Order on Pension Fund Business and the Technical Basis for Company Pension Funds

Order on Pension Fund Business and the Technical Basis and Other Matters for Company Pension Funds

Pursuant to Section 22, Section 47, Paragraph 2, Section 48, Paragraph 5, and Section 117, Paragraph 9, of the Act on Company Pension Funds, cf. Statutory Order No. 355 of 2 April 2020, the following is prescribed:

Scope of Application

Section 1. This Order applies to company pension funds covered by Section 2, Paragraph 1, of the Act on Company Pension Funds.

Content and Purpose

Section 2. Notification pursuant to Section 47, Paragraph 1, of the Act on Company Pension Funds regarding the company pension fund's technical basis and other matters, and amendments thereto, shall be made by using the Financial Supervisory Authority's form titled "Notification of the Technical Basis and Other Matters."

Paragraph 2. The notification shall

1. reflect the types of pensions that the company pension fund intends to use,
2. describe any guarantees in more detail,
3. be in such clear and precise form that it can readily serve as the basis for an expert actuary's control calculations, and
4. in its entirety be suitable for providing a comprehensive picture of the company pension fund's activities regarding pensions.

Paragraph 3. It shall be clearly indicated or marked in the notification which changes have been made compared to earlier notifications of the technical basis and other matters.

Paragraph 4. The notification shall contain the following:

1. A mathematical description and review of the notified matters.
2. A statement of the legal and economic consequences for the individual member, the individual pension recipient, and other pension beneficiaries under the pension agreement. The statement must at a minimum comply with the requirements of Section 3, Paragraphs 1-3.
3. A statement of the legal, economic, and actuarial consequences for the company pension fund. The statement must at a minimum comply with the requirements of Section 3, Paragraph 4.

Paragraph 5. The company pension fund shall each year before the end of June submit a compilation of the company pension fund's total current notified technical basis and other matters to the Financial Supervisory Authority. The compiled technical basis and other matters must include all notifications of the technical basis and other matters that have been submitted to the Financial Supervisory Authority pursuant to Section 47, Paragraph 1, of the Act on Company Pension Funds before the end of the preceding year. The compiled technical basis and other matters must not contain previously notified rules and rates that are no longer in force at the end of the preceding year. The Financial Supervisory Authority's form titled "Compilation of the Technical Basis and Other Matters" must be used.

Section 3. When notifying information pursuant to Section 47, Paragraph 1, Nos. 1-5, of the Act on Company Pension Funds, the company pension fund must state that the notified rules are secure and reasonable for the individual member, the individual pension recipient, and other pension beneficiaries under the pension agreement. The company pension fund must, where relevant, also state that the notified rules, as a general principle, take into account having a reasonable distribution of risks and benefits between the generations in the company pension fund's activities.

Paragraph 2. When notifying interest, cost, and risk rates pursuant to Section 47, Paragraph 1, Nos. 2 and 3, of the Act on Company Pension Funds, the statements pursuant to Paragraph 1 must be accompanied by documentation based on the company pension fund's actual return on investments, actual cost conditions, and actual loss experience.

Paragraph 3. When notifying interest, cost, or risk rates pursuant to Section 47, Paragraph 1, No. 3, of the Act on Company Pension Funds, the company pension fund must provide the expected or actual interest, cost, or risk result and state the consequences for any bonus reserve in the form of collective bonus potential and equity.

Paragraph 4. When notifying the basis for calculating pension provisions pursuant to Section 47, Paragraph 1, No. 6, of the Act on Company Pension Funds, the company pension fund must state that the basis complies with the requirements of the Order on Valuation of Pension Provisions and Pension Arrangements upon Transfer for Company Pension Funds.

Paragraph 5. Pursuant to Section 47, Paragraph 1, No. 6, of the Act on Company Pension Funds, the company pension fund must each year before the end of the year notify the mortality used in the basis for calculating pension provisions to the Financial Supervisory Authority.

Paragraph 6. When notifying the mortality mentioned in Paragraph 5, the company pension fund must state the life expectancy analysis mentioned in Section 4, Paragraph 5, of the Order on Valuation of Pension Provisions and Pension Arrangements upon Transfer for Company Pension Funds, corresponding to the Financial Supervisory Authority's latest published guidelines for reporting life expectancy analysis. This does not apply if the company pension fund has not conducted a life expectancy analysis pursuant to Section 4, Paragraph 6, second sentence, of the Order.

Public Availability

Section 4. Notifications pursuant to Section 47, Paragraph 1, of the Act on Company Pension Funds are publicly available when registered with the Financial Supervisory Authority and published on the Financial Supervisory Authority's website. Notifications received by the Financial Supervisory Authority before 1 November 2007 are not entered into the register and are not publicly available.

Paragraph 2. The compiled technical basis and other matters mentioned in Section 2, Paragraph 5, are publicly available when registered with the Financial Supervisory Authority and published on the Financial Supervisory Authority's website.

Section 5. The company pension fund may, in a separate appendix that is not publicly available, include parts of the statements mentioned in Section 2, Paragraph 4, No. 3, which the company pension fund assesses are not necessary to understand the most significant elements of the pension arrangement or to perform control calculations, cf. however Paragraph 2. The Financial Supervisory Authority's form titled "Statement pursuant to Section 5, Paragraph 1" must be used. In addition, the company pension fund may include the following in the statement:

1. The statement on life expectancy analysis mentioned in Section 3, Paragraph 6.
2. Compilation of the notified matters and previously notified matters.
3. Other supplementary information to the Financial Supervisory Authority.

Paragraph 2. The Financial Supervisory Authority may decide that the whole or part of the appendix titled "Statement pursuant to Section 5, Paragraph 1" shall be publicly available if the Financial Supervisory Authority assesses that the appendix in whole or in part is necessary to understand the most significant elements of the pension arrangement or to perform control calculations.

Authorization, Signature, and Submission

Section 6. It must appear from the company pension fund's procedure for notifying the technical basis and other matters and amendments thereto which persons the company pension fund has authorized to sign the notification of the technical basis and other matters and the compiled technical basis and other matters mentioned in Section 2, Paragraph 5.

Paragraph 2. Notification of the company pension fund's technical basis and other matters, amendments thereto, a statement pursuant to Section 5, Paragraph 1, and an actuary's declaration pursuant to Section 7, Paragraph 1, must be submitted electronically to the Financial Supervisory Authority in one signed copy.

Paragraph 3. The compiled technical basis and other matters mentioned in Section 2, Paragraph 5, must be submitted electronically to the Financial Supervisory Authority in one signed copy.

Actuary's Declaration

Section 7. A notification pursuant to Section 47, Paragraph 1, of the Act on Company Pension Funds of the company pension fund's technical basis and other matters must be accompanied by a separate declaration from the company pension fund's responsible actuary regarding the notified matters. The Financial Supervisory Authority's form titled "Actuary's Declaration" must be used.

Paragraph 2. The actuary must in their statement declare whether the actuary agrees that the notified matters are in accordance with Section 48, Paragraphs 1-3, of the Act on Company Pension Funds. The actuary must further declare whether the actuary agrees with the company pension fund's statement pursuant to Section 3.

Paragraph 3. The actuary's declaration is not publicly available.

Underwriting Basis

Section 8. In the underwriting basis that a company pension fund uses when setting pension contributions and benefits, the mortality tables and interest rates must be chosen with caution, cf. however Sections 12-14.

Paragraph 2. The mortality tables mentioned in Paragraph 1 must not be chosen less cautiously than the mortality tables used for calculating pension provisions, cf. Section 4, Paragraph 2, of the Order on Valuation of Pension Provisions and Pension Arrangements upon Transfer for Company Pension Funds.

Paragraph 3. The interest rates mentioned in Paragraph 1 must not exceed the maximum basis interest rate for life insurance companies and cross-sector pension funds, cf. the Order on Basis Interest Rate for Life Insurance Companies. For any commitments, different interest rates may be assumed before and after the determined retirement date if this can be justified by the nature of the pension commitments.

Paragraph 4. If the pension commitments involve guaranteed adjustment according to a wage or price level or similar, the interest rates mentioned in Paragraph 3 must be reduced by a cautiously determined estimate of the adjustment rate, which must not be lower than the adjustment rate that is included in the valuation of pension provisions, cf. Section 4, Paragraphs 3 and 4, of the Order on Valuation of Pension Provisions and Pension Arrangements upon Transfer for Company Pension Funds.

Paragraph 5. If the underwriting basis for creating new pension commitments is changed, this only has significance for future commitments and adjustment of already issued commitments. However, exit benefits can be calculated on the or the previously used basis for the commitments issued before the basis change.

Section 9. If the company pension fund incurs administrative costs, the underwriting basis mentioned in Section 8 must contain rules for covering these, including cautiously determined cost elements.

Paragraph 2. If the company pension fund incurs administrative costs, and these are covered wholly or partly by the contributions paid, the net contribution is set to the contribution paid minus a cost allowance. In other cases, the net contribution is set to the contribution paid.

Section 10. Net contributions and benefits must be set for each individual member such that upon enrollment, the present value of the benefits is equal to the present value of the net contributions using the underwriting basis mentioned in Sections 8 and 9. The same applies to any change in net contributions and benefits, including surplus distribution and transition to early pension or dormant membership.

Section 11. For benefits set in advance, including to a specific amount or a specific share of the pensionable salary, a fixed ongoing contribution, a non-deferred lump-sum deposit, or both must be set based on the normal time for cessation of contributions.

Paragraph 2. If the size of the benefits mentioned in Paragraph 1 is regulated according to rules set in the pension regulations, including according to the member's seniority, the size of the benefits at normal retirement age must be used when setting the fixed ongoing contribution, the non-deferred lump-sum deposit, or both.

Underwriting Basis for Company Pension Funds with Benefit-Defined Pension Arrangements Created on 1 November 2007 or Later, and for Company Pension Funds with Benefit-Defined Pension Arrangements Created Before 1 November 2007 that Have Decided to Use This Basis

Section 12. A company pension fund with benefit-defined pension arrangements created on 1 November 2007 or later must use an underwriting basis for setting contributions and benefits where the mortality tables and interest rates must be chosen with caution, and where the cost elements must at least be based on the best estimate at the calculation date instead of the underwriting basis mentioned in Sections 8 and 9. The basis must also include a security margin, cf. Paragraph 5.

Paragraph 2. The mortality tables mentioned in Paragraph 1 must not be chosen less cautiously than the mortality tables used for calculating pension provisions, cf. Section 4, Paragraph 2, of the Order on Valuation of Pension Provisions and Pension Arrangements upon Transfer for Company Pension Funds.

Paragraph 3. The interest rates mentioned in Paragraph 1 must not exceed the interest rates that the company pension fund has set according to the rules in Section 4 of the Order on Valuation of Pension Provisions and Pension Arrangements upon Transfer for Company Pension Funds.

Paragraph 4. If the pension commitments involve guaranteed adjustment according to a wage or price level or similar, the interest rates mentioned in Paragraph 3 must be reduced by an adjustment rate that must not be lower than the adjustment rate that is included in the valuation of pension provisions, cf. Section 4, Paragraphs 3 and 4, of the Order on Valuation of Pension Provisions and Pension Arrangements upon Transfer for Company Pension Funds.

Paragraph 5. The security margin mentioned in Paragraph 1 must at least correspond to the security margin that the company pension fund has set according to the rules in Section 4 of the Order on Valuation of Pension Provisions and Pension Arrangements upon Transfer for Company Pension Funds.

Section 13. The underwriting basis mentioned in Section 12 must contain provisions on the accrual of the pension commitment corresponding to the provisions in the articles of association and the pension regulations. Each member's accrued pension commitment must at any time (the calculation date) constitute the sum of

1. the member's pension commitment upon enrollment in the company pension fund and
2. a share of the difference between the member's pension commitment at normal retirement age and the member's pension commitment upon enrollment in the company pension fund, which must at least correspond to the ratio between the time from enrollment in the company pension fund to the calculation date and the time from enrollment in the company pension fund to normal retirement age (linear accrual).

Paragraph 2. The contribution must for each individual member at least constitute the part of the growth in pension provisions that is not covered by the assumed interest minus risk premium, assumed adjustment, and administration. The calculation uses the underwriting basis set in accordance with Section 12.

Section 14. A company pension fund with benefit-defined pension arrangements created before 1 November 2007 may decide to use the underwriting basis mentioned in Sections 12 and 13 to set benefits and contributions instead of the underwriting basis mentioned in Sections 8 and 9. If the change of the underwriting basis simultaneously involves a change in the company pension fund's articles of association or pension regulations, the change must be adopted in accordance with Section 27 of the Act on Company Pension Funds.

Reduction of the Pension-Committing Company's Contribution Payment (Suspension)

Section 15. In company pension funds with benefit-defined pension arrangements, a decision may be made on temporary reduction (suspension) of the pension-committing company's contribution payment when:

1. The conditions in Section 14, Paragraph 3, Nos. 1 and 2, of the Act on Company Pension Funds are met.
2. The contribution payment is reduced for a period that does not extend beyond the coming financial year, and amounts to at most 15 months.
3. No contribution becomes negative for any member.
4. The company pension fund, each time a decision is made to reduce the contribution payment, notifies an amount and a period within which the contribution is reduced.

Exit and Transfer of Pension Commitments

Section 16. The exit benefit for a member is set to the present value of the member's pension commitment minus the present value of future contributions for the relevant member calculated on the underwriting basis mentioned in Sections 9 and 10, which was in force at the issuance of the respective pension commitment upon enrollment in the company pension fund and any subsequent adjustments, cf. however Paragraph 2. The exit benefit is calculated using the benefits and net contributions calculated on the underwriting basis. A deduction may be made from the exit benefit to cover the costs of the exit.

Paragraph 2. In benefit-defined pension arrangements covered by Sections 12 and 13, the exit benefit for a member must at least be set to the present value of the member's accrued pension commitment calculated on the underwriting basis mentioned in Sections 12 and 13, which is in force at the time of exit. A deduction may be made from the exit benefit to cover costs associated with the exit.

Paragraph 3. It may be determined in the underwriting basis that for members over a certain age, when calculating the part of the exit benefit relating to spouse's pension, the member's actual marital status and the age of any spouse are taken into account.

Paragraph 4. If part of a member's pension commitment is covered by an insurance policy for the member in a life insurance company, the exit benefit is increased by the surrender value that may be paid out by the insurance company, unless the relevant insurance policy is transferred to the member.

Section 17. If the pension regulations provide access for members to have the right to a higher exit benefit than what application of Section 16 leads to, the exit benefit must be included when setting pension contributions and benefits mentioned in Section 10.

Section 18. If an exiting member moves to other employment to which an obligatory pension arrangement with ongoing benefits is attached, the member has the right to have the exit benefit transferred to the new pension arrangement upon enrollment in this according to the rules that the company pension fund has notified pursuant to Section 47, Paragraph 1, No. 7, of the Act on Company Pension Funds, cf. Section 4. The same applies in the case of business transfer and business conversion.

Paragraph 2. If an exiting member is employed as a civil servant or in a position to which a corresponding pension arrangement is attached, the exit benefit may be transferred to this pension arrangement when it can be used to increase the pension commitment.

Section 19. A company pension fund is obliged to take over the value of an obligatory pension arrangement with ongoing benefits created in a life insurance company, a cross-sector pension fund, or another company pension fund as a deposit, if a person who is employed in the pension-committing company is enrolled in the company pension fund upon transfer from other employment, and such an arrangement was attached to the previous employment, and if the employee wishes it, cf. however Paragraph 2.

Paragraph 2. A benefit-defined pension arrangement has a maximum obligation to receive a deposit that brings the pension commitment up to the largest commitments that the company pension fund otherwise issues, cf. Section 10.

Health Assessment

Section 20. If the company pension fund conducts a health assessment upon enrollment of members, the pension regulations must contain an indication of rights and duties, etc., for persons who are not enrolled on normal terms.

Penalties

Section 21. Whoever intentionally or grossly negligently violates Sections 2 and 3, Section 5, Paragraph 1, second sentence, Section 6, Section 7, Paragraphs 1 and 2, Section 8, Sections 9-13, Section 15, Section 16, Paragraphs 1, 2, and 4, Sections 17-20, and 23 shall be punished with a fine.

Paragraph 2. Companies, etc. (legal persons) may be subject to criminal liability according to the rules in Chapter 5 of the Criminal Code.

Entry into Force

Section 22. This Order enters into force on 1 July 2020.

Paragraph 2. Statutory Order No. 8 of 4 January 2019 on Pension Fund Business and the Technical Basis and Other Matters for Company Pension Funds is repealed.

Transitional Provisions

Section 23. In company pension funds with benefit-defined pension arrangements created before 1 November 2007, and which in accordance with Section 14 have decided to use the underwriting basis mentioned in Sections 12 and 13 to set benefits and contributions, the exit benefit for a member, regardless of Section 16, Paragraph 2, must at least constitute the member's exit benefit calculated according to the rules in Section 16, Paragraph 1, at the time of the company pension fund's transition to the underwriting basis mentioned in Sections 12 and 13.

The Financial Supervisory Authority, 14 May 2020

JESPER BERG / Line Bergmann