Employee Capital plans: employers’ information obligations

by Martyna Ryt

25 November 2019

Among the employers’ obligations connected with the Employee Capital Plans (ECP), the ECP Act imposes information obligations towards employees and financial institutions.

In this article we are explaining what information employers are obliged to communicate to their employees and to the financial institutions in connection with the ECP and we are advising on how to fulfil the statutory information obligations.

What do employers need to communicate to their employees in the context of the ECP

1. INFORMATION ABOUT THE OBLIGATION TO SUBMIT A REQUEST FOR TRANSFER PAYMENT ON BEHALF OF THE EMPLOYEE

The employer’s choice of the financial institution contracted to manage the Employee Capital Plan is not made once and for all. According to the ECP Act, the employer may terminate an existing ECP management agreement and contract the ECP management to another financial institution.

The employer who terminates his ECP management agreement and contracts the management to another financial institution must inform the employees about his obligation to submit on their behalf a request for a transfer payment of the funds accrued on the employees’ ECP account to the ECP account maintained by the newly-chosen financial institution.

The employer must communicate this obligation immediately, but no later than 7 days of the date of the ECP management agreement with the new financial institution.

The same obligation exists in respect of new hires whose previous employers signed ECP management agreements on their behalf. The employer must inform such employees about his obligation to submit on their behalf a request for a transfer payment of the funds accrued on their ECP accounts maintained by the financial institutions contracted on their behalf by the other employers to the ECP account maintained by the financial institution chosen by the new employer.

The employer must communicate the above-mentioned obligation immediately after signing the ECP maintenance agreement for and on behalf of the new employees.

2. INFORMATION ABOUT THE OPTION TO JOIN THE ECP FOR PEOPLE AGED 55 TO 70

Employees aged between 55 and 70 are not covered by the ECP automatically but may join the saving programme if they wish by submitting the relevant request. Employers are obliged to notify such employees of their option to join the Employee Capital Plans.

The statute does not stipulate any deadline for this communication. It seems right to notify such employees before signing the ECP maintenance agreement so that they can join the saving programme together with the rest of the workforce signed up automatically.

3. INFORMATION ABOUT THE OPTION TO REDUCE THE BASIC CONTRIBUTION AND ABOUT THE ADDITIONAL CONTRIBUTION

The employer must inform his employees that they can reduce the basic contribution or choose to pay additional contributions to the ECP. The basic contribution paid by an ECP member is generally 2% of his salary. However, if the ECP member's monthly salary earned from different sources does not exceed 1.2-times the minimum wage, the contribution may be reduced but no more than to 0.5% of the employee’s salary. Furthermore, employees may declare to pay additional contributions of maximum 2% of their salary.

4. INFORMATION ABOUT RESUMED PAYMENTS

Employees aged 18 to 54 are signed up for the ECP scheme automatically. However, as the ECP membership is voluntary, they can opt out by informing the employer in writing. Employees who opt out of the ECP will be automatically re-enrolled every four years but can opt out again. Employers must inform employees about resumed payments on their behalf every 4 years by the last day of February.

What needs to be communicated to financial institutions

Employers must inform the management of the financial institution about the ECP opt-outs. Such communication must be immediate but no later than 7 days of the employee’s opt-out decision.

Moreover, employers must notify the financial institution about resumed payments on behalf of ECP members who have opted out but have been re-enrolled after 4 years.

How to fulfil the information obligations towards employees

The ECP Act does not prescribe any special method and form to fulfil the employer's obligations. What matters is that the employees receive the statutory required information and employers can demonstrate that they have fulfilled their information obligations. From the employer’s perspective, the safest solution is to prepare written information to be signed off by his employees. However, this may prove difficult with a large workforce. Large enterprises may publish announcements containing the necessary information about the introduction of the Employee Capital Plans.

Irrespective of the statutory information obligations, we recommend that employers conduct information campaigns about the ECPs to inform employees about the terms of the ECP membership and the related rights and obligations of employers and employees.