Tax-privileged health support by employer without any private supplementary insurance at all

– Efficient employee retention through company sickness benefits –


According to § 10 I No.3 EStG should since 2010 all Contributions to private health and long-term care insurance are fully tax-deductible as “other pension expenses”. However, this only applies in so far as it is proportionally a so-called basic insurance (basic health insurance and compulsory nursing care insurance).


The Federal Fiscal Court (Bundesfinanzhof, BFH, ruling of 02.09.2014, ref. IX R 43/13) recently confirmed that tax-exempt employer contributions to health or long-term care insurance (§ 10 para. 2 no. 1 sentence 2 EStG) are “as a whole” in the immediate economic connection with the provision expenses within the meaning of § 10 para. 1 No. 3 EStG, i.e. the so-called basic coverage. The tax offices offset tax-free subsidies to the employee, whether for basic benefits or for optional benefits, exclusively against the preferential contributions to the basic insurance, which can then no longer be claimed for tax purposes to that extent.


However, these tax disadvantages for employees, if the employer wanted to be generous by providing voluntary allowances also for optional services, can be avoided. This is because employers have the opportunity to be more fiscally flexible and to involve employees more closely.


Employer’s aid fund instead of tax trap for employees

The employer can – without any contract with a “company” health insurance – install his own solution for his employees. To this end, it is sufficient for the employer to promise health benefits for the employees and their family members, for example, either itself or through a support fund or foundation. In addition to such sickness benefits, extended continued payment of wages, or subsidies for glasses or teeth can also be promised.


In individual cases (e.g. where the interest is predominantly business) this may be tax-free. Tax exemption can also be considered when social reasons are at the forefront. In any case, benefits through provident funds can always be optimised at least within the tax limits. An employer’s own aid fund does not need to be licensed as an insurance company, and is therefore not subject to supervision or regulation. Low-cost administration with no distribution costs also benefits employees.


Tax benefits are constitutionally secured

Since the Constitutional Court has expressly exempted the costs of adequate health care from taxation, this also applies to contributions to a support fund. Corresponding tax certificates issued by health insurance funds, some of which have been in existence for more than 70 years, are therefore regularly recognised by the tax authorities.


If the employer directly covers half of the costs of the provident fund for employees instead of paying a subsidy, there is no wage tax liability for this. Payments made by the support fund in the event of illness are also fully tax-free, because they are offset by a corresponding amount of medical expenses.


Support services for employees covered by statutory health insurance

Commitments – by the employer directly or through a provident fund – for additional benefits to employees and family members insured by the statutory health insurance scheme are also possible. The Waldorf Schools, for example, have developed such an institution together with the Hannoversche Beihilfekasse with actuarial support.

Today, this is often still arranged via a group insurance or, within the framework of the so-called company health insurance, via a private health insurance (PKV). However, an own offer by the employer is not only cheaper, but also causes a stronger commitment and identification of the employee. In addition, far more is recognised for tax purposes than is the case with company health insurance. To ensure that the benefit does not become an employee’s salary, equal treatment must be guaranteed, for example by means of a sufficiently independent support fund in the form of a foundation.


Solid planning and calculation is a prerequisite

In order to avoid surprises, in the case of health care cost commitments made directly via employers or via a provident fund, solid planning and actuarial calculation of the expected benefits based initially on external experience is necessary. Only then can the services be finally determined.

In contrast to private health insurance, social aspects can also be taken into account in the premium structure, such as age independence, income and the possibility of providing non-contributory insurance for children. A disproportionate increase in contributions in old age, as in the private health insurance, due to an individual actuarial premium calculation, is not necessary. This is usually more socially acceptable abroad anyway, as it is customary here to calculate premiums according to the so-called “community rating”.

There is no compulsory insurance for those not covered by statutory insurance in the case of alternative solutions

According to the law, there is no obligation to insure the “uninsured” if there is comparable coverage in the event of illness to that provided by a support fund, if the legal claim to the benefits is based on a promise by the employer, which may even be limited to the legal minimum level. However, the insurance obligation can even be fulfilled by the provident fund taking out a reinsurance policy for each member with a German private health insurer for outpatient and inpatient services in a multi-bed room, with a maximum annual deductible of 5,000 euros per person.


Such reinsurance policies are currently offered for about EUR 40 per month for adults and half that for children. This is recommended anyway to absorb an unforeseen burden of major losses.


by Dr. Johannes Fiala and Peter A. Schramm


courtesy of

from (published in CHAZ 06/2015)

and (published on 03/27/2015 in P.T. Magazine under the headline: Smartly Insured)


and (Issue 01-2016, Page 30)


Der Koment, trade journal for showmen and market traders” (Published in issue of 30.03.2015)

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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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