bAV: Details on insolvency protection gaps in pension commitments

By Johannes Fiala, lawyer, and Andreas Michael Bosl, corporate consultant for occupational pension schemes
Distribution approach of the pension commitment
Your pension commitment is safe: Either it is pledged to a GGF ‘bomb-proof’ or the PSVaG steps in”. But this idea is far removed from the reality of practical GmbH insolvency cases in medium-sized companies.
As a traditional product provider, the insurance industry tries to play down the fact that the insolvency administrator can collect the reinsurance for the pension commitment. For example, the insolvency administrator has to “secure” or “deposit” the money. But these attempts at explanation fall short. The decisive point is that the GGF loses its right to participate in the collection or termination of the reinsurance policy in accordance with the lien regulations. The new and sole boss in the ring is the insolvency administrator. For the financial intermediary and advisor, the situation is much more precarious: Because the statement “insofar insolvency protection exists” is only half the battle – because such legal advice by the broker and agent must also be correct and complete. About 30,000 lawsuits annually, from customers against the advisor on the front show how serious the issue is.
Here it is of no use to serve the customer or GGF with advertising slogans or half-truths. To take recourse against the product provider later – according to the new BGB regulations since 1.1.2002 – because of faulty advertising, training or instructions is not an alternative for many intermediaries. The customer and his trust are more important for the intermediary than any product provider.
Insolvency liability of CCF with pledge protection and wife with PSV protection
Insiders claim that in the vast majority of cases, bankruptcy is filed too late. Neither the commercial nor the tax balance sheet is decisive. Only a few entrepreneurs and professional advisors are familiar with a current balance sheet according to the insolvency code with deviating valuation regulations, even in times of crisis. The consequence is that the insolvency administrator later accuses the GGF, among other things, of having made excessive withdrawals. Also the wife, if she de facto (co-)manages the business, can be affected by this, more precisely also by the so-called manager liability. It is also conceivable that the insolvency administrator will discover further claims, for example because of outstanding loan claims against the GGF andIor his wife.
No insolvency protection through the PSVaG
In the case of the wife, the situation is such that, “insofar as offsettable claims” are involved, the PSVaG does not have to pay anything according to its insurance conditions, § 5 IV AIB. The insolvency administrator must dutifully increase the assets – so in case of doubt he will offset (or sue first and then seize). In case of doubt, the wife is not even left with the so-called garnishment-free subsistence minimum, § 394 BGB. The intermediary does well to distrust the advertising information of some product providers for sales. The BGH calls this the duty of plausibility check by the intermediary. Only the intermediary is on the front line, he is the first to be sued. If the wife is still exempt from compulsory insurance in the statutory pension and there is no other provision, the only option may initially be to apply for Hartz IV’, and later to go to the social welfare office.
No insolvency protection through pledging
The situation is similar for the GGF, but without a statutory transfer of the reinsurance to the PSVaG. The insolvency administrator has his hand on the money in any case for the time being, because the GmbH is in any case the VN in the case of reinsurance and, according to the BGH ruling of 7.4.2005, can withdraw the reinsurance.
The insolvency practitioner then has time to consider his case and can offset at any time. This is not a question of the extremely difficult revocation of an employment-legal promise and this has also nothing to do with the question whether a seizing-free amount would have to remain – as subsistence minimum. The case law also allows it to be sufficient in the case of a living company that a predominant fault to the detriment of the GGF is sufficient to cancel pension payments from the GmbH by offsetting which are in and of themselves exempt from seizure. A look at the large commentary makes it easier to find the law.
Considerable risks of the intermediary
For the clarification of the customer, it is crucial to depict the “worst-case scenario” also with regard to the advisory topic of insolvency protection. Jurisprudence requires that the intermediary can prove that the customer really understood him correctly, i.e. the clarification, even after up to ten years. If the intermediary now thinks that he is an agent and that his insurer is therefore liable for him, then this is only correct at first glance: because vis-à-vis the customer, the intermediary will usually identify himself as an “occupational pension expert” and claim the personal trust of the customer – then he is also personally liable vis-à-vis the customer.
Other disadvantages of the pension commitment
In contrast to the time value account, the claims from the labour law commitment are not inheritable. If money is left over, for example because the GGF does not reach retirement age (without survivor protection in the commitment), the assets of the reinsurance of the GmbH accrue to the insolvency estate. Or think of the sale of the company in old age or anticipated succession: with a pension commitment a difficulty. And the damage, which is then determined by an auditor or the court estimates it because of avoidable unsaleability of the company. The enlightened client then writes to his lawyer in no uncertain terms, ?this must be a case of broker liability…. .”.
Restructuring of the pension commitment
The pension commitment is one of the tax-saving models, with all the consequences in the aftermath. In practice, the reinsurance will often be between 20% and 200% too low. This even happens to tax consultants with their own GmbH. It is in the interest of intermediaries and product providers to fill these gaps. Another chance to educate the client, or to plant new liability? If the Finanzdienstleister has to examine investments and concepts ?legally, economically and fiscally ?at least for plausibility and load-carrying capacity (with the Finanzdienstleister, BGH of 13.12.2000, I11 ZR 62/99 – and with the tax councellor, BGH of 23.1.2003, IX ZR 180/01), then the Finanzberater must clear up also: This naturally includes the question of the viability of insolvency protection in practice. If necessary, the enlightened client will want the (sole?) pension provision to be separated from the business risks. The need for this among clients is growing, just as the equity ratio of small and medium-sized businesses has been declining for years. In addition, the insurance cover (e.g. for invalidity) then ends and the premature dissolution and collection is regularly hardly economically advantageous for the GGF (e.g. if cancellation deductions are made). For the insurance industry this leads to an outflow of funds, because the deposit or security’ has to be gilt-edged – a quality which the legislator did not give to life insurance alone, § 1806 f. BGB.
Homework It is already possible for the intermediary to cover entire asset values and to withdraw them from the direct access of the (potential) insolvency administrator in good time. Some half-advice with a high liability can still be corrected today – for example on the occasion of the new BGH judgement of 7.4.2005. The fact that the pledging of the pension commitment to the GGF as protection against the access by the insolvency administrator has never been really safe will be clear to every intermediary since the judgement of the LG Erfurt of 4.12.2003 (Ref. 3 0 660103) anyway: In this case, the insolvency administrator first successfully sued the GGF for damages due to excessive withdrawals: the insolvency administrator then seized the entire reinsurance – and the beautiful sales dream of insolvency protection was over.

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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