What was this all about?
A group of employees still had a final salary pension scheme and did not pay personal contributions. The administration agreement at Nationale-Nederlanden (“NN”) ended on 31 December 2017 and NN no longer offered a final salary pension scheme. Other insurers likewise stopped offering a final salary pension scheme.
The employer then decided to convert the final salary pension scheme to a career average scheme with effect from 1 January 2018 and to introduce an employee’s contribution of 5% of pensionable earnings. The employer did so by relying on the pension scheme and the unilateral amendment clause in the employment contract. The works council agreed to the amendment. The employer informed the relevant employees of this in a letter of 17 January 2018. The letter included an individual calculation, drawn up by an actuary, setting out the implications of the amendment. The employer offered one-off financial compensation for the difference between the schemes. One of the employees challenged the unilateral amendment.
The ruling
The judge found that the employer was permitted to amend the existing scheme unilaterally. The judge considered that the employer had a compelling reason for doing so, because (a) insurers no longer offered final salary pension insurance; (b) fines under the Dutch Pensions Act (Pensioenwet) were looming by continuing the final salary pension scheme; (c) the works council had agreed; and (d) the employees concerned received compensation. The employer had moreover sufficiently demonstrated that the career average scheme with compensation being offered to the employee was an appropriate alternative.
The judge disallowed the introduction of the 5% personal contribution, however. The employer’s argument that such a contribution was a society-wide trend and prevented negative financial business results did not hold. The judge also considered that the financial sacrifice asked from the employee was substantial.
Take aways of the CLINT | Littler team
- Check whether there is a compelling reason for unilaterally amending the pension scheme (e.g. deteriorating business results) and whether this outweighs the employee’s interests according to the principles of reasonableness and fairness;
- Prepare a list of criteria that the new scheme must comply with. Call in the assistance of a pension expert;
- Remove the employees’ objections where possible. For example, is compensation or a phase-out scheme an option?
- Ask for the works council’s consent in good time;
- Communicate well with the works council and employees. Illustrate the implications of the amendments using individual calculations drawn up by the pension expert.
