IRELAND - The Pensions Board has extended until June next year the deadline for schemes filing a funding proposal related to plans to reduce DB benefits. But the Irish Business and Employers Confederation (IBEC) claimed the guidance is still too strict.
Earlier this month, IBEC argued that the requirements for schemes to be able to alter accrued DB benefits to help stabilise the scheme - using a section 50 application - were "too high". One of the requirements is an ongoing funding level capable of withstanding a stress test of a further 15% fall in equity markets and a 0.5% fall in interest rates. (See earlier IPE article: Irish rules on DB benefit cuts set 'too high')
It called on the Pensions Board to alter the rules and give pension schemes more time to file funding proposals. The Pensions Board has now issued an amended version of the section 50/50a Frequently Asked Questions (FAQs), which includes an extension to the deadline and changes to the value of "a suitable long-term Irish gilt yield" used in calculating contribution rates.
The regulator has allowed for the rate of return used in contribution calculations to be increased from 4.5% to 5% "where the scheme actuary is satisfied that such an adjustment is appropriate". And Brendan McGinty, director of industrial relations and HR services at IBEC, said this was one of two key changes to the guidance and is "certainly helpful as it allows companies to assume a higher rate of return".
In addition, the Pensions Board confirmed any scheme with a deadline "for a filing of a funding proposal (and/or section 50 application) before 30 June 2010 will be allowed to adopt 30 June 2010 as a revised deadline".
However McGinty highlighted other issues the organisation is still unhappy with, including the clarification that funding proposals related to section 50 applications cannot be longer than 10 years.
McGinty said: "This is still a difficult issue as we are aware of many companies that were preparing funding proposals over a longer period of say 15 years. There was a lack of clarity in terms of this aspect of the rules until the first set of FAQs were issued. So the introduction of a 10-year maximum clearly has dramatic implications for schemes."
He admitted the extension of the deadline means companies will have some breathing space to reassess the proposals they were developing for section 50 applications, particularly if their funding proposals were spread over more than 10 years.
However he confirmed IBEC will continue lobbying over the guidance and issues such as the 10-year funding limit, including an ongoing dialogue with the ministry of social and family affairs after the organisation raised its concerns with the minister, Mary Hanafin, earlier this week.
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