occupational pension scheme: tax consultants and insurance brokers are jointly liable*.

*by Stefan Oppelt (Rödermark), bAV business consultant (www.abacus-consult.de) and Johannes Fiala (Munich), lawyer (www.fiala.de)
Pensions in a family limited company: An occupational pension consultant finds the following situation in a company to be examined, a medium-sized trading company (family limited company): In 1978, a pension commitment was made by the GmbH for both the managing director and his wife. The pension commitment was formulated by the tax advisor in charge and approved by the shareholders at the time by way of a shareholders’ resolution. The commitment for the shareholder-manager (GGF) was fixed at DM 3,000 retirement pension, DM 3,000 disability pension and DM 1,600 widow’s pension.
In subsequent years, the commitment was adjusted in each case to the changed income situation of the shareholder-manager. The adjustments were duly recorded with shareholder resolutions. In the wording of the shareholders’ resolution, the adjustment to the retirement pension followed in each case. The auditor of the tax office appears: The current tax audit of the tax office for the years 2001 to 2004 has now found fault with the pension commitment and requested the company to pay tax on 75,000 euros in hidden profit distributions (vGA). The auditors argued that although the old-age pension was mentioned in the shareholders’ resolutions, disability pensions and widows’ pensions were not shown separately. However, the partial value was calculated on the basis of the old-age pension, occupational disability pension and disability pension. Expensive error of the tax adviser: After examination of the documents submitted by the tax adviser – comparison with the accessible iurisdiction ? it turns out that the claim of the tax office is justified. As a rule, commitments are linked to retirement pensions. This means that the disability pension is 100% the same as the old-age pension. However, the commitment in question regulates all facts individually, so that the disability pension should also have been explicitly mentioned in the shareholders’ resolutions on the adjustment of the pension that took place in the following years. Irrespective of this, the tax office also critically noted that there was no congruent reinsurance for the pension granted – only old-age pensions were partially reinsured – but has so far left it at a note of the increased risk. Defense strategy of tax consultant and insurance broker: The entrusted insurance broker, as well as the tax consultant consistently rejected a liability in their person. It was argued that in previous audits the facts had not been criticised by auditors. Liability reasons: In the case of the insurance broker, a reference to his (!) obligations and his position as a trustee led to an immediate notice of claim. With the tax adviser half a dozen judgements had to be submitted, until also he recognized his incorrect balance sheet approach, the omitted clearing up for years. Tax advisors in the liability boat as a sales multiplier: Just as financial service providers can use a lawyer or actuary to get rid of unwanted responsibility, tax advisors are also trying this. Mostly without the slightest success ! This is shown, for example, by the judgement of the OLG Düsseldorf of 18.02.1999 (file no. 13 U 60/98): The prudent tax adviser had called in an external consultant because the questions in connection with the occupational pension scheme appeared to him to be too complex.
Liability through the back door: However, the OLG ruled unerringly that although the tax advisor had not provided any advice on occupational pension schemes, he should have checked during the preparation of the balance sheet ? i.e. the preparation of the annual financial statements ? whether all requirements for the recognition of the pension commitment were met. This aspect, a de facto permanent liability of the tax advisor for the pension commitment, is a central topic of discussion for occupational pension sales. The popular argument that a pension commitment was set up by a “predecessor of the tax advisor” or that the pension commitment was set up so long ago is thus invalidated. Many a tax consultant suspects that he is sitting on skeletons in the cellar ? whoever has understood this will seek de-liability. The tax advisor easily gets into the area of uninsured activities, for example by drafting a pledge or a company resolution ? he is not insured for such (mostly forbidden) legal advice. On the other hand, the tax advisor has to check the legal preliminary questions (e.g. also from labour law) when preparing the balance sheet, for example whether a legally correct pledge exists. Sales practice: It is not uncommon for the bAV company consultant to find a family limited liability company where it is inconceivable, according to the earnings situation, that the commitment can be sufficiently covered. Because of the not to be underestimated danger of an over-indebtedness or insolvency situation, the tax advisor could also be criminally affected as a ?guarantor? The restructuring of the pension commitment can also be extremely lucrative for the sales department in such situations.

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About the author

Dr. Johannes Fiala
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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