Until February 2020, the Romanian legal framework regarding pensions followed the three-pillar model generally promoted by the World Bank.

However, a recent enactment (i.e. Law no. 1/2020 on occupational retirement provisions) that entered into force on 7 February 2020, transposing Directive no. 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision, has introduced a fourth pillar into Romania’s legal framework on occupational retirement provisions.


From the perspective of the employer-employee relationship, the following characteristics of the occupational retirement provisions should be noted:

  • fourth-pillar occupational retirement provisions are optional and can be implemented by each employer, under the conditions provided by law;
  • the occupational retirement provisions represent an amount paid periodically, in addition to public and private pension;
  • the employer is entitled to propose an occupational retirement provisions scheme to its employees via a collective bargaining agreement or, in absence of such an agreement, via the individual employment agreements of the employees; for such purpose, the employer will sign a management contract with an authorised management company and the employees will fill in a request to participate in the fourth pillar.
  • an employer that envisages implementing a fourth-pillar scheme for occupational retirement provisions is compelled to offer this type of benefit to all employees; the employer cannot condition the conclusion of an individual employment agreement to participation in such a scheme;
  • an occupational retirement provisions fund can be incorporated and managed by an entity authorised by the competent Romanian authority (i.e., the Financial Supervisory Authority) or by an EU/EEA competent authority;
  • the employer may establish different contributions for its employees depending on various criteria, i.e., seniority, amount of salary, position;
  • contributions to a fourth-pillar fund are comprised of: (a) the contribution of the employer and (b) the contribution of the employee (i.e., a maximum of one-third of the monthly gross salary, without exceeding (taking into consideration the total amount of withholdings) one-half of a employee’s monthly net salary);
  • contributions to the fund are withheld and paid by the employer at the same time as the mandatory social contributions;
  • employees can suspend or cease contributions to the fund by sending a written notice to the employer and to the management company of the occupational retirement provision 30  calendar days before suspension or cessation; the employer can decide, anytime, to modify, suspend or cease contributions to a fourth-pillar fund for its employees by sending a written notice to its employees and to the management company of the occupational retirement provisions 30 calendar days before applying its decision;
  • the amounts representing contributions to fourth-pillar occupational funds in Romania are fiscally deductible, as per the applicable fiscal legislation.

Differences between the third and fourth pillars

The main differences between the occupational retirement provisions (fourth pillar) and private pension (the third pillar - regulated by Law no. 204/2006 on optional pensions) are:

  • unlike the third pillar, where the pension scheme is established by a management company, under the fourth pillar, the employer establishes the pension scheme;
  • contributions to the third pillar cannot exceed 15% of the gross salary of the participant, while contributions to the fourth pillar cannot exceed one-third of the gross monthly salary of the employee, respectively one-half of the net salary, as mentioned above;
  • in case of the third pillar, the private pension is granted, in principle, if the participant reaches 60 years of age and at least 90 monthly contributions are paid; under the fourth pillar, upon the request of the participant, the right to occupational retirement provisions is determined under the conditions provided by the pension scheme established by the employer or when the employee reaches the standard retirement age (if the contributions are insufficient for paying the occupational retirement provisions, the participant will receive a one-off payment or instalments for a maximum of five years).

Romania’s Financial Supervisory Authority will adopt specific regulations to implement the new legal provisions

From the practical perspective, the Statement of Reasons to Law no. 1/2020 on occupational retirement provisions outlines that the fourth pillar will (a) support the long-term financial sustainability of the public pensions scheme by decreasing the pressure exercised on this system and (b) will bring capital contributions to the internal market, which is expected to have positive effects on economic growth.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.