 | 0 |
| 1 |
| 1 |
| 1 |
| 1 |
In this issue of Brans Brief:
On 5 January 2007, the Dutch Supreme Court ruled that excluding part-time employees during waiting periods in pension schemes (while allowing them the option of participating) does not contravene Article 119 of the EC Treaty (Article 141 EC). This ruling upholds the Court’s views on time limitation.
The facts
Under the pension regulations of the foundation administering Pension Fund X, temporary workers and part-time staff (working fewer than 12 hours a week) were, until 1 January 1978, excluded from membership of the pension scheme. In 1978, the pension scheme was amended. Part-timers were only required to join the pension scheme after a waiting period of five years. During that waiting period, they had the option of joining. The pension scheme was amended again in 1 December 1986, and the waiting period was reduced to one year, after which it was abolished entirely in 1992. From then on, all employees were obliged to participate in the pension scheme.
The judgment
The proceedings before the Dutch Supreme Court revolved around the question of whether the pension scheme, in the form as it applied to part-time employees from 1 January 1978 until 1 January 1992, created a situation of unequal treatment of part-time workers. The Court of Appeal had ruled that the pension scheme resulted in a situation that relatively few part-time workers participated in the pension scheme during the waiting period, and as such was less beneficial for part-timers than it was for full-timers. This led the Court of Appeal to conclude that this constituted unequal treatment.
The Supreme Court addressed the question of whether the optional membership for which the pension scheme provided constituted a case of discrimination prohibited by the operation of Article 119 of the EC Treaty in respect of part-time workers, in connection with participation in the pension scheme.
The Supreme Court held that the risks defined by the Court of Appeal (such as lack of familiarity, thoughtlessness) were not such that they actually prevented part-timers from exercising the option to join the pension scheme during the waiting period, or else that they were not such that the part-timers were effectively excluded from joining the pension scheme.
The Supreme Court also repeated the position it adopted previously in connection with time limitation, i.e. that the limitation period as defined in Section 301(1) of Book 3 of the Netherlands Civil Code does not commence until the day following that on which the defendant ‘is capable’ of bringing legal action against Pension Fund X for compensation for damages. For these purposes, the injured party must be familiar both with the facts and circumstances pertaining to the damage and the parties liable for that damage and with the legal assessment thereof. In other words, in the present case, the five-year limitation period does not start until the injured party knows, my interests are being prejudiced, there is someone who can be held liable for this, and there are legal grounds to claim compensation for my damages.
For more information contact: Marijke Biewinga.
The Dutch Financial Supervision Act, which incorporates virtually all the rules and regulations for the financial markets and their supervision, entered into force on 1 January 2007. The rules with which financial service providers must comply have been simplified and the administrative burden reduced. The scope of the Act does not include pension funds (subject to a series of conditions), with the exception of Part 5 of the Act. Chapter 5.6 of the Financial Supervision Act constitutes a legal codification of the best practice provisions set out in the Tabaksblat Code on corporate governance that are aimed at institutional investors. This Chapter also codifies the principle of ‘apply or explain’.
Pension administrators will be affected by Part 5 of the Act, because institutional investors are defined as collective investment schemes, life insurers and pension funds.
As such, pension administrators are required to apply the relevant provisions from the Tabaksblat Code, or else explain their reasons for not complying with the Code. The best practice provisions in question concern the manner in which institutional investors report on their voting policies, the implementation of those voting policies and the actual voting conduct at general meetings of shareholders.
It is important to note that pension administrators are also subject to the Dutch Market Abuse (Financial Supervision Act) Decree. While most pension administrators were exempt from supervision under the Dutch Act on the Supervision of the Securities Trade, that exemption no longer applies under the Financial Supervision Act. All pension administrators are required to draw up rules to prevent conflicts of interest (code of conduct for private transactions), insider information and internal supervision of compliance with the relevant rules.
Pursuant to the Dutch Pensions Act, Title 4.2.3 of the Financial Supervision Act applies to contribution agreements offering investment choice. In light of a far-reaching duty of care on the part of the pension administrator in respect of its pension scheme members, pension administrators who manage contribution agreements offering investment choice are required to observe a series of information-related obligations. Any member who expresses a desire to invest directly must be given the opportunity to do so; however, the pension administrator must provide the member with information and advice. For example, before the agreement is concluded, the member must be provided with relevant information about the product while the pension administrator must also obtain information about the member’s financial position, understanding, experience, objectives and willingness to take risks, before providing any advice. The pension administrator’s advice must be based on that information.
For more information contact: Rick Crauwels.
In the Brans Brief of November 2005, we announced that no new members would be admitted to the FVP benefits scheme of Stichting Financiering Voortzetting Pensioenverzekering (the foundation for financing the continuation of pension insurance, ‘the FVP Foundation’) after 1 January 2008. As a result, employees aged 40 and above who become entitled to Dutch unemployment benefits during or after 2008 will no longer receive any contributions from the pension insurance continuation scheme. The consequence for those employees is that the FVP Foundation will not pay for the continuation of the accrual of pension rights under their former employer’s pension scheme.
However, contrary to earlier announcements, the Foundation recently decided to extend the FVP benefits scheme by one year, until 1 January 2009. The reasons for that extension are that the FVP Foundation’s income from investments during 2006 exceeded the forecasts, and that unemployment has dropped as a result of the economic recovery. As a consequence, the Foundation has more income, on the one hand, while on the other, fewer claims are being made on the FVP benefit scheme.
The Foundation has also announced that the FVP benefits scheme will continue to be conditional for anyone who already receives benefits under the scheme or will do so in the future.
Further information If you would like further information about the matters addressed in this issue of Brans Brief, please contact Marijke Biewinga (Exclusion of part-timers during waiting periods in pension schemes), Rick Crauwels (Implications of the Dutch Financial Supervision Act for pension administrators) or Mirella Verhaaf (FVP benefits scheme to be extended until 1 January 2009).
For more information contact: Mirella Verhaaf.
If you have any questions or remarks concerning this issue of the BransBrief, please let us know.
Contact |
Overzicht actuele berichten |
Watson Wyatt Update Nieuwsbrief overzichtBekijk hier uitgaven van de Watson Wyatt Update Nieuwsbrief. |
Vragen & Opmerkingen |
Ontvang de nieuwsbrief per e-mail |
Copyright 2010 Towers Watson. All rights reserved.
Terms of Use
Privacy Policy
See all locations
Contact us
Request services
