Reduction of the taxation of lump-sum benefits, abolition of disincentives for those who join occupational insurance at an older age, the possibility of transferring rights from one Occupational Fund to another Occupational Fund, and the creation of a new, more flexible operating framework for the second insurance pillar are at the core of the bill on Occupational Insurance Funds (TEA) presented yesterday by the political leadership of the Ministry of Labour and Social Insurance.
The draft law, entitled “Improving the occupational insurance framework: More opportunities for employees and businesses”, was approved by the Cabinet and, according to the plan, will be put to public consultation within July, in order to be voted on by Parliament in the Autumn.
It also aspires, as both the competent minister Niki Kerameus and the Deputy Minister of Social Insurance Anna Efthymiou and the Secretary General Konstantinos Tsagkaropoulos pointed out, to give new impetus to the institution of TEA, while at the same time strengthening competition and supplementary retirement savings.
The greatest interest is focused on the upcoming reform of the tax regime, as the government is attempting to make occupational insurance more attractive for employees and businesses. According to the current law of 2023, TEA lump-sum benefits are taxed progressively from 20% for insurance up to 5 years, 15% for 6 to 10 years, 10% for 11 to 20 years and 5% for more than 21 years of insurance.
The economic staff is now oriented toward a significant reduction in taxation, with the highest tax rate falling “significantly below 20%”, while a reduction in the tax brackets is also being considered. At the same time, the philosophy of the system is also changing. Taxation is being disconnected from the years of participation in the Fund and linked to the age of the insured person at the time of receiving the benefit.
In this way, the tax disincentive is abolished that older employees faced, who until now were burdened with high taxation because they could not complete many years of insurance. At the same time, an increase is also being considered in the upper limit of contributions that can enjoy tax incentives, beyond the current cap of 20%, broadening the scope for retirement savings.
The Minister of Labour and Social Insurance, Niki Kerameus, described the new framework as an important reform for the second insurance pillar. As she stated, the goal is to create a modern and reliable supplementary system that will operate in parallel with the first pillar, EFKA and TEKA, offering additional retirement protection to employees and new staff recruitment tools to businesses, while at the same time strengthening savings and the Greek economy.
An important innovation of the bill is the establishment of Open Occupational Insurance Funds. The regulation comes to address a chronic problem of the Greek market, as the overwhelming majority of businesses are small in size and were unable to meet the threshold of 100 insured persons required by the current framework for the creation of a multi-employer TEA.
With the abolition of this specific restriction, small businesses, self-employed professionals and professional bodies will gain easier access to occupational insurance, through Funds that banks, chambers and social partners will be able to create, under the supervision of the Bank of Greece.
The bill also introduces the Group Insurance Product for Occupational Retirement (OAPES), a new product that will be offered by insurance companies and will operate under the same supervisory and tax framework that applies to TEA.
The aim is to create equal rules of competition among occupational insurance providers, thus giving employees more choices without discounts in the protection of their rights.
Particular emphasis is also placed on the portability of insurance rights. For the first time, the possibility is provided for transferring the entire retirement program without charge, either from one TEA to another TEA, or between TEA and OAPES. Thus, a change of employer or professional status will not entail a loss of insurance rights, while at the same time mobility in the labour market is facilitated.
The new framework also includes the possibility for TEA to provide health programs, provided that the relevant risks are covered by an insurance or reinsurance company or by a health services provider, as well as the possibility of covering members of the insured person's family.
At the same time, stricter transparency rules are provided for, a public registry for the new products, periodic information for the insured regarding the course of their investments, and special arrangements to avoid conflicts of interest.
A special provision will exist in the draft law under discussion for the protection of the insured in the event of unemployment, as the possibility is provided to remain in occupational insurance even after the loss of employment. In addition, the investment framework of TEA and OAPES is being reformed, with greater diversification of investments and the possibility of creating different investment products depending on the profile of each professional group.