Information obligations of EbAV II Directive

In our blog post “The Ebx. AV-II Directive and what it means”, we already reported on the general changes affiliated with the new EbAV II Directive. In this post, we want to take a closer look at the changes regarding the information obligations for direct insurance, pension funds and pension schemes.

The new obligations are mainly directed towards for pension recipients and members as well as potential members. The specifications are described in the new VAG Information Obligation Ordinance (VAG-InfoV), which was published on 18.06.2019. They are a supplement to existing information obligations in accordance with §4a BetrAVG regarding labor laws and in accordance with §154 VG and VVG-InfoV regarding actuarial law.

There is no transitional period for the implementation of the new information obligations. Thus, there is an urgent need for action among all EbAV. The annual notifications for 2019 that will be sent in 2020 must fulfill the new requirements.

For the new commitment type “defined contribution commitment” in accordance with the Company Pensions Reinforcement Act (social partner model), there is an investment risk for those entitled to benefits, because the achieved entitlement can sink due to the capital investment. In this case, additional information will be required, for example, cost information, specifications on the structure of the investment portfolio as well as specification of interest during the last 5 years. In this post, we will not get into detail about the changes regarding the defined contribution commitment, because they do not (yet) play a role.

General information about the retirement pension system

General information must be provided before the beginning of benefits.

• Description of the retirement pension system
• Information about possible financial, actuarial and miscellaneous risks
• Information about tax and social security contribution obligation
• Information about guarantees
• Information about mechanisms to protect entitlements, for example, Pensionssicherungsverein (PSV) or Protector
• Information about the service components, the payment form as well as optional choices in the event of a claim

If there are significant changes, for example, a change to the calculation basis for the calculation of actuarial reserves, this general information must be updated.

Information during entitlement

During both entitlement and the retirement phase, the regular contract information will be described as “retirement information”.

During entitlement, the retirement information should be provided to the member on an annual basis and contain the following information:

• Repetition of diverse information from the general information (for example, service components, guarantee elements, information about tax and social security contribution obligations)
• Representation of the achieved entitlement:
  • Defined and premium-based defined benefit: the amount of the obtained pension entitlement (guaranteed and not guaranteed benefits)
  • Defined contribution commitment with minimum payment: the currently achieved planned pension capital
• The projection of the future payments at the planned beginning date of retirement occurs in two different ways:
  • Elementary scenario (guarantee payment) with future premiums until the planned beginning of retirement
  • Profit scenario with a realistic assessment of future capital profits or declaration of profit sharing (without final profits). Alternatively, a scenario can be used for the best estimated value (for example, a contribution commitment with minimum payment).
  • Other extrapolations (for example, different final age) are possible on a voluntary basis.
• Information about the premiums from the last twelve months, if the payments depend on premiums (premium-oriented defined benefit (boLZ), contribution commitment with minimum payment and defined contribution commitment). This requirement does not apply to defined benefits that should have been transferred to a pension fund through §3 no. 66EStG.
  
  
• Significant changes compared to the previous year must be clearly identified (§234o VAG). Nevertheless, it is not defined any further what exactly significant changes are in this sense. Until a clarification is available here, we recommend not identifying changes to the calculation bases, but rather all changes in regard to the contract content.

Information during the retirement phase

Retirement information must be created at least every 5 years during the retirement phase. All current benefits and voting rights should be shown.

If there are reductions in benefits, the recipients must be informed about this at last three months before the reduced amount is paid (for example, reduction of profit sharing or restructuring clause).

Provision of information

A generally comprehensible language should be paid attention to and technical expressions should be avoided.

For the fulfillment of the new obligations in accordance with VAGInfoV, documents can be transferred in paper form and electronically (for example, through a web portal). With the latter, permanent availability must be ensured. The recipient can nevertheless explicitly demand a copy in paper form.

A confirmation about the receipt of the information is of great importance to comply with revision standards. The respective pension institution will have to prove during an audit by the BaFin (Federal Financial Supervisory Authority) if the affected people have received the information. The electronic sharing through a portal has the advantage that the “confirmation” is automatic as soon as a document has been downloaded or read.

With the inclusion of new recipients, there are often registrations in a list form. Here we recommend that every new candidate should have to confirm the receipt of the general information in writing in the future.

In Conclusion

In general, it can be said that the requirements regarding information obligations have risen and, altogether, are reasonable and appropriate. The changes are mostly regarding the adjustment of static texts (with the exception of the required projection types at the beginning of retirement). The expenses to implement the changes in the existing documents will therefore be manageable in the IT systems. The fact that electronic provision will be possible through a portal in the future is met with open arms.

Do you have questions about the information obligations and need help with implementation? We would be happy to help you!