Avoiding contributions to pension scheme insurance that no longer result in a pension increase

A paradigm shift in the interpretation of the exemption provision regarding exemption from pension insurance on grounds of age for „newly self-employed persons“

Legal situation

Under § 273 (8) of the GSVG, People, who reached their 57th (men) or 55th (women) birthday on 1st January 1998 shall be exempt from compulsory pension insurance.

However, this exception applies not for people, who were insured on 31 December 1997 in accordance with Section 3(3) of the GSVG or Section 4(3) of the ASVG – as they stood on 31 December 1997. This includes, for example, tax advisors, journalists, veterinarians, midwives, musicians, etc.

Explanations

These individuals remain subject to mandatory pension insurance regardless of their age – until they cease their activity – even though these contributions no longer affect the amount of their pension if they pay contributions beyond the age at which they reach their retirement pension. This legal anomaly, which has existed since October 2000, is to be abolished according to the government programme, and a reassessment of the retirement pension is to be reactivated if mandatory contributions to pension insurance continue to be paid while in gainful employment subject to mandatory pension insurance and receiving a pension simultaneously.

At the same time, however, the exemption acts as a safeguard for those „newly self-employed“ who have reached the specified age limit and would otherwise be excluded from compulsory pension insurance. It is up to them to decide how long they wish to continue their activity covered by compulsory insurance and whether they are prepared to continue paying (lost) contributions beyond the pensionable age.

Interpretation of the exemption from the age clause

The second sentence of § 273 (8) of the GSVG, which exempts certain persons from the exemption from pension insurance, can be interpreted either personally or in relation to the activity.

Personalisation
This interpretation means that, regardless of their income from employment, those persons who were compulsorily insured on 31 December 1997 remain compulsorily insured. (For example, a chartered accountant who was compulsorily insured under the GSVG on 31 December 1997, had reached the age of 57 on 31 December 1997 and relinquished his professional licence at the end of 2002, but continues to receive income as a ‘newly self-employed person’ – e.g. specialist writer, foundation board member, etc. – which falls under Section 2(1)(4) of the GSVG.)

Occupational relevance
This interpretation links compulsory pension insurance to the nature of a person’s earned income. If a person retires and cancels their business licence or surrenders their professional licence, their compulsory insurance cover ceases. However, if this pensioner earns income as a ‘newly self-employed person’, compulsory insurance is reinstated in accordance with Section 2(1)(4) of the General Social Insurance Act (GSVG), although for pension insurance the provisions set out at the beginning quoted age clause (§ 273 (8)) shall apply.

Administrative exercise
By the end of 2002 was the exception provision cited by the age clause designed for the individual. With that, the administration followed the literal interpretation of the Act, which reads: „This does not apply to persons who…“

From 2003 a paradigm shift has occurred in this regard. Administrative practice now follows the teleological (purposeful) interpretation specifically activity related, thereby fulfilling the ratio legis.

The activity-based interpretation effectively removes the previous disparity in treatment between business owners and those self-employed individuals who are classified as „newly self-employed“. Traders are, in fact, exempted from compulsory insurance upon surrendering their trade licence and, when taking up gainful employment as ‘newly self-employed persons’ (e.g. as a board member of a foundation) are exempt from compulsory pension insurance upon reaching the age threshold. However, the self-employed person in question would, after surrendering their professional licence and subsequently taking up gainful employment as a „newly self-employed person“ (e.g. a foundation board member) with this income, even if they have exceeded the statutory retirement age. The age exemption, which the legislator apparently intended as a safeguard, would therefore have the opposite effect for the self-employed professional.

The original misinterpretation is likely due to the legislator, in § 273(8), sentence 2 of the Austrian General Social Security Act (GSVG), creating an exception to the age clause instead of correctly onto the Type of earned income erroneously on "People" which has been brought in ultimately, is now being renovated.

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