#1. Legislative History

N. 1 The three-pillar concept was anchored in the Federal Constitution with the adoption of Art. 34quater old Federal Constitution on 3 December 1972 (BBl 1971 II 1609). The Federal Council message states that Swiss old-age provision should be based on a coordinated system of state basic security, occupational provision, and individual self-provision. The total revision of the Federal Constitution adopted this basic concept unchanged in Art. 111 Federal Constitution.

N. 2 By explicitly anchoring the three-pillar principle, the constitutional legislator wanted to create a clear structure for Swiss social insurance. The Federal Council message on the popular initiative concerning old-age, survivors' and disability insurance of 10 November 1971 emphasised that comprehensive provision could only be achieved through the interaction of all three pillars (BBl 1971 II 1609, 1625).

#2. Systematic Classification

N. 3 Art. 111 Federal Constitution is located in Chapter 2 («Social Goals, Education and Research») of Title 3 of the Federal Constitution. It gives concrete form to the social goal of → Art. 41 para. 2 Federal Constitution (social insurance) and forms the constitutional basis for the special provisions → Art. 112 Federal Constitution (OASI/DI), → Art. 112a Federal Constitution (supplementary benefits), → Art. 113 Federal Constitution (occupational provision) and → Art. 114 Federal Constitution (unemployment insurance).

N. 4 Unlike Art. 41 Federal Constitution, which as a programmatic provision does not establish subjective rights, Art. 111 Federal Constitution contains binding structural requirements for the legislator. Some commentators emphasise that Art. 111 Federal Constitution does not merely represent a competence provision, but contains material design principles.

#3. Elements of the Offence / Normative Content

#a) The Three-Pillar Principle (Para. 1)

N. 5 Art. 111 para. 1 Federal Constitution anchors the three pillars as the supporting structure of Swiss old-age, survivors' and disability provision. According to one view in the literature, these pillars are substantive design principles that supplement the competence provision in substance, or substantive guidelines for the legislative mandate.

N. 6 The first pillar (OASI/DI) should secure subsistence needs according to prevailing doctrine (Locher/Gächter, Outline of Social Insurance Law, 4th ed. 2014, § 3 N. 12). It is based on the pay-as-you-go system and covers the entire resident population on a mandatory basis.

N. 7 The second pillar (occupational provision) should, together with the first pillar, enable the continuation of the accustomed standard of living in an appropriate manner (Scartazzini/Hürzeler, Federal Social Insurance Law, 4th ed. 2012, § 15 N. 3). It functions according to the funded system and is mandatory for employees with a certain minimum income.

N. 8 The third pillar (self-provision) supplements the collective measures of the first two pillars according to individual needs. It is divided into tied self-provision (pillar 3a) with tax privileges and free self-provision (pillar 3b) without special tax promotion (Valterio, Old-Age and Survivors' Insurance Law, 2011, p. 45 ff.).

#b) Constitutional Limitations

N. 9 According to one view in the literature, Art. 111 para. 1 Federal Constitution forms «a constitutional limitation for the competences of the legislator in the area of old-age, survivors' and disability provision». The legislator may not abandon the three-pillar principle or completely undermine individual pillars (Tschudi, The New Federal Constitution as the Basis of Social Insurance Law, SZS 2001, 63, 71).

#c) Permanent Purpose Fulfilment (Para. 2)

N. 10 According to Art. 111 para. 2 Federal Constitution, the Confederation must ensure the permanent purpose fulfilment of the first and second pillars. In the literature, this is interpreted to mean that the constitutional legislator intended to stress that the first and second pillars must perform their tasks on a lasting basis within a coordinated system.

N. 11 Permanent purpose fulfilment encompasses both financial sustainability and material goal achievement according to prevailing doctrine (Häfelin/Haller/Keller/Thurnherr, Swiss Federal Constitutional Law, 10th ed. 2020, N. 789). The Confederation must take action if financing or performance goals are endangered.

#d) Tax Measures (Para. 3)

N. 12 Art. 111 para. 3 Federal Constitution empowers the Confederation to oblige the cantons to grant tax privileges to pension institutions and pension benefits. This competence was implemented in Art. 80 ff. BVG and Art. 81 ff. OASI Act (Rhinow/Schefer/Uebersax, Swiss Constitutional Law, 3rd ed. 2016, N. 3712).

#e) Promotion of Self-Provision (Para. 4)

N. 13 The promotion of self-provision takes place «in cooperation with the cantons» through tax and property policy. This cooperative competence underscores the federalist character of pension policy (Müller/Schefer, Fundamental Rights in Switzerland, 4th ed. 2008, p. 892).

#4. Legal Consequences

N. 14 Art. 111 Federal Constitution establishes a legislative obligation of the Confederation. The legislator must design the three pillars and ensure their coordination. A complete dismantling of a pillar would be unconstitutional.

N. 15 For individuals, Art. 111 Federal Constitution does not establish direct subjective rights. Claims only arise from the implementing laws (OASI Act, BVG, BVV 3). The provision primarily operates as an objective legal institutional guarantee (Gächter, Basic Structures of Swiss Social Security Law, ZSR 2014 II 5, 42).

N. 16 The cantons are obliged to cooperate in tax and property policy (para. 4). They can be compelled by federal law to grant tax privileges to pension institutions (para. 3).

#5. Points of Controversy

N. 17 Disputed is the normative force of the three-pillar principle. While Tschudi (The Three-Pillar Principle, SZS 1987, 1, 15) and Brühwiler (Occupational Staff Pension Schemes in Switzerland, 1989, p. 45) assume a strict constitutional obligation, a minority opinion holds that the legislator has wide design latitude as long as the basic structure is preserved.

N. 18 The scope of «permanent purpose fulfilment» (para. 2) is also controversially discussed. Some commentators demand an active monitoring and intervention obligation of the Confederation. Other authors emphasise the primary responsibility of the social partners in the second pillar and warn against excessive state interventions.

N. 19 The equal tax treatment of the pillars is also disputed. While tied self-provision (pillar 3a) is tax-privileged, comparable promotion for voluntary buy-ins to the second pillar is partially lacking. Part of the doctrine sees this as an incoherence of the system.

#6. Practical Notes

N. 20 In legislation in the area of social insurance, it must always be examined whether the envisaged measures are compatible with the three-pillar principle. Reforms must maintain the balance between the pillars and may not structurally weaken any pillar.

N. 21 In legal application, coordination between the pillars must be observed. Over-compensation must be avoided (→ Art. 69 GISA), whereby the constitutionally intended complementary function of the pillars must not be undermined.

N. 22 For advisory practice, it is decisive that clients are informed about all three pillars. Optimal old-age provision regularly results from the coordinated use of all three pillars. In particular, attention should be drawn to tax optimisation possibilities with pillar 3a and the importance of the BVG mandatory scheme.

N. 23 In international situations, it should be noted that only the first and second pillars fall under the coordination rules of the bilateral agreements and the Agreement on the Free Movement of Persons. The third pillar is fundamentally subject to the national law of the state of residence (→ BGE 140 II 364).

#Fundamentals of the Three-Pillar System

BGE 130 I 205 (30.6.2004) Constitutional anchoring of the three-pillar concept since 1972

The Federal Supreme Court fundamentally establishes that Swiss old-age, survivors' and disability insurance is based on the three-pillar concept, which has been anchored in the Federal Constitution since 1972. The Court explains the constitutional basis of the three pillars and their tax treatment.

«Die schweizerische Alters-, Hinterlassenen- und Invalidenvorsorge beruht auf der so genannten Dreisäulenkonzeption, die seit 1972 in der Bundesverfassung verankert ist (Art. 34quater aBV, Art. 111 ff. BV).»

BGE 140 II 364 (23.6.2014) Delimitation of the third pillar from OASI insurance

The Court clarifies that pillar 3a is only tax-deductible for persons insured under OASI. The provision of Art. 111 FC requires coherent implementation of the three-pillar system.

«Den jährlichen Beitrag für die Säule 3a kann nach DBG nur steuerlich abziehen, wer der AHV-Pflicht unterstellt ist.»

BGE 117 Ib 358 (25.10.1991) Constitutional foundation of the three-pillar concept

In this early decision after the introduction of the OPA, the constitutional significance of the three pillars is reaffirmed. The Court holds that the three-pillar concept as a system of old-age, survivors' and disability insurance is constitutionally anchored.

«È stato quindi ancorato nella Costituzione il cosiddetto concetto dei tre pilastri della previdenza per la vecchiaia, i superstiti e l'invalidità.»

#First Pillar: OASI/DI

BGE 135 V 33 (19.12.2008) Coordination between OASI old-age pension and occupational pension scheme

The Federal Supreme Court addresses the constitutionally required coordination between the pillars, particularly in cases of overcompensation. Art. 111 FC requires a coordinated pension system.

«Die nach dem Erreichen des Pensionierungsalters auszurichtende lebenslängliche Invalidenrente der obligatorischen beruflichen Vorsorge kann in den Schranken des Art. 24 BVV 2 gekürzt werden.»

BGE 139 V 12 (24.1.2013) Contribution obligation in early retirement as part of the first pillar

The Court clarifies the OASI contribution obligation in early retirement and thereby confirms the central role of the first pillar as the basis of the system under Art. 111 FC.

«Ob ein Versicherter erwerbstätig ist, beurteilt sich nicht in Funktion der Beitragshöhe, sondern nach den tatsächlichen wirtschaftlichen Gegebenheiten.»

#Second Pillar: Occupational Pension Scheme

BGE 115 V 337 (22.11.1989) Delimitation from the third pillar

The Court addresses the delimitation between occupational pension scheme and tied self-provision (pillar 3a) in the context of OASI contribution collection.

«Für die Belange der AHV-Beitragserhebung dürfen die Einlagen des Selbständigerwerbenden in der individuell gebundenen beruflichen Vorsorge (Säule 3a) nicht vom Brutto-Erwerbseinkommen abgezogen werden.»

BGE 121 III 285 (7.9.1995) Protection from attachment and systematic classification of occupational pension scheme

The Federal Supreme Court addresses the application of protection from attachment to benefits from pillar 3a and confirms the systematic classification within the three-pillar system.

«Ces deux formes constituent, dans le système des trois piliers de la prévoyance, le 3e pilier A.»

#Third Pillar: Self-Provision

BGE 135 II 183 (10.7.2009) Tax treatment of pillar 3b

The Court addresses the tax distinction between tied provision (pillar 3a) and unrestricted provision (pillar 3b) and their constitutional classification within the system of Art. 111 FC.

«Steuerliche Behandlung von Leistungen aus Vorsorge im Allgemeinen. Begriff der Leibrente und der "Zeitrente". Unterscheidung zwischen Kapitalversicherung und Rentenversicherung.»

2A.292/2006 (15.1.2007) Basic ability insurance in pillar 3a

The Federal Supreme Court addresses special forms of provision within tied self-provision and their constitutional classification.

2C_652/2018 (14.5.2020) Current developments in the third pillar

A more recent decision on special issues of self-provision within the constitutionally prescribed system.

#Tax Aspects of the Three-Pillar System

BGE 130 I 205 (30.6.2004) Double taxation of pension benefits

The Court extensively addresses intercantonal double taxation of benefits from all three pillars and develops a comprehensive systematic approach to tax treatment:

«Mit der obligatorischen Alters-, Hinterlassenen- und Invalidenversicherung (AHV/IV) als erster Säule soll, zusammen mit den Ergänzungsleistungen, der Existenzbedarf gedeckt werden. Die berufliche Vorsorge soll als zweite Säule zusammen mit der ersten die Fortsetzung der gewohnten Lebenshaltung in angemessener Weise ermöglichen. Die dritte Säule bildet die Selbstvorsorge, mit der die kollektiven Massnahmen der andern beiden Säulen entsprechend den persönlichen Bedürfnissen ergänzt werden.»

2C_1050/2011 (3.5.2013) Tax deductibility of pillar 3a

The Federal Supreme Court reaffirms the constitutional requirements for the tax treatment of tied self-provision.

2C_22/2016 (21.4.2016) Recent tax law developments

The Court addresses current issues concerning the tax implementation of the three-pillar system.

#European Law Aspects

BGE 140 II 364 (23.6.2014) Agreement on the Free Movement of Persons and the three-pillar system

The Federal Supreme Court addresses the compatibility of the Swiss three-pillar system with the Agreement on the Free Movement of Persons and confirms its constitutional foundation.

«Die Säule 3a unterliegt nicht dem System der sozialen Sicherheit nach Art. 8 und Anh. II FZA. Das Diskriminierungsverbot von Art. 9 Anh. I FZA bezieht sich nur auf Arbeitnehmer und nicht auf solche Personen, die im Aufnahmestaat (d.h. in casu in der Schweiz) nur Wohnsitz nehmen.»

#Constitutional Coordination of the Pillars

BGE 136 V 419 (22.10.2010) Coordination of survivors' benefits

The Court addresses the constitutionally required coordination between the various pillars for survivors' benefits.

2C_916/2020 (19.5.2022) Current developments in coordination

A more recent decision on coordination between the pillars within the framework of the constitutional requirements of Art. 111 FC.

#Cantonal Court Case Law

SB.2011.00037 (21.9.2011, Administrative Court of Zurich) International aspects of the third pillar

The Administrative Court of Zurich addresses the deductibility of OASI and pillar 3a contributions in international relations and confirms the systematic classification.

SB.2013.00161 (2.4.2014, Administrative Court of Zurich) Tax deductibility upon cessation of gainful employment

The Court addresses special issues concerning the tax treatment of occupational pension scheme upon cessation of gainful employment and its constitutional foundations.