In Hearn v Dobson the High Court had to consider whether there was only one “employer” in the defined benefit Construction Confederation Staff Pension Scheme for the purposes of Part 3 of the Pensions Act 2004 and the Scheme Funding Regulations 2005.
The scheme was initially a multi-employer scheme. Subsequently all the participating employers, apart from the principal employer, terminated their liability to contribute in accordance with the scheme rules. The trustees sought directions as to whether the assets and liabilities of separate funds that were set up in relation to the former employers should be taken into account when setting the contribution rate of the principal employer.
Broadly, where a multi-employer scheme is divided into two or more sections relating to various employers each section may be treated as a separate scheme for the purpose of the scheme funding legislation.
The Court held that when the sections were set up only the principal employer was an employer for the purpose of the scheme-funding legislation – and the scheme was therefore not a multi-employer scheme - so the different sections could not be treated as separate schemes.
The Court rejected the argument that one of the participating employers was an “employer” because it employed employees although they were not members of the scheme. The Court held that the funding legislation contained a clear statement that when an employer ceased to employ active members it ceased to be an employer. Accordingly, in determining the rates of contribution payable by the principal employer the assets and liabilities to be taken into account included those in the separate sections that were attributed to the previous participating employers.