Reduction in taxation of lump-sum benefits, elimination of disincentives for those who enroll in occupational insurance at an older age, the ability to transfer benefits from one occupational pension fund to another, and the creation of a new, more flexible framework for the second pillar of social security—these are at the core of the bill on Occupational Insurance Funds (TEA) presented yesterday by the political leadership of the Ministry of Labor and Social Security.
The draft law, titled “Improving the Occupational Insurance Framework: More Opportunities for Workers and Businesses,” was approved by the Council of Ministers and, according to the plan, will be put out for public consultation in July, with a view to being passed by Parliament in the fall.
It aims, as noted by both the minister in charge, Niki Kerameos, and the Deputy Minister of Social Security, Anna Efthymiu, as well as Secretary General Konstantinos Tsagaropoulos, to give new impetus to the TEA system, while simultaneously boosting competition and supplementary retirement savings.
The upcoming reform of the tax regime is drawing the most attention, as the government seeks to make occupational insurance more attractive to employees and businesses. According to the current law of 2023, lump-sum benefits from the TEA are taxed on a sliding scale: 20% for up to 5 years of coverage, 15% for 6 to 10 years, 10% for 11 to 20 years, and 5% for more than 21 years of coverage.
The economic team is now moving toward a significant reduction in taxation, with the top tax rate falling “significantly below 20%,” while a reduction in tax brackets is also being considered. At the same time, the philosophy of the system is changing. Taxation is being decoupled from the number of years of participation in the Fund and linked to the insured person’s age at the time of receiving benefits.
This eliminates the tax disincentive faced by older workers, who until now have been subject to high taxes because they were unable to accumulate many years of insurance coverage. At the same time, consideration is being given to raising the upper limit on contributions eligible for tax incentives, beyond the current 20% cap, thereby expanding the scope for retirement savings.
The Minister of Labor and Social Security, Niki Kerameos, described the new framework as a significant reform for the second pillar of social security. As she stated, the goal is to create a modern and reliable supplementary system that will operate alongside the first pillar, EFKA and TEKA, offering additional pension protection to workers and new tools for businesses to attract staff, while also boosting savings and the Greek economy.
A significant innovation of the bill is the establishment of Open Occupational Insurance Funds. This regulation addresses a long-standing problem in the Greek market, as the overwhelming majority of businesses are small and were unable to meet the threshold of 100 insured employees required under the current framework for establishing a multi-employer occupational insurance fund.
With the removal of this restriction, small businesses, self-employed professionals, and professional associations will have easier access to occupational insurance through funds that banks, chambers of commerce, and social partners will be able to establish, under the supervision of the Bank of Greece.
The bill also introduces the Group Occupational Pension Insurance Product (OAPES), a new product that will be offered by insurance companies and will operate under the same supervisory and tax framework that applies to TEAs.
The goal is to establish a level playing field among occupational insurance providers, thereby giving employees more choices without compromising the protection of their rights.
Particular emphasis is also placed on the portability of insurance rights. For the first time, the law provides for the option to transfer an entire pension plan at no cost, either from one TEA to another TEA, or between a TEA and OAPES. Thus, a change in employer or professional status will not result in the loss of insurance entitlements, while at the same time facilitating mobility in the labor market.
The new framework also includes the option for TEAs to offer health plans, provided that the relevant risks are covered by an insurance or reinsurance company or by a health services provider, as well as the option to extend coverage to the insured person’s family members.
At the same time, the bill provides for stricter transparency rules, a public registry for new products, periodic updates to policyholders on the performance of their investments, and specific provisions to prevent conflicts of interest.
The draft bill currently under discussion will include a specific provision to protect policyholders in the event of unemployment, as it allows them to remain enrolled in occupational insurance even after losing their jobs. In addition, the investment framework for TEAs and OAPES is being reformed, with greater diversification of investments and the ability to create different investment products tailored to the profile of each occupational group.