Computer multinational IBM's German subsidiary has been ordered by a Stuttgart tribunal to pay a disputed €90m fee to the company's Pension Insurance Association (Pensions-Sicherungs-Verein) safety net.

The fee is three times higher than the €30 million that IBM's three German subsidiaries said they would be prepared to pay to the association for their insurance in 2009.

The association takes on the pension promises of insolvent firms but had itself run into financial difficulty in the wake of a large number of insolvencies during the financial crisis.

An expert at the German ministry of finance told Pension Funds Insider that "due to the financial and economic crisis, in 2009 the association had its biggest loss since its foundation. Although due to the positive economic developments the Pensions-Sicherungs-Verein moved back in to calmer waters in 2010, the effects of the wave of insolvencies will be felt much longer in the years ahead as a result of the added contribution burden being made on companies in order to share costs."

The tribunal ruled that IBM had no right to contest the payments demanded of their pension fund under Germany's occupational pension law (Betriebsrentengesetz). The Pension Insurance Association's lawyer, Jörg Burmann, expressed relief at the decision and revealed that around a dozen other cases are being brought to Germen tribunals. Many companies are said to have expressed displeasure at the level of contributions they have recently been requested to pay, so the judgement is potentially vital for the organisation.

IBM spokespeople have confirmed that the company has registered the decision but is awaiting a report detailing the reasoning behind the tribunal's decision before commenting further. According to Pension Funds Online data, IBM's German pension fund has assets of €6.4 bn and 49,000 members, meaning that the contested 2009 Pension Insurance Association levy is roughly equivalent to 140 basis points of total assets.

Hans Melchiors, a Pension Insurance Association board member, confirmed to Pension Funds Insider that they did indeed bill all German pension funds a 1.4% contribution fee in 2009 in order to finance a €4.4bn expense on insuring funds of insolvent firms under their pay as you go levy-based financing system. Melchiors explained that "in 2010 the association's losses were very low again against all expectations" at €648m and "as a result, the contribution rate fell under 20 basis points again. The predicted rate for 2011 currently lies at 26 basis points, which is well under the historical average."

Since its foundation in 1975, contributions requested of pension funds for insurance under the associations have varied from a high of 142 basis points in 2009 to a low of just 3 basis points in 1990.

First published: 12.07.2011

dbillingham@wilmington.co.uk