Pension

Occupational Pensions: Partial retirement is to be treated as part-time work

By judgment of 21 January 2020 (docket number: 3 AZR 281/18) the Federal Labour Court (Bundesarbeitsgericht – BAG) has ruled that for the calculation of pension benefits partial retirement (Altersteilzeit) is to be treated as part-time work (Teilzeitarbeit). The employer and the former employee were in dispute over the question of whether periods of partial retirement must be treated as part-time work and, thus, should be assessed with a part-time factor as determined in the pension plan. The plaintiff was granted a pension commitment which stated that the pension benefit level was to be reduced pro rata for periods of …

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Occupational Pensions: Employer’s obligation to carry out pension adjustments according to occupational pension law does not apply to non-occupational pension benefits

By judgment of 19 November 2019 (docket number: 3 AZR 281/18) the Federal Labour Court (Bundesarbeitsgericht – BAG) has ruled that, in the event that an employer has granted a total pension (Gesamtversorgung) which consists of both occupational pensions and other types of pension benefits, the employer’s obligation to carry out pension adjustments according to Section 16 of the German Occupational Pensions Act (Betriebsrentengesetz) does only apply to occupational pensions. The employer and the former employee were in dispute over the level of pension adjustments. The employee had been granted a special pension commitment according to which he received a …

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Occupational Pensions: European Court of Justice confirms protection of employees in the event of employer insolvency

By judgment of 19 December 2019 (docket number: C-168/18) the European Court of Justice has ruled that employee’s pension entitlements which are based on so-called captive pension insurance schemes (Pensionskassenzusagen) are (to a certain extent) protected from benefit reductions in the event of employer insolvency. The plaintiff participated in a captive pension insurance scheme (Pensionskasse). From 2000 on he received benefit payments. In 2003 the captive pension insurance ran into financial difficulties and had to reduce its level of benefit payments. As a result, the employer became liable for the difference in benefits resulting from the reduction. In 2012 the …

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Occupational Pensions: Information provided by the employer to the employees must be correct, clear and complete

By judgment of 18 February 2020 (docket number: 3 AZR 206/18) the Federal Labour Court has ruled that if an employer provides information on occupational pensions such information must be correct, clear and complete. However, there is no general obligation to provide information on the social security treatment of pension benefits. The plaintiff participated in a captive pension insurance scheme (Pensionskasse) which was funded by himself via salary conversion. Prior to the conclusion of the corresponding insurance policy in 2003 he attended a works meeting on which an external advisor informed the employees about the financial chances such participation in …

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Occupational pensions: Deviation from employer’s (contractual) obligation to adjust pension benefits requires detailed statement of reasons

By judgment of 21.06.2019 (docket number: 7 Sa 92/18) the State Labour Court Hamburg has ruled that a deviation from the employer’s obligation to adjust pension benefits in accordance with an increase in state pension benefits – as provided for in the employer’s pension plan in the event that the employer considers an adjustment “not justifiable” – requires a detailed statement of reasons. The employer must describe all relevant factors for his decision, the company’s economic status quo and the assumed negative development which would arise from the pension adjustment. The parties were in dispute over the adjustment of the …

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Entitlements on company pension are subject to particular protection in the event of a transfer of business according to Section 613 a German Civil Code

By judgment of 22 October 2019 (docket number: 3 AZR 429/18) the Federal Labour Court has extended its settled case law regarding the replacement of pension plans in the event of mergers and acquisitions. A replacement of a pension plan by a pension plan existing at the acquirer a must be in accordance with the principle of protection of legitimate expectation and the principle of proportionality. For occupational pensions, the Federal Labour Court has developed a special three-stage examination that reflects these principles. In the present case, the Federal Labour Court stated that these principles and requirements also apply in …

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Occupational Pensions: Federal Labour Court confirmed its ruling with respect to so-called “age difference clauses” in pension arrangements

By judgment of 11 December 2018 (docket number: 3 400/17) the Federal Labour Court has ruled that a so-called “age difference clause” (Altersabstandsklausel) providing that a survivor’s benefit is reduced if the age difference between the spouses is more than 10 years is admissible and is not to be considered as unjustified discrimination on grounds of age. The plaintiff was born in 1945. Her husband was born in 1930 and died in 2014. The spouses married in 1966. The plaintiff’s deceased husband was granted a survivor’s pension promise by his employer. The corresponding pension plan contained a clause according to …

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Occupational pensions: No claim for employee to terminate an employee-funded direct life insurance policy

By judgment of 26 April 2018 (docket number: 3 AZR 586/16) the Federal Labour Court has ruled that an employee has no claim against his employer to terminate an employee-funded direct life insurance policy (deferred compensation /salary conversion) in order to receive the surrender value. The employee (plaintiff) concluded a deferred compensation agreement with the employer in 2001. According to that agreement, the employer – as policyholder – was obliged to pay an annual amount of approximately 1,000.00 euros to an insurance company for the purpose of funding the insurance policy. The insurance policy was concluded in favour of the employee. …

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Transitional payment prior to retirement to be considered as an occupational pension

By judgment of 20.03.2018 (3 AZR 277/16) the Federal Labour Court has ruled that a transitional payment (taking into account pension payments) that is granted to a former employee during the first six months after their retirement is to be deemed to be an occupational pension and is, therefore, covered by the German Pension Insurance Association (Pensionssicherungsverein). The former employee (plaintiff) was granted a transitional payment on the basis of a works agreement by his former employer, which was insolvent at the time when the payment was due. According to that agreement, the transitional payment was intended to be granted …

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Occupational Pensions: Submission by Federal Labour Court to the European Court of Justice regarding compensation for benefit reductions by the Pension Insurance Association

By order of 20 February 2018 (3 AZR 142/16 (A)), the Federal Labour Court asked the European Court of Justice for a preliminary ruling on the interpretation and direct application of Article 8 of Directive 2008/94/EC. According to that provision, Member States are required to ensure that the necessary measures are made to safeguard the interests of employees regarding pension entitlements in case of insolvency of the employer. The plaintiff receives benefits from a company pension insurance fund (Pensionskasse) which were reduced by the company pension insurance fund due to economic difficulties. In the past, the plaintiff’s former employer compensated for …

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Occupational Pensions: Legitimacy of so-called “age difference clauses” in pension arrangements

By judgment of 20.02.2018 (3 AZR 43/17) the Federal Labour Court has ruled that a so-called “age difference clause” (Altersabstandsklausel) providing that spouses receive a survivor’s benefit only if they are no more than 15 years younger than the deceased former employee is admissible.   The plaintiff was born in 1968. She married her husband, who was born in 1950 and died in 2011, in 1995. The plaintiff’s deceased husband was granted a survivor’s pension promise by his employer. The pension scheme provided that spouses receive a survivor’s benefit only if they are no more than 15 years younger than …

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Compensation (severance pay) of director’s pension benefits

By judgment of 23.05.2017 (II ZR 6/16) the Federal Supreme Court (Bundesgerichtshof) has ruled that the prohibition against compensating for pension benefits according to Section 3 German Occupational Pension Act (Betriebsrentengesetz) may be derogated from by mutual consent and, as a result, ongoing pension benefits of a director can be paid out (severance pay). In the present case, the admissibility of the compensation for an ongoing pension, which in principle according to Section 3 German Occupational Pension Act is inadmissible, was in dispute. However, the applicability of this provision (Section 3 German Occupational Pension Act) was excluded in the pension …

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Reform of the German Occupational Pension Act (“Betriebsrentengesetz”)

Effective January 1, 2018, the German Occupational Pension Act will be reformed by the Act to Strengthen Occupational Pensions (“Betriebsrentenstärkungsgesetz“), adopted by the German Parliament on 1 June 2017. In 2002, the German legislator issued a difficult challenge to the area of occupational pension provision with the introduction of the so-called “Riester Reform”. Together with the subsidised private “Riester pension”, occupational pensions were intended to compensate for the cuts to state pensions that had already been decided. The rationale was to keep the pension levels of future generations of pensioners stable. However, take-up of both the “Riester pension” and occupational …

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Occupational Pensions: Free bus ticket for wife to be considered as pension

By judgment of 23.06.2017 (6 Sa 173/17) the Regional Labour Court of Düsseldorf has ruled that with regard to the period from which the employee receives a pension, a free bus ticket provided by the employer to the employee’s wife is to be considered to be an occupational pension and therefore cannot be revoked. The employer, a transport company, granted his employees and their husbands/wives a free bus ticket both for the period of employment and the period of retirement. The basis for these benefits was (inter alia) a works agreement of 1991. In 2016, the employer concluded a new …

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Are workers in minor employment entitled to occupational pensions?

In an interesting appeal to the Federal Labour Court (docket number 3 AZR 83/16) the services trade union ver.di had been called upon by a female employee – who had originally been employed by the union Deutsche Postgewerkschaft since 1991 and had been working for the defendant since its merger with ver.di in 2001 – to obtain a pension. Since 2004, the applicant had been working in minor employment (a so called mini job or marginal employment with a maximum monthly income of Euro 450). The provisions of the 1995 pension scheme, which applied to the defendant, provide that all …

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