Judgment of the Federal Labor Court from August 20, 2024, Strengthens Employers – Ref. No.: 3 AZR 285/23
In the case of salary conversion for occupational pensions, employers are required to contribute. However, collective agreements may include different provisions. This also applies if the collective agreement was concluded before the First Occupational Pensions Strengthening Act came into effect in 2018, as indicated by a judgment of the Federal Labor Court dated August 20, 2024 (Ref. No.: 3 AZR 285/23).
In salary conversion for occupational pensions, a portion of the employee’s gross salary is withheld and directly paid by the employer into a pension fund, pension scheme, direct insurance, or similar. This method offers the advantage of reducing income tax and social security contributions, allowing the money to be invested in retirement provision. Since 2018, employers have been required to pass on these benefits at least partially to employees. However, deviations from this regulation can be made in collective agreements, as noted by the law firm MTR Legal Rechtsanwälte, which also advises on employment law.
Occupational Pensions Strengthening Act in Force Since 2018
The Occupational Pensions Strengthening Act, which came into force on January 1, 2018, aims to expand and strengthen occupational pensions to secure retirement provisions. Since 2018, contributions to occupational pensions paid into a pension fund, pension scheme, or direct insurance have been tax-advantaged and are exempt from income tax up to a limit of eight percent of the contribution assessment ceiling in statutory pension insurance, and exempt from social security contributions up to a limit of four percent. Within these limits, the converted salary flows into the occupational pension gross as well as net.
Since 2022, it has also been mandatory for employers to pay a subsidy of 15 percent of the converted salary when salary conversion is used for occupational pensions.
Role of Collective Bargaining Parties Strengthened
At the same time, the legislator has strengthened the role of the collective bargaining parties in occupational pensions. Employers’ associations and trade unions can deviate from statutory regulations and agree on individual occupational pension models in collective agreements.
The Federal Labor Court (BAG) has now ruled on August 20, 2024, that deviations from the regulation on employer subsidies for occupational pensions are also permissible if the collective agreement was concluded before the First Occupational Pensions Strengthening Act came into effect on January 1, 2018.
Plaintiff Demands Employer Subsidy
In the underlying case, the plaintiff had been employed by the defendant employer since 1982. The employment relationship was governed by the collective agreement on pensions between the regional association of the wood and plastics processing industry in Lower Saxony and Bremen and IG Metall, which has been in effect since 2009. Based on this collective agreement, the plaintiff has been converting salary into an occupational pension since 2019. The collective agreement grants employees who convert salary an additional pension base amount equivalent to 25 times the standard wage for skilled workers.
Starting in January 2022, the plaintiff demanded the employer subsidy of 15 percent according to Section 1a(1a) of the German Occupational Pensions Act (BetrAVG) in addition to his converted salary. He argued that no deviating provision had been agreed upon in the collective agreement and that the entitlement to the employer subsidy could not be excluded by a collective agreement concluded before the First Occupational Pensions Strengthening Act came into effect on January 1, 2018.
Lawsuit Fails in Final Instance
As in the lower courts, the lawsuit also failed in the appeal before the BAG. The Third Senate of the Federal Labor Court clarified that deviating provisions in collective agreements can also be valid if the collective agreements were concluded before January 1, 2018. Therefore, the plaintiff had no claim to the 15 percent employer subsidy.
However, the BAG left open the question of whether an employer could entirely avoid paying a subsidy in old collective agreements if the agreement did not include provisions on occupational pensions. Negotiations on this issue are also pending before the BAG.
MTR Legal Rechtsanwälte offers comprehensive advice on employment law. The advice also includes questions on occupational pensions and other company and collective agreements.
Feel free to contact us!
