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New pension law and the consequences in the event of a merger business takeover for a pension plan

Nov. 23, 2023

6 min reading time

What is the impact of a merger, acquisition or split on the pension plan? And what do you need to pay attention to because of the Future Pensions Act? The impact on the pension plan can have major and very unpleasant financial consequences long after the business acquisition. Here we discuss the impact on the pension plan.

Incidentally, our pension advisors regularly receive questions on this subject from business owners, HR advisors, employment lawyers or employees of accounting and administration firms. When is an employer obliged to participate in the pension plan of a (different) mandatory industry pension fund (hereinafter: bpf)? A simple question at first sight, but it (sometimes) takes a lot of time to investigate. And let's not forget what the impact can be for both employee and employer.

Furthermore, we must take into account the Future of Pensions Act. This law came into effect on July 1, 2023.

Pension implications of merger or acquisition

A merger, acquisition or division of the company can have major consequences for the pension plan. It can just happen that the actual activities of the company change with the consequence that the employer has to join a (different) bpf. An underexposed point, especially if no change in the SBI code is necessary, but other activities are actually added or expanded.

Where is the problem now?

In terms of employment law, the employment contract and pension agreement (employer's promise to employee) may become contradictory here. Various legislative aspects are important here:

Civil Code / Pension Act
- The rights and obligations of the employee, employer and pension administrator are defined in the Civil Code (BW 7:662 - 7:666) and the Pension Act.

Special provisions
- Pensions are subject to a special provision during a transfer of undertaking. The main rule is that employees keep the same pension plan with the new employer, but there are a number of important exceptions to this main rule.
- 1 There is no bpf at the new employer. The new employer already has its own pension plan. Before employees join the new employer, the new employer first makes an offer of participation in the pension plan.
- 2 A (different) bpf applies at the new employer. Employees will automatically join the pension plan at this bpf. The old pension scheme will be made non-contributory for all employees. The employees can no longer claim any rights to it.
- 3 The collective bargaining agreement states that the old employer's pension plan will not apply with the new employer (does not transfer with them).
- 4 Multiple pension plans (administration agreements) arise within the company, with the question of which plan is legally valid and which one takes precedence.

Scope of the bpf.

The extent to which an employer must participate in a bpf's pension plan depends on the company's actual activities. It must be examined whether the activities are defined in the scope of a bpf. In practice, we often run into the problem that an employer is written to by two bpf's for mandatory membership. Here the employer does not have the opportunity to make his own choice!

Impact for employee and employer

The financial consequences can be significant. We therefore recommend that the pension issue be included in the advisory process from the very start of a merger, acquisition or demerger. This in order to prevent problems.

Possible situations in transfer of undertaking

Transferring employer	Acquiring employer	Rights and obligations regarding retirement	Legal Articles
Mandatory participation in an industry pension fund	Own pension plan	No transition by operation of law	No
Mandatory participation in an industry pension fund	Same compulsory industry pension fund	Transition by operation of law	Art. 7:663 BW Art. 7:664 BW (2)
No pension plan	Mandatory participation in an industry pension fund	Required to participate in the industry pension plan	Art. 2 and 4 Wet Bpf 2000
Mandatory participation in an industry pension fund	No pension plan	No transfer of rights and obligations	Art. 2 Wet Bpf 2000
Mandatory participation in an industry pension fund	Other compulsory industry pension fund	Other industry pension fund applies. No transfer by operation of law	Art. 7:664 BW para, under b
Own pension plan	Own pension plan	Transfer by operation of law, unless offer of pension agreement by transferee or different collective bargaining agreement	Art. 7:663 BW Art. 7:664 BW paragraph 1, under a and c
Own pension plan	No pension plan	Transition by operation of law	Art. 7:663 BW
No pension plan	Own pension plan	Suspicion of an offer	Art. 9 PW
Own pension plan	Mandatory participation in an industry pension fund	Transition by operation of law not an issue. Mandatory participation in industry pension plan	Art. 7:664 BW para, under b

Extra attention due to the Future Pension Act and its implications in the event of a merger or acquisition

The switch from a pension fund to an insurer creates a sticking point in the law. After all, the employer is required to offer only a level premium to its employees after July 1, 2023. An increasing pension premium reduces the burden at the outset and provides greater equality for participants over the entire period of participation in the pension plan. Committing to a new pension plan with an increasing premium is no longer possible after the introduction of the new Pension Act*. A takeover,merger or change of company form after July 1, 2023 will therefore directly affect the pension commitment.

Get involved in a timely manner

It is crucial to assess the financial risks of the pension plan(s) before the decision to acquire, merge or change corporate form. Therefore, be sure to involve a pension advisor in a timely manner in these common situations. Map out the consequences for the employers involved in advance so that all parties can include this in the negotiations. For example, you can advise on the desirability of standardizing terms and conditions of employment.

Proving your added value in business acquisition?

Make sure you are sure of your advice, seek support from our pension specialists within Alpina Pensions where necessary. We are happy to think with you!

* For insured plans, there is a transitional right within the Future Pension Act, whereby existing members prior to 1-7-2023 with an increasing contribution tier may remain entitled to this commitment.