Occupational Pensions Update: Key Decisions of the Third Senate from 2025 – Part 2

Like employment law in general, the often less prominent field of occupational pensions — which employees regularly cite as one of the most valued benefits — is subject to continuous change and must adapt to evolving factual circumstances, requirements and developments. In many cases, this evolution is shaped by the case law of the Third Senate of the Federal Labor Court („Bundesarbeitsgericht“, BAG), which has special jurisdiction in all matters relating to occupational pensions and clarifies both specific and more general questions of application by interpreting and applying pension plan rules and the underlying statutory provisions.

After the first part focused on two decisions concerning the adjustment of pension benefits, this second part addresses two BAG decisions from August 2025: one on deferred compensation („Entgeltumwandlung“) and the employer subsidy, and one on the interpretation of the scope of pension plan rules.

This decision by the BAG must be read in the context of earlier case law of the Third Senate concerning deferred compensation and, in particular, the question whether and under what conditions collectively agreed provisions may validly derogate from the employer subsidy that is, in principle, required by law. According to the BAG’s now-confirmed case law, collective bargaining agreements that comprehensively regulate deferred compensation and do not provide for any form of employer subsidy constitute a valid derogation from the subsidy obligation under Section 1a (1a) of the German Occupational Pensions Act („Betriebsrentengesetz“, BetrAVG). This also applies where the relevant collective bargaining agreements were concluded before the statutory subsidy obligation was introduced by the Occupational Pensions Strengthening Act („Betriebsrentenstärkungsgesetz“, BRSG) with effect from January 1, 2018. The opening clause for collective bargaining agreements in Section 19 (1) BetrAVG is not limited to collective bargaining provisions concluded only after the BRSG entered into force.

The collective bargaining agreement of DAK-Gesundheit at issue in the proceedings contained a comprehensive set of provisions governing salary conversion. However, it did not provide for an employer subsidy. Nor was the subsidy expressly excluded. According to the BAG’s case law, however, such an express exclusion is not required.

Also on August 26, 2025, the BAG issued a decision that is likely to be significant for the interpretation of the scope of pension plan rules. The BAG clarified that pension plan rules intended to apply to “employees of the business” also cover apprentices („Auszubildende“). Accordingly, pension entitlements under an occupational pension scheme may already be accrued during an apprenticeship if the pension plan rules so provide. The BAG further held that even a restriction of the scope of application to employees of the business who work at least 50% of collectively agreed working time does not preclude apprentices from accruing entitlements, because apprenticeship time also qualifies as employment time for these purposes.

The decision also reaffirmed the BAG’s established view that the termination of a works agreement governing occupational pensions generally only has the effect of closing the pension scheme to newly hired employees for the future. Accrued entitlements are frozen, but do not lapse. The waiting period for acquiring an entitlement to occupational pension benefits may still be completed after termination of a works agreement unless the pension plan rules expressly provide otherwise.

If you have missed the first part of this blog series read here what the BAG decided in 2025 on key issues relating to the adjustment of pension benefits.