Changes to the right of exemption concerning old-age pension insurance

Members of professional pension schemes require current, employment-related exemption notifications.

Employees and self-employed persons are entitled to exemption from compulsory insurance under the statutory old-age pension scheme if they are members of a professional association (e. g. Medical Association, Bar Association) and of a professional pension scheme (e. g. doctors’ pension scheme, lawyers’ and tax advisors’ pension scheme), and practice a profession-related activity (Section 6 Subsection 1 no. 1 SGB (Code of Social Law) VI). The legal consequence of this is that contributions must be paid to the professional pension scheme and not to the Deutsche Rentenversicherung Bund (DRV Bund) (German Federal Pension Fund).

With classic profession-related activities, the DRV Bund assumed in the past that, once issued, exemption would remain valid in the event of a change of employer if the new activity is likewise clearly profession-related (example: a doctor moves from one hospital to another; a lawyer joins another law firm).

In its judgment dated 31 October 2012, the Federal Social Court (BSG) declared this generous practice to be inadmissible. In the opinion of the court, exemption from compulsory membership of the statutory old-age pension scheme applies only for a very specific employment with a specific employer or for a selfemployed activity actually practiced. The exemption becomes ineffective upon giving up the employment. This means that each change of employer or each significant change in the area of duties with the existing employer requires the submission of a new application for exemption.

This case law resulted in major uncertainty. Given the longstanding administrative practice of the DRV Bund, the question arose as to whether exemption notifications issued before 31 October 2010 enjoy safeguarding of existence and protection of confidence.

Change in the administrative practice at the DRV Bund

In its letter dated 10 January 2014, the DRV Bund advised that it has adjusted its administrative practice to the requirements of the BSG as stated in the judgment of 31 October 2012. This results in the following case scenarios.

Taking up of employment after 31 October 2012 – new exemption notification required

An independent exemption procedure must be carried out for each new position of employment or self-employed activity taken up after 31 October 2012, if these are subject to compulsory insurance.

For this purpose, “newly taken up” means not only any change of employer but also any significant change in the area of duties with the existing employer. The employer must include the exemption notification in the remuneration files and present this if necessary during a tax audit. If the employer is not in possession of a current profession-related exemption notification, he is obliged to register the employee with the statutory old-age pension scheme and to pay the corresponding contributions. Otherwise, a later social security audit can result in the employer being obliged to make back payments of past contributions. By and large, the related costs affect solely the employer. This is because the employee contribution to the statutory old-age pension scheme can only be claimed from the employee retrospectively to a limited extent, namely only with the next three salary payments. If the employment relationship has since ended, recourse claims against the employee are no longer possible at all.

Taking up of employment before 31 October 2012

In the case of employees whose last change of job was before 31 October 2012, the DRV Bund differentiates in terms of whether a classical profession-related employment exists (e. g. doctor in a hospital, lawyer with lawyers as employers, pharmacist in pharmacies) or another profession-related activity (e. g. in-house lawyer, in-house tax advisor, pharmacist in an industrial company).

Protection of confidence for classical profession-related activities

Nothing changes in the case of employees who have received an exemption notification in the past for a classical professionrelated employment (e. g. doctor in a hospital, lawyer with lawyers as employers, pharmacist in pharmacies), and who continue to practice such an activity following a change of job before 31 October 2012: their “old” exemption notification remains applicable for the employment currently practiced. An obligation to submit a new application for exemption does not apply until there is a renewed change of employment. If so desired, an application can also be submitted for the current employment in order to obtain clarification.

No protection of confidence for in-house lawyers

The situation is different with employees who are in possession of an exemption notification for an earlier profession-related activity, but have relinquished this as a result of a change of job (e. g. in-house lawyer changes company) or a significant change in duties (e. g. promotion of an in-house lawyer to Head of Department) prior to 31 October 2012. They have no protection of confidence concerning the exemption notification issued previously. In all cases, they require a current, employmentrelated exemption notification and must therefore submit a new application for exemption covering the current activity. The DRV Bund grants these employees the possibility of retrospective submission of the application.

If processing of the application shows that the current activity qualifies for exemption, the exemption will be issued as from the date of submission of the application. Nevertheless, there is no requirement for back payments of contributions to the statutory old-age pension scheme for the past. The contributions paid to the professional pension scheme remain applicable. This guarantees the employees concerned uninterrupted protection by the professional pension schemes.

If, however, liability to compulsory insurance under the statutory old-age pension scheme is ascertained during processing of the application or during a social security audit, the contributions to the old-age pension scheme will be levied from the employer retrospectively for the past, in accordance with the general rulings and together with the surcharge on overdue payments.

Conclusion

Employers who pay contributions to the professional pension scheme for employees should have an employment-related exemption notification from the DRV Bund concerning the current activity in their remuneration files. If this is not the case, the employees concerned should demonstrably be requested to submit a corresponding application for exemption as soon as possible, because only a positive exemption notification can create legal certainly as regards the contribution payments, and protects the employer against high demands for back payments from the DRV Bund.