In this case, the High Court ruled on the meaning “employment-cessation event” (ECE) as set out in the Occupational Pension Schemes (Employer Debt) Regulations 2005 (S.I. 2005/678) as they applied to multi-employer defined benefit schemes before amendments came into force on 6 April 2008.
The key issue was whether the words “employing persons in the description of employment to which the scheme relates” in the legislation should be interpreted to mean that an employer debt under section 75 of the Pensions Act 1995 (a Section 75 Debt) is triggered when an employer ceases to employ active members or whether the expression refers to a wider category of persons, such as eligible employees.
The case centred on whether an ECE had been triggered by Cemex, a participating employer of the Merchant Navy Officers Pension Fund (MNOPF). The trustees of the MNOPF argued that an ECE occurred on 28 November 2005 when the only active member of the MNOPF reached normal pension age under the scheme and became a deferred member. Cemex argued that there was no triggering of a Section 75 Debt on that date as it had at all material times employed people who were eligible to join the MNOPF, although those eligible had chosen not to join.
The court held that the words “employing persons in the description of employment to which the scheme relates” could not be construed as applying to active members only. It followed that an ECE was not triggered, and a Section 75 Debt did not arise, since when Cemex ceased to employ an active member of the fund on 28 November 2005, it did not “cease to be an employer employing persons in the description of employment to which the scheme relates”.
A new definition of ECE was implemented with effect from 6 April 2008, so that a cessation of employing active members was the express trigger for the application of a Section 75 Debt. The decision in this case will therefore come as a relief to many employers who ceased to have any active members prior to that date in a defined benefit scheme with a deficit. However, employers who now employ only a few active members in a scheme do need to take care that a Section 75 Debt is not unwittingly triggered if and when those employees cease to be active members.