P ENSIONS L EGISLATION U PDATE Paul Kenny Pensions Ombudsman Mary Hutch Head of DB Supervision 20...

PENSIONS LEGISLATION UPDATE

Paul Kenny

Pensions Ombudsman

Mary Hutch

Head of DB Supervision 20 May 2008

The Pensions Board

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AGENDA

The Pensions Acts, 1990 – 2008 Social Welfare and Law Reform Act, 2006 Social Welfare and Pensions Acts, 2007 - 2008

On-the-spot Fines Trust based RAC’s Registered Administrators Trustee Training Requirements

Pensions Board Supervisory Developments Update from Pensions Ombudsman Disclosure of Information Developments

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THE PENSIONS ACTS 1990 - 2008

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 VIA – Registered Administrators*2 Part VII – Equal Treatment*1 Introduced by the Social Welfare and Pensions Act,2008*2 Equal Pension Treatment introduced by Social Welfare Act, 2004

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THE PENSIONS ACTS, 1990 - 2008

*3 Part VIII– Compulsory and Voluntary Reporting

*3 Part IX – Miscellaneous Applications to the High Court

*3 Introduced by the Pensions (Amendment) Act, 1996

*4 Part X – Personal Retirement Savings Accounts (PRSA’s)

*4 Part XI – Pensions Ombudsman*5 Part XII – Cross Border Schemes*4 Introduced by the Pensions (Amendment) Act,2002

*5 Introduced by the Social Welfare and Pensions Act,2005 Social Welfare Law Reform and Pensions Act, 2006 Social Welfare and Pensions Act, 2007 Social Welfare and Pensions Act, 2008

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SOCIAL WELFARE LAW REFORM AND PENSIONS ACT, 2006

Enabling provisions for fines regime – inserts new S3A• “pay up and remedy regime” as alternative to summary

prosecution (not commenced until 17.9.07)• Inserts new S3B relating to rules of evidence in PB prosecutions

Miscellaneous technical amendments:• S48(3A) and 3(B) – Provisions to discharge liabilities where

scheme is wound-up with insufficient funds• S46(1)(c) allows scheme actuary to assume index–linked benefits

may be replaced by equivalent fixed–rate increases -reflects S48(3A) changes

• S51(A) – “Peer Review” of actuarial work for compliance with the Pensions Act and in accordance with professional guidance issued by SOAI – commenced 2 April 2007 by S.1. No 137 of 2007

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SOCIAL WELFARE LAW REFORM AND PENSIONS ACT, 2006

Schemes ceasing to be exempt from S52 to submit AFCs to Board with ED no more than 6 months after date on which exclusion ceased – S43 amendment

PO can bypass IDR if nothing to be gained - S131 amendment PB can require small schemes in wind-up to produce Annual Report

where its deemed appropriate – S55(2) amendment Trustees can make transfer payments of preserved benefits to PRSAs –

S35 amendment Employers giving access to an overseas scheme not obliged to give

access to a PRSA – S121 amendment

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SOCIAL WELFARE AND PENSIONS ACT, 2007

Section 3A of the Pensions Act had been inserted by Social Welfare Law Reform and Pensions Act 2006 to provide “fines” regime

• further amended in 2007 Act to specify contraventions subject to on-the–spot fines Specified breaches are not new Mainly administrative–type breaches

- Scheme registration

- Disclosure of information

- Request for information

- Submission of AFCs

- Procedures for transfer payments

- SIPPs

- Increases to pensions in payment

See Pensions Board Trustee Checklist on www.pensionsboard.ie

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ON-THE-SPOT FINES

Regulations made on 17 September 2007

- S.I.s No. 631, No. 632 and No. 633 of 2007 Fine for each offence is €2,000 per trustee Fines cannot be paid out of resources of scheme, trust RAC or PRSA More serious matters will continue to be dealt with by going to Court Coincides with a tougher approach by the Board to offences To date Fines Notices have issued to 11 sets of trustees and to 5

employers

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ON-THE-SPOT FINES

Breaching the Pensions Act is breaking the law

Timescales are generous, no real excuses

Breaches will result in fines or prosecutions

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SOCIAL WELFARE AND PENSIONS ACT, 2007TRUST BASED RACS

Social Welfare and Pensions Act, 2007 bring trust RACs under the remit of certain provisions of Pensions Act with effect 27.4.07 – commenced by S.I. No. 181 of 2007

Trust RACs are “IORPS” for purposes of Pensions Directive 2003/41/EC Regulatory Requirements

Trustees Duties Scheme Registration and pay fees –

-trust RACs (Registration) Regulations, 2007 – S.I. No. 187 of 2007

-trust RACs (Fees) Regulations, 2007 - S.I. No. 768 of 2007 Remittance and investment of contributions SIPPs (not small trust RACs) Investment obligations – Trust RACs (Investment ) Regulations – S.I. No. 185

of 2007 plus S.I. No. 188 of 2007 Trustees qualifications and experience – Trust RACs (Trustee) Regulations,

2007 – S.I. No. 186 of 2007

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Continued


TRUST BASED RACS

Disclosure of Information (not small Trust RACs) - Trust RACs (Disclosure of Information) Regulation S.I. No 182 of 2007

Cross-Border requirements – Trust RACs (Cross-Border) Regulations, 2007 – S.I. No. 184 of 2007

“Whistleblowing” Pensions Ombudsman – Pensions Ombudsman Regulations, 2007

– S.I. No. 183 of 2007

FAQs on Trust Based RACs are available on www.pensionsboard.ie

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SOCIAL WELFARE AND PENSIONS ACT, 2007OTHER AMENDMENTS

6 month time limit on appeal to High Court on point of law from a determination by Board – S38(4), 53(3), 58(3), 64A(3)

DC schemes subject to Funding Standard to produce first AFC with effective date no later than 1 April 2007 – S43(1)(c)

S50 amended to enable Board direct reduction in some or all of active members benefits so scheme can satisfy Funding Standard by date specified in Funding Proposal rather than immediately after reduction takes place

Board can require actuaries to furnish actuarial work directly to it – S54 PRSA providers need only give notice in relation to increased charges –

S104(11) Level of fines for both summary and indictable offences increased from

€1,904.61 to €5,000 for a summary offence and from €12,697.38 to €25,000 for an indictable offence

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OTHER LEGISLATIVE CHANGES IN 2007

Commencement of S43 of Pensions (Amendment) Act, 2002 with effect from 31.12.07

- inserts Section 59D, 59E, and 59F into Pensions Act, 1990 S59D provides that Regulations may be made to provide for members to be

consulted before trustees or employers exercise any discretion regarding abatement of assets or dispose of surplus in a wind-up

- Disclosure of Information (Amendment) Regulations – S.I. No. 842 of 2007 include regulations required under S59D

S59E provides that regulations may be made requiring disclosure to scheme members prior to bulk transfer

S59F provides that regulations may be made that would invalidate amendment of scheme rules prior to a bulk transfer in certain circumstances

- S59E and S59F Regulations not made yet Regulation S.I. No. 844 of 2007 made on 18.12.2007 revoked 3 sets of

UK/Ireland Regulations as these have been superseded by IORPs Directive and no longer required

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Implements the recommendations in the Board’s Report to the Minister on Trusteeship re Registered Administrators and trustee training

Report noted that third party administrators were unregulated in terms of scheme administration work undertaken on behalf of trustees

Recommended that scheme administrators should register with Board who would have responsibility to:

- audit administration service provision, and

- remove registration or apply sanctions if required standards are not met

Pensions Act amended to bring administrators within its remit in relation to certain core functions they perform

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SOCIAL WELFARE AND PENSIONS ACT, 2008REGISTERED ADMINISTRATORS (RAS)

No RA qualification specified but RA must be satisfied they are competent and capable of:

providing core administration functions have systems and procedures in place to deliver services Trustee can appoint themselves as RAs if they can fulfill

above requirements 1 member schemes must appoint RA for benefit statement/

records/Eurostat information RA can apply to be registered for either or both functions and

must maintain records for function for which appointed

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With effect from 1 November 2008 trustees of every scheme (including large Trust RACs) must appoint an RA to provide “core administration functions”

Core administrations functions are:- preparation of annual reports- preparation of benefit statements- maintenance of sufficient and accurate member records to discharge above Offence for RAs to fail to carry out core functions within time limits specified

- within 8 months of scheme year end for annual reports

- within 1 month prior to date of issue for benefit statements Board has power to :

- Require RA to furnish it with such information it considers necessary, either on scheme specific basis or generally with respect to RA activities

- Carry out on-site inspections of RA’s premises or any outsource’s premises Sanctions for failure to perform core functions may include:

- prosecution (not on-the-spot-fines)

- subjecting RA to conditions on renewal of its registration

- refusal to renew the registration

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continued


REGISTERED ADMINISTRATORS (RAS)

Sanction depends on degree of non-compliance and number of schemes in respect of which offence has been committed

RA can appeal Board’s decision to terminate or refuse to renew registration to High Court

Criminal offence to carry out core functions without registering with the Board

Trustees still retain current duties under Pensions Act to provide Annual Reports and benefit statements

- where they fail to do so but can show they had taken reasonable steps to secure compliance by RA, Board will not pursue trustees

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Registration Process

Existing RAs must register with Board prior to 1.11.08 New RAs must register before commencing business

- registration period lasts 12 months RAs must complete form indicating:

- schemes for which they are applying to be registered

- certify they are satisfied they are competent to provide core administration functions to these schemes

RAs must renew their registration annually no later than 30 days before anniversary of initial registration or renewal

No fee payable on registration or renewal Draft registration forms available on Boards website shortly

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RAs also required to provide statistical information for Eurostat

- applies to RA responsible for preparation of annual report RAs subject to “whistleblowing” requirements RAs who outsource still liable RAs can rely on third party defence apart from outsource arrangement Overseas administrators must register as RA and provide address in the State

for service of notices and proceedings POs powers under the Act apply to RAs Register of RAs will be published on Board’s website Regulations are pending

FAQs on RAs are available on www.pensionsboard.ie

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SOCIAL WELFARE AND PENSIONS ACT, 2008TRUSTEE TRAINING REQUIREMENTS

Employers required to arrange trustee training for new trustees

- within 6 months of their appointment, and

- at least every 2 years thereafter No requirement on persons who are already trustees when legislation

commences to undertake training within 6 months

BUT

- the ongoing 2 year training does apply Employers who breach obligation may be prosecuted

- not obliged to arrange for professional and pensioneer trustees

Trustees who fail to take training are liable to on-the-spot fines

- must report in Annual Report that they have undertaken required training

Trustee e-learning in development Regulations are pending

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SOCIAL WELFARE AND PENSIONS ACT, 2008MISCELLANEOUS AMENDMENTS

DC scheme definition revised to clarify that schemes offering guaranteed benefits or investment performance do not constitute DC schemes

S 4(1) amended to allow PO and Revenue to exchange information S54 amended to require trustees of small trust RACs to provide

Eurostat information to Board S141(4) amended in relation to enforcement of PO determinations to

include registered office or place of business of a person against whom determination made

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PENSIONS BOARD SUPERVISORY DEVELOPMENTS

Supervision function divided into 2 teams

- Defined Benefit Supervision headed by Mary Hutch

- Defined Contribution Supervision headed by Philip Dalton (to include PRSAs, DC OPS, Trust Based RACs)

Move to risk based supervision More focus on administration On-site and off-site supervision

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Office of the Pensions Ombudsman

• Changes to the Pensions ActMade by – Social Welfare Law Reform & Pensions Act

2006– Social Welfare & Pensions Act 2007– Social Welfare & Pensions Act 2008– Amendment to PO Regulations in 2006

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2006 Amendments• Power to waive Internal Disputes Resolution (IDR)

requirement except in “Public Authority” Schemes– Public authority schemes -some surprising exclusions– Some schemes are public authority for one purpose, not for

another

• If I consider it reasonable in the circumstances of the case that the requirement be dispensed with– And it is desirable that the complaint be investigated

• Regulations amended: IDR deemed exhausted after 3 months or such longer period as I consider appropriate….– Investigation proceeds without IDR completion

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2007 Amendments

• A number of technical amendments to extend jurisdiction to Trust RACs, provide for IDR requirement, etc

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2008 Amendments• Registered Administrators did not require any

amendment to PO Regulations, as already covered by very wide definition of “Administrator” in 2003 regs

• Power to Exchange Information;– Already existed between PO and Pensions Board.

– Extended to Revenue Commissioners

– Memorandum of Understanding to be drawn up with Revenue (Act does not require this)

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Other Developments• Rules of Court for Appeals from and Enforcement

by statutory tribunals published : SI 14 of 2007• Our enforcement is through Circuit Court: rules

drafted for this. (Minister’s involvement)• First enforcement actions proceeding• Applications to Circuit Court for information

withheld• First Criminal prosecutions for obstruction

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Changes to Disclosure Requirements

• 2005 Regulations replaced 1998 regs.• 2006 regulations (SI 301 of 2006) are called

Remake Regulations – some changes made.• Amendment regulations (SI 582 of 2006) made

some technical amendments• Amendment regulations (SI 842 of 2007) made

some further technical amendments

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2006 (SI 301) Changes• Exclude one-member arrangement from need to

prepare a valuation report • Clarify preparation of annual report by insurance

undertaking• Information in annual benefit statement (DB)

based on info not more than 6 months old• Statements of reasonable projection not needed

until 1/1/2008

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2006 (SI 301) Changes

• Trustees named as at time of issue of benefit statement, not relevant date of statement

• Some textual changes

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2006 (SI 582) Amendments

• Statements of Reasonable Projection to follow Soc. Of Actuaries Guidelines

• Small schemes exempt from including SIPP in Annual Report

• All Annual Reports must identify scheme type (DB or DC)

• Leaving service statement not to refer to PAO if none issued!

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• Small schemes operating cross-border to produce full annual reports and accounts

• Information in DC annual benefit statement to relate to date not being earlier than 6 months before date of issue

• Defer requirements for SORP to 1 Jan 2009– Information on SORP to relate to date not being earlier than 6

months before date of issue

• DB and DC deferred members entitled to information in paras 2 – 6 of Part 1 – Schedule E

• DB and DC annual benefit statements need only provide details of all contributions, transfers in etc received by schemes since previous statement

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• Consultation with members before any discretion exercised on abatement of assets/disposition of surplus on wind-up

• DB schemes can reference information already provided to members specifying how additional DB benefits can be acquired and specify either:– amount of the benefits, or

– an explanation of how they will be calculated

as alternative to providing this information in DB benefit statement

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P ENSIONS L EGISLATION U PDATE Paul Kenny Pensions Ombudsman Mary Hutch Head of DB Supervision 20...

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