Current case law
Christine Hansen and Jean-Baptiste Abel
Adjustment claim in the event of planned restructuring measures (BAG ruling dated April 26, 2018, 3 AZR 686/16)
The plaintiff claimed an adjustment of his pension benefit as of January 1, 2013. The defendant employer had refused to make the adjustment, citing its own and the Group’s poor economic situation. The Group parent company filed for insolvency proceedings in the USA in the previous year, which were concluded in the current year with worldwide job cuts and extensive restructuring measures. The defendant generated a return on equity of 5.61% (2010), of 4.4% (2011), of 4.15% (2012) and of 2.6% (2013) from 2010 to 2013. The plaintiff has argued that the restructuring measures justify the forecast of a positive economic development.
In the opinion of the BAG, the plaintiff was not entitled to an adjustment of his company pension. The economic situation of an employer justifies the refusal of a company pension adjustment insofar as this places an excessive burden on the company and endangers its competitiveness. This is the case if a forecast shows that the company will not achieve an appropriate return on equity in the adjustment period.
For the forecast, it is not a matter of taking an average of the three previous years, but rather of whether the development suggests that the economic situation in the three years following the adjustment period will be sufficient for the company pension adjustment. These conditions were not met in this case. This was not changed by the fact that restructuring measures had been initiated to stabilize the economy. Such restructuring measures are designed to increase operating results in the long term, he said. At best, these allowed for an uncertain long-term forecast, which did not justify being shaken by the negative forecast made on the basis of the operating results to date.
Conclusion: In this decision, the BAG makes it pleasingly clear that planned restructuring measures alone are not suitable for shaking a negative forecast of the economic situation. Our recommendation – take Section 16 of the German Occupational Pensions Act (BetrAVG) at its word: It is initially an adjustment review obligation. Check at the specific time of the adjustment review whether and to what extent a full or partial suspension of the adjustment of the company pension appears appropriate with regard to the economic situation. We will be pleased to support you in the relevant consideration, the assessment of the net asset value of your company and in the legally effective correspondence on the adjustment decision with the pension recipients.
© 2023 KPMG Law Rechtsanwaltsgesellschaft mbH, associated with KPMG AG Wirtschaftsprüfungsgesellschaft, a public limited company under German law and a member of the global KPMG organisation of independent member firms affiliated with KPMG International Limited, a Private English Company Limited by Guarantee. All rights reserved. For more details on the structure of KPMG’s global organisation, please visit https://home.kpmg/governance.
KPMG International does not provide services to clients. No member firm is authorised to bind or contract KPMG International or any other member firm to any third party, just as KPMG International is not authorised to bind or contract any other member firm.