Employee Capital Plans (PPK) – the obligatory agreements

By October 27th, 2020, small and medium-sized companies are obliged to sign agreements with the chosen financial institution to manage Employee Capital Plans (abbrev. in Poland as PPK). This nationwide requirement covers about 20 thousand medium-sized companies and 58 thousand small businesses.

The next important date for entrepreneurs is November 10th, 2020, which is the deadline for signing PPK management agreements.

What is PPK?

Employee Capital Plans are a voluntary long-term savings program, created and co-financed by employees, employers, and the government. The system is an alternative to Employee Pension Plans, which have not gained recognition and popularity among employees due to the complicated process of registering and maintaining the program. The program has been developed with the financial security of Poles in mind. According to the legislators’ intentions, it is supposed to positively affect the economy and the number of jobs available, as well as increase private savings of employees.

Who are the Employee Capital Plans recipients?

The implementation of PPK applies to all domestic enterprises with employees eligible for the program. Automatic enrollment for the program applies to workers aged 18-55 who have stayed in a given workplace for more than 90 days, and for whom the retirement and disability pension contributions are paid (UZ, UOP). Employees aged 56-69 should submit a separate application to join the PPK.

However, there are exceptions to said rules. Companies employing less than ten people may not join the program, provided they submit a PPK resignation form, signed by all employees. Also, the law excludes employees that are over 70 years old.

Important dates for employers

The nationwide PPK implementation progresses gradually, and the deadlines depend on the size of the companies’ employment structure. The crisis related to the COVID-19 pandemic also affected the timing.

Employers employing at least 20 employees should remember about the new dates for setting the agreements with the insurance company regarding:

• management of the PPK. The deadline is October 27th, 2020, at the latest.
• administration of the PPK, by November 10th, 2020, at the latest.

The PPK agreements

The first agreement defines the rules of management. It connects the company with a selected financial institution, like TFI funda, TFE funds, or insurance company. The contract must be prepared in the electronic form. Please refer to the list of available institutions at www.mojeppk.pl for more information.

The second agreement concerns the ongoing administration of the PPK system. It should be agreed upon between the financial institution and the employer, on behalf of all employees. Although the deadline is November 10th, 2020, remember that it must be signed no earlier than ten days after the date of signing the first contract.

Keep in mind that the selection of a financial institution must be accepted by the employee representation (works council, trade union representatives), along with a transparent and well-documented process. The Law exempts from the obligation to document the process if there are less than 30 days from the date of signing the management agreement.

What should the employer remember?

• Binding deadlines for both agreements. (October 27th / November 10th, 2020).
• Formalities with employees (communication, documents). The method of informing employees about the PPK implementation is not arbitrary. It is stated in the law and must be followed strictly. Ensure the proper documentation for each stage and transparent communication of the results.
• Ongoing PPK system administration. If the employer decides to administer the system himself, he must remember his monthly duties. That includes, among others, generating a report of employee dispositions and a specific component file, every last day of the given month. The said dispositions cover termination of employment, salary adjustments, changes in personal data.
• Payments management. The transfer of advances to the insurance company by the 15th day of the following month. Important: contributions to the PPK financed by the employer constitute the income of the PPK participant. This means that an advance on personal income tax should be calculated and charged on these payments following the tax rate applicable to a given employee (17% or 32%).
• Documentation and archiving. That includes collecting, storing, and archiving documentation on PPK, as well as renewing the dispositions submitted every four years, starting from April 1st, 2023.