What insurance brokers should know about the statutory pension insurance?

The Bavarian State Social Court (LSG Munich, judgement of 03.06.2016, Ref. L 1 R 679/14) confirmed the determination of the insurance obligation of a pool broker in the statutory pension insurance. The pool broker had already been defeated in the lower court: “In its ruling of 9 May 2014, the SG dismissed the action. The plaintiff was permanently and essentially only working for the SG. The clients withdrew as clients, as the plaintiff did not become a party to the contracts brokered by him through the AG”. (LSG, loc. cit.). The AG is the broker pool.

 

Brokers’ association and brokers confused social security law with brokerage law

One association of brokers expressed offence: “The ruling must be regarded as a grossly erroneous individual decision”. Brokers and lawyers who would need to do so could turn to the German Pension Insurance Association (DRV) for free training and further education in the Social Security Code (SGB VI). The judgement is neither erroneous, nor is it an individual case decision – or, as the vernacular says, “those who have been able to read texts have a clear advantage”.

 

There is the bogus self-employed (with full social security and employer liability), as evidenced by the bankruptcy of the distribution company MEG. Some broker advisors of insurers and typically agents can also be affected by this – they are then in reality not self-employed at all, but only on a worthless paper for show.

 

In simpler cases, if the undoubtedly self-employed pool broker receives 5/6 or more of his income from one source (pool) and has not employed any employee normally, he will usually be subject to full statutory pension insurance obligations if the status of “employee-like self-employed” is established during the examination.

 

The wording of the LSG “He is permanently only active for one client” and “Clients are excluded as clients, as the plaintiff is not a party to the contracts he mediated”. shows: The broker is not acting on behalf of the client, it is not his client, he has no “real” brokerage contract with him. Just as little as the waiter, who brings the desired measure to the guest, is active on his behalf. Pools, which want to make the broker believe otherwise, lead him astray. This view of the LSG disturbs – apart from the financial component – the self-image of some brokers in the pool and the acceptance of pools.

 

Determination of the status by the DRV

Some agents or broker advisors who have left the company obtain a supplementary pension from the DRV, which is as it were free of charge, at a later date: they have a status determination procedure carried out three months after leaving the company – at which point the employer’s possibility of recourse ends.

 

For pool brokers, the status determination is also a possibility for legal security – after all, in the event of negligence, they are liable for the contributions for the current year, as well as for the four completed previous years, i.e. up to approximately EUR 50,000 additional payment. If there is a case of (conditional) intent, the DRV can retroactively collect contributions for up to 30 years. The DRV will perhaps regard brokers as experts, especially when they give advice on old-age provision – and accept conditional intent for the time being?

 

Recently, a broker complained in a forum that his customer, a self-employed midwife, does not receive a Riester bonus because she does not pay contributions to the statutory pension insurance, which is a prerequisite for the Riester bonus. It was then explained to the broker that the customer does indeed receive the Riester supplement, because it does not depend on whether one pays contributions to the SPS, but whether one is obliged to pay insurance there, and that is it, possibly with an obligation to make back payments for up to five years. As a broker, you should know this.

 

As employee-similar independent ones also already with judgement of the BSG of 24.11.2005 – Az.: B12 RA 1 /04 R the GmbH partner managing directors were judged, because they are not active on behalf of the customers of the GmbH, but in the order of the GmbH. Only by a law change they were excluded later again from it.

 

Employment-like – genuine – self-employed receive at least 5/6 of their income from one source and do not employ an employee (AN) – a mini-job does not count. Such self-employed persons owe the full (e.g. maximum or standard) contribution to the statutory pension insurance.

 

The pool is the “sales manager” of the pool broker

The LSG compares the pool broker with a franchisee – this is a decades-long legal tradition of the Federal Social Court (BSG), so that no fundamentally new questions arise and therefore no appeal was allowed.

 

The LSG then opens the door for the question of whether pool brokers are brokers at all, because the judgement says among other things “Finally, it is also irrelevant whether and to what extent the Chamber of Industry and Commerce or the BaFin violate their supervisory duties in basing their decision on the view represented here that the plaintiff is an independent insurance broker but only works for one client. Whether the plaintiff complies with the legal provisions with the present contract drafting, which are monitored by these institutions, is to be decided solely by these institutions”.

 

Perhaps the pool is a multiple agent who also owns the pool broker’s stocks, with a limited range of products – and the pool broker is only a dummy broker who, according to § 60 I VVG (German Insurance Contract Act), “expressly draws the attention of every “his” customer to a limited choice of insurer and contract”?

 

The LSG is not so much interested in what is written on paper but in how it is actually lived. It is not impressed by attempted (self) deception. Pool brokers must therefore recognise that they may be dependent on pools in a similar way to employees. Her client is the pool – her supposed client is not hers.

Of course, the pool broker is not independent, just because he could – just like the employee his job – change the pool, and how he can take his knowledge with him, theoretically also for a direct connection to insurers. Dependence can also be a voluntary state, which theoretically could be changed at any time – but only as long as it continues. Brokers who see independence here are deluding themselves, just as the alcoholic claims not to be dependent because he can stop drinking at any time.

Economic impact

The employee similarity of the pool broker also affects the pools financially:

  1. Because his brokers have to pay RV contributions and maybe that’s why they want more commission?
  2. Because the RV contributions make it no longer interesting for many to join a pool – he loses brokers.
  3. Because brokers could join two pools – the pool loses business.
  4. Because pools can no longer maintain the image of the independent broker to whom the customer belongs – the misleading effect is exposed by the LSG.

This may not be to the liking of pool brokers. They could go to service providers who only offer administrative services – which, however, usually affects the VAT liability. Many could simply give up in the face of the alternatives – additional financial or organizational effort.

 

Besides the financial effect, the psychological effect is relevant because brokers in pools will not like to hear that they are AN-like because they are dependent. And pools may therefore be reluctant to say it.

 

According to the motto: “I am a free person and can decide freely” – “Of course: Would you like a cell with a view to the yard or to the street?”

 

False self-employed or employee-like self-employed?

The status is very well distinguished – even without being an insurance lawyer.

The AN-like person carries out an activity similar to that of an AN, but is not an AN.

The self-employed person similar to the AN is undoubtedly self-employed, but similar to the AN.

The bogus self-employed person is not a self-employed person at all, but AN.

There were bogus self-employed persons with operational integration in MEG, but hardly ever in pools.

 

Pool brokers do not regularly own the pool’s holdings

The clients “served” by the broker are not the broker’s clients either, because he has none, only the pool. A journalist is surprised about the LSG judgement by writing “Yet the broker actually commissions the pool to support him and pays him to do so. At least that’s the common assumption.”

 

This is, however, only the fairy tale that is told for reassurance. The truth is another. Every broker in the pool only has to look at the (brokerage) contract with his pool to realize that he is not a contractual partner of the client. It takes a great deal of persuasion for a pool to make the broker believe otherwise – obviously successfully, that it is the broker’s client.

 

Just like allowing the AN to hang pictures of his wife, child and dog on the wall and his name next to the door so he thinks it is his office. Then you can say “Close your eyes – I have a surprise for you! Do not blink! See anything else? Good – that’s what you own here!”.

 

At the latest when the pool goes bankrupt, the pool broker will often receive confirmation that the assets belong to the insolvency estate – another indication of the similarity of the employees. In this respect, there is nothing in the judgment that was perhaps overlooked as a variant for the formation of law?

 

Systematic examination of the pools by the DRV?

“Pension obligation for pool brokers is nonsense”, a lawyer recently said in his commentary on the LSG ruling. The lawyer and the suing broker could have easily found out about the social security obligations from any simply trained tax clerk.

 

The LSG judgement is completely correct and nobody should be surprised: The pool broker has rather let himself be fooled and talked himself into believing that you are free, when in reality you are employee-like and dependent on the pool. The pool broker’s request apparently had little chance of success from the beginning – it would have been easier to hire someone or to follow the “trend towards a second pool”.

 

The ruling has a signal effect for the systematically working nationwide auditing service of the DRV, with increasing prospects of the pool brokers for additional payments for up to five years – a disservice to the profession? If a pool claims to reassure its pool brokers that it has already been checked and the DRV has said that everything is fine with it, this only refers to the bogus self-employed, because the AN-like compulsorily insured persons do not directly affect the pool, because there is then no liability as with the bogus self-employed. He doesn’t even need to know about these.

 

How much did the plaintiff broker understand about pension plans?

Presumably the pool broker also failed to understand that the compulsory contributions to the DRV could be quite useful, for example in terms of risk diversification. Finally, the DRV writes about the contributions paid to them voluntarily that 5.14% of these are paid out annually as a pension later. Perhaps the broker prefers “safe government bonds” with a negative interest rate; as life insurance because of the usual administrative costs with even lower prospects of later repayment?

 

Perhaps, however, he simply cannot afford personnel or his own administration software, self-organized training and time to negotiate direct connections to insurers, nor can he afford a pension plan – hence his dependence on the pool. Then, however, it is all the more correct to subject him to the pension insurance obligation so that he does not become a burden on the taxpayer in old age.

 

by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm

 

by courtesy of

 

www.experten.de (published on 06.07.2016)

Link: http://www.experten.de/2016/07/06/was-makler-ueber-die-gesetzliche-rentenversicherung-wissen-sollten/

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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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