Direct insurance

The title of this article is ambiguous. Direct insurance is also commonly referred to as insurance that is not taken out through a field service, but in direct sales , e.g. B. on the Internet, see also direct insurer . This article, on the other hand, deals with direct insurance as a way of implementing company pension schemes .

A direct insurance (also: company direct insurance , abbreviated often FID ) is according to the German labor and tax law , a life insurance contract , which the employer as the policyholder on the life of a worker ( insured ) provider licensed in Germany insurer concludes. The employee and / or their surviving dependents are entitled to benefits. Direct insurance is one of the five known ways of implementing company pension schemes in Germany .

Direct insurance is very similar to a pension fund , the difference is essentially historical: In contrast to direct insurance, pension funds were large company-internal institutions until 2002.

General

As is customary in company pension schemes, direct insurance can provide old-age, disability or survivors' benefits. These include, among other things, old-age provision, survivors' pensions or capital , occupational disability and additional accident insurance .

Since the introduction of the Law for the Modernization of Health Insurance (GMG), benefits from direct insurance have been subject to compulsory health insurance for those with statutory and voluntary health insurance under the KVdR or GKV with the full contribution. This only applies to the part of a direct insurance policy initiated by the company, but not to the part that arises after leaving the company and continuing it privately. If a new employer takes the position of the policyholder when changing employers, the insurable contributions remain with the company. This also applies to statutory long-term care insurance ( SGB ​​V and SGB ​​XI ).

Commitments since January 1, 2005

Contributions

For direct insurance contracts that have been concluded on the basis of a commitment since January 1, 2005, Section 3 No. 63 EStG applies . According to this, contributions up to 4% of the assessment ceiling (west) of the pension insurance are tax and social security-free. With the introduction of occupational pension Support Act on 1 January 2018, the tax-free contribution quota was raised to 8% of the income threshold. If there is an old commitment according to § 40b , contributions will be credited to the quota so that only the difference is available within the scope of § 3 No. 63 EStG. However, there is no additional freedom from social insurance. The tax relief of the contributions only applies to taxpayers in tax classes I to V , i.e. in the context of a first employment relationship, and possibly also to marginal part-time employees . Employees in tax class VI cannot exempt their premium income from tax.

Since 2009, no distinction has been made between employer and employee financing (the latter also known as deferred compensation), because the social security privilege now applies beyond 2008. The social security exemption from contributions also applies if they are not made from special payments.

Taxation in the retirement phase

Pension and capital payments are to be taxed in full at the individual tax rate as other income in the pension phase according to § 22 No. 5 EStG. The application of the rule of one fifth is not possible for lump-sum payments .

If contributions from taxed income were paid in during the savings phase (e.g. due to illness after the end of the continued payment of wages, unemployment, private continuation of the contract, etc.), the resulting benefits are taxed according to the profit-sharing method (Section 22 No. 5 sentence 2 in conjunction with § 22 No. 1 S. 3a EStG). This does not affect the obligation to pay health and long-term care insurance contributions on the benefits from the company-financed contributions and income.

Lump-sum settlement

If a lump-sum settlement is provided for in direct insurance, Section 3 No. 63 EStG cannot be applied. If a pension payment is planned and there is only one capital option, the tax and social security-free payment can only be continued as long as the capital option has not been exercised.

There are also insurers that allow customers to have part of the saved capital paid out in one fell swoop (partial capital settlement) and the rest as a monthly pension. As a rule, a maximum of 30 percent of the capital can be paid out as a partial capital payment at the start of retirement if the customer so wishes.

Bereaved

Eligible in the event of death can be:

• Spouses
• Former spouse
• Children entitled to child benefit
• Significant other
• Registered same-sex unions

If none of these groups of people exist, a death benefit can be paid to any person in the event of death before the start of retirement. However, this is limited to the usual funeral costs - currently € 8,000.

If the insured person dies before the start of retirement, his or her spouse or registered partner or the children entitled to child benefit will either be reimbursed the contributions paid up to now (contribution refund) or the capital accumulated up to now (plus surpluses). The aforementioned benefits are regularly paid as a pension, with one-off payments being possible. Secure biometrics, such as benefits for surviving dependents, reduce the insured's retirement pension. Survivors' pensions are paid as part of the pension guarantee period.

Commitments made before January 1, 2005

Contributions

Employer contributions to direct insurance that were approved before January 1, 2005 are subject to tax in accordance with Section 40b of the Income Tax Act (EStG) up to a lump sum of € 1,752 per year at a flat rate of 20% - plus solidarity surcharge and church tax. Furthermore, the contributions are exempt from social security, provided either there is an employer-financed commitment or the contributions are paid from special payments. If there is a deferred payment and no special payment, the contributions are subject to social security.

Averaging

Via a so-called “joint direct insurance contract”, up to € 2,148 per year can be paid into individual contracts in accordance with Section 40b of the Income Tax Act, provided that the average premium of all contracts in the company is not higher than € 1,752.

Taxation in the retirement phase

Capital payments are tax-free for old commitments. Pension payments are taxed according to Section 22 No. 5 EStG with the so-called income share.

In the retirement phase or in the case of a lump-sum payment, contributions for statutory health and long-term care insurance must be paid at the full contribution rate. The social security contributions to be paid extend over a ten-year period. This obligation results from the Health Modernization Act (GMG) of 2004 with retroactive effect on direct insurance policies that were taken out before 2005. There may be a double burden of social security contributions when paying in and then again when paying out.

Bereaved

There are no restrictions on entitlement to benefits in the event of death. The death benefit can be paid out to anyone (possibly tax-damaging).

Change of employer

If an employee leaves his employer, the insurance contract - provided there are vested claims - is transferred to the new employer or himself as part of the insurance contract (legal entitlement to so-called portability ). The employee can either continue to pay the contributions or - if possible - make the contract exempt from contributions. A termination with payment of the surrender value - as well as the lending or assignment of the credit - is not possible before the age of 60 due to the restriction on disposal in Section 2 (2) BetrAVG.

If the insured person takes up a new job, they have the following options:

• Change of policyholder and continuation of the old contract with the new employer.
• Private continuation with personal contributions (if the new employer is not willing to take over the contract) or
• Transfer of the credit in accordance with Section 4 (3) of the Company Pension Act (BetrAVG) (only for commitments from January 1, 2005). Old contracts can also be transferred if both insurance companies have signed the transfer agreement of the Association of the Insurance Industry.

The employer is fundamentally obliged to offer deferred remuneration within the framework of a pension fund or pension fund (or direct insurance), but can determine the provider of the company pension scheme ( Section 1a BetrAVG).

duplication

If an employee receives severance pay due to his departure from a company, this or parts of it can be paid into direct insurance with tax incentives. According to the previous regulation, in accordance with Section 3 No. 63 EStG, an amount of € 1,800 tax-free for each year of service since 2005 - minus the contributions paid in the calendar year in which the employment relationship was terminated, as well as the 6 previous years tax-free - could be paid into the direct insurance. If the above regulation was waived and the employment relationship and commitment existed before 2005, € 1,752 per calendar year of service - minus the direct insurance contributions for the past seven years - could be paid in at a flat-rate tax. In this context, one speaks of the so-called multiplier .

With the introduction of occupational pension law to strengthen since January 2018 a simplified scheme applies. The reproduction amount is calculated in such a way that the length of service (maximum 10 years of service) is multiplied by 4% of the current income threshold.

Others

• The employee is in direct insurance generally not possible to before reaching the retirement age one side over the balance feature , the contract assign to lend or pledge .
• The direct insurance must be reported to the pension insurance association in accordance with Section 11 (1) BetrAVG. However, an obligation to pay contributions is only triggered if the employer has (temporarily) assigned or borrowed it, or if there is a revocable subscription right .

Historical

The flat tax for old commitments rose from 1983, 10% over 15% to 20% most recently. The flat-rate tax to be paid is to be deducted from the gross salary.

See also

• Direct insurer with direct sales

• In other linguistic areas, the term "direct insurance" is used synonymously with the German term primary insurance , i.e. , in contrast to reinsurance, insurance taken out directly with the consumer. The direct insurance described above is a special feature of German tax law and is only available in Germany.

Individual evidence

1. ↑ www.lohn-info.de: Implementation methods for company pension schemes - pension fund
2. ^ Federal Constitutional Court judgment of September 28, 2010
3. ↑ Tax relief and social security law relief for contributions within the framework of tax classes I – V.
4. ^ Stiftung Warentest: Company pension - More pension with the company , In: Finanztest 8/2012, pp. 36–42 and test.de of July 24, 2012, accessed online on May 8, 2013
5. ↑ On the entire complex of the BRSG, see the practical shorthand: Daniela Karbe-Geßler: The Company Pension Strengthening Act : The new design options explained in a practical way . Rehm, Heidelberg 2018, ISBN 978-3-8073-2657-3 .