The DWP has issued a statement that amendments to the employer debt regulations will now come into force from December this year (and not from 1 October 2011, as was originally intended). In June this year, the DWP had issued the draft regulations for consultation, proposing a number of changes to the employer debt regime, including:

  • The introduction of a new arrangement, a "flexible apportionment arrangement" ("FAA") for apportioning the liabilities of an employer when withdrawing from a multi-employer defined benefit scheme.
  • Extension of the 12 months grace period within which employers leaving a multi-employer scheme can employ an active member and avoid triggering an employer debt. The consultation had proposed that the 12 month period may be extended up to 36 months at the scheme trustees' discretion.  

For more about the consultation on the draft regulations, see our earlier e-alert.

Comment

The DWP still needs to clarify some of the detail around FAAs in the draft regulations, especially with regards to the timing of when the funding test has to be met under an FAA. There is also some confusion as to the scope of the existing scheme apportionment arrangement ("SAA") regime and whether the employer's liabilities under an SAA may be apportioned on a fixed basis. We are involved in making representations to the DWP in relation to these matters.

With the implementation date of the amending regulations pushed back until December 2011, the uncertainty created by the consultation around the scope of SAAs and precisely how FAAs are intended to work remains. Although the regulations are intended to be in force from December, the DWP is likely to issue its response to the consultation on the draft regulations and the final regulations before then, which should then hopefully give more clarity. Until then, SAAs currently being negotiated and also those that have been entered applicable to employers leaving the scheme after December will need to be considered carefully.