Party and parliamentary group operate at different levels.
A parliamentary group coordinates parliamentary work, distributes tasks and develops shared positions. Its members therefore do not all need to work on the same specialist subjects at once.
The Bundestag's Rules of Procedure generally require at least five per cent of its members. They also accommodate parties with similar objectives that do not compete in any state. This allows CDU and CSU to form a joint group.

The other three answers
The other terms have different meanings.
Association
Verband is a general term for an organised association. The required parliamentary term is Fraktion.
Council of Elders
The Council of Elders is a special parliamentary body concerned with organisational matters. It is not simply the association of all MPs from one party.
Opposition
Opposition describes a political role in relation to government. Several parliamentary groups can belong to the opposition.
Joint work does not remove the free mandate.
Under Article 38, MPs are responsible to their conscience and are not bound by orders or instructions. A group position does not replace this constitutional status.
Not every arbitrarily small association automatically gains group status. The Rules of Procedure set specific conditions and recognition rules; the simple test definition summarises the basic concept.
Rules of Procedure · Section 10 · German Bundestag ↗Party: political organisation. Group: cooperation in parliament.
Opposition describes a role, not the same organisational form.
Three words for this question
- die Fraktionparliamentary group
- An association of MPs formed under parliamentary rules.
- das Mandatparliamentary seat or mandate
- The position of an elected parliamentary representative.
- das Gewissenconscience
- The personal moral responsibility referenced by the free mandate.
