In a recent ruling, the Federal Constitutional Court has deemed the obligation to pay contributions to health and long-term care insurance for benefits from a pension fund to be unconstitutional. The ruling applies in particular to people who receive benefits from a pension fund and have to pay contributions to the statutory social insurance schemes in return.
The court’s decision was issued in a lawsuit brought by a former employee of a telecommunications company. The plaintiff had made contributions to a pension fund on the basis of a company agreement and in return received a lifelong retirement pension and a disability pension. However, he also had to pay contributions to the statutory health and long-term care insurance on these benefits.
The Federal Constitutional Court has now ruled that the obligation to pay contributions in certain cases violates the principle of equal treatment and is therefore unconstitutional. In particular, if the pension benefit does not compensate for a loss of earned income, but represents an additional source of income, there should be no obligation to pay contributions. In this case, it was disproportionate to include the additional pension in the assessment of contributions, as it did not serve to cover the costs of illness and care, but merely represented additional earnings.
The unconstitutionality of the obligation to pay contributions to health and long-term care insurance on benefits from a pension fund
In a recent ruling, the Federal Constitutional Court found that the obligation to pay health and long-term care insurance contributions on benefits from a pension fund is unconstitutional in certain cases. Specifically, the ruling concerns cases in which the pension fund does not provide a pension commitment.
The court found that in such cases the obligation to pay contributions may be disproportionate. This decision mainly affects employees who pay into a pension fund by their employer on the basis of a collective agreement and later do not receive a pension commitment. Those affected can now be exempted from the obligation to pay contributions.
However, this does not mean a general abandonment of the obligation to pay contributions. A pension fund that makes pension commitments remains liable to pay contributions. The ruling thus only concerns certain cases in which the persons concerned are unreasonably burdened by the obligation to pay contributions.
The decision of the Federal Constitutional Court shows that the obligation to pay health and long-term care insurance contributions for pension fund benefits cannot be regarded as constitutional across the board. Individual cases must continue to be examined in the future to ensure that the burden on those affected is appropriate.
Situation in Germany: Unconstitutionality of the obligation to contribute to health and long-term care insurance for pension fund benefits
In a recent ruling, the Federal Constitutional Court found that the obligation to pay contributions to health and long-term care insurance for pension fund benefits is unconstitutional in certain cases. Specifically, it concerns the assessment of contributions for pension fund benefits that exceed the maximum rate of the statutory pension insurance.
The ruling comes about in the following context: many employees conclude contracts with pension funds as part of their company pension plan. These pay out a lifelong pension in retirement. Large sums are often at stake. In the statutory pension insurance, there is a contribution assessment ceiling, which ensures that contributions can only be levied up to a certain maximum amount. In the case of pension fund benefits, things have been different up to now. For these, contributions were levied in full, even if they were above the pension insurance ceiling. The Federal Constitutional Court sees this as unequal treatment and therefore a violation of the principle of equality.
The reasons for the ruling make it clear that this is a very complex matter. Rapid implementation in practice is therefore not to be expected. It remains to be seen how politicians will react to the ruling. One thing is certain, however: In the future, the courts will continue to have to deal with company pension plans and the assessment of contributions for high pensions.
As a result, the ruling of the Federal Constitutional Court shows how important it is to design the social security system carefully. This is the only way to create a level playing field for all citizens.