Securing occupational pension schemes is a key element of supplementary retirement provision in Germany. In the event of the employer’s insolvency, the Pension Security Association (PSV) is generally obliged to cover vested entitlements and claims relating to occupational pension schemes. In practice, recurring questions arise as to how these claims are to be properly valued, particularly with regard to their discounting. The decision of the Federal Labor Court (BAG) of May 18, 2021 (Case No. 3 AZR 317/20) provides important guidance in this context.
Classification of the Federal Labor Court Decision
With the present judgment, the BAG specified the previously discussed issue of discounting future company pension claims in ongoing insolvency proceedings. The focus was on the question of the appropriate standard for valuing claims to a company pension against the insolvency administrator. The court confirmed that claims to future recurring payments – as is typical in the context of occupational pensions – are in principle to be lodged in the insolvency proceedings at their present value as insolvency claims.
Relevant Legal Foundations
The valuation of such claims is primarily governed by § 45 InsO (Insolvency Code) and § 253 (2) HGB (German Commercial Code). According to § 45 InsO, future recurring payments are to be entered in the insolvency table at their so-called capital value. The basis of valuation is therefore the present value, which results from proper discounting.
Discounting According to the Valuation Act
According to the regulations in force at the time of the decision, an interest rate of 3.5% was to be applied in calculating present value. The practical implementation is based on the Valuation Act (BewG). It is specified here that recognized financial mathematical methods – especially so-called annuity present value factors – must be used to calculate the present value of a future pension payment.
Practical Effects for Affected Persons and Claimants
In the event of insolvency, the correct handling of discounting is of considerable significance. For former employees and their surviving dependents, this can determine the amount to be satisfied from the insolvency estate. Discounting ensures that claims for payments to be made over several years in the future undergo proper economic valuation that meets both insolvency law and tax law requirements.
Significance for the Insolvency Administrator and Other Parties Involved
The insolvency administrator must immediately examine whether and to what extent claims to occupational pensions arose before or after the opening of insolvency proceedings. In addition, it must be assessed what access to the PSV exists in accordance with the Occupational Pensions Act and how this affects the position of the creditors.
Relevance for Occupational Pension Funds
Companies that offer occupational pension schemes must on the one hand ensure the insolvency security of their pension commitments, and on the other hand carefully structure the accounting treatment of such obligations: Correct application of valuation regulations and event-related documentation are complex and may become subject to review in the event of insolvency.
Present Value Calculation and Legal Remedies
The use of the static discount rate under valuation law may result in the claim value recognized in insolvency proceedings being lower than the claimant’s subjectively expected value of the occupational pension. Those affected generally have the opportunity to have the administrator’s calculation reviewed or to legally contest the assessed value if necessary.
In addition, changes in case law or adjustments in valuation law must be continuously taken into account, as they may have a direct impact on the calculation of discounting and thus on the economic position of beneficiaries.
Legal Policy Outlook and Future Developments
Current developments at the European and national level – such as through reforms in insolvency law or occupational pension law – may further change the requirements for discounting in the future. Companies, investors, and beneficiaries should therefore regularly keep themselves informed about the latest legal developments and legislation to adequately assess their scope of action in the event of insolvency.
If you have any questions about the valuation and enforcement of company pension claims or the accounting treatment of provisions in the context of insolvency, a tailored legal review of your individual situation can help protect your interests and mitigate financial risks. The Rechtsanwalt of MTR Legal are available nationwide and internationally for this purpose.
