Early access to occupational pension plans
| DOI | 10.1177/1388262717714546 |
| Author | Inne Nys,Yves Stevens,Jonathan Forman |
| Date | 01 June 2017 |
| Published date | 01 June 2017 |
| Subject Matter | Articles |
Article
Early access to occupational
pension plans: Belgium vs USA.
Borrowing, pledging, hardship
withdrawal or early distribution
Inne Nys
KULeuven, Belgium
Yves Stevens
Institute of Social Law, KU Leuven, Belgium
Jonathan Forman
University of Oklahoma College of Law, USA
Abstract
Occupational pension plans help people to maintain their living standards after retirement. This
article looks at differences in the design of occupational pensions in Belgium and the USA, and
more specifically, at early access. The article shows that different cultural backgrounds influence
occupational pension systems. Occupational pension plans are intended to provide retirement
income, and assets should therefore not be used for non-retirement purposes such as holidays
Credit card debts. However, both Belgium and the USA provide mechanisms for early access. In
Belgium, early access to an occup ational pension p lan is, in princi ple, prohibite d. The only
exceptionisforthepurchaseofrealestatesincethis fits within the Belgian pension philosophy
that retirees should not have to spend any of their retirement income on rent. It is culturally
established that pensions and house ownership are inter-connected. In the USA, early access is
not prohibited but it is often discouraged. Leakages from occupational pension plans must be
limited, but some flexibility needs to remain. Since participation in occupational pension plans
ought to be encouraged, (too many) restrictions on access may discourage individuals from
making contributions to those plans. This is the reason why there is greater flexibility towards
early take up in the American private pension system.
Keywords
Occupational pensions, early take up, flexibility, pay out phase, Belgium, USA, comparative law
Corresponding author:
Inne Nys, KU Leuven, Landbouwstraat 10, 2360 Oud-Turnhout, Belgium.
E-mail: nys.inne@gmail.com
European Journal of Social Security
2017, Vol. 19(2) 186–206
ªThe Author(s) 2017
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DOI: 10.1177/1388262717714546
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Introduction
1
It is a well-known fact that pension schemes and pension designs differ widely between countries.
It is also common knowledge that the underlying philosophy of social protection varies. However,
it is often difficult to pinpoint the exact differences between these diverse so-called pension
cultures. In this article, we analyse the differences between occupational pension design in
Belgium and the USA by looking at one specific – but important – aspect of pensions: early
access. The way that legislators allow, prohibit, stimulate or discourage the use of early access
tells us a great deal about the underlying philosophy at play. In the first two sections of the article,
an analysis of the Belgian and the American occupational pension landscape is undertaken while in
the third section a comparison is made.
Early access in Belgium
The Belgian private pension system
The income needs of the retirees have increased and will probably continue to increase due to the
aging of the population. This causes an increase in the cost of basic pensions and changes the
perception of the period of retirement. People live longer, and expectations regarding their retire-
ment are higher. Occupational pension plans, which are complementary to basic pensions, are a
means of meeting these higher expectations.
2
Occupational pension plans constitute the so-called second pension pillar. The first pillar
comprises the state pension and the third pillar includes the different types of individual pension
scheme that are available regardless of professional status. The state pension forms the base, and
the second pension pillar is meant to reduce the gap between the retirement income and the final
salary.
3
Occupational pension plans enable retirees to maintain their standard of living and are
therefore of great importance. The Occupational Pension Law (OPL) of 2003 governs these
occupational pension plans.
4
The Belgian government regulates the state pension, which is one of the main components of
the social security system. The financing of state pensions is a matter of growing concern for the
government. At the same time, more and more companies and industries offer their employees an
occupational pension.
5
These plans are very tax driven. Occupational pension plans can be under-
stood as savings for retirement that are subsidised by the Belgian government. By subsidising the
occupational pension system, the government seeks to encourage employers to offer and employ-
ees to participate in occupational pension plans. And it works – in Belgium, because of the
favourable tax regime, most employers offer occupational pension plans to their employees.
6
1. This article is the result of a study trip made by Inne Nys to the USA under the supervision of Yves Stevens and
Jonathan Forman. It employs a comparative law analysis of Belgian and American legislation on early access to
occupational pensions.
2. An increase in the legal pensions is simply not feasible due to the aging problem; De Brabanter, Gieselink, Pertry,
Roels and Stevens (2007: 48-52).
3. De Brabanter, Gieselink, Pertry, Roels and Stevens (2007: 61-62).
4. Wet 28 April 2003 betreffende de aanvullende pensioenen en het belastingstelsel van die pensioenen en van sommige
aanvullende voordelen inzake sociale zekerheid, BS 15 mei 2003.
5. Wellemans (2015: 64).
6. The employer is required to pay an 8.86 per cent contribution to the Department of Social Security and 4.4 per cent
insurance tax on the contributions that he makes to the occupational pension plan. However, the employer has to take
Nys et al. 187
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