GERMANY - A regional German court has ruled an employer must compensate retired former employees if the Pensionskasse they are signed up to eventually cuts employees’ benefits.

A German Pensionskasse decided in 2003 to permanently cut the pensions it by 1.4% annually in order to cope with a deficit exceeding €100m.

Pensioners of a company in the German province of Hessen went to court to sue the Pensionskasse but eventially lost and instead went on to sue their former employer.

The appeal court now ruled this former employer has to pay the losses suffered by the pensioners because he had not set up a pure defined contribution scheme.

While the Pensionskasse was within its legal framework and able to cut benefits in order to prevent insolvencym these cuts did not automatically translate as benefit cuts set at a specific level but “according to general insurance and tariff provisions”.

According to the court, employers should step in to support employees should their chosen outsourcing vehicle for pensions cut benefits or be unable to pay them, except in cases where a pure defined contribution system has been put in place.

Officials still have the right to appeal the verdict.

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