International Programs - U.S.-German Social Security Agreement - Final Protocol 8.e

Paragraph 8(e) includes provisions for determining the amount of benefits that resulted from the payment of retroactive voluntary contributions under the Second Supplementary Agreement.  The computation was based on the law of the Federal Republic as in effect on July 1, 1990 (the effective date of §17a of the Foreign Pensions Law).   Amendments to German law that became effective after this date introduced substantially less favorable provisions on exportation of benefits based on FPL credits.  In general, applying the German law in effect on July 1, 1990 was therefore much more favorable for the persons concerned than applying later German law.

Another amendment to German law, which became effective on January 1, 1992, introduced a new social security benefit computation formula.  In general, the new benefit formula was a simplified restatement of the old formula.  Although Paragraph 8(e) generally provided for the application of German law as in effect on July 1, 1990, the second sentence of Paragraph 8(e) authorized Germany to compute benefit amounts using the new simplified benefit formula.  The new formula is as follows:

Monthly                              Personal                                  Pension                          Present  

Pension                =          Remuneration         X               Category          X           Pension

Amount                             Points                                       Factor                            Value

A worker receives credit for one “Personal Remuneration Point (PRP)” for each year in which his or her annual earnings amount equals the national average wage and proportionately more or less than one PRP if the earnings amount is more or less than the national average.  The “Pension Category Factor” varies with each type of pension.  For example, at the time of the signing of the Second Supplementary Agreement by U.S. and German Government representatives, it was 1.0 for old-age and total invalidity pensions; 0.6667 for occupational invalidity pensions; and 0.6 for pensions paid to surviving spouses over age 45, disabled or caring for a child.  The “Present Pension Value (PPV)” was 46 DM (23.51 Euros*) as of July 1, 1994, and is adjusted every July 1 for increases in average earnings levels.  Personal Remuneration Points that are based on periods of coverage completed in territory comprising the former GDR are generally multiplied by a lower PPV, known as the “Present Pension Value (East)”.

The appropriate Pension Category Factor, as determined according to German law, was used to compute all benefits resulting from Paragraph 8.  In accordance with clauses (aa), (bb) and (cc), respectively, three separate benefit computations were performed to determine the portion of the benefit payable based on (1) periods of coverage credited under §17a of the Foreign Pensions Law, (2) periods of coverage for which retroactive voluntary contributions were paid, and (3) other periods of coverage (for example, periods of covered work in the Federal Republic).

Clause (aa)

Under German law, the Personal Remuneration Points that are assigned to periods of coverage credited under §17a of the Foreign Pensions Law are based on the worker’s occupation while working in the country of origin.  Under clause (aa), the Present Pension Value by which these PRPs were multiplied in the benefit formula above was not the regular PPV, but rather the following values:

Period for which                                                                         Present Pension

the Pension is Paid:                                                                   Value:

7/1/90-12/31/90                                                                          DM 15.96 (8.16 Euros*)

1/1/91-6/30/91                                                                            DM 18.36 (9.38 Euros*)

7/1/91-12/31/91                                                                          DM 21.11 (10.79 Euros*)

1/1/92-6/30/92                                                                            DM 23.57  (PPV (East)) (12.05 Euros*)

7/1/92-12/31/92                                                                          DM 26.57  (PPV (East)) (13.58 Euros*)

1/1/93-6/30/93                                                                            DM 28.19  (PPV (East)) (14.41 Euros*)

Beginning July 1, 1993, the PPV (East) exceeded 70 percent of the regular PPV.  In accordance with Paragraph 8(e)(aa), pensions payable for periods beginning with this date based on §17a credits were determined by multiplying the Personal Remuneration Points under §17a  by 70 percent of the regular PPV DM 31.14 (19.92 Euros*) for 7/1/93-6/30/94; DM 32.30 (16.46 Euros*) for 7/1/94-6/30/95).

Clause (bb)

The Personal Remuneration Points to be assigned to each year for which retroactive voluntary contributions were paid under the Supplementary Agreement equaled, in accordance with Paragraph 8(d), the ratio between (1) the earnings corresponding to the person’s voluntary contributions (contributions ÷ current contribution rate of 19.2 percent) and (2) the average annual earnings of all covered workers for 1994 (DM 51,877) (26,524.28 Euros*).  Payment of twelve monthly contributions of DM 84.48 (43.19 Euros*) for a year thus yielded 0.1017 PRPs for the year:

(DM 84.48 X 12 ÷ 0.192) ÷ DM 51,877 = 0.1017 [expressed in Euros at the official conversion rate:  43.19 Euros* X 12 ÷ 0.192) ÷ 26,524.28 Euros* = 0.1017]

The total PRPs based on voluntary contributions were multiplied by the Present Pension Value for the year for which the Pension was paid.  For benefits payable retroactively for periods prior to July 1, 1995, the PRPs were multiplied by DM 46 (35.5823.51 Euros*) (the Present Pension Value applicable from July 1, 1994, to June 30, 1995) rather than the lower PPV that actually applied for those periods.

Clause (cc)

Personal Remuneration Points based on other periods of coverage under German law, such as periods of covered work in the Federal Republic, were multiplied by the Present Pension Value for the year for which the pension was paid.  For benefits payable retroactively for the period from July 1, 1990, to June 30, 1991, the PRPs were multiplied by DM 39.58 (20.23 Euros*) (equal to the Present Pension Value that would have applied for this period based on German earnings levels at that time).

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