Employer Action Code: Act
The timetable for the reforms moving supplemental pension accruals in the Netherlands to some type of flat rate defined contribution basis, as described in our earlier Global News Brief: Netherlands: Draft pension legislation released for consultation, has been delayed. Due to the large number of technical points raised during the public consultation, the government will submit draft legislation in early 2022 rather than this summer. It appears that the main content of the reforms will not change, and support remains strong among the social partners.
Key details
- In a letter to parliament, Minister of Social Affairs and Employment Wouter Koolmees announced that the effective date of new legislation will be delayed for at most one year — to January 1, 2023 (from January 1, 2022) — and other deadlines will be adjusted accordingly. In particular, the deadline for transition to the new system would shift to January 1, 2027, at the latest (from January 1, 2026). The relaxation of certain solvency funding rules on benefit cuts and indexation for pension funds, to have started in 2022, will be delayed, though the rules on benefit cuts that applied at the ends of 2019 and 2020 will be extended for another year (to be formalized).
- The government intends to release implementing regulations for consultation when the draft legislation is submitted. Partly because of this, plan transitions targeted by companies for January 1, 2023, may still be possible, though the transfer of existing benefits into new pension contracts on that date likely will not be feasible.
- Minister Koolmees confirmed that standardization of supplemental survivors’ benefits will be part of the new legislation. Currently, the variety in benefit level, financing and eligibility conditions in the event of job change, unemployment or divorce causes complexity and risk for plan participants.
- The government intends to consult further on changes to allow payment of the statutory AOW (Algemene Ouderdomswet – National Old Age Pensions Act) retirement pension after 45 years of service (also part of the pension reform deal). A recent study identified concerns with the approach being considered.
Employer implications
Given the complexities involved with such sweeping reforms, some delays in the legislative timetable were almost inevitable; however, the substance of the reforms remains known. We expect that most multinational companies will not delay their efforts to plan for and adopt the changes, and will maintain implementation targets of between January 1, 2023, and January 1, 2026. This summer, the Labour Foundation, the Association of Insurers and the Pension Federation will publish a transition manual (in the form of an information platform) to provide parties with helpful information for the purpose of the transition.
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