Company pension law – Case Law Update 2/2025

No Statutory Employer Contribution under Sec. 1a (1a) BetrAVG in the Case of a Conclusive Collectively Bargained Provision on Salary Conversion (BAG judgment of 26 August 2025, 3 AZR 31/25, and 11 March 2025, 3 AZR 75/24 and 3 AZR 53/24)

The BAG has held in several decisions that collective agreements on salary conversion concluded prior to 1 January 2018 may validly derogate from the statutory right to an employer contribution pursuant to Sec. 1a (1a) BetrAVG, provided they contain an autonomous and conclusive provision on salary conversion.

Facts

• In each case, the parties disputed the plaintiffs’ entitlement to an employer contribution under Sec. 1a (1a) BetrAVG.
• All three employment relationships were subject to collective agreements concluded before 1 January 2018, i.e., before the entry into force of Sec. 1a (1a) BetrAVG introduced by the First Act to Strengthen Company Pensions (BRSG 1.0): (1) Collective Agreement of DAK-Gesundheit of 6 December 2013 (TV DAK), (2) Collective Agreement on Company Pensions in the German Confectionery Industry of 18 April 2011 (TV AV), and (3) Collective Agreement on Salary Conversion for Employees in Municipal Public Service of 18 February 2003 (TV-EUmw/VKA).
• These collective agreements contained detailed provisions on implementation, eligibility requirements, and scope of salary conversion, but did not provide for an employer contribution.
  

Reasons for the Decision

• Opening clause in Sec. 19 (1) BetrAVG: The BAG clarified that Sec. 19 (1) BetrAVG constitutes a comprehensive opening clause for collective bargaining. Collective agreements may deviate from the statutory provisions of Sec. 1a BetrAVG, including the contribution pursuant to Sec. 1a (1a) BetrAVG. This also applies to collective agreements concluded before the entry into force of BRSG 1.0, provided the agreement contains an autonomous and conclusive entitlement to salary conversion.
• Conclusive provision in the collective agreement: Whether salary conversion is conclusively regulated must be determined by interpretation of the collective agreement. According to the BAG, it is sufficient if the collective agreement comprehensively regulates salary conversion without providing for a contribution. Mere silence on contributions is regarded as a deliberate derogation from the statute.
• Deviation without express exclusion: The BAG emphasized that it is not necessary to expressly exclude the statutory entitlement to a contribution. Even mere “silence” on contributions may be deemed a deliberate derogation from Sec. 1a (1a) BetrAVG. Likewise, no compensatory benefit in favor of employees is required.
  

Consequences for practice

Employers bound by collective agreements should review whether the collective agreements on salary conversion applicable in their enterprises contain a conclusive provision on salary conversion. If the agreement provides such a conclusive provision and does not provide for an employer contribution, there is no statutory obligation to grant a contribution pursuant to Sec. 1a (1a) BetrAVG. Neither an express exclusion clause nor a compensatory benefit is required to exclude the contribution obligation.

With these decisions, the BAG reinforces collective bargaining autonomy and confirms the permissibility of collectively bargained deviations from Sec. 1a (1a) BetrAVG, even in the case of older collective agreements.

No Indirect Discrimination from Exclusion of Parental Leave Periods in the Qualifying Period for Company Pensions (BAG judgment of 06 May 2025, 3 AZR 65/24)

In its judgment of 6 May 2025 (3 AZR 65/24), the BAG held that the non-consideration of periods of parental leave in calculating the qualifying period for a vested company pension benefit does not constitute unlawful indirect discrimination on grounds of sex.

Facts

• The plaintiff was employed by Deutsche Bundespost and later Deutsche Post AG. The collective agreements of Deutsche Bundespost applied to the employment relationship, in particular the Collective Agreement on Pensions (VersTV) and the statutes of the Pension Institution of Deutsche Bundespost (VAP Statutes).
• Under Sec. 35 VAP Statutes, the qualifying period for company pension benefits required contribution months or periods of voluntary insurance.
• Between February 1992 and November 1996, the plaintiff took parental leave. No contributions to the VAP were made during this time.
• The plaintiff sought to have these parental leave periods counted towards the qualifying period for a vested company pension amount. She argued that the exclusion constituted indirect discrimination on grounds of sex, as parental leave is predominantly taken by women. Alternatively, she invoked Sec. 4 (1) sentence 3 TV-BRP, which allows up to three years of parental leave to be credited.
  

Reasons for the Decision

• Qualifying period rule: Under Sec. 35 VAP Statutes, the qualifying period can only be fulfilled through contribution months or voluntary insurance periods. Parental leave without contribution payments does not count. Sec. 4 (1) sentence 3 TV-BRP, which credits up to three years of parental leave, applies only to the Post company pension, not to the vested benefit.
• No indirect discrimination: The Court found no indirect disadvantage for women. Even if women are more frequently affected, the unequal treatment is objectively justified:
  

- During parental leave, the employment relationship is suspended; there is no remuneration and thus no contribution obligation.

- Employers are not required to make additional contributions during suspended employment relationships; this reflects established case law of both the BAG and the CJEU.

- The differentiation prevents an unjustified advantage compared to part-time employees who actually perform work.

- The link to contribution months is consistent with the system logic and financial sustainability of a contribution-based pension scheme.

• EU law: The relevant provisions of Art. 10 (2) of Directive (EU) 2019/1158 are not applicable, as the plaintiff’s parental leave took place in the 1990s.
  
• AGG and BEEG: The rule does not infringe Sec. 7 of the German General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz, AGG) or Sec. 15 (2) sentence 6 of the German Parental Leave and Parental Allowance Act (Bundeselterngeld- und Elternzeitgesetz, BEEG). It does not restrict the entitlement to parental leave itself but merely attaches legal consequences to the suspension of the employment relationship.
• No obligation to refer: Referral to the CJEU was unnecessary, as the permissibility of such differentiations under EU law has been clarified.
  

Consequences for practice

The judgment confirms that, in contribution-financed company pension systems, only periods for which contributions were actually made or voluntary payments effected can be credited towards the qualifying period. Periods of parental leave, during which the employment relationship is suspended and no remuneration is owed, may therefore remain unconsidered without amounting to unlawful indirect discrimination. For the parties to collective agreements, this means that qualifying period provisions may continue to be strictly tied to periods subject to remuneration, provided objective reasons such as system logic and financial viability of the pension scheme exist. Employers gain legal certainty, as they are not required to form additional pension reserves during parental leave. Differences compared to other collective provisions—such as Sec. 4 (1) sentence 3 TV-BRP, which credits parental leave—must, however, be carefully observed, as such provisions cannot be extended to vested benefits.

Combination of Sec. 16 (1) BetrAVG and (Annual Guaranteed) Minimum Adjustments (LAG Baden-Württemberg judgment of 24 January 2025, 7 Sa 18/24)

In its judgment of 24 January 2025 (7 Sa 18/24), the LAG Baden-Württemberg addressed the adjustment of a company pension and the interpretation of an adjustment clause within a pension commitment.

Facts

• The plaintiff, a former senior executive, demanded a higher company pension as of 1 July 2017 pursuant to Sec. 16 (1) No. 1 BetrAVG.
• The claim was based on clause 5.5.3.2 of the “Pension Capital 2003” rules in the 2006 version, which provided for an annual pension increase of 1% as well as the statutory adjustment under Sec. 16 BetrAVG (every three years). The clause in dispute before the LAG Baden-Württemberg read: “The pension shall – where applicable, to be set off against the obligation under Sec. 16 […] – be increased annually, as of 1 July, by 1% p.a.”
• The plaintiff argued that both adjustments were cumulative and to be applied concurrently. The defendant rejected this view.
  

Reasons for the Decision

• Interpretation of the clause: The LAG interpreted clause 5.5.3.2 as requiring an annual minimum adjustment of 1% in addition to the statutory adjustment review under Sec. 16 BetrAVG. In doing so, it relied on an almost identical clause previously interpreted by the BAG on 11 December 2018 (3 AZR 380/17), the principles of which were deemed fully transferable.
• Meaning of “where applicable, to be set off”: According to the LAG, this wording means that the 1% increase is only to be credited against the statutory adjustment in the year of the triennial adjustment, but not in the other years. Contrary to the defendant’s position, the use of paired dashes does not indicate deletion but rather an emphasis of the inserted passage.
• Legal classification of the rules: The LAG clarified that the “Pension Capital” rules do not constitute a works agreement or speaker committee guideline with binding normative effect. They apply in the employment relationship only by virtue of the contractual reference clause, i.e., as uniform contractual terms.
• No “new commitment” (Sec. 30c (1) BetrAVG): The LAG further held that the introduction of “Pension Capital” does not constitute a “new commitment” within the meaning of Sec. 30c (1) BetrAVG, but merely a modification or supplementation of the existing commitment. Sec. 16 (3) No. 1 BetrAVG was therefore not applicable.
• Forfeiture and claims for back payments: The defendant’s objection that the claims had lapsed due to delayed objection was unsuccessful. Referring to BAG case law, the LAG clarified that objections may be raised up to the second subsequent adjustment date. Accordingly, the LAG awarded the claimed back payments for the period from 01 July 2017 to 30 April 2024 in several partial amounts.
  

Consequences for practice

The decision illustrates that specific annual minimum adjustments stipulated in company pension commitments are generally owed in addition to the statutory triennial review under Sec. 16 (1) BetrAVG. Employers can only effectively replace the statutory obligation if the conditions of Sec. 16 (3) No. 1 BetrAVG are met and clearly agreed upon—something that is usually not the case when modifying existing commitments.

For companies, this means: adjustment clauses must be precisely drafted to avoid misunderstandings. Rules without normative effect (as in the present case) bind only through contractual references. Moreover, adjustment decisions should not only be made but also documented and communicated to pensioners in order to prevent subsequent claims.

The appeal is pending before the BAG under docket no. 3 AZR 48/25 (hearing date: 25 November 2025).

No Pension Adjustment Based on Financially Strong Group Environment (LAG Munich judgment of 17 March 2025, 4 SLa 406/24)

In its judgment of 17 March 2025 (4 SLa 406/24), the Regional Labor Court (LAG) Munich held that the employer’s decision not to adjust company pensions to inflation as of the adjustment date of 1 July 2023 was not an abuse of discretion in light of its financial situation and therefore did not give rise to a claim for a pension increase. The decision was also not defective in that the employer, when assessing its financial position, did not take into account the economically strong group environment.

Facts of the Case

• The plaintiff was employed within the Airbus Group, initially by E. GmbH and subsequently by X. GmbH. Since 2002 she has received a company pension under a company pension commitment. Most recently, her pension amounted to EUR 1,893.97 gross per month.
• X. GmbH is a subsidiary of the Airbus Group and integrated into a cash-pooling system with the parent company V. SE. In 2021 and 2022, X. GmbH received capital increases totaling EUR 2.3 billion. In both 2020 and 2023, the company decided not to adjust company pensions.
• The plaintiff demanded an adjustment of her company pension as of 1 July 2020 and 1 July 2023, plus arrears, arguing that X. GmbH’s financial position would have permitted such adjustment. She further claimed the decision not to adjust was not made individually and therefore was defective in discretion. She also asserted that a company practice (betriebliche Übung) existed because pensions had regularly been adjusted in the past.
• The adjustment claim as of 01 July 2020 had already been dismissed by the Labor Court as time-barred and was therefore no longer at issue before the LAG. Claims against the former employer (defendant no. 2) were also excluded due to the spin-off pursuant to Sec. 131 (1) No. 1 Transformation Act (Umwandlungsgesetz, UmwG).
  

Reasons for the Decision

• Group affiliation / piercing the corporate veil: The court confirmed the established case law of the BAG that in the pension adjustment review under Sec. 16 (1) BetrAVG, only the economic position of the debtor company is decisive. Group integration or the possibility of obtaining liquidity via cash-pooling systems does not alter this. Piercing the corporate veil is only permissible in exceptional circumstances (e.g., profit transfer agreements), which were not present here.
• Reasonable discretion / standardized decision: The decision on pension adjustment is a matter of discretion for the employer. The court only reviews whether it complies with reasonable discretion (Sec. 315 BGB by analogy). A generalized, non-individual decision applicable to all pensioners is permissible, provided it is uniform and objectively justified.
• Company practice: The court rejected the existence of a company practice, since previous adjustments were based on statutory obligations. A company practice requires behavior beyond statutory duties, which was not present here.
• Economic position / criteria: The decisive factors are equity capitalization and return on equity as reflected in the HGB financial statements, with the benchmark being the average yield of German government bonds plus a 2% risk premium. The assessment period is at least three years; subsequent data (e.g., 2023 annual accounts) may only be considered if foreseeable at the adjustment date. Management reports or forecasts are not a reliable basis for assessment.
• Negative forecast: The LAG emphasized the erosion of equity and the lack of a return on equity up to 2022. The forecast through 2026 showed no prospect of achieving adequate returns on equity or preserving substance. Geopolitical risks (war, energy prices, inflation) reinforced this negative outlook.
  

Consequences for practice

The LAG Munich makes clear that only the financial position of the company pensions debtor is decisive for pension adjustment reviews. Group affiliation, cash-pool financing, or capital contributions from the parent company cannot substitute for a sustainably generated return on equity. The decisive factors are the commercial-law financial statements (HGB), in particular equity capitalization and return on equity, over at least three years prior to the adjustment date. Subsequent annual accounts or positive management reports may only be taken into account if they were foreseeable at the adjustment date.

Further details on structuring options and employer obligations can be found in our Client Alert „Update: Adjustment (check) of pension benefits according to Section 16 BetrAVG…and the employer’s information obligations“