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15/05/2019

AGIRC-ARRCO merger: how will social protection systems be affected?

Since 1 January 2019, the merger between the AGIRC and ARRCO schemes has affected how managers’ pensions are calculated. Moreover, with the disappearance of AGIRC, the inter-professional definition of the “Manager” (French “Cadre”) status has also disappeared, as well as one of the foundations of supplementary social protection: the obligation to pay contributions equal to 1.50% of instalment A (French “Tranche A”).

How will the “Manager status” be defined tomorrow?

The “Manager status” is specific to French labour law, defined in reference to the AGIRC agreement of 1947. When the labour-relations partners confirmed the disappearance of AGIRC, they made a commitment to negotiating a new definition of the status.

 

The future of the Manager status is weakened by the termination of the supplementary-pension scheme’s specific characteristics. It may also be challenged on the basis of equality as regards employee treatment. Since 1 January 2019, the key question has been to determine how to qualify “Managers” in a company?

 

A draft inter-professional agreement states that the definition should be taken from the branch agreements. It would be up to the branch agreement to “specify at which classification level employees benefit from the specific provisions for Managers”. If the branch agreement gives no specific details, companies will have to use other criteria to establish who has “Manager status”. This would thus lead to a “Manager status” based on variable criteria.

 

In terms of Social Protection, there is also the question of defining objective categories. Indeed, the URSSAF only authorises the implementation of different social protection schemes in a company if the groups of beneficiaries are defined according to precise criteria.

 

Until now, the regulations generally drew on the criteria referred to the AGIRC Agreement, which provided a more legitimate basis for exemption from a single social protection scheme due to its shared inter-professional origin. The criteria linked to branch-agreement classifications could only be used on a limited level: in terms of supplementary health insurance, they implied that the employer had to justify their objectivity.

 

As such, it was likely there would be a period of uncertainty concerning how to define the categories of beneficiaries for the Health Care, Life Insurance or Supplementary Pension schemes. In a letter sent to ACOSS on 25 February 2019, the Social Security Directorate specified that objective categories of staff could still be defined in reference to the AGIRC Agreement of 14 March 1947, or the ARRCO Agreement of 8 December 1961, even though these have been “replaced” by the National Inter-professional Agreement (ANI) of 17 November 2017 establishing the AGIRC-ARRCO unified system.

What are the potential changes as regards the mandatory “1.50% of Instalment A (Tranche A)”?

By imposing a contribution of 1.50% of Instalment A (Tranche A) to finance Life Insurance, and primarily the risk of death, the 1947 AGIRC agreement encouraged the development of supplementary social protection for Managers (“Cadres”) initially, but then also for all employees.

 

The disappearance of AGIRC could have meant the end of this category-based obligation. However, this will not be the case, perhaps for fear of undermining the Life Insurance system, which, unlike Health Care schemes, is not subject to any legal obligations.

 

However, it remains to be seen what the scope of this obligation will be in the future. The draft agreement allows the branches to use this contribution to finance collective guarantees other than Life Insurance…

 

In view of the highly structured “100% Health” reform and uncertainties about the aftermath of the AGIRC-ARRCO merger, Social Protection will once again be a major focus for companies in 2019. Indeed, it gives companies an opportunity to establish the exact level of social protection they wish to offer their employees.

EXPERT OPINION

Julie Jacotot, a lawyer specialising in labour law, partner at the Cabinet Fromont Briens

We sometimes forget, but the collective agreement of 14 March 1947 concerning the supplementary pension scheme for Managers (“Cadres”) also included a Life Insurance component. Indeed, Article 7 of the agreement required employers to contribute 1.50% of their Managers’/assimilated Managers’ (further to “Article 4” and “Article 4a”) remuneration not exceeding Instalment A (“Tranche A”), i.e. a social security threshold, to Life Insurance. The merger of the AGIRC-ARCCO schemes removed the concept of “Manager” in terms of a supplementary pension scheme (and therefore the definitions of employees in “Article 4 and 4a”) and this could have meant that this obligation concerning “1.50% of Instalment A” would simply disappear.

 

However, this does not seem to be what the labour-relations partners intended, since they have decided to retain it, independently. To be more precise, on the day the national inter-professional agreement (ANI) of 17 November 2017 set up the new AGIRC-ARRCO scheme, another ANI was established concerning Manager Life Insurance, in parallel. This ANI specified that the “1.50% Instalment A” scheme would remain unchanged, if no new framework agreement was in effect on 1 January 2019.

 

After a break of several months, the negotiations on the framework resumed last March, on the insistence of the public authorities. Moreover, the Social Security Directorate seems to be waiting for the outcome of the negotiations before considering an amendment to the Decree of 9 January 2012 concerning objective categories. In the coming months, we should have a clearer view of the “fate” of the “1.50 Instalment A” obligation and the consequences of the reform of the AGIRC-ARRCO schemes on the URSSAF exemption rules concerning employer financing of supplementary social protection schemes. What seems certain is that the concept of “Managers” should continue to be a feature of the schemes implemented in companies.”