The current Austrian severance payment scheme is domestically known as the “new” severance payment scheme. In this section you will find information on the scheme’s legal basis, how the severance payment scheme works and about the Financial Market Authority’s statutory mandate. The most important key indicators and information requirements are also provided.
The Financial Market Authority supervises corporate provision funds. A corporate provision fund is a company that is authorised to pursue severance and retirement fund activities in accordance with the Austrian Banking Act (BWG; Bankwesengesetz). This covers the acceptance and investment of severance payment contributions from salaried employees and self-employed persons. The contributions are owned by the corporate provision fund, which holds and manages them on a trust basis for the beneficiaries. This activity requires a separate licence pursuant to the BWG.
The severance payment scheme has been in place in this form since 1 July 2002, replacing the previous model, which is why it is known in Austria as the “new” severance payment scheme.
Severance and retirement fund activities are regulated in the Act on Severance and Retirement Funds for Salaried Employees and Self-Employed Persons (BMSVG; Betriebliches Mitarbeiter- und Selbständigenvorsorgegesetz). The BMSVG stipulates that the acceptance and investment of severance payment contributions is a banking transaction pursuant to Article 1 para. 1 no. 21 BWG. Consequently, corporate provision funds are not only subject to the BMSVG but also to the BWG, with some exceptions. Important special provisions are that state commissioners and their deputies must be appointed, as well as a supervisory board irrespective of the total assets. Separate capital resources requirements also apply.
The licence, when it has been granted, only covers severance and retirement fund activities. Holdings in other companies are not permitted, except in such companies that pursue activities related to severance and retirement fund activities. The framework conditions related to investment policies and capital resources requirements applicable to corporate provision funds are regulated by law and adherence to them is supervised by the FMA.
Their scope extends to all employment relationships under private law, in particular the employment contracts of salaried employees and manual workers. As a rule, the employer selects the corporate provision fund and enters into a membership contract with the selected fund. A similar provision model was introduced for freelancers and the self-employed on 1 January 2008.
As at 31 December 2015 nine corporate provision funds managed total assets of € 8.31 billion. One corporate provision fund manages two collective investment undertakings, while the other eight manage only one each. Please refer to the current Annual Report of the FMA for more details and statistics.
Corporate provision funds hold a licence pursuant to Article 1 para. 1 no. 21 BWG for the acceptance and investment of severance payment contributions from salaried employees and self-employed persons (“new” severance payment scheme). The employer enters into a membership contract with a corporate provision fund covering all employees and makes a regular contribution of 1.53% of their monthly salary plus any special payments, from the time their employment relationship starts. The payment is made to the health insurance institution responsible for the employer, which then forwards the contribution to the corporate provision fund.
Self-employed persons must conclude their own contract with a corporate provision fund. Certain self-employed professions and occupations (e.g. lawyers, notaries public, chartered engineering consultants, farmers and foresters) are free to decide for or against such provisions.
Corporate provision funds are authorised to accept and invest these contributions. They must conduct the severance and retirement fund business in the interests of the beneficiaries, giving particular attention to the aspects of security, profitability and the need for liquid funds as well as an appropriate mix and diversification of assets. In this context it is important to note that the law requires corporate provision funds to grant a capital guarantee for the contributions received (Article 24 BMSVG).
Collective investment undertakings, which are managed by the corporate provision funds, must meet certain investment conditions approved by the FMA. These regulate the legal relationship between the beneficiaries, the corporate provision fund and the depositary and, for instance, must include the principles according to which the fund selects its investment instruments.
Provided that the conditions of entitlement as referred to in Article 14 BMSVG are met, beneficiaries may, for example, claim payment of the entire severance amount or give instructions for its continued investment or a transfer of the entire amount to the corporate provision fund of the new employer (Article 17 BMSVG).
As banks, corporate provision funds are subject to supervision by the Financial Market Authority. The FMA is required to perform the official tasks and use the powers as laid down in the abovementioned legislation (BMSVG, BWG).
The Financial Market Authority is responsible for the ongoing supervision of corporate provision funds. In the context of its supervisory activities, the FMA is responsible for initiating and managing supervisory procedures and for processing notifications and reports submitted in accordance with the BWG. Additionally, the FMA must approve the investment conditions as well as any changes to them. Finally, the FMA also needs to approve any appointment or change of the depositary.
Corporate provision funds must adhere to certain reporting requirements. An amendment to the BWG had the effect that the responsibility for carrying out on-site inspections at corporate provision funds has been with the Financial Market Authority since 1 January 2011. In connection with collective investment undertakings, the FMA also conducts inspections at their depositaries. Other official powers include analysis activities covering such tasks as evaluating the supervised institutions’ financial statements as well as conducting annual management talks.
In accordance with Article 25 para. 2 BMSVG, beneficiaries must be informed in writing of the following details as at 31 December of the previous financial year within three months:
Required information provided in the form of an annual account statement are the name and social insurance number of the beneficiary as well as the details listed in points 1 to 5. The information must also include the investment policy principles and the investments held at the closing date. When employment relationships of beneficiaries are terminated, the corporate provision fund must inform them of their disposal options. The FMA has issued minimum standards regarding the account information and expects corporate provision funds to meet them in line with Article 39 BWG.
The annual reports of the collective investment undertaking must be sent on request to employers who pay contributions and to the competent works councils.
Act on Severance and Retirement Funds for Salaried Employees and Self-Employed Persons (BMSVG)
Annual Reports of the FMA