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Ballymun Community Law Centre. Pensions and Employment Law. Mary Hutch Head of Information and Training The Pensions Board 1 June 2005 . BACKGROUND TO LEGISLATION. Establishment of Advisory National Pensions Board in 1986 - PowerPoint PPT Presentation
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Pensions and Employment LawPensions and Employment Law
Mary Hutch Head of Information and TrainingThe Pensions Board
1 June 2005
Ballymun Community Law Centre
2
BACKGROUND TO LEGISLATION
Establishment of Advisory National Pensions Board in 1986
Examined position of occupational pension schemes and how they should be regulated
Proposed the introduction of the Pensions Act
Pensions Act, 1990 came into effect – 21 December 1990
Complements and re-affirms existing Trust Law
3
BACKGROUND TO LEGISLATION
Pensions (Amendment) Act, 1996 became law on 2 July 1996
National Pensions Policy Initiative (NPPI)
Pensions (Amendment) Bill, 2001 published on 27th July 2001
Pensions (Amendment) Act, 2002 passed on 13 April 2002
Social Welfare and Pensions Act, 2005 passed on 14 March 2005
4
OCCUPATIONAL PENSION SCHEMES IN IRELAND
112,665 occupational (i.e. employers) pension schemes
724,333 members in occupational pension schemes
Assets = €52 billion (Approximate figure currently quoted by IAPF)
5
OCCUPATIONAL PENSION SCHEMES
Employer(s) establish schemes on voluntary basis
Scheme must be set up as a trust
Separate from employer’s business
Trustees responsible for administration
Schemes financed on a pre funded basis-resources set aside in a trust fund for payment of pensions, when due.
Employees in Private/ Commercial Public Sector
6
OCCUPATIONAL PENSION SCHEMES
Schemes set up by public sector agencies for employees
Schemes financed on ‘pay as you go’ basis from current revenue in the same way as salaries and wages
Employees in Non Commercial Public Sector
7
TYPES OF SCHEMES
Defined Benefit Schemes
Pension and other benefits payable to scheme members and dependants are clearly defined
Guaranteed benefit – risk borne by employer
Benefit is usually a fraction of final salary for each year of service
Most common benefit formula – 1/60th of salary for each year of service
Majority of scheme members in these schemes – 66.7%
Gradual Move to Defined Contribution schemes
8
TYPES OF SCHEMES
Contributions into the scheme are defined e.g. 10%of annual pay. ‘What you see is what you get’
Pension and other benefits are based on amount of contributions made during member’s service and returns earned from investment
Risk borne by employee
33.3% of members in Defined Contribution schemes
Defined Contribution Scheme
9
TRUSTS
Legal obligation binding a person (the ‘trustee’)
to use certain property
for the benefit of other people (the ‘beneficiaries’)
Trustee is legal owner of the trust property
Use trust property for beneficiaries in accordance with terms of trust
Trust concept is ancient
Successfully adapted in modern times as legal vehicle for establishment of pension schemes
10
WHY ARE PENSION SCHEMES ESTABLISHED UNDER TRUST?
Very favourable tax concessions
Funds are controlled by trustees not employer company
Trustees must act in interests of beneficiaries not employer
Fund is separate from employer’s assets
Beneficiaries can enforce rights under trust
11
THE PENSIONS ACT, 1990
Brought together and set down clearly duties and responsibilities of pension scheme trustees
High degree of overlap between trustees duties under general trust law and duties under Act
Pensions Act effectively complements and reaffirms existing trust law
together provide foundation for regulation of occupational pension schemes in Ireland
Established statutory body to oversee operation of Act
The Pensions Board
12
PENSIONS ACT, 1990
Part I – Preliminary and General
Part II – Establishment of Pensions Board
Part III – Preservation of Benefits
Part IV – Funding Standard
Part V – Disclosure of Information
Part VI – Trustees of Scheme
*1 Part VII – Equal Treatment
*1 Equal Pension Treatment introduced by Social Welfare Act, 2004
13
THE PENSIONS ACT, 1990
*2 Part VIII – Compulsory and Voluntary Reporting
*2 Part IX – Miscellaneous Applications to the High Court
*2 Introduced by the Pensions (Amendment) Act, 1996
*3 Part X – Personal Retirement Savings Accounts
*3 Part XI – Pensions Ombudsman
*4 Part XII – Cross Border Schemes
*3 Introduced by the Pensions (Amendment) Act,2002
* 4 introduced by the Social Welfare and Pensions Act, 2005
14
PENSIONS ACT – PART II
Functions of the Pensions Board
To monitor and supervise operation of Act, including activities of PRSA providers, provision and operation of PRSAs
Issue guidelines to trustees on duties and responsibilities and codes of practice on specific duties
Issue guidelines/ guidance notes on duties and responsibilities of PRSA providers in relation to PRSA products
Encourage training for trustees
Advise Minister on standards for trustees and on their implementation
Issue guidelines for scheme administrators on requirements of Act
Provide information to members on their rights under the Act
15
PENSIONS ACT - PART II
Investigate complaints and, if necessary, take Court proceedings for breach of Act
Register schemes and PRSAs and collect fees due
Advise Minister for Social and Family Affairs on operation of Act and on pensions matters generally
16
THE PENSIONS BOARD
Regulation Activities
Regulatory Activities
Scheme Registration – schemes required to register with Pensions Board
Funding Standard – requirement to submit an Actuarial Funding Certificate (AFC) at specific times
Disclosure Compliance – conduct random audits of schemes. Also work with providers to ensure compliance
Investigations
“Regular” – arising from complaints or audits
Whistleblow reports – mandatory for fraud or misappropriation
Sanctions
Strong powers of investigation
Powers of direct intervention in scheme administration by application to High Court
Prosecutions may be brought
17
PENSIONS ACT – PART III
Preservation of Benefits
Applies to early leavers who have completed 2 years qualifying service
Entitlements to have benefits either: preserved in scheme they are leaving, and in case of defined benefit
schemes, revalued at end of every year, or avail of transfer options
Scheme may provide higher benefits
18
PART III
Preservation/Revaluation
Reduction of vesting period from 5 to 2 years – where members leave service after 1 June 2002
Preservation extended to pre-1991 service
Revaluation extended to pre-1991 service
19
PART III
Transfer Options
TRANSFER OF PRESERVED BENEFIT
Funded SchemeRevenue approved policy of contractUnfunded (Public Sector Scheme), with consent of trusteesPRSA subject to certain Revenue conditionsOverseas arrangements
20
PART III
Refunds of Contributions
WILL REFUNDS OF CONTRIBUTIONS CONTINUE TO BE PREMITTED?
NO, WHERE BENEFIT IS PRESERVED
21
PART IV
PENSIONS ACT
Funding Standard
Applies to Defined Benefit (DB) schemes
To ensure that, at a minimum scheme has sufficient funds to meet prescribed liabilities
Monitored by Actuarial Funding Certificates (AFCs) every 3 1/2 years (soon to be 3 years)
Extension of time possible subject to specified conditions
Intervaluation Reviews
22
PART V
PENSIONS ACT
DISCLOSURE OF INFORMATION
Trustees must give information to members about personal entitlements
Information about running of scheme and its finances must be made available to
- scheme members
- other beneficiaries
- trade unions representing scheme members
* Details are contained in the Disclosure of Information
Regulations S.I. No. 349 of 1998
* Revised Regulations expected to issue mid 2005
23
PART V
REMITTANCE OF CONTRIBUTIONS BY EMPLOYER
Applies to employers
All employee contributions to be remitted within 21 days from end of month of deduction
DC employer contributions to be paid within 21 days of end of month
Corresponding disclosure to be made to employee and trustees by employer
24
PART VI
PENSIONS ACT
Trustees Duties
To register the scheme
To ensure contributions are received
To invest the funds
To pay the benefits
To keep records
To apply resources of scheme on wind-up
25
PART VI
Trustees Duties
Social Welfare and Pensions Act, 2005
S59 being amended to give Minister power to introduce regulations on pension scheme investment
Regulations will give effect to requirements of EU Pensions Directive
Regulations pending on: Prudent investment, diversification of assets, unregulated markets Investment policy principles Borrowing
All Regulations to be in place by 23 September 2005
26
PART VI
Qualifications of Trustees
Social Welfare and Pensions Act, 2005
New Section 59A to comply with EU Pensions Directive
Prohibits certain people from acting as trustees
Section requires Minister to make Regulations setting out qualifications and experience that trustees must possess
Pensions Board can: make determinations regarding compliance with new requirements remove trustees who do not satisfy requirements
27
PART VI
MEMBER TRUSTEESHIP
Regulations effective from 1.1.1994
Permit qualified members to participate in selection of trustees
Can select half total number (excluding chairperson)
Affect –
- Funded schemes with 50 or more members
- Directly invested schemes with 12 or more members
Valid request initiates process
Existing trustees must commence process
Preliminary Poll or straight to election
28
PART VII
PENSIONS ACT
Equal Pension Treatment
Original Part VII prohibited discrimination on gender ground only
New Part VII introduced by SW (Miscellaneous Provisions) Act, 2004
Provides for equal pension treatment
9 Discriminatory Grounds
29
PART VII
Equal Pension Treatment
No discrimination on any discriminatory grounds in respect of any rule of a scheme
Rules governingaccesscontribution arrangementsbenefits retirement ages*Survivors benefits
*Ages can be fixed for admission/benefits provided no gender
discrimination
30
PART VII
Equal Pension Treatment
Examine scheme rules to ensure no provisions contrary to principle of equal pension treatment
If scheme rules discriminate more favourable treatment must be applied until rules amendedcould have funding implications
Claims for redress → ODEI
31
PART VIII
PENSIONS ACT
Compulsory and Voluntary Reporting to Board “Whistleblowing”
From 2 July 1996 duty placed on relevant persons
- to report instance of fraudulent conversion
or
- material misappropriation of scheme assets
WHICH THEY BELIEVE• Has occurred• Is occuring, or• Is to be attempted
32
PART VIII
WHISTLEBLOWING
RELEVANT PERSON IS: An auditor An actuary A trustee An insurance intermediary An investment business firm A person preparing or instructed to prepare Annual Report A person appointed by trustees to carry out specified duties A PRSA provider, actuary or auditor of business of PRSA provider An employee of S121 employer
OBLIGED TO MAKE COMPULSORY REPORT: Does not apply to information obtained pre 2.7.1996
33
PART VIII
COMPULSORY REPORTING
Relevant Person
Suspected fraud / misappropriation of scheme resources or PRSA
Additional PRSA obligations
Report in writing as soon as possible
As offence not to report
Defence for relevant person to show contravention applicable to another and reasonable steps taken to secure compliance
Protection for persons acting in good faith
No liability or action will arise e.g. defamation proceedings
34
PART VIII
VOLUNTARY REPORTING
Any person whether or not relevant person
Any matter concerning state and conduct of scheme or PRSA e.g. maladministration
Report in writing or otherwise
Protection against unfair dismissal provided report made in good faith
Also no liability or action will arise
35
PART IX
PENSIONS ACT
Miscellaneous Applications to the High Court
High Court can make various orders on application to it by Pensions Board, to
- Order employer to pay arrears of contribution
- Order restoration of scheme resources
- Order disposal of investments
- Injunction prohibiting misuse/misappropriation
Provisions extended by Social Welfare and Pensions Act, 2005 to allow Board to
- apply to High Court to prohibit disposal of assets of a scheme
- where Board receives request from another EU Member State
- Court is satisfied that prohibition is necessary to protect
members’ interest
36
PART X-
PERSONAL RETIREMENT SAVINGS
ACCOUNTS - PRSAS
For employees, self-employed, homemakers, carers, unemployed or any other category
Contract between individual and PRSA provider
- Investment account holding units in investments managed by
approved PRSA provider
Two types – PRSA and Standard PRSA
Mandatory employer access
Usual tax reliefs applicable
Transfers to and from other pension arrangements are facilitated as far as possible
37
PART X - PRSAs
Employers must sign up to a PRSA provider for access to at least one Standard PRSA
Notify employees of the right to contribute
Allow reasonable access to advice
Allow reasonable paid time off to get advice
38
PART X - PRSAs
Employers must deduct employee contributions from payroll, if requested
Pay over employee contributions and employer contributions, if any, within 21 days of the end of the month
Tell employees and provider of amounts deducted
39
Deals with
- complaints by “actual or potential beneficiary” of financial loss occasioned by maladministration by “a person responsible for the management of “a scheme/PRSA (trustee, PRSA provider, employer
- dispute of fact or law referred to Ombudsman by “actual or potential beneficiary” in relation to an act by a “person responsible for management of” the scheme/PRSA
Actual or potential beneficiary – broad definition; not just a member or PRSA contributor - member, dependant, dependant of deceased member or widow/widower
PART XI
The Pensions Ombudsman
40
Complaints or disputes;
- between trustees and employers
- between trustees
- falling outside time limit
- which have not gone through the internal disputes resolution procedure provided for
- which are already the subject of Court proceedings
- which are not ones of fact or law or do not involve maladministration
PART XI
The Pensions Ombudsman
What is not covered?
41
6 years from the date of the act giving rise to the complaint/dispute or
3 years from the date on which the person became aware or ought to have become aware of the act giving rise to the complaint or dispute, or
such longer period as the Ombudsman may allow if it appears that there are reasonable grounds and it would be just and reasonable to extend the period
However, for complaints or disputes occurring prior to the passing of the Act, an absolute limit of 6 years applies
PART XI
The Pensions Ombudsman
What is the time limit for referrals to the Ombudsman?
42
REDRESS
- Ombudsman can give directions, including for financial redress
- Financial redress cannot exceed the actual loss of benefit
HOW WILL DECISIONS OF THE OMBUDSMAN BE ENFORCED?
- By application to the Circuit Court
WHAT ABOUT LEGAL COSTS?
- No power to award legal costs
- Expenses and allowances may be awarded
HOW WILL PENSIONS OMBUDSMAN’S OFFICE BE FINANCED?
- By the exchequer
PART XI
The Pensions Ombudsman
43
PART XII
Cross Border Schemes
New part added by Social Welfare and Pensions Act, 2005 to implement EU Pensions Directive requirements
Allows employers in one jurisdiction to sponsor pension schemes
in another jurisdiction
CB schemes defined by their activities
e.g. - Irish registered scheme is CB scheme where it receives
contributions from employer located in another Member
State or EEA Country
- Danish registered scheme is CB scheme where it receives
contributions from an employer located in Ireland
44
PART XII
Cross Border Schemes
Irish schemes cannot just decide to admit overseas members prior Pensions Board authorisation required
DB schemes operating cross-border must be fully funded at all
times
Compliance with relevant Social and Labour Law required
Exemptions from parts of the Pensions Act for overseas members
Regulations pending: Social and Labour Law issues Exemptions from parts of Pensions Act Authorisation
All to be in place by 23 September 2005
45
Further Information
Pensions Board Locall 1890 65 65 65
Web → www.pensionsboard.ie
Information Booklets free of charge – online and copies available from the Board’s Information Unit
Technical Guidance Services for Practitioners and Trustees
available by subscription
Enquiry Service: Information Unit on 1890 65 65 65 or 01 6131900 info@pensionsboard.ie
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