ECP Expertise Centre

The most important purpose of creating an Employee Capital Plan (ECP) is to ensure a common and, at the same time, voluntary saving system for employees. ECPs allow employed people to hold capital in individual accounts, mainly for use after the completion of their professional activities, while employers gain a tool to motivate employees. Equally importantly, the funds in the ECPs are invested on the capital market, due to which they will help accelerate investments and economic growth.

The detailed principles of ECP functioning are determined in the Act of 4 October 2018 on employee capital plans. Due to the transparent provisions, the programme is relatively simply for the employer and for employees, whereas the liability for its efficient functioning lies with the financial institutions. The main purpose of the ECP is to collect capital which may be used after the age of 60 years or – in exceptional cases – earlier. Speaking of the ECP, there are some important principles to consider that characterise its functioning:

• Universality – due to having a designated institution, whose role was entrusted to PFR TFI, each employee has access to the ECP.
• Voluntary character – an employee may choose whether they want to keep their savings in the ECP or whether they prefer to resign from it.
• Tripartite character – savings held within the ECP include contributions paid by the Employee, the Employer and the State – which ensures the possibility of saving larger amounts more quickly.
• Privacy – all funds held on ECP accounts belong to the participant and are inheritable. Due to this, each employee has full access to the information about their account and transaction history.
   

Contributions paid into the ECP accounts are invested in debt securities (e.g. bonds, treasury bills, mortgage bonds, deposit certificates or other transferable securities) and equity securities (e.g. shares, investment certificates and participation units in investment funds). Pursuant to the act, funds paid into the ECP accounts are invested in target-date funds, whose investment policy is adjusted to the age of the participant.

In PFR TFI, we created PFR PPK SFIO (PFR ECP Specialist Open Investment Fund) with separated subfunds. In the case of the younger ECP participants, the equity part will prevail in the investment fund's portfolio, whereas with the passage of time and approaching the moment of fund withdrawal the debt part will increase.

The most important step to establish the ECP in a company is the choice of financial institution and the execution of the ECP operation and management agreement therewith.

It is worth preparing the company organisationally for the establishment of the ECP. Before implementing the programme, the company should make sure that the accounting system is updated, prepare for keeping and archiving documents in the proper manner as well as implementing appropriate procedures.

The deadline for establishing by employers the ECP in their companies depends on the employment level.

First – on 1 July 2019 – the provisions on the ECP became binding on the largest companies, those with at least 250 employees. These entities should have signed the ECP management agreement with a chosen financial institution by 12 November 2019.

Next, medium-sized companies with 50 to 249 employees will be obliged to establish the ECP. These companies will be bound by the provisions as of 1 January 2020, which means that they must sign the ECP management agreements by 11 May 2020 at the latest.

The third stage of the ECP implementation starts on 1 July 2020, and covers entities with 20 to 49 employees. These companies must sign the ECP management agreements by 27 October 2020.

The smallest companies, those with fewer than 20 employees and entities of the public finance sector, will be the last entities to join the ECP. The deadline for joining the ECP by these entities is 1 January 2021, whereas the deadline for the execution of the ECP management agreement is 23 April 2021 for enterprises and 26 March 2021 for entities in the public finance sector.

Each employer should inform their employees about their rights and obligations connected with the ECP and the principles applicable thereto. Remember that in choosing PFR TFI as the institution managing the ECP in your company you may count on the support of our team – including in the scope of communication with your employees.

The benefits of the ECP implementation are mentioned most frequently in the context of employees who save for their future pensions by participating in this programme. However, ECPs offer many opportunities for employers. The contributions paid by employers to their employees’ accounts in the ECP constitute a form of pay rise. Therefore, the Act on employee capital plans provides employers with a new tool for motivating employees, which is particularly relevant given the labour market conditions and growing expectations of employees towards employers. It is important that, in order to ease the financial burden imposed on employers, the legislator has guaranteed the possibility to include the ECP in the tax deductible expenses and to exempt the ECP from the contributions to the Social Insurance Institution.