Published on: November 16, 2024 | By: @rprasanth_kumar
The Employee Savings Plan (PEE: Plan d’épargne entreprise) is a collective savings system allowing employees to invest with company contributions and enjoy certain tax benefits in France. Funds in a PEE are locked for five years, but early withdrawal is possible under specific circumstances.
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Overview of PEE
A Plan d’Épargne Entreprise (PEE) in France is a collective savings plan offered by companies to help employees build a portfolio of securities, such as stocks, bonds, negotiable debt instruments, mutual fund units (SICAVs and FCPs), etc. The list of eligible securities may vary depending on the PEE account.
- A PEE enables employees to build an investment portfolio that includes securities such as stocks, bonds, and mutual fund shares.
- The funds are locked for 5 years but can be withdrawn earlier under certain situations.
- Taxation depends on when the funds are withdrawn.
Types of PEE Accounts
There are 3 main types of PEE,
- PEE: A company-level savings plan allowing employees to benefit from savings incentives.
- PEG: When a PEE is implemented across multiple companies within the same corporate group, it is called a “Plan d’Épargne Groupe” (PEG).
- PEI: When a PEE is set up for multiple companies outside the same group, it becomes a “Plan d’Épargne Interentreprises” (PEI).
Note: Both PEG and PEI operate in the same way as a PEE.
Who can benefit from PEE?
- If a company offers a PEE, it must be available to all employees, possibly with a maximum of three months of employment.
- If employment ends (démission, licenciement, etc), employees may retain the PEE under certain conditions.
- Small businesses with under 250 employees can also extend PEE benefits to business owners and their spouses or civil partners with collaborator or associate status.
How do contributions to PEE work?
Employee Contributions
Contributions from an employee are optional and they can be from,
- Intéressement: A direct performance incentive plan allowing employees to receive a bonus according to their individual contribution to company’s performance. This mechanism aims to motivate employees by aligning their financial rewards with the company’s objectives, creating a win-win dynamic. It’s often used by companies to encourage greater employee engagement in achieving specific performance targets.
- Participation: It is a mandatory profit-sharing mechanism. It requires eligible companies to redistribute a portion of their annual profits to employees, reflecting a commitment to equitable financial sharing rather than direct performance incentives. Participation allows employees to benefit from the company’s success and receive a share of profits that is separate from their salary.
- Voluntary contributions but capped at 25% of gross annual salary.
- From a Compte épargne temps (CET) account which allows an employee to accumulate unused paid leaves or breaks.
Employer Contributions (Matching Contributions)
- Companies can supplement employee contributions with matching contributions known as abondements.
- Matching cannot exceed three times the employee’s amount or €3,709.44, but for specific investments in company stock, this cap rises to €6,676.99.
Investment and Availability of Funds
Investment Options
- PEE funds may be invested in company shares, mutual funds, or socially beneficial enterprises.
Availability of Funds
- PEE funds are generally locked for five years but may be accessed early in specific situations, such as marriage, birth of a third child, divorce with custody, severe disability, job loss, new business ventures, and others.
- Fore more details, please refer to Eligibility conditions for early withdrawal of funds from a PEE account.
Tax on PEE
During the Plan’s Term
- Company contributions are tax-exempt up to a limit (€3,709.44 or €6,676.99 if invested in company shares) but are subject to social security charges of 17,2 % on the capital gains.
- Profit-sharing and earnings reinvested in the plan are tax-exempt but voluntary employee contributions are not deductible.
Upon Early Withdrawal or Plan Termination
- Withdrawals are generally tax-free, though social charges of 17,2 % apply to capital gains from the plan.
DISCLAIMER
Any finance-related information shared is not professional legal, tax, or investment advice. The information provided is of an educational and general nature and is not investment advice within the meaning of Articles L. 321-1 and D. 321-1 of the French Monetary and Financial Code. Investment carries risks of loss and past performance does not guarantee future performance. Please consult a financial advisor for any professional advice.