French occupational supplementary pensions (articles 39 and 83)

Occupational supplementary plans come on top of the mandatory basic and supplementary pensions. Their common names come from the articles of the General Tax Code that set their treatment. So-called article 83 contracts were defined contribution: the employer, and often the employee, pay a set contribution, for example a percentage of salary, into an individual account, and the annuity depends on what has accumulated; since the PACTE law, they have been replaced by the mandatory retirement savings plan. So-called article 39 plans are defined benefit: the employer promises a pension level, for example a percentage of final salary, and bears the funding risk. For a long time, entitlements were contingent, conditional on ending one's career with the company, hence executives' top-hat pensions, a source of controversy. The ordinance of 3 July 2019, transposing the 2014 European directive on pension portability, closed these plans to new accruals and created an article 39 with annually vested, capped entitlements. The 2003 law requires these liabilities to be externalized to an insurer, a provident institution or a mutual, so that employees do not depend on the employer's solvency. For the insurer, defined benefit plans bring longevity and interest rate risk, which bulk annuity buyouts also allow to be transferred.