Partial retirement - tax and social security aspects

Part 1 - Voluntary insurance pursuant to Art. 47 LOB

Case 1: Voluntary insurance pursuant to Art. 47 BVG

Facts:

Henriette Moser will terminate her employment at the end of July 2020 and thus leave the mandatory pension scheme. She is 58 years old at that time. In order to maintain her retirement provision, she voluntarily makes savings and risk contributions to the previous pension fund until the age of 62 (earliest time for early retirement according to the regulations). The regulations of her pension fund provide for the possibility of this external insurance.

Questions:

How is the asset value to be assessed from a tax point of view?

Case 2: Voluntary insurance pursuant to Art. 47 BVG

Facts:

Henriette Moser is terminating her employment at the end of July 2020 at a time when early retirement is already possible according to the regulations. She would like to continue to insure herself until the age of ordinary retirement (age 64 for women according to the regulations) and make savings and risk contributions.

Questions

How is the situation to be assessed from a tax point of view?

Case 3: Voluntary insurance pursuant to Art. 47a BVG

Facts:

Klara Kubb is 59 years old and a managing director at Consult AG. She is insured with the basic insurance of Consult AG for the compulsory BVG. As she is a member of senior management, she is also insured with Consult Kader- Versicherung, which exclusively provides benefits in the area of extra-mandatory pension provision.

Consult AG wants to rejuvenate its management team as part of a restructuring process and appoints a new managing director. Klara Kubb signs a termination agreement in which all details of the termination of the employment relationship with Consult AG are regulated.

Klara Kubb first wants to enjoy her newly won free time and therefore does not take a new job. However, her financial security in old age is important to her. She has heard that since 1 January 2021 there is a new possibility to continue with pension provision.

Questions:

1. Can Klara Kubb continue with Consult AG's basic insurance?
2. Can Klara Kubb continue the cadre insurance?
3. Assuming continued insurance is possible - are the pension contributions tax deductible?

Case 4: Voluntary insurance pursuant to Art. 47a BVG

Facts (continuation of case study 1):

One year after giving notice, Klara Kubb receives a high dividend and fears a high tax burden. She thinks about how she can reduce this somewhat. With the basic insurance, there is the option of voluntarily joining the +5 savings plan and thus making additional savings contributions amounting to 5% of insured earnings. Klara Kubb has not made use of this option so far.

Questions:

1. Klara Kubb is considering making a pension fund purchase. Is this possible?
2. Can Klara Kubb choose the +5 savings plan and reduce her tax burden by making additional savings contributions?

Case 5: Voluntary insurance pursuant to Art. 47a BVG (continuation of case examples 1 and 2)

Facts:

At the age of 62, Klara Kubb takes up a new job. The previous pension fund transfers to the new pension fund the amount required to purchase the full regulatory benefits.

Questions:

1. Under what conditions can Klara Kubb continue insurance with her previous pension fund?
2. Assuming that continued insurance is not possible - what happens to the part of the pension assets that has not been transferred to the new pension fund?
3. How are any other pension assets (vested benefit assets, Pillar 3a assets pursuant to Art. 7 para. 1 let. b BVV3) to be credited?

Part 2 - Financing retirement assets

Case 1: Financing retirement assets

Facts:

Ms. O works as an employee in the management of a company. When she reaches the age of 55, Ms O becomes increasingly interested in pension issues. She asks you how she could increase her retirement assets on a voluntary basis by means of purchases.

Questions:

• Question a: Explain to Mrs O what "purchasing" is, or how "purchasing" works?
• Question b: Which technical bases have an influence on the size of a purchasing gap?

Case 2: Imputation facts

Facts:

Mrs. M has reached the last part of her eventful working life. She would like to increase her retirement assets in view of her early or gradual retirement, if possible, through purchases.

However, due to a conversation with a work colleague, Ms M is unsure. Her colleague has explained to her that general conditions must be observed which set limits to optimisation efforts. She asks you for clarification in a customer meeting.

Question:

After thorough research, you feel well prepared for the exchange with the client. What facts and legal restrictions will you point out to Ms M?

Case 3: Purchase of early retirement

Facts:

Mr. Z is known as a "thrifty person". In order to reduce his income tax burden, he would like to make additional purchases into his retirement assets on a voluntary basis.

Question:

Mr. Z asks you that he has heard that purchases can be used to finance early retirement. What general conditions have to be taken into account?

Case 4: Purchase and withdrawal of capital benefit

Facts:

Ms U made a purchase of CHF 100,000 into her basic pension plan in September 2019. She retires in October 2021 and draws a pension from her basic pension plan. She draws a lump-sum benefit of CHF 300,000 from the executive pension scheme.

Question:

What are the income tax consequences of the situation?

Factual variant:

Ms U made a purchase of CHF 100,000 into her basic pension plan in September 2019. In summer 2020, Ms U suffers severe health problems with no prospect of recovery. As a result, a disability procedure is carried out. As a result, Ms U receives, among other things, a disability lump sum of CHF 300,000 from her management pension scheme.

Question:

How is the situation to be assessed from an income tax perspective?

Case 5: Purchase into pillar 2 and lump-sum withdrawal from pillar 3a in the same year

Facts:

Mr Y works as an employee in a cantonal administration. In 2018, he inherited CHF 500,000 from his deceased father. On 30 June 2020 he will reach the age of 60 and on the same day the survival event of his tied pension insurance will occur in accordance with Art. 1 para. 1 lit. a BVV 3. The insurance company pays him the survival benefit in the amount of CHF 154,000.

As a result, he makes a purchase into his pension fund in the amount of CHF 150,000 in November 2020.

Questions:

• Question a: How should the facts of the case be assessed for income tax purposes?
• Question b: As Mr Y continues to be gainfully employed, he would like to transfer the survival benefit due from a tied pension insurance to a tied pension agreement with a bank foundation in accordance with Art. 1 para. 1 lit. b BVV 3. How do you assess his request?

Case 6: Unlawful and improper withdrawal of capital

Facts - Admission SE (I):

Ms Marxer works as a trustee in the employ of a tax consultancy firm. As of 31 December 2018, she will reduce her paid employment. At the same time, she will take up self-employment (SE) as a tax consultant at a rate of 20%. The self-employed activity is subsequently expanded to a workload of 40%.

Questions:

• Question a: Ms Marxer asks from what point in time she can withdraw her vested benefits in cash based on the FZG in order to repay current business expenses with these funds?
• Question b: Which institution has to assess whether a self-employed activity exists?
• Question c: During which period is a cash payment possible as a result of taking up self-employment?
• Question d: Under which other title can self-employed persons claim a cash payment?

Factual variant - admission SE (II):

Ms Marxer submits a declaration to the pension fund that she has taken up self-employment and is no longer subject to compulsory insurance as of 1 September 2015. At the same time, she gives up her employment as of 30 August 2015. Subsequently, the pension fund pays the insured person the vested benefit in the amount of CHF 500,000, which is subject to income tax as a lump-sum pension benefit.

Contrary to her declaration, Mrs. Marxer did not take up self-employment as her main occupation and founded a GmbH in September 2015. From 1 October 2015 she will only accept orders via the GmbH.

Question:

How is the situation to be assessed from a tax point of view?

Factual Variant Admission SE and Conversion (I):

Mrs. Meier took up self-employment to the extent of 100% on 1 January 2017. On May 30, 2017 she converted her sole proprietorship into "Meier Consulting GmbH" with retroactive effect from January 1, 2017.

Question:

How is the situation to be assessed from a tax point of view?

Situation variant Early withdrawal WEF with re-increase of mortgage:

Mr and Mrs X, resident in Olten, received two lump-sum benefits totalling CHF 88,154 from the restricted personal pension plan on 31 March 2011 (CHF 30,929) and 4 April 2011 (CHF 57,225), which they immediately used to repay a mortgage loan (CHF 82,929) and to pay maintenance costs (CHF 4,821). The lump-sum benefits were definitively assessed as lump-sum benefits from pension provision.

As at 30 December 2011, the mortgage on the property was increased by the amount of CHF 40'000.

Question:

How is the situation to be assessed from an income tax perspective?

Part 3 - Partial retirement

Case 1: Partial retirement

Facts:

Bruno Braun is 61 years old and would like to retire gradually. He has therefore reduced his workload from 100% to 70% as of 31 December 2020. As of 31 December 2021, he wants to reduce his workload to 40% and then retire permanently as of 31 December 2022. Within the framework of the partial retirement steps of 31 December 2020 and 31 December 2021, his salary was or will be reduced in accordance with the reduction in the degree of employment.

In order to keep the tax burden on the withdrawal of the pension assets as low as possible, a lump-sum withdrawal in the amount of the reduction in the workload should be made in each of the first and second partial retirement steps (CHF 200,000 as of 31 December 2020 CHF 200,000 as of 31 December 2021; final retirement as of 31 December 2022). In the context of the final retirement at the end of 2022, the remaining credit balance will be drawn as a retirement pension.

The pension fund regulations permit both partial retirement and the withdrawal of pension assets in the form of a lump sum.

Question:

How are the partial emoluments to be taxed?

Case 2: Partial retirement with S-acquisition

Facts:

The self-employed lawyer Z retired at the rate of 35% as of 1 July 2015. A second partial retirement step of a further 35% took place on 1 September 2017. The final cessation of employment will take place at the end of July 2018.

The insured person received all three partial retirement benefits in the form of a lump sum. In the course of its investigations, the tax authority established that the second partial retirement step had not actually been completed. As a result, the tax authority takes the view that the second lump-sum benefit must be taxed in the ordinary way, as no reversal has taken place.

Question:

How is the legal situation to be assessed?

Case 3: Continued insurance according to 33a BVG

Facts:

Ms Elisabeth Erwin is 61 years old and will reduce her workload from 100% to 50% at the end of 2021. As of 1 January 2022, her salary will therefore also be reduced from CHF 100,000 to CHF 50,000. She fears that she will suffer a considerable loss in her occupational pension provision as a result. Therefore, she will continue to insure the previous salary, which is possible according to the pension regulations. According to the applicable regulations, the most insurable earnings correspond to the AHV-liable salary of Ms Elisabeth Erwin.

Before the reduction in working hours, her pension gap amounts to CHF 100,000. In 2022, she decides to close this gap and makes a purchase in the corresponding amount.

variant:

Ms Elisabeth Erwin earns CHF 100,000 per year until the end of 2020 (employment level 100%). In 2021, she reduces her employment level to 80% and still earns CHF 80,000 per year. Finally, in 2022 she wants to reduce her workload again by 50%.

Questions:

1. What are the consequences in terms of pension law and taxation?
2. Can the full amount of the purchase be claimed against tax?

Case 4: Continued insurance in accordance with 33b BVG

Facts:

Ms Elisabeth Erwin comes to the conclusion that she wants to continue working after reaching the normal retirement age. Since her employer is very happy about her cooperation, the two quickly come to an agreement: Ms. Elisabeth Erwin can continue to work at her current employment level of 50% and will continue to earn CHF 50,000.

The pension regulations of her employer provide for continued insurance in accordance with Art. 33b BVG.

variant:

Ms Erwin's employer decides not to continue employing her after she reaches the normal retirement age. However, Ms Elisabeth Erwin, as a proven insurance specialist, quickly finds employment with a competitor under the same employment conditions.

Question:

What are the pension law and tax implications of continued insurance under Art. 33b BVG?

Case 5: Continued insurance according to 33b BVG

Facts:

Mr Fritz Schüle will soon be 65 years old and still feels a strong connection with his profession. He would therefore like to remain gainfully employed until he reaches the age of 68. In order to improve his retirement provision, and because the pension regulations provide for this possibility, he will continue his pension provision until the end of his employment in accordance with Art. 33b BVG.

At the time of the regular regulatory retirement age, Mr. Schüle has retirement assets of CHF 800,000. The maximum retirement assets based on his insured earnings amount to CHF 1 million.

After almost three years or one month before his final retirement, Mr. Schüle wants to close all pension gaps with a purchase. His insured earnings amount to CHF 100,000 and the savings credits amount to 20%.

variant:

Mr. Schüle closes his purchase gap immediately after reaching the regular retirement age and thus at the start of continued insurance in accordance with Art. 33b BVG.

Questions:

1. Is a purchase still possible and tax deductible?
2. If yes, what is the maximum possible purchase?