Current information on the company employee welfare act - Severance New

Start of mandatory contributions

::Principle
Section 46 of the BMVG bases the temporal scope of application on the contractually agreed start date of the employment relationship. Accordingly, neither the date on which the contract was concluded nor the actual start date of employment is relevant. From the start of the employment relationship on or after 1 January 2003, the employer must pay a monthly contribution amounting to 1.53 % of the monthly remuneration, including special payments, to the relevant regional health insurance fund. The first month is exempt from contributions. Irrespective of when the employment relationship begins within the calendar month, the obligation to pay contributions commences from the second month.

::Basic rule
The law, which has been in effect since 1 July 2002, shall apply to employment relationships whose contractually agreed start date is after 31 December 2002.

Example:
Commencement of employment on 20 January 2003
Commencement of contribution obligation from February 2003
Payment of contribution on 15 March 2003 with a 3-day grace period.

Special Rules
Upon transition to the new processing system or upon continuation of interrupted employment relationships, the following applies:

– Transfer Agreement
For employment relationships existing on 31 December 2002, if the new severance pay system is agreed upon from 1 January 2003, commencing from a specific cut-off date, then from this cut-off date the ongoing contribution obligation. If the occupational pension scheme entitlement is also transferred to the employee pension fund, the agreed Transfer amount (see below) to be paid.

– Suspension of employment contracts
The obligation to contribute begins, according to § 6 BMVG, on the first day of an employment relationship if it has been renewed with the same employer within 12 months of the end of the employment relationship. If employment relationships that existed before 31 December 2002, but were interrupted, are continued after 31 December 2002 with account taken of prior service for severance pay purposes, the old severance pay rules continue to apply, unless a transfer agreement is concluded. The same applies in the case of a change of employer within a group, where, however, the crediting of prior service is irrelevant (§ 46 para. 3 BMVG).

Selection of the MV fund

::In companies with a works council, the works council fund is replaced by a Company agreement specified. For employees not represented by a works council, the employer selects the MV fund and must reach an agreement with its employees – in accordance with the procedure laid down in Section 10(2) of the BMVG –.

Careful examination of the selection
Before choosing a specific MV health insurance fund, relevant information should be obtained and – in order to avoid liability – the selection process should be documented. We advise against making any premature commitments, e.g. through preliminary agreements, before the terms and conditions are known. If you are unable to find the right MV health insurance fund by the first due date for contributions, this is not a problem, as the contributions paid to the regional health insurance fund will be held in escrow there. The selection procedure laid down by law should be followed precisely.

On 10 September 2002, the following MV cash desks were Concessions granted

– APK Employee Pension Fund AG (General Pension Fund)
– Bawag-Allianz Employee Pension Fund AG
– Bonus Employee Pension Funds AG (Generali and Zürich Kosmos)
– Niederösterreichische Vorsorgekassen AG (NÖ Hypo and Niederösterreichische Versicherung)
– ÖVK Vorsorgekasse AG (RZB, Uniqa, Öpag Pension Fund)
– VBV Employee Pension Fund AG (United Pension Funds, BVP, BA-CA, Erste Bank, Wiener Städtische)
– Victoria Volksbanken Employee Pension Fund AG

Selection criteria
– Capital guarantee in accordance with § 24 (1) of the BMVG
This is Compulsory and covers the minimum entitlement to all contributions received (current and transferred capital from transfers and from other pension funds).

– Interest rate guarantee according to Section 24 (2) of the BMVG
Beyond capital guarantee can an interest rate guarantee must also be granted, which must be the same for all beneficiaries and may only be amended for a subsequent financial year. The model calculation made at the time, based on an investment return of 6 % p.a., has become a myth due to the current slump. Even with an interest rate of 4 % p.a., it is estimated that – after taking administrative costs into account – the investment return will be plus or minus zero after three years at the earliest.

– Investment of funds
In accordance with Section 29 of the BMVG, the MV treasury is to draw up asset allocation rules (selection of securities, liquid assets, administrative costs, etc.).

Agreement on Transfer Amount § 47 para. 3 BMVG

Until the end of 2012, the entire severance entitlement can be transferred to the MV fund in a written individual agreement between the employer and the employee. There is no time limit for a partial option (freezing existing entitlements and ongoing contribution payments in the future).

The agreed transfer amount must be paid into the MV account within five years at the latest, in equal annual instalments, plus 6 % interest. The The amount of the transfer is a matter of agreement. between the employer and the employee, and is largely determined by age and length of service. An existing company severance pay fund, for example, offers the option of paying in between 20 % and 95 % of existing severance pay entitlements. Tax law takes into account the risk of termination of employment (under the old legislation) with a reduction in or – elimination of – effect is taken into account by tax law at 50 % (or 60 % for those over 50) of the notional severance pay entitlements. However, a transfer amount that deviates significantly downwards is contrary to public policy and, in this respect, void if the deviation is not objectively justified. The KSV recommends, in the event of a full switch, that only 50% of the notional entitlements accrued to date be transferred.

For the calculation of the transfer amount, the following are suitable Methods and

– Notional severance pay entitlement, less the deduction for staff turnover or voluntary resignation.
– Severance pay provision calculated in accordance with tax law, commercial law or the actuarial method.

As Criteria For case-by-case calculations, the following are taken into consideration: employee's age and gender, comparison with equivalent employees within the company, salary valorisation, probability of voluntary resignation, company redundancy plan, etc.

Tax deferral effects concerning provisions for severance pay

On 19 September 2002, in its final session, the National Council amended the provisions of § 124 b items 67 and 68 of the Income Tax Act (EStG), which had not yet entered into force, as follows:
:: Existing Accrued expenses can optionally tax-neutral in the year 2002 (previously only possible in 2003) or spread across the years 2002 and 2003 dissolved become.

:: The Periods, in which the provision rate is reduced from 50 % to 47.5 % and 45 % respectively, are 1 year in advance. The new rates will apply as early as 2002 (47.45 %) and 2003 (45 %) if the severance pay provision is not released in 2002.

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