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What is an employee benefit scheme?

An employee benefit scheme is a legal form chosen by companies to organise the occupation benefits granted to its employees. It is the most important legally regulated type of special foundation.

personalvorsorgestiftung

Overview

Employee benefit schemes are a popular legal form of occupational pension provision (2nd pillar), which aim to maintain people’s lifestyles as they become older. This system is supplemented on the one hand by the 1st pillar, i.e. through national insurance (AHV, IV, EL), and on the other, by the 3rd pillar (pillars 3a and 3b), i.e. through individual provision. Occupational provision can be used as a medium to form a cooperative or a body governed by public law (Art. 331 Para 1 OR). In practice, however, this is the most widely used legal form for occupational pensions. Other names for employee benefit schemes are pension funds or welfare funds for staff.

The purpose of employee benefits schemes is to provide pecuniary benefits to employees or their relatives. Due to the BVG, every employer which employs people for whom insurance is mandatory must establish a benefits scheme or join an existing one (Art. 11 Para. 1 BVG).

Basic legal principles

The pension plan is primarily regulated by federal laws on retirement, dependants, disability benefit schemes ( BVG ). In addition, the general legal requirements for foundations from Art. 52-59 and 80-89a ZGB apply. Employers have a duty to operate the occupational pension plan for their employees through a legal entity separate from the company (Art. 331 Para. 1 OR and 48 Para. 2 BVG).

How it differs from a typical foundation

Employee benefit schemes differ from typical foundations in terms of their circle of beneficiaries and purpose (see blog entry). Only employees may be beneficiaries, i.e. employees or their relatives. Shareholder directors can be termed as ‘employees’. They are legally entered into employment contracts (e.g. board of directors of a public company) from the company and they have an interest in the company’s capital. Owners of sole proprietorships are not seen as employees from a legal perspective. For this reason, insurance in the 2nd pillar for the self-employed is not mandatory. However, joining a pension fund is possible on a voluntary basis if, for example, the sector has its own pension fund.

The typical purpose of an employee pension fund is the provision of pecuniary benefits during age-related retirement and in case of death, unemployment, accident, disability or economic distress. It is not permitted for the purpose to simply be covering everyday expenses.

Beneficiaries’ right of appeal

The beneficiaries of an employee benefit scheme can sue for their entitlement to benefits if they have already made contributions. The right of redress is also open to relatives left behind after death if the deceased employee regularly made contributions.
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