Corporate retirement savings: what is it?
When working in a company, saving for retirement begins with the contributions that are deducted from the monthly salary for compulsory pension plans. However, in the current worrying economic, social and demographic context (lengthening of life, deterioration of the standard of living, etc.), it is more and more common to turn to other savings solutions on a personal or as part of his business. This makes it possible to set up an additional pension to compensate for the fall in the replacement rate at the time of retirement.
What is retirement savings in companies?
Retirement Savings in the Company consists of collective savings schemes allowing employees, through the company, to set up an additional retirement or to finance a future project. The amount saved over the years will be available at the time of the employee’s retirement or in the shorter term and may be withdrawn in the form of capital or annuity. On the one hand, we distinguish within the Retirement Savings in Enterprise the capitalization contracts, the Article 83 contract of the General Tax Code and the Article 39 contract of the General Tax Code.
Article 83: what is it?
The “Article 83” Retirement Savings Plans are based on the principle of capitalization. Its main features are: It is open to all companies by unilateral decision or as part of a collective agreement. Companies can choose to subscribe to this type of retirement savings for all or some of their employees. They can thus decide to benefit different objective categories of employees such as executives, non-managers, etc. In practice, “article 83” contracts mean that each employee concerned by the scheme benefits from an account dedicated to his retirement savings. On this account, the company commits to the regular payment (monthly, quarterly or annual) of contributions. The amount of these contributions depends on a rate that was set at the time of signing the contract. It may be based on the salary of the employee, according to a salary bracket … This is a defined contribution contract. The beneficiary can also make voluntary payments into his retirement savings account. The capitalized amount is definitively acquired and is paid in the form of a life annuity at the time of retirement. This is valid even if the employee leaves before retirement.
Savings contracts falling under “Article 39” are retirement savings solutions in companies similar to “Article 83” contracts. The main differences are: The company commits to an amount or level of benefits that will be paid upon retirement; This is a defined benefit contract; The company can set up this system for a category of employees of its choice and defined according to objective criteria. These are more often senior executives; Contributions are solely the responsibility of the employer; The retirement savings will be available in the form of an annuity provided that the employee concerned ends his career within the company; The employee is exempt from taxes on contributions; The IFC contract is also part of the Retirement Savings Plan. It is a question of provisioning to an insurer the sums necessary for the mandatory payment of the end-of-career indemnities due to each employee upon his retirement; The pension can be paid to the spouse under certain conditions. “Article 83” retirement savings contracts are not subject to income tax for the employee. Provisioning this social liability externally makes it possible to benefit from a very advantageous fiscal and social framework. On the other hand, in the context of the Retirement Savings Plan, it is also possible to benefit from employee savings schemes.
What is employee savings?
Understand what saving means Employee savings allows a company to financially associate its employees with its results and (good) performance. Thanks to employee savings, employees have the opportunity to build savings in the form of securities, within their company and on a dedicated savings plan. In practice, the employee freely pays savings on this account and the company then chooses to increase the sums paid through the “matching”. The savings thus constituted make it possible to finance a project or an additional retirement. One of the advantages of employee savings is the tax and social framework that benefits both the company and the employee. Note: Employee savings plans are not available to people working in the public service or in the agricultural sector.xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
The different schemes of employee savings
The employee has the opportunity to build his savings through various schemes such as PEE (I) (Savings Plan (Inter) Enterprise) or PERCO (I) (Savings Plan (Inter-company)) for the Collective Retreat. These can help the employee build savings in the short, medium or long term.
The Company Savings Plan (PEE):
This type of plan can be set up at the initiative of the employer, either unilaterally or as part of a collective agreement. Employees have the possibility of freely paying funds on their PEE within the limit of 25% of their annual salary. The company can supplement the payments up to 8% of the PASS per employee. The amount paid can not exceed three times the employee’s contribution. The amounts paid on the PEE are “locked” for a period of 5 years minimum except in case of early releases such as a marriage, a birth, a death, a divorce, a case of over-indebtedness …
The Inter-company Savings Plan (IEP):
This system is essentially aimed at encouraging employee savings in small and medium-sized enterprises. The setting up of an Inter-company Savings Plan is subject to a collective agreement concluded within a professional branch or between several companies.
The Savings Plan for Collective Retirement (PERCO):
PERCO can be set up unilaterally by the company or as part of a collective agreement. Unlike PEE or PEI, PERCO is a long-term employee savings plan. Indeed, the funds are blocked until the retirement of the employee except in case of early releases. The employer contribution can not exceed 16% of the PASS per employee per year. His participation can not be more than 3 times greater than the employee’s contribution on his plan. At retirement, the capital may be withdrawn in the form of an annuity or capital. Note: In addition to the employee’s payments and the employer’s contribution, the PEE, the PEI and the PERCO can be powered by what is known as profit-sharing or participation. These two schemes correspond to an amount paid to employees and based on the financial performance of the company. Participation is compulsory from 50 employees and is calculated according to the results of the company and according to a legal formula. The incentive is optional and is based on objectives of profitability, performance, quality … defined by the company. Their amount may differ and be based on the salary of an employee or his seniority within the company for example. Retirement Savings in Business is therefore composed of very different devices. The choice of one or the other differs according to the objectives of the company, its targeted target or the choice of its financial contribution to its employees.