Evidence obligation in company pension schemes

1. The starting point for the statutory requirements to provide evidence: NachwG 1995

The Act on Notification of Employment Conditions was introduced in 1995 to strengthen employee protection in Germany from the European Directive 91/533/EEC in order to create transparency about the working conditions existing in the employment relationship. Notwithstanding the possibility to conclude employment agreements informally, employers were required to inform their employees about the essential terms and conditions of employment. With Directive 2019/1152/EU on transparent and foreseeable working conditions, the European legislator has mandated the EU member states to extend the employer's obligation to provide evidence as of 1 August 2022.

2. Written form requirement in Germany

The EU Directive to be implemented by the national legislators did not stipulate a strict written form requirement. Rather, the new version opened up the possibility of introducing electronic evidence. Despite extensive criticism during the legislative process and the divergent implementation in neighbouring EU countries, the German legislator adhered to the written form requirement of Sec. 2 NachwG on the employer side, extended the information obligations pursuant to the requirements of the Directive and introduced a financial penalty for employers who breach the written record of the essential terms and conditions of employment.

3. Existing obligations to provide evidence for company pension schemes

Even before the new version of the NachwG, the “composition and amount of remuneration including bonuses, allowances, premiums and special payments as well as other components of remuneration and their due date” had to be recorded in writing pursuant to Sec. 2 (2) sentence 1 no. 6 NachwG former version.

According to the common understanding in practice, remuneration components resulting from company pension schemes and working time accounts (credit balances) fall under the concept of remuneration. In its judgement of 13 November 2012 (Ref. 3 AZR 444/10), the German Federal Labour Court (Bundesarbeitsgericht, BAG) already recognised the remuneration character of benefits from company pension schemes, so that even before the amendment of the NachwG, information on benefits from company pension schemes had to be provided. There is no differentiation between employer- and employee-financed company pension schemes.

Employers must therefore continue to include at least the following information in the relevant documentation in order to comply with the provisions of the NachwG:

• Specification of the chosen mode of implementation,
• Amount and due date of the pension contributions,
• Amount and calculation of pension benefits,
• Information on the risks hedged with the commitment in each case, and
• Requirements for the occurrence of the insured event
  

4. New obligations to provide evidence regarding company pension schemes

The obligation to state the name and address of the pension provider was newly introduced in Sec. 2 (2) sentence 1 no. 13 NachwG. Pension providers are defined as pension pools, pension funds, support funds and insurance companies in the event of the conclusion of direct insurance policies. Third parties that are involved in the implementation of the specific company pension commitment (only) for the purpose of supplementary (insolvency) protection and are not directly liable to the beneficiaries under the company pension commitment, such as trustees under contract trust agreements or insurance companies under reinsurance policies, are exempt from the disclosure requirement.

Pursuant to Sec. 2 (2) sentence 1 no. 13 NachwG, the obligation to provide evidence does not apply if the pension provider is required to provide information on the name and address. In practice, it is sometimes argued that statutory obligations to provide information, which 'only' include the transmission of information, do not include an assumption of the obligation to provide evidence as a whole, since only the "information" is required by law. For pension funds, pension pools, and life insurance companies, such an obligation arises from Sec. 3 (1) no. 2 VAG-Information-Regulation (VAG-Informationspflichtenverordnung, VAG-InfoV). In the case of provision by a support fund, the obligation to provide information may be justified in the benefit plan. In order to fulfil the information obligation under the VAG-InfoV, compliance with the written form requirement stipulated in the NachwG is not mandatory, since for pension funds, pension pools, and life insurance companies the electronic form or paper form in Sec. 2 (1) VAG-InfoV is sufficient for fulfilment. The formal requirements of the employer's obligation to provide evidence are not met if the lower form requirements are applied. The information obligations according to Sec. 3 (1) no. 2 VAG-InfoV are nevertheless suitable for fulfilling the evidence obligations of Sec. 2 (2) sentence 1 no. 13 NachwG, if and because the declaration of exemption can be understood comprehensively in view of the other statutory information obligations and can therefore also include the form relevant for the respective statutory regulation.

5. Deadlines for evidence-related notices

The new version of the NachwG also stipulates deadlines for the employer's notices about evidence. The information on remuneration and thus also on the company pension scheme must be submitted at the beginning of the employment for employment from 1 August 2022 and the information on the pension provider of the company pension scheme commitment must be submitted one month after the beginning of the employment.

In the event of any future changes to the working conditions, i.e. also in the event of changes to the company pension scheme or in the event of a later start of the company pension scheme, the respective information must be communicated with the effective date. This also applies to company pension schemes existing before 1 August 2022.

For existing company pension schemes without any changes in the meantime, the employer has to fulfil the obligation to provide evidence only upon the employee's request with regard to the remuneration at the latest on the 7th day after receipt of the request and with regard to the information on the pension provider at the latest one month after receipt of the request. The practical experience with the enforcement of the evidence for existing company pension schemes has been mixed so far; nevertheless, it has proven useful for employers to prepare the relevant information 'in advance' in order to be able to act in due time in case of enforcement.

6. Substitution of evidence obligations via reference

Sec. 2 (4) sentence 1 NachwG allows employers to replace specific information with a reference to specific provisions of the relevant legal and administrative regulations and statutes or collective bargaining agreements, works agreements or service agreements. In this respect, however, attention must always be paid to the fact that the legally required information exists in the respective referenced regulations. Information on the pension provider is often omitted in works agreements due to the fact that the works council is not subject to co-determination.

7. Interim summary

The implementation of the extended obligations to provide evidence also for the company pension scheme commitments is sometimes difficult for employers, especially with regard to the formal written form requirement; this is particularly the case with the already (far) advanced digitization of the company pension scheme with a paperless processing of, for example, deferred compensation agreements. Employers must therefore continue to check whether deferred compensation agreements must be supplemented by an original employer signature, whether company agreements or collective bargaining agreements referred to in an employment agreement satisfy the statutory notification obligations and whether the information on the pension provider has been properly provided. If necessary, a limitation of the number of providers of externally executed commitments is indicated in order to reduce the administrative burden.

Since only the unilateral written declaration of the employer is required by the Act on Notification of Employment Conditions, it is still possible to conclude pension commitments, pension regulations and deferred compensation agreements under simplified formal requirements as long as the written documentation is subsequently submitted to the required extent and in compliance with the deadline.

The digitization of the company pension scheme is therefore not completely prevented by the amendment to the law. However, it will be made more complex. For example, evidence of a modern portal solution - as in other European countries - will not be available in Germany for the time being. The practice must continue to adjust to this.