15 December 2017

On 19 October 2017, the Minister of Pensions and the Minister for Social Affairs submitted a draft act which, among other things, affects one of the basic principles governing the statutory pensions of public personnel. For example, the draft act stipulates that services performed as a non-permanent personnel member will no longer be taken into account for the pension as a permanent personnel member. This change must be compensated for by the extension of occupational pensions to include contractual personnel in the public sector.

In order to promote the setting up of these occupational pensions, the draft act aims to make a number of changes to the Occupational Pensions Act ("OPA") to bring it more in line with the specific characteristics of the public sector, particularly with regard to collective labour relations. The draft act also aims to require public authorities to externalise their (new) occupational pension commitments, and to change the individual responsibility of the provincial and local authorities within the Consolidated Pension Fund of the provincial and local authorities, so that the introduction and development of occupational pensions within those authorities is encouraged.

The draft act aims to encourage the introduction of occupational pensions in the public sector.
 

The draft act is in line with a previous decision of the Federal Government to introduce an occupational pension for contractual personnel working for the federal public services. In particular, it implements the Government Agreement and the suggestions for the reform of pensions in the public sector, made by the Pensions Reform Commission 2020–2040, which call for the introduction of occupational pensions for contractual personnel in the public sector.

The draft act itself does not introduce occupational pension commitments for the public sector, but it encourages public sector employers to introduce such schemes as part of the employment conditions of the contractual personnel. The role of the amended OPA in the protection of the occupational pension can be compared to the role that the Wage Protection Act plays in protecting wages. The most important proposed changes are briefly discussed below.

The draft act itself was the subject of consultation in Committee A which resulted in an agreement.

Services performed as a non-permanent personnel member in the public sector are no longer eligible for the pension as a permanent personnel member

As a result of administrative case law, approved by the Court of Audit ("Rekenhof"/"Cour des comptes"), services provided by a member of the contractual personnel of a public sector employer are also taken into account for the calculation of a statutory pension as a permanent personnel member when these services as a contractual personnel member were followed by appointment to a permanent position. This creates a difference in treatment between (i) members of the contractual personnel of the public authority who are subsequently appointed to a permanent position and receive a pension within the system for civil servants in respect of their career both as a permanent and as a non-permanent personnel member, and (ii) members of the contractual personnel who are never appointed to a permanent position and thus receive a (usually substantially lower) employee's pension for their career.

The draft act has two objectives. First, it aims to give a legal basis to the current case law regime which considers contractual services followed by appointment to a permanent position as services performed in the context of a permanent position, at least if the appointment took place before 1 December 2017. Secondly, it provides for termination of this case law regime for all contractual personnel who are appointed to a permanent position as from 1 December 2017: for them, the services provided as contractual personnel will now be included in the pension regime for employees. This contractual personnel will therefore receive two pensions on retirement: one as an employee and one as a civil servant. It is the intention that an occupational pension will be added for their career as an employee.

It is also noteworthy that the draft act attempts to eliminate one of the obstacles which, in the past, often made it difficult to set up an occupational pension for contractual personnel: if permanently appointed, the person concerned not only obtained a pension as a civil servant which also covered his career as a contractual personnel member, but, in addition, he was – in general – allowed to keep the occupational pension which he had accrued during the period of employment as a member of the contractual personnel of his public employer (subject to the act which caps the pension amount for services in the public sector). Such a "double" reward was not a desirable state of affairs. The draft act now stipulates that, if services as a contractual personnel member are still taken into account for the pension as a civil servant, the additional benefits accrued for these services will be deducted from the pension increase resulting from the inclusion of those services for the pension as a civil servant. This does not apply to the additional benefits which are built up through employee contributions.

The OPA customised for the public sector

The Occupational Pensions Act of 28 November 2003 only takes the specific characteristics of the public sector into account to a limited extent. This can lead to difficulties in application if a public employer wants to introduce an additional pension commitment for its contractual personnel. Therefore, the draft act aims to add specific provisions for public employers to the OPA.

One of the specific characteristics of the public sector relates to collective labour relations. Employers in the public sector do not have a works council, but they have a system of autonomous collective relations, which varies according to the type of public employer (Federal State, public institutions of the Federal State, autonomous public enterprises, the regions and communities and their dependent institutions, the provincial and local authorities, education, etc.). The draft act takes this into account by specifying the competent information, consultation and negotiation body for occupational pensions for each type of employer in the public sector.

The concept of "exit" is also amended: the permanent appointment of a contractual personnel member is considered as an exit from the pension commitment. However, the consequences of this exit, e.g. the possibility of transferring the acquired reserves, are postponed until the end of the permanent position, or the date of transfer if the appointed civil servant is transferred to another employer in the public sector.

Finally, the draft act also aims to modify the act of 27 October 2006 (supervision of the institutions for occupational pension provision). Currently, this act does not require public authorities – unlike autonomous public enterprises, where the obligation already exists – to externalise their occupational pension commitment to an authorised pension institution, i.e. an institution for occupational pension provision or an insurance company. The draft act aims to gradually introduce the obligation for the public authorities to entrust their occupational pensions to a pension institution. All occupational pension commitments created after 1 December 2017 must entrust the management of their pension plans to an insurance company or an institution for occupational pension provision. The same applies to extensions or substantial modifications to existing occupational pension commitments. Occupational pension commitments exempted from the mandatory externalisation must be registered in the DB2P database for occupational pensions. For the sake of clarity, the new provisions concerning mandatory externalisation do not apply to statutory pensions.

Reduction of the extra accountability contribution by the cost of the occupational pension

The draft act provides for an incentive to encourage provincial and local authorities to develop or introduce an occupational pension scheme for their contractual personnel. Currently, local authorities have to pay the statutory pension costs of their staff by paying contributions, and on top of that by paying an extra contribution to increase their accountability, introduced by the act of 24 October 2011. This extra contribution is intended to increase the accountability of employers if the solidarity system comes under pressure as a result of their personnel costs being too high in relation to their contributions.

The draft act introduces the possibility for a local authority making an additional pension commitment which meets certain conditions (no age limit for affiliation, pension benefit of a sufficiently significant level, indefinite duration of the pension commitment, etc.), to deduct from the individual extra accountability contribution 50% of the employer's cost incurred for financing the occupational pension of its contractual personnel. The draft act includes a mechanism to prevent this deduction from resulting in a deficit in the Consolidated Pension Fund of the provincial and local authorities.

The Assembly of the French Community Commission invokes a conflict of interest 

On 17 November 2017, the Assembly of the French Community Commission announced that it considered it could be seriously disadvantaged by the draft act, which was being discussed in the Federal Chamber of Representatives. It therefore requested suspension of the approval procedure for the draft act in the Chamber with a view to consultation. This suspension can last for a maximum of 120 days.

Conclusion

The draft act aims make a drastic adjustment to the statutory pension regime for contractual personnel in public service who are subsequently appointed on a permanent basis. In order to compensate for the potential pension loss, the draft act aims to improve the general framework for setting up and developing occupational pensions for contractual personnel employed in the public sector. This will not only benefit contractual staff who subsequently obtain a permanent position, but also all other contractual personnel. It remains to be seen whether employers in the public sector will make use of this framework. But first we have to await the outcome of the conflict of interest procedure. We will, of course, keep you informed of further developments.