Company pension scheme – What you need to know… … about the new mandatory employer subsidy for deferred compensation (Section 1a (1a) BetrAVG)

You need to know…
… on the new mandatory employer subsidy for deferred compensation (Section 1a (1a) BetrAVG)

by Christine Hansen and Jean-Baptiste Abel

In our Client Alert https://kpmg-law.de/mandanten-information/weichenstellungen-beim-arbeitgeberzuschuss-zur-entgeltumwandlung/ , we have already informed you about the current, and in some cases still controversial, course of the new subsidy for deferred compensation. Do you already know the most important things about the grant? Here we summarize in 5 points for you:

• From when does the subsidy apply? For new deferred compensation agreements since January 1, 2019, the subsidy applies immediately; for older agreements, it does not apply until 2022. In our view, the point of reference is the time of the specific agreement with the employee, not the act of establishment under collective law (collective agreement, works agreement).
• In what amount is subsidy to be paid? The amount of the employer’s allowance is based on two variable parameters: (1) it comprises 15% of the converted remuneration, (2) if and to the extent that the employer actually saves social security contributions (“SI contributions”). Thus, the amount of the subsidy depends on the actual amount of the conversion itself. Another decisive factor is whether the employer saves SI contributions through deferred compensation. The relevant SI contributions are the contributions to statutory health, nursing care, pension and unemployment insurance as well as the employer’s contribution to pension insurance to occupational pension schemes and to voluntary or private health and nursing care insurance and lump-sum contributions for marginally paid employees, but not apportionments to accident insurance and under the Expenditure Compensation Act or insolvency benefit apportionments.
• When is the SV contribution saving assessed? Actually annually – but the SV carriers mean: monthly. However, in the case of employees who receive special payments in one or more months that cause them to exceed the income threshold for pension insurance, this view leads to the payment of an allowance that, in our opinion, is not owed under labor law because – viewed over the year – there is no saving of SI contributions. The opinion of the social security institutions does not bind the labor courts. Nevertheless, the circular is likely to have considerable factual significance – e.g. also in payroll accounting software.
• Offsetting of other grants? The question as to whether a previous employer’s allowance should be credited to the allowance under Sec. 1a para. 1a BetrAVG may be credited, harbors considerable potential for conflict. In principle, offsetting is only possible if the legal basis of the existing (voluntary) allowance explicitly refers to the SV savings. Check carefully whether crediting is possible with legal certainty.
• How will the grant be used? The subsidy must be paid into the same contract as the deferred compensation. It is questionable how to proceed if the pension provider refuses to increase the endowment. Then a new contract is probably to be endowed. In the opinion of the BMAS, however, it is also permissible to reduce the conversion amount accordingly so that the deferred compensation amount and the subsidy result in the previous conversion amount.

Conclusion: We recommend that employers review their existing pension arrangements to determine whether there is a specific need for adjustment. The introduction or adjustment of the employer’s allowance should be carried out in compliance with the works council’s co-determination rights under Section 87 (2). 1 No. 8 and 10 BetrVG and after joint discussion of administrative issues with the pension providers.