Employee Capital Plans

1. Employee Capital Plans
from the perspectives of
the employee and the employer
Assumptions, estimated costs
and benefits
Joanna Narkiewicz-Tarłowska
Katarzyna Urbańska
May 2018
Presentation based on draft law on Employee Capital Plans of 24 May 2018

2. PwC
Abbreviations used in the report
2
• IKE – Individual Pension Account
• IKZE – Individual Pension Security Account
• KNF - Office of the Polish Financial
Supervision Authority
• OFE – Open Pension Funds
• PBK – Capital Construction Programme
• PFR – Polish Development Fund
• PIP - Chief Labour Inspectorate
• PPE – Employee Pension Plans
• PPK – Employee Capital Plans
• PTE – General Pension Societies
• SDS – Sustainable Development Strategy
• ZUS – Social Insurance Institution

3. PwC 3
As part of the Sustainable Development Strategy, the government proposed an important
reform of the current pension system, which functions as a Capital Construction
Programme
SDS
Sustainable Development Strategy
PBK
Capital Construction Programme PPKs
Employee Capital Plans
Why is the reform important?
The proposed reform of the pension system proposes the introduction of Employee Capital Plans (PPKs).
PPKs are intended to:
• Be widespread
• Be co-financed by the government and employers
• Have opt-in by default
PPKs will be new, voluntary employee pension products within the second pillar of the Polish pension plan, functioning alongside Employee Pension
Programmes (PPEs).
Money gathered in PPK are private.
Market operators will be managing PPKs from the start.
Employers, who on the day that the legislation is introduced already have PPEs, will be exempt from establishing PPKs.

4. PwC
An outline of the pension scheme following the reform
4
State budget
PPK
1st pillar
One-off transfer
Legend:
Contributions
Voluntary contributions
IKE / IKZE
PTE (OFE)
ZUS
PPE
Employers
Employees
Pension assetssecurity slider
(for 10 years before
retirement)
2nd pillar
3rd pillar

5. PwC
PPKs impose new obligations on employers. To ensure an adequate amount of
time for entrepreneurs to prepare, their implementation is divided into stages
5
Draft of the
legislation
Enterprises with
≥ 50 employees
Enterprises with
≥ 1 employee
and public
administration
employees
PPK Legislation applies to:
Schedule for the implementation of PPKs
Enterprises with
≥250 employees
Enterprises with
≥ 20 employees
01.01.202001.01.2019* 01.07.2019 01.07.202008.02.2018

6. PwC
PPKs are distinguished from the solutions that have so far been proposed by the
real significant involvement of employer funds and attractive fiscal incentives
6
• 25% of the funds paid in the event of a serious illness of the
participant, their spouse or the participant’s child
• The possibility to use 100% of the capital as an own contribution when
purchasing first housing (repayment of the funds begins after a 5-year
grace period)
Employees
Employers
State
240 PLN per annum
1,5% of the default contribution
(+2.5% of the voluntary contribution)
*2% of the default contribution
(+2% of the voluntary contribution)
Pension
(the funds can be inherited
by the subject’s spouse
and/or other persons
concerned)
Gathering savings for retirementAllowances and incentives
The contribution
constitutes a cost of
gaining income
250 PLN of the welcome contribution (until the end
of 2020)
60 latSavings
Scheme of Functioning of the PPK
Benefits
Legend:
Contributions
Allowances
The contribution is a tax
deductible cost
The contributions to PPKs made by
employers are not counted as income
which constitutes a base for the
determination of the magnitude of
pension contributions (but are taxed)
Withdrawals of pension benefits
are exempt from taxation if they
follow the established schedule
*in case of employess who earn monthly below 2100 PLN they may pay less than 2% of contribution but no less than 0,5%

7. PwC
What one should know about PPKs
7
Remuneration for
managing an
investment fund or a
subfund in which PKK
funds are gathered
should be in the
amount not greater
than 0.5% of the value
of the fund’s or
subfund’s net assets for
the year
Financial institutions
can charge fees for the
performance achieved
– not larger than 0.1%
of the value of the
asset’s net funds
Distributors of PPKs
cannot be remunerated
The employer makes a
contract for PPK
provision with one
financial institution
within seven days after
90 days from the hiring
date of a given
employee.
Contracts are included
in a register of PFR.
An employee can opt-
out from their PPK
based on a written
declaration.
Every 4 years the
employer informs the
employee who opted-
out from the PKK that
the contributions will
be collected again.
005The costs of
managing
PPKs
004Managing
PPKs
003Opt-in by
default and
opt-out
002001
Employees below the
age of 55 are obligatory
participants of PPKs.
Persons between 55
and 70 can join at their
own request.
Employees, persons
working within cottage
industries, members of
agricultural production
cooperatives and
cooperatives of
agricultural collectives,
persons performing
jobs based on agency
contracts or free-for-
task agreements or
another contract for
service provision,
members of
supervisory boards.
Whom do PPKs
concern?
Market operators:
Investment Funds with
at least four investment
funds using different
policies, which take
into account different
ages of participants –
defined date funds
Pension Companies
Employee Pension
Companies
Insurance
companies
Supervision
over PPKs
Supervision over PKKs
is undertaken by: KNF,
PFR, PIP.
PFR conducts a register
of PKK contracts, with
the aim of verifying
information on hiring
and PPK contracts.

8. PwC
The ability to use the funds in financing
health treatments or when buying first
housing
The participation of employers and the
government in financing the PKK, and the
long time horizon mean that every 1 PLN
set aside by the employer generates around
3 PLN of pension capital
One-off welcome fees are financed by the
government (250 PLN until 2020)
Benefits
The capital raised as part of PKK is heritable
Benefits and costs for employees
8
Employees
Costs
A decline in disposable income
The contributions towards PKK will not be
exempt from income tax, and in extreme
cases withdrawals of pension benefits can
also be subject to taxation
The participation in PKKs, even with minimal
contributions, can raise the replacement rate
of benefits by close to 16 percentage points for
men and 12 percentage points for women

9. PwC
Benefits and costs for employers
9
Increased economic growth and improved
access to capital
A tool which increases the loyalty of
employees
An additional contribution constitutes the
cost of gaining income, hence decreases
the tax due
Benefits
Employers
Costs
An additional contribution increases
employee costs
Costs associated with implementing and
administering the PPK
Sanctions for encouraging employees to
opt-out (up to 1.5% of payroll fund in
the previous financial year)
Sanctions for not performing the
obligations related to PKK (fines ranging
from 10,000 PLN to 1000 000 PLN,
for not making a contract for PPK –
up to 1.5% of payroll fund in the
previous financial year )
On an annual basis the employer informs
the employee about the amount raised
within the PKK and the amount of
contributions made in the previous
calendar year

10. PwC
PPE vs. PPK
PPE PPK
Creation obligation No Yes
Mandatory employee contributions *3.5% and at least 50% of employees. 1.5%
Mandatory employer contributions No 2%
Scope
Employees below the age of 70, who fulfil
the criterion on the duration of
employment at the enterprise indicated in
the workforce contract. The criterion
needs to be fulfilled by at least 50% of
employees.
All employees below the age of 55. Those
between the ages of 55-70 only upon
request.
Role of employees Decisive, employer and employees jointly
choose the form of the program and those
in charge of managing it. They sign a
workforce contract.
Decisive
Employee’s ability to opt-out Any moment, based on a written
declaration
Any moment, based on a written
declaration
Information obligations towards
employees
Yes Yes
Investment rules Free Regulated by law
Registration It is necessary to register the PPE with
KNF
It is necessary to include the PPK in the
PPK’s register
Supervision KNF KNF, PFR, PIP
Elimination Yes No
*criteria for exemption from the obligation to set up a PPK

11. PwC
How can PwC help?
11
MilestonesMeetingsand
workshops
* - Activities related to registering the service will be valid only when the choice is made in favour of PPE.
Decision on the
choice between
PPE and PPK
Decision on the
terms and conditions
of cooperation
Presentation
comparing
PPE and PPK
Meeting/workshop
with employee
representatives
Meeting with
the HR team
Presentation for
employees
Meeting with the
service provider
Stage I Stage II
Comparison
between PPE and
PPK
Consultation with
employees
Negotiation
with providers
Registration* /
Application
Implementation
of the product
Decision on the choice
of service provider
PwC can help choose between PPE or PPK and can support the implementation of the product
at the company
Assessment
of available
offers
An analysis comparing PPE and PPK
from the client’s perspective
Presentation of the analysis for the
client’s management team
Support in the consultations with
the social side (employees and trade
union representatives) and potential
preparation of the workforce
contract (PPE)
Support in selecting a service
provider
Verification of the contract for
service provision and negotiation of
the contract with the provider
Registration of PPE with KNF
Appropriate communication of the
decision undertaken by the client to
employees, including the
presentation of costs and benefits to
employees, and a workshop for
employees on the rules governing
the functioning of the PPE or PPK.

12. PwC
Thank you
Katarzyna Urbańska
Vicedirector Financial Services Regulatory
PwC
katarzyna.urbanska@pwc.com
+48 519 507 169
Joanna Narkiewicz-Tarłowska
Director PwC
Joanna.narkiewicz-tarlowska@pwc.com
+48 502 18 4764
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