Switching to a different pension fund – what do you need to be aware of?

You want to switch your company to a different pension fund. MyRight explains what you need to know.

The answer in detail

What are your obligations as an employer with regard to occupational benefits?

As an employer you are responsible for ensuring that your employees are properly covered by an occupational benefits plan. In Switzerland, all employees whose annual salary subject to AHV/AVS contributions exceeds the minimum salary stated in the Federal Act on Occupational Old Age, Survivors' and Invalidity Pension Provision (OPA/BVG/LPP) must be insured with a pension fund. 

What are the possible reasons for switching to a different pension fund?

Apart from the security aspect, there are a number of reasons that could prompt a company to switch to a different pension fund. For instance, the pension funds may have widely differing premiums, benefit plans, conversion rates or supplementary benefits. 

What has changed and what do you need to be aware of when switching to a different pension fund?

The ruling by the Federal Supreme Court on May 5, 2020 made it clear that employees have a basic right to participate in any decision to switch to a different occupational benefits institution – and that if this right is infringed, a switch from one pension fund to another may not validly take place. If you are considering switching to a different pension fund, it is important to inform your employees and employee representatives at the earliest possible stage, and to include them in the decision-making process. Previously – i.e. before the Federal Supreme Court ruling – the decision-making process was not clear-cut. Employees did not usually find out about a pension fund switch until notice to terminate the contract had been given, at which point they would have an opportunity to object. 
According to the Federal Supreme Court, such a procedure no longer satisfies the legal requirements. The right of participation gives your employees not only the right to be informed and consulted, but also the right to take part in making decisions (Art. 11 para. 3bis sentence 1 OPA/BVG/LPP and Art. 10d Federal Act on the Provision of Information to and the Consultation of Employees of Businesses). 

Switching to a different pension fund must be a joint decision by employees and employer. What do you need to know about this?

Switching to a different pension fund must consequently be a joint decision by employees and employer. The decision-making process must be open and transparent for all your employees. There must be clarity regarding the occupational benefits solutions being evaluated and the conditions on which a contract may be concluded with a new pension fund. As an employer, you must also document the process and arrangements for any contemplated switch to a different pension fund. This means, for example, that it must be clear how employee approval is to be given (e.g. via an employee representative body), and what majority will be required for such approval.  This procedure is verified by the current pension fund. If no agreement is reached regarding termination of the contract, the law states that a neutral arbitration court shall decide.

Conclusion

Your employees must actively agree in advance to any switch to a different pension fund; otherwise the termination of the contract is invalid. Although switching pension funds will in future be a more complex and time-consuming process, the involvement of your employees should ensure that the decision enjoys broad support.