In March 2023, parliament approved reforms to the Swiss second-pillar BVG/LPP pension system to improve its long-term financial balance while maintaining the general benefit level. Benefits from the Swiss first-pillar social security system (AHV/AVS) are complemented by mandatory minimum employer-provided pensions based on a cash balance account design (BVG/LPP system), payable on termination, retirement, death or long-term disability. Many companies offer plans exceeding the minimum BVG/LPP benefits, a separate top-up arrangement or both. The recently approved reforms to the mandatory BVG/LPP system (BVG/LPP 21) include reducing the pension amounts generated by the cash balance account, changing the earnings threshold for participation and the offset used to determine insured earnings so that coverage is enhanced for workers with lower earnings (e.g., part-time and multiple employment workers), providing an additional pension amount for a certain cohort of future retirees and revising benefit accrual rates. The package of measures is controversial, and a public referendum on them in 2024 is almost certain. WTW Switzerland has prepared an overview of the reforms: BVG 21 reform.
The BVG/LPP 21 reforms are meant to complement AHV/AVS reforms that were approved in a public referendum in September 2022. Left-wing parties in parliament and trade unions have already launched a national signature campaign to call for a referendum on the BVG/LPP 21 reforms (50,000 signatures are required by July 6, 2023). The last reform attempt in 2017 (which combined AHV/AVS and BVG/LPP reforms) was rejected by voters 53% to 47%, and the prospects for BVG/LPP 21 surviving a referendum are uncertain. Employers should monitor the progress of the referendum campaign and review the impact of the BVG/LPP 21 provisions on their mandatory plans as well as any potential impacts on voluntary plans they may have in place.