Flexible pension and compensation systems for uncertain times – this is what employers, employees, but also legal and tax advisors are increasingly looking for. Not least because of the uncertainties on the labor market, the turmoil caused by the financial markets, the complicated legal situation under social law and the considerable cuts in the statutory pension scheme, those affected from all sectors are looking for future-proof hedging strategies in order to be able to plan certain phases of their lives in a balanced and responsible way financially.
For prudent legal practitioners, employers and employees, this makes it unmistakably clear: since old-age provision has been transferred more to the individual’s responsibility, all forms of private and, above all, occupational pension schemes must be used to secure the standard of living in old age, but innovative supplementary components must also be integrated.
Fortunately, with the introduction of the Act on the Social Legal Protection of Flexible Working Time Arrangements of April 6, 1998 (the so-called “Flexi Act”), the legislature created the possibility of finding an answer to these challenges. Since then, the introduction of the resulting working time accounts (in german: Zeitwertkonten / ZWK) has opened up outstanding new opportunities for broad groups of employees and workers to make their working hours more flexible and to plan their individual pension situation during their working lives and in advance of receiving statutory pension benefits.
In accordance with the tax and social security requirements of the legislator, it is possible for employees to waive the payment of any salary components in a freely definable amount and to transfer these to the respective time value account free of tax and social security contributions. Only a salary subject to social security contributions above the threshold for so-called “marginal employment” must remain with the respective employee after a waiver of remuneration in this respect, provided that he or she also did not perform any marginal employment prior to the contribution of remuneration to a time value account.
The possibility of this “gross saving” enables employees to build up “wage reserves” from their own deferred remuneration components, which can be used at a later date to finance any periods of release or early retirement they may wish to take until they reach the statutory standard retirement age. Consequently, the employee can control his or her time value account savings independently (in accordance with the employer’s defined framework conditions) in order to be able to determine the scope of release or early retirement phases in this way, in which the downstream tax and social security contributions then take place.
At the same time, employers can use working time account solutions to manage the age structure of their workforce in order to achieve the desired realignment of the workforce.
In this context, Kenston Pension GmbH supports both employers and consultants from all sectors in the complete legal implementation and ongoing support of working time account systems in their own companies or in those from mandate relationships. For this purpose, all necessary legal requirements and backgrounds, such as collective agreements, opening clauses, balance sheet treatment are analyzed and implemented accordingly.