Recently, the Dutch senate approved the Lump Sum Payment, Early Retirement and Leave Savings Scheme Act (Wet bedrag ineens, RVU en verlofsparen) ("Act"). The Act contains two measures immediately providing employers more flexibility in reaching a termination settlement three years before the individual state pension age ("AOW age"):

  • Relaxation of the RVU Levy: If a leaving employee is granted severance that de facto serves as a bridge to the AOW age, a punitive tax levy of 52%—in addition to the regular taxes—could be due by the employer ("RVU levy"). From 2021 to 2025, this RVU levy will not apply provided that (i) payment is made within 36 months before the AOW age; and (ii) the gross payment does not exceed the gross amount equal to net state pension until the AOW age (in total approximately €63,612 gross for a period of 36 months). The RVU levy will also not apply to payments in 2026, 2027, and 2028 if the termination settlement is agreed upon by no later than December 31, 2025. Severance payments exceeding the aforementioned maximum amount will continue to be subject to the RVU levy.
  • Tax-Facilitated Leave: If an employee saves over 50 weeks of leave, payroll taxes are due by the employer. This threshold is increased to 100 weeks. Accrued leave could be used for early retirement or sabbaticals, and an incentive to sign a termination settlement.

In addition, as of January 1, 2023, employees have the possibility to withdraw up to 10% of the value of accrued old-age pension as a lump sum upon retirement. These measures could support older employees leaving employment before their AOW age, such as employees with physically demanding jobs.

This tax relaxation is the first step of sweeping Dutch pension reforms fundamentally altering the current system for supplemental employer-provided pension plans. New legislation would take effect on January 1, 2022, with all pension plans required to switch to a new contract effective between that date and January 1, 2026 (an exception applies to current insured defined contribution plans). Dutch employers are required to agree on a "transition plan" with unions or works councils and employees on such new contracts by January 1, 2024, at the latest. 

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