German employers propose simplified solvency levy
GERMANY - The German federation of employer representatives (BDA) is suggesting a simplified alternative to its proposal for a risk-based levy to the German pension insolvency fund PSV.
Last year, the BDA demanded a reduction in the PSV levy for companies with plan assets which were invested under certain regulations and checked by external advisers. (See earlier IPE article story: Germany's BDA wants risk-based pensions levy)
At this year's annual conference of the German pension fund association Aba, Alexander Gunkel of the BDA said his organisation has amended its proposal to allow for reductions for companies with plan assets under the new German accounting standards BilMoG, as they are almost identical to the plan assets under IAS19.
"Using plan assets as described in German accounting standards will make it easier for SMEs as they could be deterred by international accounting standards," Gunkel pointed out.
However, even with this amendment the BDA found that many companies did not want to commit to investment regulations for their CTAs or other external funding vehicles as they might be tightened in the next crisis.
"A much easier alternative would be to just take into account plan assets under BilMoG, which have to be insolvency-proof anyway, as any company will create these assets anyway and figures would be easy to get," Gunkel pointed out.
This would mean a much less pronounced cut in the PSV-levy which last year reached a record high of 1.4% (from a former five-year average of around 0.3%) which would also assuage critics of PSV cuts who fear a major shift in levy-payments by a reform.
Gunkel also pointed out that companies which had their external funding vehicles fully re-insured should get a major discount as well.
This last suggestion was also seconded by Claus Berenz, head of the legal department at the PSV. But he was critical about discounts for companies with a CTA as the fact that this vehicle was unregulated and not clearly defined meant it was not certain whether the PSV would be able to work with the assets in the CTA should the company file for insolvency.
"For example, the problem with one major company with a CTA that became insolvent is now that because there is [legally] no such thing as a CTA, we have to check what was put into this CTA, and what the company had agreed to."
Gunkel also proposed to increase the annual levy slightly for all members in order to fill the PSV fund, which has to cover the average pay-out sum over the last five years, to double that amount.
"This would decrease cyclical payments which currently mean high spikes in contributions in years when the companies are struggling with difficult economic situations," said Gunkel.
Hans-Ludwig Flecken, head of the state pension department in the German social and labour ministry, noted that the government would like to see an agreement on the subject between companies, unions and the Aba before making a decision.