Automatic salary conversion

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With automatic salary conversion , employees are automatically included in the employee-financed company pension scheme (i.e. without having to take any action) with a proposed savings rate and proposed form of investment , if they do not explicitly decide against it. Since the company pension scheme is the standard in this model, from which the employees can opt out , the automatic salary conversion is also referred to as the opting-out model or opt-out model . In contrast, with “opting-in” models it is the standard not to have an employee-financed company pension scheme. If you want to be included, you have to opt in, i.e. actively take care of it.

Mode of action and empirical evidence

In both the opting-in model and the opting-out model, employees can decide for themselves whether part of their gross wages will go into the company pension scheme or not. Actually, pension behavior should not be influenced by whether the decision has to be made to opt into or opt out of company pension schemes. However, there are two special features to consider. On the one hand, dealing with the topics of "old-age provision" and "finances" is an unpleasant activity for many people. On the other hand, many people attach extremely great importance to the present moment. Since they attach too much importance to the "here and now", they tend to postpone unpleasant activities from the present to "tomorrow". In these cases, there is a - often permanent - postponement or non-action with regard to pension provision. This leads to opposite results in the two models: with opting-in models, doing nothing leads to a company pension scheme being neglected, while opting-out models lead to participation in company pension schemes. Automatic salary conversion is therefore discussed as a starting point for strengthening company pension schemes.

Studies of the effects of automatic deferred compensation are available in particular from the USA. According to a study there, the introduction of opting-out models has in some cases "dramatically" increased the participation rates in company pension schemes. For the three companies examined, they are over 85 percent, regardless of length of service. Before that, after 6 months of service, they were 26-43 percent and after 3 years or longer with the company they were 57-69 percent. Automatic salary conversion not only increases participation rates, but also affects the composition of the participants. While the right to conventional deferred compensation (opting-in) introduced in Germany has led to higher participation rates, especially among high-income earners and men, i.e. groups of people who already use company pension schemes more than average, the effects of opting-out models are completely different to observe. According to a study in the USA with the introduction of automatic salary conversion, the participation rates have risen particularly sharply among those groups of people who had previously only used the conventional salary conversion less than average: low-wage earners, younger employees and women. However, with the automatic salary conversion, most employees agree not only to participate in the company salary conversion, but also to the proposed savings rate by means of a “passive decision” (i.e. not making an objection). In the USA, this is usually lower than the savings rate that was selected for opting-in models. Since a large part of the employees automatically included in the company pension scheme left it at this low savings rate, it was observed in the examined companies that the average savings rate fell significantly after the introduction of automatic salary conversion.

To counteract this, "Save-More-Tomorrow" approaches are being discussed. These provide for a certain part of each future salary increase to be used to increase contributions to the company pension scheme until an agreed maximum savings rate is reached. Here, too, the employee has the right to object, ie he can forego the increase in the savings rate or completely suspend the savings contributions.

Discussion in Germany

The concept of opting-out models comes from the USA, where it is referred to as automatic enrollment . In 2003, the Bertelsmann Foundation brought it into public discussion in Germany. In the early stages it was controversial. Critics - at the time including the German Insurance Association - argued that opting-out models restricted freedom of choice. In the meantime, the opting-out model has in principle received broad support from the associations. The question of whether employers should be obliged to offer their employees opting-out models is now less of a critical issue than the opting-out models themselves. The Federal Association of German Employers' Associations (BDA) fears that this would increase bureaucracy costs. According to surveys, around 60 to 70 percent of the general population in Germany rate opting-out models as positive. The level of agreement is even higher among employees in companies that offer opting-out models: Almost three quarters are satisfied, and almost a further quarter have not yet dealt specifically with it, but agree. 60 percent of companies can also imagine introducing operational opting-out solutions, as a survey of company pensioners showed. At the political level, the SPD has so far committed itself to opting out. The grand coalition of CDU / CSU and SPD has agreed on “[…] strengthening company pension schemes. It must also become a matter of course for employees of small and medium-sized companies. ”How this should be done is still unclear. As of November 2014, according to media reports, the federal government is examining whether employers should be obliged to introduce opting-out models. In December 2015, the three Hessian ministers of state Al-Wazir (Greens), Grüttner (CDU) and Schäfer (CDU) once again made the opting-out models the focus of political discussions with their proposal for a “Germany pension”. In April 2016, members of the Finance Working Group and the Social Working Group of the CDU / CSU parliamentary group in a joint position paper also spoke out in favor of the introduction of opting-out models. With the "draft law to strengthen the company pension plan and amending other laws ( occupational pension Support Act )" the Federal Government plans to anchor from 1 January 2018 Betriebsrentengesetz that the social partners legally binding models can regulate the automatic salary ( "opt-out" - or "option models").

Legal framework

The collective bargaining agreement in accordance with Section 17 (5) BetrAVG also applies to automatic salary conversion : "As far as payment claims are based on a collective agreement , a salary conversion can only be carried out for this if this is provided for in the collective agreement or permitted by the collective agreement." automatic) salary conversion, so opting-out models are not possible in the company pension scheme for employees who are bound by collective bargaining agreements, unless claims above the collective bargaining agreement can be converted. With this restriction, automatic inclusion in the deferred compensation can be regulated on three levels: in the employment contract , in a works agreement or in the collective agreement. Although these levels of regulation are to be measured against different legal provisions, comparable requirements apply: The employee must be adequately demonstrated his right to choose or to object and he must be given reasonable deadlines for decision-making. The structure of the company pension scheme offered must be based on the statutory regulation of Section 1a BetrAVG.

Individual evidence

  1. ^ The Vanguard Center for Retiremen Research: Automatic Enrollment. Benefits and Costs of Adoption. Valley Forge PA 2001, p. 2. (online)
  2. ↑ J. Leinert: Company old-age provision: automatic instead of compulsion. Why the opting-out model is better. Cologne 2005 (published by the German Institute for Retirement Provision), pp. 2, 15–18 and 23–25. (on-line)
  3. ↑ a b J. J. Choi et al .: For Better or For Worse: Default Effects and 401 (k) Savings Behavior. NBER Working Paper No. 8651, December 2001. (online)
  4. ^ J. Leinert: Retirement provision 2003: Who has it, who wants it? Private and company pension schemes for 30- to 50-year-olds in Germany. (= Bertelsmann Stiftung Pension Study. 18). Gütersloh 2003, p. 11. (online)
  5. ↑ BC Madrian, F. Shea: The Power of Suggestion: Inertia (k) in 401 Participation and Savings Behavior. NBER Working Paper No. 7682, May 2000, pp. 12 and 15. (online)
  6. ^ R. Thaler, B. Shlomo: Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving. In: Journal of Political Economy. vol. 112, no. 1, pt. 2, 2004. (online) ( Memento of the original from April 12, 2015 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / faculty.chicagobooth.edu
  7. ^ Bertelsmann Stiftung: Package of measures for old-age provision. Reform concept of the Bertelsmann Foundation to promote private and company pension schemes. (= Bertelsmann Stiftung Pension Studies. 18). Gütersloh 2003, p. 12. (online)
  8. ^ W. Ruprecht: Automatic salary conversion in company pension schemes - a replica. In: Economic Service. 84th vol., H. 2, 2004, pp. 98-104. (on-line)
  9. ↑ Understanding finances: Automatic salary conversion - opting-out in company pension schemes: surveys, positions and literature. Sections Surveys on Acceptance of Opting-Out Models. Position of the parties and position of the associations . (on-line)
  10. ↑ o. V .: Company pension for everyone? In: Focus. No. 3, 2014. (online)
  11. ^ Al-Wazir, Grüttner, Schäfer: The Germany pension - the state should organize central pension funds. Proposal for simple and secure additional retirement provision. Position paper from December 22nd, 2015. finanzen.hessen.de  ( page no longer available , search in web archives )  Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice.@1@ 2Template: Toter Link / finanzen.hessen.de  
  12. ↑ Karliczek, Kudla, Strebl, Weiß: Further development of company pension schemes. Position paper of April 15, 2016, p. 8. (online)
  13. ↑ Federal Government 2016: Draft of a law to strengthen company pensions and to amend other laws (Company Pension Strengthening Act) (online)
  14. ↑ A. Engert: On the charm of inertia: the automatic inclusion in the company pension scheme. (= Bertelsmann Stiftung Pension Studies. 23). Gütersloh 2003, p. 20. (online)

literature

  • A. Engert: The charm of inertia: automatic inclusion in company pension schemes. (= Bertelsmann Stiftung Pension Studies. 23). Gütersloh 2003. bertelsmann-stiftung.de
  • J. Leinert: Automatic salary conversion: high participation rates without compulsion. In: Economic Service. 84th vol., 2004, no. 2, pp. 98-104. (on-line)
  • J. Leinert: Company pension: automatic instead of compulsion. Why the opting-out model is better. Published by the German Institute for Retirement Provision. Cologne 2005. (online)

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