DNB assesses the constitution and pension scheme rules of the pension funds and the pension contracts of insurers. This is known as ‘material supervision’. In this connection DNB advises the Ministry of Social Affairs and Employment (SZW) on mandatory participation in industry-wide pension funds.
The BES Pensions Act and the secondary legislation based on it impose material requirements on the pension fund, in particular concerning:
- the contents of the pension fund constitution; and
- the contents of the pension scheme (between the pension fund and the members).
The pension fund constitution and the pension scheme rules form the basis for the pension benefits. To ensure that the rights and obligations of members are correctly determined, it is in their interest for the constitution and pension scheme rules to comply with the legislation and regulations. Material supervision exists to check this.
The BES Pensions Act distinguishes between corporate pension funds and industry-wide pension funds. Pension funds are legal entities, usually in the form of a foundation, and therefore have a constitution. The BES Pensions Act defines what provisions must be included in the constitution, namely:
- the designated use of the fund;
- the administration of the fund;
- the categories of members;
- the income of the fund;
- the investment of the moneys;
- the pension entitlements and the system of funding these entitlements;
- the manner in which the board members are appointed;
- the cases in which the employer has reserved the right to reduce or terminate its contribution;
- the alteration of the constitution and pension scheme rules, particularly as regards changes to the rights and obligations of the members and deferred members in cases in which this is necessitated by the financial state of the fund;
- the liquidation of the pension fund, particularly as regards the obligations of the liquidators and the use to which the possessions of the pension fund may be put.
To define the scope of the pension scheme an industry-wide pension fund must describe the activities of the industry. If an industry-wide pension fund offers employers the possibility of voluntary membership, its constitution must specify which conditions are applicable to this.
DNB decides whether the constitution of a pension fund complies with the requirements of the BES Pensions Act and the BES Civil Code and of other relevant legislation and regulations. It does this by carrying out a risk-based assessment of a random sample. In principle, each pension fund is included in the random sample once every three years, but DNB assesses the constitution of large pension funds annually. This involves a comprehensive assessment of all the constitutions concerned.
Under the BES Pensions Act a copy of the constitution must be filed with DNB at two points in time:
Pension scheme rules
A pension fund or insurer (pension administrator) adopts pension scheme rules on the basis of a pension agreement. The agreement describes the pension scheme. As a result of the introduction of the BES Pensions Act the legislator has clarified the responsibilities of each of the relevant parties in the pension legislation. This is expressly based on the tripartite relationship between the employee, employer and pension administrator.
The basis of this tripartite relationship is that pension is a term of employment. Within this tripartite arrangement the following relationships exist:
- the relationship between the employer and the employee who have concluded a pension agreement;
- the relationship between the employer who outsources the administration of this pension agreement and the external pension administrator to whom it is outsourced under the terms of an administration agreement;
- the relationship which arises as a result of the outsourcing of the administration of the pension agreement between the pension administrator and the employee, who becomes a pension scheme member in this relationship.
DNB assesses whether the pension scheme rules of a pension administrator comply with the BES Pensions Act and other relevant legislation and regulations. These include the equal treatment legislation, the BES Public Servants Pension Act and the secondary legislation based on these Acts. It does this by carrying out a risk-based assessment of a random sample. This involves a comprehensive assessment of all the pension scheme rules concerned.
The assessment of the rules of pension schemes directly contracted out to an insurer is carried out on the basis of a random check at the insurers.
The pension scheme rules are drawn up by the pension administrator in conformity with the pension agreement and pension administration agreement or the pension administration rules.
The pension fund should in any event include the following provisions in the pension scheme rules:
- a description of the pension commitment resulting from the pension agreement (the two must therefore dovetail precisely);
- the alteration of the constitution and pension scheme rules, particularly as regards changes to the rights and obligations of the members and deferred members in cases in which this is necessitated by the financial state of the fund.
Under the BES Pensions Act a copy of the pension scheme rules of a pension fund must be filed with DNB and Our Minister at two points in time:
- an authentic copy of the pension fund rules must be filed within three months of the establishment of the fund;
- an authentic copy of the pension fund rules must be filed within three months of the execution of a deed altering the rules.