$Unique_ID{bob00196} $Pretitle{} $Title{Unified Germany Chapter 4. Provisions Concerning the Social Union} $Subtitle{} $Author{Press and Information Office} $Affiliation{German Embassy, Washington DC} $Subject{insurance republic german pension democratic germany federal fund health article} $Date{1990} $Log{} Title: Unified Germany Book: The Unity of Germany and Peace in Europe Author: Press and Information Office Affiliation: German Embassy, Washington DC Date: 1990 Chapter 4. Provisions Concerning the Social Union ARTICLE 17__________ Principles of Labour Law In the German Democratic Republic freedom of association, autonomy in collective bargaining, legislation relating to industrial action, corporate legal structure, codetermination at board level and protection against dismissal shall apply in line with the law of the Federal Republic of Germany; further details are contained in the Protocol on Guidelines and in Annexes II and III. ARTICLE 18__________ Principles of Social Insurance (1) The German Democratic Republic shall introduce a structured system of social insurance, to be governed by the following principles: 1. Pension, sickness, accident and unemployment insurance shall each be administered by self-governing bodies under public law subject to legal supervision by the state. 2. Pension, sickness, accident and unemployment insurance including employment promotion shall be financed primarily by contributions. Contributions to pension, sickness and unemployment insurance shall, as a rule, be paid half by the employee and half by the employer in line with the contribution rates applicable in the Federal Republic of Germany, and accident insurance contributions shall be borne by the employer. 3. Wage replacement benefits shall be based on the level of insured earnings. (2) Initially, pension, sickness and accident insurance shall be administered by a single institution; income and expenditure shall be accounted for separately according to the type of insurance. Separate pension, sickness and accident insurance institutions shall be established, if possible by 1 January 1991. The aim shall be to create an organizational structure for social insurance which corresponds to that of the Federal Republic of Germany. (3) For a transitional period the present comprehensive compulsory social insurance cover in the German Democratic Republic may be retained. Exemption from compulsory social insurance cover shall be granted to self-employed persons and professionals who can prove that they have adequate alternative insurance. In this connection, the creation of professional pension schemes outside the pension insurance system shall be made possible. (4) Wage-earners whose earnings in the last wage accounting period before 1 July 1990 were subject to a special tax rate under Section 10 of the Ordinance of 22 December 1952 on the Taxation of Earned Income (Law Gazette No. 182, p. 1413) shall receive until 31 December 1990 a supplement to their pension insurance contribution amounting to - DM 30 for monthly wages up to DM 600, - DM 20 for monthly wages of more than DM 600 up to DM 700, and - DM 10 for monthly wages of more than DM 700 up to DM 800. Earnings from several employments shall be counted together. The supplement shall be paid to the wage-earner by the employer. Upon application the employer shall be reimbursed for these payments from the budget. (5) The ceilings for compulsory insurance cover and for contribution assessment shall be fixed according to the principles of social insurance law applying in the Federal Republic of Germany. ARTICLE 19__________ Unemployment Insurance and Employment Promotion The German Democratic Republic shall introduce a system of unemployment insurance including employment promotion which shall be in line with the provisions of the Employment Promotion Act of the Federal Republic of Germany. Special importance shall be attached to an active labour market policy, such as vocational training and retraining. Consideration shall be given to the interests of women and disabled persons. In the transitional phase, special conditions in the German Democratic Republic shall be taken into account. The Governments of both Contracting Parties shall cooperate closely in the development of unemployment insurance including employment promotion. ARTICLE 20__________ Pension Insurance (1) The German Democratic Republic shall introduce all necessary measures to adapt its pension law to the pension insurance law of the Federal Republic of Germany, which is based on the principle of wage and contribution-related benefits. Over a transitional period of five years account shall be taken of the principle of bona fide rights protection in respect of persons approaching pensionable age. (2) The pension insurance fund shall use its resources exclusively to meet its obligations with regard to rehabilitation, invalidity, old age, and death. The existing supplementary and special pensions schemes shall be discontinued as of 1 July 1990. Accrued, claims and entitlements shall be transferred to the pension insurance fund, and benefits on the basis of special arrangements shall be reviewed with a view to abolishing unjustified benefits and reducing excessive benefits. The additional expenditure incurred by the pension insurance fund because of such transfers shall be reimbursed from the budget. (3) Upon conversion to Deutsche Mark current pensions from the pension insurance fund shall be fixed at a net replacement rate which, for a pensioner who has completed 45 insurance/working years and whose earnings were at all times in line with average earnings, shall be 70 per cent of average net earnings in the German Democratic Republic. For a greater or smaller number of insurance/working years, the percentage shall be correspondingly higher or lower. The basis for calculating the upgrading rate for individual pensions shall be the pension of an average wage-earner in the German Democratic Republic, graduated according to year of entry, who has paid full contributions to the voluntary supplementary insurance scheme of the German Democratic Republic, over and above his compulsory social insurance contributions. If there is no upgrading on this basis a pension shall be paid in Deutsche Mark which corresponds to the amount of the former pension in Mark of the German Democratic Republic. Survivors' pensions shall be calculated on the basis of the pension which the deceased would have received after conversion. (4) Pensions from the pension insurance fund shall be adjusted in line with the development of net wages and salaries in the German Democratic Republic. (5) The voluntary supplementary pension insurance scheme in the German Democratic Republic shall be discontinued. (6) The German Democratic Republic shall make a government contribution to its pension insurance fund to offset its expenditure. (7) Persons who have transferred their habitual residence from the territory of either Contracting Party to that of the other Party after 18 May 1990 shall receive from the pension insurance institution hitherto responsible a pension calculated according to the regulations applicable to that institution for the period completed there. ARTICLE 21__________ Health Insurance (1) The German Democratic Republic shall introduce all necessary measures to adapt its health insurance law to that of the Federal Republic of Germany. (2) Benefits which have hitherto been financed from the health insurance fund according to the legislation of the German Democratic Republic but which according to the legislation of the Federal Republic of Germany are not benefits covered by the health insurance fund shall, for the time being, be financed from the budget of the German Democratic Republic. (3) The German Democratic Republic shall introduce continued payment of wages in the event of sickness which is in line with legislation governing continued payment of wages in the Federal Republic of Germany. (4) Pensioners shall be covered by health insurance. The contribution rate of the relevant health insurance fund shall be applicable. The health insurance contributions of pensioners shall be paid in a lump sum by the pension insurance fund to the health insurance fund. The amount to be paid shall be determined according to overall pension payments before deduction of the proportion of the health insurance contribution payable by pensioners. This shall not affect the net replacement rate envisaged after conversion of pensions. (5) Investment in in-patient and out-patient facilities of the health service of the German Democratic Republic shall be financed from budget funds and not from contribution revenue. ARTICLE 22__________ Public Health (1) Medical care and health protection are of particular concern to the Contracting Parties. (2) While provisionally continuing the present system, which is necessary to maintain public medical services, the German Democratic Republic shall gradually move towards the range of services offered in the Federal Republic of Germany with private providers, particularly by admitting registered doctors, dentists and pharmacists as well as independent providers of medicaments and remedial aids, and by admitting private providers of independent, non-profit-making hospitals. (3) The German Democratic Republic shall create the necessary legal framework for the development of the necessary contractual relations - particularly as regards remuneration - between health insurance institutions and providers of services. ARTICLE 23__________ Accident Insurance Pensions (1) The German Democratic Republic shall introduce all necessary measures to adapt its accident insurance law to that of the Federal Republic of Germany. (2) Upon conversion to Deutsche Mark, current accident insurance pensions shall be recalculated and paid on the basis of average gross earnings in the German Democratic Republic. (3) Accident pensions to be determined after the conversion to Deutsche Mark shall be based on the average gross monthly earnings in the twelve months prior to the accident. (4) The provisions of Article 20 (4) and (7) shall apply mutatis mutandis. ARTICLE 24__________ Social Assistance The German Democratic Republic shall introduce a system of social assistance which shall correspond to the Social Assistance Act of the Federal Republic of Germany. ARTICLE 25__________ Initial Financing If, during a transitional period, contributions to the unemployment insurance fund of the German Democratic Republic and both the contributions and the government subsidy to the pension insurance fund of the German Democratic Republic do not fully cover expenditure on benefits, the Federal Republic of Germany shall provide temporary initial financing for the German Democratic Republic within the framework of the budgetary aid granted under Article 28 of this Treaty.