Recent case law on company pension schemes 1/2026

CTA on the insolvency protection of Old age part time (Altersteilzeit, ATZ) credit balances (Section 8a ATG) – Specific requirements for quantitative valuation of trust assets in securities funds (BAG judgment of 21 October 2025, 9 AZR 66/25)

In its judgment of 26 August 2025 (3 AZR 283/24), the German Federal Labour Court (Bundesarbeitsgericht, BAG) to assess whether, in a double-sided contractual trust agreement (CTA) for the insolvency protection of an ATZ credit balance when the retirement period is implemented under the block model in accordance with Section 8a of the German Old age part time Act (Altersteilzeitgesetz, ATG), special requirements apply to the quantitative valuation of the trust assets if the trust assets consist (largely) of securities funds.

Facts

• The parties are executing a part-time employment contract under the block model (working phase: 1 January 2023–31 December 2024, release phase: 1 January 2025–31 December 2026).
• To fulfil the insolvency insurance obligation pursuant to Section 8a ATG, the defendant’s parent company had concluded a CTA in 2020, which was extended to the defendant in 2021. The trust assets consist primarily of securities funds.
• On 27 April 2023, the plaintiff requested proof of proper insolvency protection. On 12 May 2023, the defendant informed the plaintiff that his claims were secured by the CTA; the defendant submitted the CTA to the plaintiff on 25 June 2023. On 9 May 2023, the trust assets had a value of EUR 388,206.12; the credit balances of all 15 ATZ employees of the defendant amounted to EUR 294,790.31 on 31 May 2023.
• The plaintiff asserts a claim for security pursuant to Section 8a (4) sentences 1 and 2 ATG in respect of his entire part-time retirement savings, as the defendant has not duly provided the evidence required under Section 8a (3) ATG.
• The claim was unsuccessful in the first two instances before the Labour Court Stuttgart and the Regional Labour Court Baden-Württemberg. In its reasoning, the Regional Labour Court Baden-Württemberg stated that the trust assets covered the full amount of all credit balances and that the defendant had in any event provided the evidence by subsequently submitting the CTA.
• The parties have declared the legal dispute in the appeal instance to be settled with regard to the credit balances used up in the period from January 2025 to September 2025.

Reasons for the decision

The BAG dismissed the appeal on appeal, as the claimant had not issued a written request for proof of insolvency insurance within the meaning of Section 8a (4) sentence 1 ATG in respect of the credit balances accrued from February 2023 onwards. It further stated, inter alia, that the trust assets did not fully cover the value credits as at 31 May 2023, as the securities funds comprising the trust assets were to be valued at only 75% of their fair value, and the entitlement to security under Section 8a (4) ATG arises as soon as the employer has failed to provide proper proof of adequate insolvency insurance within the one-month period pursuant to Section 8a(4), sentence 1 ATG.

• Valuation of trust assets as securities funds at only 75% of market value: The 75% valuation results from an analogous application of Section 234(3) of the German Civil Code (BGB), as securities funds may be subject to potential price fluctuations.
• Taking into account all expenses/costs of the trustee that are met from the trust assets: These may include, in particular, settlement costs (including costs in the event of insolvency) as well as capital gains tax payable on price gains.
• Entitlement to security already in the event of failure to provide proper and complete evidence within the one-month period pursuant to Section 8a (4) ATG: Submission of evidence after the deadline has expired is not an option.The employer must provide the employee, within the deadline, with all the information and data required for proper and complete proof, which, in addition to the quantitative data on the value credits and the amount of insolvency insurance, also includes a copy of the CTA.

Implications for practice

The judgment has implications for the standard practice of fulfilling the employer’s obligation to provide insolvency insurance for credit balances in old age part-time contracts under the block model (pursuant to Section 8a ATG) with regard to the timely provision of evidence of insolvency insurance under Section 8a(4) sentence 1 ATG, as well as regarding the requirements for the quantitative valuation of trust assets as securities funds. Employers should therefore, where necessary (= trust assets consisting primarily of securities), consider adjusting the composition of the trust assets on a case-by-case basis for these trust agreements and adjust the relevant liquidity and asset management accordingly. Furthermore, it must be ensured that the trustee’s expenses to be met from the trust assets are taken into account when determining the insolvency coverage ratio. The judgement may also have implications in individual cases for CTA practice regarding companypension commitments (under the direct commitment scheme). Generally speaking, when using a CTA to finance pension obligations arising from such company pension commitments, the employer does not grant the pension beneficiaries any entitlement to a cash-out. In individual cases, however, a commitment to full funding may be included in the legal basis of the company pension commitment or in the CTA. Employers must also bear in mind the scope of the judgment when implementing a pension buy-out as a transfer of pension obligations arising from such company pension commitments to another legal entity under the law on the conversion of pension schemes (pensioners’ company (Rentnergesellschaft); see, for example, our Client Alert, in which, following the BAG judgement of 11 March 2008 (3 AZR 358/06), have a claim against the transferring employer for the pensioners’ company to be adequately capitalised, which in practice is often fulfilled by the transfer of corresponding trust assets (including securities) into a CTA concluded with the pensioners’ company for this purpose. It also remains to be seen whether the Third Senate – which is responsible for occupational pension schemes – will follow the Ninth Senate’s legal opinion on this matter.

It is also questionable whether the Ninth Senate’s legal interpretation can be extended to the insolvency protection of long-term accounts (Section 7e SGB IV). At first glance, the comparable purpose of the statutory obligation to provide insolvency protection for the credit balances accrued through work already performed might suggest that this is the case. However, one factor that argues against such transferability is the restrictions on the investment of these credit balances set out in Section 7d(3) of SGB IV, which already include comprehensive investment-related risk provisioning.

Trainees as “employees” – inclusion within the personal scope of a works agreement on company pension schemes (BAG judgment of 26 August 2025, 3 AZR 283/24)

The German Federal Labor Court (Bundesarbeitsgericht, BAG) decided in its judgment of 26 August 2025 (3 AZR 283/24) on the question of whether a works agreement concerning a company pension scheme, which promises benefits to “company employees,” also includes employees employed as apprentices, and what legal consequences the unconditional termination of such a works agreement has for persons who have already benefited from it.

Facts of the case

• The plaintiff began on 1 August 2026 an apprenticeship as a real estate agent with the defendant. Upon completion of the apprenticeship, he was taken on as an employee, initially on a fixed-term contract and later on a permanent contract, with effect from 1 July 2009; the employment relationship continues to this day.
• The defendant had agreed with the works council a works agreement on a company pension scheme (RO 89). RO 89 granted a company pension and disability benefit to ‘employees who are employed for at least 50% of the standard working hours’. 
• The defendant terminated RO 89 with due notice as of 31 January 2009, without stating grounds for termination and without establishing a replacement pension scheme.
• The plaintiff argued that he had already been covered by the personal scope of RO 89 during his apprenticeship and had therefore acquired pension entitlements prior to its termination. The defendant, however, took the view that RO 89 was directed exclusively at employees; apprentices were not eligible employees.
• The Labour Court Hamburg upheld the claim, whilst the Regional Labour Court Hamburg dismissed it. On appeal by the plaintiff, the BAG ruled in favour of the plaintiff.

Reasons for the decision

The BAG recognised that the plaintiff is entitled to pension benefits in accordance with RO 89 in the event of retirement:

• Personal scope of application – inclusion of apprentices: The BAG interpreted RO 89 to mean that the term ‘company employees’ covers all persons working in the company (Section 75 (1) of the German Works Constitution Act (Betriebsverfassungsgesetz, BetrVG)). According to general labour law terminology, this also includes those employed as apprentices. By promising a “company pension scheme”, RO 89 follows the legal definition in Section 1 (1) of the German Act on Company Pension Schemes (Betriebsrentengesetz, BetrAVG). Employees within the meaning of Sections 1 to 16 BetrAVG expressly include, pursuant to Section 17 (1) BetrAVG, those employed for the purpose of vocational training. The definition of an employee under works constitution law in Section 5 (1) BetrVG also covers apprentices. Against this background, it must be assumed in cases of doubt that the works parties intended the term ‘employees’ to encompass the entire group of persons covered by their regulatory authority. Excluding this group of persons would have required a clear and unambiguous provision.
• 'At least 50% of the standard working hours’: It cannot be inferred from the wording ‘at least 50% of the standard working hours’ that the entitlement is restricted to employees in the narrower sense. In the opinion of the BAG, this criterion does not constitute a status-related characteristic, but describes exclusively a minimum quantitative scope of the work performed for the company. The provision thus does not differentiate according to the nature of the legal relationship, but according to the duration of employment. Apprentices also perform work within a fixed training or employment framework; attendance at vocational school does not preclude this. A restriction to “traditional” employees cannot be inferred from the wording.
• Rewarding loyalty to the company: The purpose of RO 89 was to reward loyalty to the company. In this context, it makes no decisive difference whether this loyalty was demonstrated within an employment relationship or (partly) within a training relationship. This applies in particular to cases such as the present one, where the training is seamlessly followed by an employment relationship.
• Legal consequences of terminating the works agreement: The termination of a works agreement on company pension schemes without replacement is permissible under Section 77 (5) BetrVG without specific grounds; however, its effect is limited. If the notice of termination does not explain the intended legal consequences, the termination is generally to be understood only as meaning that the level of entitlement accrued up to the date of termination is ‘frozen’. Further interventions, such as the complete loss of entitlements already accrued, require specific justification.

Implications for practice

The BAG has made it clear that apprentices generally fall within the personal scope of a pension scheme if the scheme is linked to “employees” or similarly broadly defined groups of persons. Any exclusion of apprentices – which is permissible under company pension law – requires a clear and unambiguous provision in the legal basis. The BAG emphasises the strict separation between pension commitments and eligibility requirements. Qualifying periods, age limits or minimum service periods typically restrict entitlement to benefits, but not the start of the accrual of pension rights. The judgement also reiterates the limited scope of the termination of company pension schemes. Without an explicit stipulation of the legal consequences, termination generally leads only to a freeze on accrued entitlements. When introducing or terminating pension schemes, employers should explicitly regulate the personal scope of application and the intended legal consequences of termination in order to avoid unclear wording and the resulting risks.

Limits of a provision under Sec. 16 (3) no. 1 BetrAVG in new company pension scheme (BAG judgment of 25 November 2025, 3 AZR 91/25)

In its judgment of 25 November 2025 (3 AZR 91/25), BAG has continued its jurisdiction that Section 30c (1) BetrAVG permits the application of Section 16 (3) no. 1 BetrAVG only to genuine new company pension commitments which were granted after 31 December 1998 and are independent of an existing pension commitment. This must be seen against the background that Section 16 (3) (1) BetrAVG constitutes an exception to the statutory obligation to review pension commitments, which must be interpreted narrowly. If older company pension commitments are merely transferred to a new system and continued on an economic basis, the statutory obligation to carry out regular reviews pursuant to Section 16 (1) and (2) BetrAVG remains in force.

Facts

• The plaintiff had been a senior executive since 1996 and received a defined benefit commitment in 1998. The defendant employer converted the pension scheme with effect from 1 January 1999 to a defined contribution capital account model (BV 1999 KVP) governed by a works agreement.
• The company pension commitments existing up to that point were transferred to the new company pension system in the form of an initial credit; the previous commitment remained the economic basis and was continued at the same value.
• The employer made annual pension adjustments of 1% and invoked Section 16 (3) no. 1 BetrAVG (exclusion of adjustment in the case of a fixed 1% adjustment).
• On 22 July 2020, defendant and works council agreed on a memorandum intended to clarify that, when the 1999 KVP collective agreement was concluded, they had intended the 1% rule to constitute a complete exclusion from adjustment.
• The defendant initially applied (only) a 1% adjustment in accordance with Section 16 (3) (1) BetrAVG to the company pension benefits received by the plaintiff since 2020. In the lawsuit, the plaintiff asserted a statutory adjustment review pursuant to Section 16 (1) and (2) BetrAVG for his company pension running since 2020, as well as corresponding back payments for the adjustment-relevant periods that had already elapsed.

Reasons for the decision

• Interpretation of the 1% clause: The 1% provision in the BV 1999 KVP does not include a definitive indexation within the meaning of Section 16 (3) (1) BetrAVG, but merely a minimum adjustment; the general statutory adjustment review every three years in accordance with Section 16 (1) and (2) BetrAVG remains in force alongside this.
• Irrelevance of the minutes’ note: The minutes’ note of 20 July 2020 does not alter the existing guidelines and does not introduce any new, clearly formulated provision; it merely documents the (divergent) understanding of the parties to the collective agreement. Such a retrospective “clarification” does not replace the effective establishment of rules within the meaning of Section 16 (3) no. 1 BetrAVG. Furthermore, the BAG expressly left open the question of whether such a provision could have been effectively introduced retrospectively at all.
• Scope of Section 30c (1) BetrAVG (requirement for a new commitment): Section 30c (1) BetrAVG permits the application of Section 16 (3) no. 1 BetrAVG only to current benefits based on pension commitments made after 31 December 1998, which are new and independent of any previous pension commitments. A mere transfer, conversion or even amendment of an existing pension commitment (e.g. through an initial credit) is not sufficient for this purpose. What is decisive, rather, is whether the new arrangement is economically based on an independent commitment. Section 30c BetrAVG must be interpreted narrowly in accordance with its wording, the structure of the legislation and the explanatory memorandum; the legislature intended to create a clear and distinct cut-off date rule for genuine ‘new commitments’ whilst at the same time ensuring predictability for employers and the protection of legitimate expectations for pension beneficiaries.

Implications for practice

The ruling once again draws employers’ attention to the requirements for an effective ‘1% cap’ on pension adjustments in accordance with section 16 (3) no. 1 BetrAVG: An exemption from the statutory three-year review under Section 16 (1) and (2) BetrAVG is only possible in the case of original new commitments made after 31 December 1998, which were granted anew and independently of existing pension commitments.; As an exception to be interpreted narrowly, Section 16 (3) no. 1 BetrAVG therefore does not apply if benefits continue to be based economically on an old commitment. Mere system changes, transfers or even amendments to existing commitments (such as through initial credits) are not sufficient for this purpose.

Against this background, 1% clauses in old or transitional guidelines are generally to be interpreted as minimum adjustments; their subsequent ‘clarification’ – for example, through minutes of meetings – has no legal effect without clear, amending regulatory content.

BAG links the raising of maximum limits in split pension formulas to equitable discretion under Section 315 of the German Civil Code (Bürgerliches Gesetzbuch, BGB)

The BAG decided in its judgment of 28 October 2025 (3 AZR 35/25) that a clause in a general commitment regarding the possible increase of the maximum limit for the portion of benefits exceeding the contribution assessment ceiling for German statutory pension insurance (Beitragsbemessungsgrenze, BBG) is to be interpreted as a unilateral reservation of performance determination by the management in accordance with Section 315 BGB, and that any corresponding decision must therefore be made at the management’s reasonable discretion.

Facts

• The plaintiff, born in 1958, had been employed by the defendant/its legal predecessor since October 1990.
• The employment contract referred to a company pension scheme for non-tariff employees dated 1 January 1989, which contained a split pension formula: 0.5% p.a. up to the basic pensionable income (BBG) and 1% p.a. for income above that up to a maximum limit (at that time DM 140,000), the management reserving the right to increase this limit ‘in due course’.
• In 2003, the legal predecessor raised the upper limit to EUR 92,000 for certain intake cohorts.
• By letter dated 28 December 2023, the defendant informed the plaintiff of his pension entitlements as of 1 January 2024; in doing so, 33 years of service and a pensionable annual salary of EUR 92,000 were taken as the basis, of which only 4,400 EUR above the BBG were taken into account.
• The plaintiff sought a further increase in the upper limit at the court’s discretion in order to preserve the original objective of the split formula (closing gaps in provision above the BBG).

Reasons for the decision

The BAG ruled in favour of the plaintiff and granted him a right to a decision by the employer which must be in accordance with equitable discretion. 

• Legal nature of the reservation: The clause providing for a unilateral right of adjustment by the management must be interpreted in accordance with the principles of interpretation of standard terms and conditions. Insofar as the clause stipulates that an adjustment must take place ‘in due course’, this constitutes a reservation of the right to unilaterally determine performance. According to Section 315 (1) BGB, such a decision must, in case of doubt, be made at the employer’s reasonable discretion. An interpretation that the employer may make a decision at its ‘absolute discretion’ would, moreover, deviate from the statutory model and would be invalid as an unreasonable disadvantage (Section 307 BGB); which would in turn be superseded by Section 315 BGB (in accordance with the provision of Section 306 (2) BGB), which stipulates that the decision must be made at the company’s reasonable discretion. 
• Interpretation in accordance with the purpose of the split pension formula and protection against depletion: The split formula clearly privileges income above the BBG; a static maximum amount would continuously devalue this privileged portion as the BBG increases. The reservation “at the appropriate time” is therefore to be understood to mean that both the timing and extent of any increase must be determined at reasonable discretion in order to preserve the substance of the portion above the BBG.
• Guidelines for the exercise of discretion:
  • Core salary threshold (25%): In this context, reasonable discretion is generally not deemed to exist if the gap between the BBG and the maximum limit existing at the time the pension scheme was introduced falls below 25%; such a reduction would only be acceptable for compelling economic reasons on the part of the employer.
  • Guidance framework: It is generally within the bounds of reasonable discretion if between 75% and 100% of the original margin is maintained; typical employee interests, the company’s financial situation, the development of the average wage in relation to the BBG, and the administrative burden must be taken into account.

Implications for practice

If the company pension scheme provides for the possibility of unilateral adjustment, a decision to that effect must be made at the employer’s discretion. Employers with company pension commitments in the form of split pension formulas and maximum limits must review at appropriate intervals whether the gap between the BBG and the maximum limit still preserves the core substance of the commitment, and must make a decision, after duly weighing the interests of both parties, as to whether, when and to what extent an increase in the limits is warranted. If this is not done, the court shall determine the upper limit and any claims for back payments.

Admissibility of the full crediting of the statutory pension in civil servant-like pension schemes

The Munich Regional Labor Court (LAG München) decided in its judgment of 31 July 2025 (3 SLa 95/25) that, in the case of a civil servant-like pension commitment, the statutory pension must be fully offset against the promised retirement pension, and that the civil service maximum limit regulation of Article 85(2) of the Bavarian Civil Servants’ Pensions Act (BayBeamtVG) is not to be applied “accordingly.”

Facts

• The plaintiff receives a civil servant-like retirement pension from the defendant, a public-law institution with legal capacity. The pension commitment grants the plaintiff an entitlement to a retirement pension calculated “in accordance with the provisions applicable to Bavarian civil servants” (Section 6 (1) sentence 1 of the pension commitment). Under Section 6 (1) sentence 4 of the pension commitment, the plaintiff’s prior service periods are extensively credited as pensionable service, which regularly exceed the periods credited for civil servants. Section 7(1) of the pension commitment provides that, among other things, benefits from pension and group insurance schemes are to be credited against the pension. 
• In his claim, the plaintiff sought a declaration that, when his statutory pension was offset against his retirement pension, the maximum limit rule applicable to civil servants under Article 85(2) BayBeamtVG – under which offsetting is limited to a certain amount – must be taken into account accordingly, and further claimed an inflation adjustment payment (EUR 1,807.40) granted only to retired civil servants and those in active service.
• The Labour Court dismissed the claim. The Regional Labour Court dismissed the appeal lodged by the plaintiff against the judgment of the court of first instance.

Reasons for the decision

• No application of the civil service law ceiling (Article 85(2) BayBeamtVG): The Munich Regional Labour Court ruled out the application of the civil service law ceiling under Article 85 (2) BayBeamtVG. 
• Interpretation of the pension commitment: The pension commitment is a general term and condition and must therefore be interpreted in accordance with general principles as it could reasonably be understood by a reasonable and honest contracting party. The pension commitment contains an independent and exhaustive crediting scheme (Section 7 (1)) and specifically does not include a maximum limit or a reference to Article 85 (2) BayBeamtVG. Section 6 (1) of the pension commitment further refers to a retirement pension calculated ‘in accordance with’ the provisions of civil service law, which suggests that full equivalence was not intended. Since the parties have simultaneously agreed in Section 6 (1) sentence 4 of the pension commitment to a far-reaching recognition of prior service, the full crediting of the statutory pension serves as the corresponding counterbalance to avoid double benefits.
• Compatibility with Section 5 (2) BetrAVG: There is no breach of Section 5 (2) BetrAVG. Section 7 (1) of the pension commitment constitutes the required contractual basis for calculation; The calculation does not include pension components based exclusively on voluntary personal contributions or on supplementary insurance, provided that the employer has not borne at least half of the contributions. 
• No breach of the law on General standard terms and conditions: Nor does the crediting provision breach the law on General standard terms and conditions. The provision is not surprising and also stands up to a substantive review. There is no disproportionate disadvantage within the meaning of Section 307(1) sentence 1 BGB, as the provision does not deviate from the fundamental principles of the law and the legitimate employer’s interest in avoiding double benefits and in ensuring calculable pension liabilities outweighs the plaintiffs’ interests.
• Inflation adjustment payment: There is no entitlement to inflation adjustment payments under the pension commitment, as these are not considered part of the retirement pension. The pension commitment does not fully incorporate civil service law. The fact that the inflation adjustment payment is granted only to active employees and not to company pensioners does not in itself constitute a breach of the principle of equal treatment under labour law. The purpose of the payment, namely to reward loyalty to the company and motivate employees, cannot be fulfilled by the bonus in the case of company pensioners. 

Implications for practice

Pension commitments similar to those for civil servants may effectively provide for a separate crediting regime for statutory pensions, up to and including full crediting, provided that (i) the crediting is clearly regulated by contract, (ii) personal contribution/higher insurance components within the meaning of Section 5 (2) BetrAVG are excluded, and (iii) an interpretation of the commitment does not lead to a different result. Employers should review their pension documents and accompanying communication materials for consistency. The following applies to special payments: Differentiated granting to active employees is permissible if there is a legitimate purpose for the unequal treatment.