The Norwegian Act on Mandatory Occupational Pension Plans came into force on January 1, 2006. Under the Act, all companies with more than one employee are obliged to establish a pension plan for their employees. Plans must be implemented by December 31, 2006 at the latest, and in force from July 1, 2006.
The Act defines certain minimum requirements for mandatory plans, which may be based on defined benefits or defined contributions. So far, all Norwegian life insurers have marketed defined contribution plans; the defined benefit plan is merely an option under the Act.

Mandatory pension plans are being introduced to address the problem that until now, many small companies have not had plans in force to supplement the benefits provided by the social security system. Some 550,000 employees working for approximately 130,000 employers are affected, with a potential premium volume of NOK 3.36 billion.

Which companies are affected?
Every company which is liable for tax payments and which does not have an existing company pension plan is affected, as well as companies with at least two full-time equivalent positions. These companies must implement a mandatory occupational pension plan.

If a company has an existing plan that meets the minimum requirements set out in the new Act, the mandatory plan requirements are deemed to be fulfilled.

Minimum requirements
The minimum requirements regarding plan level and contribution rates for a defined contribution plan are:

- 2% of salary between 1 Basic Amount under Social Security (NOK 60,699) and 12 Basic Amounts (NOK 728,388)
- Payment of a retirement pension from age 67 for a minimum of 10 years.
- Waiver of contributions in case of disability.

Investment options
Swiss Life’s Norwegian Network Partner Vital Forsikring ASA offers two options for capital accrual under the new Act:

- Defined contribution plan with investment choices. The employee may select from the following: high risk profile (80% equities), medium risk profile (50% equities), low risk profile (30% equities)
- Defined contribution plan with zero-guaranteed investment yield.

Plan contributions are tax-free for the employer. On the death of the member, the accrued capital will be used to purchase children’s and spouse’s pensions.

The plan is fully vested for the employee after one year of plan membership, and will be secured as a paid-up policy upon dismissal.

Act now to ensure compliance
Companies affected by the Act should start preparing for implementation and budgeting as soon as possible. Although the final date set for compliance is December 31, 2006, it is wise to take steps as soon as possible in order to avoid a last-minute rush.

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