Exemption from the compulsory corset of the BetrAVG

More favourable occupational pensions without the Occupational Pensions Act (BetrAVG)

-How employers can free themselves from the constraining corset of the BetrAVG


Employers who want to set up company pensions look at the Company Pensions Act (Betriebsrentengesetz), or more precisely the Occupational Pensions Act (Betriebliches Altersversorgungsgesetz – BetrAVG). However, structuring a company pension in accordance with the BetrAVG usually suits neither the employer’s nor the employee’s needs.


Changes in the law, also as a result of EU law and case law, also make the BetrAVG unpredictable.

Real freedom for a design according to one’s own wishes is gained by throwing the
as an unnecessary burden and restriction. It takes surprisingly little – but it does a lot.

The unnecessary corset of the occupational pension law has already been stripped off those who do not promise the pension themselves as employers. Because the first sentence of said law reads:


“Where an employee is promised retirement, disability or survivor benefits by the employer on the occasion of his employment (occupational pension scheme), the provisions of this Act shall apply.”


So as soon as it is not the employer who makes the commitment, the whole law simply does not apply to it, not even a single provision of it.

Done correctly, this results in the greatest freedom for an optimal and flexible design of occupational pensions.

For this purpose, it is advisable to use a group company or, for example, a corporate foundation, also as an independent subfoundation of a group foundation.

This can simply be a sister company, but it must not itself be the employer of the employees concerned.

This opens up more flexible arrangements – for example, if the company pension is conditional on the employee remaining until retirement or occupational disability (BU).

Flexible social compensation to avoid hardship may also be included.


Federal Labour Court Judgment of 20 May 2014 – 3 AZR 1094/12

In its ruling of 20 May 2014, the Federal Labour Court (Bundesarbeitsgericht – BAG) has already decided that a group parent company’s

an occupational pension commitment made to an employee of a subsidiary who, neither at the time the commitment was made nor subsequently

was an employee of the parent company, is not a company pension within the meaning of the
§ 1 (1) BetrAVG

The express consequence of this is that there is also no insolvency protection, i.e. in the event of the insolvency of the pension guarantee association, the pension guarantee association

(parent) company does not occur, as the BAG expressly states.

A positive side effect is, of course, that no contributions have to be paid to the Pension Protection Association.


According to the BAG, it is the formal employment relationship that is important. According to
§ Section 17 (1) sentence 2 BetrAVG
this applies accordingly to persons,

who are not employees, if they receive old-age, invalidity or survivors’ benefits on account of their employment

have been committed to a company.

However, according to the BAG ruling, the fulfillment of the contractual obligations towards the subsidiary does not constitute such an obligation.

The Group does not consider this to be an activity for the parent company, even if it has benefited the parent company economically.

Of course, a subsidiary can also be responsible for employees of other subsidiaries or those of the group parent company.

a group foundation, which may then have a very low risk of insolvency due to the lack of other operational activities on the side.


Longer vesting periods strengthen employee loyalty

A vested pension entitlement under the German Occupational Pensions Act (BetrAVG) is retained on a pro rata basis when the employee leaves the company.

The rapid vesting (according to the will of the EU now within three years) has only a minor binding effect on the employee despite a lot of effort.

Also, a higher risk of insolvency of the company pension instead of protection by the Pension Protection Association could, especially in a crisis

strengthen the cohesion between employees and employers in the sense of an economic division of fate.


Elimination of liability risks for the employer

Within the framework of the BetrAVG, the employer can be subject to an obligation to pay compensation, i.e. a hardly comprehensible obligation to pay compensation.

additional financial expense, for example if insurers or pension funds, as partners of the employer, unilaterally reduce their benefits.

legally – for example because of the low market interest rate and longer life expectancy, also under pressure from the supervisory authority.

Some employers believe that they can escape their liability by giving the employee the opportunity to leave the company.

from the company simply transfers “his” contract for the company pension scheme (bAV) – however, this can only be used in individual cases.


On the other hand, it is safer to make the commitment to a company pension scheme through a separate non-employee group company or foundation.

similar to a direct commitment. This can be done in such a way that they, in turn, also do not act as an insurance company.

is subject to state supervision.

In this type of organization “off balance sheet” of the employer, the employer reimburses to the performing group company/foundation

current expenditure as agreed. This eliminates not only any further liability, but any further balance sheet exposure at all.

There is also no obligation to contribute to the Pensionssicherungsverein (
) do not exist – and such a security is not necessary for non-operational

Foundation also dispensable anyway. Adjustment obligations under the German Company Pensions Act (BetrAVG) thus also cease to apply.

Likewise, all limits on unilateral settlements. Since the pledging foundation is not an employer, it is not subject to any equal treatment obligations.

towards the foreign workers.


Company pension under social/tax law even without BetrAVG

The social courts also count such a provision outside the BetrAVG as an occupational pension – the term is not, for example, already defined by

the BetrAVG is also conclusive or uniformly formulated for other areas of law, for example when it comes to contributions to statutory health insurance (GKV).


  • 229 para. 1 Sentence 1 No. 5 SGB V mentions pensions from occupational pension schemes (company pensions) as pension benefits. This includes old-age, invalidity or survivors’ benefits, insofar as they accrue directly or indirectly as a result of a previous employment relationship.

In the case law of the BSG, the concept of occupational pension schemes (bAV) in the contribution law of the GKV is different from that of the

occupational pension scheme has always been understood independently in the BetrAVG.

If the pension is not already recorded as a pension in the BetrAVG, it is nevertheless recorded as a pension of the occupational pension scheme in the

pension, provided that there is a close link between the acquisition of this pension and the previous employment.


This is stated in the leading sentence of the judgment of the Federal Social Court (BSG) of 25 May 2011 – B 12 P 1/09 R -:


Retirement pensions” paid by a foundation to former employees of the founder’s group of companies are considered pensionable income

(pension payments) are subject to health and long-term care insurance contributions, if there is a connection between the acquisition of these

benefits and the previous employment and they are intended to replace lost income from employment.


As an exception, the BSG adds:


Only in the case where a benefit is no longer directly attributable to gainful employment and is not intended to replace

income or remuneration, but to secure the livelihood of needy members or their dependants.

survivors and therefore has the character of private benefits similar to social assistance, the Senate has not recognised the capacity

as income comparable to the pension.


Accordingly, there is no obligation to pay contributions to the GKV if the foundation does not provide “wage replacement”, but – in particular depending on the individual case –

“mitigates hardship” because there is then no reference to the wage replacement benefit. Accordingly, the classification as a wage substitute then also applies for tax purposes with regard to wage tax.


Company pension foundation for employee capital participation and for home ownership promotion

Employee share ownership can also be used to provide for retirement, or, for example, to encourage home ownership; including through “employer” loans,

which can even be (re)financed from the capital accumulated at the company pension foundation.

However, the foundation can also grant loans directly to the employer, thereby strengthening the employer’s financial power or, for example, providing a

Fund company daycare. Or award scholarships to employees for children, for example. In this way, the employee’s loyalty can then also be increased.

Further advantages with Group foundation and Group company

It is by no means a so-called support fund (which is also possible as a foundation) – with narrow fiscal

regulations and within the framework of the BetrAVG. Employers often don’t see the true cost of their solution – until they

years or decades after the fact. However, this is also due to the fact that the real future expenditure

for company pensions of employees are not reflected in the tax balance sheet.

In the event of bankruptcy, the insolvency administrator will then look for grounds for personal liability of the directors, for example, because of the

The risk management system is therefore regularly lacking in small and medium-sized enterprises (SMEs).

This is easier in the case of a group foundation, because it is not an employer and simply makes a commitment itself, for which the

Employer then pays something as a lump sum, or also partly in advance or successively endows the foundation with capital.

The employer is not liable for this reason alone, because he himself has not made any commitment. Even if ideally expected,

that the employer voluntarily provides financial support to the pledging group foundation if necessary – he is by no means forced to do so.

On the other hand, the employer is certainly liable if he opts for the external solution of the provident fund, which is

does not itself offer any legal entitlement. In the event of insolvency, the PSVaG also draws on the assets there to provide the

and distributes it to the employees by virtue of the statutory subrogation.

And if the provident fund has fallen for a Ponzi scheme as a capital investment, the employer may be in the picture

spoken make double contributions – even if it causes him financial hardship.


Even without insurance business up to full tax deductibility

For the state financial services regulator, the Group company and the Group foundation are not operators of an insurance business,

if one may assume that the employer purely voluntarily supports the group foundation when the latter needs additional money – in advance quite

so you can’t rule it out.

This means that there will be no maximum actuarial interest rate of 0.25 percent in future, which will make low-cost pension commitments possible, nor will there be a

Solvency II capital requirements

As a result of longer vesting periods and, compared to the BetrAVG, lower starting benefits at the time of vesting, the following can occur

targeted significantly more cost-effective exactly for company loyalty or particularly connected employees a significantly higher pension commitment

financed than is possible under the BetrAVG.

And this with the elimination of virtually all risks for the employer.

For tax purposes, the Group foundation is not subject to the rules of company pension law from the BetrAVG, but rather to the general

Rules for pension commitments to be treated, for example, as if some commercial company had to pay an annuity to the aggrieved customer,

or it is a pension like on the advertising pillar in front of the Pfefferminzia insurance “6,000 Euro monthly pension for a one-time 15 Euro annual lottery ticket,

1 in 1,000,000 chance”.

This also means that there are no harmful differences in discount rates between the commercial and tax balance sheets, which would then in any case have to be taken into account.

would only affect the Group Foundation.


The bAV liability and debt relief – restructuring option also for smaller companies

Admittedly, this is not the everyday business of those working in occupational pension schemes. Because these live virtually from the so far high complexity and

continuously new demand for advice on occupational pensions in accordance with the BetrAVG. You might as well have the Mafia make a

legal drug that is not addictive.

Rather, you get an immediate annuity of 20,000 euros per month with a 7-day deferment period; or from 24 hours of deferment.

for single premium 20,000 to 40,000 euros lifelong upon expiry of the deferment period by the named third party, which does not include

on a different paper, but on none at all, because verbally concluded in the back room of a pizzeria in Palermo City at

an excellent Chianti and a portion of Calamari Fritti.

For a company pension outside the BetrAVG, a flexible arrangement is possible as desired, without taking into account complex

restrictive requirements of the BetrAVG and the associated balance sheet and tax regulations and risks. With which also the only from it

resulting high consulting costs with nevertheless continuing legal uncertainty can be dispensed with.

Experience has shown, however, that traditional occupational pension consultants feel very insecure outside their highly regulated field of activity.

Some occupational pension models can already be conveniently unwound, as legally against the backdrop of overly complex but unreliable

Regulations flawed in the end. Authors of numerous “patterns without value” are merely excellent sales professionals.

Separating “hidden burdens” from the flourishing business often means a more permanent livelihood of the

company, and at the same time often a starting point for the sustainable tailor-made reorganisation of the occupational pension system.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of


www.experten.de (published 30.07.2021)

Link: www.experten.de/2021/07/30/befreiung-vom-zwangskorsett-des-betravg/


www.pt-magazin.de (published 07/29/2021 under the headline: How employers free themselves from the compulsory corstet of the BetrAVG)

Link: www.pt-magazin.de/de/wirtschaft/unternehmen/wie-arbeitgeber-sich-vom-zwangskorsett-des-betravg_krkerpcj.html?&highlight=1&keys=Zwangskorsett&lang=1


submissions-announcement of 28.07.2021, No. 144 under the headline: More favourable occupational pensions without the Occupational Pensions Act (Betr)


DMZ Deutsche Molkerei Zeitschrift (published in DMZ Milch Wirtschaft in issue 142, 12.08.2021, pages 39- 41 under the headline: More favourable company pensions without the Company Pensions Act (BetrAVG).


www.nd-aktuell.de (published Aug. 18, 2021, under the headline: The compulsory corset of the BetrAVG)

Link: www.nd-aktuell.de/artikel/1155620.das-zwangskorsett-des-betravg.html







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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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