by Johannes Fiala, Lawyer (Munich), M.B.A. (Univ.Wales), M.M. (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Banker (www.fiala.de)
Void conversion of remuneration Dr. Reinecke, chairman of the pension senate at the Federal Labour Court (BAG), has let the bombshell burst. Its core statement is that contracts for the implementation of occupational pension schemes can be (partially) null and void. Insurance intermediaries are surprised ? they’ve been brokering invalid contracts for years? The Federal Labor Court is merciful and just? The chairman is merciful because he announces how he will decide – against employers and thus also against intermediaries. Many intermediaries ignore the message ? after all, everyone (habitually via commission) needs something to live on. Banks are also involved in this cartel of commission orientation. The problem that deferred compensation could be null and void, and with it legally linked contracts with insurers for reinsurance or outsourcing, has long been known. But the sales advertising of the product providers has often put this aside. The mediators will be the first to take the blame, before the employers of course.
bAV-Honorarberatung: And now it comes in detail. Acquisition costs (commissions) and excessive administrative costs, as well as “zillmerisation”, could violate the principle of equal value. In the company pension law (BetrAVG) this is regulated, not only since yesterday. The advertisement of the product givers looks at this legal requirement only recently more exactly. And already the advertising machinery runs, it is not so bad everything ? is concealed, with which the justice concerns itself already longer. Dr. Reinecke is by no means the only labour judge to comment on equal value.
The risk of punishment: let’s think about it objectively. There is the recognition that the employee can demand a company pension scheme. He has a right to it because the legislature has made it so. This entails costs and liability for the employer ? as is natural for the whole area of payroll accounting. As far as taxes are concerned, bAV arrangements are usually advantageous at present. In this legal game, the employer is a trustee of the assets/wages of his employees, because he determines ?the implementation method and the tariff? The view into §§ 266, 266a StGB is gruesome ? Unfaithfulness threatens (the employer, and the intermediary from the point of view of instigation and aiding and abetting). Dr.Reinecke did not put this with any word into the room. But connoisseurs of the matter know what and whom the hour might have struck.
Arrogance of an insurance executive? Then a broker reports, ‘It’s not so bad; yesterday I spoke to the board of Pfefferminzia, and he’s going to call the Chancellor’s Office to get it fixed.’ The liability suits against brokers show that employers have no understanding when they feel deceived. Many intermediaries know the situation when they are sued and their product provider first “drops them cold”.
Consultation deficits: There are omissions on the part of the legislature, especially when ?indeterminate legal terms? are contained in the law. Here the judge is allowed to create new law. One of these is “equality of value”. Such a thing is a risk, for all involved ones ? here thus the employer and the financial advisor, up to the punishability, and there a threatening back completion weighs nearly far less. Who has already informed the employer that it is completely unclear whether an insurance company is allowed to ?zillmern? or otherwise charge any administrative costs and commissions? Clarification is announced also here for years (BGH judgement of 20.10.2005), also for the mediator. But which mediator received already from its product giver to the value equality a de-liability information? At the end (again?) times the one or other mediator is condemned and leaves the market?
Tax advisor liability: Tax advisors are no better off than intermediaries. A tax advisor recently had to realize through the aforementioned BGH ruling that the uncertainties of the interpretation of an undefined legal concept, such as equality of value, must be clarified. This is nothing new, but in which sales training course was this covered?
For the intermediary, but also for the tax advisor, it is questionable whether the VSH insurer is liable in such cases. Because if (like here?) possibly legal prohibitions are violated, no VSH insurer pays. Ask your VSH broker, because a violation of the requirement of ?equal value? is usually uninsurable. Tax advisors have another problem: How is an (undetected?) ineffective salary conversion treated in payroll? The intermediary is almost always on board?!
Deception by product providers? An federation gave it now on its Internet side, the federation of the independent ones (BVD): Here we made clear that entrepreneurs can lose their entire operational old age pension after the ?pledge model of the insurance industry? in the insolvency. Only this finding does not lead for the mediator to the goal. Also in this point a substantial reorganization need exists to repair unhappy arrangements, naturally paid.
Rethinking sales: For intermediaries, it is now a matter of recognising that fee-based advice has a promising future. Agents are still trying to earn their money with commissions in occupational pension consulting. The risk of civil and criminal liability is high. For risks and side effects, consult your legal counsel ? but (just don’t) your broker’s handler?
Employer liability as a door-opener: Mass reorganisation is apparently needed in the occupational pension system because of the violation of equal value. The reason under employment law is the breach of duty of care, because the employee’s claim against the employer under employment law is usually higher than the claim against the insurer involved under insurance law. A discussion with trade unions or works councils, perhaps even a gentle reference to the objective criminal offences of §§ 266, 266 a StGB, can help to open up this market. Or you ask how the tax advisor has managed to treat (partially) ineffective deferred compensation for tax purposes over the years? Even if some insurers are unsuccessfully trying to disprove Dr.Reinecke ? his statements reveal an existential need for advice as a sales opportunity.
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About the author
PhD, MBA, MM
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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