Hanseatisches Oberverwaltungsgericht: Reinsured relief fund is not insolvency-proof either

– Why reinsured relief funds lead to employer liability –


The Hamburg-based OVG provides in its Urt. v. 14.1.2010 (Case No. 4 Bf 22/08), the Federal Court of Justice made it clear that even in the case of reinsured provident funds (UK)
to pension funds and direct insurance, there is an increased risk of insolvency for employees. This is because the reinsurance policies of a UK offer
no insolvency protection whatsoever, but are merely a financing instrument.


  1. Consequences of employer insolvency for the UK

If the insolvent employer ceases to make premium payments to the UK, the UK will routinely be forced to make its performance
even below the promised pension benefits. Then the employer is liable for the difference alone, and at his
insolvency, the Pension Protection Association must step in.

The defendant PSVaG also points to the possibility that the employer could even buy back the reinsurance policies via the
bodies of the UK could reach, so that this cover capital of the UK for the employees is lost and the now exclusively against
the employer must be borne by the PSVaG in the event of the employer’s insolvency. The insolvency practitioner can also be informed by the UK
demand the surrender of the reinsurance policies if, for example, the pension commitments to the employees are revoked,
if a reorganization is planned (BAG, ruling dated 29.9.2010, ref. no. 3 AZR 107/08).

  1. Zillmerung burdens the employer’s pension commitments

If the employer unexpectedly becomes insolvent, or employees leave after a few years with the employer, employees put
regularly find that only a small fraction of the contributions paid into the UK are still available as pension capital.
This is not a bad thing in itself, because the pension entitlements are based on the pension commitment and not on what is specified in a
financing instrument of the provident fund – the reinsurance – is actually available.

The employer is liable for the remainder and only in the event of insolvency of the employer of the PSVaG, precisely because of the employer’s liability which always exists.

  1. 80 %, 90 % or more for acquisition and administration costs

The reinsurance contracts of the insurers are usually structured in such a way that in the first 12 to 24 months no actuarial reserve is paid for the UK
and the surrender value is “zero” or less than half of the premiums paid. From these contributions
insurers and intermediaries feed on. Nevertheless, the employer is liable for the promised pension benefits. Problematic from
From the employer’s liability point of view, deferred compensation via the UK is also particularly important, because the law requires equal value with the
converted remuneration is demanded.


  1. No congruence between actuarial reserve and pension commitment

The fact that the assets accumulated at the UK will almost never be sufficient to fully fund the promised pensions will be of great concern to employees.
and employers are regularly concealed. This is because the pension commitments are aligned with the reinsurance policy in such a way that they provide a
The latter assumes an undisturbed course of events until the start of the pension, which is, however, a rare exception in practice. The services offered by the intermediary
example calculations to illustrate this, with returns and increases in the value of the reinsurance at best only go with scheduled
On closer examination, however, they must at best be seen as a figment of the imagination based on the principle of hope,
because overly optimistic forecasts are often made.


  1. Insolvency of the UK is not covered by the PSVaG protection

The OVG Hamburg clarifies that the insolvency or insolvency of the UK or other pension providers in the BAV is precisely not covered by the
Company Pension Act is covered. In all these cases, the employer is liable for his commitment. If, on the other hand, the employer becomes insolvent,
the employee’s claim against the employer is economically worthless, and the UK can only pay the
benefits at any time – for example, if the insufficient actuarial reserve due to a lack of further contributions is exhausted.
Nor does the UK have anything more to counter the objection of lack of legal entitlement than that it has no practical significance,
since there is a legally binding commitment from the employer.


  1. Hardly any protection for managing partners (GGF) and top managers

The PSVaG only protects the pension provision of genuine employees, so that in case of doubt the GGF literally “looks into the mountains with the stovepipe” in the event of insolvency,
…so he goes away empty-handed. In the case of top managers, who are genuine employees, the PSVaG usually only pays a relatively small proportion of the old-age pension.
be paid in the event of insolvency, because the PSVaG does not pay any amount.


  1. UK as a financing instrument with deferred insolvency of the employer

In sales practice, employees and employers are offered numerous advantages, particularly in terms of taxes. However, that
The fact that pension commitments will unfortunately have to be honoured in about 25 years’ time is often regarded as a minor problem at present.
For the mass of the middle class the bad awakening comes only late, because there is no obligation for tax counsels, the real already piled up
Liabilities from pension commitments to be (also) reported in the tax balance sheet.


  1. Maximising liability for employers by maximising costs for the UK

UK operators are concerned to achieve high brokerage fees, which is why in many cases a broker is also involved in the distribution.
However, the high brokerage fees charged to employees and financed by them in the case of deferred compensation put this into perspective,
if one considers the realization of several public prosecutor’s offices that often also work councils or managing directors are to be bribed by it.

In doing so, the UK could, for example, come to the conclusion that the original reinsurance policies are no longer optimal, terminate them and issue new
with a new commission. The majority of employers, even DAX-listed companies, rarely have any provisions in place for the
UK does not continually maximise employer liability through unnecessary acquisition and administration costs. But an emergency brake is looming here,
since many a free sample contract off the shelf from insurance sales, designed by business economists in violation of for example
the Legal Services Act, becomes a viable approach to complete reversal once the employer has exercised its hitherto little regarded
Liability diversity recognizes.


  1. No obligation of the UK to provide information on costs of reinsurance

It is explained to both the employee and the employer that 100% of the contributions will benefit the UK and will be paid by the UK into the
reinsurance policies are paid in. That they then pay to the referring broker a large portion of the first 5 years’ premiums of each
However, the fact that the company pays individual deferred compensation as a brokerage fee at the expense of the accumulated pension assets is not disclosed.
This is entirely justified, as there is no regulated insurance mediation whatsoever involved in the mediation of a UK provision vis-à-vis the
employer and a fortiori not in relation to the employee. This eliminates all obligations of the broker as well as the insurer
to clarify the cost allocations included. Even about the current surrender value of each insurance policy, the insurer must
only inform the UK – what they then report to the employer is up to them. First actuarial reports
have often led to increased transparency and to the fact that employees as well as employers have become aware of their mistake about the
of the actual circumstances.


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


Published in AE Arbeitsrechtliche Entscheidungen, issue 02/2013, pages 47-48

Link: http://www.ag-arbeitsrecht.de/downloads/ae/AE-2-13Inhalt.pdf



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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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