A separation, regardless of its duration, is not equivalent to a petition for divorce.

(Publication in the official collection of Federal Supreme Court decisions [ATF] planned)

A (born in 1980), a Senegalese national, and B (born in 1985), a Swiss national, were married in Switzerland in 2011; they had no children. On July 25, 2022, the wife filed a unilateral petition for divorce. The spouses lived together in a joint household for only a short time, and 9 years elapsed between their separation and the initiation of the divorce proceedings.

B, the wife did not wish to share her occupational pension assets, invoking Article 124b paragraph 2 of the Swiss Civil Code (SCC). She argued that during these long years of separation, the husband allegedly did not build up any retirement savings even though he could have worked, whereas she was expected to share hers.

The Federal Supreme Court points out that Article 124b must be applied restrictively (for example, in cases of a marriage of convenience, absence of a marital union, or severe breaches of the obligation to contribute to the family’s maintenance) and that the general principle remains an equal split.

The equal splitting of occupational pension benefits is based on the abstract criterion of the formal duration of the marriage, and not on the actual lifestyle adopted by the spouses.

A separation—even a long-term one compared to the actual time lived together—does not, in principle and on its own, constitute a valid reason under Article 124b paragraph 2 SCC.

It is recalled that following the amendment that entered into force on January 1, 2017, the period for dividing pension assets ceases upon the filing of the divorce petition. The delay was attributable to the plaintiff; therefore, if she had wished to shorten the duration and, consequently, the amount of the assets to be shared, it was her responsibility to file the petition promptly, which she failed to do.

For the record, it should be noted that prior to the January 1, 2017 amendment, the occupational pension assets acquired up until the divorce judgment became legally binding had to be shared. In practice, this caused difficulties for the courts as well as for the pension funds. Furthermore, it allowed one of the parties to use delaying tactics in order to obtain a higher settlement amount.

A French national born in 1964 settled in Switzerland as a Chief Financial Officer.

He made several buy-ins, but the last one for CHF 250,000 was rejected by the pension fund because it exceeded the limit of 20% of the maximum insured salary, which amounted to CHF 860,040.

Following the rejection of his claim by the cantonal court, he filed an appeal in public law matters. His main argument was that Article 60b paragraph 1 OPP 2 contradicts the Agreement of 21 June 1999 between the Swiss Confederation, of the one part, and the European Community and its Member States, of the other part, on the Free Movement of Persons (hereinafter abbreviated as AFMP).

The Federal Supreme Court recalled the content of Article 60b paragraph 1 OPP 2. According to this provision, the annual buy-in amount paid by persons arriving from abroad who have never been affiliated with a pension institution in Switzerland must not exceed 20% of the insured salary, as defined by the pension plan regulations, during the five years following their entry into the Swiss pension institution. Upon the expiry of the five-year period, the pension institution must allow an insured person who has not yet bought in the totality of their regulatory benefits to proceed with such a buy-in.

Our Supreme Court dismissed the appeal, reiterating that the aforementioned provision limits the annual buy-in amount both quantitatively (20% of the insured salary) and temporally (five years) for persons arriving from abroad who have never been affiliated with a pension institution in Switzerland.

According to the Federal Supreme Court, the unequal treatment that Article 60b paragraph 1 OPP 2 may entail is justified as a mechanism aimed at ensuring the coherence of the tax system and complies with Article 21 paragraph 3 AFMP.

Strictly speaking, a foreign national who settles in Switzerland for the first time for a period of one year, then leaves for their country of origin or another country for, say, six months, and subsequently returns to Switzerland, would no longer be subject to this 20% limitation for 5 years, insofar as they have already been affiliated with a pension institution in Switzerland.

That being said, one can legitimately raise the question of an abuse of rights if this person, after a brief initial stay in Switzerland, remains abroad briefly and then returns to work in Switzerland for the same employer, still affiliated with the same pension institution.

Given the purpose of Article 60b paragraph 1 OPP 2, which is to prevent tax avoidance, one might wonder whether, in such an instance, a court would not favor a teleological interpretation, even though it should not do so inasmuch as a literal interpretation is sufficient.

2025 Review of employee benefits accounting

Accounting for employee benefit plans under IAS 19, ASC 715 and IPSAS 39 remains a hot topic in Switzerland. Difficulties in applying Defined Benefit accounting methodology to hybrid Swiss pension plans leads companies to ask whether their methodology as well as their assumptions give a true and fair view of their company’s commitments.

We would be pleased to discuss what this means for your company and to help you plan for your year end in light of continuing market changes.

2023 Review of employee benefits accounting

Accounting for employee benefit plans under IAS 19, ASC 715 and IPSAS 39 remains a hot topic in Switzerland. Difficulties in applying Defined Benefit accounting methodology to hybrid Swiss pension plans leads companies to ask whether their methodology as well as their assumptions give a true and fair view of their company’s commitments.

We are pleased to present our study of trends based on about 200 Swiss companies’ reporting at 31 December 2022 here. We would be pleased to discuss what this means for your company and to help you plan for your year end in light of continuing market changes.

The supreme body of the pension fund (board of trustees) is responsible for the overall management of the pension fund. The non-transferable and inalienable duties of the supreme body include the following tasks among others: the setting of the financing system and comprehensibly designing, monitoring, and controlling the asset management to improve the returns and benefits for the members of the pension fund. Since being a member of the board of trustees is not a full-time job, the scope of duties is enormous: meeting the aforementioned legal requirements requires a lot of time and expertise. Pension fund accredited actuaries, investment consultants, auditors as well as pension fund management teams should fully support the board of trustees to make proper decisions.

The reliable forecast of liabilities is very important for the determination of the pension funds’ financing system and its control (with risk budgeting). Since many liability parameters depend on the development of yield curves and inflation, it is worthwhile to prepare the analysis of their historical data, visualize them and additionally forecast them reliably.

The aim of this web session is to show how useful the yield curve and inflation forecasting are with the deep learning approach, the visualization of the results and the liability forecast based on them. These approaches are implemented using Python (Anaconda/Jupiter) and R-Project. This type of analysis helps the board of trustees to make their decisions and to better understand the forecast results (compared to affine models). In addition, we will show that such approaches are useful for forecasting international accounting results (IFRS, US GAAP, IPSAS) and for preparing asset allocation to be the strong third contributor.

Organised by the EAA – European Actuarial Academy GmbH.

Participants

The web session is suitable for pension fund actuaries and actuarial professionals, pension fund managers and IT developers for pension fund administration tools who are directly or indirectly involved in providing actuarial and investment advice to pension funds and collective foundations with occupational pension benefits. In addition, these topics may also be useful for pension fund boards of trustees and auditors for international accounting.

Technical Requirements

Please check with your IT department if your firewall and computer settings support web session participation (the programme Zoom is used for the web session). Please also make sure that you are joining the web session with a stable internet connection.

Purpose and Nature

The aim of this web session is to provide insights into the approach to forecasting liabilities, inflation, and yield curves for risk budgeting analysis – including the reliable deep learning approach. 

Language

The language of the web session will be English. 

Lecturers

Dr Ljudmila Bertschi
Ljudmila is a qualified member of the Swiss Association of Actuaries (SAV/SAA) and an accredited pension fund actuary of the Swiss chamber of pension fund experts (SKPE). She has a PhD in phys.-math. from the MSU and has worked in pension fund consulting for about 20 years in different Swiss and international consulting firms and insurance companies. She conducted a research study for the Federal Office of Social Security (2015), prepared many publications and presentations for international conferences as well as made training presentations for Swiss chamber of pension fund experts (SKPE).

Dr Mauro Triulzi
Mauro is a qualified member of the Swiss Association of Actuaries (SAV) and holds a Dr. math. ETHZ. He has been working as a developer of actuarial tools for about 20 years and implemented nested stochastic modelling of pension fund liabilities including mortality rates for ALM studies. He is currently developing various actuarial tools for local and international accounting and pension fund management. Together with Ljudmila, he has prepared presentations for international conferences.

Monday, 09 October 2023

1. 08:30 – 10:30 Topics / Content

• Guidelines for the Swiss pension funds for liability parameters
• Investment Driven Liability (instead of LDI)
• Explanation how to use Anaconda/ Jupiter for visualisation
• Visualization of historical data with Python (Anaconda) and R-project

1. 10:30 – 11:00 Break
2. 11:00 – 13:00 Topics / Content

• Examples with Anaconda/ Jupiter for visualizations
• Forecasting yield curve, inflation with R-project and visualization
• Analysis Threshold Portfolio Return and its forecasting
• Summary

(Time zone: CEST – Central European Summer Time)

• AFIR: Threshold portfolio return corresponds to the minimum portfolio return necessary to keep the funding ratio on the same level compared to the last financial year.
  • Our approach based on the nested stochastic modelling (esp. of liabilities) verifies potential limits of this necessary portfolio return over different future periods
  • This approach helps to understand how mutations in the pension fund population as well as client specific scenarios of the HR-policy could impact the liability bandwidth and the development of the funding ratio
  • PDF Presentation
  • Link to presentation (registration is required)

• PBSS: Our presentation in PBSS-Section uses the nested stochastic approach in relation to forecasting results for international accounting valuations (examples for IAS19).
  • This analysis is more important for CFOs of firms listed in stock exchanges – because they have to evaluate pension fund liabilities based on IAS19 (or US GAAP or IPSAS)
  • It shows the forecast of the most important disclosure key metrics for the next 1-3 years (examples for IAS19) – could be implemented for US GAAP and IPSAS as well
  • PDF Presentation
  • Link to presentation (registration is required)

The use of risk-sharing assumptions for the measurement of pension obligations in the IFRS financial statements allows the regulatory requirements of Swiss pension plans to be reflected more realistically with regard to the employer\’s share of the total funding of a pension plan and thus to implement potential benefit adjustments and underfunding measures.

IFRS pension obligations are to be measured at the market-based discount rate, therefore in recent years IFRS pension costs have become much higher and more volatile in the current low interest rate environment, which can lead to a significant under-recovery in the IFRS financial statements. Traditionally, all related costs were recorded at the employer\’s expense. As a result, various de-risking strategies have been implemented by boards of trustees and companies to stabilize the funding of pension benefits and reduce IFRS liabilities. Such strategies lead to benefit reductions and employees are mainly affected by this.
In December 2016, the Commission for True and Fair View Accounting of Expertsuisse communicated \”that the obligation existing between employers and employees to jointly fund pension obligations is to be taken into account under certain circumstances in the sense of risk sharing when measuring pension obligations according to IAS 19.
The objective of this paper is to show the impact of the implementation of the risk sharing models 1.0, 2.1 and 2.2 on the IFRS financial statements, illustrated for two sample funds, PF 1 and PF 2, which represent typical Swiss pension funds.
Chapter 2 provides an insight into the risk sharing (RS) of the IFRS standards. The results for the sample funds are presented in chapter 3.

Article published in Expert Focus (in German)

This article was published in Expert Focus

Fluctuations in the liability in the IFRS financial statements are recognized either in the income statement or in other comprehensive income, depending on the cause. Forecasts of this variability of the obligation could be made realistically and in line with market conditions using stochastic modeling based on historical experience. Results support financial management.

Forecasts of the IFRS financial statements for the next two to three years give company CFOs a deeper quantitative insight into the potential short-term development of all IFRS key figures. It is therefore worthwhile to regularly compare the key figures of the IFRS financial statements with the stochastic forecasts. This gives a deeper insight into the quality of the forecasting process implemented. In addition, the influence of changes in demographic and financial assumptions, personnel policy scenarios and related portfolio mutations on the IFRS key figures can be evaluated.

The implementation of the risk-sharing models 1.0 and 2.0 as well as the asset-ceiling procedures, depending on the coverage ratio during the projection period, can be easily implemented within the stochastic forecasting of IFRS financial statements. Forecasts for financial statements according to IPSAS and US GAAP can be generated with this method.

The preparation of stochastic forecasts is particularly useful in today\’s uncertain situation, as market interest rates are extremely volatile and at the same time at a historically low level. On the other hand, changes in staff and deviations from the expected development of pension obligations based on the assumptions of the previous year play a major role. Many market parameters are interlinked and, depending on the timing, can also influence the management of the company. Even in this constellation, the preparation of stochastic forecasts can prove helpful.

Dès le 01.01.2021, un assuré de plus de 58 ans qui perd son emploi pourra rester dans sa caisse de pensions en payant soit les cotisations pour risques et frais, soit toutes les cotisations, y compris pour l’épargne. Il pourra alors bénéficier d\’une rente de retraite lorsqu’il prendra sa retraite, selon les mêmes conditions que lorsqu’il était salarié.

Quelques points à relever :

• Entrée en vigueur au 01.01.2021
• Si le règlement de l’institution de prévoyance le permet, la mesure de maintien est possible dès 55 ans.
• Le salaire assuré est en principe le même que le dernier salaire assuré. Il ne peut pas être plus grand, mais il peut être réduit à la demande de l’assuré si l’institution de prévoyance le prévoit dans son règlement.
• Il faudrait mettre à jour les règlements de prévoyance d\’ici la fin 2020. Nous avons prévu des articles modèles à intégrer dans ceux-ci.
• Après deux ans de maintien, l’assuré ne peut plus prendre sa prestation de retraite sous forme de capital. L\’assuré qui voudrait son capital devrait sortir sa prestation sur un compte de libre-passage ou prendre sa retraite anticipée dans un délai de deux ans.
• La limitation jusqu’à 3 ans avant d’atteindre l’âge-terme pour rembourser un versement anticipé en vue de l\’acquisition d’un logement n’existe plus et le remboursement peut s’effectuer jusqu’à la naissance du droit réglementaire aux prestations de vieillesse. (Art 30d LPP)
• Si l’assuré trouve un nouvel emploi, sa PLP est transférée à la nouvelle institution de prévoyance. Si toutefois la nouvelle institution de prévoyance n’accepte pas toute la PLP, l’institution de prévoyance doit conserver la partie non-absorbée de la PLP.

Art. 47a Interruption de l’assurance obligatoire à partir de 58 ans

1. L’assuré qui, après avoir atteint l’âge de 58 ans, cesse d’être assujetti à l’assurance obligatoire en raison de la dissolution des rapports de travail par l’employeur peut maintenir son assurance en vertu de l’art. 47, ou exiger que son assurance soit maintenue dans la même mesure que précédemment auprès de la même institution de prévoyance en vertu des al. 2 à 7 du présent article.
2. Pendant la période de maintien de l’assurance, il peut augmenter sa prévoyance vieillesse en versant des cotisations. La prestation de sortie reste dans l’institution de prévoyance même si l’assuré n’augmente plus sa prévoyance vieillesse. Si l’assuré
   entre dans une nouvelle institution de prévoyance, l’institution de prévoyance précédente doit verser la prestation de sortie à cette nouvelle institution dans la mesure qui peut être utilisée pour le rachat des prestations réglementaires complètes.
3. L’assuré verse des cotisations pour la couverture des risques de décès et d’invalidité ainsi que des frais d’administration. S’il continue à augmenter sa prévoyance vieillesse, il verse en outre les cotisations correspondantes.
4. L’assurance prend fin à la survenance du risque de décès ou d’invalidité ou lorsque l’assuré atteint l’âge ordinaire réglementaire de la retraite. Si l’assuré entre dans une nouvelle institution de prévoyance, l’assurance prend fin si plus de deux tiers de la prestation de sortie sont nécessaires au rachat de toutes les prestations réglementaires sur les prestations complémentaires dans la nouvelle institution. L’assurance peut être résiliée par l’assuré en tout temps; elle peut l’être par l’institution de prévoyance en cas de non-paiement des cotisations.
5. Les assurés qui maintiennent leur assurance en vertu du présent article ont les mêmes droits que ceux qui sont assurés au même collectif sur la base d’un rapport de travail existant, en particulier s’agissant de l’intérêt, du taux de conversion et des versements effectués par leur dernier employeur ou un tiers.
6. Si le maintien de l’assurance a duré plus de deux ans, les prestations sont versées sous forme de rente; le versement anticipé ou la mise en gage de la prestation de sortie en vue de l’acquisition d’un logement pour ses propres besoins ne sont plus possibles. Les dispositions réglementaires prévoyant le versement de prestations sous forme de capital uniquement demeurent réservées.
7. L’institution de prévoyance peut prévoir dans son règlement le maintien de l’assurance conformément au présent article dès l’âge de 55 ans. Elle peut aussi y prévoir la possibilité pour l’assuré de maintenir sa prévoyance professionnelle ou sa seule prévoyance vieillesse pour un salaire inférieur au dernier salaire assuré.