Mandatory Contribution Requirements for Employers in Regard to the bAV Allowance

Starting from the beginning of next year, there are significant changes coming for employers involved in occupational pension schemes (betriebliche Altersvorsorge, bAV) based on salary conversion (Entgeltumwandlung).

Until now, employers could save on social security costs when an employee opted for salary conversion for bAV. However, from January 1, 2022, this will change. Employers will be legally required to pass on a significant portion of the savings from bAV to employees, even for old contracts.

The regulation applies to new contracts concluded since 2019, and from 2022, it will also apply to existing contracts. Employers are required to pass on 15 percent of the social security costs for new contracts directly into the bAV of the respective employee. For existing contracts, this obligation is prospective from January 1, 2022.

Employers should be aware of the potential financial consequences of not passing on bAV savings for existing contracts after January 1, 2022. They may face liability risks for lost interest payments and possibly reduced pension claims due to non-paid contributions.

To ensure compliance with the new regulations, employers are advised to seek professional advice. W&K Wirtschaftsberatung, an independent insurance broker operating since 2010, offers fee-based financial advice for selected professional groups in cooperation with Honorarfinanz. Tino Weissenrieder, the managing director of W&K Wirtschaftsberatung in Lahr, is available to provide guidance.

It's important to note that employees can take advantage of bAV to provide for their retirement through their employer. bAV is a system where employees can save for retirement through their employer, with a portion of their salary being converted. The mandatory employer contributions to bAV are intended to make company pensions more attractive for employees.

The change in requirements for bAV savings will result in employees receiving a portion of the savings that employers previously kept as a result of salary conversion. Employers should have their bAV promises reviewed in advance to avoid potential back payments later on.

In summary, employers need to prepare for the changes coming to bAV retirement savings from January 1, 2022. Seeking professional advice can help ensure compliance and avoid potential financial consequences.