As a specialist in supplementary pension schemes, our experience is that during such deals supplementary collective benefits are repeatedly overlooked and are only dealt with at a later stage. This matter is anything but just some negligible detail, as supplementary pension plans form an important part of the remuneration of employees who are being transferred. They weigh financially on a company’s social liabilities. In addition, your HR policy has every interest in maintaining the harmony that is required between your current and new employees.
One important factor requiring special attention in this area is a correct analysis of the type of deal that is created between companies:
- If it is a merger or takeover in which the shares of the company are being acquired by the transferee, then we are talking about a share deal. Such a transfer only changes the shareholder’s structure. The company’s legal entity remains in existence, but control over the company changes. The employer’s legal entity remains unchanged with regard to its employees, the employment contracts continue to run and there is no impact on the employees at any time. Following this share deal, the existing collective pension schemes remain intact.
- If it is a merger or takeover of (part of) the assets/liabilities of a company, then we are talking about an asset deal and we enter the legal waters of collective labour agreement 32bis. A national collective labour agreement known to many negotiators leads to the common misconception that supplementary pension schemes should not be taken into account within the company at all. This has to do with the fact that the CLA itself provides for a clear exclusion, stating that it “does not govern the transfer of employees’ rights arising out of the schemes for old-age, survivors’ and disability benefits granted under supplementary social security schemes. Nor does it prejudice the special arrangements provided for by law or by other collective labour agreements[1].”
[1] Article 4 CLA 32bis, dated 7 June 1985
Does the transferee have complete freedom or is he bound by a legal framework? Some nuance about the form of takeover is warranted:
- If a complete legal entity is taken over in accordance with the rules of company law[2], then there is an automatic transfer of rights and obligations and the pension plan must be continued under the current conditions.
- If the pension plan is set out in a CLA, then this follows the principle that collective labour agreements automatically transfer to the transferee. The CLA needs to be continued, as does the pension plan.
- If the parties opt for a conventional transfer of business, only then can the freedom of negotiation as set out in CLA 32bis be fully implemented. After all, the transferee negotiates which assets and liabilities he is taking over, allowing him to choose not to continue with the supplementary collective pension scheme. However, this freedom does not mean that he is given complete autonomy. Employer contributions in a group insurance policy are part of the remuneration package and this package cannot just be changed unilaterally. In the event of a drastic cutand without compensation, you may end up on a legal roller coaster.
[2] Article 12:9 and Article 12:10 Company Code, 23 March 2019.
Be vigilant while conducting your merger or acquisition negotiations. Even if supplementary collective pension schemes do not fall within the scope of CLA 32bis, this does not mean that you have complete autonomy.
In practice, a large number of questions are raised, and it is important for you to be properly informed in good time and certainly before making any decision. Urgent questions need to be answered, such as:
- Is the insurer prepared to continue this group insurance for the employees who have been taken over?
- Can the plan design and the guarantees be maintained in exactly the same way?
- Are the interest guarantees on accumulated reserves and premiums going to be taken over?
It is crucial to know the answer to these questions before the decision is made. After all, in the past it has been the case that an employer/negotiator was unable to honour his agreements because he had not been sufficiently informed beforehand about the practical options offered by the insurer of his supplementary pension scheme.
