Petition proves: pension commitment is not insolvency-proof

by Johannes Fiala, Attorney at Law
(Sources: epn; DZW – Die Zahnarzt Woche)
The report of the Petitions Committee of the German Bundestag shows where the “rabbit in the hare” lies. In printed matter 15/5570 of 1 June 2005, it is stated that “A petitioner objects to the unrestricted seizability … . He stated that in the context of insolvency proceedings which took place in 2002, his life insurance policy concluded in 1989 with a pension commitment had been attached.” Anyone who is confronted with this as an entrepreneur with an existing pension commitment is surprised: Weren’t an intermediary, an insurer and also one’s own tax advisor convinced that insolvency protection would certainly apply after advertising?
Recently, it was once again possible to read in a sales circular “The BGH explicitly confirms in its ruling of 7 April 2005 that the pledging of a reinsurance policy is insolvency-proof even after the entry into force of the Insolvency Code.” Critics believe that intermediaries are being negligently misled here, because
1. any creditor of the GGF may attach the reinsurance,
2. the insolvency administrator can always terminate, dissolve and collect the reinsurance,
3. the insolvency administrator may set off against the claims arising from the commitment.
Why is that so obvious? Because according to the Heubeck values with six percent the pension provision is economically much too low – the two to threefold value comes much closer to the reality of a commercial balance sheet (cf. § 253 HGB) or the over-indebtedness balance sheet (cf. § 19 InsO): Then the insolvency administrator, as in many GmbH insolvencies, will reclaim and set off too high withdrawals. Thus the practice.
Offsetting has nothing whatsoever to do with the revocation of a commitment (cf. BGH ruling of 17 December 2001, Case No. II ZR 222/99): In terms of design, the ruling shows that it is advisable to bring about vesting immediately – at the same time as the commitment. There are various approaches to this. First of all, it is a question of separating the “reinsurance” from the company so that an insolvency administrator does not have direct access to the insurance assets.
The sales manager of a U-Kasse: “We have made it clear to every insolvency administrator that the fund assets are earmarked. By presenting our articles of association, we then sent every insolvency administrator running for the hills.” That’s good, but the devil is in the details – it all depends on the benefit plan and the articles of association: And according to these, not every U-Kasse (for the GGF) is “insolvency-proof”. As one expert puts it: “If the sponsoring company (i.e. an insolvency administrator) succeeds in enforcing a repurchase of the reinsurance policy, the insurance funds saved up are lost in this way for the employees (i.e. also the GGF). Blanket statements that the U-Kasse is always insolvency-proof are incorrect.”
A lot can also be saved by means of a direct insurance with pension benefits: there is the possibility here to secure garnishment-free amounts (depending on the number of family members entitled to maintenance), in individual cases even 2,000 euros, against execution. But again, it all depends on the details, i.e. the exact conditions. A lump-sum benefit with an annuity option would be attachable, whereas an annuity benefit with a lump-sum option would hardly be attachable.
Another approach is to transform the company pension scheme into a private one. A private pension plan can be protected abroad, for example in Switzerland, in favour of the spouse and descendants in the event of bankruptcy. Trust solutions abroad should also be considered – because in principle enforcement and bankruptcy law is a matter for the national legal system; but here, too, the details matter, for example international agreements in the event of insolvency.

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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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