must employ an actuary);
- The independent auditing actuary (who is responsible for examining annually whether the business plan is being correctly implemented);
- The annual accounts.

If the pension rights are at risk, the FMA may take any necessary action to secure these rights.

In order to compensate potential investment losses, every pension fund has to accumulate a volatility reserve which must be between 10% and 25% of the pension liabilities and is financed by a part of the employer contributions.

The minimum funding requirement corresponds to the accumulated benefit obligation. In the case of underfunding, the employer is obliged to secure appropriate funding within a period of ten years.

If a plan is wound up, the assets of the pension fund which cover the pension liabilities of the fund must be used to satisfy the pension claims of the members. Should these assets not be sufficient to satisfy all pension claims, these claims prevail over all other claims with respect to all additional assets of the pension fund. There is no legal requirement of insolvency insurance and there is no state guarantee fund.

Direct insurance: The protection of rights is mainly secured through the supervision of insurance companies by the FMA - Financial Market Authority.

The powers of the supervisory authority, the minimum funding requirement and the protection in the case of insolvency are similar to those which were given above for pension funds.

Book reserve: There is no supervisory authority for book reserve plans. The company work council has information and control rights.

The company does not have to insure the pension rights of the members of the pension fund and no state guarantee fund exists. However, a partial funding requirement applies. At least 50% of the book reserves must be invested in EU company or government bonds or in investment funds that include only EU company or government bonds in their portfolio denominated in EURO. In case of insolvency of the employer, these assets are solely used to satisfy pension claims and must not be used to satisfy any other claims.

Consequently, merely 50% of the benefit value is protected in the case of insolvency. Moreover, the payment of one-half of the benefits can be interrupted by the employer if this is allowed by the pension plan or if a continuation of payment would endanger the existence of the company.

Support funds: No legal rules. No legally enforceable right to benefits.

All plans: No legal provisions for resolving complaints or disputes between plan members and the plan management. Civil courts must decide on disputes if these cannot be solved through private settlements.

Protection of Assets

Pension funds: Pension fund assets must be held separately from the assets of the sponsoring employer.

Assets must be kept by one or more custodians.

Direct insurance and occupational group insurance: Pensions are implemented through contracts with life insurance companies. Assets are held by the life insurance company and are, therefore, separated from the assets of the sponsoring employer.

Book reserve: There are no regulatory requirements for the assets partially covering the value of internal reserves to be separated from the assets of the sponsoring employer.

Support funds: There are no regulatory requirements.

Financial and Technical Requirements / Reporting

Pension funds: In order to compensate for potential investment losses, every pension fund must establish a volatility reserve of between 10 per cent and 25 per cent of the pension liabilities. The reserve is financed by a part of the employer contributions.

Each year pension funds must prepare financial statements, which must be audited by an external auditor. The audited financial statements must be submitted to the Financial Market Authority (FMA).

Quarterly investment reports must also be submitted to the FMA.

Pension funds must employ an actuary to establish and implement the business plan (which contains the actuarial and technical provisions). In addition, each year pension funds must appoint an independent external auditing actuary to examine:

- whether the business plan is correctly implemented;
- whether any changes to the current contribution rates or benefit structure are necessary; and
- whether funding shortfalls exist.

The independent external actuary must prepare a report on the actuarial examination which must be submitted to the FMA.

A minimum funding requirement applies, corresponding to the accumulated benefit obligation. In case of underfunding, the employer is obliged to achieve an appropriate funding level within a period of ten years.

Direct insurance and occupational group insurance: A minimum funding requirement applies, similar to that for pension funds.

Insurance companies are required to report regularly to the FMA on their operation.

Book reserve: At least 50 per cent of the value of internal reserves must be covered by external assets.

There are no regulatory requirements regarding reporting.

Support funds: There are no regulatory requirements.

Whistleblowing

Pension funds: External independent actuaries must notify the Financial Market Authority immediately of anything that is likely to:

- endanger the sound operation of the pension fund;
- hamper the fulfilment of benefit obligations; or
- indicate non-compliance with legal requirements.

The holders of a key function (Risk Management Function, Actuarial Function and Internal Audit Function) shall report any material findings and recommendations in the area of their responsibility to the administrative, management or supervisory body of the institution for occupational retirement provision (IORP) which shall determine what actions are to be taken.
Without prejudice to the privilege against self-incrimination, the holder of a key function shall inform the competent authority of the IORP if the administrative, management or supervisory body of the IORP does not take appropriate and timely remedial action in the following cases:
- where the person or organisational unit carrying out the key function has detected a substantial risk that the IORP will not comply with a materially significant statutory requirement and reported it to the administrative, management or supervisory body of the IORP and where this could have a significant impact on the interests of members and beneficiaries; or
- where the person or organisational unit carrying out the key function has observed a significant material breach of the laws, regulations or administrative provisions applicable to the IORP and its activities in the context of the key function of that person or organisational unit and reported it to the administrative, management or supervisory body of the IORP.

Direct insurance, occupational group insurance, book reserve and support funds: There are no regulatory requirements.

Standards for service providers

All plans: Custodians must be institutions as stated in the EU IORP II-Directive (2).

An auditor may audit the financial statements of a pension fund for a maximum of seven consecutive years. The auditor's appointment must be notified to the FMA, which has the right to disapprove of the appointment within one month.

Actuaries must have proven proficiency in the field of actuarial analysis. External actuaries must moreover be independent (defined as not receiving more than 30 per cent of yearly income from, and not carrying out any other function for, the pension fund). The appointment of both employed actuaries and external actuaries must be notified to the FMA, which has the right to disapprove of the appointment within one month.

___________________________

(2) EU Directive on the activities and supervision of institutions for occupational retirement provision (IORPs) of 14 December 2016.

Fees

Pension funds: Administrative charges must be defined in the pension companies contract concluded between the pension fund and the sponsoring employer (see section on Types of plans).

Direct insurance, occupational group insurance, book reserve and support funds: There are no regulatory requirements.

Winding up / Merger and acquisition

Pension funds: A pension fund may be wound up by a voluntary decision of the shareholders or upon the decision of the Financial Market Authority (FMA) to withdraw the authorization to establish the fund. Voluntary winding up of a pension fund is subject to approval by the FMA. Assets and liabilities must be transferred to another pension fund.

The fund assets covering benefit liabilities must be used to satisfy the claims of members. If these assets are not sufficient, all additional assets of the pension fund must first be used fully to satisfy the members.

Mergers of pension funds are subject to approval by the FMA. Approval is granted if the merger does not endanger the rights of members of the merging pension funds.

Direct insurance, occupational group insurance: The winding up of insurance companies is governed by the Insurance Supervision Act.

Book reserve: The assets that partially cover the value of internal reserves (see section on Protection of rights - subsection on Financial and technical requirements / Reporting) must, upon insolvency of the sponsoring employer, be used solely to satisfy the claims of members.

Support funds: There are no regulatory requirements.

Bankruptcy: Insolvency Insurance / Compensation Fund

Pension funds: Neither a composition with creditors nor preliminary proceedings may be instituted against the assets of a Pensionskasse. A forced composition with creditors shall not be performed in the course of a Pensionskasse's bankruptcy proceedings. Only the FMA may file the petition to institute bankruptcy proceedings. The assets allocated to an investment and risk sharing group shall constitute a special fund (Sondermasse) in the bankruptcy proceedings. The institution of bankruptcy proceedings shall terminate the contractual relationships stemming from Pensionskasse contracts.

 

Direct insurance and occupational group insurance:

Only the FMA may file the petition to institute bankruptcy proceedings. The FMA shall be obliged to file the petition, subject to Article 316, where the conditions are met.
No recovery process under insolvency law may be instituted over the assets of an insurance undertaking. An application for a recovery plan under insolvency law shall not be permitted during insolvency proceedings at an insurance undertaking. The Deckungsstock constitutes a special fund (Sondermasse) in the bankruptcy proceedings.

Support funds: There are no regulatory requirements.


Book reserve: The employer is not required to insure the pension rights of the members and no compensation fund exists.

Rights are partially protected in the case of insolvency through the requirement to cover at least 50 per cent of the value of internal reserves by external assets.

Disclosure of information / Individual action

All plans:
There are no legal provisions for resolving complaints or disputes between plan members and the plan management. Civil courts decide on disputes if these cannot be solved through private settlements.

Pension funds, direct insurance, occupational group insurance: Individual plan members may request yearly information on their accrued rights from the pension fund or the insurance company respectively.

Book reserve: The company work council has information and control rights.

Other measures

All plans: There are no regulatory requirements.

Taxation of employee contributions

Pension funds, direct insurance and occupational group insurance: Employee contributions are treated as special expenses. 25 per cent of an employee's special expenses (employee contributions and other special expenses) are tax-deductible up to the limit of EUR 2,920 a year for a single person.

If the annual salary exceeds EUR 36,400, these limits are gradually decreased and no tax-deductible special expenses can be claimed if the annual salary exceeds EUR 60,000.

Book reserve and support funds: Employees do not contribute.

Taxation of employer contributions

Pension funds and occupational group insurance: Employer contributions to defined benefit plans are tax-deductible company expenses, provided that the total benefit target including social security benefits does not exceed 80 per cent of current salary.

Employer contributions to defined contribution plans up to 10.25 per cent of total salary are tax-deductible company expenses.

Employer contributions do not constitute taxable fringe benefits for employees.

Direct insurance: Premiums up to EUR 300 a year are tax-deductible company expenses.

The part of any premium exceeding EUR 300 a year is a taxable fringe benefit for the employee.

Book reserve: Allocations to internal reserves are tax-deductible against income and corporation tax if the total benefit target including social security benefits does not exceed 80 per cent of current salary.

Allocations do not constitute taxable fringe benefits for employees.

Support funds: Employer contributions up to 10 per cent of salary are tax-deductible company expenses.

Employer contributions do not constitute taxable fringe benefits for employees.

Taxation of investment income

Pension funds, occupational group insurance and support funds: Tax-exempt.

Direct insurance: Taxed at a rate of 20 per cent.

Book reserve: Investment income is considered as company profit and subject to profit tax.

Taxation of benefits

Pension funds and occupational group insurance: Pensions are taxed as earned income. The portion of pension accrued by employer contributions is fully taxed. Only 25 per cent of the portion of pension accrued by employee contributions is taxed.

Direct insurance: Pensions are taxed as earned income from the moment the total value of benefits paid exceeds the capital value of the pension at retirement.

Book reserve and support funds: Benefits are taxed as earned income.

Financial Market Authority (FMA): Supervises pension funds, insurance companies and other financial service providers.

If pension rights are at risk, the FMA may take necessary actions to secure these rights.

The FMA carries out supervision through ex ante, current and ex post supervisory actions:

- ex ante: approval of technical provisions of pension funds and insurance companies;
- current: expert consultations, on-site inspections, withdrawal of authorization, enforcement of fit and proper requirements;
- ex post: analysis of yearly balances and of quarterly investment reports.

The FMA is financed mainly through levies on supervised entities.

Finanzmarktaufsichtsbehörde

Otto-Wagner-Platz 5
1090 Wien
Austria

Tel.: (+43) 1 24 959 2005/2005
Fax: (+43) 1 23 959 2099/2199

Internet: http://www.fma.gv.at

Federal Ministry of Finance: Supervises the tax rules for book reserve plans.

Bundesministerium für Finanzen
Himmelpfortgasse 5
1010 Wien
Austria

Tel.: (+43) 1 514 33


Internet: http://www.bmf.gv.at

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