Survivors’ insurance, the third senate of the BAG and the AGG – a never-ending story?
Actually, everything could be so simple: “The Company Pension Act applies to company pension plans,” says the General Equal Treatment Act (AGG). However, this does not mean – or at least this is how the Federal Labor Court explains it – that the AGG does not apply to questions of occupational pension schemes. Rather, the AGG is always applicable if there are no special rules in the BetrAVG – a legal matter of course. Survivors’ benefits have emerged as a subfield in which the highest court jurisprudence has developed a considerable tendency to casuistry.
When assessing whether a provision of a pension scheme is discriminatory, the AGG, which is based on European requirements, must be observed. This is a difficult situation for an area of law which, on the one hand, is designed for legal relationships over extraordinarily long periods of time – in the course of which case law has time to change – and, on the other hand, is virtually designed to set age limits due to the twofold nature of the entitlement and benefit phases. In addition, there is the understandable interest of employers in being able to keep track of the commitments made to employees in economic terms and to keep them predictable.
In practice, limitations on survivors’ benefits occur primarily in two constellations: (1) in the form of age gap clauses, which exclude survivors’ benefits for spouses who exceed a certain age gap, and (2) in the form of late marriage clauses, which exclude survivors’ benefits in the event that the marriage was entered into after a certain point in time.
Age gap clauses
The Federal Labor Court considers age clauses to be direct discrimination on the grounds of age against the employee himself, since the clause forces him to provide for his surviving dependents elsewhere. The BAG abandoned the view that the catalog of permissible unequal treatment in Sec. 10 S. 3 No. 4 AGG only included old-age and invalidity pensions, but not survivors’ pensions, following an ECJ ruling that expressly qualified survivors’ pensions as a form of old-age pension.
Overall, the BAG appears to be tending towards a more benevolent assessment of restrictions on survivor benefits and to honor employers’ efforts to limit the financial risk associated with unlimited spousal benefits: It has approved an age gap clause that completely eliminated the benefit for an age gap of at least 15 years (Rt. v. 20.02.2018, 3 AZR 43/17) as well as a provision under which, for an age gap of ten years, the pension was reduced by 5% for each year beyond that.
The court based its decision mainly on data from the Federal Statistical Office, according to which 80% of married couples have an age gap of less than seven years and only 5.9% of all married couples have an age gap of eleven or more years. The BAG thus focuses on the deviation from a perceived normal case. In the case of a large age difference, it was foreseeable from the outset that one spouse would outlive the other for a long time and would have to live without the other’s income for a longer period of time.
In its decision (ruling dated December 11, 2018, 3 AZR 400/17), the BAG also emphasizes that it attaches particular importance to the gradation of the reduction, which only leads to a complete exclusion of benefits when the age gap exceeds 30 years. So a spacing clause that caps coverage at 10 years might be viewed differently by the court. It is also noteworthy that the BAG did not consider the widow’s objection that the regulation discriminated against her not only because of her age, but also because of her gender, only for formal reasons.
Late marriage clauses
With regard to late marriage clauses, in 2015 the BAG rejected a clause that excluded coverage for surviving dependents if the marriage had been entered into after the pension-entitled employee had reached the age of 60 (ruling dated August 4, 2015, 3 AZR 137/13). Later, the BAG deemed a clause to be valid that stipulated marriage before the age of 65 as a prerequisite for the payment of a survivor’s pension (ruling dated November 14, 2017 – 3 AZR 781/16). The fact that the age of 65 was understood as a caesura in terms of occupational pension law also played a role in this. After reaching the fixed age limit according to the pension scheme, the employer is entitled to disregard the employee’s lifestyle in the period thereafter.
Finally, the judgment in the Parris case before the European Court of Justice (ECJ, judgment of 24.11.2016, C-443/15) raised the question of whether the interplay of age discrimination and discrimination on the basis of sexual orientation can lead to so-called multidimensional discrimination if a late marriage clause applies to employees who should not have been allowed to marry their partner earlier at all because marriage was previously closed to them. The ECJ very narrowly answered this question in the negative, but the last word has probably not been spoken on these issues – as on all anti-discrimination law issues relating to occupational pensions.
Conclusion: There is therefore still considerable uncertainty with regard to limitation clauses for survivors’ benefits. In recent decisions, however, the BAG has begun to recognize the justified interest in manageable financial obligations on the part of employers. The future will have to show whether this trend is confirmed and whether it leads to more reliable ratios. In any case, it cannot be the goal of the BAG that employers will no longer promise any survivors’ benefits at all in the future.
© 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.