BRSG II: The new federal government is on the ball when it comes to occupational pensions

The new federal government is about to pass the second Occupational Pensions Strengthening Act (BRSG II). We summarise what the government draft means for companies and employees.

 

“Pay and forget”: The social partner model is being expanded

The introduction of a company pension has recently been made more attractive for employers. A system has been introduced that enables company pension schemes without subsequent liability. Since then, collective agreement parties have been able to introduce the Sozialpartnermodell (social partner model) by collective agreement.

Employee and, in most cases, employer contributions are agreed in collective agreements. The contributions are paid to a service provider entrusted with the implementation, for example a pension fund. When a pension event occurs, payment is made directly to the former employee. The employer has nothing to do with the payment and can’t be held liable if the service provider is unable to provide the agreed pension in full.

To make this model – presented in simplified terms – socially acceptable, the BRSG II is intended to allow smaller companies to participate as well. In future, employers and employees who aren’t bound by collective agreements will be able to agree to apply an existing social partner model with the consent of the relevant collective bargaining parties. The collective agreement must be relevant to the employment relationship.

 

Settlement of pension fund commitments

In future, when a pension fund is dissolved and the capital accumulated in it is paid out to those entitled to benefits, it should also be possible to settle the pension commitment under labour law to the same extent as it was implemented by the pension fund. After the dissolution of a pension fund, only a partial amount will remain under labour law.

 

New opt-out option

The automatic obligation of employees to convert part of their remuneration – with the option to opt out – has been touted for years as a necessary instrument for increasing the prevalence of occupational pension schemes. Employees are to be “forced” into their own good fortune – a company pension.

Unlike in the past, it should be possible in future to introduce an opt-out arrangement for deferred compensation even without a collective agreement, by means of a company or service agreement. Such a company or service agreement requires that the remuneration entitlements of those affected aren’t usually regulated by a collective agreement. The employer must also undertake to make a contribution of at least 20% of the deferred remuneration.

 

Practical note

For employers, it’s now important to check whether the planned changes will have a positive effect on their own pension landscape. For example, automatic deferred compensation can be introduced. Or handling a company's own pension fund can be rethought. Employers who aren’t bound by collective agreements should also consider introducing the social partner model, which has been made easier, as a means of de-risking company pension commitments.

Read the government draft here: Draft of a second law to strengthen occupational pension schemes and amend other laws. (only in German)