The Swiss canton of Berne has conceded it owes the BPK and the BLVK – its public pension funds – CHF1.1bn (€900m), although plan sponsors and members will need to account for the remaining CHF1.7bn funding shortfall.
The canton estimated that, for the CHF10.5bn Bernische Pensionskasse (BPK), the remaining shortfall will be CHF923m, while the shortfall for the CHF5.9bn Bernische Lehrerversicherungskasse (BLVK) for teachers in the canton stands at CHF776m.
According to Swiss law for cantonal pension funds passed in 2013, public authorities must decide whether to fund their pension plans fully or stick with a state guarantee.
For the Berne pension funds, the target to achieve full funding was set for 20 years from now.
To fill the funding gap, the BPK – which is 83.4% funded – has set additional recovery contributions of 2.3% on top of regular contributions to the fund.
At the BLVK, 81% funded, the rate was set at 4.25%.
The canton and various cantonal authorities will be responsible for 60% of the cost of the recovery measures, while employees will be responsible for the remainder.
In 2013, the BPK managed to push its funding level up from 78.8% with a 9.3% return.
At the BLVK, a 6.3% return also improved funding, which had stood at a similar level to that of the BPK at year-end 2012.
Both funds will be switched from defined benefit to defined contribution plans.
This decision had been postponed three years ago, as the canton was still undecided on how to run the fund in future.
In May, the majority of the people of Berne agreed to the key changes set down in the new legal framework for these changes, which will take effect from 1 January 2015.