15% subsidy - Yes? No? Maybe? And from when? - The BAG takes a position for the first time on the employer subsidies for deferred compensation

April 2022 · Estimated read time: mins

Die Entscheidund das BAG vom 08. März 2022

Since January 01, 2022 at the latest, employers have been subject to the statutory obligation to make contributions to deferred compensation. Genuine exceptions to this are only possible through collective bargaining agreements. The Federal Labor Court has now recently dealt with detailed questions on this subject. Time for an initial assessment.



In accordance with Section 1a (1a) of the German Occupational Pensions Act (BetrAVG), employers are obliged to make a subsidy to the deferred compensation of their employees if the conversion of compensation components saves them social security contributions. This obligation was introduced with effect from January 01, 2019 by the Company Pension Strengthening Act (Betriebsrentenstärkungsgesetz - BSRG) and has since applied to all newly agreed deferred compensation. Section 26a BetrAVG contains a transitional provision ("grace period") under which a subsidy obligation does not apply until January 01, 2022 for commitments already made before January 01, 2019.

In two widely respected cases, the Federal Labor Court (BAG) now issued decisions on March 08, 2022 with regard to this mandatory employer subsidy for deferred compensation. Even if the written opinions for the decisions are not yet published, the first legal reasoning of the 3rd Senate behind them can already be identified, which require an initial classification due to their practical relevance. What do these decisions mean for practice? What should employers pay attention to now?


Background to the decisions

The decisions were issued in two cases in which pension beneficiaries demanded an allowance for deferred compensation from their employer. In both cases, a provision of the collective agreement on pensions concluded in 2008 between the Lower Saxony and Bremen Regional Association of the Woodworking and Plastics Industry and the IG Metall union played a decisive role. This collective agreement basically regulates the possibility for employees to make use of deferred compensation. The collective agreement also provides for the employer to grant employees a so-called basic pension amount, which can be used in addition to the converted remuneration in the deferred compensation scheme. The parties to one of the proceedings were both bound by collective bargaining agreements, while in the other proceedings an applicable in-house collective bargaining agreement from 2019 referred to the aforementioned collective bargaining agreement from 2008.


What was the decision of the Federal Labor Court?

In the proceedings in which the aforementioned collective agreement was directly applicable, the BAG came to the conclusion that there was no entitlement to an additional employer allowance for deferred compensation pursuant to Section 1a (1a) BetrAVG due to the transitional provision in Section 26a BetrAVG until December 31, 2021. The "grace period" enshrined therein for pension commitments on deferred compensation that already existed prior to January 01, 2019 also applies in the present case, with the result that the entitlement to the statutory employer subsidy does not arise until 2022. In the opinion of the BAG, the aforementioned collective agreement from 2008 contains an entitlement to deferred compensation and regulations on its structure. It is a deferred compensation agreement under collective law, so that an entitlement to an employer's allowance under Section 1a (1a) BetrAVG does not exist until January 01, 2022 at the earliest. This also applies if - as in the case decided - the collective agreement was created before the BSRG came into force, i.e. in ignorance of the fundamental entitlement to an employer's subsidy, but the commitment to the plaintiff pension beneficiary was not made until after the BSRG came into force. The decisive factor for the BAG is therefore apparently not the time of the individual commitment and its issue, but the time of the underlying collective pension plan/commitment.

In the parallel proceedings, in which the collective agreement provisions from 2008 were included via an in-house collective agreement from 2019, the BAG came to the conclusion that there is no entitlement to the statutory employer's subsidy even after December 31, 2021. In the opinion of the court, the reference to the 2008 collective agreement and the provision contained therein that deviates from Section 1a (1a) BetrAVG constitutes a deviating collective agreement provision within the meaning of Section 19 (1) BetrAVG. Employees entitled under the collective bargaining agreement are therefore not entitled to an additional statutory employer's allowance for deferred compensation in addition to the basic pension amount.


What does this mean for practice?

Admittedly, the decisions have only limited general significance due to the special constellation and the decisive provisions of the collective agreement. For example, the BAG left open the question of whether a deviating regulation created before the BSRG came into force continues to constitute a deviation within the meaning of Section 19 (1) BetrAVG after the BSRG came into force, without the collective bargaining parties once again "confirming" these regulations in the knowledge of the legally obligatory employer subsidy. The BAG has also so far failed to take a position on the exciting question of whether a non-adjustment of a collective bargaining agreement concluded prior to the entry into force of the BSRG, which does not contain any provision on an employer's subsidy due to the saving of social security contributions, can also exclude a claim to the allowance under Section 1a (1a) BetrAVG after the BSRG has entered into force. Can the non-action of collective bargaining parties also contain their intention to agree on a legally permitted deviation? Also of interest is the often-discussed question of offsetting pre-existing employer subsidies against the statutory entitlement, which has still not been decided by the highest court. Perhaps the written opinions for the two decisions will provide more information.

Nevertheless, the following can already be stated at present:

  • In connection with the transitional provision in Section 26a BetrAVG, the question of whether an employer subsidy is to be paid in accordance with Section 1a (1a) BetrAVG appears to be based on the time of the collective commitment and not on the time of the individual deferred compensation agreement with the employees.

  • If, after the entry into force of the basic entitlement to payment of a legally obligatory employer's subsidy, collectively agreed pension regulations contain provisions on employer's subsidies that deviate from this, this may constitute a permissible deviation under a collective agreement that excludes an entitlement to a further employer's subsidy. This also applies to references to collectively agreed regulations that already existed before the BSRG came into force.

Ultimately, however, as is generally the case in the area of company pension plans, it is still a matter of evaluating the pension commitments and the decisive regulations in each individual case.

Contact us!

Do you have questions about deferred compensation or the employer subsidy in general, or are you unsure whether or in what amount a deferred compensation subsidy is payable?
Senior Associate Hamburg
Malte Schürmann
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