Adjustment of the contribution to long-term care insurance

The benefits and contributions of statutory long-term care insurance will be adjusted in several stages, with the change in contribution rates already taking effect from July 1, 2023.

The Care Support and Relief Act, which was passed by the Bundestag and Bundesrat shortly before the summer break, readjusts regulations in statutory long-term care insurance and improves many benefits. The contribution rates for long-term care insurance will also be redefined. While childless contributors will face an increase in contributions, parents with two or more children will pay less for long-term care insurance than they do today.

The first step of the reform is to stabilize and improve the financial basis of long-term care insurance by adjusting the contribution rates as of 1 July 2023. This change should then enable the first benefit improvements from January 1, 2024. In a second step, all benefit amounts will be significantly increased again on January 1, 2025.

The contribution adjustment as of July 1, 2023 also consists of two parts. The general contribution rate for statutory long-term care insurance will be increased by 0.35 % to finance the existing benefit entitlements and the benefit improvements planned as part of this reform. In addition, the Federal Government is authorized to adjust the contribution rate by decree in the future if short-term financing requirements arise.

At the same time, a decision by the Federal Constitutional Court will be implemented, which in April 2022 ruled that the previous regulation of the contribution rate for long-term care insurance was unconstitutional. The court was convinced that the current system puts parents with more children at a disadvantage compared to those with fewer children because the additional childcare costs that increase with the number of children are not taken into account in the contribution law. A uniform contribution for all parents regardless of the number of children is therefore not constitutionally justified, the court said, and gave the legislature until July 31, 2023 to come up with a new regulation.

From July 1, 2023, the contribution rate will therefore also be differentiated according to the number of children and the surcharge for childless contributors will be increased by 0.25 % from 0.35 % to 0.6 %. This means that a contribution rate of 4.0 % applies to contributors without children, while parents with one child only pay a contribution rate of 3.4 %. From the second child onwards, the contribution is reduced by 0.25 % per child up to the fifth child. This additional reduction only applies during the child-raising phase, i.e. until the end of the month in which the respective child reaches the age of 25.

After the respective child-raising period, the deduction will therefore no longer apply and contributors with several children will once again pay the regular contribution rate of 3.4 %. The employer's share of the contribution to long-term care insurance always remains constant at 1.7 %, while employees pay different contributions depending on the number and age of their children:

• Childless: Employee contribution 2.30 %, total contribution 4.00 %

• Parents with max. 1 child under 25: Employee contribution 1.70 %, total contribution 3.40 %

• Parents with 2 children under 25: Employee contribution 1.45 %, total contribution 3.15 %

• Parents with 3 children under 25: Employee contribution 1.20 %, total contribution 2.90 %

• Parents with 4 children under 25: Employee contribution 0.95 %, total contribution 2.65 %

• Parents with at least 5 children under 25: Employee contribution 0.70 %, total contribution 2.40 %

Proof of parental status and the number and age of the children must be provided in a suitable form. While self-payers must provide proof directly to the care insurance fund, employees must provide their employer with appropriate proof, e.g. the birth certificate(s) of the child/children. The employer should then forward this to the payroll department as soon as possible, unless they do the payroll themselves.

In order to ensure uniform application of the law and to make the verification process as efficient as possible, the Federal Government is working with the relevant authorities to develop a digital procedure for recording and verifying the number of eligible children by March 31, 2025. Initial details should be available by the end of the year. For the time being at least, direct paper evidence is therefore required in order to be able to take the reduced contribution rate into account from July.

Previously, proof for a child was deemed to have been provided at the beginning of the month of birth if it was submitted within three months of the child's birth. Otherwise, the proof only takes effect after the end of the month in which the proof is submitted. However, the proof rule was adjusted for the changeover to the new contribution calculation procedure:

• For all Children born before July 1, 2023 the proof is valid from July 1, 2023, even if it is only provided retrospectively. Overpaid contributions will then be refunded, although the refund may take some time. However, the reimbursement of contributions should be completed by June 30, 2025 at the latest.

• For Children born between July 1, 2023 and June 30, 2025 the proof is valid from the month of the child's birth, even if it is only submitted retrospectively.

• For all children born after July 1, 2025 the previous principle that proof must be provided within three months of the birth in order for it to be recognized retroactively from the birth applies again. Otherwise, the proof is only valid from the beginning of the following month.

Even if nobody needs to be afraid of permanently paying too much in contributions as a result of the changeover because the proof of children is not provided quickly enough, it is still best if the proof is available before the payroll for July 2023, because only then can the correct contribution calculation be guaranteed from July 2023 and subsequent calculations avoided.