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Social Security in Switzerland
Details on Site Contribution
Site contribution
Date: January 2011
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 aim of the three pillar system that forms part of the Swiss constitution is to maintain the accustomed standard of living during retirement or in the event of disability (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, only employees are covered by the second pillar. The third pillar is based on a voluntary basis. In a summary, the three pillars are the following:
The first pillar covers the AHV pension (old age and survivors' insurance), disability insurance (IV), compensation for loss of earned income during military service as well as maternity insurance (EO) and unemployment insurance (ALV). AHV/IV insurance is mandatory for all Swiss residents.
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. The BVG contributions are mandatory for employees who have to contribute to the AHV/IV and who earn an annual salary exceeding a certain amount (currently CHF 20'880).
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 generally treated equally. In case an insured person leaves Switzerland for good, upon request, the pension institution is required to pay out the funds blocked for future pensions. There are exceptions for specific provisions that apply in case an insured person leaves Switzerland to reside in the EU or EFTA.
Since the first and second pillar achieve their aim only partially, the state also supports private pension provision 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. 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.
d)  Overview
Graphically, the Swiss three pillar system can be summarized as follows:

II. The Swiss Healthcare System
Switzerland has a very high level of healthcare. Since the costs are accordingly high, healthcare is consistently a high priority on the political agenda. It is mandatory for everyone living in the country to have basic health insurance. Providers are free to choose where to settle down in business and people are free to choose providers. Swiss private insurers are required by law to offer coverage for all citizens, regardless of age or medical history. Foreigners must obtain health insurance within the first three months of their arrival in Switzerland. It is important to know that all individuals are responsible for their healthcare insurance themselves - employers do not have to arrange for health insurance coverage for their employees.
However, employers are obliged to insure all employees against accidents whereas costs are usually split between employee and employer. Furthermore, the federal law on labor 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 bear 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 patient's pocket.
There are public, publicly subsidized 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 to usually pay higher rates than inhabitants of the supporting Canton. The (compulsory) basic insurance normally 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. Bilateral Social Security Agreements, particularly with the U.S.
To date, Switzerland has concluded social security agreements with over 40 countries. The aim of these agreements is to guarantee equal treatment of citizens, the determination of the applicable legislation and the payment of social security benefits abroad.
The agreement between the U.S. and Switzerland on Social Security entered into force on November 1, 1980. 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 that are sent by their employer to a subsidiary in the other country shall be subject to compulsory social security coverage in their home 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.
IV. Agreement on the free Movement of Persons within 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 refer also to section II of the Swiss Immigration Law on our website).
The scope of the agreement is limited to a coordination of the different Social Security Systems, i.e. there is no standardized 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