There are currently three Bills (draft laws) before the Irish parliament each which proposes to amend the Pensions Act 1990 (the 'Act') to address situations in which solvent companies are the sponsors of insolvent pension schemes. The focus of each of the Bills is on defined benefit (i.e. final salary) pension schemes. The Bills come in the wake of a series of high-profile cases which highlighted the fact that Irish pensions legislation allows solvent companies to wind up their pension schemes. Where pension schemes are insolvent when they are wound up, the effects of the pension scheme deficits are currently felt by the members of those schemes in the form of reduced or eliminated pension entitlements.
The following three Bills address this issue in various ways.
The Pensions (Amendment) Bill 2017: This Bill would amend the Act to prevent a solvent employer being allowed to wind up a defined benefit pension scheme unless the pension scheme has assets equal to at least 90 per cent of its actuarially-calculated liabilities.
The Pensions (Amendment) (No.2) Bill 2017: This Bill would make it “illegal for a solvent company to wind up its defined benefit pension scheme” unless either (a) the value of the assets of the scheme is equal to or greater than the amount of the liabilities of the scheme or (b) the State regulatory body, the Pensions Authority, consents to the winding up of the scheme. This Bill also proposes to give rights to scheme members to request the Pensions Authority to prevent scheme members from being treated inequitably in a wind-up.
The Pensions (Amendment) (No. 3) Bill 2017: This Bill is predicated on the fact that most Irish defined-benefit pension schemes are held in trust by trustees who are independent of the relevant employer. These trustees are obliged to act in the best interests of the scheme’s members. This Bill would apply where the scheme is being wound up, the relevant employer concerned is not insolvent and the value of scheme’s assets is less than its liabilities. The Bill proposes that, in such circumstances, the relevant employer would be obliged to pay the difference in order that the scheme’s assets would meet its liabilities. If the employer did not pay, the trustees would be empowered to sue the relevant employer for the amount of the difference.
Normally, Bills such as these would only be passed into law if the Government parties support them. The Government is supportive of addressing the crisis in pension schemes but has indicated that it has grave reservations about converting pension scheme liabilities into direct employer liabilities. By doing so, the Government fears that this may create what would effectively be an “employer guarantee” of the schemes and turn the previously voluntary commitments under these schemes into mandatory obligations. Additionally, there is a danger that some employers with underfunded schemes might wind up the scheme in advance of the completion of the legislative process in order to avoid potential liability.
It remains to be seen whether any one of these proposals will be passed into law, whether in the same, or an amended, form.