Company pension scheme in labor law
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Company pension scheme in labor law
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The general German pension system consists of three pillars of almost equal size. The first pillar is statutory pension insurance, the second pillar is private pension provision, and the third pillar is occupational pension provision. The occupational pension system is subdivided into occupational pensions in the private sector and supplementary pensions in the public sector. The aim of the company pension scheme by the employer is to provide the employee with binding benefits in terms of old-age, invalidity or even retirement pensions for precisely this reason within the employment relationship. Survivor benefits to § Section 1 I 1 of the BetrAVG to be sent to you.
The employer's obligation to provide benefits can be based on a variety of claims. For example, the employer may be obligated to pay benefits under an employment contract, an existing collective bargaining agreement, a standard employment contract provision, a works agreement, a company practice or on the basis of an overall commitment. An overall commitment is a declaration by the employer to the workforce or parts of the workforce to provide benefits. An additional pension commitment, also known colloquially as a "company pension", is in addition to the employee's statutory pension entitlements and does not replace them.
In principle, there is no general obligation on the part of the employer to provide this benefit. Rather, this benefit by the employer is to be regarded as a voluntary benefit. Voluntariness is only broken by a possible entitlement of the employee to a company pension financed by deferred compensation. The reason for this is that the employee creates this benefit himself through his remuneration. The company pension cannot be forfeited, even if the employment relationship ends before the pension becomes due. However, the employer's pension commitment must normally have existed for at least 5 years and the employee must have reached the age of 30.
If the employer pays a company pension and there is a uniform increase in the statutory pension, the employee may not reduce the fixed company pension for this reason. Similarly, pension benefits that were earned by the employee alone and are therefore based on the employee's performance may not be negatively credited. The German Occupational Pensions Act (Betriebsrentengesetz) focuses on these possible ways of implementing the occupational pension scheme:
The direct commitment:
Provisions for pension payments
In the case of a direct commitment, the employer organizes the pension plan itself. Thus, the employer forms the necessary provisions itself and also organizes the pension payments on its own behalf. This type of pension plan involves a very high level of organizational effort. For this reason, a direct commitment is likely to be used only in very large companies. The amount of this company pension can be freely agreed, if both parties wish to do so. It can also be decided whether the payment is made all at once in the form of a lump-sum payment or whether it is paid as an annuity. A major difference to other forms is that the contractual relationship for the pension exists directly between the employee and the employer and there is no third party in between.
A significant disadvantage is also that the employer is liable for the direct commitment not only with its business assets, but also with its total assets. For this reason, the risk that the employer has to bear is very high. Those who were not directly familiar with the term direct commitment will perhaps know it better under the term company deferred compensation. In principle, this is nothing different, except that here the employer additionally waives part of his remuneration. However, if an employment relationship is ever terminated, the employee is not entitled to continue the provision with his own contributions and to finance it himself. However, the entitlement continues to exist up to the point of leaving the company.
The direct commitment:
The direct insurance is a company life insurance or pension insurance concerning the life of the employee. He takes out this with the thought of his family and its Survivors from. Normally, therefore, a full or at least partial subscription entitlement applies to the Survivors. The benefit in the event of a pension claim is provided by the insurance company with which the employer has concluded its contract in favor of the employee. The employee even has a legal claim to this. The contributions to the insurance can be paid by the employer alone, or they can be divided between the employer and the employee.
In other ways, there is still the flexible option of the employee paying the contributions himself/herself as part of the company deferred compensation scheme. Unlike a privately concluded direct insurance policy, this cannot be terminated prematurely. If the employment relationship between the two parties ends here as well, the sum cannot therefore be paid out. Nevertheless, the employee still has the option of continuing the insurance with another employer as long as the latter is willing to do so. If this is not the case, the current insurance is not shut down, but the employee can try to raise the contributions privately accordingly and thus continue to pay into the insurance. Otherwise, the insurance will be non-contributory.
In the case of the pension fund, the employer organizes and operates its own type of life insurance company. The employer independently pays its contributions to this company. This company has the exclusive task of providing retirement benefits. A possible claim for payment against his employee is then paid by the employer from the fund of this. Likewise, the employee is entitled to pension payments in a direct manner.
The necessary contributions can be paid in by both the employees and the employer. These funds then manage the assets on their own behalf, and legally these pension funds are on a par with normal insurance companies. The policyholder in a pension fund is not the employee himself, but the employer. He concludes an insurance policy with the pension fund for the benefit of the employee. A certain "control" of these Pensionskassen is incumbent on the Federal Financial Supervisory Authority (BaFin).
The pension fund:
The possible benefit of a pension fund consists of the payment of old-age pensions in general, as the name pension implies. Possible disability pensions, as is common with other types of pension provision, may not be provided by a pension fund. Here, too, the former employee has a direct claim. In this context, a pension fund is an insurance-like but legally independent pension institution. The legal entitlement to the benefit must be approved by the Federal Financial Supervisory Authority (BaFin) and is also subject to its subsequent control and supervision. It regularly reviews the institution's investment policy.
The benefit is financed by means of the funded method. Thus, a pension fund is free to invest up to 90 % of its assets in shares and to make investments in public and private bonds. Investment funds and real estate or bonds are unlimited. As a result, a pension fund is subject to fewer restrictions on its investments and investment policy, unlike the pension fund or other life insurance companies. Even if this appears to be very risky at first glance, it can be advantageous (at least for the funds), as a higher return seems possible as a result.
The provident fund:
A provident fund is a separate pension fund organized by one or more employers. This pension fund has legal capacity in its own right. The former employer has no claim of its own. Nevertheless, the provident fund is similar to pension funds. Even if there is no actual claim on the part of the company pensioner, the Federal Labor Court is increasingly assuming that a pension commitment made by the employer gives rise to a claim on the part of the pensioner against the provident funds. However, it remains open to the employer to revoke this claim for factual reasons. The provident funds themselves often protect themselves by means of reinsurance.
Once the employer has promised a service, he also has a certain obligation to perform, i.e. he has a certain liability towards the employee.
If an employer becomes insolvent and is no longer able to fulfill its obligation to pay benefits, there are various ways in which further payments to former employees could continue. The first option is for insolvency proceedings to be opened against the employer's assets. Another possibility may be an out-of-court settlement in which the employer agrees with his creditors to avert the insolvency proceedings, provided the institution of the insolvency proceedings agrees. Otherwise, there may be a rejection of the application to open insolvency proceedings for lack of assets.
Finally, there is the possibility of a complete termination of the business. This is possible within the scope of this Act, provided that an application for commencement of insolvency proceedings has not been filed and insolvency proceedings obviously cannot be considered for lack of assets. A rejection of insolvency proceedings for lack of assets in this sense means nothing else than that the insolvency court rejects the insolvency proceedings due to probable non-performance of the insolvent. In other words, the insolvent's assets are not sufficient to pay the costs of the proceedings.
Nevertheless, employers always benefit from a company pension plan for its employees. As a result, companies can always advertise a point of security to petential new employees. Likewise, existing employees are also more likely to want to stick with their current employer. Thus, in addition to salary and corporate benefits (perks for employees), a company pension is a financially attractive additional benefit.
When it comes to what employees want in terms of pension provision, the most important points are security, but also flexibility. Thus, the normal employee increasingly wants to adjust his payment to his needs. Likewise, employers can claim the expenses they have under the pension contracts for tax purposes. Thus, in the case of deferred compensation, employers are also exempt from social security contributions.
An answer to the question of whether a company pension scheme for the self-employed exists has been disregarded to date. The reason for this is that such direct insurance for the self-employed simply does not exist in the known form in which it is implemented. For this type of employment, the only remaining option is private pension provision. Here, the "Rürup" pension is generally recommended. This is a type of pension, where the policyholder pays a certain contribution per month, which is tax-free during the savings phase and remains so for the first time.
The contributions are thus subject to deferred taxation. Therefore, this is largely comparable to the basic coverage of the company pension plan for employees, as this is also tax-free. The more profit a self-employed person generates, the more he or she should also pay into the "Rürup" pension, since in this case the total tax savings will be higher. However, even in the case of private pensions, an expert should always be consulted, who will find a suitable model of provision for everyone in every situation.
A change from permanent employment to freelance work or self-employment is also no problem. For example, a former company insurance policy can normally simply continue to be paid privately. The claims from the contracts do not expire. If it is not possible to continue an insurance policy taken out as an employee, it is still possible to make the insurance non-contributory.
This is often unproblematic, provided that a certain minimum amount of the supply contract has been reached. In case of doubt, the sum accrued up to that point is then paid out at the time of the agreed payout date. If the contract has been made non-contributory, please note that a payout can and will be significantly lower at the expense of the policyholder. Any resulting pension shortfall can in turn be compensated for by a private pension plan.