65M/F, if born before 1947 or after very long insurance duration (45 years); increasing to 67M/F, if born after 1963

Transcription

1 Prepared by Swiss Life Germany. I SUMMARY Social Security Eligibility All gainfully employed persons, except those employed with a salary of less than EUR 450 per month and persons with occasional earnings (short-time employments) of less than 70 days per year Retirement Age 65M/F, if born before 1947 or after very long insurance duration (45 years); increasing to 67M/F, if born after 1963 Contributions Contribution ceiling: EUR 72,600 (EUR 62,400 for the new provinces of the former GDR) Retirement Disability Death On average before tax 48% of final salary after full period of contributions, i.e. 45 years If unable to perform any gainful occupation. The new benefit is the pension on reduced earnings capacity. 60 months of insured status are required, 36 months within the last 60 months. No waiting period on accidental disability Spouse s Pension: 60 months of insured status, except on accidental death. During the first 3 months the benefit is 100% of the pension or disability pension of the deceased, thereafter 55% - 60% (small pension 25%). Ceases on remarriage Orphan s Pension: Up to age 18 (25 if in full-time education). 10% pension on reduced earnings capacity (doubled for full orphans) Medical Mandatory for all wage-earners and salaried persons up to a contribution ceiling of EUR 49,500, whereas the ceiling for entrance into a private scheme on a voluntary basis is EUR 54,900. Same ceiling for old and new provinces. In- and outpatient, maternity, child-raising benefit etc. Employee Reference Manual Swiss Life Network

2 Private Benefit Plans In Germany pension plans can be shaped individually. There are five different funding vehicles: The direct insurance (Direktversicherung), the support fund (Unterstützungskasse), the retirement fund (Pensionskasse) and the pension fund (Pensionsfonds), which are the external ways, and last but not least the direct (pension) promise (book reserves) (Pensionszusage), which is the only internal way. Eligibility Retirement Age Contributions Retirement Disability Death Depending on the company, usually between 25 and 60M/F 65M/F; for new plans partly 66 or 67 in accordance with the raising of the retirement age in the social security system Level of contribution depends on the kind of plan: Defined benefit: contribution according to the level of benefit (average level of benefit 0.5% - 1.5% of salary up to social security ceiling, plus 1.4% - 2% of salary above ceiling multiplied by length of service Defined contribution: average level of contribution 4% - 8% of salary up to social security ceiling plus 10% to 15% above ceiling Old age pension or capital lump sum Pension: Projected old age pension or up to 70% salary Spouse s Pension: Defined benefit: 50% - 60% of salary on death in service, or 60% of projected or actual old age pension Defined contribution: 50% - 60% of projected or actual old age pension Orphan s Pension: 10% of salary or projected/actual old age pension, usually payable until age 18 (25 if in full-time education). Normally doubled for full orphans Lump Sum Death: Usually 1-2 annual salaries Medical Vesting Additional occupational benefits are unusual must be vested if employment is terminated or the employee terminates service after having reached age 30, provided that by then there were at least 5 years of plan participation For employees who entered a plan as of January 1, 2009, benefits must be vested if the employment is terminated after the age of 25, provided that there were at least 5 years of plan participation Employee Reference Manual Swiss Life Network

3 Taxation Employer Contributions Social security: Deductible Private benefit plans: Generally deductible, but deductibility largely depends on funding vehicle chosen Employee Contributions Deductible only within special expenses Social security: In essence, paid out of net income Private benefit plans: Depending on how the plan is funded Social security: 50% and more of the pension is taxable (depending on the year of first pension payment; in 2020: 80%, starting from 2040: 100 %) Private benefit plans: Depending on how the plan was funded Employee Reference Manual Swiss Life Network

4 II INTRODUCTION Country Statistics Population/ growth rate Age structure 0-14years: years: years: years: 65 years and over: GDP purchasing power parity Real growth rate Agriculture Industry Services Unemployment rate Inflation rate Annual gross salary* Para-professional Professional Management Legal minimum wage Exchange rate on February 27, 2015 Currency: Euro 80,996,685 (July 2014 est.)/ -0.18% (2014 est.) 13% 10.6% 41.7% 13.6% 20.9% (2014 est.) USD trillion (2013 est.) 0,54 % (2013 est.) 0.0.9% 30.7% 68.4% (2013 est.) 6.7% (2014 est.) 0.9% (2014 est.) in EUR General: 37,172 Skilled: 46,522 Junior: 58,222 Senior: 72,866 Lower middle: 91,193 Upper middle: 120,521 EUR 8.50 per hour. A higher minimum wage is often set by collective bargaining agreements and enforceable by law (Since January 1, 2015) 1 EUR = USD *Source: Mercer s International Geographic Salary Differential, Edition 2015 Legislation and Insurance Market Update in Brief No major changes in Employee Reference Manual Swiss Life Network

5 III SOCIAL SECURITY Background Information Since January 1, 1992, the structural reform of the social security law has provided a homogeneous law for all states in the Federal Republic of Germany. However, because of the divergent salary levels of employees in the old and new states (former GDR), the figures used for assessing social security benefits are partly different. The figures for the new states, if different, are shown below. German statutory benefits are provided under the following comprehensive schemes: Retirement and survivors pensions (social security) Medical care Work injury Unemployment benefits Family allowance (government subsidy). Eligibility All gainfully employed persons resident in Germany are compulsorily covered, except persons drawing a monthly salary of less than EUR 450 and persons with occasional monthly earnings (short-time employments) of less than 50 days per year. Contributions The statutory benefits are financed by contributions from employees and employers and the federal government. The contribution rates are expressed as a percentage of salary up to the ceilings applicable to different schemes introduced from 1 January 2015 as follows (new states in brackets): Contributions Contribution Scheme Employer Employee Ceiling in EUR Old age pension 9.35% 9.35% 72,600 (62,400) Health Insurance 7.3% 7.3% + additional 0,9% (depending on the health insurance) 54,900 Nursing Care 1.175% 1.175% 54,900 Work Injury Insurance 0.7% - 2% - amount of gross wages Unemployment Insurance 1.5% 1.5% 72,600 (62,400) The above limits are also applicable for calculating the benefits. Employee Reference Manual Swiss Life Network

6 Retirement Retirement Age Normal retirement: 65M/F if born before 1947 or after very long insurance duration (45 years); increasing to 67M/F if born after 1963 Early retirement: 63 or 60 For each month of drawing a pension before full term the pension is reduced by 0.3%. Depending on date of birth and number of months of early retirement, the pension may be reduced by as much as 18% (e.g. 5 years = 60x0.3%). Age 63: If the insured has had a long insurance duration (35 years). Maximum reduction 7.2% if born before 1947; 14.4% if born after If unemployed for at least 12 months, or old age part-time employment of at least 2 years. Maximum reduction 10.8% if born before Age 60: For severe disability, or a person drawing disability pension: Maximum reduction 18%, if born before For women born before 1952 with at least 15 years of insured status, whereof at least 10 years after age 40: Maximum reduction 18%. More information under: Late retirement is also possible. The normal retirement age will gradually be increased to 67M/F starting in Qualifying Conditions Minimum Contributions: 60 months. The old age pension will be paid from retirement date. Although there are no minimum or maximum pension amounts, in general it is not possible to draw more than 35% of the last salary (maximum social security contributions) after 45 years of service. In case of early retirement additional earnings are permitted up to an amount of EUR 450 per month. If higher earnings are received, a partial pension can be chosen. The partial pension may correspond to 66%, 50% or 33% of the full pension. The limits for the additional earnings will be determined based on the level of the partial pension, as well as the individual remuneration points of the insured. In case of late retirement the old age pension will be increased by 0.5% for each month the pension is deferred after the normal retirement age (age 65-67). Employee Reference Manual Swiss Life Network

7 Disability Qualifying Conditions Waiting period for the Pension: 60 months of insured status, 36 months of contribution within the last 60 months. No waiting period, if disability or death was caused by an accident at work. The disability pension is paid if an inability to perform a gainful activity is recognised. If the remaining earning capacity is not sufficient to work at least 3 hours a day, the full pension will be paid. It is equal to the insured old age pension. If the earning capacity allows a minimum of less than 6 hours of work, but more than 3 hours a day, then half of the pension will be due. Death Qualifying Conditions Waiting period for spouse s pension and orphan s pension is 60 months of insured status. No waiting period if disability or death was caused by an accident at work. Spouse s Pension The kind of spouse s pension is determined according to different methods depending upon age, working ability, dependent children and personal income of the surviving spouse at the time of death. A spouse under age 45, or not disabled or without a dependent child, receives a reduced pension for 24 months. A spouse over age 45 or disabled with at least 1 dependent child receives a full pension. Every pension may be reduced by a portion of the personal income of the surviving spouse, provided this consists of earnings of a certain type. During the first 3 months, the widow s/ widower s pension is equal to the disability pension, whichever was applicable at the time of death. Upon remarriage the spouse s pension ceases and instead a lump sum of 2 times the annual spouse s pension is paid. Orphan s Pension The orphan s pension for each dependent child under age 18 (or age 25 if a student) amounts to 10% (or 20% if full orphan) of the general disability pension, which would have become payable had the insured become disabled on the date of death. The orphan s pension for full orphans is calculated on the basis of the disability pension of both deceased. Employee Reference Manual Swiss Life Network

8 The total amount of survivors pensions (spouse s pension and orphan s pension) is limited to 100% of the retirement or general disability pension, whichever was applicable at the time of death. Other payable pensions are subject to legislative review and are generally adjusted. The qualifying age for a full spouse s pension will gradually be raised to 47, starting in Sickness Qualifying Conditions If employees are sick, they are entitled to receive sick pay (Lohnfortzahlung). Replacement of Earnings: The payment amounts to 70% of covered gross earnings, but not more than 90% of net earnings less the employee contributions to social security. It is calculated per day and may not exceed EUR (in 2015). It is payable from the seventh week of illness for a maximum of 78 weeks during a 3-year period. For the first 6 weeks of illness, the employer is obliged to pay full salary. The other cash benefit is a type of funeral grant payable upon death of a member of a sickness fund. Medical/Health Qualifying Conditions Health insurance schemes are administered by a number of sickness funds, all of which are subject to government regulations. These funds provide medical benefits, hospital care and cash benefits. All wage-earners and salaried employees including a dependant spouse and children, pensioners including family members, unemployed persons and students are eligible for the scheme. Wage-earners and salaried employees with earnings up to EUR 54,900 (in 2015) (approx. 75% of the social security ceiling) must be covered by a public sickness fund. Employees earning in excess of this ceiling may join on a voluntary basis or obtain medical insurance coverage privately. Pensioners are asked to belong to a sickness fund unless they have private medical insurance coverage at the commencement of pension payment. Out-patients: Doctors and dentists fees, all costs of medication, and part of the costs of drugs, prostheses, hearing aids, and dental care costs (replacements and crowns) are covered. In-patients: All general ward (multi-bed rooms) costs for hospitalisation, partial to total cost of treatment, and the cost of domestic help for the duration of hospitalisation are covered. Reductions are planned for the future. Since 2004 patients have had to bear the costs of medication (max. EUR 10 per product) up to 2% of their annual income. Patients with chronic medical conditions have to bear these costs only up to 1% of their annual income. Employee Reference Manual Swiss Life Network

9 Work Injury Qualifying Conditions The work injury scheme is compulsory for all employees and it is administered by industry-wide employers associations. Full medical treatment, hospitalisation and wage or salary replacement benefits, which are similar to those under health insurance, are covered. The benefits are provided in case of an industrial (or office) accident and occupational illness. In case of accidents at work, on the way to and from work and occupational illness, the following benefits below are paid: Disability Pension On partial disability of at least 20%, a disability pension amounting to at least 13.3% and on permanent and total disability a disability pension up to 66.67% of the previous year s covered earnings is paid. In the event of disability of at least 50%, a dependant s supplement for each child under age 18 (or age 25 if a student) is paid. The supplement amounts to the greatest of 10% of the pension or the child s allowance. Until disability is established and recognised, an interim allowance of 80% of covered earnings is paid. Survivors Pension The eligible survivors of the deceased employee receive a spouse s pension and an orphan s pension. The spouse s pension amounts to 40% (if the surviving spouse is over age 45, more than 40% disabled or has a dependant child) or 30% (if the surviving spouse is under age 45) of the previous year s covered earnings. This pension will be reduced proportionally to the personal income, if any, of the surviving spouse. The amount of orphan s pension for each dependant child (under age 18 or 25 if a student) is 20% (or 30% if full orphan) of the previous year s covered earnings. The total amount of survivors pensions (widow s pension and orphan s pension) is limited to 80% of the previous year s covered earnings. The amount of the pension paid is adjusted every year in accordance with the earnings trend. Unemployment Qualifying Conditions The employee is only entitled to draw benefits if a job was held for at least 12 months during the past 3 years before unemployment began. The benefit is provided for between 6 and 24 months depending on age and how long the employee has worked before unemployment. For employees under age 55, for example, the maximum period is 12 months, if the person has worked for more than 2 years. Employee Reference Manual Swiss Life Network

10 The benefit level depends on the previously earned salary, family status and number of children. It is not possible to compute the individual claim exactly, because there are many special decrees and laws which influence the benefit level. But as a rule benefit is 62% - 68% of the employee s last net income. Other Maternity All female employees, or wives of persons covered by a sickness fund, receive free medical care both in- and outpatient. Female employees do not need to work for 6 weeks preceding the expected delivery date, and are not allowed to work for 8 weeks (or 12 weeks if birth is premature or if twins are born) thereafter. For this period they receive a maternity allowance amounting to 100% of net earnings if insured under the social security system between the 4th and 10th month prior to delivery. This maternity allowance will be paid by the sickness fund up to a maximum of EUR 13 per calendar day. The difference, if any, will be paid by the employer. Parent For the period of 14 months after delivery, a parental benefit will be paid, which is a minimum of 67% of the previous net earnings (minimum EUR 300, maximum EUR 1,800). If monthly net earnings are below EUR 1,000, the parental benefit amounts to 100% of the last net earnings. This benefit can either be paid to the child s father or mother. Parents can choose an extended parental benefit period (with reduced benefits). Social Security Nursing Care All employees who are compulsorily insured under statutory health insurance are obliged to participate in the social security nursing care scheme. Voluntary members are also included; however, they may choose private nursing care insurance. Employees who are members of a private health insurance scheme are obliged to take out a private nursing care insurance contract, which must be equivalent to the social security nursing care. Private health insurers must provide such coverage. The following benefits are provided: Domestic nursing care: Persons are in need of care if they require help to fulfill their daily needs. The degree of care needed is to be evaluated according to 4 stages: Care Stage 0 - in need considerable limited everyday skills (c.l.e.s.) e.g. dementia Care Stage 1 - in need of considerable care Care Stage 2 - in need of heavy care Care Stage 3 - in need of extreme care. Employee Reference Manual Swiss Life Network

11 Domestic nursing care is granted either as benefit in kind or cash. Benefit in kind is provided if professional personnel are required for nursing care. The benefits for such care may amount to: Care Stage EUR per Month 0 0 (231 if c.l.e.s.) (689 if c.l.e.s.) 2 1,144 (1,298 if c.l.e.s.) 3 1,612 (1,995 in case of hardship) Contributions: The contribution to social security nursing care amounts to 2.35% (principally) of salary up to a contribution ceiling of EUR 49,500 in Generally employers and employees will bear the cost of nursing care equally; however, to compensate employers for the additional expense, 1 public holiday has been abolished. Since January 1, 2005, members of social security nursing who were born after 1939, who are over 23 years old and who do not have a child, have to pay an allowance of 0.25%. Supplementary Nursing Care Insurance: The basic benefits under social security nursing care as described above can be enhanced by supplementary nursing care coverage provided by life insurers or private health insurers. Taxation Contributions to the social security system are treated differently: Employer contributions are tax-deductible business expenses and are not considered to be income for the employees. Employee contributions are paid from their net income. Social security pensions ceased to be tax-free in The level of taxation depends on the year of the first pension payment. If the first pension was paid before % of the pension is taxable; as of 2006 the level of taxation for new pension payments is rising step by step until in 2040 the entire pension will be subject to income tax. Other Information Reciprocal Social Security Agreements Australia, Austria, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Croatia, the Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Greece, Hungary, Iceland, India, Ireland, Israel, Italy, Japan, Korea (Republic), Kosovo, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Montenegro, Morocco, the Netherlands, Norway, Poland, Portugal, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tunisia, Turkey, the United Kingdom, Uruguay and the United States of America. Employee Reference Manual Swiss Life Network

12 IV PRIVATE BENEFIT PLANS Background Information There are not many collectively bargained provisions. However, once a plan has been established, there are several laws which must be observed. Despite this, about 66% of employees in the industry sector (but only 28% in trade) are members of some type of plan. It is generally accepted that German social security benefits are no longer comprehensive and sufficient. In order to assure a reasonable standard of living on retirement, voluntary company benefit schemes are very important. In particular, the structural reform of social security has led to reductions in the level of pension due to the diminution of points credited for schooling and projected periods, as well as actuarial reductions in case of early retirement. Eligibility Usually, employees are admitted as of employment, (after having finished the probation period). Contributions The level of contribution depends on the kind of plan: Defined benefits: contribution according to the level of benefits (average level of benefits 0.5% - 1.5% of salary up to social security ceiling, plus 1.4% - 2% of salary above ceiling multiplied by length of service. Defined contribution: 4% - 8% of salary up to social security ceiling plus 10% to 15% above ceiling. Retirement Retirement Age Normal retirement: Early retirement: 65M/F, for new plans partly 66 or 67 in accordance with the raising of the social security retirement age. Same as under social security. Old age pension or capital lump sum depending on the funding vehicle. Vesting See Other Information / Legal Aspects below. Employee Reference Manual Swiss Life Network

13 Disability On total disability, this normally amounts to either 100% of projected old age pension or 60% - 70% of annual base salary. Normally, partial disability is not recognised, but the full disability benefit is due where the degree of disability is at least 50%. Death Spouse s Pension: As a rule, spouse s pension amounts to 50% - 60% of projected or actual old age pension. Where the benefit is in relation to salary, it normally amounts to between 40% - 60% of the annual base salary. Orphan s Pension: Orphan s pension is usually approximately 10% - 15% of projected old age pension. Where this benefit is salary related, it normally amounts to 8% - 12% of annual base salary. When both parents are deceased, this benefit is normally doubled. Orphan s pension is usually paid till age 18, and is often continued to age 25 if student. Lump Sum Death Benefit: This is often provided in addition to the spouse s pension. The level of life insurance usually varies between 1-2 times annual base salary. Medical/Health Additional occupational benefits are unusual. Taxation As of 2005 employer contributions in all five funding vehicles are generally fully tax deductible for the employer and tax-free for the employee. However, benefits paid are taxable. Lump sum payments under direct insurance contracts dating from before 2005 will remain exempt of tax as before. There is an exception: contributions to a direct insurance with an effective date prior to 2005 are taxable (with a flat tax rate of about 20% for annual amounts of up to EUR 1,752 per person). Lump sum benefits are tax-free. Private benefit plans are greatly influenced by fiscal considerations. The various funding arrangements are therefore best discussed in conjunction with their relevant tax treatment and requirements. Employee Reference Manual Swiss Life Network

14 Tax Treatment of Contributions Book Reserves The annual increase in accumulated reserves is deductible as an operating expense for corporate or income tax. The liabilities are also appraisable for property tax deduction. Company contributions made to an insurance policy held by the company are not taxable income to the employee. The benefits paid by the company, except for certain allowances, are treated as taxable income. For an insured plan, a deduction is allowed for the total premium (net of dividends if used to reduce the future costs) paid to an insurer, in the case of a (uninsured) book reserve plan for the annual actuarial allocation to the book reserve. Direct Insurance with an effective date prior to 2005 Company contributions made toward the insurance policy qualify as a tax-exempt operating expense. These contributions in turn are treated as taxable income to the employee, but the flat tax rate is only 20% of the assessable premium contribution, 40b income tax act. Retirement Fund and Direct Insurance with an effective date as of 2005 or later (NEW Direct Insurance) Contributions to the retirement fund and the new direct insurance are generally fully deductible for the employer and tax-free for the employee. The annual premium may not exceed 4% of the relevant social security ceiling, 3.63 income tax act Re-insured Group Support Fund. The group support fund features 100% pre-funding of benefits during the employee s active period by means of allocations paid by the company to the support fund on the basis of the benefit plan. The support fund concludes an indirect insurance contract congruently re-insuring the benefits. The amount of allocations paid by the company to the support fund is equal to the insurance contributions. The allocations qualify as business expenses up to their full amount. Pension Fund The pension fund in Germany has existed since the beginning of 2002 and is the most recent model. Contributions to the pension fund are generally fully deductible for the employer and tax-free for the employee. The annual premium may not exceed 4% of the relevant social security ceiling, 3.63 income tax act. Particularly, it is possible to transfer direct promises and support fund plans to the pension fund with special tax advantages ( 3.66, 4d (3), 4e ( ) income tax act) which has to be considered as the most important field of activity for the pension fund. Employee Reference Manual Swiss Life Network

15 Tax Treatment of The benefits from social security and company employee benefit schemes are taxed in somewhat different ways as shown in the following table. Source Lump Sum Pension Book Reserves and Support Fund Plans Death, disability or normal retirement benefits are treated as taxable income, except for an annual allowance of 24.0% of the benefit for pensions first payable in On payment of the retirement benefit prior to age 62, the tax-exempt allowance becomes available upon reaching age 63. Lump sum benefit payments may be spread over 5 years. Retirement Fund, Pension Fund Plans and Direct Insurance with effective date as of 2005 or later ( 3.63 Income Tax Act) Death, disability or normal retirement benefits are treated as taxable income. There is a proportional tax allowance for tax payers starting at the age of 65 which will be gradually eliminated by For beneficiaries reaching the age of 65 in 2015 this allowance is 24.0% of income. Direct Insurance Plans and Retirement Fund with effective date prior to 2005 Tax-free Taxable income only for interest (e.g. 18% at age 65), provided income exceeds certain limits. ( 40b Income Tax Act) Social Security n.a. Same as direct insurance Health Insurance Tax-free Tax-free Unemployment Insurance n.a. Tax-free Social Security Nursing Care n.a. Tax-free Other Information Although companies are relatively free to choose the right plan design, they are obliged to observe general labour laws along with the relevant tax laws. The following summarises some aspects of the labour laws. Legal Aspects The law on Improvement of Company (hereafter called the Pension Law) was at last reformed in the year Mandatory Vesting The general guidelines are that benefits must be vested if employment is terminated or an employee terminates service after having reached age 30, provided that by then there were at least 5 years of plan participation. For employees entering a plan as of January 1, 2009 benefits must be vested if employment is terminated or the employee terminates service after having reached age 25, provided that by then there were at least 5 years of plan participation. The Federal Labour Court has ruled that if due to eligibility requirements, participation in the benefit plan is delayed for vesting purposes, an employee will be considered to have become a participant from the date of employment or, at earliest, from the date a general benefit plan was established in the company. from deferred compensation are vested from the beginning. This rule has existed since The amount of minimum vesting is a portion of the insured or promised benefits in the ratio of completed company service and total possible service projected to normal retirement. The exception to this pro-rata rule occurs in the case Employee Reference Manual Swiss Life Network

16 of a directly insured (or retirement fund) plan under which dividend earnings are used to increase the level of insured benefits, in which the maximum vested benefit is the policy value on the date of termination. Reduction of For pension payments, the company benefit may not be withdrawn or reduced by future increases in social security benefits or other company benefits. Insolvency Protection There is a mandatory insolvency protection in place to guarantee both vested and currently payable benefits. The contribution rate is fixed each year and is a percentage of a certain base depending upon the funding method applied. Since 2014, the rate has been 1.3 per thousand of the applicable base. The contribution base corresponds only to the vested funds and pensions in payment as follows: In the case of direct insurance and a retirement fund, if the benefits are revocable, or if a policy loan is taken out, the policy reserves are the base. In the case of pension promises, whether or not these are actually created, the actuarial value of the book reserves is the base. In the case of a pension fund, 20% of the capital value of the acquired benefits is the base. In the case of a (non-reinsured) support fund, the capital value of the pensions in payment plus 20 times the allocation for deferred benefits is the base. In case of a reinsured support fund, the capital value of the pensions in payment plus 5 times the annual pension or 50 % of the endowment benefit for deferred benefits is the base. Pension Indexing One of the most discussed provisions of the Pension Law was the requirement to review the level of company pensions in the course of payment every 3 years, and to adjust them according to the needs of the pensioners, taking into account the economic situation of the company. Automatic indexing is not required. Various court rulings have clarified some aspects and have led to new controversial questions. The maximum legal obligation to increase pensions is based on the cost-of-living index within the review period for a four-member family with an average income. The maximum legal obligation may be limited to the extent that, within the review period, the percentage increase in the company pension is not higher than the average percentage increase in the net salary of the employees. Furthermore, the company may reduce or refuse indexing on objective financial grounds. The decisive consideration, according to the court, is that the future continued growth of the company and the jobs of the employees must not be jeopardized, as this is the only way to generate the necessary funds to pay the plan benefits. For benefit promises which started January 1, 1999, the indexing of pensions every 3 years can be replaced with a provision that the employer automatically increases annual pensions by a minimum of 1% per year. Another possibility for direct insurance and retirement funds is to use all surpluses from the beginning to increase the insured sums. Employee Reference Manual Swiss Life Network

17 Double Taxation Agreements Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Bolivia, Bosnia and Herzegovina, Bulgaria, Canada, China, Chinese Taipei, Côte d Ivoire, Croatia, Cyprus, the Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Georgia, Ghana, Greece, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kenya, Korea (Republic), Kosovo, Kuwait, Kyrgyzstan, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mauritius, Mexico, Moldova, Mongolia, Morocco, Namibia, the Netherlands, New Zealand, Norway, Oman, Pakistan, the Philippines, Poland, Portugal, Romania, the Russian Federation, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syria, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, the Ukraine, the United Arab Emirates, the United Kingdom, the United States of America, Uruguay, Uzbekistan, Venezuela, Vietnam, Zambia and Zimbabwe. Employee Reference Manual Swiss Life Network