A Branch 21 or Branch 23 financing fund? The choice is yours
Like most good employers that provide their staff with corporate-sponsored group insurance, you're probably well aware of the requirement to set up a financing fund. A lesser known fact, however, is that AG Employee Benefits allows you to choose between a Branch 21 and a Branch 23 financing fund. And this added flexibility is hardly a standard option in today's marketplace.
What exactly is a financing fund?
A financing fund serves to (pre-)finance your future group insurance liabilities, i.e. your projected benefit obligations. Since 1985, a financing fund must be set up for each group insurance plan.
To spread the financing of the future liabilities of your group insurance, you can opt for a financing fund. You simply make regular contributions to the financing fund according to a funding plan.
Individual or collective management
An active financing fund can be linked to a plan under individual or collective management.
With individual management, your future liabilities are funded at the plan participant level. The employer premium is set according to specific variables (plan type, applicable rate, etc.). The premium is calculated separately for each individual and serves to build up individual pension savings. At regular intervals, the employer premiums are taken out of the financing fund and credited to the individual accounts.
Under collective management, you fund your future liabilities at the group level. In this case, the concept of "employer premium" does not come into play. The employer makes contributions to the financing fund for the entire group of plan participants, building up a collective supplementary pension nest egg. The accrued savings are converted into individual entitlements and taken out of the financing fund when the entitlements are really paid out.
The main benefit of an active financing fund linked to a financing plan is that it gives employers complete mastery over their budget and expenditures.
Returns of a financing fund
The return earned on your financing fund will depend on how you invest. You first need to select from among our Branch 21 and Branch 23 solutions, or a combination of both.
It seems obvious that you should be able to choose your preferred investment option yourself, but this is hardly a standard option nowadays. Insurers are increasingly dropping Branch 21 solutions from their product range. AG Employee Benefits is one of the exceptions, because we see ourselves as a global pension player with a complete range of solutions that addresses all of your needs as an employer. For employers that are looking security, we continue to believe and invest in a solid range of Branch 21 products. But if your risk appetite is somewhat higher, we also offer a full range of Branch 23 funds to choose from.
The interest rates applicable to our Branch 21 financing funds are as follows:
Active financing fund: 1.00% since 1 April 2017
Financing funds linked to group insurance plans under group management: 2.25% since 1 January 2018
Need help in making the right choice?
Our experts are standing by to help you select the right financing fund to match your company culture and risk profile.
Feel free to get in touch with your regular AG Employee Benefits contact person for individually-tailored advice to fit your specific circumstances. Or ask for more information via the contact button on this page.