Planned "flexible retirement" (Aktivrente) for 2026: What should employers pay atten-tion to?

Which employees are eligible and what should be considered?

Starting January 1, 2026, employees who have reached the statutory retirement age (67 years, including transitional arrangements for birth cohorts up to 1963—for example, those born in 1960 with a retirement age of 66 years and 4 months) can receive tax-free employment income of up to 2,000 EUR per month for work subject to social security contributions. This tax benefit applies regardless of whether a pension is already being received, or retirement is postponed. It is planned that tax exemption can already be considered in the payroll process. 

Income from self-employment, business income and agriculture or forestry is not covered by this regulation. In addition, employees in so called "mini-jobs" are excluded from the rule. Also not eligible, for example, are pensions or other payments and benefits from previous services (§19 para. 1 no. 2 GITA), as these do not arise from the intended tax-privileged active employment.

The so called "Aktivrente" also does not apply to civil servants who continue to be employed in a civil service position after reaching the statutory retirement age. This group does not meet the requirement of employment subject to social security contributions. Whether retired civil servants engage in such employment in a secondary job as an employee, which is not related to their civil service activities, depends on the individual case.

In any case, according to the Federal Government, the consultations regarding the specific design of the "Aktivrente" have not yet been concluded now.

Do existing employment contracts remain valid or do new employment contracts need to be concluded?

According to the current draft of the act, the planned regulation is intended to apply to both existing and new employment relationships. It is therefore possible to continue an existing employment relationship or to enter a new one.

At this point, it is advisable from an employer’s perspective to check whether the employment contract contains an effective provision stating that the employment relationship automatically ends as soon as the employee becomes entitled to the statutory retirement pension. If such an agreement is missing, the employment relationship generally continues unchanged—even beyond retirement. Even if continued employment after retirement is possible, it is recommended to include an age-related limitation in the employment contract, as this offers the employer maximum flexibility. On the one hand, it provides clarity, and on the other hand, it allows both parties to jointly decide whether an extension of the employment relationship is reasonable and desired.

If an employee wishes to use the tax exemption in an employment relationship with tax class VI, they must provide written confirmation to the new employer that the exemption is not already being applied in another employment relationship (§ 3 No. 21 Sentence 4 GITA-Draft). The employer is required to keep this declaration in the payroll account. For example, company pensioners and retired civil servants can claim exemptions without having to change the tax class of their (company) pension.

What wage tax obligations do employers have?

With the introduction of the "Aktivrente," new requirements also arise for payroll accounting. Accordingly, tax-free income from the "Aktivrente" (§ 3 No. 21 GITA-Draft) must also be reported on the wage tax certificate (§ 41b para. 1 sentence 2 no. 5 GITA). This is a consequential amendment to the existing record-keeping obligations in the payroll account (§ 41 para. 1 sentence 4 GITA).

In addition, the introduction of the "Aktivrente" eliminates the possibility of an annual payroll tax adjustment for this income. This adjustment is also a direct consequence of the new legal regulations. Please take these changes into account when preparing pay slips and wage tax certificates.

Who is subject to social security contributions, and are these earnings subject to the provision of progression?

According to the current planning status, the tax-free income will not be subject to the progression proviso under § 32b GITA. Despite being tax-free, these earnings remain subject to social security contributions. This means that the "Aktivrente" recipients who receive their full pension must continue to pay contributions to health and long-term care insurance. In addition to contributions to health and long-term care insurance, the employer will also have to pay contributions to pension and unemployment insurance.

This is clarified by an amendment in § 1 para. 1 sentence 1 no. 1 of the Social Security Remuneration Ordinance-Draft, according to which wages that are tax-free solely due to § 3 no. 21 GITA-Draft are still considered income subject to social security contributions.

What does this mean in practice? In an illustrative example, an employee earns a monthly salary of 2,000 EUR under the planned "Aktivrente" scheme. This amount is completely exempt from wage tax but is subject to social security contributions. The employer will therefore pay social security contributions (health, pension, long-term care, and unemployment insurance) totaling approximately 20.95% (assumption; not considering special surcharges or reductions in the individual insurance branches, or the insolvency levy) of the gross salary, which amounts to 419 EUR. This results in a total cost for the employer of 2,419 EUR per month.

In this example, the employee must also pay social security contributions. The share for health and long-term care insurance amounts to approximately 10.35% of the tax-free "Aktivrente" of 2,000 EUR, which is 207 EUR (assumption; not considering special surcharges or reductions in the individual insurance branches). After deducting this contribution, the employee receives a monthly net payment of 1,793 EUR.

Notes & Recommendations for Your Company

It remains to be seen whether the draft bill will be adopted by the legislature in its current form. As the legislative process continues, further additions and adjustments may be made because of parliamentary discussions and the involvement of various interest groups. The final design of the law will therefore be significantly influenced by further political negotiations and the course of the legislative process. The Federal Government will closely examine the effects of the "Aktivrente" two years after its introduction. By the end of 2029, the new regulation will be reviewed to evaluate whether more people remain employed after reaching the statutory retirement age. The results of this review will be published in a report to the German Bundestag. Subsequently, it will also be examined whether the "Aktivrente" can be further expanded, for example by including self-employed people, to create additional incentives for growth and employment.

Since the "Aktivrente" is scheduled to take effect as of January 1, 2026, it is crucial for you as an employer to closely monitor the legislative process to implement the new regulation promptly. We are happy to support you along the way and keep you up to date on all developments regarding the "Aktivrente."