Executives and high salaries: managing gaps in supplementary occupational pension coverage

Executives and high salaries: managing gaps in supplementary occupational pension coverage

Introduction

As soon as a salary exceeds the limits of the mandatory occupational pension scheme (LPP), an SME can find itself with a tiered pension plan: part is covered according to minimum rules (mandatory), the rest depends on the fund's regulations (supplementary). The result: potential gaps in retirement benefits, as well as in death and disability coverage.

In 2026, the LPP obligation starts at 22,680 francs of annual salary. The upper limit of the annual salary for the mandatory scheme is 90,720 francs, with a coordination deduction of 26,460 francs and a minimum coordinated salary of 3,780 francs.

Reading promise: by the end, you will be able to diagnose your LPP supplementary coverage gaps, choose the right levers (supplementary plan, framework plan, 1e) and above all document and then follow these decisions on the management, finance and HR side.

Why high salaries create gaps (mandatory vs. over-mandatory)

The 2026 benchmarks to be put on the table

Before any internal discussion, align the stakeholders (management, CFO, HR) on factual and stable benchmarks.

Source: Federal Social Insurance Office (FSIO), amounts valid from 1 January 2026.

What "mandatory" means, in concrete terms

Two points are often misunderstood in business:

• The mandatory scheme only covers a portion of salary, not the entire remuneration (main reason for the shortcomings in management).

• Some minimum rules apply only to this mandatory portion. For example, the minimum conversion rate is 6.8% at the standard retirement age (65) to convert mandatory old-age savings into an annuity.

Another important benchmark for 2026: the Federal Council has maintained the minimum LPP interest rate at 1.25% (it applies to old-age assets of the mandatory scheme).

What changes in mandatory status (and why governance matters)

As soon as your health insurance fund provides coverage beyond the limits of the mandatory scheme, you are in the supplementary coverage category. The Federal Social Insurance Office (FSIO) points out that some funds also cover salaries exceeding the mandatory amounts, and that in this supplementary coverage category, funds have more leeway in setting benefits.

As a consequence of this approach: there is no single, mandatory standard. The truth lies in your documents (regulations, plan, certificates) and in your decisions (who is covered, on what basis, and why).

Diagnosing your weaknesses: a method in three readings

1) HR review: population, eligibility, internal consistency

Objective: to know who is involved without starting from a feeling.

• List the functions with salary above the upper limit of mandatory LPP (90,720 in 2026).

• Check if the plan includes categories (executives, management, experts) and on what criteria.

• Identify the "sensitive" elements of remuneration (variable pay, bonuses, benefits) for which insurability is not obvious.

2) CFO reading: assured basis and financial exposure

Objective: to translate foresight into financial risk.

• Compare AVS salary (payroll) vs insured salary (fund).

• Identify the internal ceilings in the plan (even in the case of mandatory).

• Check if the gap is mainly "old age" (savings) or mainly "risk" (disability/death).

3) Reading “documents”: regulations, plan, certificates

Objective: to obtain facts, not impressions.

The OFAS indicates that the pension institution must inform insured persons annually, in particular about their rights, coordinated salary, contribution rate, retirement savings, organization and financing, and provide additional information on request (performance, costs, degree of coverage, etc.).

In practice, this means: if you cannot decide with what you have, you must ask for the missing information.

Box: What needs to be documented

• Regulations and pension plan (dated versions).

• Membership contract and appendices (categories insured, scope).

• Pension certificates (sample of managers/non-managers).

• Compensation policy and payroll rules (fixed/variable).

• Management decision note (options, arbitration, impacts) + minutes if necessary.

• Communication plan for the employees concerned.

• Annual review process (responsible parties, schedule, indicators).

Arbitrating the options to fill the gaps in supplementary LPP coverage

Three governance questions to consider before choosing a solution

1. Which risk do you want to control as a priority: death/disability, retirement, or both?

2. What kind of internal equity are you aiming for: the same rules for everyone, or segmentation (framework plan) with objective criteria?

3. What level of complexity are you willing to accept: a readable and robust solution, even if less "fine-tuned", or a more sophisticated architecture?

Focus 1e: threshold, requirements, effects of “SMEs”

The CHS PP (OAK BV) specifies that the 1e solutions exclusively target the portion of salary exceeding one and a half times the upper limit amount.

In 2026, the upper limit of the annual salary is 90,720 francs: 1.5 × 90,720 = 136,080 francs.

The same OAK BV communication emphasizes two major implications:

• A 1e solution must be managed in a separate legal entity.

• The 1e solutions do not benefit from the guarantees of art. 15 and 17 LFLP (exit benefits).

And if the exit is at the effective value, a low-risk investment strategy should be proposed.

Translation for management: you gain flexibility on a very high salary bracket, but you must over-invest in documentation (decisions, information, follow-up), because the investment risk becomes more visible and more individualized.

Mini case study 1: “Risk” gap created by an overly narrow definition of insured salary

A small business pays a significant variable bonus to its managers. The LPP plan adequately covers the mandatory portion, but the variable portion is not included (or only partially included) in the supplementary insured salary.

Management: HR and CFO compare, based on certificates, the AVS salary vs insured salary and the basis for calculating disability/death benefits.

Decision: either integrate a portion of the variable into the supplementary insured salary, or supplement with separate risk coverage.

Documentation: arbitration note (fairness, budget, simplicity) + update of payroll/communication rules.

Monitoring: annual review during bonus cycles.

Mini case study 2: The need for a manager for very high salaries

A growing SME is recruiting candidates whose salaries far exceed the mandatory ceiling. Management refuses to grant exceptions on a case-by-case basis.

Steering: mapping of people above the 1e threshold (salary share above 1.5 × the upper limit) and comparison of two architectures: classic framework plan vs 1e.

Decision: choice of a single architecture with formalized eligibility criteria and information rules (low risk strategy, transparency).

Follow-up: annual review “on paper” to verify the salary scope and the consistency of the certificates.

Guidelines and checklist

Reference points

• Do you have a definition of guaranteed salary that aligns with your compensation policy?

• Is your "executives" solution based on objective and auditable criteria?

• In your diagnosis, have you separated what relates to retirement (savings) and what relates to risk (death/disability)?

• Is your governance structure documented (who decides, who approves, who informs, who follows up)?

Checklist (manage, document, monitor)

Pilot

• Identify people above 90,720 and those potentially affected by 1e (above 136,080).

• Check AVS salary vs insured salary and the basis for risk benefits.

Document

• Gather regulations, plan, contract, certificates; draft an arbitration note validated by management.

• If 1e: document separate entity, absence of LFLP guarantees, low risk strategy and information to policyholders.

Follow

• Establish an annual review and request relevant information (yield, costs, coverage level) if necessary.

• Check the official benchmarks (limit amounts, minimum interest rates) and their impacts every year.

Common mistakes and how to avoid them

• Deciding based on an “idea” of the cover, without reading the documents.

  • Solution: regulations + plan + certificates, then mapping.

• Treat the subject as a “retirement” issue and forget about death/disability.

  • Solution: analyze the basis for calculating risk, not just savings.

• Leave variable compensation out of scope by default.

  • Remedy: an explicit and stable rule, aligned with remuneration and benefits.

• Create a framework plan without objective criteria (then multiply the exceptions).

  • Solution: simple, transparent, documented criteria.

• Underestimating the governance of a 1e solution.

  • Remedy: formalized decisions, information, compliance monitoring (separate entity, safeguards, low-risk strategy).

Questions to ask your insurer/broker

1. What is the definition of guaranteed salary (fixed, variable, bonus, caps, deductions)?

2. How does the fund separate mandatory and supplementary (two accounts, one encompassing the other)?

3. What ceilings apply to supplementary coverage (and why)?

4. What are the bases for calculating disability and death benefits (insured salary, projection, time limits)?

5. What minimum conversion rate applies to the mandatory portion (6.8%) and what logic is applied to the rest?

6. What is the minimum LPP interest rate for the following year (1.25% for 2026) and how does the fund credit the interest on the two shares?

7. What information can you provide on performance, fees and degree of coverage to support our piloting?

8. If a framework plan is in place: what admission criteria guarantee equal treatment and compliance?

9. If 1e: how do you guarantee the separate legal entity, the absence of LFLP guarantees and the low-risk strategy?

10. What are the operational impacts (payroll, communication, certificates) and what is the implementation timeline?

Conclusion

The issue of frameworks is not a “product” debate, but a governance decision: where are the gaps in supplementary pension plan coverage, what risks are you willing to accept, and how do you document and monitor the decision? Rely on official benchmarks (2026 contribution limits, minimum interest rates, minimum conversion rates) and a document-based analysis, then formalize one or two scenarios for management approval.