Back in February, France’s two compulsory second pillar pay-as-you-go pensions associations AGIRC, the general association of pensions institutions for managerial staff, and ARRCO, the association for the supplementary retirement scheme for salaried employees, announced plans to combine their activities following pressure from the country’s employers’ federations and the employees’ trade unions (social partners) for one solitary association in order to reduce management fees. Nine months on, however, cost cutting seems no nearer.
On an annual basis, the social partners, which oversee AGIRC and ARRCO, and oversee the schemes (caisses de retraite) that report to them, decide what percentage of employee contributions should be paid out in management fees. With an ageing population in France an increasing concern, cost efficiency has become a priority in both the second pillar pension industry as well as for the state pension system, and the social partners suggested closer links between the two associations in an attempt to reduce management costs.
Under the old scheme all employees in the private sector were contributing to and receiving pensions from ARCCO (around 15m contributors), while professional and managerial staff were also having to contribute to and receive a pension from AGIRC (around 2.3m contributors). In addition to being cost inefficient – the doubling up of administration for each employer and employee – the overlap was considered confusing.
In an agreement signed on 10 February 2001, AGIRC and ARRCO agreed to come together in some form to tackle the issue of costs. The social partners set December 2002 as a deadline for the two parties to have proposed plans of management fusion, and to have issued guidelines of how and when employees would be dealing with one occupational pension only.
On July 1, the “merger” was made official with the two entities fusing to become a Groupement d’Interet economique – GIE AGIRC ARRCO, and September 25 saw the last of AGIRC’ s and ARRCO’s staff unite under one roof at the new offices in Paris. The managing directors of AGIRC and ARRCO, Marie-Thérèse Lance and Jean-Jacques Marette joined together to become co-managing directors of the new entity.
Now all under one roof, one could be forgiven in thinking that the social partners’ demands have been answered. But as explains Cécile Vokleber, adviser at GIE AGIRC ARRCO, the integration process and “one pension plan” is actually a long way off.
“GIE AGIRC ARRCO is one entity by name, but AGIRC and ARRCO are still two schemes operating independently, with their own staff and their own board of directors. There have been no redundancies. Nothing has changed in that respect. It is more of a joint venture than a merger.”
So what is being done to reduce management costs and simplify the pension system? With December looming around the corner, one would have thought plans would be more concrete. In terms of simplifying the scheme, the approach seems to be “one step at a time”.
Explains Vokleber: “now we are all working together, we can little by little look at harmonising our regulations. There are some differences in the benefits that are on offer by AGIRC and ARRCO, for example the widow/er pension age at AGIRC is 60, and at ARRCO 55. These discrepancies will gradually be ironed out. “
With regards to reducing administrative costs, there also seems no real rush. Indeed, no cost-cutting tools have been implemented, or even decided.
“At the moment we are studying whether employees and employers are interested in receiving and contributing to only one pension. We are looking at different methods of implementing this and will decide on the best way of doing it.”
“Whether it will be implemented in one year’s time, or two or three, cannot be said. But we have to propose some sort of plan by December.”
In GIE AGIRC ARRCO’s defence, priority is being given to “quality of service” rather than rushing in head first with proposals that will be of no help to any of the parties involved.
“With the number of pensioners set to boom in 2005-2010, we need to make sure that reforms will be efficient. We cannot afford to make mistakes by rushing.”
And it does appear that groundwork is being laid, albeit slowly.
Vokleber explains that the issue of data processing – a significant cost inefficiency if there are two associations – has been dealt with. AGIRC and ARRCO have already combined the information stored on internal databases to form one platform holding details on each employee and their career history. Having exchanged information, it will now be easier to calculate employees’ pension incomes, and produce one statement, and one payment in retirement.
So attempts are being made to reduce costs and fulfil the agreement of February 2001, but it will be interesting to see whether in December the social partners are as satisfied with the pace of the reforms.
In the bid for reduction in management fees, the social partners are also calling for a streamlining of France’s caisse de retraite market. ARRCO represents 74 caisses de retraite and ARCCO around 33, many of which offer the same product.
By 2004 the number of supplementary caisse de retraite groups is to be limited from 42 to 25. In a similar fashion to the AGIRC and ARRCO “merger”, groups offering the same products, regarded by the social partners as “unnecessary competition” will be forced to merge or close thereby eliminating unnecessary competition. The 25 re-organised retraite groups will each contain just one AGIRC and one ARRCO caisse and be divided geographically around France.
Plans for the reduction seem to be moving faster than the AGIRC ARRCO fusion. Since the beginning of 2002, new companies may only join a caisse de retraite in their geographic area or which covers their industrial sector.
The new organisation takes some of the administrative burden away from the company by allowing it to make just one overall contribution which GIE AGRIC ARRCO separates accordingly.
Industry participants are confident that the deadline of December 2002 will be met for AGIRC and ARRCO.

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