Employee Capital Plans (ECP) – key information

by Michał Prokop 

When can we pay out the money collected in ECPs

Payout options differ depending on the age of an employee. In the period when savings are collected, i.e. before turning 60, payouts will be possible only under special circumstances:

• grave illness;
• payment of up to 25% of the funds;
• payment of 100% of the funds to cover own contribution towards purchase of a residential property – however, such a payment is a sort of loan as it needs to be returned within 15 years;
• the so-called transfer payment of all funds to another ECP account or, in the case of the participant’s death, to the account of the spouse of the deceased or of the authorised person in ECP, Individual Retirement Account (IRA or Polish: IKE) or the Employee Pension Scheme (EPP or Polish: PPE).

After reaching 60 years of age, payments can be made in the following form:

• 25% of the funds on a one-off basis, and the remaining 75% in at least 120 monthly instalments, 100% of the funds invested in the spouses’ joint EPC account (i.e. a sort of a joint retirement pension for the spouses) in at least 120 monthly instalments;
• transfer payment to a time deposit or
• transfer payment to the Social Insurance Institution for periodic or life payments.

Can the ECP contribution be increased or reduced

Yes. Both the employee and the employer may change the amount of the contribution on certain conditions. However, the employer cannot change the amount of the basic contribution. The basic contribution paid by the employer is 1.5% of the salary but the employer may voluntarily undertake in the ECP management agreement to pay extra contributions of maximum 2.5% of the salary.

The employer cannot avoid the payment of the above-mentioned basic contribution or to change its amount in any way. The basic contribution to the ECP financed by the employee (deducted from his salary after tax) is 2%. The employee's basic contribution may be reduced (but may not amount to less than 0.5% of the salary) if the ECP participant’s earnings from different sources in a given month do not exceed 1.2 times the minimum wage. Just like the employer, the employee can voluntarily decide to pay extra contributions up to 2% of the salary.

Can the employee opt out of the ECP and when

The employee can opt out of the Employee Capital Plans at any time by means of a written declaration delivered to the employer. The declaration should include details of the employer and the ECP participant as well as the ECP participant's confirmation that he/she is aware of the consequences of the declaration. However, the ECP opt-out declaration cannot be filed once and for all. Starting from 2023 the employer will inform the employee who filed an ECP opt-out declaration – every 4 years by the end of February – that he will again pay the ECP contributions for the employee. Then, the employee may once again opt out from the ECP by filing the relevant declaration.

What happens to the ECP when we change jobs

When changing over to a new job, the employee has to inform the new employer about the ECP maintenance agreements concluded on the employee’s behalf. Such a declaration must contain the name of the financial institution with which the ECP agreements were concluded. The new employer is obliged to submit on the employee’s behalf a request for a transfer payment of the funds accrued on the employee's ECP accounts to the ECP account kept by the financial institution with which the new employer has signed an ECP maintenance agreement, unless the employee objects to it. It should be noted that the ECP participant may, at the same time, be a party to more than one ECP maintenance agreement.