Even re-insured companies must pay insolvency levy, German court rules

GERMANY - A German court has ruled that companies must pay a levy to the insolvency fund PSV even if they re-insure their pension schemes.

All companies with non-insurance based pension plans in Germany have to pay an annual levy to the insolvency fund, recently set at 1.9/m for 2010.

The Federal Administrative Court BVerwG published a verdict confirming that this obligation would remain even if a company partly or fully re-insured its pension plan.

In the case of non-funded pension plans (Direktzusage) and supplementary funds (Unterstützungskasse), the court said an insolvency would lead to the PSV having to take on the company's pension liabilities - unlike with insurance-based schemes such as Pensionskasse or Direktversicherung.

The court also noted it did not see any basis for a reduced levy for re-insured plans, which the law allows for Pensionsfonds and which has already led a few companies to set up such a scheme.

Stefan Suhre, chief executive at German consultancy Longial, said: "A reduction of the PSV levy for re-insured pension plans can only be achieved via a change in the law."

He added his company welcomed the ongoing political debate on reforming the system to include a more risk-based approach.