By: HUB’s EB Global Benefits Team

WHAT IS IT ABOUT?

Multinational employers with operations in Belgium will be significantly impacted by the country’s pension reforms coming into effect in 2025. Workforce management, corporate compliance and financial planning will all be affected by the new regulations.

Extended Employment

The statutory retirement age has increased from age 65 to 66 in 2025 and is planned to increase to age 67 by 2030.

This change indirectly affects supplementary benefit programs as many plans link their end dates to the state pension age. Aside from the extra cost of additional years of pension accrual, long term disability and survivor benefit premiums in pension plans will also increase. Generally, these plans pay benefits until retirement age.

To further incentivize employees to work past the state retirement age, a tax-exempt “pension bonus” has been introduced. The bonus accrues daily for up to three years after the earliest retirement date.

Due to job protection laws, the above changes will translate in higher employment costs as older employees with high salaries will hang onto their jobs for additional time delaying their replacement with junior individuals at the lower end of their employer’s salary scales.

Increased Social Contributions

The pension reform is also doubling the special annual social security contribution rates on supplementary pensions for high earners from 3% to 6% in 2028.

Survivor Benefit Payment Period Curtailment

It is expected that in 2026, the survivor’s pension will be replaced by a transitional benefit payable up to a maximum of two years.

This curtailment in the payment period may result in an automatic increase in company survivor’s pensions where integrated with the state pension or otherwise result in a loss for employees with spouse and children.

Higher Pension Asset Return Guarantees

Under Belgium’s Workplace Pension Act, employers are required to guarantee a minimum long-term rate of return on contributions paid for supplementary pension plans. That minimum return has been 1.75% since 2016. As of January 2025, the minimum increased to 2.5% under the prescribed methodology. Employers must cover any shortfall upon retirement or termination of employment.

If employees are given any investment choice, then the company assumes the risk of poor performance, even in situations where employees choose fixed income investments, if results do not meet the guaranteed level.

Many pension plans in Belgium have significant placements under so-called “Branch 21” endowment insurance contracts receiving low yield guaranteed interest each year, with modest investment participation features. Most of these investments generate returns below the guaranteed minimum rates.

The combined effect of these recent developments is that Multinational employers will experience higher pension, and social security costs and increases in pension liabilities recorded in their balance sheets.

IMPACT ON COMPANIES

  • Workforce Management - higher costs associated with retaining older employees, including wages, benefits, healthcare expenses and pension contributions.
  • Financial Implications on Benefits Plans - Increased employer pension, life and disability program costs and higher risk of shortfalls in investment return guarantees, and higher social security levies.
  • Increased Administrative Burden - Additional company effort on benefit program adaptation and record-keeping to cope with the recent legislative and regulatory developments.

SUGGESTED EMPLOYER ACTION

  • Review your company’s employee demographics to determine the impact of higher retirement age on staffing plans.
  • Have new actuarial estimates of impact of the legislated changes on the company’s pension programs.
  • Review the current investment strategy of your pension plan assets to assess potential gaps from higher minimum rate of return guarantees.
  • Review other benefit programs for potential financial implications of increased retirement age and need to adjust terminal age of cover.
  • Review current collective bargaining agreements as they relate to the impact of the pension reforms.
  • Communicate resulting changes and their impact on current benefits to your workforce.
  • Review and adjust record-keeping and plan administration procedures.

If you have any questions, please contact your HUB Advisor. View more updates in our Global Benefits Directory.