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Social Security in Switzerland
Details on Site Contribution
Site contribution
Date: September 2015
Prepared by:
Michèle Stutz, LL.M., Attorney at Law, Partner
Certified Specialist SBA Employment Law / Certificate of Advanced Studies Social Security Law
MME Legal | Tax | Compliance
Kreuzstrasse 42
8008 Zurich
Phone:   +41 44 254 99 66
Fax:   +41 44 254 99 60
E-Mail:   michele.stutz@mme.ch
Caution: This summary is an overview only and does not contain details of the complexe Swiss Social Security legislation. It is recommended to seek legal advice for a detailed analysis of a particular Swiss Social Security / Health Care question.
I. Switzerland’s three-pillar System
The Swiss social security system is split into three 'pillars': state pension (first pillar), occupational pension plan (second pillar), and private saving plans (third pillar). The aim of the three pillar system is to maintain the accustomed standard of living during retirement or in the event of disability (because of accident or sickness) or to support the surviving dependants in case of death. All residents are covered by the first pillar on a mandatory basis. If certain conditions are fulfilled, employees are covered by the second pillar. The third pillar is based on a voluntary basis.
The first pillar – old age, survivors’, disability insurance and income replacement scheme – is a generally compulsory insurance for everyone. Its aim is to cover basic living costs.
1. Old age and survivors' insurance (AHV)
The AHV is a general state insurance. Contributions are payable from 1st Janu-ary of the year after the twentieth birthday to retirement age. Individuals who are gainfully employed before their twentieth birthday are obliged to pay contributions from 1st January of the year following their seventeenth birthday. Contributions are divided equally between the employee and employer and amount to 8.4 % of the salary. Self-employed persons pay 9.7% of their income.
Men, at 65, and women, at 64, are entitled to an old-age pension. Payments of the pension may be started earlier by one or two years, but a deduction of the pension is made per year advanced. Payments can also be postponed by one to five years, which gives an increase in payments depending on the number of months postponed. Also, Children can get a pension if one or both of the parents die before they turn 18 or before they have completed their education, but no longer than the age of 25. Furthermore, in some cases a widow or a widower can get a pension.
2. Disability insurance (IV)
The Swiss Disability Insurance (IV) is a further compulsory nationwide insurance. The insurance assists disabled people with rehabilitation or provides subsistence payments. Contributions to the IV amount to 1.4% of wages and are divided equally between the employee and the employer.
3. Income replacement scheme (EO)
The income replacement scheme is a compulsory insurance for all individuals in Switzerland. Those serving in the Swiss Army, doing alternative civilian services or are in maternity leave are indemnified for loss of earnings via this scheme. Both employers and employees contribute 0.50% of their wages to the EO. Since the first pillar does not always achieve its goal of securing a minimum level of income, supplementary benefits can be claimed depending on the person's asset and income situation (EL). Since the first pillar does not achieve its goal of securing a minimum level of income, supplementary benefits can be claimed depending on the person's asset and income situation (EL).
The second pillar is governed by the provisions of the laws on occupational pension provision (BVG) and accident insurance (UVG). Together with the first pillar (state pension provision), the employees' benefit insurance is designed to guarantee maintenance of the current standard of living in case of retirement, disability or death.
Employees who are paid by the same employer an annual salary exceeding CHF 21,150 are subject to compulsory insurance against death and disability starting on 1st January following their 17th birthday, and to old-age insurance from 1st January following their 24th birthday. The share of the salary which is subject to compulsory insurance is capped. Actually, the amount of annual salary between CHF 24,675 (the coordination deduction) and CHF 84,600 must be insured – often a higher (beyond obligatory) portion of the salary is insured. The part of salary between CHF 24,675 and CHF 84,600 is known as the "coordinated salary". The minimum coordinated salary is CHF 3,525. An employer who employs persons subject to compulsory insurance must be affiliated to a provident institution entered in the register for occupational benefit plan.
The contributions into the pension scheme depend on age and include a minimum saving portion of 7% - 18% of the coordinated salary plus a risk portion. Both are equally shared between employer and employee.
The benefits of the insured persons consist in the old age, invalidity and survivors pensions. In order to acquire residential real estate property, a person may pledge its claim against the pension insurance or may even, if certain conditions are met, withdraw the respective money that was blocked for future pensions.
Swiss and foreign insured persons are basically treated equally. In case an insured person leaves Switzerland for good, upon request, the pension institution has to pay out the funds blocked for future pensions unless the person leaves Switzerland to re-side in an EU / EFTA State. In this case, only the part payed in beyond obligatory may be paid out.
Since the first and second pillar only partially achieve their aim, the state also supports private saving plans called the third pillar. It aims to systematically close gaps in a person's pension coverage.
Payments to the third pillar offer partial tax advantages. Within the third pillar, it has to be distinguished between the fixed retirement savings schemes (pillar 3a), which offer tax benefits and the flexible retirement saving schemes (3b), which cover savings vehicles that do not normally offer tax advantages (e.g. accounts, bonds, money market investments, equities, investment fund units and residential property).
As opposed to the mandatory AHV insurance and pension funds, there is a free choice of savings arrangements under the third pillar 3a and 3b. Nevertheless, the capital saved under the 3a pillar is only released when an insured event occurs (retirement, death or invalidity) or under certain circumstances for purchasing one’s own home. Contrary to the 3a pillar capital, the capital saved under the 3b pillar is freely available at any time, unless other provisions in a specific savings contract were agreed upon. Furthermore, it is possible to conclude life insurance policies that may benefit from tax privileges.
II. The Swiss Healthcare System
Switzerland has a very high level of healthcare. Since the costs are respectively high, healthcare is consistently put high on the political agenda. It is mandatory for everyone living in the country to have basic health insurance. Foreigners must obtain health insurance within the first three months of their arrival in Switzerland. Basically, providers are free to choose where to locate and patients are free to choose providers. Swiss private insurers are required by law to offer coverage for all citizens, regardless of age or medical history. It is important to realize that all individuals are responsible for their healthcare insurance themselves - employers do not have to arrange for health insurance coverage for their employees
Employers are obliged to insure all employees against occupational accidents and in most cases as well against non-occupational accidents. Usually, employers pay the premiums for occupational accidents and employees pay those for non-occupational accidents.
Furthermore, the federal law on labour requires all employers to protect the health of their employees by applying all necessary and (financially and technologically) reasonable safety-measures. The Cantons have to ensure this requirement.
The basic package and the services to be covered by the compulsory health insurance are defined by law. Basically, the insurance provider shall reimburse health service providers like doctors and hospitals if the services are clinically effective, appropriate and cost-effective. The same criteria apply to pharmaceuticals, to medical devices and to medical aids. There is a national association for promoting quality in healthcare which is the main body responsible for development in quality management that monitors, coordinates and supports work in this area.
Healthcare insurance covers the costs of medical treatment and hospitalisation of the insured. However, the patients have to pay part of the costs of the treatment themselves. This amount called the franchise ranges from CHF 300 to a maximum of CHF 2'500 as chosen by the insured person. The insurance premiums are adjusted accordingly, i.e. if the insured person chooses a high franchise, the premiums are lower. In addition, the patients are also charged with 10% of the costs over and above the franchise up to a maximal amount of CHF 700.
The compulsory insurance with predefined and general coverage can be supplemented by private complementary insurance. Such private coverage usually encompasses treatment categories not being covered by the basic insurance or improves the standard of room and service in case of hospitalisation.
Several foreign insurance companies offer their services for basic health insurance and many foreigners who start living in Switzerland are covered by such policies. However, very often the Swiss insurance authorities do not accept such global health insurance even if the policy states that it covers medical care also in Switzerland. Thus, in general, with some exceptions with respect to EC nationals, everybody has to register with a Swiss health insurance company.
Apart from very few exceptions, dental treatment is not covered by the basic health insurance. There is the option to conclude an additional dental health insurance. Since such additional coverage is usually very expensive, dental health insurance is rarely used - most of the costs for dentists are paid directly out of the pocket of the patients.
There are public, publicly subsidised and private hospitals. The financing of the public hospitals is maintained by the fees for the treatments (patients, health insurances) and by subsidies of the Cantons and municipalities. This cantonal funding of the local hospitals urges patients from out of the Canton usually to pay higher rates than inhabitants of the supporting Canton. The (compulsory) basic insurance usually covers only a treatment in the general ward of a hospital (there are exceptions in cases of emergency, as e.g. cardiac surgery or neurosurgery, that are both restricted to certain specialized centres).
Besides its considerable level of general public healthcare, Switzerland has one of the world's largest private healthcare sectors. Particularly Zurich and Geneva draw many international patients seeking health advice and treatment with the world renowned specialists in the university hospitals.
III. Unemployment Insurance (ALV)
Employees in Switzerland who have not yet reached retirement age are compulsorily insured against loss of income through unemployment. Unemployment insurance contributions amount to 2.2% for salaries up to CHF 126,000 and 1% for the portion of the salary that exceeds CHF 126,000. Contributions are split between the employer and the employee.
IV. Overview of social security contributions
Employers participate in the funding of most insurances and all social securities contributions are in general the employer’s responsibility with the exception of health insurance, which, unlike in the Unites States (US), is financed by each insured person who pays premiums based on their age and where they live. The employer has to withhold and remit the total contribution including the employee’s part from his/her gross salary.
Therefore, for employed individuals subject to Swiss social securities contributions the following is payable (for self-employed individuals different contribution rates may apply):
* starting on January 1, 2016
V. Bilateral Social Security Agreements, particularly with the US
Switzerland has concluded social security agreements with over 40 countries to date. The aim of these agreements is to guarantee the equal treatment of citizens, the determination of the applicable legislation and the payment of social security benefits abroad.
On November 1, 1980, the Agreement between the U.S. and Switzerland on Social Security entered into force. The Agreement provides for equal treatment of the US and Swiss nationals under the social security laws of the two countries. Benefits to which a US or Swiss national is entitled under a countries national law or the agreement will not be withhold merely because the person is outside of that country.
As a principle, an employee is subject to mandatory social security coverage of the country in the territory of which he is employed. However, employees who are sent by their employer with a place of business in one of the two countries to the other country, shall be subject to compulsory social security coverage in the first country only, provided that the employment in the other country is not expected to be longer than a time period of five years. As opposed to this principle, a person who is self-employed and resident of the territory of either contracting state is subject to compulsory social security coverage only of the country in whose territory the person resides.
VI. Agreement on the free Movement of Persons with the EU
The agreement on the free movement of persons is one of seven bilateral agreements between Switzerland and EU which came into effect on 1 June, 2002. Under this Agreement, workers (Swiss nationals and citizens of EU member states) will gradually be allowed to move freely between Switzerland and the EU. The right to freedom of movement basically includes the mutual recognition of professional qualifications (with exceptions) and the coordination of national social security systems (Please also refer to section II of Swiss Immigration Law .
The scope of the Agreement is limited to a coordination of the different Social Security Systems, i.e. there is no standardised system in all countries - the structure, form and scope of the benefits provided by each national social security system shall remain the same. However, the Agreement mitigates or eliminates negative effects to a person's insurance cover as a result of moving to a different country for the purposes of employment and/or residence. The Agreement applies to the entire social security system (old age, invalidity, surviving dependants, illness, maternity, occupational accidents and diseases, unemployment, and family allowances). However, social welfare is not covered by the agreement.
The EFTA agreement contains the same provisions as the Swiss-EU agreement on the free movement of persons, but applies to citizens from EFTA member states.
V. Useful Links
  • Bilateral Social Security Agreement between the US and Switzerland
  • Federal Office of Public Health
  • Health Insurance (Federal Office of Public Health)
  • Overview of Swiss Social Security (Federal Social Insurance Office)
  • Social Security Agreement between Switzerland and the EU
  • State Secretariat for economic affairs
  • Swiss National Accident Insurance