Compulsory occupational pension
Most employers are required to set up an occupational pension scheme for their employees.
When must you set up a pension scheme
You are required to set up a pension scheme for your employees when at least one of the conditions below are met:
- The enterprise has at least one employee who has no ownership interests in the enterprise and whose working hours and salary amount to 75% or more of a full-time position.
- The enterprise has at least two employees who both have working hours and a salary amounting to 75% or more of a full-time position, and at least one of the employees have ownership interest in the enterprise.
- The enterprise has persons employed who each have working hours and salary amounting to 20% or more of a full-time position, and who collectively carry out work corresponding to at least two full-time equivalents.
When the enterprise is obligated to have a pension scheme, all employees aged 13 or more must be registered as members from their first working day.Salary payments of less than NOK 1,000 per year does not trigger the obligation to be registered as members of the pension scheme, unless a lower or no minimum requirement is defined in the pension scheme.
The pension scheme must be set up within six months after the obligation to establish an occupational pension scheme was triggered. If you as employer do not set the scheme up by the relevant deadline, you will have to make the payments that should have been made in accordance with the law retrospectively. The business will be entitled to tax deductions for payments to the pension scheme. Employer's National Insurance contributions must be calculated on the pension payments and costs linked to the agreement.
Various types of compulsory occupational pension schemes (OTP)/pension schemes
The Act on obligatory occupational pension states that the scheme must be either defined contribution-based or benefit-based. It is up to the employer to decide which type of scheme should be set up.
Defined contribution pensions
Defined contribution is the most common pension scheme. In the case of a defined contribution pension scheme, annual contributions are determined as a percentage of salary (minimum of 2 percent). Pension disbursements will depend on the contributions to the pension fund and the return generated on the fund.
Defined benefit pensions
In a defined benefit pension scheme (company pension) the employee is entitled to a predetermined level of combined pension which also takes account of the pension from the Norwegian National Insurance scheme. The premiums will vary from year to year and increase following pay rises.
An occupational pension is a combination of defined contribution and defined benefit pensions. During the period of accrual, the employer must build up the members' pension fund through annual contributions determined as a percentage of salary. The pension fund guarantees fixed pension payments from retirement age.
Temporary lay-offs and mandatory occupational pension scheme
It is not mandatory for employers to keep paying for occupational pension scheme for laid-off workers, but they can choose to do so. The terms for this should be laid out in the rules for the pension scheme/insurance agreement, and any agreements between the employer and the employee (collective agreements and employment contracts). If the rules/insurance agreement does not specify such an eventuality, it is possible for the employer to change the agreement with the pension scheme provider so that laid-off workers still can be part of the pension scheme.
When an employer resigns - pension capital certificate and continuation insurance
Employees resigning from a company should be taken out of the pension scheme and the employee will receive a pension capital certificate from the pension scheme provider. This certificate entitles the employee to a pension pay out from when the employee reaches retirement age. Employees taken out of the company´s pension scheme should also be offered to continue the pension savings themselves. Employees can make use of this opportunity within six months after they are taken out of the company´s pension scheme.
If you do not set up a pension scheme
If your enterprise is obliged to set up an occupational pension scheme, but fail to do so, you will be directed to set one up. If the directive is not followed within a predetermined due date, enforcement fees will follow. The enforcement fee is NOK 250 per day for each employee until you can show that the pension scheme has been arranged.