Supplementary pension: Restructuring can trigger compensation payments

Restructuring and privatization are the order of the day in both the public and church sectors. Something that is often not considered when planning: Public and church employers are regularly members or participants in a supplementary pension fund (ZVK) such as the Versorgungsanstalt des Bundes und der Länder (VBL). If staff numbers are reduced, high compensation payments are usually due for the supplementary pension claims on the ZVK. Depending on the number of employees, these can run into the millions and should therefore be taken into account at an early stage when deciding on the transaction. The basis for the compensation obligation and its calculation is the statutes of the respective ZVK.

Audit of the statutes of the supplementary pension fund

The ZVK statutes also specify when and how a compensation amount is to be paid. Despite some similarities, the statutes of the more than 20 municipal and church supplementary pension funds in Germany are not uniformly structured. In addition, there are different interpretations of the relevant regulations from fund to fund. Advice is therefore always required on a case-by-case basis. In the context of a restructuring or transaction, public and church employers should check the respective fund statutes at an early stage to determine the effects on the specific contractual relationship with the respective fund and whether this results in an obligation to make compensation payments.

In these cases, there is generally an obligation to pay compensation

Compensation payments may be due if a certain number of employees are laid off without replacement or transferred – usually by way of a transfer of business pursuant to Section 613a BGB – to a purchaser who has no contractual relationship with the previous fund. If the acquirer is a member of another supplementary pension fund and there is no transfer agreement between the two funds, the employees’ entitlements cannot be transferred either. As a rule, there is then an obligation to pay compensation.

In the case of a transaction, the question of whether the acquirer fulfills the statutory requirements for the continuation of the contractual relationship with the fund and/or whether a security deposit or guarantor’s declaration is necessary to secure the contractual relationship may be particularly relevant. If, for example, the acquirer is unable to continue membership of a church ZVK due to a lack of church character, an obligation to pay compensation is likely.

The issue of supplementary pensions should be examined at an early planning stage of restructuring

As a first step, public and church employers should examine the impact of the planned restructuring or transaction on employees. If the intended measure includes, in particular, a transfer of business, a change of shareholder or the announcement of redundancies, this may affect the supplementary pension. If this is the case, the next step should be to examine the ZVK’s articles of association in particular. This may offer scope for solutions that do not lead to compensation payments. It may be worth seeking structural advice again at this point and reorganizing the structure differently.

Early coordination with cashier(s)

Once the employer has examined the legal and factual situation, it should enter into a coordinated agreement with the health insurance fund(s) concerned at an early stage and with expert advice. The question should be clarified as to whether compensation is necessary at all and, if so, how high it would be. If necessary, a special agreement can also be negotiated with the fund to regulate the specific case, for example a partial participation agreement or a special agreement to avoid the compensation amount.

Accordingly, sufficient time should be planned for the coordination processes. This is because the resulting outcomes have a direct financial impact on the planned restructuring or transaction with regard to any compensation amounts or security deposits.

Conclusion

Special attention should be paid to company pension schemes in all restructurings and transfers of undertakings, especially in the public sector or in the church sector. This is because it can be particularly expensive for the employer. If employees in the public sector or in the church sector are affected by a restructuring or transaction, employers should therefore consider the supplementary pension and any compensation claims from the outset when making their plans. This could easily incur costs in the millions. The basis for the obligation to pay compensation is the statutes of the respective ZVK. If necessary, an individual arrangement can be made with the health insurance fund to avoid compensation payments.