October 23, 2017
Authored by: Jens Peters
It was hard work and in the end a close call. Up to the very end, it was unclear whether the “Company Pension Strengthening Act” (Betriebsrentenstärkungsgesetz) (“the Act”) would fail or succeed. On January 1 2018, most parts of the Act will come into force. The Act will bring the biggest reform of the company pension landscape in Germany since the enactment of the Company Pension Act (Betriebsrentengesetz) in the mid-70s and since the Pension Fund Law (“Altersvermögensgesetz”) of 2001. The objective of the reform is to strengthen company pensions and to promote further dissemination, especially within small and medium sized companies with respect to employees with low income. Below is a brief overview of the most important aspects of the reform.
Genuine Defined Contribution Plan
The key element of the reform is the recognition of a genuine defined contribution plan (reine Beitragszusage) as company pension promise under the Company Pension Act. As of 2018, the employer will have the opportunity to pay a certain amount of money to a third-party financer as company pension without the need to provide a guarantee for a definitive or determinable retirement benefit in favor of the employee. This concept of “pay and forget” means that by paying the fixed contribution as company pension, the employer entirely fulfills its obligations under the pension promise. Consequently, there is also no subsidiary liability on behalf of the employer for the retirement benefits of the employee and the employee will have any legal claims only against the