The Pensions Act, 1990 Implications for Public Sector Schemes

1. The Pensions Act, 1990 Implications for Public Sector Schemes Carol Jordan Assistant Head of Regulation The Pensions Board 21 May 2009

2. 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 Schemes • Part VIA1 – Registered Administrators • Part VII2 – Equal Treatment 1Introduced by the Social Welfare and Pensions Act, 2008 2Introduced by the Social Welfare Act, 2004

3. The Pensions Acts 1990 - 2008 • Part VIII3 – Compulsory and Voluntary Reporting • Part IX3 – Miscellaneous Applications to the High Court 3Introduced by the Pensions (Amendment) Act, 1996 • Part X4 – Personal Retirement Savings Accounts (PRSA’s) • Part XI4 – Pensions Ombudsman • Part XII5 – Cross Border Schemes 4Introduced by the Pensions (Amendment) Act, 2002 5Introduced 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

4. The Pensions Act and Public Sector Schemes Subject to: • Part I - Preliminary and General • Definitions • Pension Scheme (Family Law) Regulations, 1997 • Part II - The Pensions Board • S25 Fees Payable to the Board • Part V - Disclosure of Information • Part VI - Trustees of Schemes • Scheme Registration Only • Part VII - Equal Pension Treatment • Part VIII - Compulsory and Voluntary Reporting • Part X - Personal Retirement Savings Accounts (PRSAs) • Part XI - Pensions Ombudsman

5. The Pensions Act and Public Sector Schemes Exempt from: • Part III - Preservation of Benefits • Part IV - Funding Standard • Part VI - Trustees of Schemes : General Duties of Trustees • Part VIA - Registered Administrators • Part XII - Cross Border Schemes

6. The Pensions Act and Public Sector SchemesFunctions of the Pensions Board – Part II • To monitor and supervise the operation of the Act • To issue guidelines/codes of practice to trustees on their duties and responsibilities • To issue guidelines/guidance notes on duties and responsibilities of administrators and PRSA providers • To encourage training for trustees • To advise the Minister on standards for trustees and on their implementation

7. The Pensions Act and Public Sector SchemesFunctions of the Pensions Board – Part II • To provide information to members on their rights under the Act • To investigate complaints and, if necessary, impose fines or take court proceedings for breaches of the Act • To register schemes, large trust RACs and PRSAs and to collect fees due • To advise the Minister for Social And Family Affairs on the operation of the Act and on pensions matters generally.

8. The Pensions Act and Public Sector Schemes Compliance Obligations • Main responsibilities fall on trustees or, for schemes not established under trust, on ‘Administrator’ • Definition of ‘Administrator’ is set out in s13(1) of the Taxes Consolidation Act, 1997: “Administrator in relation to a retirement benefits scheme means the person or persons having the management of the scheme…” • Who is the ‘Administrator’ of your scheme? • They are responsible for Pensions Act compliance.

9. The Pensions Act and Public Sector SchemesScheme Registration and Amendments • Schemes must be registered with the Board not later than 1 year after commencement • Joint Revenue Approval/Pensions Board Registration form • PB Number is allocated to the scheme • Any changes to the registered details must be notified to the Board, in writing, within 12 months of the change

10. The Pensions Act and Public Sector SchemesPayment of Pensions Board Fees • Annual fee must be paid in respect of each scheme year by 31 March each year • Fee is based on the number of active members in the scheme at the renewal date in the previous year • Fee Payable: (represents 40% of normal fee) • Less than 500 actives €3.80 per member • 501 – 1000 actives €1,900 • More than 1000 actives €1.90 per member

11. The Pensions Act and Public Sector SchemesPension Schemes (Family Law) Regulations S.I. No. 107 of 1997 – Part I • Regulations made under s5 of the Pensions Act specify guidelines for the purpose of pension provisions of Family Law Acts (1995 & 1996) • Family Law Acts require courts to take pension rights into account where parties apply to court for an order under the Act • Court may direct Pensions Adjustment Order (PAO) be served on scheme of which either/both spouses are members • PAO must be given effect by trustees/administrator • PAO requires trustee/administrator to pay a proportion of pension benefits to other spouse or for benefit of dependant family member • PAO overrides the rules of the scheme.

12. The Pensions Act and Public Sector SchemesPension Schemes (Family Law) Regulations S.I. No. 107 of 1997 – Part I • Pension benefits for PAOs fall under one or other of two headings: Retirement Benefits • Pensions, lump sums/gratuities • Dependants benefits on death in retirement • Periodic increases to pensions in payment • Deferred benefits Contingent Benefits • Death in service benefits • Lump sum benefits • Dependants pensions • Court can make either or both types of order

13. The Pensions Act and Public Sector SchemesPension Schemes (Family Law) Regulations S.I. No. 107 of 1997 – Part I PAOs – Public Sector Schemes • Orders can straddle both main scheme and spouse’s and children’s schemes • PAO in relation to retirement benefits would cover: (a) pension and lump sum (or preserved pension and lump sum, or preserved death gratuity) payable under the main scheme, and (b) where member dies after retirement or resignation, pensions payable under the spouse’s and children’s scheme.

14. The Pensions Act and Public Sector SchemesPension Schemes (Family Law) Regulations S.I. No. 107 of 1997 – Part I • PAO in relation to Contingent Benefits could cover both: (a) death in service gratuity payable under the main scheme, and (b) where the member dies in service, pensions payable under the spouse’s and children’s scheme.

15. The Pensions Act and Public Sector SchemesDisclosure of Information – Part V • Details are set out in the Act and Disclosure of Information Regulations 2006 – 2008 • Trustees/Administrators must give members, prospective members, their spouses, other scheme beneficiaries and authorised trade unions: • Details about constitution of scheme and rules (i.e. legal governing documents) • On request • Basic information about the scheme (i.e. explanatory booklet) • On request (but automatic to new members within 2 months of joining) • Details of personal benefit entitlements (i.e. benefit statement) • Annually - automatically

16. The Pensions Act and Public Sector SchemesDisclosure of Information – Part V • Benefit Statement: • Based on information not more than 6 months old • Statutory schemes can provide electronically if members consent and have access to this facility • Benefit statement must include information on whether additional benefits can be secured, purchased or granted by way of any, or all, of the following: (i) notional service; (ii) AVCs; or (iii) transfer of rights from another scheme/PRSA.

17. The Pensions Act and Public Sector SchemesDisclosure of Information – Part V • Other documents that must be disclosed: • Annual report (limited information) On request (but availability must be notified to members) • Actuarial valuations On request (if a funded DB scheme) • Valuation of liabilities On request (if a DC scheme) • Annual audited accounts On request (not applicable to public sector) • Employer must give employees a monthly statement of pension contributions deducted and remitted on their behalf.

18. The Pensions Act and Public Sector SchemesDisclosure of Information – Part V Other documents that must be disclosed: • Leaving service options letter Automatically to leavers within 2 months of leaving • On retirement or death Automatically to persons entitled to benefits within 2 months • Notification of grant of PAO Automatically to persons specified in order within 2 months • Failure to comply with disclosure obligations is subject to on-the-spot fines. • Detailed Guidance Notes and information booklet on disclosure obligations also available online.

19. The Pensions Act and Public Sector SchemesEqual Pensions Treatment – Part VII • Original Part VII prohibited discrimination on gender ground only • New Part VII introduced by SW (Misc. Provisions) Act, 2004 provides for equal pension treatment on 9 grounds: • Gender, marital status, family status, sexual orientation, religion, age, disability, race and membership of the travelling community. • Claims for redress: The Office of the Director of Equality Investigations (ODEI)

20. The Pensions Act and Public Sector SchemesEqual Pensions Treatment – Part VII • No discrimination on any discriminatory grounds in respect of any rule of a scheme • Rules governing employer obligations re: • Access • Contribution arrangements • Benefits • Retirement ages* • Survivors benefits *Ages can be fixed for admission/benefits provided no gender discrimination • Detailed Guidance Notes and Information Booklet available on Board’s website.

21. The Pensions Act and Public Sector SchemesCompulsory & Voluntary Reporting – Part VIII • ‘Whistleblowing’ • Duty placed on ‘relevant persons’ to report • instances of fraudulent conversion, or • material misappropriation of scheme assets • Which they believe • has occurred • is occurring • is to be attempted.

22. The Pensions Act and Public Sector SchemesCompulsory Reporting • Relevant Person is: • An auditor • An actuary • A trustee/administrator • An insurance intermediary • An investment business firm • A person preparing/instructed to prepare the Annual Report • A person appointed by trustees to carry out specified duties • A PRSA provider, actuary or auditor of the business of a PRSA provider • An employee of a s121 employer – “excluded employee” • Obliged to make compulsory report (doesn’t apply to information obtained prior to 2 July 1996)

23. The Pensions Act and Public Sector SchemesCompulsory Reporting • Relevant Person • Suspected fraud/misappropriation of resources of scheme/PRSA • Report in writing as soon as possible (offence not to report) • Defence for relevant person to show contravention applicable to another and reasonable steps taken to secure compliance • Protection for persons acting in good faith • No liability or action will arise, e.g. defamation proceedings.

24. The Pensions Act and Public Sector SchemesVoluntary Reporting • Any person whether or not a relevant person • Any matter concerning state and conduct of scheme or PRSA e.g. maladministration • Report in writing or otherwise • Protection against unfair dismissal provided report made in good faith • No liability or action will arise

25. The Pensions Act and Public Sector SchemesPRSAs – Part X • Every employee must be provided with access to some form of pension provision • If no provision in employers scheme for AVCs, a Standard PRSA must be offered for AVC purposes • PRSA Provider should be designated and employees informed accordingly • If employees elect to make AVCs to a PRSA this must be facilitated through payroll • Where AVCs are to be paid, the trustees/administrator must ensure that contributions are limited to the amount required to provide maximum benefits permitted by Revenue • Information booklets on employer obligations and a Consumers Guide to PRSAs available on Board’s website

26. The Pensions Ombudsman and Public Sector Schemes – Part XI • PO investigates and decides complaints and disputes concerning occupational pension schemes and PRSAs • Complaints usually made against those responsible for management of scheme/PRSA e.g. trustees, managers, employers, administrators etc. • Complaints involve allegation that individual has suffered financial loss due to maladministration of the scheme/PRSA • PO also investigates disputes of fact or law re schemes/PRSAs • Pensions Act requires all schemes/PRSAs to operate an Internal Dispute Resolution Procedure (IDR) • PO cannot, as a rule, investigate complaint/dispute until IDR process completed

27. The Pensions Ombudsman and Public Sector Schemes – Part XI • IDR system requires details of complaint to be given to ‘Relevant Person’ • Private sector = trustees • Public sector = the Minister or Ministers to whom there is a right of appeal • ‘Relevant Person’ issues Notice of Determination within 3 months of obtaining all necessary information • Complainants not bound by determination and can still complain to PO • PO has discretion to bypass IDR but not for Public Authority Schemes, i.e. schemes governed by statute or funded from public monies, in which there is provision for appeal to Minister(s). Includes most of broader public service (exceptions - Local Govt. Superannuation Scheme, Garda Síochána scheme).

28. The Pensions Ombudsman and Public Sector Schemes – Part XI • If complaint/dispute sent to PO he will decide if matter is appropriate for him and may require further information from parties • Often gives ‘Preliminary View’ to all parties in complaint/dispute giving them opportunity to provide further information/evidence • ‘Final Determination’ made which may award financial compensation (limited to the amount of the actual loss) • PO determination is final and can be appealed to High Court • Time limits for bringing complaint/dispute: • 6 years from date of act or event giving rise to complaint/dispute • 3 years from date on which complainant aware/ought to have been aware • PO may extend period if reasonable grounds www.pensionsombudsman.ie

29. The Pensions Act and Public Sector SchemesPensions Board Approach to Regulation Historical Approach • Encouraged broad compliance with Pensions Act • Reflected • Large number of schemes • Lack of previous pensions legislation • Policy of encouraging voluntary supplementary pension provision • Heavy reliance on disclosure of information provisions • Gradual move towards stricter policy of expecting full compliance • Required shift from reactive to pro-active approach

30. The Pensions Act and Public Sector SchemesPensions Board Approach to Regulation Current Approach • Pro-active approach since 2007 following Operational Review • Reflects • international best practice in supervisory field • need to have regard to principles of regulation • risk based model • direction of resources to most suitable areas • Involves • supervisory approach based on hierarchy of risk priorities, and • pro-active engagement with regulated entities and their administration providers.

31. The Pensions Act and Public Sector SchemesPensions Board Approach to Regulation Key Objectives • To ensure that: • No pension monies are misappropriated • Beneficiaries receive their full entitlements • Schemes are appropriately funded • Pension assets are appropriately invested • Members are provided with enough information to make appropriate decisions

32. The Pensions Act and Public Sector Schemes Pensions Board Regulatory Activity • Activities are aligned to regulatory priorities and include: • *Annual interaction with range of funded DB schemes and unfunded public sector schemes • Annual interaction with scheme administrators/pension providers • Particular interaction with DB schemes failing the funding standard • *Compliance audits – both provider audits and scheme audits • *On-the-spot fine investigations • *Section 18 investigations – on-site and off-site • *Prosecutions – as necessary *All relevant to public sector schemes

33. The Pensions Act and Public Sector Schemes Pension Board Regulation Function • One supervisory function – Regulation • PRSA supervisory process streamlined and integrated into ongoing provider contact • Scheme registration (and the Register of schemes) now comes within the Regulation function • Portfolio system adopted for DB schemes (including public sector schemes) and pension providers • ‘Open Door’ policy remains

34. The Pensions Act and Public Sector Schemes Sanctions for Non-Compliance • On-the-spot fines for specified breaches • Mainly administrative type breaches: • Late registration of schemes • Failure or delay in notifying amendments to the Board • Disclosure of information – failure to provide required/requested information • Failure to reply to a Board request for information • Failure or delay in submitting AFCs (for funded DB schemes only) • Fine for each offence is €2,000 per trustee/administrator • Fine cannot be paid out of the resources of the scheme • More serious breaches of the Act will continue to be dealt with in the Courts

35. The Pensions Act and Public Sector Schemes Further Information: • www.pensionsboard.ie • Guidelines • Guidance Notes • FAQs • Information Booklets • Presentations