Part IV establishes the basic rules for determining entitlement to and the amount of U.S. and Swiss benefits in the case of people who have periods of coverage in both countries. The new Agreement makes no substantive change in the original Agreement's rules for determining U.S. benefit eligibility or amounts, but does modify several Swiss benefit provisions.
The Swiss social security system provides health insurance (called ‘sickness') benefits, accident and occupational disease and injury benefits, traditional old-age, survivors and disability benefits, military service and maternity earnings replacement benefits, occupational old‑age, survivors and disability benefits, family allowances and unemployment insurance. The scope of the Agreement includes the traditional and occupational old-age, survivors and disability benefits schemes. Persons who meet the applicable eligibility requirements qualify for Swiss social security system benefits. Such requirements may include a minimum coverage period or date of coverage qualifier. Finally, Switzerland's social security system provides needs-based (extraordinary) benefits subject to income limits. These are within the scope of the Agreement, although similar U.S. income support benefits are not.
Switzerland built its social insurance program around a three-pillar system, which includes a basic, (ordinary) mandatory pay-as-you-go old‑age pension scheme, a mandatory occupational pension scheme and voluntary individual accounts. Both mandatory pillars provide for voluntary coverage for certain workers not subject to the general rule of mandatory coverage. Further, both mandatory pillars require contributions from employers and covered employees and self-employed persons to qualify for benefits.
FIRST PILLAR
OLD-AGE BENEFITS
The first pillar applies to all persons residing in Switzerland or gainfully employed in Switzerland. To be eligible for benefits, a person must have one year of contributions. Under the first pillar, the full retirement age is 65 for men and 64 for women. Early retirement is possible at one or two years before retirement age. A deferred old-age benefit is possible from one to five years after full retirement age. A deferred benefit provides an increased benefit amount that takes into account the period during which the worker was eligible for a benefit but not yet receiving it. Child's benefits based on the old-age benefit are payable if the child is under the age of 18 or if the child is in military or vocational training and is not yet age 25. These cannot exceed 60 percent of the maximum monthly old‑age benefit per child. Child's benefits are not payable to early retirees for the period between early and full retirement age. The monthly benefit consists of a fraction of the minimum old-age benefit (fixed amount) and a fraction of the determining average annual income (variable amount). The average annual income consists of indexed income from paid employment (the contributions of persons without gainful employment are counted as income from paid employment), with bonuses for child rearingand service as a caregiver.
SURVIVORS BENEFITS
To qualify for survivors benefits, a widow must be caring for a child or be 45 years old and married for at least five years when widowed. She receives 80 percent of the benefit of the deceased worker. Surviving divorced spouses may qualify under certain conditions. Widows benefits stop if the widow remarries prior to full retirement age. A widower caring for a child under the age of 18 receives 80 percent of the benefit of the deceased worker. Orphan's benefits are payable to surviving children under age 18 (or age 25 if the child is in military or vocational training). Orphan's benefits are 40 percent of the old-age benefit amount, or a maximum of 60 percent if both parents are deceased. Surviving same‑sex registered partners are treated as widowers.
DISABILITY BENEFITS
The first pillar finances disability benefits under the same pay-as-you-go scheme that administers old-age and survivors benefits. The old-age and survivors compensation fund addresses any fluctuations in funding available to the disability program, and covers the same persons. Disability benefits require a minimum of three years of contributions. They are payable six months after the filing date to covered persons age 18 and one month or older who qualify. Qualification requires permanent or long-term full or partial earning capacity loss due to a physical, mental or psychological health impairment persisting after treatment and rehabilitation. Disability may result from a congenital disease, or from sickness or an accident. The monthly disability benefit consists of a percentage of the old-age benefit determined by the percentage degree of disability. Disability benefits are 100 percent of the old-age benefit with more than 69 percent disability; 75 percent with 60‑69 percent disability; 50 percent with 50-59 percent disability and 25 percent with 40-49 percent disability. A complete disability benefit results when the disabled person's work history includes contributions over the same number of years as his or her age cohort. A partial benefit is payable if the number of years of contributions is lower than that of the disabled person's age cohort. Benefits are no longer payable when disability ends, the disabled person qualifies for an old-age benefit or when he or she dies.
SECOND PILLAR
OLD-AGE BENEFITS
The second pillar occupational old-age benefits scheme applies to employees over the age of 24, covered under the first pillar and earning an annual salary above a specified amount. Persons not mandatorily covered and the self-employed may opt to contribute into the second pillar. While it is not possible to qualify without coverage, there are no minimum contribution requirements to qualify for second pillar benefits. Under the second pillar, men must contribute from age 25 to 65 and women from age 25 to 64 to qualify for a full benefit. As under the first pillar, the full retirement age is generally 65 for men, and 64 for women, although individual pension fund regulations may specify a single retirement age regardless of sex. Early retirement as early as age 58 is possible if individual pension fund regulations so provide, and lump sum payments are possible under certain conditions. Child's benefits are payable for children under age 18 who would qualify for an orphan's benefit in the event of the insured person's death (or age 25 if the child is in military or vocational training). The child's benefit amount is the same as the second pillar orphan's benefit, for each child.
SURVIVORS BENEFITS
To qualify for survivors benefits, a surviving spouse must be caring for a child, or be 45 years old and married for at least five years when widowed. The surviving spouse may receive a maximum benefit of 60 percent of the retirement or disability benefit the deceased would have received. A childless surviving spouse under the age of 45 receives a lump sum benefit equal to three years' benefits. Surviving divorced spouses may qualify under certain conditions. Surviving spouse benefits stop if the surviving spouse remarries prior to full retirement age. Orphan's benefits are payable to surviving children under age 18, (or age 25 if the child is in military or vocational training). Each surviving child's benefit is 20 percent of the full disability benefit the deceased would have received, for each child. Swiss law treats surviving same-sex registered partners as surviving spouses.
DISABILITY BENEFITS
The second pillar disability benefit scheme applies to employees older than 17 with earnings above a specified amount. Persons not mandatorily covered and the self-employed may opt to contribute into the second pillar. Second pillar pension funds cover earnings within a particular range called the ‘coordinated salary'. Second pillar funds may cover earnings below the specified amount, but may not cover earnings beyond a specified limit. Persons at least 40 percent disabled under first pillar rules and covered at disability onset qualify. The monthly disability benefit consists of a percentage of the second pillar old-age benefit. This includes consideration of theoretical earnings for the years between disability and retirement age. Benefit levels are subject to the percentage degree of disability. Second pillar disability benefits are 100 percent of the second pillar old-age benefit with more than 69 percent disability; 75 percent with 60-69 percent disability; 50 percent with 50-59 percent disability and 25 percent with 40-49 percent disability.