France: New Rules for Collective Retirement Savings Plans

Some measures encourage companies to set up PERCOs by lowering the social tax paid by employers. This is currently 20 percent of an employee's salary that is exempt from social security contributions, such as profit-sharing and company stock options. (The social tax has been 20 percent since 2012; it was 2 percent when introduced in 2003). For companies with fewer than 50 employees that set up a PERCO, the social tax will be lowered to 8 percent for a six-year period. The social tax will be lowered to 16 percent for companies whose PERCOs.

• Have at least 7 percent of their portfolio invested in instruments that help finance small and medium businesses.
• Provide a default option that will gradually lower investment risks as a worker ages. 

Other changes include the following:

• The 8.2 percent on the portion of the employer contribution to a PERCO account that exceeds EUR 2,300 (USD 2,524) a year will be eliminated.
• Employees will be allowed to contribute to a PERCO account the equivalent of up to ten days of paid leave that was not taken each year. Currently, up to five days are permitted.
• Employers may contribute even if employees do not contribute. Currently, employers provide matching contributions. (The annual limit will be set by decree.)
  
  

At retirement, either a lump sum or an annuity is paid from a PERCO account. Withdrawals before retirement are only permitted in certain circumstances: to purchase a house, if a worker becomes disabled or dies, if a worker is unable to pay back his or her debts, or if a worker's unemployment benefits have ceased.

A July 2015 Ministry of Labour study of participation in PERCOs found that in 2013, some 20 percent of private-sector employees had PERCO accounts. While the number of PERCO members nearly quadrupled over the previous seven years, the percentage of employees who contribute has decreased from 37.6 percent in 2012 to 32.4 percent in 2013.

PERCOs supplement the first and second pillar mandatory pensions. The first pillar is made up of the pay-as-you-go public pension programme, and the second pillar consists of two pension institutions: AARCO (Association for Employees’ Supplementary Schemes)—for all private-sector workers, and AGIRC (General Association of Retirement Institutions for Executives)—covering only managerial and executive staff.

Sources

“France,” IBIS Compliance Alert, August 31, 2012; Life-cycle Management of PERCO Workplace Savings Schemes,” French Asset Management Association, April 2014. “France: Further Pressure to Accelerate Pension Reform,” International Update, U.S. Social Security Administration, April 2015; “La Loi Macron Modifie à la Marge L'épargne Salariale,” Le Monde, 13 juillet 2015; “Epargne Retraite: Un Salarié sur Cinq a un Perco,” TRETECOM, 24 juillet 2015; “Retirement Program Changes Enacted,” Global Benefits Legislative Update, July/August 2015; “Loi Macron: Les Nouveautés Concernant L'épargne Salariale,” Theme du Droit du Travail: Rémunération BTP, 04 août 2015.