Insolvency benefit

Since the creation of the Guarantee Fund with the entry into force of LOB in 1985 the guarantee for insured persons’ claims has become its main task. From 1997, the non-compulsory entitlements up to a higher limit are guaranteed in addition to the compulsory benefits under LOB.

The Guarantee Fund guarantees the benefits of insured persons under the 2nd pillar in the event of insolvency of the benefit scheme or group of insured (affiliation of an employer to a collective or cooperative foundation).

The applicant for the Guarantee Fund benefits is the insolvent benefit scheme or the legal owner of the insolvent insurance group.

Benefit scheme

The Guarantee Fund guarantees the benefits of insolvent benefit schemes (Art. 56 para. 1, letters b. and c. LOB).

A benefit scheme is insolvent if it cannot pay statutory or regulatory benefits which are due and restructuring is no longer possible (Art. 25 para. 1 SFV). Under Art. 65d Abs. 1 LOB, the benefit scheme must itself eliminate cover gaps.

The restructuring of a benefit scheme is no longer possible if liquidation, bankruptcy or similar proceedings have been initiated against it (Art. 25 para. 2, letter a. SFV). The supervisory authority decides on the opening of liquidation proceedings and hence on the possibility of restructuring. 

The Guarantee Fund guarantees the claims of insured persons to occupational benefits. There is no guarantee in respect of any contributions which have not been paid by the affiliated employer.

Benefits which are not covered by assets of the benefit scheme are guaranteed. Free resources, reserves for special measures and other special reserves no longer needed must be written back against the underfunding.

The statutory benefits payable under LOB are guaranteed.

The regulatory benefits extending beyond the statutory benefits are likewise guaranteed, provided that they are based on pension plan provisions to which the Vesting Law (FZG) applies. No guarantee is provided for voluntary benefits.

Regulatory benefits are guaranteed up to a maximum limit (Art. 56, para. 2 LOB). The maximum limit depends on the determining salary and hence on the salary insured under the regulations. It has been fixed at 1.5 times the maximum salary under LOB and currently stands at CHF 129,060.00 (status on 1.1.2021).

If an employer has several benefit plans (possibly with several different benefit schemes), all the plans for each employee are taken into account to determine whether the maximum limit is affected.

If an insured salary exceeds the maximum limit, it is reduced to the maximum limit and the insured person's account is recalculated on the corrected basis.

Guaranteed are buy-ins and voluntary contributions if they were possible on the basis of the purchase chart of the insolvent pension scheme in due consideration of the maximum salary according to the maximum limit (Art. 56 para. 2 LOB). Current pensions are guaranteed up to 70 % of the maximum limit.

The following expenditure is not guaranteed (this list is not exhaustive):

  • Administrative costs, arrears and other interest liabilities (apart from the interest payable by law on the pension credit balances, Art. 15 LOB)
  • Liquidation costs
  • Employer’s contribution reserves
  • Voluntary benefits

The Guarantee Fund can provide advances to guarantee benefits from the time at which the liquidation proceedings in respect of the benefit scheme are opened.

The benefits of the Guarantee Fund are provided specifically in favour of the insolvent benefit scheme and can only be used for the intended purpose. The liquidation or bankruptcy management must separately manage the guarantee benefit in addition to the liquidation or bankruptcy assets. 

 Before making a possible payment we wish to obtain our own picture of the financial situation of the benefit scheme and the events which caused the problems. When an application for insolvency benefits is made, documents on these points must therefore be attached and appropriate observations made.

The information required for the treatment of an insolvency application may vary from case to case. We normally work on the basis of the following information which must be submitted as a minimum:

  • Liquidation ruling of the supervisory authority (if already issued)
  • Statutes/regulations of the foundation
  • Pension accounts of the insured persons (including information on AHV wages)
  • Annual accounts, including report of the auditors for at least the last 5 years prior to opening of the liquidation proceedings
  • Information about the founder company
  • Information about the assets investments: liquidity, reasons for insufficient cover etc.
  • Information about restructuring measures taken and audited
  • Planned liquidation procedure
  • Other appropriate documents

Group insured

Where several employers or several associations which are not closely related in economic or financial terms are affiliated to a benefit scheme, the Guarantee Fund guarantees the benefits for each insolvent group of insured (all employees of an employer insured pursuant to the affiliation contract with the benefit scheme; benefit fund) (Art. 56 para. 3 in conjunction with art. 56 para. 1, letters b. and c. LOB).

A group of insured is insolvent if it cannot pay statutory or regulatory benefits which are due and restructuring is no longer possible (Art. 25, para. 1 SFV).

The restructuring of a group of insured no longer possible if the employer is in arrears with premium payments and bankruptcy or similar proceedings have been opened against him (Art. 25, para. 2, letter b. SFV).

The Guarantee Fund guarantees the claims of insured persons to occupational benefits. There is therefore no guarantee in respect of contributions which have not been paid by the employer.

Benefits which are not covered by the assets of the benefit scheme are guaranteed. Freely disposable resources, special reserves for special measures and other reserves no longer required, together with the employers’ contribution reserves on the level of benefit schemes, must be written back against the insufficient cover at the level of the group of insured.

The statutory benefits due under LOB are guaranteed.

Regulatory benefits extending beyond the statutory benefits are likewise guaranteed provided that they are based on benefit circumstances to which the Vesting Law act applies. No guarantee is provided for purely voluntary benefits. The guarantee of non-compulsory benefits is confined group of insured for which compulsory enforcement proceedings were opened against the employer after 1 January 1997.

Regulatory benefits are guaranteed up to a set ceiling (Art. 56, para. 2 LOB). The ceiling depends on the determining wage and hence on the wage insured under the regulation. It has been fixed at 1.5 times the LOB ceiling and currently stands at CHF 129'060.00 (status on 1.1.2021).

If an employer has several benefit plans (possibly with several different benefit schemes), all the plans for each employee are taken in to account to determine the ceiling.

Where an insured wage exceeds the ceiling, it is reduced to the ceiling and the insured persons’ account recalculated on that basis. This recalculation does not affect possible portable benefit payments or bought-in benefits. These are fully guaranteed.

The following expenditure is not guaranteed (this list is not exhaustive):

  • Administrative costs, arrears and other interest payments (apart from interest payable by law on the pension credit balance, Art. 15 LOB), warning and collection costs etc.
  • Employers contribution reserves.
  • Contributions to cover the cost of living adjustment.
  • Any risk premiums.

The Guarantee Fund can provide advances to guarantee benefits from the time at which the liquidation proceedings in respect of the benefit scheme are opened.

The benefits of the Guarantee Fund are provided specifically in favour of the insolvent benefit scheme and can only be used for the intended purpose. The liquidation or bankruptcy management must separately manage the guarantee benefit in addition to the liquidation or bankruptcy assets.

Before making a possible payment we wish to obtain our own opinion of the financial situation of the benefit scheme and the events which caused the problems. When an application for insolvency benefits is made, documents on these points must therefore be attached and appropriate observations made.

The information required for the treatment of an insolvency application may vary from case to case. We normally work on the basis of the following information, which must be submitted as a minimum:

  • Liquidation ruling of the supervisory authority (if already issued)
  • Statutes/regulations of the foundation
  • Pension accounts of the insured persons (including information on AHV wages)
  • Annual accounts, including report of the auditors for at least the last 5 years prior to opening of the liquidation proceedings.
  • Information about the founder company
  • Information about the assets investments: liquidity, reasons for insufficient cover etc.
  • Information about restructuring measures taken and audited
  • Planned liquidation procedure
  • Other appropriate documents