Occupational pension schemes: U-funds without insolvency protection, up to 25 billion euros employer liability

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)
The case ?XXX U-Kasse?: Once upon a time there was a U-Kasse in Ratingen, today you can only find the insolvency administrator on the Internet who is winding up this U-Kasse. The case went through the press, because the last official act of the owners of that U-Kasse was to transfer the U-Kasse assets to the Cayman Islands. The members of the U-Kasse, i.e. the employers, were not at all happy about this. The employer bears the so-called Ausfallhaftung ? an extremely expensive bAV fun.
No PSV protection in the event of insolvency of the U-Kasse: Neither in the event of insolvency of the U-Kasse, nor in the event of embezzlement by the administrators of such an association (a non-profit GmbH or foundation is also conceivable) does the Pension Security Association (PSVaG) step in. This is simply a case of employer liability. For the financial intermediary or management consultant in matters of occupational pension schemes, a total loss risk that requires clarification. Here the recourse is with the mediators.
Void agreements with employees: The Company Pension Act (BetrAVG) stipulates that in the case of company pension schemes, the employees’ money must be invested ?in equal value? In principle thus the wage saved up for the age, may not be loaded by unnecessary administrative costs. In the technical periodical of the expert federation ?aba? it stood at the beginning of of 2006 clearly in it: U-cashes cause additionally ?unnecessary? costs. ? all those models, with which the coworkers are loaded directly or indirectly with the administrative costs of the U-Kasse in the context of a remuneration conversion, are (partially) ineffective. The lawyer speaks here also of nullity.
Invalidity effect of missing value equality: The highest Federal German labor judge in the matter of ?pensions? pp., Dr. Reinecke, brought it on the Handelsblatt forum to the operational old age pension at the beginning of of 2006 on the point. Because the invalidity of such agreements with the coworkers strikes through on the contracts with the product givers and/or the external carriers of the operational age precaution. Here, much to the delight of all contracting parties, it is a matter of reversal. In practical terms, this means that the employer demands back all contributions paid and a standard capital market interest rate on these funds. In addition, there are potential damages from additional charges for taxes and social security contributions.
Love letter to the U-Kasse: The typical letter to the U-Kasse then states that according to §§ 134 BGB in conjunction with the provisions of the BetrAVG both the deferred compensation agreement with the employee and the agreement with the U-Kasse referring to it are null and void, in particular due to a lack of equal value (additional administrative costs of the U-Kasse) and additionally due to zillmerisation of the reinsurance at the U-Kasse (also a reason for nullity due to a violation of a legal prohibition of the BetrAVG!). Some U-Kassen then state that no (!) zillmerisation would take place, because in the insurance conditions it would say ‘At the beginning of the insurance contract high costs arise? These costs are not charged separately, but are covered by the first contributions. ?? The expert recognizes immediately the authority of the author of such ineffective tranquilizing pills from the feather of a U-cash, because this reference tends typically straight toward a Zillmerung.
Shock for unions and mediators: The mediator, trained at a ?private academy? is horrified ? no, he was never informed about this. He cannot call a commentary on the company pension law his property. Also with the trade unions chaos prevails, because the so-called ?metal pension? stands also in the fire ? were there not also commissions in the play, paid from the converted money of the coworkers? And now everything is supposed to be ?null and (partially) void? Yes, what equal value means, one did not know about it?
Insolvency of the GmbH with U-Kassen-bAV solution: The case is commonplace ? every year about 20,000 GmbH�s go into insolvency. Let us take an entrepreneur from Hesse. The managing partner (GGF) and his 10 employees had opted for a U-Kasse. In case of insolvency, the PSVaG will claim the complete money from the U-Kasse, i.e. also the money for the GGF’s pension provision. If you ask the PSVaG, this is not a “socialisation of the GGF’s pension assets”, but simply a legal transfer of claims. No, no, the money of the GGF for his pension provision is not gone – it just belongs to someone else.
The PSVaG’s statement of account is what matters: The PSVaG will often determine that the ‘reinsurance’ of the employees at the U-Kasse is to be described as ‘underfunded’. The determined financial deficits are then in fact compensated with the retirement provision assets saved by the GGF. And if there is still some of the GGF’s assets left with the U-Kasse, then the fate of this money is determined by the statutes and benefit plan of the U-Kasse. Here, too, it is easier for those who know how to read the details.
GGF provision goes to Caritas: In numerous U-Kassen statutes it is stated that the “remaining” assets are to go to a charitable organisation. assets should go to a charitable organisation. What is not infrequently missing is a provision that the (few?) remaining assets from the U-Kassen coverage of the GGF should go to him as a so-called person entitled to a pension. The GGF is left with the proverbial view “through the stovepipe into the mountains”. It is not surprising when the insurance sales manager of a large U-Kasse says that no insolvency administrator has ever received any money from him ? but the GGF has also never received the money for his provision?
GGF provision for the insolvency administrator: And if it were otherwise, i.e. the U-cash statute provides that the GGF could receive at least part of its pension provision in the insolvency of its GmbH, then the insolvency administrator is already at the door, holding out both hands. The insolvency administrator will usually assert claims from insolvency delay etc. ? and again the GGF looks ?into the Bavarian foothills of the Alps? He then still has to go to the social security office.
Solutions via foreign countries: Yes, abroad there is a different social policy, e.g. the ?insolvency privilege? for life insurances (supported by the local minister with a ban on advertising in Germany) or an unseizability of assets for pension provision. A look at the united Europe shows that many an entrepreneur would not “recover from the German legal system”. Thus some Mittelständler then gladly shifts a partial enterprise abroad ? while in this country the unemployment rises: Achievement is to be worthwhile again ? Will the decreasing work be distributed more fairly by extending working hours?
Need for repair: Repairing such ?void? Repairing such ?void? agreements on deferred compensation must not mean ?casting out the devil with the Belzebub? The product providers and the external pension providers are facing a liability in the billions. How the Federal Labor Court will decide, the presiding judge clearly predicted. It is to be feared that the U-Kasse from Ratingen – with a back completion of void contracts on the insistence of the ?cheated? employees ? Coworker ? not the only U-Kassen insolvency case will remain. The deceived mediators stand here also in the responsibility ? who will at the end whose insolvency risk ausbaden? In practice, it will come down to, as the saying goes, “first come, first served”.

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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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