Auto Enrolment PPK Reform – what can we expect in the upcoming weeks?

Polish version available here

In recent days, numerous articles on the obligations of employers and the rules applying to the Auto Enrolment PPK Plans (PPK) have been released. In general, the texts discuss numerous doubts concerning interpretation of the stipulations of the act on PPK Plans which results in intimidation of the employers.

So, what should the employers do in this situation?

How can an employer prepare oneself for the implementation of an PPK Reform? Is it the case that by doing nothing we as employers are exposing ourselves to risk of not being able to respond at a later stage? While this is an important question, it seems that currently no single answer exists. In fact at this stage there is no need to initiate direct work on PPKs. First of all, there are no products of this type available on the market, employers are therefore unable to select a financial institution (asset manager) responsible for managing the plans. Since there is no one to manage the plans, there is no one to negotiate with when it comes to the conditions for making contributions to the PPKs or the steps that need to be taken to launch the plan.

When should one take action then?

Many publications contain a very literal interpretation of the act where the 1st of July is the date on which the largest employers (ones that employ more than 250 people) are obliged to launch their PPKs. This in fact is not true. The act only indicates that this group of companies shall be subject to its stipulations from that date.  This naturally does not mean that anything special is to take place in those companies on that day.

The Polish Development Fund (PFR), being one of PPK markets’ regulators in an attempt to help Polish enterprises has published on its website the deadlines for fulfilling the obligations placed upon them by the act. The released information states that the employers are required to “enter into the first PPK agreement” (in other words, to conclude an agreement with asset manager for the management over PPKs) no later than on 25th of October 2019. The next step required is to sign an agreement with a financial institution (note that “to sign” is a rather vague term) concerning management over an PPK on behalf of the employees. The deadline for this, as indicated by PFR is the 12th of November.  As a consequence, the date from which the first contributions to the PPK will be calculated has been established (the calculation shall initiate from when the first remuneration payment is made after the mentioned agreement has been concluded). This way deadline until which the first contribution is to be made has also been established (the 15th day of next month).

As evidenced by the above, in practice the first contributions to the PPKs will be made in November or December 2019 (the latest). It may thus seem that there is a lot of time left until then. However obviously, in order to conclude the first of the mentioned agreements one must select a financial institution and the process will take more than 1-2 months. Nevertheless, this means that in practice the PPK projects should be initiated not earlier than in April or May. By that time, it should become apparent which financial institutions will offer PPK products.

What can be done today then?

The list of activities that can be taken by the employers today when it comes to PPK is not very long.

  1. One may take the decision on the role of the PPK in the company. That is, it is up to the employer to decide whether he intends to offer a plan in order to barely fulfil the administrative obligations or whether to offer an PPK that constitutes an element of our benefits (pension) system. It is worth to note here that middle-sized employers (ones who have fewer than 250 employees) have the time to launch a tax qualified PPE pension plan instead of an PPK (they can do so until December 2019). This means that, at least in case of these employers, the answer to this question is not so simple.
  2. An employer may already initiate organizational preparations for the PPK project, that is – to plan the process, its schedule, decide if or who will support the implementation of the PPK, whether to use external help in in the process, as well as take decisions on who will be a part of the project team, etc.
  3. There is nothing that prevents employers from making plans or initiating the internal communication process at this stage. The activities could include establishing the manner in which cooperation with trade unions (as long as trade unions are present in the company) or employee representatives will take place. In case there are no employee representatives selected – the employer could consider preparing oneself for appointing them.

When it comes to the above mentioned issues, it is worth to give thought to communication activities, as a company may initiate them immediately. Why can communication be so important? It is certain that the employees want to know what PPKs are and why it is good to participate in them. Moreover, trade unions or employee representatives, are likely to depend on the support of the employer, as the act on PPK requires them to participate in the process of asset manager selection. Finally, the employer should display extreme caution in communication concerning PPK, as the act prohibits “discouragement from participation in PPKs”. The violation of this is subject to a fine of up to 1,5% of the payroll budget. This last is the cause of many discussions and concerns of employers. What activities can be treated as discouragement? What will drive the court’s decisions in such cases? One should thus ask himself the question of what communication activities is the employer obliged to perform. The act on PPK seems to clearly indicate that this scope of activities shall be constitute the domain of the moderator (regulator) of the PPK market – PFR, the Polish Development Fund and in particular the PPK Portal (separated institution), as well as of the financial institutions that have PPKs in their product portfolio. The list of obligations of the Portal includes informing the participants of the PPKs, employees and employers concerning their rights and obligations arising from the act. It is therefore important to give thought to the issue of to what extent should the employer participate in communication. Should the company confine itself to merely providing the employees with the information published at the Portal? Or should it only provide them with a form of resignation from participation in PPKs etc.?

It is certain that numerous approaches will be applied and that this scope of activities should be well thought through and planned. One should note that the employer is entitled to inform on the conditions for participation in PPKs. However, the issue of whether or not to “utilize” this option depends on the company.

In conclusion – undoubtedly a large group of the employers will decide that it is worth to engage in communication on PPK. Since the cost of the employee contributions is increased, one should build value around this fact and underline the role of the employer in the whole process. Some employers will take the decision that because the legislator does not require the company’s activity in this area, it is sufficient to fulfill the legal obligations. Both approaches have their pros and cons. However, a conscious decision in this scope is crucial.

The next article concerning PPK Plans shall cover the issue of how to construct an Auto Enrolment PPK Plan? Should an PPK constitute the key element of company benefits system? What are the gains and risks arising from such an approach? And finally – the article shall explore whether there still are any real alternatives to PPK.


Krzysztof Nowak, Mercer
Warsaw, 4 of March 2019