Experience-rated Contribution of Employers with Insurance Contract
The size of the disability component of a company’s TyEL contribution is based on, among other things, the size of the company. The size is determined on the basis of the company’s insured employees’ wage bill two years ago. When the wage bill exceeds the limit of nearly EUR 2 million, the disability component of the TyEL contribution is also affected by the number of disability cases in the company two years ago.
To determine the disability contribution component, large companies are divided into contribution categories based on the number of disability pension incidences in the company two years ago. There are 11 contribution categories depending on the size of the disability risk. Each category contains a different-sized experience-rated contribution.
The contribution category of a company depends on its calculated risk ratio. The risk ratio means the ratio of the funded pension expenditure of new disability pensions to the average theoretical disability pension expenditure according to the risk. The risk ratio and the theoretical pension expenditure are calculated separately for each age cohort. This means that the disability rate of a company’s employees of a certain age is compared to the average disability rate of people of the same age. Partial disability pensions are also included in the calculation, while cash rehabilitation benefits, rehabilitation allowances and other rehabilitation costs are excluded when calculating the risk ratio.
Experience-rated contribution of employer with insurance contract
|Contribution category||Average risk ratio||Experience-rated contribution coefficient||Average experience-rated contribution, % of wage|
|11||at least 5||5.5||4.95|
|1||less than 0.2||0.1||0.09|
A company’s contribution category is determined based on the realised average risk ratios of the previous two years. The Ministry of Social Affairs and Health annually confirm the experience-rated contribution coefficients along with the average risk ratios of the different contribution categories listed in the table above. The figures in the table above have been confirmed for 2017.
The lower the disability pension costs of a company is, the lower is its contribution category and the amount of its disability pension contribution. However, the age distribution of the employees does not affect the determination of the contribution category since the pension expenditure is reviewed separately for each age cohort.
Contribution categories are determined only for large employers; risk ratios required to determine the contribution categories are not calculated for small-sized employers. If the employer’s payroll is slightly less than EUR 2 million, or if the employer’s risk ratio deviates less than 20 per cent from the average TyEL disability risk (i.e. if the employer belongs to contribution category 4), the employer’s TyEL contribution is a fixed percentage of the payroll of its insured employees.
A new employer whose payroll for insured employees is EUR 2 million or more pays a contribution according to the basic contribution category, i.e. contribution category 4, for the first few years. A company’s contribution category is checked annually.
One of the purposes of the experience-rated contribution is to encourage employers to take care of the wellbeing and rehabilitation of their employees.