The AVS 21 reform, which among other things introduces early retirement options, requires employers to play an active role in their employees’ transition to retirement. This article provides an overview of the practical steps you can take to support your employees in this process, while ensuring that you meet your legal obligations, particularly with regard to AVS contributions.
1. Informing your employees
It is essential that your employees understand the early retirement options offered by the AVS 21 reform. Organise information sessions to cover :
– The legal retirement age for men (65) and women (64 until 2024, then 65 from 2025).
– The possibility of taking early retirement from 1 to 24 months after the age of 63 for men and women (and 62 for women born between 1961 and 1969).
– The financial impact, in particular the reduction in AVS pension of 6.8%/year per year of early retirement.
Practical tip: Make retirement simulation calculation tools available to help employees better understand the consequences of their choices and anticipate pension reductions.
2. Supporting the early retirement application
The administrative steps involved in early retirement require special attention. Here are the key stages:
– Plan discussions in advance: Encourage your employees to raise the issue of early retirement at least 6 to 12 months before the desired date.
– Formalise the request: Employees must submit a written request to the AVS compensation fund at least three months before the desired early retirement date. It is important to support them in this process by providing the necessary documents and advice.
– Coordination with the pension fund: If your employees also wish to draw their second-pillar pension before the statutory retirement age, you must inform them of the specific rules of their pension fund and assist them with the formalities.
3. Managing AVS contributions after retirement
One aspect of early (partial) retirement that is often overlooked is the management of AHV contributions.
If the employee continues to work and earns income after taking early retirement, the employer must continue to pay AVS contributions.
However, the work must be part-time, with a reduction in the rate of employment of at least 20%.
– Early retirement with gainful employment: Even if the employee continues to work and receives income from gainful employment after taking early retirement, both he and the employer must continue to pay AVS contributions until the age of 65 for both men and women (64 for women born between 1961 and 1969).
– Early retirement without gainful employment: If the former employee is no longer working and does not receive any income, he or she may be considered to be without gainful employment. In this case, they must pay minimum AVS contributions during the period of early retirement. But this is not the employer’s responsibility. However, if the person’s spouse is working and paying sufficient contributions, no contributions are due.
Why this obligation?
Under Swiss law, AHV contributions must be paid up to the statutory retirement age, even if the employee has stopped working. If the employee is still in receipt of income (pensions, allowances or income from part-time work), the contributions are of course still due.
AVS pensions are directly influenced by the contributions paid throughout an employee’s career. Maintaining contributions, even after you stop working, ensures a higher pension amount, which is crucial to guaranteeing financial security in retirement.
Note: If an employee continues to work after retirement age, AVS/AHV contributions are only due on the part of the income exceeding an excess of CHF 16,800 per year. This rule reduces the burden while ensuring that contributions remain relevant.
Employer’s responsibility: You must ensure that AVS contributions are correctly deducted and paid, even after the employee has ceased their main activity, for as long as they receive income. This also includes the responsibility for managing the reintegration into the occupational pension scheme if the employee takes up a post-retirement activity and wishes to continue to contribute to the LPP (supplementary compulsory). The terms and conditions of your contract with your pension fund will apply (e.g. the period between a stoppage and a partial return to work). In addition, any conditions linked to your CCNT or trade are reserved.
4. Propose transitional solutions
– Part-time work: You can offer reduced-time work options for employees approaching retirement, enabling them to retain an income while gradually reducing their workload.
– Second-pillar contributions: If an employee chooses to continue working part-time, they can also continue to contribute to their pension fund, which could increase their future benefits.
– Offering a bridging pension: This measure, like a temporary allowance from the employer, is used to compensate for the loss of income due to early retirement, before reaching the statutory retirement age.
Conclusion
The AVS 21 reform marks a turning point in pension management in Switzerland. It is crucial for employers to look beyond mere legal obligations and see this period as an opportunity to strengthen relations with their employees, and to position themselves as a key player in this change of life. Anticipation and dialogue will be your best allies.