Top-hat pension (defined benefit plan)
A supplementary company pension plan that guarantees certain employees, often executives, a predefined pension level, funded by the company and managed by an insurer.
In a defined benefit plan, the company commits not to a contribution amount but to the level of the pension, for example a percentage of final salary per year of service. It funds this commitment by paying premiums to an insurer, which builds a collective fund and pays the annuities to beneficiaries. For a long time these plans had conditional rights: the employee received nothing if they left the company before retirement, which made them a retention tool for executives, at the cost of sometimes very high and contested amounts. The 2014 European directive on the portability of pension rights led France to close these plans to new entrants and to create a plan with rights vested each year, capped. For the insurer, these plans combine longevity risk, financial risk and reputational risk, and the company's provision follows employee benefit accounting standards.
Ordinance No. 2019-697 of July 3, 2019 closed conditional-rights plans and created a plan in which rights vest each year, capped at 3% of pay per year and 30 points over a career, after the 2013 controversy over the 21 million euro top-hat pension of a PSA executive, who gave it up.
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.